[Federal Register Volume 75, Number 155 (Thursday, August 12, 2010)]
[Proposed Rules]
[Pages 49314-49350]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-19567]
[[Page 49313]]
-----------------------------------------------------------------------
Part IV
Federal Housing Finance Board
-----------------------------------------------------------------------
Federal Housing Finance Agency
-----------------------------------------------------------------------
Department of Housing and Urban Development
-----------------------------------------------------------------------
Office of Federal Housing Enterprise Oversight
-----------------------------------------------------------------------
12 CFR Parts 908, 1209, 1780
Rules of Practice and Procedure; Proposed Rule
Federal Register / Vol. 75, No. 155 / Thursday, August 12, 2010 /
Proposed Rules
[[Page 49314]]
-----------------------------------------------------------------------
FEDERAL HOUSING FINANCE BOARD
12 CFR Part 908
FEDERAL HOUSING FINANCE AGENCY
12 CFR Part 1209
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of Federal Housing Enterprise Oversight
12 CFR Part 1780
RIN 2590-AA14
Rules of Practice and Procedure
AGENCY: Federal Housing Finance Board; Federal Housing Finance Agency;
and Office of Federal Housing Enterprise Oversight, HUD.
ACTION: Notice of proposed rulemaking; request for comment.
-----------------------------------------------------------------------
SUMMARY: The Federal Housing Finance Agency (FHFA) solicits written
comment on a proposed rule to implement the Housing and Economic
Recovery Act of 2008 (HERA) amendments to the Federal Housing
Enterprises Financial Safety and Soundness Act of 1992 (Safety and
Soundness Act) and the Federal Home Loan Bank Act (Bank Act) pertaining
to the civil enforcement powers of FHFA, and the Rules of Practice and
Procedure for enforcement proceedings. The Safety and Soundness Act, as
amended by sections 1151-1158 of HERA, authorizes FHFA to initiate
enforcement proceedings against the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation (together,
the Enterprises) and the Federal Home Loan Banks (the Banks)
(collectively, the regulated entities), and entity-affiliated parties
as defined in the Safety and Soundness Act. When final, the rule will
replace the existing Rules of Practice and Procedure promulgated by the
Office of Federal Housing Enterprise Oversight (OFHEO) and the Federal
Housing Finance Board (Finance Board) formerly charged with overseeing
the regulated entities. The proposed rule may provide FHFA personnel,
the regulated entities, entity-affiliated parties, and other interested
parties with the clear guidance necessary to prepare for and
participate in the administrative enforcement action process to
increase the efficiency and transparency of FHFA's administrative
enforcement hearings.
DATES: Comments on the proposed rule must be received in writing on or
before October 12, 2010.
ADDRESSES: You may submit your written comments on the proposed
rulemaking, identified by RIN number 2590-AA14, by any of the following
methods:
E-mail: Comments to Alfred M. Pollard, General Counsel,
may be sent by e-mail at [email protected]. Please include ``RIN
2590-AA14'' in the subject line of the message.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments. If you submit your
comment to the Federal eRulemaking Portal, please also send it by e-
mail to FHFA at [email protected] to ensure timely receipt by the
Agency. Please include ``RIN 2590-AA14'' in the subject line of the
message.
U.S. Mail, United Parcel Service, Federal Express, or
Other Mail Service: The mailing address for comments is: Alfred M.
Pollard, General Counsel, Attention: Comments/RIN 2590-AA14, Federal
Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington,
DC 20552.
Hand Delivery/Courier: The hand delivery address is:
Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AA14,
Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW.,
Washington, DC 20552. A hand-delivered package should be logged at the
Guard Desk, First Floor, on business days between 9 a.m. and 5 p.m.
FOR FURTHER INFORMATION CONTACT: Charlotte A. Reid, Associate General
Counsel, Federal Housing Finance Agency, 1700 G Street, NW., Fourth
Floor, Washington, DC 20552, telephone (202) 414-3810 (not a toll-free
number). The telephone number for the Telecommunications Device for the
Deaf is: (800) 877-8339.
SUPPLEMENTARY INFORMATION: The Supplementary Information is organized
according to this table of contents:
I. Comments
II. Background
III. Synopsis of the Proposed Rule
IV. Section-by-Section Analysis and Discussion
V. Regulatory Impact
I. Comments
The Federal Housing Finance Agency (FHFA) invites comments on all
aspects of the proposed Rules of Practice and Procedure (proposed
rule), including legal and policy considerations, and will take all
comments into consideration before issuing the final rule. All comments
received by the deadline will be posted for public inspection on FHFA
Web site at http://www.fhfa.gov. Copies of all comments timely received
will be available for public inspection and copying at the address
above on government-business days between the hours of 10 a.m. and 3
p.m. To make an appointment to inspect comments please call the Office
of General Counsel at (202) 414-6924.
II. Background
A. Establishment of FHFA
Effective July 30, 2008, Division A of HERA, Public Law 110-289,
122 Stat. 2654 (2008), titled the Federal Housing Finance Regulatory
Reform Act of 2008, created FHFA as an independent agency of the
Federal government.\1\ HERA amended the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992 (Safety and Soundness Act)
(12 U.S.C. 4501 et seq.) and the Federal Home Loan Bank Act (Bank Act)
(12 U.S.C. 1421 through 1449), respectively, to provide that the
Federal National Mortgage Association (Fannie Mae) and the Federal Home
Loan Mortgage Corporation (Freddie Mac) (together, the Enterprises) and
the Federal Home Loan Banks (Banks) (collectively, the regulated
entities), are subject to the supervision and regulation of FHFA.\2\
---------------------------------------------------------------------------
\1\ See generally, HERA, Division A, Titles I-III, Public Law
110-289, 122 Stat. 2654, sections 1101 et seq. (July 30, 2008).
Specifically, section 1101 of HERA amended section 1311(a) of the
Federal Housing Enterprises Financial Safety and Soundness Act of
1992 (Safety and Soundness Act), Title XIII, Public Law 102-550, 106
Stat. 3672, 3941-4012, sections 1301 et seq. (1993), to establish
FHFA as an independent agency of the Federal government. See 12
U.S.C. 4511(a).
\2\ See section 1101 of HERA, amending section 1311(b)(1) of the
Safety and Soundness Act, which provides that each regulated entity
[defined at section 1303(20) of the Safety and Soundness Act to
include the Enterprises and Banks] is subject to the supervision and
regulation of FHFA. 12 U.S.C. 4511(b)(1).
---------------------------------------------------------------------------
Additionally, section 1101 of HERA amended section 1311(b)(2) of
the Safety and Soundness Act to provide that the regulated entities and
the Office of Finance are subject to the general regulatory authority
of the Director of FHFA. 12 U.S.C. 4511(b)(2).\3,4\ Under this
provision the Director has broad general regulatory authority to
``ensure that the purposes of [HERA], the
[[Page 49315]]
authorizing statutes, and any other applicable law are carried out.''
See id. 4511(b)(2).\5\
---------------------------------------------------------------------------
\3\ The Office of Finance acts as agent of the Banks in the
issuance of Bank debt called consolidated obligations. See 12 U.S.C.
1431. HERA defined the Office of Finance as an ``entity-affiliated
party.'' 12 U.S.C. 4502(11)(E). In some cases, under the HERA
amendments, executive officers, directors or management of the
Office of Finance may be subject to the requirements of the
enforcement provisions and rules.
\4\ Section 1101 of HERA established the position of Director,
as head of FHFA, in section 1312(a) of the Safety and Soundness Act.
12 U.S.C. 4512(a).
\5\ Section 1303(3) of the Safety and Soundness Act, as amended
by section 1002 of HERA, provides that the term ``authorizing
statutes'' means the Federal National Mortgage Association Charter
Act, the Federal Home Loan Mortgage Corporation Act, and the Federal
Home Loan Bank Act. See 12 U.S.C. 4502(3).
---------------------------------------------------------------------------
HERA transferred to FHFA the supervisory, mission, and oversight
responsibilities over the Enterprises and Banks from the U.S.
Department of Housing and Urban Development (HUD), including OFHEO, and
the Federal Housing Finance Board (Finance Board), respectively.\6\
FHFA was established as the financial safety and soundness regulator to
oversee the prudential operations of the Enterprises and Banks (i.e.,
the regulated entities) and to ensure that they operate in a safe and
sound manner; remain adequately capitalized; foster liquid, efficient,
competitive and resilient national housing finance markets; comply with
the Safety and Soundness Act and their respective authorizing statutes,
as well as all rules, regulations, guidelines, and orders issued under
law; and carry out their missions through activities that are
authorized by law and are consistent with the public interest.\7\
---------------------------------------------------------------------------
\6\ HERA abolished OFHEO and the Finance Board one year after
the date of its enactment. By operation of law, the regulated
entities and the Office of Finance continue to operate under
existing regulations promulgated by OFHEO and the Finance Board.
Those existing regulations are enforceable by the Director until
such time as they are modified, terminated, set aside, or superseded
by the Director. See sections 1302 and 1312 of HERA, 122 Stat. 2795,
2798. When final, FHFA Rules of Practice and Procedure (12 CFR part
1209) will supersede the Rules of Practice and Procedure previously
promulgated by OFHEO (12 CFR part 1780) and the Finance Board (12
CFR part 908). See also note 17, and accompanying text.
\7\ See Section 1102 of HERA, amending section 1313 of the
Safety and Soundness Act (12 U.S.C. 4513).
---------------------------------------------------------------------------
B. Statutory Background
Together, Freddie Mac and Fannie Mae owned or guaranteed nearly
$5.34 trillion of residential mortgages in the United States (U.S.) as
of December 31, 2009. The Banks support the U.S. housing market by
making advances (i.e., loans secured by eligible collateral) to their
member commercial banks, thrifts, and credit unions, assuring a ready
flow of mortgage funding. Bank advances stood at $631.2 billion as of
December 31, 2009. Thus, the regulated entities play a key role in
housing finance and the U.S. economy.
The mission of FHFA is to provide effective supervision,
regulation, and housing mission oversight of the Enterprises and the
Banks to promote their safety and soundness, support housing finance
and affordable housing, and support a stable and liquid mortgage
market. Accordingly, the HERA amendments to the Safety and Soundness
Act make explicit the general regulatory and supervisory authority of
FHFA and the Director, and grant specific supervisory and enforcement
powers to the Director. See e.g., 12 U.S.C. 4511, 4513, 4517, 4518,
4526, 4631 through 4641.
By design, the Safety and Soundness Act provides the Director with
broad supervisory and regulatory authority to ensure the safety and
soundness of the regulated entities: the Director ``shall exercise such
general regulatory authority, including such duties and authorities set
forth under section 1313 of the Safety and Soundness Act, to ensure
that the purposes of this Act, the authorizing statutes, and any other
applicable law are carried out.'' See 12 U.S.C. 4511(b)(2). The
Director's general regulatory authority is joined to more specific
powers, such as those invoked under section 1313 of the Safety and
Soundness Act, and the examination authority under section 1317 of the
Safety and Soundness Act, thereby constructing a comprehensive
framework for safety and soundness regulation of the regulated
entities. See 12 U.S.C. 4513, 4517.
Specifically, section 1313(a)(1) of the Safety and Soundness Act
prescribes the principal duties of the Director. The Director shall
``oversee the prudential operations of each regulated entity.'' 12
U.S.C. 4513(a)(1)(A). Similarly, section 1313(a)(1)(B) of the Safety
and Soundness Act enumerates the principal duties of the Director to
ensure that: each regulated entity operates in a safe and sound manner,
including maintenance of adequate capital and internal controls; the
operations and activities of each regulated entity promote the
efficiency, competitiveness, and liquidity of national housing finance
markets; each regulated entity complies with the Safety and Soundness
Act and the rules, regulations, guidelines, and orders issued under the
Safety and Soundness Act and the authorizing statutes; each regulated
entity executes its statutory mission through authorized activities;
and the activities of each regulated entity are consistent with the
public interest. 12 U.S.C. 4513(a)(1)(B).\8\
---------------------------------------------------------------------------
\8\ See 12 U.S.C. 4513(a)(1)(B)(i) through (v).
---------------------------------------------------------------------------
Further underscoring the Director's ongoing authority to ensure
that the operations and management of the regulated entities comport
with the Safety and Soundness Act and their respective authorizing
statutes, section 1313(a)(2)(B) of the Safety and Soundness Act
expressly authorizes the Director to ``exercise such incidental powers
as may be necessary or appropriate to fulfill the duties and
responsibilities of the Director in the supervision and regulation of
each regulated entity.'' See 12 U.S.C. 4513(a)(2)(B).\9\ Thus, the
Director may undertake such regulatory and supervisory actions as
deemed to be necessary or appropriate to fulfilling the duties and
responsibilities of FHFA with respect to the regulated entities.\10\
---------------------------------------------------------------------------
\9\ The Supreme Court has held that the incidental powers
provision applicable to national banks constitutes ``an independent
grant of authority,'' and that courts should view ``the specific
powers set forth thereafter as exemplary, not exclusive.''
NationsBank of N.C., N.A. v. Variable Annuity Life Ins. Co., 513
U.S. 251, 258 (1995).
\10\ Furthermore, other provisions in the Safety and Soundness
Act reinforce the independence and general regulatory authority of
the Director. For example, section 1311(c) of the Safety and
Soundness Act, as amended by section 1101 of HERA, provides that the
authority of the Director ``to take actions under subtitles B and C
[of Title I of Division A of HERA] shall not in any way limit the
general supervisory and regulatory authority granted to the Director
under subsection (b).'' See 12 U.S.C. 4511(c). Section 1313B of the
Safety and Soundness Act provides that the Director shall establish
certain prudential management and operations standards, by
regulation or guideline, for each regulated entity. See 12 U.S.C.
4513b. Finally, section 1319G(a) of the Safety and Soundness Act
provides ample, independent authority for the issuance of ``any
regulations, guidelines, or orders necessary to carry out the duties
of the Director under this title or the authorizing statutes, and to
ensure that the purposes of this title and the authorizing statutes
are accomplished.'' 12 U.S.C. 4526
---------------------------------------------------------------------------
When promulgating regulations that may relate to the Banks, under
section 1313(f)[sic] of the Safety and Soundness Act (as amended by
section 1201 of HERA) the Director is required to consider the
differences between the Banks and the Enterprises with respect to the
Banks' cooperative ownership structure; mission of providing liquidity
to members; affordable housing and community development mission;
capital structure; and joint and several liability. The Director may
also consider any other differences that are deemed appropriate. See 12
U.S.C. 4513(f)[sic].\11\ In preparing the proposed rule, the Director
considered the differences between the Banks and the Enterprises as
they relate to the above factors. The Director is requesting comments
from the public about whether differences related to these factors
should result in a revision of the proposed rule as it may relate to
the Banks.
---------------------------------------------------------------------------
\11\ So in original; paragraph designation should be (d).
---------------------------------------------------------------------------
[[Page 49316]]
C. Enforcement Authority of the Director Under Sections 1371 Through
1379D of the Safety and Soundness Act, as Amended by HERA
To carry out its statutory mission, FHFA must have effective
enforcement tools. The HERA amendments to the Safety and Soundness Act
and the Bank Act provide that clear authority. The Enterprises and
entity-affiliated parties are subject to administrative enforcement
proceedings as provided in sections 1371 through 1379D of the Safety
and Soundness Act, as amended by sections 1151 through 1158 of HERA (12
U.S.C. 4631 through 4641). HERA also amended the Bank Act and the
Safety and Soundness Act to provide that the Banks and the Office of
Finance, respectively, are subject to this enforcement framework.\12\
As amended, sections 1371 through 1379D of the Safety and Soundness Act
(12 U.S.C. 4631 through 4641) subject the Enterprises, the Banks, the
Office of Finance, and entity-affiliated parties to the authority of
the Director to initiate proceedings to issue cease and desist orders,
to issue temporary cease and desist orders, to impose civil money
penalties, or to obtain removal and prohibition orders, in accordance
with applicable law.
---------------------------------------------------------------------------
\12\ Section 1204 of HERA repealed the enforcement authority of
the Finance Board over the Banks and specified parties in section
2B(a)(5) of the Bank Act (12 U.S.C. 1422b(a)(5)). Therefore, the
Banks, the Office of Finance, and specified parties are subject to
FHFA enforcement authority as set forth in sections 1371 through
1379D of subtitle C of the Safety and Soundness Act, as amended. See
12 U.S.C. 4631 through 4641.
---------------------------------------------------------------------------
In particular, the HERA provisions in section 1377(a) of the Safety
and Soundness Act (12 U.S.C. 4636a(a)), give the Director express
authority to suspend or remove from office, or to prohibit any further
participation in the conduct of the affairs of a regulated entity, an
entity-affiliated party, or any officer, director, or management of the
Office of Finance, for any violation, practice, or breach of such
party's fiduciary duty, as set forth therein. Additionally, in
accordance with section 1377(b) of the Safety and Soundness Act (12
U.S.C. 4636a(b)), the Director can take immediate action to suspend or
remove from office, or to prohibit the participation in any manner in
the conduct of the affairs of the regulated entity, any party subject
to an action under section 1377(a) of the Safety and Soundness Act.
