Fair Hiring in Banking Act
Notice of proposed rulemaking.
CFR Part: "12 CFR Parts 303 and 308"
RIN Number: "RIN 3064-AF92"
Citation: "88 FR 77906"
Page Number: "77906"
"Proposed Rules"
Agency: "
SUMMARY: The
DATES:
Comments must be received on or before
ADDRESSES: You may submit comments, identified by RIN 3064-AF92, by any of the following methods:
* FDIC Website: https://www.fdic.gov/resources/regulations/federal-register-publications/. Follow instructions for submitting comments on the agency website.
* Email: [email protected]. Include RIN 3064-AF92 on the subject line of the message.
* Mail:
* Hand Delivery to
Please include your name, affiliation, address, email address, and telephone number(s) in your comment. All statements received, including attachments and other supporting materials, are part of the public record and are subject to public disclosure.
* Public Inspection: Comments received, including any personal information provided, may be posted without change to https://www.fdic.gov/resources/regulations/federal-register-publications/. Commenters should submit only information that the commenter wishes to make available publicly. The
FOR FURTHER INFORMATION CONTACT:
SUPPLEMENTARY INFORMATION:
I. Background Section 19 of the Federal Deposit Insurance Act (section 19) /1/ prohibits, without the prior written consent of the
FOOTNOTE 1 12 U.S.C. 1829. END FOOTNOTE
From 1998 until 2020, the
FOOTNOTE 2 See 63 FR 66177 (
FOOTNOTE 3 See 84 FR 68353. END FOOTNOTE
FOOTNOTE 4 See 85 FR 51312 (
On
FOOTNOTE 5 The FHBA appears at section 5705 of the James M. Inhofe National Defense Authorization Act for Fiscal Year 2023, Public Law 117-263, 136 Stat. 2395, 3411. END FOOTNOTE
* Certain older offenses: (1) if it has been 7 years or more since the offense occurred; (2) if the individual was incarcerated with respect to the offense and it has been 5 years or more since the individual was released from incarceration; or (3) for individuals who committed an offense when they were 21 years of age or younger, if it has been more than 30 months since the sentencing occurred. /6/
FOOTNOTE 6 These exceptions do not apply to the offenses described under 12 U.S.C. 1829(a)(2). END FOOTNOTE
* Offenses for which an order of expungement, sealing, or dismissal has been issued in regard to the conviction in connection with such offense and it is intended by the language in the order itself, or in the legislative provisions under which the order was issued, that the conviction shall be destroyed or sealed from the individual's State, Tribal, or Federal record even if exceptions allow the record to be considered for certain character and fitness evaluation purposes.
* "Designated lesser offenses," including the use of fake identification, shoplifting, trespass, fare evasion, driving with an expired license or tag (and such other low-risk offenses as the
* Misdemeanor criminal offenses involving dishonesty, if the offense was committed more than one year before the date on which an individual files a consent application, /7/ excluding any period of incarceration.
FOOTNOTE 7 Under the FHBA, a "consent application" "means an application filed with [the
* A criminal offense involving dishonesty that also "involv[es] the possession of controlled substances."
The FHBA clarifies several terms in section 19, including "criminal offense involving dishonesty" and "pretrial diversion or similar program." It also provides conditions regarding de minimis offenses, to the extent the
The FHBA codifies procedures for consent applications filed with the
II. Discussion of Proposed Amendments
The proposed amendments to the
FOOTNOTE 8 See 12 U.S.C. 1829(f)(9) ("In carrying out this section, the [
Significant proposed revisions /9/ include the following:
FOOTNOTE 9 The proposed rule would also make a number of non-substantive, technical edits to the section 19 regulations that are not discussed in this section. END FOOTNOTE
