Proposed SOP - Section 19 - 83 FR 807 (Jan 8 2018)

Federal Register / Vol. 83, No. 5 / Monday, January 8, 2018 / Notices
send the information related to this
environmental review to all individuals,
organizations, and government entities
interested in and/or potentially affected
by the proposed project.
If we publish and distribute the EA,
copies of the EA will be sent to the
environmental mailing list for public
review and comment. If you would
prefer to receive a paper copy of the
document instead of the CD version or
would like to remove your name from
the mailing list, please return the
attached Information Request (appendix
2).

sradovich on DSK3GMQ082PROD with NOTICES

Becoming an Intervenor
In addition to involvement in the EA
scoping process, you may want to
become an ‘‘intervenor’’ which is an
official party to the Commission’s
proceeding. Intervenors play a more
formal role in the process and are able
to file briefs, appear at hearings, and be
heard by the courts if they choose to
appeal the Commission’s final ruling.
An intervenor formally participates in
the proceeding by filing a request to
intervene. Instructions for becoming an
intervenor are in the Document-less
Intervention Guide under the e-filing
link on the Commission’s website.
Motions to intervene are more fully
described at http://www.ferc.gov/
resources/guides/how-to/intervene.asp.
Additional Information
Additional information about the
project is available from the
Commission’s Office of External Affairs,
at (866) 208–FERC, or on the FERC
website at www.ferc.gov using the
eLibrary link. Click on the eLibrary link,
click on General Search and enter the
docket number, excluding the last three
digits in the Docket Number field (i.e.,
CP18–12–000). Be sure you have
selected an appropriate date range. For
assistance, please contact FERC Online
Support at [email protected]
or toll free at (866) 208–3676, or for
TTY, contact (202) 502–8659. The
eLibrary link also provides access to the
texts of formal documents issued by the
Commission, such as orders, notices,
and rulemakings.
In addition, the Commission offers a
free service called eSubscription which
allows you to keep track of all formal
issuances and submittals in specific
dockets. This can reduce the amount of
time you spend researching proceedings
by automatically providing you with
notification of these filings, document
summaries, and direct links to the
documents. Go to www.ferc.gov/docsfiling/esubscription.asp.
Finally, public sessions or site visits
will be posted on the Commission’s

VerDate Sep<11>2014

16:29 Jan 05, 2018

Jkt 244001

calendar located at www.ferc.gov/
EventCalendar/EventsList.aspx along
with other related information.
Dated: January 2, 2018.
Kimberly D. Bose,
Secretary.
[FR Doc. 2018–00089 Filed 1–5–18; 8:45 am]
BILLING CODE 6717–01–P

FEDERAL DEPOSIT INSURANCE
CORPORATION
Proposed Statement of Policy for
Participation in the Conduct of the
Affairs of an Insured Depository
Institution by Persons Who Have Been
Convicted or Have Entered a Pretrial
Diversion or Similar Program for
Certain Offenses Pursuant to Section
19 of the Federal Deposit Insurance
Act
Federal Deposit Insurance
Corporation (FDIC).
ACTION: Notice.
AGENCY:

The FDIC seeks to update its
Statement of Policy (SOP), which is
issued pursuant to Section 19 of the
Federal Deposit Insurance Act (FDI Act)
(Section 19). Section 19 prohibits,
without the prior written consent of the
FDIC, 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 or similar program
in connection with the prosecution for
such an offense.
Based upon its experience with the
application of the SOP since 1998, the
FDIC is now proposing to revise and
issue an updated SOP and rescind the
current SOP, and is seeking comments
on the proposed revisions by issuing
this Federal Register Notice. Notably, in
addition to minor format and technical
changes, as well as clarifying changes,
the FDIC is proposing to expand its
current de minimis exception to
encompass insufficient funds checks of
aggregate moderate value; small dollar,
simple theft; and isolated, minor
offenses committed by young adults.
These carefully measured changes are
intended to reduce regulatory burden by
decreasing the number of covered
offenses that will require an application,
while ensuring that insured institutions
are not subject to risk by convicted
persons.

SUMMARY:

Comments must be received on
or before March 9, 2018.
ADDRESSES: You may submit comments,
identified by Section 19, by any of the
following methods:
DATES:

PO 00000

Frm 00025

Fmt 4703

Sfmt 4703

807

• Agency website: https://
www.fdic.gov/regulations/laws/federal/.
Follow instructions for submitting
comments on the Agency website.
• Email: [email protected]. Include
Section 19 on the subject line of the
message.
• Mail: Robert E. Feldman, Executive
Secretary, Attention: Comments, Federal
Deposit Insurance Corporation, 550 17th
Street NW, Washington, DC 20429.
• Hand Delivery: Comments may be
hand delivered to the guard station at
the rear of the 550 17th Street Building
(located on F Street) on business days
between 7:00 a.m. and 5:00 p.m.
Public Inspection: All comments
received will be posted without change
to https://www.fdic.gov/regulations/
laws/federal/, including any personal
information provided. Paper copies of
public comments may be ordered from
the FDIC Public Information Center,
3501 North Fairfax Drive, Room E–1002,
Arlington, VA 22226 by telephone at
(877) 275–3342 or (703) 562–2200.
FOR FURTHER INFORMATION CONTACT:
Brian Zeller, Review Examiner, (319)
395–7394 x4125, or Larisa Collado,
Section Chief, (202) 898–8509, in the
Division of Risk Management
Supervision; or Michael P. Condon,
Counsel, (202) 898–6536, or Andrea
Winkler, Supervisory Counsel, (202)
898–3727 in the Legal Division.
SUPPLEMENTARY INFORMATION:
I. Background
Section 19 of the FDI Act (12 U.S.C.
1829) prohibits, without the prior
written consent of the FDIC, a person
convicted of any criminal offense
involving dishonesty or breach of trust
or money laundering (covered offenses),
or who has agreed to enter into a pretrial
diversion or similar program in
connection with a prosecution for such
offense, from becoming or continuing as
an institution-affiliated party (IAP),
owning or controlling, directly or
indirectly an insured depository
institution (insured institution), or
otherwise participating, directly or
indirectly, in the conduct of the affairs
of an insured institution. Further, the
law forbids an insured institution from
permitting such a person to engage in
any conduct or to continue any
relationship prohibited by Section 19. It
also imposes a ten-year ban against the
FDIC’s consent for a person convicted of
certain crimes enumerated in Title 18 of
the United States Code, absent a motion
by the FDIC and approval by the
sentencing court.
The FDIC issued, after notice and
comment, the current SOP for Section