Finally, under section 1377(h) of the Safety and Soundness Act (12
U.S.C. 4636a(h)), with respect to any entity-affiliated party who is
charged with a Federal or State crime involving dishonesty or breach of
trust, which is punishable by imprisonment for more than one year, in
any criminal information, indictment or complaint, the Director is
authorized to suspend such party from office or prohibit him or her
from any further involvement in the conduct of the affairs of a
regulated entity if continued service or participation by such party
could pose a threat to, or impair public confidence in, the regulated
entity. See 12 U.S.C. 4636a(h)(1)(A). The statute prescribes that a
copy of the suspension notice shall be served on each relevant
regulated entity. See 12 U.S.C. 4636a(h)(1)(B)(i).
Thus, under these enhanced powers, the Director has at his or her
disposal a broad range of enforcement actions to enforce, as needed,
applicable law, rules, orders, and agreements pertaining to the safe
and sound operation of the Enterprises and Banks.\13\ Because this
enforcement authority parallels that of the enforcement tools available
to bank regulatory agencies, the procedures for pursuing such actions,
by design, are similar. The Federal bank and thrift regulators' uniform
rules of practice and procedure for enforcement actions adopted under
section 916 of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 (FIRREA), Public Law 101-73, 103 Stat. 183
(1989) (the Uniform Rules) set the standard for formal enforcement
proceedings, and served as the model for the enforcement regulations
later adopted by OFHEO and the Finance Board.\14\ Thus, the proposed
regulation builds upon the Uniform Rules, as well as the existing
enforcement regulations adopted by OFHEO in 1999 (and amended in 2001)
(12 CFR part 1780), and the Finance Board's Rules of Practice and
Procedure adopted in 2002 (12 CFR part 908).
---------------------------------------------------------------------------
\13\ The Director has broad safety and soundness enforcement
authority under sections 1371 through 1379D of the Safety and
Soundness Act, (subtitle C--Enforcement Provisions) (12 U.S.C. 4631
through 4641), in furtherance of the Director's general safety and
soundness regulatory authority. Additionally, the Director has
authority under subtitle B of the Safety and Soundness Act (sections
1361 through 1369E) to set and enforce capital levels or appoint
FHFA as conservator or receiver for a regulated entity. More
important, as amended by HERA, section 1311(c) of the Safety and
Soundness Act expressly preserves these powers in addition to the
Director's general supervisory and regulatory authority under
subsection (b) of section 1311 of the Safety and Soundness Act, as
amended: ``[t]he authority of the Director to take actions under
subtitles B and C shall not in any way limit the general supervisory
and regulatory authority granted to the Director under subsection
(b).'' See 12 U.S.C. 4511(c).
\14\ The Federal Financial Institutions Examination Council
(FFIEC) members adopted the Uniform Rules as noted: the Office of
the Comptroller of the Currency (OCC), 12 CFR part 19 (56 FR 38028,
August 9, 1991) (as amended 61 FR 20334, May 6, 1996; 70 FR 69638,
November 17, 2005); the Office of Thrift Supervision (OTS), 12 CFR
Part 509 (56 FR 38306, August 12, 1991) (as amended 56 FR 59866,
November 26, 1991; 61 FR 20353, May 6, 1996; 70 FR 69641, November
17, 2005, and 72 FR 25955, May 8, 2007); the Federal Deposit
Insurance Corporation (FDIC), 12 CFR Part 308 (56 FR 37975, August
9, 1991) (as amended 61 FR 20347, May 6, 1996; 70 FR 69639, November
17, 2005); the Board of Governors of the Federal Reserve (FED) 12
CFR Part 263 (56 FR 38052, August 9, 1991) (as amended 61 FR 20341,
May 6, 1996; 70 FR 69638, Nov. 17, 2005; 73 FR 58032, Oct. 6, 2008);
and the National Credit Union Administration (NCUA), 12 CFR Part 747
(56 FR 37767, August 8, 1991) (as amended 57 FR 523, January 7,
1992; 61 FR 28024, June 4, 1996; 71 FR 67440, November 22, 2006).
---------------------------------------------------------------------------
Cease and desist enforcement proceedings are commenced by serving a
notice of charges that is to set forth the facts constituting the
practice or violation and fix a time and place for a hearing to
determine on the record whether an order to cease and desist from such
practice or violation should issue. See 12 U.S.C. 4631(c)(1). Such
hearings are governed by section 1373 of the Safety and Soundness Act.
See generally, 12 U.S.C. 4633. In fact, section 1373(a)(1) of the
Safety and Soundness Act (12 U.S.C. 4633(a)(1)) provides that any
hearing under sections 1371 (cease and desist order), 1376(c) (civil
money penalty assessment) or 1377 (removal or suspension orders; except
removal actions under section 1377(h) of the Safety and Soundness Act)
be held on the record. See 12 U.S.C. 4633(a)(1). Therefore, prior to
issuing a cease-and-desist order, imposing civil money penalties, or
ordering the suspension or removal of an entity-affiliated party or any
officer, director, or management of the Office of Finance, FHFA must
conduct a hearing on the record and provide the subject of such an
order with notice and the opportunity to participate in a hearing that
is to be conducted in accordance with chapter 5 of title 5 of the
United States Code.\15\ Sections 554, 556, and 557 of the
Administrative Procedure Act govern hearings on the record.\16\ The
Rules of Practice and Procedure as proposed (proposed rule) establish
the procedural requirements for any hearing on the record in an
enforcement proceeding brought under subtitle C of the Safety
[[Page 49317]]
and Soundness Act in conformity with the APA.
---------------------------------------------------------------------------
\15\ See section 1373(a)(3) of the Safety and Soundness Act (12
U.S.C. 4633(a)(3)).
\16\ Public Law 89-554, 80 Stat. 381 (1966) (codified at 5
U.S.C. 551-559; 701-706). Formal adjudications (i.e., hearings ``on
the record'') are governed by chapters 5 and 7 of the Administrative
Procedure Act (5 U.S.C. 554, 556, and 557) (APA). The APA grants
each agency ``the authority necessary to comply with the
requirements of [chapter 5] through the issuance of rules or
otherwise.'' See 5 U.S.C. 559.
---------------------------------------------------------------------------
D. Rules of Practice and Procedure
As stated, the proposed Rules of Practice and Procedure are
designed to govern hearings on the following matters that FHFA by law
must conduct on the record in accordance with APA formal hearing
requirements:
(1) Enforcement proceedings under sections 1371 through 1379D of
the Safety and Soundness Act (12 U.S.C. 4631 through 4641) (except
section 1377(h) (12 U.S.C. 4636a));
(2) Removal, prohibition, and civil money penalty proceedings for
violations of post-employment restrictions imposed by applicable law;
and
(3) Proceedings under section 102 of the Flood Disaster Protection
Act of 1973, as amended (42 U.S.C. 4012a) to assess civil money
penalties.
To ensure that comprehensive hearing procedures are in place to
conduct such hearings, the proposed rule departs from the
organizational structure of the existing OFHEO rule and delinks the
procedural steps for hearings on the record from the underlying
statutory enforcement authority set forth in sections 1371 through
1379D of the Safety and Soundness Act (12 U.S.C. 4631 through 4641). To
make this distinction clear, the enforcement authority is set out in
subpart B of the proposed rule, whereas the formal hearing procedures
are separately stated in subpart C of the proposed rule.
The stand alone formal hearing procedures in subpart C of Part 1209
also could govern civil money penalty proceedings authorized under
section 1345 of the Safety and Soundness Act that require a hearing on
the record, but that specifically provides for remedies that differ
from those under sections 1371 and 1376 of the Safety and Soundness
Act. See 12 U.S.C. 4582, 4585, 4631(a)(2) and 4636(a). In addition to
the housing goals enforcement proceedings under sections 1341 and 1345
of the Safety and Soundness Act, the formal hearing procedures in
subpart C of this part could apply to the enforcement of the regulated
entities' reporting requirements under section 1314 of the Safety and
Soundness Act (12 U.S.C. 4514).
The Rules of Practice and Procedure, when final, will replace the
Rules of Practice and Procedure previously adopted by OFHEO (12 CFR
part 1780) and the Finance Board (12 CFR part 908).\17\ The OFHEO rule
serves as the template for the proposed rule.\18\ Specifically, the
proposed rule sets out the requirements for the commencement of an
enforcement proceeding by service of a notice of charges; the
appointment of a presiding officer; hearing procedures and permissible
activities; the conduct of the trial-like testimonial phase of the
hearing process; the presiding officer's filing with the Director of a
recommended decision and order, along with the hearing record; the
decision by the Director; and the qualifications and disciplinary rules
for practice before FHFA.\19\ During the course of the hearing, the
presiding officer controls virtually all aspects of the proceeding. In
particular, the presiding officer: determines the hearing schedule;
presides over all conferences; rules on non-dispositive motions,
discovery, and evidentiary issues; and ensures that the proceeding is
prompt, fair, and impartial, and allows for the creation of a written
record upon which the recommended decision is based.\20\
---------------------------------------------------------------------------
\17\ The Finance Board's enforcement authority, as enacted in
sections 2B(a)(2) and (5) of the Bank Act in 1999, was derived in
part from OFHEO's enforcement authority under sections 1371 through
1379D of the Safety and Soundness Act of 1992. Compare 12 U.S.C.
1422b(a)(2), (5) with 12 U.S.C. 4631 through 4641. With the
exception of the grounds for cease and desist actions and removal
authority accorded the Finance Board, the provisions were nearly
indistinguishable. Accordingly, the Finance Board Rules of Practice
and Procedure (12 CFR part 908) were highly aligned with the pre-
existing OFHEO Rules of Practice and Procedure (12 CFR part 1780).
In many respects these procedural rules are nearly identical. The
term ``existing provision,'' is used to refer to those co-extensive
provisions.
\18\ As stated, the Finance Board Rules of Practice and
Procedure (12 CFR part 908) were modeled on, and are nearly
identical to, the OFHEO rule in most procedural respects. For
convenience, the OFHEO rule served as the basic template for the
proposed FHFA rule. In some cases, however, the Finance Board rule
informed the drafting, for example, in defining certain terms such
as notice (i.e., notice of charges), hearing, and the Safety and
Soundness Act.
\19\ 5 U.S.C. 1305 sets forth the authority of the Office of
Personnel Management (OPM) relating to the appointment of an
administrative law judge (ALJ). In practice, an OPM-appointed ALJ
serves as presiding officer.
\20\ As with the Uniform Rules, parties to an FHFA enforcement
proceeding have the right to present evidence and to examine and
cross-examine the witnesses at the evidentiary hearing stage. Upon
completion of the testimonial phase of the hearing, the parties may
submit proposed findings of fact and conclusions of law and a
proposed order. After taking the evidence and considering the
record, the presiding officer makes a recommended decision and
submits the complete record to the Director, which includes
recommended findings of fact and conclusions of law, and a proposed
order. The record also includes all transcripts, exhibits, rulings,
motions, briefs and memoranda, expert witness reports, and all
supporting papers filed in connection with the hearing.
---------------------------------------------------------------------------
The current requirement that the Director issue a final ruling
within ninety (90) days of the date on which the Director serves notice
upon the parties that the hearing record is complete and the case has
been submitted for final decision also is retained in the proposed FHFA
Rules of Practice and Procedure. Importantly, the presiding officer
does not have the authority to make a ruling that disposes of the
proceeding. Only the Director has the authority to dismiss the
proceeding, in whole or in part, or to make a final determination of
the merits of the proceeding. This ensures that FHFA and the respondent
receive full and fair consideration of the matters at issue.
Many of the proposed revisions to the Rules of Practice and
Procedure were informed by OFHEO's prior experience in conducting
enforcement proceedings under its rule. From that practice, FHFA has
identified certain issues for clarification. Accordingly, FHFA is
suggesting revisions in the proposed rule to make the adjudication
process more efficient, fair, and transparent. For example, the
proposed rule includes a definition of ``notice of charges.'' The
notice of charges is the charging document that is served by FHFA on a
regulated entity or party as provided in sections 1371 through 1377 of
the Safety and Soundness Act (12 U.S.C. 4631 through 4636a) to initiate
enforcement proceedings. Additionally, to resolve any confusion, the
definition as proposed in Sec. 1209.3 clarifies that a ``notice of
charges'' is to be distinguished from an ``effective notice'' within
the meaning of 12 U.S.C. 4635(a), and that that provision does not
confer jurisdiction upon a Federal district court over an agency
enforcement proceeding.
FHFA also is proposing to make the presiding officer's authority
more explicit in several respects. First, Sec. 1209.11 of the proposed
rule (Authority of the Presiding Officer) affords the presiding officer
support for holding an initial scheduling conference to control the
proceedings. Thus, Sec. 1209.11(b)(1) of the proposed rule states that
the date for the testimonial phase of the hearing is to be set in a
scheduling order issued in conjunction with the initial scheduling
conference set under Sec. 1209.36 of the proposed rule. Second, the
proposed rule permits the presiding officer more leeway to control the
pace and context of discovery; and, if necessary, discretion to
prohibit unnecessary or burdensome discovery. Accordingly, Sec.
1209.11(b)(5) of the proposed rule confirms that, among other things,
the presiding officer may issue and enforce discovery orders. Section
1209.11(b)(8) of the proposed rule restates the broad powers of the
[[Page 49318]]
presiding officer to regulate the scope, timing, and completion of
discovery of any non-privileged matter that is materially relevant to
the charges or allowable defenses in the proceeding. Third, FHFA has
determined to make more explicit the requirement that matters or
documents subject to discovery must be ``materially relevant'' to the
charges or allowable defenses in the proceeding to support the
presiding officer's ability to deny discovery requests that are not so
framed. (``Materially relevant'' is generally understood to mean that
the information sought must have a logical connection to a
consequential fact that tends to prove or disprove a matter in issue.)
Similarly, Sec. 1209.11(b)(11) of the proposed rule underscores that
the presiding officer has ample authority to admit, exclude, or limit
evidence according to its material relevance to the legally cognizable
claims and defenses presented by a notice of charges. Finally, as a
corollary to the authority of the presiding officer to set the date of
the evidentiary hearing in a scheduling order, Sec. 1209.23 of the
proposed rule clarifies that the notice of charges is to specify that
the testimonial hearing date will be determined when the presiding
officer holds the initial scheduling conference and issues a scheduling
order within thirty (30) to sixty (60) days of service of the notice of
charges.
FHFA believes that these and other enhancements to the rule as
proposed will ensure that any enforcement action taken by FHFA is
governed by a process that is expeditious, thorough, and fair.
III. Synopsis of the Proposed Rule
FHFA is proposing to revise the Rules of Practice and Procedure to
be codified in a new part 1209 that would supersede the existing OFHEO
and Finance Board Rules of Practice and Procedure governing enforcement
proceedings, which are nearly identical procedurally. For ease of
drafting, the template for the proposed rule is the OFHEO Rules of
Practice and Procedure (12 CFR part 1708).\21\ In addition, the
proposed rule is faithful to the model Uniform Rules and meets or
exceeds all applicable APA requirements for formal hearings. Part 1209
will govern the conduct of FHFA administrative hearings on the record
for enforcement proceedings as provided in the Safety and Soundness
Act. Many of the provisions in the existing OFHEO rule (and their
identical counterparts in the Finance Board rule) are to be adopted
unchanged. Other provisions, as noted below, are to be modified to
reflect actual practices or current law, to make the process more
efficient, or to ensure that the procedures, on their face, are fair
and transparent.
---------------------------------------------------------------------------
\21\ As stated, when it was originally adopted, the Finance
Board rule (12 CFR part 908) was based on the OFHEO rule (12 CFR
part 1780), and the procedural requirements are substantively
identical, unless otherwise noted. See notes 17 and 18 with
accompanying text.
---------------------------------------------------------------------------
The proposed rule is organized as follows: Part 1209 is to be
divided into several topical subparts in order to more clearly
delineate the specific enforcement authority of the Director under
sections 1371 through 1379D of the Safety and Soundness Act (12 U.S.C.
4631 through 4641) as distinct from the procedural steps for hearings
on the record for enforcement actions and proceedings as enumerated
below. Thus, part 1209 of this title is segmented into subparts as
follows:
Subpart A (Scope and Authority) sets out the purpose and authority
of the rule, the rules of construction, and the definitions that have
general applicability to part 1209, and provides that the rules of
practice and procedure governing agency hearings on the record shall
apply to:
(1) Enforcement proceedings under sections 1371 through 1379D of
the Safety and Soundness Act (12 U.S.C. 4631 through 4641);
(2) Removal, prohibition, and civil money penalty proceedings for
violations of post-employment restrictions imposed by applicable law;
and
(3) Civil money penalty proceedings under section 102 of the Flood
Disaster Protection Act of 1973, as amended (42 U.S.C. 4012a).
Subpart B (Enforcement Proceedings under sections 1371 through
1379D) summarizes the controlling law for enforcement proceedings set
out in sections 1371 through 1379D of the Safety and Soundness Act (12
U.S.C. 4631 through 4641).
Subpart C (Rules of Practice and Procedure) the principal
procedural subpart sets out the requisite procedures for formal agency
hearings held on the record in accordance with this part.
Subpart D (Parties and Representational Practice before the Federal
Housing Finance Agency; Standards of Conduct) sets out the
responsibilities that govern every party or party's representative
appearance in hearings on the record under these rules, or in any
appearance before the Director or any agency representative.
Subpart E (Civil Money Penalty Inflation Adjustments) provides a
stand alone framework for making inflation adjustments to the civil
money penalty amounts periodically required (not less than every four
years) under the Federal Civil Penalties Inflation Adjustment Act of
1990, Public Law. 101-410, 104 Stat. 890, as amended by the Debt
Collection Improvement Act of 1996, Public Law 104-134, title III, sec.