A. Revised Provisions of 12 CFR Part 303, Subpart L
1. Section 303.220 What is section 19 of the Federal Deposit Insurance Act?
The
2. Section 303.221 Who is covered by section 19?
The
FOOTNOTE 10 15 U.S.C. 78l. END FOOTNOTE
3. Section 303.222 Which offenses qualify as "Covered Offenses" under section 19?
The proposed revisions to paragraph (a) of this section would reflect the new statutory definition of "criminal offense involving dishonesty." /11/ The FHBA excludes from the scope of such offenses "an offense involving the possession of controlled substances." /12/ The
FOOTNOTE 11 See 12 U.S.C. 1829(g)(2). END FOOTNOTE
FOOTNOTE 12 12 U.S.C. 1829(g)(2)(C)(ii). END FOOTNOTE
This revised regulatory language would mark a shift from the
The FHBA also states that the term "criminal offense involving dishonesty" does not include "a misdemeanor criminal offense committed more than one year before the date on which an individual files a consent application, excluding any period of incarceration." /13/ The
FOOTNOTE 13 12 U.S.C. 1829(g)(2)(C)(i). END FOOTNOTE
Revised paragraph (c) would include new language reflecting the statute's exception of certain older offenses from the scope of section 19. /14/ Among other exceptions, the FHBA states that section 19's restrictions will not apply to an offense if "it has been 7 years or more since the offense occurred." /15/ The
FOOTNOTE 14 See 12 U.S.C. 1829(c)(1). END FOOTNOTE
FOOTNOTE 15 See 12 U.S.C. 1829(c)(1)(A)(i). END FOOTNOTE
FOOTNOTE 16 See 12 U.S.C. 1829(c)(1)(A)(ii). END FOOTNOTE
FOOTNOTE 17 12 U.S.C. 1829(c)(1)(B). END FOOTNOTE
FOOTNOTE 18 See 12 U.S.C. 1829(c)(1)(C). END FOOTNOTE
Revised paragraph (d) excludes "designated lesser offenses" (for example, using fake identification), as specified in 12 U.S.C. 1829(c)(3)(D), if one year or more has passed since the applicable conviction or program entry.
Revised paragraph (e) adds language to codify the
4. Section 303.223 What constitutes a conviction under section 19?
Paragraph (c) of this section has been revised to reflect statutory language related to the treatment of orders of expungement, sealing, or dismissal of criminal records. /19/ The FHBA provides a two-pronged test to determine whether a covered offense should be considered expunged, dismissed, or sealed and therefore excluded from the scope of section 19. First, there must be an "order of expungement, sealing, or dismissal that has been issued in regard to the conviction in connection with such offense"; second, it must be "intended by the language in the order itself, or in the legislative provisions under which the order was issued, that the conviction shall be destroyed or sealed from the individual's State, Tribal, or Federal record, even if exceptions allow the record to be considered for certain character and fitness evaluation purposes." /20/ The statute does not address expungements, sealings, or dismissals by operation of law, and the
FOOTNOTE 19 See 12 U.S.C. 1829(c)(2). END FOOTNOTE
FOOTNOTE 20 12 U.S.C. 1829(c)(2). END FOOTNOTE
Revised paragraph (d) clarifies that it encompasses the terms "youthful offender" and "juvenile delinquent" and similar terms, since a court does not have to specifically use these terms in an adjudication in order for paragraph (d)'s provisions to apply.
5. Section 303.224 What constitutes a pretrial diversion or similar program (program entry) under section 19?
This section has been revised to reflect the statutory definition of "pretrial diversion or similar program." /21/
FOOTNOTE 21 See 12 U.S.C. 1829(g)(3). END FOOTNOTE
6. Section 303.225 What are the types of applications that can be filed?
This section has been revised to reflect the updated statutory filing procedures. The statute removes the
FOOTNOTE 22 See 12 U.S.C. 1829(f)(1). END FOOTNOTE
Revised paragraph (b), consistent with the FHBA, states that an individual or an institution may file applications at separate times. Under either approach, the application(s) must be filed with the appropriate FDIC Regional Office. /23/