E:\FR\FM\08JAN1.SGM

08JAN1

808

Federal Register / Vol. 83, No. 5 / Monday, January 8, 2018 / Notices

19 of the FDI Act in December 1998 1 to
provide the public with guidance
relating to Section 19 and the FDIC’s
application thereof. The 1998 SOP,
among other things, instituted a set of
criteria to provide for blanket approval
of certain low-risk crimes, and for
persons convicted of such de minimis
crimes to forgo filing an application.
A clarification to the SOP was issued
in 2007, based on the 2006 amendment
to Section 19 of the FDI Act by the
Financial Services Regulatory Relief Act
of 2006, Public Law 109–351, § 710,
which modified Section 19 to include
coverage of institution-affiliated parties
(IAPs) participating in the affairs of
bank holding companies, or savings and
loan holding companies, and gave
supervisory authority over such entities
to the Board of Governors of the Federal
Reserve System (Federal Reserve Board)
and the Office of Thrift Supervision
(OTS), respectively.2 The FDIC, in 2011,
further clarified the SOP as to: (i) The
applicability of Section 19 to IAPs of
bank and savings and loan holding
companies; (ii) the meaning of the term
‘‘complete expungement;’’ and (iii) the
factors for considering which
convictions are considered de minimis.
76 FR 28031 (May 13, 2011). In
December of 2012, the FDIC modified
the de minimis exception to filing by
changing the amount of the maximum
potential fine to qualify for de minimis
treatment from $1,000 to $2,500. The
modification also changed the limit on
the amount of jail time needed to
qualify for the de minimis exception
from no jail time served to a maximum
number of three days spent in jail. 77 FR
74847 (Dec 18, 2012)).
The FDIC is again proposing to amend
the SOP as more fully set forth below,
and seeks comments on a number of the
proposed changes as set out forth
Section II of this Federal Register
Notice. The proposed changes are
identified by the area of the SOP that is
being considered for the revision.
When final, the revised SOP, after
consideration of any comments
received, will be published in the
1 63

FR 66177 (Dec. 1, 1998).
FDIC amended the SOP by including a
footnote which noted the authority of the Federal
Reserve Board and the OTS with regard to bank and
savings and loan holding companies under Section
19. 72 FR 73823 (Dec. 28, 2007) with correction
issued at 73 FR 5270 (Jan. 29, 2008). In May of
2011, the FDIC subsequently eliminated the
footnote added in December of 2007 and
incorporated the change directly into the text of the
SOP. It also noted the coming transfer of authority
under the Dodd-Frank Wall Street Reform and
Consumer Protection Act, Public Law 111–202,
§ 312 (2010) (Dodd-Frank) of savings and loan
holding company jurisdiction to the Federal
Reserve Board.

sradovich on DSK3GMQ082PROD with NOTICES

2 The

VerDate Sep<11>2014

16:29 Jan 05, 2018

Jkt 244001

Federal Register and on the FDIC’s
website at www.fdic.gov.
II. Revisions to the Statement of Policy
The SOP will be revised in the
following areas:
1. Introductory Section
In addition to some minor
grammatical and format changes, the
introductory section includes language
that would allow an FDIC-supervised
insured institution, in the case of a
prospective employee or other person
seeking to participate in the affairs of
the institution, to make a conditional
offer of employment to such a person,
contingent on the completion of a
background check satisfactory to the
institution and a determination that the
person is not barred by the provisions
of Section 19. In such a case, the SOP
makes clear that the prospective
employee or person seeking to
participate in the affairs of the
institution will not be permitted to work
at or participate in the affairs of, the
institution unless the applicant’s
background check is completed to the
satisfaction of the institution and a
determination is made that the
applicant’s employment or participation
at the institution is not barred by
Section 19. Related to this change is an
alteration of the language that limits the
FDIC’s determination whether an
institution’s inquiry as to whether
Section 19 applies is reasonable.
The FDIC is seeking to clarify its
supervisory role regarding Section 19
and seeks comments whether the use of
a conditional offer of employment is a
practice that is helpful to FDICsupervised institutions in their hiring
practices and in their determination
whether Section 19 bars an applicant
from being employed at, or participating
in, the affairs of the institution.
2. A. Scope of Section 19
In addition to some minor
grammatical and format changes, the
FDIC is proposing to provide a more
consistent view of the application of
Section 19 to certain persons who are
not employees, officers, directors or
shareholders of an insured institution.
The definition of persons covered by
Section 19 includes ‘‘institution
affiliated parties’’ (a term which is
defined in 12 U.S.C. 1813(u) and that is
broader than employees, officers,
directors or shareholders). The FDIC
believes that the key concern under
Section 19 is whether a person
participates directly or indirectly in the
affairs of an insured institution,
regardless of their formal relationship
with the institution. Therefore, the