31001(s)(1), Apr. 26, 1996, 110 Stat. 1321-373; Public Law 105-362,
title XIII, sec. 1301(a), Nov. 10, 1998, 112 Stat. 3293 (28 U.S.C. 2461
note) (Inflation Adjustment Act).
Subpart F (Suspension or Removal of Entity-Affiliated Party Charged
with Felony) specifies the procedures for a hearing following
suspension or removal of an entity-affiliated party charged with a
felony under section 1377(h) of the Safety and Soundness Act (12 U.S.C.
4636a(h)) that are not governed by subpart C (Rules of Practice and
Procedure).
The section-by-section analysis and discussion of subparts A-F
address each section in more detail below.
IV. Section-by-Section Analysis and Discussion
Subpart A--Scope and Authority
Section 1209.1 Scope
This section sets out the authority for agency enforcement
proceedings under sections 1371 through 1379D of the Safety and
Soundness Act governing civil enforcement proceedings, including:
removal, prohibition, and civil money penalty proceedings for
violations of post-employment restrictions imposed by applicable law,
and proceedings under section 102 of the Flood Disaster Protection Act
of 1973, as amended (42 U.S.C. 4012a) to assess civil money penalties.
Section 1209.2 Rules of Construction
This section prescribes general rules of construction and provides
that unless stated otherwise a party's representative of record may
take any action required of a party.
Section 1209.3 Definitions
This section sets out definitions of terms applicable to this Part.
Many of the definitions are drawn from the existing OFHEO and Finance
Board rules. In addition, definitions of terms are added as required to
address the HERA amendments to the Safety and Soundness Act and Bank
Act, such as the inclusion of the Office of Finance and its executive
officers, directors, or management where applicable under the HERA
amendments, or where experience has shown that the process would
benefit from greater clarity. In particular, the rule is to contain a
definition of ``notice of charges'' to clarify that the term refers to
the charging document served on a respondent in an enforcement
[[Page 49319]]
proceeding, and is not to be confused with an effective notice as that
term is used in section 1375(a) of the Safety and Soundness Act (12
U.S.C. 4635(a)). Similarly, any notice of removal or suspension or
intent to impose civil money penalties, is akin to a notice of charges
in that respect. These charging documents are to be distinguished from
effective notices and orders that are of immediate and enforceable
effect under the Safety and Soundness Act.
Subpart B--Scope and Authority-Enforcement Proceedings Under Sections
1371-1379D
Section 1209.4 Scope and Authority
This section states the authority for enforcement proceedings under
sections 1371 through 1379D of the Safety and Soundness Act (12 U.S.C.
4631 through 4641). Specifically, section 1373 of the Safety and
Soundness Act (12 U.S.C. 4633) provides that the following actions must
be held on the record: (1) Cease and desist proceedings under section
1371 of the Safety and Soundness Act (12 U.S.C. 4631), (2) civil money
penalty assessment proceedings under section 1376 of the Safety and
Soundness Act (12 U.S.C. 4636), and (3) proceedings under the removal
and prohibition authority of section 1377 of the Safety and Soundness
Act (12 U.S.C. 4636a) (except proceedings under section 1377(h) of the
Safety and Soundness Act for the suspension or removal of an entity-
affiliated party charged with a felony. (12 U.S.C. 4636a(h)).
Additionally, this section states that the cease and desist and
civil money penalty provisions of sections 1371 and 1376 of the Safety
and Soundness Act (12 U.S.C. 4631 and 4636) do not apply to cease and
desist or civil money penalty proceedings relative to the enforcement
of housing goals under sections 1331 through 1348 of the Safety and
Soundness Act. In particular, section 1336(c) of the Safety and
Soundness Act (12 U.S.C. 4566(c)) provides that actions to enforce
housing goals must proceed under sections 1341 and 1345 of the Safety
and Soundness Act. See 12 U.S.C. 4581, 4585, and 4631(a)(2).\22\
Prior to HERA, actions to enforce Enterprise housing goals were
reserved to the Secretary of Housing and Urban Development (HUD). That
division of enforcement authority was eliminated because HERA
transferred to the Director of FHFA the responsibility for enforcing
Enterprise housing goals. Thus, the requirement that housing goals
enforcement actions are to proceed under sections 1341 through 1348 of
the Safety and Soundness Act (12 U.S.C. 4581 through 4588)
controls.\23\ The grounds for initiating such cease and desist
proceedings relative to housing goals are set forth in section 1341 of
the Safety and Soundness Act (12 U.S.C. 4581), and section 1345 of the
Safety and Soundness Act provides for civil money penalties for such
violations that differ from the civil money penalty provisions in
section 1376 of the Safety and Soundness Act (12 U.S.C. 4636). See 12
U.S.C. 4585. Like the enforcement proceedings under sections 1371
through 1376 of the Safety and Soundness Act (12 U.S.C. 4631 et seq.),
housing goals enforcement actions proceed following the issuance and
service of a notice of charges and are conducted as a hearing on the
record. See 12 U.S.C. 4582(a)(1). Thus, the formal hearing procedures
set out in subpart C of part 1209 as proposed are well-suited to govern
housing goals enforcement proceedings.
---------------------------------------------------------------------------
\22\ The corollary provision in section 1371(a)(2) of the Safety
and Soundness Act (12 U.S.C. 4631(a)(2)) states in pertinent part
that the Director may not proceed under that section to ``enforce
compliance with any housing goal established under [sections 1331
through 1348 of the Safety and Soundness Act], with section 1336 or
1337 of this title, with subsection (m) or (n) of section 309 [of
Fannie Mae's authorizing statute] (12 U.S.C. 1723a(m), (n)), with
subsection (e) or (f) of section 307 [of Freddie Mac's authorizing
statute] (12 U.S.C. 1456(e), (f)), or with paragraph (5) of section
10(j) of the Federal Home Loan Bank Act (12 U.S.C. 1430(j)).''
\23\ Section 1205 of HERA added a new section 10C of the Bank
Act to provide that the housing goals for the Banks should be
consistent with the housing goals for the Enterprises and applied
the enforcement provisions of section 1336 of the Safety and
Soundness Act to the Banks in the same manner and to the same extent
as that section applies to the Enterprises. That effectively applies
the same enforcement authority under sections 1341 and 1345 of the
Safety and Soundness Act to the Banks. See generally 12 U.S.C. 1421.
---------------------------------------------------------------------------
Section 1209.5 Cease and Desist Proceedings
Generally, the statutory authority and requirements for cease and
desist proceedings are set out in section 1371 of the Safety and
Soundness Act (12 U.S.C. 4631), as amended by section 1151 of HERA.
Assuming that the requisite conditions are met, a cease and desist
proceeding is initiated by service of a notice of charges, and a
hearing on the record is held to determine whether the grounds are
satisfied. The hearing is administered by an independent presiding
officer who makes recommended findings of fact and conclusions of law
and transmits the entire administrative record to the Director who
makes a final determination based on the record and issues an order.
Judicial review of an order is available pursuant to section 1374
of the Safety and Soundness Act (12 U.S.C. 4634), which provides that
judicial review of any order issued under sections 1371, 1313B, 1376,
or 1377 of the Safety and Soundness Act (12 U.S.C. 4631, 4513b, 4636,
or 4636a) may be obtained by filing a petition in the United States
Court of Appeals for the District of Columbia Circuit within thirty
(30) days of the date of the order. An appeal does not operate as a
stay of an order issued by the Director, unless specifically ordered by
the court.
Under section 1375(a) of the Safety and Soundness Act, it is within
the Director's discretion to seek enforcement of an effective and
outstanding notice or order issued under subtitle C or subtitle B of
the Safety and Soundness Act. Section 1375(b) of the Safety and
Soundness Act prescribes that, except as otherwise expressly conferred,
no court shall have jurisdiction to affect the issuance or enforcement
of any notice or order under sections 1371, 1372, 1313B, 1376, or 1377
of the Safety and Soundness Act (12 U.S.C. 4631, 4513b, 4636, and
4636a).
The grounds for instituting cease and desist proceedings are set
forth in section 1371(a) and (b) of the Safety and Soundness Act (12
U.S.C. 4631(a) and (b)). Specifically, an unsafe or unsound practice in
conducting the business of a regulated entity or the Office of Finance,
or violation of a law, rule, regulation, order, or any condition
imposed in writing by the Director, may be grounds for a cease and
desist order. Service of a notice of charges is governed by section
1371(c)(1) of the Safety and Soundness Act (12 U.S.C. 4631(c)(1)).
Issuance of an order is governed by section 1371(c)(2) of the Safety
and Soundness Act (12 U.S.C. 4631(c)(2)). If the Director finds on the
basis of the record made at a hearing that any practice or violation
has been established (or the regulated entity or entity-affiliated
party consents to an order), the Director may issue and serve on the
regulated entity or entity-affiliated party an order requiring the
party to cease and desist from such practice or violation.
Under section 1371(d) of the Safety and Soundness Act (12 U.S.C.
4631(d)), a cease and desist order or a temporary cease and desist
order may also require a party to take affirmative action to correct or
remedy any condition resulting from any practice or violation with
respect to which the order is issued. See 12 U.S.C. 4631(a), (c)(2),
and (d). Additionally, section 1371(e) of the Safety and Soundness Act
(12 U.S.C.
[[Page 49320]]
4631(e)), states the authority of the Director to place limitations on
the activities or functions of the regulated entity or entity-
affiliated party or any executive officer or director of the regulated
entity or entity-affiliated party in connection with the cease and
desist order or temporary cease and desist order. Finally, section
1371(f) of the Safety and Soundness Act (12 U.S.C. 4631(f)), specifies
the effective date of a cease and desist order and provides that such
order shall remain effective and enforceable as provided in the order,
except to the extent that the order is stayed, modified, terminated or
set aside by the Director or otherwise as provided under the Safety and
Soundness Act.
Section 1209.6 Temporary Cease and Desist Orders
Section 1372(a) of the Safety and Soundness Act (12 U.S.C. 4632(a))
provides that if the Director determines that the actions specified in
the notice of charges served upon a regulated entity or any entity-
affiliated party, or the continuation thereof, is likely to cause
insolvency or significant dissipation of assets or earnings of that
entity, or is likely to weaken the condition of that entity prior to
the completion of the proceedings conducted pursuant to sections 1371
and 1373 of the Safety and Soundness Act (12 U.S.C. 4631, 4633), the
Director may issue a temporary order requiring that party to cease and
desist from any such violation or practice and that such party take
affirmative action to prevent or remedy such insolvency, dissipation,
condition, or prejudice pending completion of the proceedings.\24\ In
addition, the order may include any limitations on the activities or
functions of a regulated entity or any entity-affiliated party in
connection with the temporary cease and desist order permitted under
section 1371(d) of the Safety and Soundness Act (12 U.S.C. 4631(d)).
---------------------------------------------------------------------------
\24\ FHFA notes that ``prejudice,'' which is a carryover in the
statute as amended by HERA, without more may appear to be misplaced.
But consider that the term by itself does not provide a separate
ground for issuing a temporary cease and desist order that requires
affirmative action. Presumably, acts or omissions prejudicial to the
financial interests of a regulated entity would fall under the
``dissipation of assets'' proviso, and actions prejudicial to other
interests of the regulated entity could be subsumed by
``condition.'' For that reason, FHFA has determined that it is not a
term to be deleted as an anachronism, and invites public comment on
this issue.
---------------------------------------------------------------------------
Section 1372(b) of the Safety and Soundness Act (12 U.S.C. 4632(b))
provides that the effective date of a temporary order issued under
section 1372(a) of the Safety and Soundness Act (12 U.S.C. 4632(a)) is
the date of service on the party. Any such order, unless set aside,
limited, or suspended by a court under the judicial review provisions
of section 1372(d) of the Safety and Soundness Act (12 U.S.C. 4632(d)),
shall remain in effect and enforceable pending the completion of the
proceedings, and shall remain effective until the Director dismisses
the charges or the order is superseded by a cease and desist order
under section 1371 of the Safety and Soundness Act (12 U.S.C. 4631).
See 12 U.S.C. 4632(b). Additionally, section 1372(c)(1) of the Safety
and Soundness Act (12 U.S.C. 4632(c)(1)) prescribes the measures
available where the notice of charges specifies that the books and
records of the regulated entity are so incomplete or inaccurate that
the Director is unable to determine the true financial condition of the
regulated entity or the details of a transaction that may have a
material effect on the financial condition of the entity. In brief, the
Director may issue a temporary order requiring the entity to cease the
practices giving rise to the incomplete or inaccurate records or take
affirmative action to correct the records. See 12 U.S.C. 4631(c)(1).
Section 1372(c)(2) of the Safety and Soundness Act (12 U.S.C.
4632(c)(2)) specifies that the effective period of a temporary order
pertaining to the books and records of an entity is effective upon
service, and (unless set aside under 12 U.S.C. 4632(d)) shall remain in
effect and enforceable until the earlier of the completion of the
proceedings initiated under section 1371 of the Safety and Soundness
Act (12 U.S.C. 4631) or the Director determines upon examination or
otherwise that the books and records are accurate and reflect the
financial condition of the regulated entity. Judicial review of a
temporary order proceeds under section 1372(d) of the Safety and
Soundness Act (12 U.S.C. 4632(d)) when a party served with a temporary
order acts within ten (10) days to seek an injunction to set aside the
order pending completion of the cease and desist proceeding. The
district court's jurisdiction is limited to the issuance of such an
injunction, and does not extend to the merits of the underlying
enforcement proceeding. See 12 U.S.C. 4632(d). Without exception, the
district court has no authority under this provision to assert subject
matter jurisdiction over the underlying enforcement action or to remove
the enforcement case from the presiding officer's jurisdiction to
Federal district court.
Finally, section 1372(e) of the Safety and Soundness Act (12 U.S.C.
4632(e)), specifies that in the event of a violation or threatened
violation of a temporary order issued under section 1372 of the Safety
and Soundness Act (12 U.S.C. 4632), the Director may bring an action in
the United States District Court for the District of Columbia for an
injunction to enforce the order. The validity of the order is not at
issue here and the court's action is a mandate. If the court finds any
violation, threatened violation, or failure to obey an order issued
under this provision, the court shall issue the injunction.
Section 1209.7 Civil Money Penalties
Section 1376 of the Safety and Soundness Act, as revised by section
1155 of HERA, governs civil money penalty enforcement proceedings under
the Safety and Soundness Act, except as to housing goals violations
addressed under section 1345(a) of the Safety and Soundness Act. See 12
U.S.C. 4636(a). The Director may impose a civil money penalty on any
regulated entity or an entity-affiliated party in accordance with
section 1376 of the Safety and Soundness Act (12 U.S.C. 4636(a)). HERA
amendments to section 1376 of the Safety and Soundness Act strengthened
the statutory authority, preserved the three-tiered structure for
assessing civil money penalties (Tiers 1-3), and increased (and, in the
case of the higher tiers, significantly increased) the maximum penalty
amounts for each tier. Under the HERA amendments to the provisions
governing Tier 1, a regulated entity or entity-affiliated party shall
forfeit and pay a civil penalty of not more than $10,000 for each day
during which a violation continues, if such regulated entity or party
violates--(1) Any provision of the Safety and Soundness Act, the
authorizing statutes, or any order, condition, rule or regulation under
the Safety and Soundness Act or authorizing statutes; (2) any final or
temporary order issued under the Safety and Soundness Act; (3) any
condition imposed by the Director in connection with the grant of any
application or other request by the regulated entity; or (4) any
written agreement between the regulated entity and the Director. See 12
U.S.C. 4636(b)(1)(A)-(D) (Tier 1 violations).
As amended by HERA, section 1376(b)(2) of the Safety and Soundness
Act (12 U.S.C. 4636(b)(2)) sets forth broader standards for Tier 2
violations and penalties. Moreover, with the addition of the caveat
``notwithstanding paragraph (1),'' the revised section allows that Tier
2 violations can stand independently of Tier 1 violations, while at the
same time building on that set of violations. See 12 U.S.C. 4636(b)(2).
Under the provisions
[[Page 49321]]
governing Tier 2 penalties, the Director can assess a higher daily
civil money penalty of not more than $50,000 for each day during which
a violation, practice, or breach continues, if (A) the regulated entity
or entity-affiliated party: (1) Commits any Tier 1 violation described
in 12 U.S.C. 4636(b)(1); (2) recklessly engages in an unsafe or unsound
practice in conducting the affairs of the regulated entity; or (3)
breaches any fiduciary duty, and (B) the violation, practice, or
breach: (1) Is part of a pattern of misconduct, (2) causes or is likely
to cause more than a minimal loss to the regulated entity, or (3)
results in pecuniary gain or benefit to such party. See id.
Thus, section 1376(b) of the Safety and Soundness Act, among other
things deleted the predicate ``violation or conduct;'' substituted
``more than minimal loss'' for the previous requirement of ``material
loss;'' added both ``breach of fiduciary duty'' and ``results in
pecuniary gain'' as culpability standards; deleted the requirement of
``recklessness;'' and eliminated the distinction in the prior statutory
scheme that had allowed for lesser penalty amounts to be assessed
against individuals than for regulated entities for the same Tier 2
violations. See id. The revised statutory scheme underscores the
Congressional purpose behind strengthening the Director's civil money
penalty enforcement authority.
