Final SOP - Section 19 - 83 FR 38143 (Aug 3 2018)

Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Notices
As part of
its continuing effort to reduce
paperwork burdens, and as required by
the PRA, 44 U.S.C. 3501–3520, the FCC
invites the general public and other
Federal agencies to take this
opportunity to comment on the
following information collections.
Comments are requested concerning:
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
the accuracy of the Commission’s
burden estimate; ways to enhance the
quality, utility, and clarity of the
information collected; ways to minimize
the burden of the collection of
information on the respondents,
including the use of automated
collection techniques or other forms of
information technology; and ways to
further reduce the information
collection burden on small business
concerns with fewer than 25 employees.
OMB Control Number: 3060–0508.
Title: Parts 1 and 22 Reporting and
Recordkeeping Requirements
Form Number: Not applicable.
Type of Review: Revision of a
currently approved collection.
Respondents: Business or other forprofit entities, Individuals or
households, and State, Local or Tribal
Governments.
Number of Respondents and
Responses: 15,465 respondents; 16,183
responses.
Estimated Time per Response: 0.13
hours–10 hours.
Frequency of Response:
Recordkeeping requirement; On
occasion, quarterly, and semi-annual
reporting requirements; Third-party
disclosure requirement.
Obligation to Respond: Required to
obtain or retain benefits. The statutory
authority for this collection is contained
in 47 U.S.C. 154, 222, 303, 309 and 332.
Total Annual Burden: 2,606 hours.
Annual Cost Burden: $19,138,350.
Privacy Act Impact Assessment: Yes.
Nature and Extent of Confidentiality:
There is no need for confidentiality with
this collection of information. The
information to be collected will be made
available for public inspection.
Applicants may request materials or
information submitted to the
Commission be given confidential
treatment under 47 CFR 0.459 of the
Commission’s rules.
Needs and Uses: Part 22 contains the
technical and legal requirements for
radio stations operating in the Public
Mobile Services. The information
collected is used to determine on a caseby-case basis, whether or not to grant

amozie on DSK3GDR082PROD with NOTICES1

SUPPLEMENTARY INFORMATION:

VerDate Sep<11>2014

18:26 Aug 02, 2018

Jkt 244001

licenses authorizing construction and
operation of wireless
telecommunications facilities to
common carriers. Further, this
information is used to develop statistics
about the demand for various wireless
licenses and/or the licensing process
itself, and occasionally for rule
enforcement purposes.
This revised information collection
reflects deletion of a rule applicable to
all licensees and applicants governed by
Part 22 of the Commission’s rules, as
adopted by the Commission in a Third
Report and Order in WT Docket Nos.
12–40 (Cellular Third R&O) (FCC 18–
92). The Cellular Third R&O deleted
certain Part 22 rules that either imposed
administrative and recordkeeping
burdens that are outdated and no longer
serve the public interest, or that are
largely duplicative of later-adopted
rules and are thus no longer necessary.
Among the rule deletions and of
relevance to this information collection,
the Commission deleted rule section
22.303, resulting in discontinued
information collection for that rule
section.
The Commission is now seeking
approval from the OMB for a revision of
this information collection.
Federal Communications Commission.
Marlene Dortch,
Secretary, Office of the Secretary.
[FR Doc. 2018–16585 Filed 8–2–18; 8:45 am]
BILLING CODE 6712–01–P

FEDERAL DEPOSIT INSURANCE
CORPORATION
Modifications to the Statement of
Policy Pursuant to Section 19 of the
Federal Deposit Insurance Act
Concerning Participation in the
Conduct of the Affairs of an Insured
Institution by Persons Who Have Been
Convicted of Crimes Involving
Dishonesty, Breach of Trust or Money
Laundering or Who Have Entered
Pretrial Diversion Programs for Such
Offenses
Federal Deposit Insurance
Corporation (FDIC).
ACTION: Final policy statement.
AGENCY:

On January 8, 2018, the FDIC
published in the Federal Register notice
of proposed changes to its statement of
policy (SOP) concerning participation in
banking of a person 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 offense pursuant to Section 19 of

SUMMARY:

PO 00000

Frm 00028

Fmt 4703

Sfmt 4703

38143

the Federal Deposit Insurance Act, 12
U.S.C. 1829 and sought comments on
the proposed changes. After the closing
of the comment period, the FDIC
reviewed the comments received and
has made some changes and
clarifications to the proposed statement.
The FDIC is now publishing the SOP in
its final form. After publication the
statement of policy will also be
available on the FDIC’s website.
DATES: Applicable Date: July 19, 2018.
FOR FURTHER INFORMATION CONTACT:
Brian Zeller, Review Examiner (319)
395–7394 ext. 4125, 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 Federal Deposit
Insurance Act, 12 U.S.C. 1829, (FDI Act)
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 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.
Section 19 provides a criminal penalty
for the knowing violation of its
provisions of a fine of not more than
$1,000,000 for each day of the violation
or imprisonment for not more than five
years. The FDIC’s current SOP was
published in December 1998 (63 FR
66177) to provide the public with
guidance relating to Section 19, and the
application thereof.
II. Revisions to the Statement of Policy
Based on Comments Received
Following the close of the comment
period the FDIC reviewed the comments
received. All of the comments were, in
general, supportive of the changes the
FDIC had proposed but several of the
comments suggested additional changes,
modifications or clarifications of both
existing provisions of the statement of
policy and in response to the changes

E:\FR\FM\03AUN1.SGM

03AUN1

38144

Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Notices

on which the FDIC had requested
comment. Having reviewed the
comments the FDIC has accepted some
of those comments, in whole or in part,
as well as making some additional
technical revisions to the SOP.

amozie on DSK3GDR082PROD with NOTICES1

III. Review of Comments Received
The FDIC received seven comment
letters or emails on its proposed
revision of the SOP. The comments
came from a number of different
entities—one from an individual; one on
behalf of an insured depository
institution; two from different
depository institution trade groups; two
from different components of an
umbrella advocacy group; and one from
an organization that provides legal aid
assistance. Of the seven commenters,
three (from the individual and the two
depository institution trade groups)
were supportive of the proposed
changes in the SOP and did not suggest
any additional changes or
modifications. While the remaining four
commenters were, in general,
supportive of the FDIC’s proposed
changes, they suggested additional new
changes, clarifications or modifications,
which are discussed below.
Conditional Offers of Employment
Two comments addressed proposed
changes to the SOP that would allow
institutions to make conditional offers
of employment prior to conducting a
background check into the applicant’s
prior arrests, convictions or entries into
a pre-trial diversion or similar program
(program entry). Both comments
suggested that the FDIC actually instruct
all FDIC-insured institutions to adopt
the practice of making such conditional
offers of employment. The FDIC
declines to make this change for a
number of reasons.
The FDIC’s statutory authority under
Section 19 is focused upon the
requirement that the FDIC provide prior
written consent before an individual
covered by the statute may participate
in the affairs of an insured depository
institution. It does not grant the FDIC
any rule-making authority to impose
conditions or requirements on an
insured depository institution other
than to note that an institution may face
a criminal penalty for acting in violation
of the statute. The FDIC takes the
position that insured depository
institutions should be free to develop
the policies and procedures best suited
to them to ensure compliance with
Section 19. In addition, the FDIC does
not have direct supervisory authority
over insured depository institutions that
are subject to the supervisory authority
of other Federal banking agencies

VerDate Sep<11>2014

18:26 Aug 02, 2018

Jkt 244001

(FBAs). Therefore, it is within the
supervisory authority of the other FBAs
to determine what is satisfactory to
them in reviewing the policies and
procedures their respective supervised
institutions adopt to ensure compliance
with Section 19. Insofar as the SOP
constitutes policy guidance rather than
an enforceable regulation, it is an
inappropriate means for the FDIC to
impose such a mandatory requirement
even on its own supervised insured
depository institutions.
Expungements
Three comments opined that the
language proposed by the FDIC
regarding expungements should be
clarified or expanded. One suggested
that the FDIC accept all expungements
as complete expungements regardless of
whether the records could be accessible
for any other purpose. In considering
the comments, the FDIC agrees that the
proposed language in the SOP should be
altered to clarify when an expungement
is considered complete for Section 19
purposes, while providing the FDIC’s
rationale for allowing at least some
expungements to remove a conviction or
program entry from Section 19’s
coverage.
The FDIC has determined that
expungements that reflect the complete
destruction of the records and the
jurisdiction’s goal to completely remove
the conviction or program entry from a
person’s past, justified the interpretation
that the intent was to, as a matter of law
and fact, place the person in the
position as if conviction or program
entry had never happened. However, in
cases where the FDIC has considered
whether an expungement was complete
it found that in the majority of cases
either the records were still in existence
or the expungement was limited and
allowed the use of the conviction or
program entry records in subsequent
matters including, but not limited to,
questions associated with character and
fitness depending on the jurisdiction’s
public policies.
After reviewing the comments the
FDIC agrees that the language in the
proposed changes to the SOP should be
altered to clarify and more carefully
focus on the type of expungement that
it believes should exclude a conviction
or program entry from the bar in Section
19. First, as noted in the proposed
notice and comment, the existence of
records of convictions and program
entries may be found in multiple places
even if the originals are destroyed in a
timely manner. Second, in considering
the issue of whether the expungement is
one that should be outside the scope of
Section 19 the more fundamental