FOOTNOTE 23 See 12 U.S.C. 1829(f)(1). END FOOTNOTE
7. Section 303.226 When may an application be filed?
This revised section notes that, before an application may be filed, "all of the sentencing requirements associated with a conviction, or conditions imposed by the program entry, including but not limited to, imprisonment, fines, condition of rehabilitation, and probation requirements, must be completed, and the case must be considered final by the procedures of the applicable jurisdiction." The
Furthermore, the FHBA requires the
FOOTNOTE 24 12 U.S.C. 1829(f)(5)(A). END FOOTNOTE
FOOTNOTE 25 12 U.S.C. 1829(f)(5)(B). END FOOTNOTE
8. Section 303.227 De minimis Offenses
The
The FHBA removed the use of fake identification from the scope of section 19, and revised paragraphs (a)(1) and (b)(4) reflect this exclusion. /26/ Revised paragraph (a)(2) would reflect the FHBA's confinement criteria as to the
FOOTNOTE 26 See 12 U.S.C. 1829(c)(3)(D). END FOOTNOTE
FOOTNOTE 27 See 12 U.S.C. 1829(c)(3)(B). END FOOTNOTE
The
FOOTNOTE 28 See 12 U.S.C. 1829(c)(3)(C). END FOOTNOTE
9. Section 303.228 How To File an Application
This revised section would eliminate the institution filing requirement and waiver process and indicate that an "institution"--an IDI or a depository institution holding company--could file an application on behalf of an individual, rather than just an IDI. Both of these proposed revisions are due to the updated statutory language. /29/ This revised section would also clarify that the appropriate
FOOTNOTE 29 See 12 U.S.C. 1829(f)(1). END FOOTNOTE
10. Section 303.229 How an Application Is Evaluated
Revised paragraph (a) would reflect new statutory requirements related to the
FOOTNOTE 30 See 12 U.S.C. 1829(f)(6)(A)(i). END FOOTNOTE
FOOTNOTE 31 See 12 U.S.C. 1829(f)(6)(A)(ii). END FOOTNOTE
Revised paragraph (b) would state that the
FOOTNOTE 32 12 U.S.C. 1829(f)(6)(B). END FOOTNOTE
Revised paragraph (d) would clarify how the
FOOTNOTE 33 12 U.S.C. 1829(f)(7). While the statute uses the terms "rehabilitation" and "mitigating" as separate categories of evidence, the terms appear to be substantially similar, in the context of section 19 applications, and the use of both terms in these regulations may create confusion. Therefore, the proposed rule uses the term rehabilitation not mitigating. END FOOTNOTE
Revised paragraph (g) would eliminate references to the former application-waiver requirement.
Finally, revised paragraph (h) would incorporate statutory language explaining when a new institution-sponsored application would be necessary due to changes in the scope of an applicant's employment. /34/
FOOTNOTE 34 See 12 U.S.C. 1829(f)(8). END FOOTNOTE
11. Section 303.231 Waiting Time for a Subsequent Application if An Application Is Denied
This section, as currently written and among other provisions, requires a one-year waiting period to file a consent application, following the issuance of a decision denying such an application. The proposed rule would retain the existing regulatory text as paragraph (a) and create a new paragraph (b)--which would note that an institution-sponsored application is not subject to the one-year waiting period if the application (1) follows the denial of an individual application, or (2) follows the denial of an institution-sponsored application and the subsequent application is sponsored by a different institution or is for a different position.
B. Revised Provisions of 12 CFR Part 308, Subpart M
The proposed rule would make several technical amendments to [Sec.]
III. Expected Effects
As previously discussed, the proposed rule would align the
FOOTNOTE 35 FDIC Call Report data,
To estimate the number of institutions and individuals affected by the rule, the
FOOTNOTE 36 FDIC Application Tracking System. END FOOTNOTE
FOOTNOTE 37 (76/4,654) * 100 = 1.6 percent. END FOOTNOTE
As previously described, the proposed rule would align the
The proposed rule would amend the
Finally, in seeking to align its section 19 regulations with the provisions of the FHBA, the
The
IV. Alternatives
As discussed above, almost all of the proposed substantive changes stem from the FHBA's revisions to section 19. The
V. Request for Comments
1. The
2. Offense date. As revised, section 19 provides for an exception for an offense if "it has been 7 years or more since the offense occurred." /38/ There is a similar provision that removes from the definition of "criminal offense involving dishonesty" "a misdemeanor criminal offense committed more than one year before the date on which an individual files a consent application, excluding any period of incarceration[.]" /39/ Historically, the
FOOTNOTE 38 12 U.S.C. 1829(c)(1). END FOOTNOTE
FOOTNOTE 39 12 U.S.C. 1829(g)(2)(C)(i). END FOOTNOTE
FOOTNOTE 40 See 12 CFR 303.223(a) (2020). ("There must be a conviction of record. Section 19 does not cover arrests or pending cases not brought to trial, unless the person has a program entry as set out in
3. "Sentencing occurred." The FHBA exempts offenses committed by individuals 21 years of age or younger if it has been more than 30 months since the sentencing occurred. /41/ However, the statute does not define the phrase "sentencing occurred." The