Section 1376(b)(3) of the Safety and Soundness Act, governs Tier 3
conduct and penalties. As with Tier 2, Tier 3 also can stand
independent of the lower tiers. Specifically, Tier 3 provides that a
regulated entity or entity-affiliated party shall forfeit and pay a
civil penalty, in the amounts described below, for each day during
which such violation, practice, or breach continues, if such party
knowingly (1) commits any violation described in the Tier 1 provisions,
(2) engages in any unsafe or unsound practice in conducting the affairs
of the regulated entity, or (3) breaches any fiduciary duty, and
knowingly or recklessly causes a substantial loss to the regulated
entity or a substantial pecuniary gain or other benefit to such party
by reason of such violation, practice, or breach. See 12 U.S.C.
4636(b)(3). The Tier 3 penalty provisions set the daily maximum penalty
at $2 million for a regulated entity. Whereas, the Director can assess
against an entity-affiliated party a daily penalty not to exceed $2
million.
Section 1376(c)(2) of the Safety and Soundness Act sets out the
factors to be considered by the Director in determining the penalties
to be assessed under this section (12 U.S.C. 4636(c)(2)). Section
1376(c)(3) of the Safety and Soundness Act provides that the imposition
of any penalty under section 1376 of the Safety and Soundness Act (12
U.S.C. 4636) is not reviewable, except as provided for in section 1374
of the Safety and Soundness Act (12 U.S.C. 4634). See 12 U.S.C.
4636(c)(3). Additionally, these revised amounts, which represent a
large increase in the daily maximum penalty amounts (particularly by
bringing penalties to be assessed against entity-affiliated parties in
line with those assessed on a regulated entity), are adjusted
periodically under the Inflation Adjustment Act, as provided in subpart
E of this part.
Section 1209.8 Removal and Suspension Proceedings
Section 1153 of HERA provides that the statutory authority and
requirements for removal and suspension enforcement proceedings are set
forth in section 1377 of the Safety and Soundness Act (12 U.S.C.
4636a). The removal or suspension of an entity-affiliated party, or the
officers, directors, or management of the Office of Finance, a joint
office of the Banks--where the requisite conditions are met, is
initiated by service of a notice, and a hearing on the record is held
to determine whether the grounds are satisfied, as provided by section
1373(a)(1) of the Safety and Soundness Act (12 U.S.C. 4633(a)(1)). As
with a cease and desist proceeding, the hearing (with the exception of
removal proceedings under section 1377(h) of the Safety and Soundness
Act (12 U.S.C. 4636a (h)) is presided over by an independent presiding
officer who sets a date for an evidentiary hearing, presides over the
proceeding, and then submits her recommended findings of fact and
conclusions of law with the entire administrative record to the
Director who makes a final determination on the merits and issues an
order.
In particular, section 1377(a)(1) of the Safety and Soundness Act
authorized the Director to serve upon a party described in paragraph
(a)(2) of the section, or any officer, director, or management of the
Office of Finance, written notice of the intention of the Director to
suspend or remove such party from office, or prohibit any further
participation by such party, in any manner, in the conduct of the
affairs of a regulated entity. See 12 U.S.C. 4636a(a)(1). For purposes
of this section, under section 1377(a)(2) of the Safety and Soundness
Act, a party is an entity-affiliated party or any officer, director, or
management of the Office of Finance, if the Director determines that a
party, officer, or director directly or indirectly violated a law,
regulation, final cease and desist order, or any written condition in
connection with an application, notice, or other request of a regulated
entity; engaged or participated in any unsafe or unsound practice in
connection with any regulated entity or business institution; or
breached a fiduciary duty, and by reason of such violation, practice,
or breach, the regulated entity or business institution suffered or
probably will suffer financial loss or other damage, or such party
received financial gain or other benefit, and the violation, practice,
or breach involves either personal dishonesty on the part of such party
or demonstrates willful or continuing disregard by that party for the
safety or soundness of the regulated entity or business institution.
See 12 U.S.C. 4636a(a)(2).
Section 1377 of the Safety and Soundness Act subjects the officers,
directors, and management of the Office of Finance to the suspension
and removal authority of the Director, if the stated conditions are
met. See 12 U.S.C. 4636a. The Office of Finance is included in the
definition of entity-affiliated party in section 1303(11)(E) of the
Safety and Soundness Act 12 (U.S.C. 4502(11)(E)). Presumably, the term
``business institution,'' as used in section 1377 of the Safety and
Soundness Act, too, refers to the Office of Finance, a joint office and
agent of the Banks central to the issuance of consolidated obligations
on which the Banks are jointly and severally liable.
Under section 1377(b) of the Safety and Soundness Act (12 U.S.C.
4636a(b)), the Director may issue an order to suspend or remove a party
from office, or prohibit such party from participation in the affairs
of the regulated entity, upon service of the notice under paragraph
(a)(1) of section 1377 of the Safety and Soundness Act (12 U.S.C.
4636a(a)), if the Director makes a determination that the action is
necessary for the protection of the regulated entity and such party is
served with the order. See 12 U.S.C. 4636a(b)(1). An immediate order of
suspension issued under paragraph (b) of this section is effective when
served. See 12 U.S.C. 4636a(b)(2)(A).
Furthermore, section 1377(b)(2)(B) of the Safety and Soundness Act
(12 U.S.C. 4636a(b)(2)(B)) provides that unless stayed by a court under
paragraph (g) of section 1377 of the Safety and Soundness Act (12
U.S.C. 4636a(g)), any suspension order issued under paragraph (b) shall
remain in effect and enforceable until the Director dismisses the
charges set out in the notice served under paragraph (a)(1) of this
section or
[[Page 49322]]
the effective date of the order issued under paragraph (b) [sic].\25\
See 12 U.S.C. 4636a(b)(2)(B).
---------------------------------------------------------------------------
\25\ The reference should be to paragraph (c) of section 1377 of
the Safety and Soundness Act (12 U.S.C. 4636a(c)), which concerns
final orders.
---------------------------------------------------------------------------
Under section 1377(b)(3) of the Safety and Soundness Act (12 U.S.C.
4636a(b)(3)), if the Director issues an order under paragraph (b) of
this section, the Director shall serve a copy of such order upon any
regulated entity with which the subject of the order is affiliated at
the time the order is issued.
Section 1377(c) of the Safety and Soundness Act (12 U.S.C.
4636a(c)) governs the process for providing notice, setting the
hearing, and issuing the order. Specifically, section 1377(c) of the
Safety and Soundness Act sets the requirements for: (1) The notice--
under section 1377(a) of the Safety and Soundness Act the notice shall
contain a statement of the facts constituting grounds for such action
and fix a time and place at which a hearing is to be held on the
action; (2) the timing of the hearing--the same thirty (30) to sixty
(60) day requirement as that pertaining to cease and desist orders,
unless a request is made (by the party receiving the notice upon a
showing of good cause, or the U.S. Attorney General) for an earlier or
later date for the hearing to occur; (3) establishing consent of the
party--a party shall be deemed to consent to the order by failing to
appear; (4) issuance of an order of suspension--the Director may issue
an order as he deems it appropriate if the party is deemed to consent
or if the Director finds any of the grounds specified in the notice
have been established upon the record developed at the hearing; and (5)
effectiveness of an order--at the expiration of a thirty (30) day
period after service upon the relevant regulated entity and the party,
except where a party has consented, in which case the order shall
become effective at the time stated in the order. Additionally, under
section 1377(c)(5) of the Safety and Soundness Act (12 U.S.C.
4636a(c)(5)), the order remains effective and enforceable except to
such extent as it is stayed, modified, terminated, or set aside by
action of the Director or a reviewing court.
Section 1377(d) of the Safety and Soundness Act (12 U.S.C.
4636a(d)) specifies the activities that any person subject to a removal
or suspension order under this section is prohibited from undertaking.
Persons subject to these orders are barred from participating in
conducting the affairs of a regulated entity or the Office of Finance,
and they may not exercise any proxy or voting rights or violate any
voting agreement previously approved by the Director with respect to a
regulated entity, or vote for a director or serve in any capacity as an
entity-affiliated party of a regulated entity or the Office of Finance.
Section 1377(e) of the Safety and Soundness Act (12 U.S.C.
4636a(e)) bars a person subject to a removal or suspension order from
participating in the conduct of the affairs of a regulated entity or
the Office of Finance. See 12 U.S.C. 4636a(e)(1). An exception is made
where the Director provides his written consent, in which case the
order--to the extent of the consent--shall cease to apply to the party
and the consent shall be made public. See 12 U.S.C. 4636a(e)(2). Any
violation of the prohibition on participating in the affairs of the
regulated entity or the Office of Finance by any entity-affiliated
party charged with a felony who is subject to a suspension or removal
order under section 1377(h) of the Safety and Soundness Act (12 U.S.C.
4636a(h)) shall be treated as a violation of that order. See 12 U.S.C.
4636a(e)(3).
Section 1377(f) of the Safety and Soundness Act (12 U.S.C.
4636a(f)), states that the removal provisions apply to individuals
only--unless the Director specifically finds that the provisions should
apply to a corporation, firm, or other business entity. See 12 U.S.C.
4636a(f). Section 1377(g) of the Safety and Soundness Act (12 U.S.C.
4636a(g)) authorizes a subject of a removal or suspension order under
this section to seek an injunction to stay the suspension or
prohibition order pending completion of the administrative hearing to
be held under section 1377(c) of the Safety and Soundness Act (12
U.S.C. 4636a(c)). This grant of subject matter jurisdiction to the
United States District Court for the District of Columbia, or the
United States district court for the judicial district in which the
regulated entity is headquartered, is limited to the authority to stay
the suspension or prohibition. See 12 U.S.C. 4636a(g). It should not be
read to confer jurisdiction over the underlying enforcement hearing.
Section 1209.9 Supervisory Actions Not Affected
This section underscores the independence of the Director to take
such regulatory, supervisory, or enforcement action, as deemed
necessary and in accordance with the Safety and Soundness Act or the
Bank Act. In addition to the plenary regulatory and supervisory
authority of the Director under section 1311(b)(1) of the Safety and
Soundness Act (12 U.S.C. 4511(b)(1)), under section 1311(b)(2) of the
Safety and Soundness Act the Director has express regulatory authority
over the regulated entities and Office of Finance to ensure that the
purposes of the Safety and Soundness Act, the authorizing statutes, and
any other applicable law are carried out. (12 U.S.C. 4511(b)(2)).
Moreover, section 1311(c) of the Safety and Soundness Act (12
U.S.C. 4511(c)) preserves the Director's ability to avail himself of
any of the broad powers conferred in the Safety and Soundness Act.
Under section 1311(c) of the Safety and Soundness Act (12 U.S.C.
4511(c)), the Director may take any regulatory or supervisory action
under section 1311(b) of the Safety and Soundness Act (12 U.S.C.
4511(b)), notwithstanding any action related to capital adequacy that
may be taken under sections 1361 through 1369E of the Safety and
Soundness Act (12 U.S.C. 4612 et seq.) or any enforcement action taken
under sections 1371 through 1379E of the Safety and Soundness Act (12
U.S.C. 4631 through 4641). Thus, the Director's authority under
subtitle B of the Safety and Soundness Act to set capital requirements
for the regulated entities, to enter into enforceable written
agreements, to appoint FHFA as conservator or receiver for a regulated
entity, and to take enforcement actions under specified conditions,
does not limit his general regulatory authority over the regulated
entities and the Office of Finance.
Similarly, the Director's authority under sections 1371 through
1379E of the Safety and Soundness Act (12 U.S.C. 4631 through 4641) to
prosecute administrative enforcement actions by serving a notice of
charges to enforce any provision or requirement of the Safety and
Soundness Act, or other applicable standard, is independent of and does
not limit his general supervisory or regulatory authority. Indeed, the
selection of one form of supervisory or regulatory action or a
combination of actions is within the discretion of the Director, and
does not foreclose the Director from pursuing any other supervisory or
regulatory action authorized by law.
Subpart C--Rules of Practice and Procedure for Hearings on the Record
Section 1209.10 Authority of the Director
This section makes clear that enforcement proceedings are under the
general authority of the Director to allow for interlocutory appeals or
to permit actions to be performed before the appointment of the
presiding officer.
[[Page 49323]]
The Director may perform, direct the performance of, or waive
performance of any act that could be done or ordered by the presiding
officer. This promotes efficiency in the hearing process, and should
not be read to create an inherent, institutional bias on the part of
the Director.
Section 1209.11 Authority of the Presiding Officer
This section states that hearings are to be held in accordance with
the APA, and provides that the presiding officer is to have complete
charge of the proceedings, to act in a fair and impartial manner, and
to ensure that a full and complete record of the proceeding is made.
This section lists the powers of the presiding officer to control the
proceedings. First among these is the authority of the presiding
officer to set the date, time, and place (within the District of
Columbia) of the testimonial phase of the hearing process, i.e.,
evidentiary hearing. Consistent with Sec. 1209.23, the appearance
hearing is to be set in the scheduling order issued by the presiding
officer following the initial scheduling conference that must be held
no later than sixty (60) days from the date of service of the notice of
charges, notice of intention to assess a civil money penalty, or notice
of intention to suspend or remove a party as provided in the Safety and
Soundness Act. In accordance with Sec. 1209.11(b)(1) setting of the
evidentiary hearing may occur sooner upon motion of the respondent, or
otherwise as the presiding officer finds in the best interest of
justice.
The section prescribes the presiding officer's authority to: reset,
continue, or recess the hearing in whole or in part for a reasonable
period of time; hold conferences to ensure the legal, factual, or
evidentiary issues addressed are materially relevant to the charges or
allowable defenses; administer oaths and affirmations; issue and
enforce subpoenas, subpoenas duces tecum, and discovery and protective
orders, or modify, revoke, or quash such subpoenas; take and preserve
testimony under oath; rule on motions, except that only the Director
may dismiss the proceeding or make a final determination on the merits;
take all actions necessary to regulate the scope, timing, and
completion of discovery of any non-privileged matter that is materially
relevant to the charges or allowable defenses; rule upon the
admissibility of evidence, and exclude or limit evidence; regulate the
course of the testimonial phase of the hearing; examine witnesses; upon
motion of a party, take judicial notice of a fact; prepare and present
to the Director a recommended decision; and establish the time, place,
and limitations on public and media attendance at public
proceedings.\26\
---------------------------------------------------------------------------
\26\ This section reflects both the analogous provision in the
Uniform Rules, and instructive portions of the Manual for
Administrative Law Judges (Third Edition), the last official edition
of the ``Manual for Administrative Law Judges,'' published by the
Administrative Conference of the United States. The Third Edition
was edited and resurrected as the ``2001 Interim Internet Edition,''
Morrell E. Mullins, ed. (Interim Manual). The preface to the Interim
Manual traces the history of the manual and its application in
administrative law practice.
---------------------------------------------------------------------------
Section 1209.12 Public Hearings; Closed Hearings
Generally, appearance hearings are to be open to the public. But
this section also reflects the authority of the Director, under section
1379B(b) of the Safety and Soundness Act (12 U.S.C. 4639(b)), to
determine that holding an open hearing would be contrary to the public
interest, and provides appropriate mechanisms for making and
implementing such determinations. To make the determination, the
Director must receive the party's motion, opposing briefs, and a
recommended decision, from the presiding officer. A determination by
the Director under this section is not a reviewable final agency
action.
The authority to file documents under seal is reserved to agency
counsel, who must make a written determination that the disclosure of
the document would be contrary to the public interest. The presiding
officer must preserve the confidentiality of the document and, if
needed, issue a protective order that is acceptable to FHFA counsel of
record. If a hearing is to be closed for the purpose of introducing
testimony or documents filed under seal, certain prescriptive
procedures (such as the Methods of Handling Confidential Information of
general applicability in administrative proceedings under the Interim
Manual) are to be followed. In any event, the presiding officer is
bound to ensure that any objections to the introduction of confidential
information or testimony into evidence will not obstruct the
prosecution of the enforcement case.
Section 1209.13 Good Faith Certification
This section sets out the requirement that any filing or submission
for the record must be signed by the movant's representative of
record--or a party appearing pro se--to effectively certify that the
pleading or motion is offered in good faith and not for any improper
purpose. That certification is also imputed to any oral motion and or
argument. The presiding officer must strike any unsigned document if it
is not signed promptly after the omission is brought to the movant's
attention.
Section 1209.14 Ex Parte Communications
This section defines and prohibits ex parte communications, and
provides for procedures for dealing with such communications, including
sanctions. The phrase ``may be reasonably expected to be involved''
suffices to protect contacting parties who could not reasonably be
expected to know that an agency employee might be involved in the
decisional process. FHFA thus intends to insulate those who lack
sufficient notice of the exclusion, for example if their work is
provided to the Director or a decisional employee after it was
submitted to the agency in the usual course of business. This section
also provides for the separation of functions of Agency personnel. Any
employee or agent of FHFA that participated in the examination,
investigative, or prosecutorial functions on the case may not
participate in or advise in the recommended decision or the Directors'
decision on the final determination (analysis of settlement offers and
regulatory or supervisory matters are excepted from this prohibition).
Section 1209.15 Filing of Papers
This section, which specifies the filing requirements for papers,
pleadings, motions, and memoranda in any proceeding governed by subpart
C of this part, was updated to reflect electronic filing practices.
Section 1209.16 Service of Papers
This section, which specifies the service requirements for papers,
pleadings, motions, and memoranda in any proceeding governed by subpart
C of this part, was updated to reflect electronic service practices.
Section 1209.17 Time Computations
This section sets out the general rule for computing any time
period prescribed by subpart C of this part and states when filing or
service are deemed to be effective. Additionally, this section was
updated to reflect electronic service practices. The rule also provides
that the prescribed effective filing and service dates may be modified
by the presiding officer or by agreement of the parties in the case of
service. Finally, the rule prescribes the method for calculating of
time for service and filing of responsive papers.