PO 00000

Frm 00026

Fmt 4703

Sfmt 4703

example currently set out in the SOP
regarding employees of the insured
institution’s holding company has been
changed to be more consistent with the
language of Section 19 and the
definition contained in 12 U.S.C.
1813(u), to focus on the ability of
employees to define and direct the
management or affairs of the insured
institution. Similarly, the concept of
participating in the affairs of an insured
institution has been added to the
example of directors and officers of
affiliates, subsidiaries or joint ventures
to more accurately reflect the concerns
of Section 19.
In addition, the inclusion of the
definition of independent contractors,
as contained in 12 U.S.C. 1813(u), has
been deleted as unnecessary in
determining whether Section 19 would
apply at the time the person
commenced work for, or participated in
the affairs of, the insured institution.
Further, the FDIC deleted language
referencing the change that expanded
Section 19’s application to bank and
savings and loan holding companies.
The language now simply notes that if
a person also seeks to participate in the
affairs of a bank or savings and loan
holding company, they may be required
to comply with any requirements of the
Federal Reserve Board under 12 U.S.C.
1829(d) & (e).
The FDIC seeks comments on the
consistency of the application of Section
19 to officers and directors of bank and
savings and loan holding companies,
affiliates, subsidiaries and joint ventures
as well as independent contractors.
3. B. Standards for Determining
Whether an Application is Required
In addition to some minor
grammatical and format changes, the
FDIC is proposing a number of changes
in this section of the SOP which
pertains to determining whether an
application under Section 19 is
required. In the introductory paragraph
of this section, the FDIC has included
language addressing when an
application will be considered by the
FDIC which states that the FDIC will not
consider an application unless all of the
sentencing requirements associated with
the conviction, or the conditions
imposed by a pretrial diversion or
similar program, are completed, and the
court’s decision must be considered
final under the procedures of the
applicable jurisdiction.
The FDIC seeks comments on whether
the requirement that an applicant
completes the sentencing requirements
of a conviction, or the conditions
imposed by a program entry, and that
the case is considered final are relevant

E:\FR\FM\08JAN1.SGM

08JAN1

sradovich on DSK3GMQ082PROD with NOTICES

Federal Register / Vol. 83, No. 5 / Monday, January 8, 2018 / Notices
factors to accepting an application
under Section 19.
In subsection B(1) ‘‘Convictions’’, the
FDIC has added additional language to
address questions regarding
expungements. Previously, the FDIC
simply stated that an expungement was
considered a complete expungement
only when the conviction of record was
no longer accessible even by court
order. However, it is clear that in recent
times, the existence of such records
cannot always be completely sealed or
destroyed. If the expungement is
intended to be complete under the law
of the jurisdiction that issues the
expungement, and the jurisdiction
intends that no governmental body or
court can use the prior conviction or
program entry for any subsequent
purpose, then the SOP makes clear that
the fact that the records have not been
timely destroyed, or that there exist
copies of the records that are not
covered by the order sealing or
destroying them, will not prevent the
expungement from being considered
complete for the purposes of Section 19.
The FDIC seeks comment on whether
this interpretation would aid in
determining if an expungement is
complete.
In this section, the FDIC also proposes
language that treats certain convictions
that have been set aside or reversed after
the sentencing requirements have been
completed the same as pretrial diversion
or similar programs are treated, unless
the reason that the conviction was set
aside or reversed is based on a finding
on the merits that the conviction was
wrongful.
Given the wide range or pretrial
diversion and similar programs, the
FDIC seeks comments on whether this
language serves to properly include as
pretrial diversion or similar programs,
programs in jurisdictions that set aside
or reverse convictions in a manner that,
in effect, operates as a pretrial diversion
or similar program.
In subsection B(2) ‘‘Pretrial Diversion
or Similar Program’’, the FDIC is also
clarifying that whether a program
constitutes a pretrial diversion or
similar program is determined by
relevant Federal, state or local law, and
if that program is not so designated
under applicable law, then the
determination will be made by the FDIC
on a case-by-case basis.
The FDIC is seeking comments
whether using some or all of the
elements of a pretrial diversion program
as cited in the SOP are appropriate for
determining on a case-by-case basis
whether a procedure is a similar
program for the purposes of Section 19,
and whether a determination that