FOOTNOTE 41 12 U.S.C. 1829(c)(1)(B). END FOOTNOTE
4. Foreign convictions and pretrial diversions. Section 19 applies to "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." /42/ The phrase "criminal offense involving dishonesty" is defined in the statute but is silent as to whether it includes convictions and pretrial diversions for criminal offenses prosecuted by foreign authorities (foreign convictions). /43/ The statute does not define "offense involving . . . breach of trust or money laundering." The
FOOTNOTE 42 12 U.S.C. 1829(a)(1). END FOOTNOTE
FOOTNOTE 43 See 12 U.S.C. 1829(g)(2). END FOOTNOTE
5. Expungements, sealings, and dismissals. The FHBA established a new statutory exemption for expunged, sealed, and dismissed convictions (collectively, "expungements"). /44/ The
FOOTNOTE 44 See 12 U.S.C. 1829(c)(2). END FOOTNOTE
6. Offenses involving controlled substances. The FHBA states that "offenses involving the possession of controlled substances" are not included within the definition of "criminal offense involving dishonesty" and, therefore, are not subject to section 19's prohibition. /45/ The proposed rule includes this definitional exclusion and notes that the
FOOTNOTE 45 12 U.S.C. 1829(g)(2)(C)(ii). END FOOTNOTE
7. De minimis offenses. The FHBA states that the
FOOTNOTE 46 See 12 CFR 303.227. END FOOTNOTE
8. Written comments must be received by the
VI. Regulatory Analysis and Procedure
A. The Paperwork Reduction Act
In accordance with the requirements of the Paperwork Reduction Act (PRA), /47/ the
FOOTNOTE 47 44 U.S.C. 3501 et seq. END FOOTNOTE
The
(a) Whether the collection of information is necessary for the proper performance of the
(b) The accuracy of the estimate of the burden of the information collection, including the validity of the methodology and assumptions used;
(c) Ways to enhance the quality, utility, and clarity of the information to be collected;
(d) Ways to minimize the burden of the information collection on respondents, including through the use of automated collection techniques or other forms of information technology; and
(e) Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.
All comments will become a matter of public record. Comments on the collection of information should be sent to the address listed in the ADDRESSES section of this document. A copy of the comments may also be submitted to the OMB desk officer: By mail to
Information Collection
Title: "Application Pursuant to Section 19 of the Federal Deposit Insurance Act".
OMB Number: 3064-0018.
Affected Public: Insured depository institutions and individuals.
Summary of Estimated Annual Burdens
IC Description Type of burden (obligation to respond) Frequency Number of Number of Hours per Annual burden
of response respondents responses/ response (hours)
respondent
Application Pursuant to Section 19 of the Federal Deposit Insurance Act Reporting (Required to obtain or retain benefits) On occasion 76 1 16 1,216
Total Annual Burden Hours : 1,216
Source: FDIC .
B. The Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) generally requires an agency, in connection with a proposed rule, to prepare and make available for public comment an initial regulatory flexibility analysis that describes the impact of the proposed rule on small entities. /48/ However, an initial regulatory flexibility analysis is not required if the agency certifies that the proposed rule will not, if promulgated, have a significant economic impact on a substantial number of small entities.
FOOTNOTE 48 5 U.S.C.
FOOTNOTE 49 The SBA defines a small banking organization as having
As discussed further below, the
As of the quarter ending
FOOTNOTE 50 FDIC Call Report,
FOOTNOTE 51 FDIC Application Tracking System. END FOOTNOTE
FOOTNOTE 52 (70/3,433) * 100 = 2.04 percent. END FOOTNOTE
As discussed in the SUPPLEMENTARY INFORMATION section, the proposed rule would align the
In light of the foregoing, the
C. Plain Language
Section 722 of the Gramm-Leach-Bliley Act /53/ requires each Federal banking agency (FBA) to use plain language in its proposed and final rules published after
FOOTNOTE 53 Public Law 106-102, sec. 722, 113 Stat. 1338, 1471 (1999), 12 U.S.C. 4809. END FOOTNOTE
* Has the
* Have we clearly stated the requirements of the rule? If not, how could the rule be more clearly stated?
* Does the rule contain technical 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 would make the regulation easier to understand?
* What else could we do to make the regulation easier to understand?
D.
Under section 302(a) of the
FOOTNOTE 54 12 U.S.C. 4802(a). END FOOTNOTE
FOOTNOTE 55 12 U.S.C. 4802. END FOOTNOTE
List of Subjects
12 CFR Part 303
Administrative practice and procedure, Bank deposit insurance, Banks, banking, Reporting and recordkeeping requirements, Savings associations.
12 CFR Part 308
Administrative practice and procedure, Bank deposit insurance, Banks, banking, Claims, Crime, Equal access to justice, Fraud, Investigations, Lawyers, Penalties, Savings associations.
