Federal Deposit
Insurance Corporation

[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]                         

=======================================================================

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]
BILLING CODE 6714-01-P