VerDate Sep<11>2014

16:29 Jan 05, 2018

Jkt 244001

considers such elements is required
under the statute.
In subsection B(3) ‘‘Dishonesty or
Breach of Trust’’, the FDIC proposes
language that would allow certain minor
drug convictions or program entries
which currently require an application
to fall within the de minimis exceptions
to filing that are set out in subsection
B(5).
The FDIC seeks comments whether
allowing the de minimis treatment for
certain minor drug crimes would be
beneficial.
In subsection B(4) ‘‘Youthful Offender
Adjudgments’’, the FDIC has added
language confirming that an
adjudication under ‘‘youthful offender’’
statutes is not covered by Section 19 at
all and, therefore, is not a matter
covered under the de minimis exception
to the filing requirements.
In subsection B(5) ‘‘De Minimis
Offenses’’, the FDIC, based upon its
experiences and past Section 19
applications that it has reviewed since
the current SOP was adopted in 1998,
has decided to create several additional
conditions under which the de minimis
exception to filing may apply, and has
restructured the pertinent subsection.
The subsection has been divided into
two parts. The first (a) ‘‘In General’’,
restates the current version of the de
minimis exception to filing, and moves
the current provision related to bad or
insufficient funds checks into the
second part of the subsection. The FDIC
has also made one modification to the
provision addressing imprisonment
and/or fines. In order to clarify what the
FDIC intends by the concept of jail time,
the FDIC is including explanatory
language which indicates that a
significant restraint on a person’s
freedom of movement will be
considered jail time. The intent is to
address situations such as work release
or other situations that allow a person’s
release to perform a specific function or
functions, or a release in which a person
must report continuously to a facility
that is not itself a jail for some portion
of the day or night.
The FDIC is seeking comments as to
whether this clarification of what
constitutes jail time for the purposes of
the SOP is useful and levels the playing
field among those who are convicted.
A second part of subsection (5), (b)
‘‘Additional Applications of the De
Minimis Exception to Filing’’, includes
an expanded version of the current
provision related to bad or insufficient
funds checks as well as two additional
limited circumstances in which the de
minimis exception to filing applies. The
first new exception that the FDIC is
proposing would create an age-based

PO 00000

Frm 00027

Fmt 4703

Sfmt 4703

809

exception to the filing requirement. A
person with a covered conviction or
program entry that occurred when the
individual was 21 or younger at the time
of the conviction or program entry, who
also meets the general de minimis
exception to filing and who has
completed all sentencing or program
requirements, will qualify for this de
minimis exception to filing if it least 30
months have passed prior to the date an
application would otherwise be
required.
A second new de minimis exception
to filing is proposed for convictions or
program entries for small-dollar theft.
The exception applies if the conviction
or program entry is based on a small
dollar theft of goods, services, and/or
currency (or other monetary instrument)
and the aggregate value of the goods,
services and/or currency was $500 or
less at the time of the conviction or
program entry. Additionally, the
individual must have only one
conviction or program entry under
Section 19, and five years must have
passed since the conviction or program
entry. Simple theft for the purposes of
this exception to filing does not include
burglary, forgery, robbery,
embezzlement, identity theft and/or
fraud. Additionally, if the conviction or
program entry occurred when the
individual was 21 or younger, then
proposal reduces the five-year period to
30 months.
The FDIC also proposes to modify the
current de minimis exception to filing
for convictions or program entries
related to bad or insufficient funds
checks, to cover multiple convictions or
program entries for bad or insufficient
funds checks, provided that the
aggregate value of all the checks across
all the convictions or program entries is
$1,000 or less. The current requirement
that there are no other convictions or
program entries subject to Section 19,
and that no insured financial institution
or credit union was a payee on any of
the checks, remains.
Lastly, the FDIC proposes to add
qualifying language that no conviction
for a violation of certain Title 18
provisions, as set out in 12 U.S.C.
1829(a)(2), can qualify under any of the
de minimis exceptions to filing that are
set out in subsection (5).
The FDIC is seeking comments
regarding whether these expansions of
the de minimis exceptions to filing are
appropriate and reasonable, and
whether individuals with the minor
offenses covered in the expansion of the
exceptions should be able to participate
in the affairs of an insured institution
without filing a Section 19 application.

E:\FR\FM\08JAN1.SGM

08JAN1

810

Federal Register / Vol. 83, No. 5 / Monday, January 8, 2018 / Notices

4. C. Procedures
The FDIC has added language to this
subsection clarifying that individual
applicants file their application with the
FDIC Regional Office covering the state
where the person lives.
5. D. Evaluation of Section 19
Applications
The FDIC has redrafted some of the
factors set forth in the SOP for
considering a Section 19 application to
more closely follow the provisions for
considering applications set forth in the
FDIC’s rules at 12 CFR 308.157.
Additionally, the FDIC has noted that
under the provision that allows the
FDIC to consider other appropriate
factors, the FDIC may contact the
primary Federal and/or state regulator to
aid in the evaluation of an application.
The FDIC seeks comment on whether
there remains a material inconsistency
between the factors used in the
proposed SOP and the regulation.
Additionally, in this section, the FDIC
has added clarifying language that states
that the utilization of the evaluation
factors related to the ten-year ban
provision refers to the restriction in 12
U.S.C. 1829(a)(2).
Lastly, the FDIC is proposing to add
clarifying language related to banksponsored applications that makes clear
that changes in an individual’s duties at
the insured institution which filed a
previously approved Section 19
application on that individual’s behalf
will require a new application. There is
also a clarification that a new
application will be required if an
individual covered by a previously
approved bank-sponsored application
desires to participate in the affairs of
another insured depository institution.
The FDIC seeks comments on whether
the changes to this subsection
sufficiently clarify the requirement for
previously approved bank-sponsored
applications—first, that the bank seek
additional approval of the FDIC when
the duties previously approved by the
FDIC change and second, that a new
application must be filed when the
individual covered by the previous bank
sponsored application wishes to work at
a different insured institution.

sradovich on DSK3GMQ082PROD with NOTICES

III. Paperwork Reduction Act
In accordance with section 3512 of
the Paperwork Reduction Act of 1995,
44 U.S.C. 3501 et seq., an agency may
not conduct or sponsor, and a person is
not required to respond to, a collection
of information unless it displays a
currently valid Office of Management
and Budget (OMB) control number.
These modifications to the SOP for