Authority and Issuance For the reasons stated in the preamble and under the authority of 12 U.S.C. 1819 (Seventh and Tenth), the
PART 303--FILING PROCEDURES
1. The authority citation for part 303 is revised to read as follows:
Authority: 12 U.S.C. 378, 1464, 1813, 1815, 1817, 1818, 1819(a) (Seventh and Tenth), 1820, 1823, 1828, 1829, 1831a, 1831e, 1831o, 1831p-1, 1831w, 1835a, 1843(l), 3104, 3105, 3108, 3207, 5414, 5415, and 15 U.S.C. 1601-1607.
2. Revise subpart L, consisting of [Sec.]
Subpart L--Section 19 of the FDI Act (Consent to Service of Persons Convicted of, or Who Have Program Entries for, Certain Criminal Offenses)
Sec.
303.220What is section 19 of the Federal Deposit Insurance Act?
303.221Who is covered by section 19?
303.222Which offenses qualify as "Covered Offenses" under section 19?
303.223What constitutes a conviction under section 19?
303.224What constitutes a pretrial diversion or similar program under section 19?
303.225What are the types of applications that can be filed?
303.226When may an application be filed?
303.227De minimis offenses.
303.228How to file an application.
303.229How an application is evaluated.
303.230What will the
303.231Waiting time for a subsequent application if an application is denied.
(a) This subpart covers applications under section 19 of the Federal Deposit Insurance Act (FDI Act), 12 U.S.C. 1829. The
(b) In addition, the law prohibits an IDI from permitting such a person to engage in any conduct or to continue any relationship prohibited by section 19. IDIs must therefore make a reasonable, documented inquiry to verify an applicant's history to ensure that a person who has a Covered Offense under section 19 is not hired or permitted to participate in its affairs without the written consent of the
(c) If there is a conviction or program entry covered by the prohibitions of section 19, an application under this subpart must be filed seeking the
(a) Persons covered by section 19 include IAPs, as defined by 12 U.S.C. 1813(u), and others who are participants in the conduct of the affairs of an IDI. Therefore, all directors, officers, and employees of an IDI who fall within the scope of section 19, including de facto employees, as determined by the
(b) The term person, for purposes of section 19, means an individual, and does not include a corporation, firm, or other business entity.
(c) Individuals who file an application with the
(d) Section 19 specifically prohibits a person subject to its provisions from owning or controlling, directly or indirectly, an IDI. The terms control and ownership under section 19 shall have the meaning given to those terms in subpart E of this part (including the rebuttable presumptions stated in subpart E).
(1) A person will be deemed to exercise "control" if that person--
(i) Has the ability to direct the management or policies of an IDI;
(ii) Has the power to vote 25 percent or more of the voting shares of an IDI; or
(iii) Has the power to vote 10 percent of the voting shares of an IDI if--
(A) No other person owns, controls, or has the power to vote more shares; or
(B) The institution has registered securities under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l).
(2) Under this paragraph (d), a person will be deemed to "own" an IDI if that person owns--
(i) 25 percent or more of the institution's voting stock; or
(ii) 10 percent of the voting shares if--
(A) No other person owns more; or
(B) The institution has registered securities under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l).
(3) The standards in this paragraph (d) would also apply to an individual acting in concert with others so as to have such ownership or control. Absent the
(a) Categories of Covered Offenses. The conviction or program entry must be for a criminal offense involving dishonesty, breach of trust, or money laundering.
(1) The term criminal offense involving dishonesty--
(i) Means an offense under which an individual, directly or indirectly--
(A) Cheats or defrauds; or
(B) Wrongfully takes property belonging to another in violation of a criminal statute;
(ii) Includes an offense that Federal, State, or local law defines as dishonest, or for which dishonesty is an element of the offense; and
(iii) Does not include--
(A) A misdemeanor criminal offense committed more than one year before the date on which an individual files a consent application, excluding any period of incarceration; or
(B) An offense involving the possession of controlled substances. At a minimum, this exclusion applies to criminal offenses involving the simple possession of a controlled substance and possession with intent to distribute a controlled substance. This exclusion may also apply to other drug-related offenses depending on the statutory elements of the offenses or from court determinations that the statutory provisions of the offenses do not involve dishonesty, breach of trust, or money laundering, as noted in paragraph (b) of this section. Potential applicants may contact their appropriate FDIC Regional Office if they have questions about whether their offenses are covered under section 19.
(iv) The term offense committed in paragraph (a)(1)(iii)(A) of this section means the last date of the underlying misconduct. In instances with multiple offenses, offense committed means the last date of any of the underlying offenses.
(2) The term breach of trust means a wrongful act, use, misappropriation, or omission with respect to any property or fund that has been committed to a person in a fiduciary or official capacity, or the misuse of one's official or fiduciary position to engage in a wrongful act, use, misappropriation, or omission.