PO 00000

Frm 00029

Fmt 4703

Sfmt 4703

question is whether the jurisdiction, by
statute or court order, intended that the
conviction or program entry be no
longer in existence and, essentially,
gone from the individual’s history.
Preservation in an expungement statute
or in a court order of the ability to
subsequently use the conviction or
program entry for another purpose,
consistent with the jurisdiction’s public
policy, means that the conviction or
program entry has not been completely
expunged. In such a circumstance, the
FDIC will also review the conviction or
program entry to determine if it should
grant consent for the person to work in,
or otherwise participate in the affairs of,
an insured depository institution. The
FDIC is amending the language in the
SOP to read:
If an order of expungement has been issued
in regard to a conviction or program entry
and is intended by the language in the order
itself, or in the legislative provisions under
which the order was issued, to be a complete
expungement, then the jurisdiction, either in
the order or the underlying legislative
provisions, cannot allow the conviction or
program entry to be used for any subsequent
purpose including, but not limited to, an
evaluation of a person’s fitness or character.
The failure to destroy or seal the records will
not prevent the expungement from being
considered complete for the purposes of
Section 19 in such a case.

One comment suggested that
successful completion of a pretrial
diversion or similar program should be
considered a complete expungement.
The FDIC declines to make the
suggested change for two reasons. First,
the statutory language in Section 19
applies in the same manner to
convictions and program entries.
Second, consistent with the treatment of
expungements discussed, in the context
of a conviction, to the extent a program
entry is still subject to subsequent use
by the jurisdiction where it was entered,
then the FDIC will treat it the same as
a conviction. One comment also
suggested that sealed records should be
excluded from the coverage of Section
19. If the order sealing the records is one
that would be the same as an order of
complete expungement as set out in the
SOP, then the FDIC will treat it in the
same manner as a complete order of
expungement.
Conviction of Record
Two comments focused on the
proposed language in the SOP that
states that convictions that are set aside
or reversed after sentencing
requirements have been completed
remain convictions of record for
purposes of Section 19. As noted by one
of the comments, there are jurisdictions

E:\FR\FM\03AUN1.SGM

03AUN1

Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Notices

amozie on DSK3GDR082PROD with NOTICES1

in which after an individual has
completed all of the sentencing
requirements, the court has set aside the
conviction based upon the completion
of sentencing alone. The FDIC is aware
that such jurisdictions have used the
foregoing process to create what is
essentially a ‘‘pretrial diversion or
similar program.’’ In contrast, courts
may set aside or reverse a conviction on
appeal based upon a procedural or
substantive error in the case. The vast
majority of such cases will have a
finding that addresses the error.
The FDIC believes that where a
conviction has been set aside because of
the completion of a sentence, such a
procedure is, in essence, a pretrial
diversion or similar program, covered
by Section 19. On the other hand, in
cases in which there has been a
procedural or substantive error that
results in the conviction being set aside,
the FDIC will not consider such
convictions as a conviction of record for
Section 19 purposes. In order to clarify
the different treatment, the FDIC has
adjusted the language in the SOP to
clearly recognize that convictions set
aside or reversed on appeal that are
based on a finding that there has been
a procedural or substantive error should
not be considered convictions for the
purposes of Section 19.
Three of the comments focused on the
state of New York’s adjournments in
contemplation of dismissal (ACD)
program (and in general seemingly to
other similar programs), and
recommended that the FDIC explicitly
find that ACDs are not pretrial diversion
or similar programs. As the comments
recognize, however, one or more of the
elements of rehabilitation addressed in
the SOP as a factor for determining
whether something is a pretrial
diversion or similar program can apply
to ACDs. Therefore, it is difficult to treat
ACDs as anything other than a pretrial
diversion or similar program. To the
extent that the FDIC may have
previously issued a letter determining
that a particular individual who had an
ACD was not covered by Section 19, the
FDIC will not retroactively change its
response in that case.
De Miminis Exception
Three of the comments focused on
various aspects of the FDIC’s de minimis
exception to filing, as it currently exists,
or as proposed, and sought additional
clarifications or modifications. One
comment criticized the definition of
‘‘jail time’’ in the proposed SOP, and
suggested that the definition should
remain the traditional definition of that
term, i.e., actual time in jail. The
existing SOP does not include any