VerDate Sep<11>2014

16:29 Jan 05, 2018

Jkt 244001

Section 19 of the FDI Act include
clarification of reporting requirements
in an existing FDIC information
collection, entitled Application
Pursuant to Section 19 of the Federal
Deposit Insurance Act (3064–0018), that
should result in a decrease in the
number of applications filed.
Specifically, the revised policy
statement broadens the application of
the de minimis exception to filing an
application due to the minor nature of
the offenses and the low risk that the
covered party would pose to an insured
institution based on the conviction or
program entry. By modifying these
provisions, the FDIC believes that there
will be a reduction in the submission of
applications where approval has been
granted by virtue of the de minimis
offenses exceptions to filing in the
policy statement. In its last submission
with OMB, the FDIC indicated that it
will receive approximately 75
applications per year. The FDIC
estimates that the revised SOP would
reduce the number of applications filed
each year by approximately 28 percent
bringing the number of applications
each year down to approximately 54.
This change in burden will be submitted
to OMB as a non-significant,
nonmaterial change to an existing
information collection. The estimated
new burden for the information
collection is as follows:
Title: ‘‘Application Pursuant to
Section 19 of the Federal Deposit
Insurance Act’’.
Affected Public: Insured depository
institutions and individuals.
OMB Number: 3064–0018.
Estimated Number of Respondents:
54.
Frequency of Response: On occasion.
Average Time per Response: 16 hours.
Estimated Annual Burden: 864 hours.
Comments are invited on:
(a) Whether this collection of
information is necessary for the proper
performance of the FDIC’s functions,
including whether the information has
practical utility;
(b) the accuracy of the estimates of the
burden of the information collection,
including the validity of the
methodologies 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
All comments will become a matter of
public record. Comments may be

PO 00000

Frm 00028

Fmt 4703

Sfmt 4703

submitted to the FDIC by any of the
following methods:
• http://www.FDIC.gov/regulations/
laws/federal/.
• Email: [email protected]. Include
the name and number of the collection
in the subject line of the message.
• Mail: Robert E. Feldman, Executive
Secretary, Attention: Comments, Federal
Deposit Insurance Corporation, 550 17th
Street NW, Washington, DC 20429.
• Hand Delivery: Comments may be
hand-delivered to the guard station at
the rear of the 550 17th Street Building
(located on F Street), on business days
between 7 a.m. and 5 p.m.
A copy of the comment may also be
submitted to the OMB Desk Officer for
the FDIC, Office of Information and
Regulatory Affairs, Office of
Management and Budget, 725 17th
Street NW, #10235, Washington, DC
20503; by facsimile to (202) 395–5806;
or by email to: oira_submission@
omb.eop.gov, Attention, Federal
Banking Agency Desk Officer. All
comments should refer to the
‘‘Application Pursuant to Section 19 of
the Federal Deposit Insurance Act,’’
OMB No. 3064–0018.
IV. Proposed Statement of Policy for
Section 19
For the reasons set forth above, the
entire text of the proposed FDIC
Statement of Policy for Section 19 is
stated as follows.
FDIC Statement of Policy for Section 19
of the FDI Act
Section 19 of the Federal Deposit
Insurance Act (12 U.S.C. 1829)
prohibits, without the prior written
consent of the Federal Deposit
Insurance Corporation (FDIC), a person
convicted of any criminal offense
involving dishonesty or breach of trust
or money laundering (covered offenses),
or who has agreed to enter into a pretrial
diversion or similar program (program
entry) in connection with a prosecution
for such offense, from becoming or
continuing as an institution-affiliated
party, owning or controlling, directly or
indirectly an insured depository
institution (insured institution), or
otherwise participating, directly or
indirectly, in the conduct of the affairs
of the insured institution. In addition,
the law forbids an insured institution
from permitting such a person to engage
in any conduct or to continue any
relationship prohibited by Section 19. It
imposes a ten-year ban against the
FDIC’s consent for persons convicted of
certain crimes enumerated in Title 18 of
the United States Code, absent a motion
by the FDIC and court approval.

E:\FR\FM\08JAN1.SGM

08JAN1

Federal Register / Vol. 83, No. 5 / Monday, January 8, 2018 / Notices

sradovich on DSK3GMQ082PROD with NOTICES

Section 19 imposes a duty upon an
insured institution to make a reasonable
inquiry regarding an applicant’s history,
which consists of taking steps
appropriate under the circumstances,
consistent with applicable law, to avoid
hiring or permitting participation in its
affairs by a person who has a conviction
or program entry for a covered offense.
The FDIC believes that at a minimum,
each insured institution should
establish a screening process that
provides the insured institution with
information concerning any convictions
or program entry pertaining to a job
applicant. This would include, for
example, the completion of a written
employment application that requires a
listing of all convictions and program
entries. In the alternative, for the
purposes of Section 19, an FDICsupervised institution may extend a
conditional offer of employment
contingent on the completion of a
background check satisfactory to the
institution and to determine if the
applicant is barred by Section 19. In
such a case, the job applicant may not
work for or be employed by the insured
institution until such time that the
applicant is determined to not be barred
under Section 19. The FDIC will look to
the circumstances of each situation for
FDIC-supervised institutions to
determine whether the inquiry is
reasonable.
Section 19 applies, by operation of
law, as a statutory bar to participation
absent the written consent of the FDIC.
Upon notice of a conviction or program
entry, an application must be filed
seeking the FDIC’s consent prior to the
person’s participation. The purpose of
an application is to provide the
applicant an opportunity to demonstrate
that, notwithstanding the bar, a person
is fit to participate in the conduct of the
affairs of an insured institution without
posing a risk to its safety and soundness
or impairing public confidence in that
institution. The burden is upon the
applicant to establish that the
application warrants approval.
A. Scope of Section 19
Section 19 covers institution-affiliated
parties, as defined by 12 U.S.C. 1813(u)
and others who are participants in the
conduct of the affairs of an insured
institution. This Statement of Policy
applies only to insured institutions,
their institution-affiliated parties, and
those participating in the affairs of an
insured depository institution.
Therefore, all employees of an insured
institution fall within the scope of
Section 19. In addition, those deemed to
be de facto employees as determined by
the FDIC based upon generally