(b) Elements of the offense. Whether a crime involves dishonesty, breach of trust, or money laundering will be determined from the statutory elements of the offense itself or from court determinations that the statutory provisions of the offense involve dishonesty, breach of trust, or money laundering.
(c) Certain older offenses excluded--(1) Exclusions for certain older offenses. Section 19 does not apply to an offense if--
(i) It has been 7 years or more since the offense occurred; or
(ii) The individual was incarcerated with respect to the offense and it has been 5 years or more since the individual was released from incarceration.
(iii) The term offense occurred means the last date of the underlying misconduct. In instances with multiple Covered Offenses, offense occurred means the last date of any of the underlying offenses.
(2) Offenses committed by individuals 21 year of age or younger. For individuals who committed an offense when they were 21 years of age or younger, section 19 does not apply to the offense if it has been more than 30 months since the sentencing occurred. The term sentencing occurred means the date on which a court imposed the sentence, not the date on which all conditions of sentencing were completed.
(3) Limitation. This paragraph (c) does not apply to an offense described under 12 U.S.C. 1829(a)(2).
(d) Designated lesser offenses excluded. Section 19 does not apply to the following offenses, if one year or more has passed since the applicable conviction or program entry: using fake identification; shoplifting; trespassing; fare evasion; and driving with an expired license or tag.
(e) Foreign convictions. Individuals who are convicted of or enter into a pretrial diversion program for a criminal offense involving dishonesty, breach of trust, or money laundering in any foreign jurisdiction are subject to section 19, unless the offense is otherwise excluded by this subpart.
(a) Convictions requiring an application. There must be a conviction of record. Section 19 does not cover arrests or pending cases not brought to trial, unless the person has a program entry as set out in
(b) Convictions not requiring an application. When an individual is charged with a Covered Offense and, in the absence of a program entry as set out in
(c) Expungement, dismissal, and sealing. A conviction is not considered a conviction of record and does not require an application if--
(1) There is an order of expungement, sealing, or dismissal that has been issued in regard to the conviction in connection with such offense, or if a conviction has been otherwise expunged, sealed, or dismissed by operation of law; and
(2) It is intended by the language in the order itself, or in the legislative provisions under which the order was issued, or in other legislative provisions, that the conviction shall be destroyed or sealed from the individual's State, Tribal, or Federal record, even if exceptions allow the conviction to be considered for certain character and fitness evaluation purposes.
(d) Youthful offenders. An adjudication by a court against a person as a "youthful offender" (or similar term) under any youth-offender law applicable to minors as defined by state law, or any judgment as a "juvenile delinquent" (or similar term) by any court having jurisdiction over minors as defined by State law, does not require an application. Such an adjudication does not constitute a matter covered under section 19 and is not a conviction or program entry for determining the applicability of
(a) The term pretrial diversion or similar program (program entry) means a program characterized by a suspension or eventual dismissal or reversal of charges or criminal prosecution upon agreement by the accused to restitution, drug or alcohol rehabilitation, anger management, or community service. Whether the outcome of a case constitutes a program entry is determined by relevant Federal, State, or local law, and, if not so designated under applicable law, then the determination of whether a disposition is a program entry will be made by the
(b) When a Covered Offense either is reduced by a program entry to an offense that would otherwise not be covered by section 19 or is dismissed upon successful completion of a program entry, the offense remains a Covered Offense for purposes of section 19. The Covered Offense will require an application unless it is de minimis as provided by
(c) Expungements, dismissals, or sealings of program entries will be treated the same as those for convictions.
(a) The
(1) An individual;
(2) An IDI applying on behalf of an individual;
(3) A depository institution holding company applying on behalf of an individual with respect to an IDI subsidiary of the holding company; and
(4) A depository institution holding company applying on behalf of an individual who will work at the holding company but also participate in the affairs of the IDI or who would be in a position to influence or control the management or affairs of the IDI, in accordance with
(b) An individual or an institution may file applications at separate times. Under either approach, the application(s) must be filed with the appropriate FDIC Regional Office, as required by this subpart.
Except for situations in which no application is required under section 19 and this subpart, an application must be filed when there is a conviction by a court of competent jurisdiction for a Covered Offense by any adult or minor treated as an adult, or when such person has a program entry regarding that offense. Before an application may be filed, all of the sentencing requirements associated with a conviction, or conditions imposed by the program entry, including but not limited to, imprisonment, fines, conditions of rehabilitation, and probation requirements, must be completed, and the case must be considered final by the procedures of the applicable jurisdiction. The
(a) In general. Approval is automatically granted and an application will not be required where all of the following de minimis criteria are met.
