FDIC Law, Regulations, Related Acts - Federal Deposit Insurance Act

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1000 - Federal Deposit Insurance Act

SEC. 19. PENALTY FOR UNAUTHORIZED PARTICIPATION BY CONVICTED INDIVIDUAL.

(a) PROHIBITION.--

(1) IN GENERAL.--Except with the prior written consent of the Corporation--

(A) any person who has been convicted of any criminal offense involving dishonesty or a breach of trust or money laundering, or has agreed to enter into a pretrial diversion or similar program in connection with a prosecution for such offense, may not--

(i) become, or continue as, an institution-affiliated party with respect to any insured depository institution;

(ii) own or control, directly or indirectly, any insured depository institution; or

(iii) otherwise participate, directly or indirectly, in the conduct of the affairs of any insured depository institution; and

(B) any insured depository institution may not permit any person referred to in subparagraph (A) to engage in any conduct or continue any relationship prohibited under such subparagraph.

(2) MINIMUM 10-YEAR PROHIBITION PERIOD FOR CERTAIN OFFENSES.--

(A) IN GENERAL.--If the offense referred to in paragraph (1)(A) in connection with any person referred to in such paragraph is--

(i) an offense under--

(I) section 215, 656, 657, 1005, 1006, 1007, 1008, 1014, 1032, 1344, 1517, 1956, or 1957 of title 18, United States Code; or

(II) section 1341 or 1343 of such title which affects any financial institution (as defined in section 20 of such title); or

(ii) the offense of conspiring to commit any such offense,

the Corporation may not consent to any exception to the application of paragraph (1) to such person during the 10-year period beginning on the date the conviction or the agreement of the person becomes final.

(B) EXCEPTION BY ORDER OF SENTENCING COURT.--

(i) IN GENERAL.--On motion of the Corporation, the court in which the conviction or the agreement of a person referred to in subparagraph (A) has been entered may grant an exception to the application of paragraph (1) to such person if granting the exception is in the interest of justice.

(ii) PERIOD FOR FILING.--A motion may be filed under clause (i) at any time during the 10-year period described in subparagraph (A) with regard to the person on whose behalf such motion is made.

[Codified to 12 U.S.C. 1829(a)]

[Source: Section 2[19(a)] of the Act of September 21, 1950 (Pub. L. No. 797), effective September 21, 1950, as amended by section 910(a) of title IX of the Act of August 9, 1989 (Pub. L. No. 101--73; 103 Stat. 477), effective August 9, 1989; section 2502(a) of title XXV of the Act of November 29, 1990 (Pub. L. No. 101--647; 104 Stat. 4860), effective November 29, 1990; section 1505 of title XV of the Act of October 28, 1992 (Pub. L. No. 102--550; 106 Stat. 4055), effective October 28, 1992; section 320605 of title XXXII of the Act of September 13, 1994 (Pub. L. No. 103--322; 108 Stat. 2119), effective September 13, 1994]

(b) PENALTY.--Whoever knowingly violates subsection (a) shall be fined not more than $1,000,000 for each day such prohibition is violated or imprisoned for not more than 5 years, or both.

[Codified to 12 U.S.C. 1829(b)]

[Source: Section 2[19(b)] of the Act of September 21, 1950 (Pub. L. No. 797; 64 Stat. 893), effective September 21, 1950, as added by section 910(a) of title IX of the Act of August 9, 1989 (Pub. L. No. 101--73; 103 Stat. 477), effective August 9, 1989]

(d) BANK HOLDING COMPANIES.--

(1) IN GENERAL.--Subsections (a) and (b) shall apply to any company (other than a foreign bank) that is a bank holding company and any organization organized and operated under section 25A of the Federal Reserve Act or operating under section 25 of the Federal Reserve Act, as if such bank holding company or organization were an insured depository institution, except that such subsections shall be applied for purposes of this subsection by substituting "Board of Governors of the Federal Reserve System" for "Corporation" each place that term appears in such subsections.

(2) AUTHORITY OF BOARD.--The Board of Governors of the Federal Reserve System may provide exemptions, by regulation or order, from the application of paragraph (1) if the exemption is consistent with the purposes of this subsection.

[Codified to 12 U.S.C. 1829(d)]

[Source: Section 2[19(d)] of the Act of September 1, 1950 (Pub. L. No. 797; 64 Stat. 893), effective September 21, 1950 as added by section 710(a) of title VII of the Act of October 13, 2006 (Pub. L. No. 109--351; 120 Stat. 1990), effective October 13, 2006]

(e) SAVINGS AND LOAN HOLDING COMPANIES.--

(1) IN GENERAL.--Subsections (a) and (b) shall apply to any savings and loan holding company as if such savings and loan holding company were an insured depository institution, except that such subsections shall be applied for purposes of this subsection by substituting "Board of Governors of the Federal Reserve System" for "Corporation" each place that term appears in such subsections.