VerDate Sep<11>2014

16:29 Jan 05, 2018

Jkt 244001

applicable standards of employment
law, will also be subject to Section 19.
Whether other persons who are not
institution-affiliated parties are covered
depends upon their degree of influence
or control over the management or
affairs of an insured institution. For
example, Section 19 would not apply to
persons who are merely employees of an
insured institution’s holding company,
but would apply to its directors and
officers to the extent that they have the
power to define and direct the
management or affairs of the insured
institution. Similarly, directors and
officers of affiliates, subsidiaries or joint
ventures of an insured institution or its
holding company will be covered if they
participate in the affairs of the insured
institution or are in a position to
influence or control the management or
affairs of the insured institution.
Typically, an independent contractor
does not have a relationship with the
insured institution other than the
activity for which the insured
institution has contracted. In terms of
participation, an independent contractor
who influences or controls the
management or affairs of the insured
institution would be covered by Section
19. Further, ‘‘person’’ for purposes of
Section 19 means an individual, and
does not include a corporation, firm or
other business entity.
Individuals who file an application
with the FDIC under the provisions of
Section 19 who also seek to participate
in the affairs of a bank or savings and
loan holding company may have to
comply with any filing requirements of
the Board of the Governors of the
Federal Reserve System under 12 U.S.C.
1819(d) & (e).
Section 19 specifically prohibits a
person subject to its coverage from
owning or controlling an insured
institution. For purposes of defining
‘‘control’’ and ‘‘ownership’’ under
Section 19, the FDIC has adopted the
definition of ‘‘control’’ set forth in the
Change in Bank Control Act (12 U.S.C.
1817(j)(8)(B)). A person will be deemed
to exercise ‘‘control’’ if that person has
the power to vote 25 percent or more of
the voting shares of an insured
institution (or 10 percent of the voting
shares if no other person has more
shares) or the ability to direct the
management or policies of the insured
institution. Under the same standards,
person will be deemed to ‘‘own’’ an
insured institution if that person owns
25 percent or more of the insured
institution’s voting stock, or 10 percent
of the voting shares if no other person
owns more. These standards would also
apply to an individual acting in concert
with others so as to have such

PO 00000

Frm 00029

Fmt 4703

Sfmt 4703

811

ownership or control. Absent the FDIC’s
consent, persons subject to the
prohibitions of Section 19 will be
required to divest their control or
ownership of shares above the foregoing
limits.
B. Standards for Determining Whether
an Application Is Required
Except as indicated in paragraph (5),
below, an application must be filed
where there is present a conviction by
a court of competent jurisdiction for a
covered offense by any adult or minor
treated as an adult, or where such
person has entered a pretrial diversion
or similar program regarding that
offense. Before an application is
considered by the FDIC, all of the
sentencing requirements associated with
a conviction or conditions imposed by
the pretrial diversion, or similar
program, 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.
(1) Convictions. There must be
present a conviction of record. Section
19 does not cover arrests, pending cases
not brought to trial, acquittals, or any
conviction that has been reversed on
appeal. A conviction with regard to
which an appeal is pending requires an
application. A conviction for which a
pardon has been granted will require an
application. A conviction that has been
completely expunged is not considered
a conviction of record and will not
require an application. For an
expungement to be considered
complete, no one, including law
enforcement, can be permitted access to
the record even by court order under the
state or Federal law that was the basis
of the expungement. Further, the
jurisdiction issuing the expungement
cannot permit the use of the expunged
conviction in any subsequent
proceeding or review of the person’s
character or fitness. Expungements of
pretrial diversion or similar program
entries will be treated the same as those
for convictions. Convictions that are set
aside or reversed after the applicant has
completed sentencing will be treated
consistent with pretrial diversions or
similar programs unless the court
records reflect that the underlying
conviction was set aside based on a
finding on the merits that such
conviction was wrongful.
(2) Pretrial Diversion or Similar
Program. Program entry, whether formal
or informal, is characterized by a
suspension or eventual dismissal of
charges or criminal prosecution often