(1) The individual has been convicted of, or has program entries for, no more than two Covered Offenses, including those subject to paragraph (b) of this section; and for each Covered Offense, all of the sentencing requirements associated with the conviction, or conditions imposed by the program entry, have been completed (the sentence- or program-completion requirement does not apply under paragraph (b)(2) of this section).
(2) For each Covered Offense, the individual could have been sentenced to a term of confinement in a correctional facility of three years or less and/or a fine of
(3) Jail time under paragraph (a)(2) of this section is calculated based on the time an individual spent incarcerated as a punishment or a sanction--not as pretrial detention--and does not include probation or parole where an individual was restricted to a particular jurisdiction or was required to report occasionally to an individual or a specific location. Jail time includes confinement to a psychiatric treatment center in lieu of a jail, prison, or house of correction on mental-competency grounds. The definition is not intended to include either of the following: persons who are restricted to a substance-abuse treatment program facility for part or all of the day; or persons who are ordered to attend outpatient psychiatric treatment.
(4) If there are two convictions or program entries for a Covered Offense, each conviction or program entry was entered at least three years prior to the date an application would otherwise be required, except as provided in paragraph (b)(1) of this section, and each Covered Offense was not committed against an IDI or insured credit union.
(b) Other types of offenses for which the de minimis exception applies and no application is required--(1) Age of person at time of Covered Offense. If there are two convictions or program entries for a Covered Offense, and the actions that resulted in both convictions or program entries all occurred when the individual was 21 years of age or younger, then the de minimis criteria in paragraph (a)(3) of this section shall be met if the convictions or program entries were entered at least 18 months prior to the date an application would otherwise be required.
(2) Convictions or program entries for insufficient funds checks. Convictions or program entries of record based on the writing of "bad" or insufficient funds check(s) shall be considered de minimis offenses under this provision if the following conditions apply:
(i) The aggregate total face value of all "bad" or insufficient funds check(s) cited across all the conviction(s) or program entry(ies) for "bad" or insufficient funds checks is
(ii) No IDI or insured credit union was a payee on any of the "bad" or insufficient funds checks that were the basis of the conviction(s) or program entry(ies); and
(iii) The individual has no more than one other de minimis offense under this section.
(3) Convictions or program entries for small-dollar, simple theft. Convictions or program entries based on the simple theft of goods, services, or currency (or other monetary instrument) shall be considered de minimis offenses under this paragraph (b) if the following conditions apply:
(i) The value of the currency, goods, or services taken is
(ii) The theft was not committed against an IDI or insured credit union;
(iii) The individual has no more than one other de minimis offense under this section; and
(iv) If there are two de minimis offenses under this section, each conviction or program entry was entered at least three years prior to the date an application would otherwise be required, or at least 18 months prior to the date an application would otherwise be required if the actions that resulted in the conviction or program entry all occurred when the individual was 21 years of age or younger.
(v) Simple theft excludes burglary, forgery, robbery, identity theft, and fraud.
(c) Fidelity bond coverage and disclosure to institutions. Any person who meets the criteria under this section shall be covered by a fidelity bond to the same extent as others in similar positions, and must disclose the presence of the conviction(s) or program entry(ies) to all IDIs in the affairs of which that person intends to participate.
(d) Non-qualifying convictions or program entries. No conviction or program entry for a violation of the Title 18 sections set out in 12 U.S.C. 1829(a)(2) can qualify under any of the de minimis exceptions set out in this section.
Forms and instructions should be obtained from the
(a) Criminal-history records. In reviewing an application, the
(1) Primarily rely on the criminal history record of the
(2) Provide such record to the applicant to review for accuracy.
(b) Certified copies. The
(c) Ultimate determinations. The ultimate determinations in assessing an application are whether the person has demonstrated their fitness to participate in the conduct of the affairs of an IDI, and whether the affiliation, ownership, control, or participation by the person in the conduct of the affairs of the institution may constitute a threat to the safety and soundness of the institution or the interests of its depositors or threaten to impair public confidence in the institution.