(2) AUTHORITY OF DIRECTOR.--The ¹ "Board of Governors of the Federal Reserve System" may provide exemptions, by regulation or order, from the application of paragraph (1) if the exemption is consistent with the purposes of this subsection.

[Codified to 12 U.S.C. § 1829(e)]

[Source: Section 2[19(e)] of the Act of September 1, 1950 (Pub. L. No. 797; 64 Stat. 893), effective September 21, 1950 as added by Section 710(a) of title VII of the Act of October 13, 2006 (Pub. L. No. 109--351; 120 Stat. 1990), effective October 13, 2006]

NOTES

Derivation. Section 19(a) derives from section 2[19] of the Act of September 21, 1950 (Pub. L. No. 797; 64 Stat. 893), effective September 21, 1950.

Section 19(b) was added by section 910(a) of the Act of August 9, 1989, known as the "FIRRE Act", (Pub. L. No. 101--73; Stat. 477, effective August 9, 1989.

General guidelines and policies with respect to section 19. On September 27, 1968, the Federal Deposit Insurance Corporation's Chairman addressed the following memorandum to all insured banks.

"The Federal Deposit Insurance Corporation has for some time been studying in detail Section 19 of the Federal Deposit Insurance Act (12 U.S.C. 1829), relating to the requirement for this Corporation's consent prior to any insured bank employing persons who have been convicted of crimes involving dishonesty or breach of trust.

"Section 19 provides as follows:

"Except with the written consent of the Corporation no person shall serve as a director, officer, or employee of an in-sured bank who has been convicted, or who is hereafter convicted of any criminal offense involving dishonesty or breach of trust. For each willful violation of this prohibition, the bank involved shall be subject to a penalty of not more than $100 for each day this prohibition is violated, which the Corporation may recover for its use.' (emphasis supplied)

"Since the enactment of this law in 1950, our Board has reviewed cases coming under it on an ad hoc basis and each case has been judged on its own merits according to the particular facts and circumstances involved. The need for guidelines and standards to be applied prospectively has increased in recent years. Inquiries continue to come in from banking institutions asking what standards should be applied by them in determining whether an application under Section 19 is required. In addition, programs are now underway on both the Federal and state levels to hire and retrain the hardcore unemployed some of whom may have criminal records, and the banking community will no doubt participate in these programs to some degree. For these reasons, the Board of Directors has adopted the following general guidelines and policies with respect to Section 19. It is our hope that these guidelines will be of assistance to all banks having questions concerning the applicability of our law, and that they will, at the same time, serve to insure the continuing stability and confidence in our banking system.

"I. STANDARDS TO BE APPLIED IN DETERMINING WHETHER AN APPLICATION FOR CONSENT IS REQUIRED UNDER SECTION 19

"A. There must be present a conviction of record. Arrests, pending cases not brought to trial, acquittals, or any conviction which has been reserved on appeal will be excluded from the requirements of Section 19. A conviction which is being appealed will require a Section 19 application until or unless otherwise reversed.

"B. The conviction must be for a criminal offense involving dishonesty or breach of trust. Felonies as well as misdemeanors wherein dishonesty or breach of trust is involved are included within the definition. Dis__honesty is defined to mean "to cheat or defraud for monetary gain or its equivalent, direct or indirect, or to wrongfully take from any person, property lawfully belonging to that person in violation of any criminal statute or code.' Breach of trust is defined to mean a wrongful use, misappropriation, or omission with respect to any property or fund which has been lawfully committed to a person in a fiduciary capacity.'

"C. Youth Offenders

1. Adjudgment by a court against a person as a youthful offender under any youth offender law or adjudgment as a juvenile delinquent' by a family court or any other court having jurisdiction over minors as defined by state law will not require an application under Section 19. Such adjudications are not considered convictions for criminal offenses.

"D. Adults and All Minors Convicted of Crimes

1. The Conviction of any adult or minor by a court of competent jurisdiction for any criminal offense involving dishonesty or breach of trust as defined in paragraph B above will require an application for consent prior to a bank's employment of that person.

"II. THE CORPORATION'S POLICY WITH RESPECT TO APPLICATIONS MADE UNDER SECTION 19

"A. In considering any application made by an insured bank to employ a person who has been convicted of a criminal offense involving dishonesty or breach of trust, the factors to be considered will include but will not be limited to the following:

1. The specific nature of the offense involved and the circumstances surrounding it.

2. The evidence of rehabilitation of the person since the date of his conviction. (Parole, suspension of sentence, and reputation of the person since conviction will be given consideration. Participation by the person in programs on the national or state levels to hire and retrain the hardcore unemployed also will be given consideration.)