[[Page 49324]]
Section 1209.18 Change of Time Limits
This section permits the presiding officer, upon a showing of good
cause, to extend time limits set out in the regulation or any notice or
order, either on a motion of a party or on his own initiative.
Additionally, after the matter has been referred under Sec. 1209.53 to
the Director, the Director may also grant extensions of time.
Section 1209.19 Witness Fees and Expenses
This section specifies that the fees and expenses of witnesses
shall be paid at the same rate as those paid in proceedings in United
States district courts. Additionally, FHFA is not required to pay such
fees in advance where FHFA has requested or issued the subpoena, and
FHFA is not required to pay any fees or expenses of any witness who was
not subpoenaed by FHFA.
Section 1209.20 Opportunity for Informal Settlement
This section permits any respondent at any time in the enforcement
proceeding to make a written proposal for settlement without prejudice
to any rights of any party. Any such settlement proposal, however, must
be made only to FHFA counsel of record. Submission of a settlement
offer does not operate to stay the proceeding or to provide a basis for
adjourning or otherwise delaying the proceeding. Additionally, no
settlement offer is admissible in any proceeding.
Section 1209.21 Conduct of Examination
This section clarifies that the prosecution of a notice of charges
or a notice of imposition of a civil money penalty does not impact in
any way FHFA's authority to continue or conduct any examination,
investigation, inspection, or visitation of any regulated entity or
entity-affiliated party authorized by law.
Section 1209.22 Collateral Attacks on Adjudicatory Proceeding
This section provides that the pendency in any court of a
collateral attack on the enforcement proceeding shall have no effect on
the enforcement proceeding which shall continue without regard to the
collateral attack. Further, the section makes clear that a default or
failure to act within timeframes and requirements prescribed in the
administrative proceeding will not be excused on the basis of the
collateral attack.
Section 1209.23 Commencement of Proceeding and Contents of Notice of
Charges
This section states that an administrative enforcement proceeding
is commenced by a notice of charges as defined in Sec. 1209.3(p), and
sets out the requirements for the contents of a notice of charges. In
short, among other things, a notice must include: the legal authority
for the proceeding; a statement of the law and fact showing that FHFA
is entitled to relief; the relief sought; a statement that the
presiding officer will set the date and location (within the District
of Columbia) of the testimonial phase of the proceeding in a scheduling
order to be issued in connection with the initial scheduling conference
to be held thirty (30) to sixty (60) days from the date of service of
the notice; contact information for the presiding officer and for FHFA
counsel of record; citation to the Rules of Practice and Procedure; and
a statement that the answer must be filed with the presiding officer
within the time to file an answer as required by law or regulation. The
rule also provides that the notice must include the time within which
to request an earlier hearing. Ordinarily, however, such a request
would be obviated by the scheduling conference and scheduling order.
Section 1209.24 Answer
This section provides that the respondent must file an answer
within twenty (20) days of the service of the notice, unless the notice
specifies otherwise, and sets out the required elements of a conforming
answer. This section mandates that failure to file an answer within the
required period constitutes a waiver of the respondent's right to
appear and contest the allegations in the notice. FHFA counsel of
record may file a motion for an entry of default, and the presiding
officer, upon a finding of no good cause for the failure to answer,
shall file a recommended decision with the findings and relief sought
in the notice. A final order issued by the Director based on the
respondent's failure to file an answer is deemed to be an order issued
upon consent.
Section 1209.25 Amended Pleadings
This section allows for a notice or answer to be amended or
supplemented at any stage in the proceeding, and states the deadline
for an answer to an amended notice. The rule also provides guidance for
when no formal amendment is necessary to conform such pleadings to the
evidence and issues tried at the hearing. Additionally, the rule
provides that the presiding officer may admit evidence despite timely
objections (as to relevance or materiality with respect to issues
raised in the notice of charges) when admission is likely to assist in
adjudicating the merits of the action, if an objecting party fails to
satisfy the presiding officer that the admission of such evidence would
unfairly prejudice the party's action or defense upon the merits. In
such cases, the presiding officer may grant a reasonable continuance to
allow the objecting party to meet such evidence.
Section 1209.26 Failure To Appear
This section states that if a respondent fails to appear at a
hearing in person or through a representative of record, that
respondent waives his right to a testamentary hearing and is deemed to
have admitted to all facts alleged and consented to the relief sought
in the notice. As in the case where a respondent has failed to file an
answer, the presiding officer shall file with the Director a
recommended decision containing the findings and relief sought in the
notice.
Section 1209.27 Consolidation and Severance of Actions
This section provides authority to the presiding officer, either
upon a motion of a party or on his own initiative, to consolidate two
or more proceedings (for some or all purposes), if the circumstances
meet the stated test, unless consolidation would cause unreasonable
delay or injustice. As to severance, however, the presiding officer may
act only on a severance motion of a party if the presiding officer
finds that undue prejudice or injustice to the moving party would
result and would outweigh the interests of judicial economy in the
complete and final resolution of the proceeding.
Section 1209.28 Motions
This section specifies that requests for an order must be in a
written motion. The provision sets out the requirements for such
motions, and provides that written memoranda, briefs, affidavits, or
other relevant material may be submitted in support of a motion. On the
other hand, the rule allows for oral motions to be made in a hearing,
unless the presiding officer directs that the motion be reduced to
writing. The rule has been revised to state that a response to a non-
dispositive motion is due within ten (10) days, to distinguish it from
a response to a dispositive motion, which is governed by Sec. 1209.35,
and to provide that reply briefs must be filed within five (5) days of
a response,
[[Page 49325]]
unless the presiding officer or Director orders otherwise. The rule
also was revised to provide that the presiding officer shall consider
responses of parties having an interest in a motion before ruling on an
oral or a written motion. A party's failure to oppose a motion is
deemed to be consent to the motion and the relief sought. The rule has
been clarified to bar frivolous, dilatory, or substantively repetitive
motions, and continues to provide that the filing of such motions may
form the basis for sanctions.
Section 1209.29 Discovery
Section 1209.29 of the rule, which readopts Sec. 1780.26 of the
existing OFHEO rule, has been amended in part to reflect actual
practice experience and to clarify that the presiding officer is
charged with restricting discovery to any matter not privileged that is
materially relevant to the charges or allowable defenses in a pending
proceeding. In particular, any document request that seeks privileged
information or internal FHFA communications not materially relevant as
stated, or that otherwise is unreasonable in form, excessive in scope,
unduly burdensome, or substantially repetitive of prior discovery
requests, shall be denied or modified.
Section 1209.29(a)(2) of the proposed rule is a new provision that
requires the parties to meet and confer in good faith to agree upon and
submit to the presiding officer a discovery plan for timely, cost-
effective management of document discovery. This process was conceived
to achieve the economies of pre-trial discovery embedded in similar
requirements under the Federal Rules of Civil Procedure governing
district court actions. Under this new provision, no party may commence
discovery until the presiding officer has approved the parties'
discovery plan. This process supports the authority of the presiding
officer to control the proceedings and to minimize unnecessary or
costly document discovery. In the absence of the parties' cooperation,
however, the rule provides the presiding officer with ample authority
to require the parties to conduct discovery in a reasonable manner.
Under Sec. 1209.29(b)(3), as modified, any request for document
discovery is unreasonable, oppressive, excessive in scope, or unduly
burdensome--and shall be denied or modified--if, among other things,
the request: (i) Fails to include limitations on the relevant subject
matter or time period covered; (ii) fails to identify documents with
sufficient specificity to permit identification of the repositories of
official agency records to be searched; (iii) seeks material that is
duplicative, cumulative, or obtainable from another source that is more
accessible, less burdensome, or less expensive; (iv) calls for the
production of documents, whether in hard copy or in electronic format,
to be delivered to the requesting party or his designee and fails to
provide a written agreement by the requestor to pay in advance for the
costs of production, in accordance with Sec. 1209.30, or otherwise
fails to take into account costs associated with processing
electronically stored information or any cost-sharing agreement between
the parties; (v) fails to afford the responding party adequate time to
respond; or (vi) fails to take into account retention policies or
security protocols with respect to Federal information systems.
Discovery is limited to document requests. No other form of
discovery is permitted; depositions (except as noted) and
interrogatories are not permitted. This provision is not to be read to
require the creation of any document. Additionally, this section
reiterates that privileged documents are not discoverable. Applicable
privileges include: attorney client, work product, and privileges
available to government agencies (e.g., deliberative process;
examination; investigative; or any other privileges available under the
U.S. Constitution, Federal law, or the principles of Federal common
law). To preserve such privileges in productions, a new provision,
Sec. 1209.29(d)(1)(ii), provides that the parties may enter into so-
called clawback agreements, and the presiding officer shall enter an
order to ensure the enforceability of such agreements. Finally, Sec.
1209.29(d)(2) is added to make clear that the limitations on the
discovery process in this rule are not to be read otherwise to limit
the examination, regulatory or supervisory authority of FHFA. Again,
these provisions have been added to assist in resolving issues that may
arise in practice under this rule.
Time limits on discovery under Sec. 1209.29(e) of the proposed
rule require that all discovery shall be completed at least twenty (20)
days prior to the commencement of the testimonial phase of the hearing,
unless the presiding officer finds on the record that good cause exists
for waiving the twenty (20) day requirement. Additionally, the
provision that responsive documents be produced as maintained in the
usual course of business, or labeled and organized to correspond to the
document requests, was moved from its former place in OFHEO's existing
rule, Sec. 1780.27(a) of this title, to make it applicable to document
requests that are addressed either to parties or to non-parties.
Finally, a provision was added to permit the parties to agree upon the
production of documents as organized or otherwise, consistent with the
discovery plan, to provide more flexibility to the parties to make
discovery productions less onerous or costly.
Section 1209.30 Request for Document Discovery From Parties
This section would adopt the existing OFHEO rule, Sec. 1780.27 of
this title, with certain changes to the time limits for filing motions
to strike or to limit discovery requests, guidance for the presiding
officer on ruling on such motions, and revised procedures for
compelling production of documents by parties. The rule now
specifically requires that all document discovery from parties must
conform to these requirements and be consistent with the discovery plan
approved by the presiding officer under Sec. 1209.29. Any party served
with a discovery request may object to all or part of such request
within twenty (20) days of service of the request by filing a motion to
strike or limit the request under Sec. 1209.28, which will also govern
responses and replies, if any. No other party may file an objection.
Any objections that do not conform to these requirements are waived.
The proposed rule recognizes instances where discovery may include
electronically stored information, and the attendant costs and burdens.
The rule adds a new provision to address the complexities and costs
associated with the discovery of electronically stored information (e-
discovery). In past practice, a party requesting document discovery was
to agree in advance to pay for the costs of any document production--
e.g., reproduction (photocopies or electronic), and the responding
party was permitted to require receipt of payment of any such charges
prior to production. While this process is still available, under the
revised rule, parties may agree to cost-sharing, especially where
multiple parties present overlapping discovery requests, consistent
with the discovery plan approved by the presiding officer. In sum, the
revisions are intended to encourage transparency and early cooperation
of the parties to identify and resolve issues commonly encountered in
e-discovery, and to develop a coherent and cost-effective search
protocol and format of production (such as searchable formats, optical
character recognition, or load
[[Page 49326]]
files). This is particularly important where e-discovery may be
problematic, too costly, or unduly burdensome.
Section 1209.30(d) is amended to permit a party receiving a
discovery request to respond within thirty (30) days with a motion to
strike or limit the discovery requests, replacing the ten (10) days
provided for in the prior rule. Section 1209.28 of the proposed rule
governs responses to such motions and replies, if any.
Section 1209.30(e) of the proposed rule governs the process for
asserting privilege claims. A privilege log is required and documents
may be identified by category on the log. The presiding officer has
express discretion to determine when identification by category is
sufficient. Section 1209.30(f) of the proposed rule provides that any
motion to compel production must be filed in accordance with Sec.
1209.28 within ten (10) days of the time of the assertion of the
privilege or failure to produce is or becomes known to the requesting
party. To oppose, the responding party must file a written response
within five (5) days.
Section 1209.30(g) of the proposed rule clarifies that the
presiding officer may grant in part or otherwise modify any request for
production of documents, or deny any request for the production of any
document that is privileged or otherwise not within the scope of
permissible discovery. The proposed rule also adds a provision stating
expressly that the interlocutory appeal of a privilege determination or
ruling on a motion for a protective order is to be in accordance with
Sec. 1209.33, and reiterates that under Sec. 1209.33, interlocutory
review of a privilege determination or document discovery request shall
not stay the proceeding, unless ordered by the presiding officer or the
Director.
Under Sec. 1209.30(h) of the proposed rule, pertaining to the
enforcement of a document discovery subpoena, the Director or a party
who obtained the subpoena may seek enforcement to the extent authorized
under section 1379D(c)(1) of the Safety and Soundness Act (12 U.S.C.
4641(c)(1)) by seeking an order from the appropriate United States
district court. Under Sec. 1209.30(h)(2), the court's jurisdiction is
limited to that remedy; the court will not gain jurisdiction to affect
by injunction or otherwise the issuance or enforcement of any effective
and outstanding notice or order issued by the Director under section
1313B, subtitle B, or subtitle C of the Safety and Soundness Act, or to
review, modify, suspend, terminate, or set aside any such effective and
outstanding notice or order. The proposed rule clarifies that seeking
an order from a district court to enforce a subpoena or production
order does not stay automatically the enforcement proceeding, unless
the presiding officer or Director orders a stay. Finally, changes to
the rule would make clear that the Director may order sanctions against
a party who fails to produce or induces another to fail to produce
subpoenaed documents.
Section 1209.31 Document Discovery Subpoenas to Nonparties
Section 1209.31 of the proposed rule governs document discovery
subpoenas to nonparties. The proposed rule would adopt the existing
rule with minor changes to headings and the addition of text requiring
that the subpoenaing party seek only documents that are materially
relevant to the charges and issues presented in the action, state its
``unequivocal'' intention to pay for document discovery of a non-party,
and serve all other parties with the subpoena. The edits also make
clear the discretion of the presiding officer to refuse to issue a
subpoena to a non-party where the party's application for the subpoena
does not set forth a valid basis of its issuance, or where the request
is otherwise objectionable under Sec. 1209.29(b).
Section 1209.31(b) of the proposed rule governs motions to quash or
modify a document subpoena, and adds a provision to allow a non-party
to enter a limited appearance in the proceeding to challenge the
subpoena directed to it. The non-party may raise objections that may be
raised by a party under Sec. 1209.30 within the same time deadlines.
The revised provision permits the party seeking the subpoena to respond
to the non-party's objections within ten (10) days of service of motion
to quash or modify. Absent the express leave of the presiding officer,
no other party may respond to the non-party's motion. Additionally, the
pending motion shall not operate as a stay on the proceeding or in any
way limit the presiding officer's authority to impose sanctions on a
party who induces another to fail to comply with a subpoena. No party
may rely on the pendency of a motion to quash or modify to excuse
performance of any action required of that party under this part.
Finally, enforcement of document subpoenas to non-parties also is
authorized pursuant to section 1379D(c) of the Safety and Soundness Act
(12 U.S.C. 4641(c)), and there is no automatic stay in that event.
Here, again, a party's right to seek enforcement of a non-party
document subpoena does not limit in any way the authority of the
presiding officer to impose sanctions on a party who induces another to
fail to comply with a subpoena.
Section 1209.32 Deposition of Witness Unavailable for Hearing
Section 1209.32 of the proposed rule provides for a subpoena to
compel the attendance at a deposition of a witness who will not be at
the evidentiary hearing in order to preserve the testimony of that
witness for the record. The existing proposed rule would adopt existing
provision with only two changes. First, the proposed rule would amend
the existing rule to require that a witness unavailable for the hearing
must have personal knowledge of the facts and that the testimony is
reasonably expected to be materially relevant to claims, defenses, or
matters determined to be at issue. This requirement parallels the
presiding officer's authority to control the proceedings and ensure
that only materially relevant evidence is adduced. Second, a
requirement is added to create a full written record; recorded or
videotaped depositions must be transcribed and copies of the recordings
or videotapes and the transcriptions must be provided to each party.
Section 1209.33 Interlocutory Review
Section 1209.33 of the proposed rule prescribes the circumstances
under which the Director may exercise interlocutory review of a ruling
of the presiding officer prior to the certification of the record. The
existing provision is adopted as stated.
Section 1209.34 Summary Disposition
Section 1209.34 of the proposed rule states the test for an order
granting a motion for summary disposition of the matter and the process
for hearing and deciding such motions. The existing provision is
adopted with one change; the time period for filing a response to a
dispositive motion is extended to thirty (30) days, in order to provide
sufficient time to respond to arguments that may present novel or
complex issues.
Section 1209.35 Partial Summary Disposition
Section 1209.35 of the proposed rule states that if the presiding
officer determines that some of the claims are subject to summary
disposition a hearing on the remaining claims shall be conducted, and
following that, the recommended decision will address all of the
claims. The proposed rule would adopt the existing provision as stated.
[[Page 49327]]
Section 1209.36 Scheduling and Pre-Hearing Conferences
Section 1209.36 sets out how the presiding officer manages the
scheduling and pre-hearing conferences and the issuance of scheduling
and pre-hearing orders. The proposed rule would adopt the existing
provision with one change: paragraph (a) ``scheduling conference''
would be edited to conform to the proposed powers of the presiding
officer. As proposed, it specifies that within thirty (30) days of
service of the notice of charges, the presiding officer is to require
each party or the party's representative to participate (in person or
via teleconference at the option of the presiding officer) in an
initial scheduling conference for the purpose of setting the time and
place of the evidentiary hearing in the District of Columbia. In
connection with this initial scheduling conference, the presiding
officer will determine the course and conduct of the proceeding.
