[Federal Register Volume 59, Number 242 (Monday, December 19, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31110]

[[Page Unknown]]

[Federal Register: December 19, 1994]



12 CFR Part 263

[Docket No. R-0855]


Uniform Rules of Practice and Procedure

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rule.


SUMMARY: The Board of Governors of the Federal Reserve System (Board of 
Governors) is amending a provision of the Uniform Rules of Practice and 
Procedure adopted by the Board. The final rule is intended to clarify 
that the rules' provisions relating to ex parte communications conform 
to the requirements of the Administrative Procedure Act (APA). In 
particular, the amendment would clarify that the ex parte provisions do 
not apply to intra-agency communications, which are governed by a 
separate provision of the Administrative Procedure Act.

EFFECTIVE DATE: January 18, 1995.

FOR FURTHER INFORMATION CONTACT: Katherine H. Wheatley, Assistant 
General Counsel, Legal Division (202/452-3779), or Ann Marie 
Kohlligian, Senior Counsel, Division of Banking Supervision and 
Regulation (202/452-3528). For the hearing impaired only, 
Telecommunication Device for the Deaf (TDD), Dorothea Thompson (202/


I. Background

    In August 1991, the Board of Governors adopted the Uniform Rules of 
Practice and Procedure (Rules) (56 FR 38048, Aug. 9, 1991). The 
Comptroller of the Currency (OCC), Federal Deposit Insurance 
Corporation (FDIC), Office of Thrift Supervision (OTS) and National 
Credit Union Administration (NCUA) have also adopted the Rules (OCC, 56 
FR 38024, Aug. 9, 1991; FDIC, 56 FR 37968, Aug. 9, 1991; OTS, 56 FR 
38302, Aug. 12, 1991; and NCUA, 56 FR 37762, Aug. 8, 1991). The Board 
of Governors is amending one aspect of the Rules relating to ex parte 
communications to clarify that the Rules parallel the requirements of 
the Administrative Procedure Act. The other agencies have proposed or 
are considering proposing a similar amendment (FDIC, 59 FR 60921, Nov. 
29, 1994; OTS, 59 FR 62354, Dec. 5, 1994). The Board of Governors 
issued this amendment as a proposed rule on November 22, 1994 (59 FR 
60094, Nov. 22, 1994). It is now adopting the rule in the form 
    Currently, Sec. 263.9 of the Rules prohibits ``a party, his or her 
counsel, or another interested person'' from making an ex parte 
communication to the Board or other decisional official concerning the 
merits of an adjudicatory proceeding. When the Rules were proposed and 
adopted in 1991, the joint notice of proposed rulemaking (56 FR 27790, 
27793, June 17, 1991) explained that the proposed rule regarding ex 
parte communications ``adopts the rules and procedures set forth in the 
APA regarding ex parte communications.'' There was no intention at that 
time to impose a rule more restrictive than that imposed by the APA 
    The APA contains two provisions relating to communications with 
agency decision-makers. The APA's ex parte communication provision 
restricts communications between ``interested person[s] outside the 
agency'' and the agency head, the administrative law judge (ALJ), or 
the agency decisional employees. 5 U.S.C. 557(d) (emphasis added). 
Intra-agency communications are governed by the APA's separation of 
functions provision, 5 U.S.C. 554(d). That section prohibits 
investigative or prosecutorial personnel at an agency from 
``participat[ing] or advis[ing] in the decision, recommended decision, 
or agency review'' of an adjudicatory matter pursuant to section 557 of 
the APA except as witness or counsel. The same separation of function 
provision provides that the ALJ in an adjudicatory matter may not 
consult any party on a fact in issue unless the other parties have an 
opportunity to participate. 5 U.S.C. 554(d)(1). The separation of 
functions provision does not prohibit agency investigatory or 
prosecutorial staff from seeking the amendment of a notice or the 
settlement or termination of a proceeding.
    The rule as proposed and adopted in 1991, however, did not mention 
the separation of functions concept explicitly, and appeared to apply 
the ex parte communication prohibition to all communications concerning 
the merits of an adjudicatory proceeding between the agency head, ALJ 
or decisional personnel on the one hand, and any ``party, his or her 
counsel, or another person interested in the proceeding'' on the other. 
The Board of Governors does not interpret this provision as limiting 
agency enforcement staff's ability to seek approval of amendments to or 
terminations of existing enforcement actions. As drafted, however, the 
provision could be misinterpreted to expand the ex parte communication 
prohibition beyond the scope of the APA. The Board of Governors did not 
intend this result.
    The amendment clarifies that the regulation is intended to conform 
to the provisions of the APA by limiting the prohibition on ex parte 
communications to communications to or from ``interested persons 
outside the agency,'' 5 U.S.C. 557(d), and by incorporating explicitly 
the APA's separation of functions provisions, 5 U.S.C. 554(d). This 
approach is also consistent with the most recent Model Adjudication 
Rules prepared by the Administrative Conference of the United States.
    The Board of Governors received two comments on the proposed rule, 
both of which supported it. One of the commenters suggested that the 
Board explain the so-called ``Chinese wall'' that prevents those staff 
members involved in the prosecutorial function from communicating with 
those who advise the Board on a particular matter. The amended rule 
specifically sets out the APA's separation of function provision, which 
prohibits agency prosecutorial personnel in one case from participating 
in the Board's decision on that or a factually related case. This 
provision clearly prevents prosecutorial staff from communicating about 
the merits of a case with those staff members who advise the Board 
regarding a final decision in the case. It is unnecessary to set out 
internal procedures implementing this statutory prohibition in a formal 
rulemaking, and to do so could limit the Board's flexibility with 
respect to internal organization.

II. Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act, the 
Board of Governors hereby certifies that the final rule will not have a 
significant economic impact on a substantial number of small entities. 
Accordingly, a regulatory flexibility analysis is not required.
    The final rule makes a minor amendment to a rule of practice 
already in place, and affects intra-agency procedure exclusively. Thus, 
it should not result in additional burden for regulated institutions. 
The purpose of the revised regulation is to conform the provisions of 
the regulation to those imposed by statute.

List of Subjects in 12 CFR Part 263

    Administrative practice and procedure, Claims, Crime, Equal access 
to justice, Federal Reserve System, Lawyers, Penalties.

    For the reasons set forth in the preamble, the Board of Governors 
amends 12 CFR Part 263 as set forth below:


    1. The authority citation for part 263 is revised to read as 

    Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 248, 324, 504, 505, 
1817(j), 1818, 1828(c), 1847(b), 1847(d), 1884(b), 1972(2)(F), 3105, 
3107, 3108, 3907, and 3909; 15 U.S.C. 21, 78o-4, 78o-5, and 78u-2.

    2. Section 263.9 is amended by revising paragraphs (a) and (b) and 
adding a new paragraph (e) to read as follows:

Sec. 263.9  Ex parte communications.

    (a) Definition--(1) Ex parte communication means any material oral 
or written communication relevant to the merits of an adjudicatory 
proceeding that was neither on the record nor on reasonable prior 
notice to all parties that takes place between:
    (i) An interested person outside the Board (including such person's 
counsel); and
    (ii) The administrative law judge handling that proceeding, a 
member of the Board, or a decisional employee.
    (2) Exception. A request for status of the proceeding does not 
constitute an ex parte communication.
    (b) Prohibition of ex parte communications. From the time the 
notice is issued by the Board until the date that the Board issues its 
final decision pursuant to Sec. 263.40(c):
    (1) No interested person outside the Federal Reserve System shall 
make or knowingly cause to be made an ex parte communication to a 
member of the Board, the administrative law judge, or a decisional 
employee; and
    (2) A member of the Board, administrative law judge, or decisional 
employee shall not make or knowingly cause to be made to any interested 
person outside the Federal Reserve System any ex parte communication.
* * * * *
    (e) Separation of functions. Except to the extent required for the 
disposition of ex parte matters as authorized by law, the 
administrative law judge may not consult a person or party on any 
matter relevant to the merits of the adjudication, unless on notice and 
opportunity for all parties to participate. An employee or agent 
engaged in the performance of investigative or prosecuting functions 
for the Board in a case may not, in that or a factually related case, 
participate or advise in the decision, recommended decision, or agency 
review of the recommended decision under Sec. 263.40, except as witness 
or counsel in public proceedings.

    By order of the Board of Governors of the Federal Reserve 
System, December 14, 1994.
William W. Wiles,
Secretary of the Board.
[FR Doc. 94-31110 Filed 12-16-94; 8:45am]