VerDate Sep<11>2014

18:26 Aug 02, 2018

Jkt 244001

definition of jail time; however, the
FDIC, based on its experience, is aware
that jurisdictions apply various
approaches to confinement based upon
the nature and circumstances of the
crime. Therefore, the FDIC seeks to
provide a definition of the term ‘‘jail
time’’ that is consistent with its efforts
to apply the de minimis exception to
lesser crimes. In reviewing the
comments, however, the FDIC
determined that the definition, as
proposed, may be too broad given the
interpretations reflected in the
comments, which suggest that such
items as parole may appear to be
included. Therefore, the FDIC has
adjusted the language in the SOP to
define ‘‘jail time’’ as ‘‘the confinement
to a specific facility or building on a
continuous basis . . .’’ The definition is
not intended to include those on
probation or parole who may be
restricted to a particular jurisdiction, or
who must report occasionally to an
individual or to a specified location.
Another comment sought to change
the unlimited time to which Section
19’s coverage applies to criminal
convictions or program entries to only
those occurring within the prior 7 to 10
years. Because the statutory language
contains no limits on the period of time
to which its prohibitions apply, the
FDIC does not have the authority to
change that time. In fact, the FDIC notes
that there is a ten-year restriction on its
ability to grant consent for certain
serious crimes that requires the FDIC to
obtain the sentencing court’s permission
prior to its granting consent to permit a
covered individual to participate in the
affairs of an insured depository
institution. Further, while the passage of
time is a factor in the FDIC’s review of
an application under Section 19, it is
not, by itself, dispositive.
One comment proposed that the SOP
should contain a short list of crimes that
would never require an application or
that would be included within a de
minimis exception to filing once a
limited period of time has passed. The
FDIC believes that a sufficient period of
time should pass after a crime has
occurred to allow the FDIC to determine
if the individual has engaged in similar
behaviors, which would potentially put
an insured financial institution at risk.
The FDIC considers this to be an
important element of the de minimis
exception to filing and is not prepared
to eliminate the time requirement.
One comment appears to suggest that
all crimes committed by a person under
the age of 21 should be covered by the
de minimis exception to filing, provided
that there is at least 30 months between
the conviction and the potential

PO 00000

Frm 00030

Fmt 4703

Sfmt 4703

38145

employment. Again, the FDIC has
determined that if there is a pattern of
covered crimes before the age of 21, it
should look at an individual’s
application to determine the degree of
risk to any insured depository
institutions as proposed in the SOP.
However, one aspect of the comment
addressed the use of false, fake or
altered forms of identification. Although
the FDIC is not prepared to extend de
minimis as far as the comment
suggested, the FDIC has decided that the
use of a fake, false or altered form of
identification by a person under the
legal age to obtain or purchase alcohol,
or to enter a premises where alcohol is
served but for which an age appropriate
identification is required, is an
acceptable category for the use of the de
minimis exception to filing, provided
that the person has no other conviction
or program entry for a crime covered
under Section 19.
Additionally, one comment suggested
that the proposed de minimis exception
to filing for crimes or program entries
that occurred when the individual was
21 or younger be expanded to include
cases in which the actions that led to
the conviction or program entry
occurred before age 21, but the
conviction or program entry did not
occur until after the age of 21. The FDIC
has determined that this change is
consistent with the reasons for this
exception to the filing requirements and
has included a specific exception to
include such cases.
Two comments focused on the
requirement that drug crimes that do not
fit the de minimis exception to filing
should not be covered by Section 19.
The FDIC maintains that an application
is required for it to determine the nature
of the offense and elements of the crime,
and therefore it will continue the
current requirement that an application
be filed. Alternatively, it was suggested
that the FDIC create a specific category
of de minimis exceptions to filing to
cover minor drug offenses. The FDIC in
its proposed changes has already noted
that, if the drug crime fits the de
minimis exception to filing, then no
application is required, and no separate
de minimis category for drug offenses is
necessary.
One other issue of note is that, after
careful review, the FDIC has recognized
that all of the categories falling within
the de minimis exceptions to filing
should be consistent, and that no
category should be included in the
exception if the covered crime was
committed against an insured
depository institution or insured credit
union. This requirement is contained in
the general de minimis exception to