Section 1209.37 Pre-Hearing Submissions
Section 1209.37 of the proposed rule states the required
submissions and sets the deadline for service of these items by each
party on every other party. The existing provision, as stated, would be
adopted.
Section 1209.38 Hearing Subpoenas
Section 1209.39 of the proposed rule sets forth the process for
applying for a hearing subpoena and the circumstances under which the
presiding officer may refuse to issue a subpoena or require a
modification of a proposed subpoena. The provision would be adopted, as
set forth in the existing provision with minor technical edits.
Sections 1209.39 Through 1209.49 [Reserved]
Section 1209.50 Conduct of Hearings
Section 1209.50 of the proposed rule prescribes the general rules
for hearings, and the specific rule pertaining to the order of the
hearing, the examination of witnesses, stipulations, and the hearing
transcript. The existing provision would be adopted, as stated.
Section 1209.51 Evidence
Section 1209.51 of the proposed rule sets out the requirements for
the admissibility of evidence, official notice, the introduction of
documentary evidence, objections to the introduction of evidence,
stipulations, and depositions of unavailable witnesses. The provision
would be adopted, as stated in the existing provision with minor
technical edits to require that stipulations as to any document to be
admitted into evidence be made a part of the record.
Section 1209.52 Post-Hearing Filings
Section 1209.52 of the proposed rule establishes the briefing
process and schedule for filing proposed findings and conclusions and
supporting briefs. The provision would be adopted, as stated in the
existing provision with minor technical edits to re-set filing
deadlines as follows: proposed findings of fact and conclusions of law
are to be filed with the presiding officer within thirty (30) days of
receiving the notice that the transcript was filed with the presiding
officer. The filing deadline was extended to ensure the parties would
have sufficient time to address novel or complex issues of law or fact.
Similarly, the response deadline was extended to fifteen (15) days. The
requirement that reply briefs be limited to responding to new matters
also was strengthened.
Section 1209.53 Recommended Decision and Filing of Record
Section 1209.53 of the proposed rule prescribes the process and
time deadlines for the presiding officer to file the recommended
decision and record with the Director. The provision would be adopted,
as stated in the existing provision with minor technical edits to reset
the filing deadline at forty-five (45) days after expiration of the
time allowed for filing briefs. The filing deadline proposed time is
extended to ensure that the presiding officer is afforded sufficient
time to address multiple parties' arguments, complex factual matters,
or novel legal issues that may arise in any given proceeding.
Section 1209.54 Exceptions to Recommended Decision
Section 1209.54 of the proposed rule establishes the process and
time deadlines for the parties to respond to the presiding officer's
recommended decision. The provision would be adopted, as stated in the
existing provision with minor technical edits to reset the filing
deadline at thirty (30) days after service of the recommended decision.
The filing deadline was extended to afford the parties sufficient time
to address issues raised in the recommended decision.
Section 1209.55 Review by Director
Section 1209.55 of the proposed rule provides for the Director to
serve notice on the parties when the record is determined to be
complete, allows that the Director may permit the parties to give an
oral argument on the issues, and states the process for rendering the
final decision. The provision would be adopted, as stated in the
existing provision with minor technical edits to re-set the deadline
for rendering the decision at ninety (90) days after notification to
the parties that the case has been submitted for final decision. The
time period was adjusted to enable the Director adequately to address
any issue that may be presented by an enforcement action under the
rule.
Section 1209.56 Exhaustion of Administrative Remedies
Section 1209.56 of the proposed rule provides that to meet the
exhaustion requirement, a party must file with the Director exceptions
to the recommended decision. This is a precondition to seeking judicial
review of any decision issued by the Director under this part.
Section 1209.57 Stays Pending Judicial Review
Section 1209.57 of the proposed rule provides that the commencement
of an action for judicial review does not operate as a stay of the
Director's determination unless the Director orders a stay. As
proposed, the existing provision would be adopted, as stated with no
changes.
Sections 1209.58 Through 1209.69 [Reserved]
Subpart D--Parties and Representational Practice Before the Federal
Housing Finance Agency; Standards of Conduct
Section 1209.70 Scope
Subpart D of this part contains rules governing practice by parties
or their representatives before FHFA in an adjudicatory proceeding and
standards of conduct under this part and in any appearance before the
Director or any agency representative. This subpart outlines the
sanctions that may be prescribed by a presiding officer or the Director
against parties or their representatives who fail to conform to the
requirements and conduct guidelines; such representation includes, but
is not limited to, the practice of attorneys and accountants. Employees
of FHFA are not subject to disciplinary proceedings under this subpart.
This subpart, as proposed, would adopt the existing provision with
minor edits as noted.
Section 1209.71 Definitions
Section 1209.71 of the proposed rule would adopt the existing rule
provision that defines practice before FHFA, with minor edits to
reflect that the representation is with reference to
[[Page 49328]]
regulated entities or entity-affiliated parties, rather than the
Enterprises. The definition excludes any work prepared for a regulated
entity or entity-affiliated party solely at the request of such party
for use in the ordinary course of its business.
Section 1209.72 Appearance and Practice in Adjudicatory Proceedings
Section 1209.72 of the proposed rule would adopt, without
amendment, the existing provision that delimits the representational
practice of attorneys and non-attorneys before FHFA. A party may appear
pro se. In the event of a pending proceeding any person appearing shall
file a notice of appearance. The provision prescribes the requirements
for such notices.
Section 1209.73 Conflicts of Interest
Section 1209.73 of the proposed rule would adopt, without
amendment, the existing rule provision that sets out the prohibition on
conflicts in representation and specifies applicable requirements
pertaining to certification and waiver.
Section 1209.74 Sanctions
Section 1209.74 of the proposed rule would adopt the existing rule
provision governing appropriate sanctions that may be imposed during
the course of any proceeding when any party or representative of record
has acted or failed to act in a manner clearly required by applicable
statute, regulation, or order, and that act or failure to act
constitutes contemptuous conduct, with minor technical edits. The edits
clarify that such conduct may occur in connection with any phase of any
proceeding, hearing, or appearance before a presiding officer or the
Director. The proposed rule would reissue the definitions of
contemptuous conduct, the procedure for imposition of sanctions, and
sanctions for contemptuous conduct, without change.
Section 1209.75 Censure, Suspension, Disbarment, and Reinstatement
Section 1209.75 of the proposed rule would adopt, with minor edits,
the existing rule provision governing the circumstances under which the
Director may censure any individual who practices or attempts to
practice before FHFA, or suspend or revoke the privilege to appear or
practice before FHFA, after notice and a hearing in the matter.
The edit clarifies that legal or regulatory violations may pertain
to any applicable law. Additionally, the proposed rule mirrors the
existing rule in setting out the bases for mandatory suspension and
debarment, and the requirements pertaining to notices, applications for
reinstatement, hearings, and conferences in proceedings under Subpart D
of this part.
Sections 1209.76 Through 1209.79 [Reserved]
Subpart E--Civil Money Penalty Inflation Adjustments
Section 1209.80 Inflation Adjustments
Section 1209.80 of the proposed rule would adopt, with minor edits,
the existing rule provision governing the maximum amount of each civil
money penalty within FHFA's jurisdiction, as set by the Safety and
Soundness Act and thereafter adjusted in accordance with the Inflation
Adjustment Act. In a change from the existing rule, the proposed rule
establishes this process in subpart E to facilitate subsequent
technical penalty amount adjustments as provided by law.
Section 1209.81 Applicability
Section 1209.81 of the proposed rule would adopt, with minor edits,
the existing provision stating it is applicable to civil money
penalties under section 1376 of the Safety and Soundness Act (12 U.S.C.
4636) for violations occurring after July 30, 2008, the effective date
of HERA.
Sections 1209.82 Through 1209.99 [Reserved]
Subpart F--Suspension or Removal of Entity-Affiliated Party Charged
With Felony
Section 1209.100 Scope
As proposed, new subpart F would adopt the requirements under
section 1377(h) of the Safety and Soundness Act, as amended, governing
informal hearings to be afforded to any entity-affiliated party who has
been suspended, removed or prohibited from further participation in the
business affairs of a regulated entity by a notice or order issued by
the Director in accordance with section 1377(h)(4) of the Safety and
Soundness Act (12 U.S.C. 4636a(h)). Importantly, the statute does not
require a hearing on the record, thus the formal hearing procedures in
subpart C are not applicable to proceedings under section 1377(h) of
the Safety and Soundness Act. All that is required is an informal
hearing that satisfies the basic elements of due process, notice and
opportunity to respond. Subpart F establishes that informal hearing
process.
Section 1209.101 Suspension, Removal, or Prohibition
Section 1209.101 of the proposed rule implements section 1377(h) of
the Safety and Soundness Act and prescribes the circumstances under
which the Director may suspend, remove, or prohibit the further
participation of an entity-affiliated party who has been charged, in
any information, indictment, or complaint, with the commission of or
participation in a crime that involves dishonesty or breach of trust
that is punishable by imprisonment for more than one (1) year under
State or Federal law. The rule requires a notice or an order of
removal, as appropriate, and prescribes the effective period, as well
as the effect of acquittal. The notice must state the basis for the
suspension and the right of the party to request an informal hearing as
provided in Sec. 1209.102.
Section 1209.102 Hearing on Removal or Suspension
Section 1209.102 of the proposed rule sets forth the requirements
for an informal hearing on a removal or suspension under section
1377(h) of the Safety and Soundness Act (12 U.S.C. 46436a(h)), and the
timing and procedural matters of such hearings. An APA-type full
evidentiary hearing on the record is not required under the Safety and
Soundness Act. But the hearing prescribed under this section will meet
the essential notice and opportunity to respond requirements of due
process. Therefore, the requirements as to form, timing, conduct,
submissions, and the record of the hearing, are specified in this
provision. The proposed rule allows that an entity-affiliated party may
elect in writing to waive his right to appear in person or through
counsel to make a statement and to have the matter determined solely on
the basis of his written submission. A new provision clarifies that the
purpose of the informal hearing is to determine whether the suspension
or prohibition will be continued, modified, or terminated, or whether
an order removing such party or prohibiting the party from
participation in the affairs of the regulated entity will be rescinded
or modified.
An action by the Director under this section shall not be deemed as
a predicate or a bar to other regulatory, supervisory or enforcement
action under the Safety and Soundness Act.
[[Page 49329]]
Section 1209.103 Recommended and Final Decisions
Section 1209.103 of the proposed rule sets forth the requirements
for the recommended decision of a presiding officer. Under this
provision the parties are afforded a five (5) day comment period,
comments on the recommended decision are directed to the presiding
officer, and no extensions of the stated time period are permitted. The
decision of the Director is provided in writing to the entity-
affiliated party within sixty (60) days. The decision is a final, non-
appealable order. An individual who has been suspended or removed by
order of the Director may request reconsideration of such an order
under the prescribed requirements. There is no hearing on a petition
for reconsideration, and the Director will inform the requestor of the
disposition of the request in a timely manner. A decision on a request
for reconsideration shall not constitute an appealable order.
V. Regulatory Impact
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that
a regulation that has a significant economic impact on a substantial
number of small entities, small businesses, or small organizations must
include an initial regulatory flexibility analysis describing the
regulation's impact on small entities. Such an analysis need not be
undertaken if the agency has certified that the regulation will not
have a significant economic impact on a substantial number of small
entities. 5 U.S.C. 605(b). FHFA has considered the impact of the
proposed regulation under the Regulatory Flexibility Act. FHFA
certifies that the proposed regulation, if adopted, is not likely to
have a significant economic impact on a substantial number of small
business entities because the regulation applies to the Enterprises and
Banks, which are not small entities for purposes of the Regulatory
Flexibility Act. 5 U.S.C. 605(b).
List of Subjects
12 CFR Part 908
Administrative practice and procedure, Federal home loan banks,
Penalties.
12 CFR Part 1209
Administrative practice and procedure, Federal home loan banks.
12 CFR Part 1780
Administrative practice and procedure, Penalties.
Accordingly, for the reasons set forth in the preamble, under the
authority of 12 U.S.C. 4513b and 4526, the Federal Housing Finance
Agency proposes to amend chapters IX, XII, and XVII of Title 12, Code
of Federal Regulations, as follows:
CHAPTER IX--FEDERAL HOUSING FINANCE BOARD
Subchapter B--Federal Housing Finance Board Organization and Operations
PART 908--[REMOVED]
1. Remove 12 CFR Part 908.
CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY
Subchapter A--Organization and Operations
2. Add part 1209 to subchapter A to read as follows:
PART 1209--RULES OF PRACTICE AND PROCEDURE
Subpart A--Scope and Authority
Sec.
1209.1 Scope.
1209.2 Rules of construction.
1209.3 Definitions.
Subpart B--Enforcement Proceedings Under Sections 1371 Through 1379D of
the Safety and Soundness Act
1209.4 Scope and authority.
1209.5 Cease and desist proceedings.
1209.6 Temporary cease and desist orders.
1209.7 Civil money penalties.
1209.8 Removal and prohibition proceedings.
1209.9 Supervisory actions not affected.
Subpart C--Rules of Practice and Procedure
1209.10 Authority of the Director.
1209.11 Authority of the Presiding Officer.
1209.12 Public hearings; Closed hearings.
1209.13 Good faith certification.
1209.14 Ex parte communications.
1209.15 Filing of papers.
1209.16 Service of papers.
1209.17 Time computations.
1209.18 Change of time limits.
1209.19 Witness fees and expenses.
1209.20 Opportunity for informal settlement.
1209.21 Conduct of examination.
1209.22 Collateral attacks on adjudicatory proceeding.
1209.23 Commencement of proceeding and contents of notice of
charges.
1209.24 Answer.
1209.25 Amended pleadings.
1209.26 Failure to appear.
1209.27 Consolidation and severance of actions.
1209.28 Motions.
1209.29 Discovery.
1209.30 Request for document discovery from parties.
1209.31 Document discovery subpoenas to nonparties.
1209.32 Deposition of witness unavailable for hearing.
1209.33 Interlocutory review.
1209.34 Summary disposition.
1209.35 Partial summary disposition.
1209.36 Scheduling and pre-hearing conferences.
1209.37 Pre-hearing submissions.
1209.38 Hearing subpoenas.
1209.39-49 [Reserved].
1209.50 Conduct of hearings.
1209.51 Evidence.
1209.52 Post-hearing filings.
1209.53 Recommended decision and filing of record.
1209.54 Exceptions to recommended decision.
1209.55 Review by Director.
1209.56 Exhaustion of administrative remedies.
1209.57 Stays pending judicial review.
1209.58-69 [Reserved].
Subpart D--Parties and Representational Practice Before the Federal
Housing Finance Agency; Standards of Conduct
1209.70 Scope.
1209.71 Definitions.
1209.72 Appearance and practice in adjudicatory proceedings.
1209.73 Conflicts of interest.
1209.74 Sanctions.
1209.75 Censure, suspension, disbarment, and reinstatement.
1209.76-79 [Reserved].
Subpart E--Civil Money Penalty Inflation Adjustments
1209.80 Inflation adjustments.
1209.81 Applicability.
1209.82-99 [Reserved].
Subpart F--Suspension or Removal of an Entity-Affiliated Party Charged
With Felony
1209.100 Scope.
1209.101 Suspension, removal, or prohibition.
1209.102 Hearing on removal or suspension.
1209.103 Recommended and final decisions.
Authority: 5 U.S.C. 551, 556, 557 and 701 et seq.; 12 U.S.C.
4501, 4503, 4511, 4513, 4513b, 4517, 4526, 4531, 4535, 4536, 4581,
4585, 4631-4641; and 28 U.S.C. 2461 note.
Subpart A--Scope and Authority
Sec. 1209.1 Scope.
(a) Authority. This part sets forth the Rules of Practice and
Procedure in accordance with the Federal Housing Enterprises Financial
Safety and Soundness Act of 1992, title XIII of the Housing and
Community Development Act of 1992, Public Law 102-550, sections 1301 et
seq., codified at 12 U.S.C. 4501 et seq., as amended (the ``Safety and
Soundness Act'').\1\
---------------------------------------------------------------------------
\1\ As used in this part, the ``Safety and Soundness Act'' means
the Federal Housing Enterprise Financial Safety and Soundness Act of
1992, as amended. See 12 CFR 1209.3. The Safety and Soundness Act
was amended by the Housing and Economic Recovery Act of 2008, Public
Law 110-289, sections 1101 et seq., 122 Stat. 2654 (July 30, 2008)
(HERA). Specifically, sections 1151 through 1158 of HERA amended
sections 1371 through 1379D of the Safety and Soundness Act
(codified at 12 U.S.C. 4631 through 4641) (hereafter, ``Enforcement
Proceedings'').
---------------------------------------------------------------------------
[[Page 49330]]
(b) Enforcement Proceedings. Subpart B of this part (Enforcement
Proceedings under sections 1371 through 1379D of the Safety and
Soundness Act) sets forth the statutory authority for enforcement
proceedings under sections 1371 through 1379D of the Safety and
Soundness Act (12 U.S.C. 4631 through 4641) (Enforcement Proceedings).