E:\FR\FM\08JAN1.SGM

08JAN1

sradovich on DSK3GMQ082PROD with NOTICES

812

Federal Register / Vol. 83, No. 5 / Monday, January 8, 2018 / Notices

upon agreement by the accused to
treatment, rehabilitation, restitution, or
other noncriminal or non-punitive
alternatives. Whether a program
constitutes a pretrial diversion or
similar program is determined by
relevant Federal, state or local law, and,
if not so designated under applicable
law then the determination of whether
it is a pretrial diversion or similar
program will be made by the FDIC on
a case-by-case basis. Program entries
prior to November 29, 1990, are not
covered by Section 19.
(3) Dishonesty or Breach of Trust. The
conviction or program entry must be for
a criminal offense involving dishonesty,
breach of trust or money laundering.
‘‘Dishonesty’’ means directly or
indirectly to cheat or defraud; to cheat
or defraud for monetary gain or its
equivalent; or wrongfully to take
property belonging to another in
violation of any criminal statute.
Dishonesty includes acts involving want
of integrity, lack of probity, or a
disposition to distort, cheat, or act
deceitfully or fraudulently, and may
include crimes which Federal, state or
local laws define as dishonest. ‘‘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.
Whether a crime involves dishonesty
or breach of trust will be determined
from the statutory elements of the crime
itself. All convictions or program entries
for offenses concerning the illegal
manufacture, sale, distribution of, or
trafficking in controlled substances shall
require an application unless they fall
within the provisions for de minimis
offenses set out in (5) below.
(4) Youthful Offender Adjudgments.
An adjudgment by a court against a
person as a ‘‘youthful offender’’ under
any youth offender law, or any
adjudgment as a ‘‘juvenile delinquent’’
by any court having jurisdiction over
minors as defined by state law does not
require an application. Such
adjudications are not considered
convictions for criminal offenses. Such
adjudications do not constitute a matter
covered under Section 19 and is not an
offense or program entry for
determining the applicability of the de
minimis offenses exception to the filing
of an application.
(5) De minimis Offenses.
(a) In General
Approval is automatically granted and
an application will not be required

VerDate Sep<11>2014

16:29 Jan 05, 2018

Jkt 244001

where the covered offense is considered
de minimis, because it meets all of 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 one year or
less and/or a fine of $2,500 or less, and
the individual served three (3) days or
less of jail time. The FDIC considers jail
time to include any significant restraint
on an individual’s freedom of
movement which includes, as part of
the restriction, confinement where the
person may leave temporarily only to
perform specific functions or during
specified times periods or both.
• The conviction or program was
entered at least five years prior to the
date an application would otherwise be
required; and
• The offense did not involve an
insured depository institution or
insured credit union.
(b) Additional Applications of the De
Minimis Offenses Exception to Filing
Age at Time of Conviction or Program
Entry
• A covered conviction or program
entry of record that occurred when the
individual was 21 years of age or
younger at the time of conviction or
program entry that otherwise meets the
general de minimis criteria in (a) above,
will be considered de minimis if the
conviction or program entry was entered
at least 30 months prior to the date an
application would otherwise be
required and all sentencing or program
requirements have been met.
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 a de minimis offense under
this provision and will not be
considered as having involved an
insured depository institution if the
following applies:
• There is no other conviction or
program entry subject to Section 19 and
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 $1,000 or
less and;
• No insured depository institution 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).

PO 00000

Frm 00030

Fmt 4703

Sfmt 4703

Convictions or Program Entries for
Small-Dollar, Simple Theft
• A conviction or program entry
based on a simple theft of goods,
services and/or currency (or other
monetary instrument) where the
aggregate value of the currency, goods
and/or services taken was $500 or less
at the time of conviction or program
entry, where the person has no other
conviction or program entry under
Section 19, and where it has been five
years since the conviction or program
entry (30 months in the case of a person
21 or younger at the time of the
conviction or program entry) is
considered de minimis. Simple theft
excludes burglary, forgery, robbery,
identity theft, and fraud.
Any person who meets the criteria
under (5) above shall be covered by a
fidelity bond to the same extent as
others in similar positions, and shall
disclose the presence of the conviction
or program entry to all insured
institutions in the affairs of which he or
she intends to participate.
Further, 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 to filing set out in 5 above.
C. Procedures
When an application is required,
forms and instructions should be
obtained from, and the application filed
with, the appropriate FDIC Regional
Director. The application must be filed
by an insured institution on behalf of a
person (bank-sponsored) unless the
FDIC grants a waiver of that requirement
(individual waiver). Such waivers will
be considered on a case-by-case basis
where substantial good cause for
granting a waiver is shown. The
appropriate Regional Office for an
individual filing for a waiver of the
institution filing requirement is the
office covering the state where the
person resides.
D. Evaluation of Section 19
Applications
The essential criteria in assessing an
application are whether the person has
demonstrated his or her fitness to
participate in the conduct of the affairs
of an insured institution, and whether
the affiliation, ownership, control, or
participation by the person in the
conduct of the affairs of the insured
institution may constitute a threat to the
safety and soundness of the insured
institution or the interests of its
depositors or threaten to impair public
confidence in the insured institution. In
determining the degree of risk, the FDIC