E:\FR\FM\03AUN1.SGM

03AUN1

38146

Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Notices

amozie on DSK3GDR082PROD with NOTICES1

filing, as well as the exception
pertaining to insufficient funds checks
and the exception regarding those under
21. Therefore, the FDIC is making clear
that the proposed small theft exception
is treated similarly and is subject to the
same restriction. As with any crime that
does not fit a de minimis category, an
application can still be filed.
Application Processing
Two of the comments raised a number
of suggestions related to the processing
of applications. One suggestion was to
clarify the process for job applicants on
the FDIC website. Similarly, two other
comments also focused on the FDIC’s
website and application, suggesting that
both should explain the process and
relevant law in a plainer, more
accessible language. Although these
suggestions are beyond the language of
the proposed changes to the SOP, the
FDIC will update its website and
application form and will develop a
brochure that will provide guidance to
the public on the application process.
Another suggestion was to require
financial institutions to provide notice
to job applicants if the institution will
not file a waiver on the person’s behalf,
and to make the forms easily available
to the applicant. Such a requirement is
beyond the reach of the SOP insofar as
it would require a formal rulemaking. A
third suggested change was to shorten
the period of time for the processing of
an application by permitting the FDIC to
verify documents in the applicant’s
possession. The FDIC already relies on
the verification of documents provided
by the applicant, but must also
undertake an independent review to
determine that the information is
complete and accurate. A fourth
suggestion was to include a link in the
SOP to the application form. The FDIC
agrees that this change is related to the
SOP and has added a link in the final
version.
Two comments relate to the
evaluation of applications by the FDIC.
Essentially these comments focused on
instructions to application evaluators as
to how to weigh and apply the factors
set out in the SOP and as set out in the
FDIC’s regulations (12 CFR 308.157).
The suggestions were that the FDIC
should provide instructions on how to
evaluate the age of the applicant at the
time of the conviction, the passage of
time since the conviction, and the
relevance of prior offenses. Although
these are just some of the factors used
by the FDIC to evaluate an application,
the FDIC does not agree that further
instruction to application reviewers is
necessary or appropriate. The weight
given to the various factors is often

VerDate Sep<11>2014

18:26 Aug 02, 2018

Jkt 244001

based on the totality of the
circumstances and the factors are often
interwoven in their application to a
specific case. Each application
undergoes review in the region by both
experienced safety and soundness
examiners and attorneys in the legal
division, as well as several layers of
management review, before a final
determination is made. In the case of
individuals seeking a waiver of the
institution filings requirement, in
addition to the review at the regional
office, the application undergoes a
similar review in the Washington Office.
Further, such instruction would be one
of internal policy and would not come
within the purpose or intent of the SOP.
One comment suggested that the FDIC
instruct individuals who are filing for
themselves and requesting a waiver of
the institution filing requirement to fill
out the application form and include
information identifying the position
sought by the applicant. The FDIC does
not agree that this would be appropriate
for such applications which, if
approved, result in blanket approval to
participate in banking. One comment
also suggested that the FDIC process
applications in fewer than 60 days.
While the FDIC does work to process
applications quickly, the establishment
of such a timeline would be a matter of
internal controls and does not fall
within the purpose or intent of the SOP.
Technical and Clarifying Changes
In addition to the foregoing, the FDIC,
upon review of the proposed SOP, has
made the following technical and
clarifying changes.
The FDIC has corrected an incorrect
citation in Subsection A of the SOP that
identifies the provisions of Section 19
that apply to bank and savings and loan
holding companies. The correct citation
is to 12 U.S.C. 1829(d) and (e). Also, the
FDIC believes that the example in
Subsection A that describes Section 19
as not applying to employees of bank
and savings and loan holding
companies is misleading, and the FDIC
has simplified the example to focus on
the circumstances in which Section 19
may apply in the case of an insured
depository institution. Therefore, that
example has been adjusted to read ‘‘For
example, in the context of the FDIC’s
application of Section 19, it would
apply to an insured depository
institution’s holding company’s
directors and officers to the extent that
they have the power to define and direct
the management or affairs of insured
depository institution.’’
The FDIC also made a slight change
in Subsection D(1) to remove the word
‘‘covered’’ from the language in that

PO 00000

Frm 00031

Fmt 4703

Sfmt 4703

subsection since it would appear to be
conclusory, and its removal brings this
factor in line with the language in the
FDIC’s regulations (12 CFR
308.157(a)(1)).
Furthermore, the FDIC is adding
language stating that Section 19
applications submitted by depository
institutions are to be filed with the FDIC
Regional Office covering the state in
which the institution’s home office is
located.
IV. 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
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.