(d) Individualized assessment. When evaluating applications, the
(1) Whether the conviction or program entry is subject to section 19, and the specific nature and circumstances of the offense;
(2) Whether the participation directly or indirectly by the person in any manner in the conduct of the affairs of the IDI constitutes a threat to the safety and soundness of the institution or the interests of its depositors or threatens to impair public confidence in the institution;
(3) Evidence of rehabilitation, including the applicant's age at the time of the conviction or program entry, the time that has elapsed since the conviction or program entry, and the relationship of the individual's offense to the responsibilities of the applicable position;
(4) The individual's employment history, letters of recommendation, certificates documenting participation in substance-abuse programs, successful participating in job preparation and educational programs, and other relevant evidence;
(5) The ability of management of the IDI to supervise and control the person's activities;
(6) The level of ownership or control the person will have of an IDI;
(7) The applicability of the IDI's fidelity bond coverage to the person; and
(8) Any additional factors in the specific case that appear relevant to the application or the applicant including, but not limited to, the opinion or position of the primary Federal or State regulator.
(e) No re-consideration of guilt. The question of whether a person, who was convicted of a crime or who agreed to a program entry, was guilty of that crime shall not be at issue in a proceeding under this subpart or under 12 CFR part 308, subpart M.
(f) Factors considered for enumerated offenses. The foregoing factors will also be applied by the
(g) Mandatory conditions of approval. All approvals and orders will be subject to the condition that the person be covered by a fidelity bond to the same extent as others in similar positions. If the
(h) Institution-sponsored applications: work at same employer. When deemed appropriate by the
(i) Work at a different employer after certain approvals. In situations in which an approval has been granted for a person to participate in the affairs of a particular IDI and the person subsequently seeks to participate at another IDI, another application must be submitted and approved by the
(a) The
(b) The denial will also notify the applicant that a written request for a hearing under 12 CFR part 308, subpart M, may be filed with the
(a) An application under section 19 may be made in writing at any time more than one year after the issuance of a decision denying an application under section 19. If the original denial is subject to a request for a hearing, then the subsequent application may be filed at any time more than one year after the decision of the FDIC Board of Directors, or its designee, denying the application. Unless with the passage of time the individual is no longer subject to section 19, the prohibition against participating in the affairs of an IDI under section 19 shall continue until the individual has been granted consent in writing to participate in the affairs of an IDI by the Board of Directors or its designee.
(b) An institution-sponsored application is not subject to the one-year waiting period if the application--
(1) Follows the denial of an individual application; or
(2) Follows the denial of an institution-sponsored application and the subsequent application is sponsored by a different institution or is for a different position.
PART 308--RULES OF PRACTICE AND PROCEDURE
3. The authority citation for part 308 continues to read as follows:
Authority:5 U.S.C. 504, 554-557; 12 U.S.C. 93(b), 164, 505, 1464, 1467(d), 1467a, 1468, 1815(e), 1817, 1818, 1819, 1820, 1828, 1829, 1829(b), 1831i, 1831m(g)(4), 1831o, 1831p-1, 1832(c), 1884(b), 1972, 3102, 3108(a), 3349, 3909, 4717, 5412(b)(2)(C), 5414(b)(3); 15 U.S.C. 78(h) and (i), 78o(c)(4), 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; Pub. L. 104-134, sec. 31001(s), 110 Stat. 1321; Pub. L. 109-351, 120 Stat. 1966; Pub. L. 111-203, 124 Stat. 1376; Pub. L. 114-74, sec. 701, 129 Stat. 584.
4. Revise
The rules and procedures set forth in this subpart shall apply to an application filed under section 19 of the FDI Act, 12 U.S.C. 1829 (section 19), and 12 CFR part 303, subpart L, by an insured depository institution (IDI), depository institution holding company, or an individual (any of which could be termed an applicant). Section 19 states that if an individual has been convicted of any criminal offense involving dishonesty, a breach of trust, or money laundering, or who has agreed to enter into a pretrial diversion or similar program in connection with the prosecution of such offense, the individual must seek the prior written consent of the
5. Amend
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(b) Burden of proof. The burden of going forward with a prima facie case shall be upon the
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(d) Written submissions in lieu of hearing. The applicant may in writing waive a hearing and elect to have the matter determined on the basis of written submissions.
(e) 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 a hearing. If a hearing is waived, and if there has not been a written submission in lieu of a hearing, the individual shall remain prohibited under section 19.
(f) Decision by Board of Directors or its designee. Within 60 days following the Administrative Officer's certification of the record to the Board of Directors or its designee, the Board of Directors or its designee shall notify the applicant whether the individual shall remain prohibited under section 19. The notification shall state the basis for any decision of the Board of Directors or its designee that is adverse to the applicant.
By order of the Board of Directors.
Dated at
Assistant Executive Secretary.
[FR Doc. 2023-23853 Filed 11-13-23;
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