(c) Rules of Practice and Procedure. Subpart C of this part (Rules
of Practice and Procedure) prescribes the general rules of practice and
procedure applicable to adjudicatory proceedings that the Director is
required by statute to conduct on the record after opportunity for a
hearing under the Administrative Procedure Act, 5 U.S.C. 554, 556, and
557, under the following statutory provisions:
(1) Enforcement proceedings under sections 1371 through 1379D of
the Safety and Soundness Act (12 U.S.C. 4631 through 4641);
(2) Removal, prohibition, and civil money penalty proceedings for
violations of post-employment restrictions imposed by applicable law;
and
(3) Proceedings under section 102 of the Flood Disaster Protection
Act of 1973, as amended (42 U.S.C. 4012a) to assess civil money
penalties.
(d) Representation and conduct. Subpart D of this part (Parties and
Representational Practice before the Federal Housing Finance Agency;
Standards of Conduct) sets out the rules of representation and conduct
that shall govern any appearance by any person, party, or
representative of any person or party, before a presiding officer, the
Director of FHFA, or a designated representative of the Director or
FHFA staff, in any proceeding or matter pending before the Director.
(e) Civil money penalty inflation adjustments. Subpart E of this
part (Civil Money Penalty Inflation Adjustments) sets out the
requirements for the periodic adjustment of maximum civil money penalty
amounts under the Federal Civil Penalties Inflation Adjustment Act of
1990, as amended (Inflation Adjustment Act) on a recurring four-year
cycle.\2\
---------------------------------------------------------------------------
\2\ Public Law 101-410, 104 Stat. 890, as amended by the Debt
Collection Improvement Act of 1996, Public Law 104-134, title III,
sec. 31001(s)(1), Apr. 26, 1996, 110 Stat. 1321-373; Public Law 105-
362, title XIII, sec. 1301(a), Nov. 10, 1998, 112 Stat. 3293 (28
U.S.C. 2461 note).
---------------------------------------------------------------------------
(f) Informal proceedings. Subpart F of this part (Suspension or
Removal of an Entity-Affiliated Party Charged with Felony) sets out the
scope and procedures for the suspension or removal of an entity-
affiliated party charged with a felony under section 1377(h) of the
Safety and Soundness Act (12 U.S.C. 4636a(h)), which provides for an
informal hearing before the Director.
Sec. 1209.2 Rules of construction.
For purposes of this part:
(a) Any term in the singular includes the plural and the plural
includes the singular, if such use would be appropriate;
(b) Any use of a masculine, feminine, or neuter gender encompasses
all three, if such use would be appropriate; and
(c) Unless the context requires otherwise, a party's representative
of record, if any, on behalf of that party, may take any action
required to be taken by the party.
Sec. 1209.3 Definitions.
For purposes of this part, unless explicitly stated to the
contrary:
Adjudicatory proceeding means a proceeding conducted pursuant to
these rules, on the record, and leading to the formulation of a final
order other than a regulation.
Agency has the meaning defined in section 1303(2) of the Safety and
Soundness Act (12 U.S.C. 4502(2)).
Associated with the regulated entity means, for purposes of section
1379 of the Safety and Soundness Act (12 U.S.C. 4637), any direct or
indirect involvement or participation in the conduct of operations or
business affairs of a regulated entity, including engaging in
activities related to the operations or management of, providing advice
or services to, consulting or contracting with, serving as agent for,
or in any other way affecting the operations or business affairs of a
regulated entity--with or without regard to--any direct or indirect
payment, promise to make payment, or receipt of any compensation or
thing of value, such as money, notes, stock, stock options, or other
securities, or other benefit or remuneration of any kind, by or on
behalf of the regulated entity, except any payment made pursuant to a
retirement plan or deferred compensation plan, which is determined by
the Director to be permissible under section 1318(e) of the Safety and
Soundness Act (12 U.S.C. 4518(e)), or by reason of the death or
disability of the party, in the form and manner commonly paid or
provided to retirees of the regulated entity, unless such payment,
compensation, or such benefit is promised or provided to or for the
benefit of said party for the provision of services or other benefit to
the regulated entity.
Authorizing statutes has the meaning defined in section 1303(3) of
the Safety and Soundness Act (12 U.S.C. 4502(3)).
Bank Act means the Federal Home Loan Bank Act, as amended (12
U.S.C. 1421 et seq.).
Board or Board of Directors means the board of directors of any
Enterprise or Federal Home Loan Bank, as provided for in the respective
authorizing statutes.
Decisional employee means any member of the Director's or the
presiding officer's staff who has not engaged in an investigative or
prosecutorial role in a proceeding and who may assist the Director or
the presiding officer, respectively, in preparing orders, recommended
decisions, decisions, and other documents under subpart C of this part.
Director has the meaning defined in section 1303(9) of the Safety
and Soundness Act (12 U.S.C. 4502(9)); except, as the context requires
in this part, ``director'' may refer to a member of the Board of
Directors or any Board committee of an Enterprise, a Federal Home Loan
Bank, or the Office of Finance.
Enterprise has the meaning defined in section 1303(10) of the
Safety and Soundness Act (12 U.S.C. 4502(10)).
Entity-affiliated party has the meaning defined in section 1303(11)
of the Safety and Soundness Act (12 U.S.C. 4502(11)), and may include
an executive officer, any director, or management of the Office of
Finance, as applicable under relevant provisions of the Safety and
Soundness Act or FHFA regulations.
Executive officer has the meaning defined in section 1303(12) of
the Safety and Soundness Act (12 U.S.C. 4502(12)), and may include an
executive officer of the Office of Finance, as applicable under
relevant provisions of the Safety and Soundness Act or FHFA
regulations.
FHFA means the Federal Housing Finance Agency as defined in section
1303(2) of the Safety and Soundness Act (12 U.S.C. 4502(2)).
Notice of charges means the charging document served by FHFA to
commence an enforcement proceeding under this part for the issuance of
a cease and desist order; removal, suspension, or prohibition order; or
an order to assess a civil money penalty, under 12 U.S.C. 4631 through
4641 and Sec. 1209.23. A ``notice of charges,'' as used or referred to
as such in this part, is not an ``effective notice'' under section
1375(a) of the Safety and Soundness Act (12 U.S.C. 4635(a)).
[[Page 49331]]
Office of Finance has the meaning defined in section 1303(19) of
the Safety and Soundness Act (12 U.S.C. 4502(19)).
Party means any person named as a respondent in any notice of
charges, or FHFA, as the context requires in this part.
Person means an individual, sole proprietor, partnership,
corporation, unincorporated association, trust, joint venture, pool,
syndicate, organization, regulated entity, entity-affiliated party, or
other entity.
Presiding officer means an administrative law judge or any other
person appointed by or at the request of the Director under applicable
law to conduct an adjudicatory proceeding under this part.
Regulated entity has the meaning defined in section 1303(20) of the
Safety and Soundness Act (12 U.S.C. 4502(20)).
Representative of record means an individual who is authorized to
represent a person or is representing himself and who has filed a
notice of appearance and otherwise has complied with the requirements
under Sec. 1209.72. FHFA's representative of record may be referred to
as FHFA's counsel of record or enforcement counsel.
Respondent means any party that is the subject of a notice of
charges under this part.
Safety and Soundness Act means title XIII of the Housing and
Community Development Act of 1992, Public Law 102-550, known as the
Federal Housing Enterprises Financial Safety and Soundness Act of 1992,
as amended (12 U.S.C. 4501 et seq.)
Violation has the meaning defined in section 1303(25) of the Safety
and Soundness Act (12 U.S.C. 4502(25)).
Subpart B--Enforcement Proceedings Under Sections 1371 Through
1379D of the Safety and Soundness Act
Sec. 1209.4 Scope and authority.
The rules of practice and procedure set forth in Subpart C (Rules
of Practice and Procedure) of this part shall be applicable to any
hearing on the record conducted by FHFA in accordance with sections
1371 through 1379D of the Safety and Soundness Act (12 U.S.C. 4631
through 4641), as follows:
(a) Cease-and-desist proceedings under sections 1371 through 1373
of the Safety and Soundness Act, (12 U.S.C. 4631 through 4633);
(b) Civil money penalty assessment proceedings under sections 1373
and 1376 of the Safety and Soundness Act, (12 U.S.C. 4633 and 4636);
and
(c) Removal and prohibition proceedings under sections 1373 and
1377 of the Safety and Soundness Act, (12 U.S.C. 4633 and 4636a),
except removal proceedings under section 1377(h) of the Safety and
Soundness Act, (12 U.S.C. 4636a(h)).
Sec. 1209.5 Cease and desist proceedings.
(a) Cease and desist proceedings.--(1) Authority.--(i) In general.
As prescribed by section 1371(a) of the Safety and Soundness Act (12
U.S.C. 4631(a)), the Director may issue and serve upon the regulated
entity or entity-affiliated party, a notice of charges (as described in
Sec. 1209.23) to institute cease and desist proceedings, except with
regard to the enforcement of housing goals that are addressed
separately under sections 1341 and 1345 of the Safety and Soundness Act
(12 U.S.C. 4581, 4585).
(ii) Hearing on the record. In accordance with section 1373 of the
Safety and Soundness Act (12 U.S.C. 4633)), a hearing on the record
shall be held in the District of Columbia. Subpart C of this part shall
govern the hearing procedures.
(iii) Consent to order. Unless the party served with a notice of
charges shall appear at the hearing personally or through an authorized
representative, the party shall be deemed to have consented to the
issuance of the cease and desist order.
(2) Unsatisfactory rating. In accordance with section 1371(b) of
the Safety and Soundness Act (12 U.S.C. 4631(b)), if a regulated entity
receives an unsatisfactory rating as specified therein, the Director
may deem the regulated entity to be engaging in an unsafe or unsound
practice within the meaning of section 1371(a) of the Safety and
Soundness Act (12 U.S.C. 4631(a)).
(3) Order. As provided by section 1371(c)(2) of the Safety and
Soundness Act (12 U.S.C. 4631(c)(2)), if the Director finds on the
record made at a hearing in accordance with section 1373 of the Safety
and Soundness Act (12 U.S.C. 4633) that any practice or violation
specified in the notice of charges has been established (or the
regulated entity or entity-affiliated party consents pursuant to
section 1373(a)(4) of the Safety and Soundness Act (12 U.S.C.
4633(a)(4)), the Director may issue and serve upon the regulated
entity, executive officer, director, or entity-affiliated party, an
order (as set forth in Sec. 1209.55) requiring such party to cease and
desist from any such practice or violation and to take affirmative
action to correct or remedy the conditions resulting from any such
practice or violation.
(b) Affirmative action to correct conditions resulting from
violations or activities. The authority to issue a cease and desist
order or a temporary cease and desist order requiring a regulated
entity, executive officer, director, or entity-affiliated party to take
affirmative action to correct or remedy any condition resulting from
any practice or violation with respect to which such cease and desist
order or temporary cease and desist order is set forth in section
1371(a), (c)(2), and (d) of the Safety and Soundness Act (12 U.S.C.
4631(a), (c)(2), and (d)), and includes the authority to:
(1) Require the regulated entity or entity-affiliated party to make
restitution, or to provide reimbursement, indemnification, or guarantee
against loss, if--
(i) Such entity or party or finance facility was unjustly enriched
in connection with such practice or violation, or
(ii) The violation or practice involved a reckless disregard for
the law or any applicable regulations, or prior order of the Director;
(2) Require the regulated entity to seek restitution, or to obtain
reimbursement, indemnification, or guarantee against loss;
(3) Restrict asset or liability growth of the regulated entity,
(4) Require the regulated entity to obtain new capital;
(5) Require the regulated entity to dispose of any loan or asset
involved;
(6) Require the regulated entity to rescind agreements or
contracts;
(7) Require the regulated entity to employ qualified officers or
employees (who may be subject to approval by the Director at the
direction of the Director); and
(8) Require the regulated entity to take such other action, as the
Director determines appropriate, including limiting activities.
(c) Authority to limit activities. As provided by section 1371(e)
of the Safety and Soundness Act (12 U.S.C. 4631(e)), the authority of
the Director to issue a cease and desist order under section 1371 of
the Safety and Soundness Act (12 U.S.C. 4631) or a temporary cease and
desist order under section 1372 of the Safety and Soundness Act (12
U.S.C. 4632), includes the authority to place limitations on the
activities or functions of the regulated entity or entity-affiliated
party or any executive officer or director of the regulated entity or
entity-affiliated party.
(d) Effective date of order. The effective date of an order is as
set forth in section 1371(f) of the Safety and Soundness Act (12 U.S.C.
4631(f)).
[[Page 49332]]
Sec. 1209.6 Temporary cease and desist orders.
(a) Temporary cease and desist orders.--(1) Grounds for issuance.
The grounds for issuance of a temporary cease and desist order are set
forth in section 1372(a) of the Safety and Soundness Act (12 U.S.C.
4632(a)). In accordance with section 1372(a) of the Safety and
Soundness Act (12 U.S.C. 4632(a)), the Director may:
(i) Issue a temporary order requiring that regulated entity or
entity-affiliated party to cease and desist from any violation or
practice specified in the notice of charges; and
(ii) Require that regulated entity or entity-affiliated party to
take affirmative action to prevent or remedy any insolvency,
dissipation, condition, or prejudice, pending completion of the
proceedings.
(2) Additional requirements. As provided by section 1372(a)(2) of
the Safety and Soundness Act (12 U.S.C. 4632(a)(2)), an order issued
under section 1372(a)(1) of the Safety and Soundness Act (12 U.S.C.
4632(a)(1)) may include any requirement authorized under section
1371(d) of the Safety and Soundness Act (12 U.S.C. 4631(d)).
(b) Effective date of temporary order. The effective date of a
temporary order is as provided by section 1372(b) of the Safety and
Soundness Act (12 U.S.C. 4632(b)). And, unless set aside, limited, or
suspended by a court in proceedings pursuant to the judicial review
provisions of section 1372(d) of the Safety and Soundness Act (12
U.S.C. 4632(d)), shall remain in effect and enforceable pending the
completion of the proceedings pursuant to such notice of charges, and
shall remain effective until the Director dismisses the charges
specified in the notice or until superseded by a cease-and-desist order
issued pursuant to section 1371 of the Safety and Soundness Act (12
U.S.C. 4631).
(c) Incomplete or inaccurate records.--(1) Temporary order. As
provided by section 1372(c) of the Safety and Soundness Act (12 U.S.C.
4632(c)), if a notice of charges served under section 1371(a) or (b) of
the Safety and Soundness Act (12 U.S.C. 4631(a), (b)), specifies on the
basis of particular facts and circumstances that the books and records
of the regulated entity served are so incomplete or inaccurate that the
Director is unable, through the normal supervisory process, to
determine the financial condition of the regulated entity or the
details or the purpose of any transaction or transactions that may have
a material effect on the financial condition of that regulated entity,
the Director may issue a temporary order requiring:
(i) The cessation of any activity or practice that gave rise,
whether in whole or in part, to the incomplete or inaccurate state of
the books or records; or
(ii) Affirmative action to restore the books or records to a
complete and accurate state.
(2) Effective period. Any temporary order issued under section
1372(c)(1) of the Safety and Soundness Act (12 U.S.C. 4632(c)(1)) shall
become effective upon service, and remain in effect and enforceable
unless set aside, limited, or suspended in accordance with section
1372(d) of the Safety and Soundness Act (12 U.S.C. 4632(d)), as
provided by section 1372(c)(2) of the Safety and Soundness Act (12
U.S.C. 4632(c)(2)).
(d) Judicial review. Section 1372(d) of the Safety and Soundness
Act (12 U.S.C. 4632(d)), authorizes a regulated entity, executive
officer, director, or entity-affiliated party that has been served with
a temporary order pursuant to section 1372(a) or (b) of the Safety and
Soundness Act (12 U.S.C. 4632(a), (b)) to apply to the United States
District Court for the District of Columbia within ten (10) days after
service of the temporary order for an injunction setting aside,
limiting, or suspending the enforcement, operation, or effectiveness of
the temporary order, pending the completion of the administrative
enforcement proceeding. The district court has jurisdiction to issue
such injunction.
(e) Enforcement of temporary order. As provided by section 1372(e)
of the Safety and Soundness Act (12 U.S.C. 4632(e)), in the case of any
violation, threatened violation, or failure to obey a temporary order
issued pursuant to this section, the Director may bring an action in
the United States District Court for the District of Columbia for an
injunction to enforce a temporary order, and the district court is to
issue such injunction upon a finding made in accordance with section
1372(e) of the Safety and Soundness Act (12 U.S.C. 4632(e)).
Sec. 1209.7 Civil money penalties.
(a) Civil money penalty proceedings.--(1) In general. As provided
by section 1376(a) of the Safety and Soundness Act (12 U.S.C. 4636(a)),
the Director may impose a civil money penalty in proceedings to be
conducted under the procedural rules in subpart C of this part, on any
regulated entity or any entity-affiliated party in accordance with
section 1376 of the Safety and Soundness Act for any violation,
practice, or breach addressed under sections 1371, 1372, or 1376 of the
Safety and Soundness Act (12 U.S.C. 4631, 4632, 4636), except with
regard to the enforcement of housing goals that are addressed
separately under sections 1341 and 1345 of the Safety and Soundness Act
(12 U.S.C. 4581, 4585).
(2) Amount of penalty.--(i) First Tier. Section 1376(b)(1) of the
Safety and Soundness Act (12 U.S.C. 4636(b)(1)) prescribes the civil
penalty for violations as stated therein, in the amount of $10,000.