E:\FR\FM\03AUN1.SGM

03AUN1

Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Notices
Estimated Annual Burden: 864 hours.

amozie on DSK3GDR082PROD with NOTICES1

V. Text of FDIC Statement of Policy for
Section 19 of the FDI Act
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.
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

VerDate Sep<11>2014

18:26 Aug 02, 2018

Jkt 244001

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
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, in the context of the FDIC’s
application of Section 19, it would
apply to an insured depository
institution’s holding company’s
directors and officers to the extent that
they have the power to define and direct
the management or affairs of insured
depository 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

PO 00000

Frm 00032

Fmt 4703

Sfmt 4703

38147

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.
1829(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
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. The FDIC’s application

E:\FR\FM\03AUN1.SGM

03AUN1

38148

Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Notices

forms as well as additional information
concerning Section 19 can be accessed
at the FDIC website. The link is: https://
www.fdic.gov/regulations/laws/forms/
section19.html.
(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. If an order of
expungement has been issued in regard
to a conviction or program entry and is
intended by the language in the order
itself, or in the legislative provisions
under which the order was issued, to be
a complete expungement, then the
jurisdiction, either in the order or the
underlying legislative provisions,
cannot allow the conviction or program
entry to be used for any subsequent
purpose including, but not limited to,
an evaluation of a person’s fitness or
character. The failure to destroy or seal
the records will not prevent the
expungement from being considered
complete for the purposes of Section 19
in such a case. 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.

amozie on DSK3GDR082PROD with NOTICES1

(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
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.

VerDate Sep<11>2014

18:26 Aug 02, 2018

Jkt 244001

(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
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

PO 00000

Frm 00033

Fmt 4703

Sfmt 4703

on an individual’s freedom of
movement which includes, as part of
the restriction, confinement to a specific
facility or building on a continuous
basis where the person may leave
temporarily only to perform specific
functions or during specified times
periods or both. The definition is not
intended to include those on probation
or parole who may be restricted to a
particular jurisdiction, or who must
report occasionally to an individual or
to a specified location.
• 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 covered offense:
• If the actions that resulted in a
covered conviction or program entry of
record all occur when the individual
was 21 years of age or younger, then the
subsequent 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).
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

E:\FR\FM\03AUN1.SGM

03AUN1

Federal Register / Vol. 83, No. 150 / Friday, August 3, 2018 / Notices
entry, where the person has no other
conviction or program entry under
Section 19, where it has been five years
since the conviction or program entry
(30 months in the case of a person 21
or younger as described above) and
which does not involve an insured
financial institution or insured credit
union is considered de minimis. Simple
theft excludes burglary, forgery, robbery,
identity theft, and fraud.
Convictions or program entries for the
use of a fake, false or altered
identification card:
The use of a fake, false or altered
identification card used by person
under the legal age for the purpose of
obtaining or purchasing alcohol, or used
for the purpose of entering a premise
where alcohol is served but for which
age appropriate identification is
required, provided that there is no other
conviction or program entry for a
covered offense, will be considered de
minimis.
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.

amozie on DSK3GDR082PROD with NOTICES1

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 a banksponsored application is the office
covering the state where the bank’s
home office is located. 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

VerDate Sep<11>2014

18:26 Aug 02, 2018

Jkt 244001

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
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 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

PO 00000

Frm 00034

Fmt 4703

Sfmt 4703

38149

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
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,
July 19, 2018.
Dated at Washington, DC, on July 19, 2018.
By order of the Board of Directors.
Valerie Best,
Assistant Executive Secretary.
[FR Doc. 2018–16634 Filed 8–2–18; 8:45 am]
BILLING CODE 6714–01–P

DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Food and Drug Administration
[Docket No. FDA–2012–N–1093]

Agency Information Collection
Activities; Proposed Collection;
Comment Request; Food Additive
Petitions and Investigational Food
Additive Exemptions
AGENCY:

Food and Drug Administration,

HHS.
ACTION:

Notice.

The Food and Drug
Administration (FDA or Agency) is
announcing an opportunity for public
comment on the proposed collection of
certain information by the Agency.
Under the Paperwork Reduction Act of
1995 (PRA), Federal Agencies are
required to publish notice in the
Federal Register concerning each
proposed collection of information,

SUMMARY:

E:\FR\FM\03AUN1.SGM

03AUN1