E:\FR\FM\08JAN1.SGM

08JAN1

sradovich on DSK3GMQ082PROD with NOTICES

Federal Register / Vol. 83, No. 5 / Monday, January 8, 2018 / Notices
will consider, in conjunction with the
factors set out in 12 CFR 308.157:
(1) Whether the conviction or program
entry and the specific nature and
circumstances of the covered offense are
a criminal offense under Section 19;
(2) Whether the participation directly
or indirectly by the person in any
manner in the conduct of the affairs of
the insured institution constitutes a
threat to the safety and soundness of the
insured institution or the interests of its
depositors or threatens to impair public
confidence in the insured institution;
(3) Evidence of rehabilitation
including the person’s reputation since
the conviction or program entry, the
person’s age at the time of conviction or
program entry, and the time that has
elapsed since the conviction or program
entry;
(4) The position to be held or the level
of participation by the person at an
insured institution;
(5) The amount of influence and
control the person will be able to
exercise over the management or affairs
of an insured institution;
(6) The ability of management of the
insured institution to supervise and
control the person’s activities;
(7) The level of ownership the person
will have of the insured institution;
(8) The applicability of the insured
institution’s fidelity bond coverage to
the person; and
(9) Any additional factors in the
specific case that appear relevant
including but not limited to the opinion
or position of the primary Federal and/
or state regulator.
The foregoing criteria will also be
applied by the FDIC to determine
whether the interests of justice are
served in seeking an exception in the
appropriate court when an application
is made to terminate the ten-year ban
under 12 U.S.C. 1829(a)(2) for certain
Federal offenses, prior to its expiration
date.
Some applications can be approved
without an extensive review because the
person will not be in a position to
constitute any substantial risk to the
safety and soundness of the insured
institution. Persons who will occupy
clerical, maintenance, service, or purely
administrative positions generally fall
into this category. A more detailed
analysis will be performed in the case
of persons who will be in a position to
influence or control the management or
affairs of the insured institution. All
approvals and orders will be subject to
the condition that the person shall be
covered by a fidelity bond to the same
extent as others in similar positions. In
cases in which a waiver of the
institution filing requirement has been

VerDate Sep<11>2014

16:29 Jan 05, 2018

Jkt 244001

granted to an individual, approval of the
application will also be conditioned
upon that person disclosing the
presence of the conviction(s) or program
entry(ies) to all insured institutions in
the affairs of which he or she wishes to
participate. When deemed appropriate,
bank sponsored applications are to
allow the person to work in a specific
job at a specific bank and may also be
subject to the condition that the prior
consent of the FDIC will be required for
any proposed significant changes in the
person’s duties and/or responsibilities.
In the case of bank applications such
proposed changes may, in the discretion
of the Regional Director, require a new
application. In situations in which an
approval has been granted for a person
to participate in the affairs of a
particular insured institution and who
subsequently seeks to participate at
another insured depository institution,
another application must be submitted.
By Order of the Board of Directors.
Dated at Washington, DC, the 19th day of
December 2017.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2017–28222 Filed 1–5–18; 8:45 am]
BILLING CODE 6714–01–P

FEDERAL ELECTION COMMISSION
Sunshine Act Meeting
Thursday, January 11,
2018 at 10:00 a.m.

TIME AND DATE:

999 E Street NW, Washington,
DC (Ninth Floor)

PLACE:

This meeting will be open to
the public.

STATUS:

REG 2014–
02: Draft Notice of Proposed
Rulemaking on Independent
Expenditures by Authorized
Committees; Reporting Multistate
Independent Expenditures and
Electioneering Communications
Management and Administrative
Matters
*
*
*
*
*

MATTERS TO BE CONSIDERED:

CONTACT PERSON FOR MORE INFORMATION:

Judith Ingram, Press Officer, Telephone:
(202) 694–1220.
Individuals who plan to attend and
require special assistance, such as sign
language interpretation or other
reasonable accommodations, should
contact Dayna C. Brown, Secretary and

PO 00000

Frm 00031

Fmt 4703

Sfmt 9990

813

Clerk, at (202)694–1040, at least 72
hours prior to the meeting date.
Laura E. Sinram,
Deputy Secretary of the Commission.
[FR Doc. 2018–00211 Filed 1–4–18; 4:15 pm]
BILLING CODE 6715–01–P

FEDERAL RESERVE SYSTEM
Formations of, Acquisitions by, and
Mergers of Bank Holding Companies
The companies listed in this notice
have applied to the Board for approval,
pursuant to the Bank Holding Company
Act of 1956 (12 U.S.C. 1841 et seq.)
(BHC Act), Regulation Y (12 CFR part
225), and all other applicable statutes
and regulations to become a bank
holding company and/or to acquire the
assets or the ownership of, control of, or
the power to vote shares of a bank or
bank holding company and all of the
banks and nonbanking companies
owned by the bank holding company,
including the companies listed below.
The applications listed below, as well
as other related filings required by the
Board, are available for immediate
inspection at the Federal Reserve Bank
indicated. The applications will also be
available for inspection at the offices of
the Board of Governors. Interested
persons may express their views in
writing on the standards enumerated in
the BHC Act (12 U.S.C. 1842(c)). If the
proposal also involves the acquisition of
a nonbanking company, the review also
includes whether the acquisition of the
nonbanking company complies with the
standards in section 4 of the BHC Act
(12 U.S.C. 1843). Unless otherwise
noted, nonbanking activities will be
conducted throughout the United States.
Unless otherwise noted, comments
regarding each of these applications
must be received at the Reserve Bank
indicated or the offices of the Board of
Governors not later than January 29,
2018.
A. Federal Reserve Bank of Atlanta
(Kathryn Haney, Director of
Applications) 1000 Peachtree Street NE,
Atlanta, Georgia 30309. Comments can
also be sent electronically to
[email protected]:
1. Ameris Bancorp, Moultrie, Georgia;
to merge with Atlantic Coast Financial
Corporation, and thereby directly
acquire shares of Atlantic Coast Bank,
both of Jacksonville, Florida.
Board of Governors of the Federal Reserve
System, January 2, 2018.
Ann E. Misback,
Secretary of the Board.
[FR Doc. 2018–00063 Filed 1–5–18; 8:45 am]
BILLING CODE P

E:\FR\FM\08JAN1.SGM

08JAN1