(ii) Second Tier. Section 1376(b)(2) of the Safety and Soundness
Act (12 U.S.C. 4636(b)(2)) provides that notwithstanding paragraph
(b)(1) thereof, a regulated entity or entity-affiliated party shall
forfeit and pay a civil penalty of not more than $50,000 for each day
during which a violation, practice, or breach continues, if the
regulated entity or entity-affiliated party commits any violation
described in (b)(1) thereof, recklessly engages in an unsafe or unsound
practice, or breaches any fiduciary duty, and the violation, practice,
or breach is part of a pattern of misconduct; causes or is likely to
cause more than a minimal loss to the regulated entity; or results in
pecuniary gain or other benefit to such party.
(iii) Third Tier. Section 1376(b)(3) of the Safety and Soundness
Act (12 U.S.C. 4636(b)(3)) provides that, notwithstanding paragraphs
(b)(1) and (b)(2) thereof, any regulated entity or entity-affiliated
party shall forfeit and pay a civil penalty, in accordance with section
1376(b)(4) of the Safety and Soundness Act (12 U.S.C. 4636(b)(4)), for
each day during which such violation, practice, or breach continues, if
such regulated entity or entity-affiliated party:
(A) Knowingly--
(1) Commits any violation described in any subparagraph of section
1376(b)(1) of the Safety and Soundness Act;
(2) Engages in any unsafe or unsound practice in conducting the
affairs of the regulated entity; or
(3) Breaches any fiduciary duty; and
(B) Knowingly or recklessly causes a substantial loss to the
regulated entity or a substantial pecuniary gain or other benefit to
such party by reason of such violation, practice, or breach.
(b) Maximum amounts.--(1) Maximum daily penalty. Section 1376(b)(4)
of the Safety and Soundness Act (12 U.S.C. 4636(b)(4)), prescribes the
maximum daily amount of a civil penalty that may be assessed for any
violation, practice, or breach pursuant to section 1376(b)(3) of the
Safety and Soundness Act (12 U.S.C. 4636(b)(3)), in the case of any
entity-affiliated party
[[Page 49333]]
(not to exceed $2,000,000.00), and in the case of any regulated entity
($2,000,000.00).
(2) Inflation Adjustment Act. The maximum civil penalty amounts are
subject to periodic adjustment under the Federal Civil Penalties
Inflation Adjustment Act of 1990, as amended (28 U.S.C. 2461 note), as
provided in subpart E of this part.
(c) Factors in determining amount of penalty. In accordance with
section 1376(c)(2) of the Safety and Soundness Act (12 U.S.C.
4636(c)(2)), in assessing civil money penalties on a regulated entity
or an entity-affiliated party in amounts as provided in section 1376(b)
of the Safety and Soundness Act (12 U.S.C. 4636(b)), the Director shall
give consideration to factors as:
(1) The gravity of the violation, practice, or breach;
(2) Any history of prior violations or supervisory actions, or any
attempts at concealment;
(3) The effect of the penalty on the safety and soundness of the
regulated entity or the Office of Finance;
(4) Any loss or risk of loss to the regulated entity or to the
Office of Finance;
(5) Any benefits received or derived, whether directly or
indirectly, by the respondent(s);
(6) Any injury to the public;
(7) Any deterrent effect on future violations, practices, or
breaches;
(8) The financial capacity of the respondent(s), or any unusual
circumstance(s) of hardship upon an executive officer, director, or
other individual;
(9) The promptness, cost, and effectiveness of any effort to remedy
or ameliorate the consequences of the violation, practice, or breach;
(10) The candor and cooperation, if any, of the respondent(s); and
(11) Any other factors the Director may determine by regulation to
be appropriate.
(d) Review of imposition of penalty. Section 1376(c)(3) of the
Safety and Soundness Act (12 U.S.C. 4636(c)(3)) governs judicial review
of a penalty order under section 1374 of the Safety and Soundness Act
(12 U.S.C. 4634).
Sec. 1209.8 Removal and prohibition proceedings.
(a) Removal and prohibition proceedings.--(1) Authority to issue
order. As provided by section 1377(a)(1) of the Safety and Soundness
Act (12 U.S.C. 4636a(a)(1)), the Director may serve upon a party
described in paragraph (a)(2) of this section, or any officer,
director, or management of the Office of Finance, a notice of the
intention of the Director to suspend or remove such party from office,
or to prohibit any further participation by such party in any manner in
the conduct of the affairs of the regulated entity. The notice shall
conform with Sec. 1209.23.
(2) Applicability. As provided by section 1377(a)(2) of the Safety
and Soundness Act (12 U.S.C. 4636a(a)(2)), a party described in this
paragraph is an entity-affiliated party or any officer, director, or
management of the Office of Finance, if the Director determines that:
(i) That party, officer, or director has, directly or indirectly--
(A) Violated--
(1) Any law or regulation;
(2) Any cease and desist order that has become final;
(3) Any condition imposed in writing by the Director in connection
with an application, notice, or other request by a regulated entity; or
(4) Any written agreement between such regulated entity and the
Director;
(B) Engaged or participated in any unsafe or unsound practice in
connection with any regulated entity or business institution; or
(C) Committed or engaged in any act, omission, or practice which
constitutes a breach of such party's fiduciary duty;
(ii) By reason of such violation, practice, or breach--
(A) Such regulated entity or business institution has suffered or
likely will suffer financial loss or other damage; or
(B) Such party directly or indirectly received financial gain or
other benefit; and
(iii) The violation, practice, or breach described in subparagraph
(i) of this section--
(A) Involves personal dishonesty on the part of such party; or
(B) Demonstrates willful or continuing disregard by such party for
the safety or soundness of such regulated entity or business
institution.
(3) Applicability to business entities. Under section 1377(f) of
the Safety and Soundness Act (12 U.S.C. 4636a(f)), this remedy applies
only to a person who is an individual, unless the Director specifically
finds that it should apply to a corporation, firm, or other business
entity.
(b) Suspension order.--(1) Suspension or prohibition authorized. If
the Director serves written notice under section 1377(a) of the Safety
and Soundness Act (12 U.S.C. 4636a(a)) upon a party subject to that
section, the Director may, by order, suspend or remove such party from
office, or prohibit such party from further participation in any manner
in the conduct of the affairs of the regulated entity, if the Director:
(i) Determines that such action is necessary for the protection of
the regulated entity; and
(ii) Serves such party with written notice of the order.
(2) Effective period. The effective period of any order is as
provided in section 1377(b) of the Safety and Soundness Act (12 U.S.C.
4636a(b)).
(3) Copy of order to be served on regulated entity. In accordance
with section 1377(b)(3) of the Safety and Soundness Act (12 U.S.C.
4636a(b)(3)), the Director will serve a copy of any order to suspend,
remove, or prohibit participation in the conduct of the affairs on any
regulated entity with which such party is affiliated at the time such
order is issued.
(c) Notice; hearing and order.--(1) Written notice. A notice of the
intention of the Director to issue an order under sections 1377(a) and
(c) of the Safety and Soundness Act, (12 U.S.C. 4636a(a), (c)), shall
conform with Sec. 1209.23, and may include any such additional
information as the Director may require.
(2) Hearing. A hearing on the record shall be held in the District
of Columbia in accordance with sections 1373(a)(1) and 1377(c)(2) of
the Safety and Soundness Act. See 12 U.S.C. 4633(a)(1), 4636a(c)(2).
(3) Consent. As provided by section 1377(c)(3) of the Safety and
Soundness Act (12 U.S.C. 4636a(c)(3)), unless the party that is the
subject of a notice delivered under paragraph (a) of this section
appears in person or by a duly authorized representative, in the
adjudicatory proceeding, such party shall be deemed to have consented
to the issuance of an order under this section.
(4) Issuance of order of suspension or removal. As provided by
section 1377(c)(4) of the Safety and Soundness Act (12 U.S.C.
4636a(c)(4)), the Director may issue an order under this part, as the
Director may deem appropriate, if:
(i) A party is deemed to have consented to the issuance of an order
under paragraph (d); or
(ii) Upon the record made at the hearing, the Director finds that
any of the grounds specified in the notice have been established.
(5) Effectiveness of order. As provided by section 1377(c)(5) of
the Safety and Soundness Act (12 U.S.C. 4636a(c)(5)), any order issued
and served upon a party in accordance with this section shall become
effective at the expiration of thirty (30) days after the date of
service upon such party and any regulated entity or entity-affiliated
party. An order issued upon consent under paragraph (c)(3) of this
section, however, shall become effective at the
[[Page 49334]]
time specified therein. Any such order shall remain effective and
enforceable except to such extent as it is stayed, modified,
terminated, or set aside by action of the Director or a reviewing
court.
(d) Prohibition of certain activities and industry-wide
prohibition.--(1) Prohibition of certain activities. As provided by
section 1377(d) of the Safety and Soundness Act (12 U.S.C. 4636a(d)),
any person subject to an order issued under subpart B of this part
shall not--
(i) Participate in any manner in the conduct of the affairs of any
regulated entity or the Office of Finance;
(ii) Solicit, procure, transfer, attempt to transfer, vote, or
attempt to vote any proxy, consent, or authorization with respect to
any voting rights in any regulated entity;
(iii) Violate any voting agreement previously approved by the
Director; or
(iv) Vote for a director, or serve or act as an entity-affiliated
party of a regulated entity or as an officer or director of the Office
of Finance.
(2) Industry-wide prohibition. As provided by section 1377(e)(1) of
the Safety and Soundness Act (12 U.S.C. 4636a(e)(1)), except as
provided in section 1377(e)(2) of the Safety and Soundness Act (12
U.S.C. 4636a(e)(2)), any person who, pursuant to an order issued under
section 1377 of the Safety and Soundness Act (12 U.S.C. 4636a), has
been removed or suspended from office in a regulated entity or the
Office of Finance, or prohibited from participating in the conduct of
the affairs of a regulated entity or the Office of Finance, may not,
while such order is in effect, continue or commence to hold any office
in, or participate in any manner in the conduct of the affairs of, any
regulated entity or the Office of Finance.
(3) Relief from industry-wide prohibition at the discretion of the
Director.--(i) Relief from order. As provided by section 1377(e)(2) of
the Safety and Soundness Act (12 U.S.C. 4636a(e)(2)), if, on or after
the date on which an order has been issued under section 1377 of the
Safety and Soundness Act (12 U.S.C. 4636a) that removes or suspends
from office any party, or prohibits such party from participating in
the conduct of the affairs of a regulated entity or the Office of
Finance, such party receives the written consent of the Director, the
order shall, to the extent of such consent, cease to apply to such
party with respect to the regulated entity or the Office of Finance as
described in the written consent. Such written consent shall be on such
terms and conditions as the Director therein may specify. Any such
consent shall be publicly disclosed.
(ii) No waiver; no private right of action. Nothing in this
paragraph shall be construed to require the Director to entertain or
provide such written consent, or to confer any rights to such
consideration or consent upon any party, regulated entity, entity-
affiliated party, or the Office of Finance. Additionally, any refusal
by the Director to consent to relief from an outstanding order under
this part is committed wholly to the discretion of the Director, and
shall not be a final agency action for purposes of seeking judicial
review.
(4) Violation of industry-wide prohibition. As provided by section
1377(e)(3) of the Safety and Soundness Act (12 U.S.C. 4636a(e)(3)), any
violation of section 1377(e)(1) of the Safety and Soundness Act (12
U.S.C. 4636a(e)(1)) by any person who is subject to an order issued
under section 1377(h) of the Safety and Soundness Act (12 U.S.C.
4636a(h)) (suspension or removal of entity-affiliated party charged
with felony) shall be treated as a violation of the order.
(e) Stay of suspension or prohibition of entity-affiliated party.
As provided by section 1377(g) of the Safety and Soundness Act (12
U.S.C. 4636a(g)), not later than ten (10) days after the date on which
any entity-affiliated party has been suspended from office or
prohibited from participation in the conduct of the affairs of a
regulated entity, such party may apply to the United States District
Court for the District of Columbia, or the United States district court
for the judicial district in which the headquarters of the regulated
entity is located, for a stay of such suspension or prohibition pending
the completion of the administrative enforcement proceeding pursuant to
section 1377(c) of the Safety and Soundness Act (12 U.S.C. 4636a(c)).
The court shall have jurisdiction to stay such suspension or
prohibition, but such jurisdiction does not extend to the
administrative enforcement proceeding.
Sec. 1209.9 Supervisory actions not affected.
As provided by section 1311(c) of the Safety and Soundness Act (12
U.S.C. 4511(c)), the authority of the Director to take action under
subtitle A of the Safety and Soundness Act (12 U.S.C. 4611 et seq.)
(e.g., the appointment of a conservator or receiver for a regulated
entity; entering into a written agreement or pursuing an informal
agreement with a regulated entity as the Director deems appropriate;
and undertaking other such actions as may be applicable to
undercapitalized, significantly undercapitalized or critically
undercapitalized regulated entities), or to initiate enforcement
proceedings under subtitle C of the Safety and Soundness Act (12 U.S.C.
4631 et seq.), shall not in any way limit the general supervisory or
regulatory authority granted the Director under section 1311(b) of the
Safety and Soundness Act (12 U.S.C. 4511(b)). The selection and form of
regulatory or supervisory action under the Safety and Soundness Act is
committed to the discretion of the Director, and the selection of one
form of action or a combination of actions does not foreclose the
Director from pursuing any other supervisory action authorized by law.
Subpart C--Rules of Practice and Procedure
Sec. 1209.10 Authority of the Director.
The Director may, at any time during the pendency of a proceeding,
perform, direct the performance of, or waive performance of any act
that could be done or ordered by the presiding officer.
Sec. 1209.11 Authority of the Presiding Officer.
(a) General rule. All proceedings governed by subpart C of this
section shall be conducted consistent with the provisions of chapter 5
of title 5 of the United States Code. The presiding officer shall have
complete charge of the adjudicative proceeding, conduct a fair and
impartial hearing, avoid unnecessary delay, and assure that a record of
the proceeding is made.
(b) Powers. The presiding officer shall have all powers necessary
to conduct the proceeding in accordance with paragraph (a) of this
section and 5 U.S.C. 556(c). The presiding officer is authorized to:
(1) Control the proceedings.--(i) Upon reasonable notice to the
parties, not earlier than thirty (30) days or later than sixty (60)
days after service of a notice of charges under the Safety and
Soundness Act, set a date, time, and place for an evidentiary hearing
on the record, within the District of Columbia, as provided in section
1373 of the Safety and Soundness Act (12 U.S.C. 4633), in a scheduling
order that may be issued in conjunction with the initial scheduling
conference set under Sec. 1209.36, or otherwise as the presiding
officer finds in the best interest of justice, in accordance with this
part; and
(ii) Upon reasonable notice to the parties, reset or change the
date, time, or place (within the District of Columbia) of an
evidentiary hearing;
[[Page 49335]]
(2) Continue or recess the hearing in whole or in part for a
reasonable period of time;
(3) Hold conferences to address legal or factual issues, or
evidentiary matters materially relevant to the charges or allowable
defenses; to regulate the timing and scope of discovery and rule on
discovery plans; or otherwise to consider matters that may facilitate
an effective, fair, and expeditious disposition of the proceeding;
(4) Administer oaths and affirmations;
(5) Issue and enforce subpoenas, subpoenas duces tecum, discovery
and protective orders, as authorized by this part, and to revoke,
quash, or modify such subpoenas;
(6) Take and preserve testimony under oath;
(7) Rule on motions and other procedural matters appropriate in an
adjudicatory proceeding, except that only the Director shall have the
power to grant summary disposition or any motion to dismiss the
proceeding or to make a final determination of the merits of the
proceeding;
(8) Take all actions authorized under this part to regulate the
scope, timing, and completion of discovery of any non-privileged
documents that are materially relevant to the charges or allowable
defenses;
(9) Regulate the course of the hearing and the conduct of
representatives and parties;
(10) Examine witnesses;
(11) Receive materially relevant evidence, and rule upon the
admissibility of evidence or exclude, limit, or otherwise rule on
offers of proof;
(12) Upon motion of a party, take official notice of facts;
(13) Recuse himself upon his own motion or upon motion made by a
party;
(14) Prepare and present to the Director a recommended decision as
provided in this part;
(15) Establish time, place, and manner limitations on the
attendance of the public and the media for any public hearing; and
(16) Do all other things necessary or appropriate to discharge the
duties of a presiding officer.
Sec. 1209.12 Public hearings; Closed hearings.
(a) General rule. As provided in section 1379B(b) of the Safety and
Soundness Act (12 U.S.C. 4639(b)), all hearings shall be open to the
public, except that the Director, in his discretion, may determine that
holding an open hearing would be contrary to the public interest. The
Director may make such determination sua sponte at any time by written
notice to all parties, or as provided in paragraphs (b) and (c) of this
section.
(b) Motion for closed hearing. Within twenty (20) days of service
of the notice of charges, any party may file with the presiding officer
a motion for a private hearing and any party may file a pleading in
reply to the motion. The presiding officer shall forward the motion and
any reply, together with a recommended decision on the motion, to the
Director, who shall make a final determination. Such motions and
replies are governed by Sec. 1209.28. A determination under this
section is committed to the discretion of the Director and is not a
reviewable final agency action.
(c) Filing documents under seal. FHFA counsel of record, in his
discretion, may file or require the filing of any document or part of a
document under seal, if such counsel makes a written determination that
disclosure of the document would be contrary to the public interest.
The presiding officer shall issue an order to govern confidential
information, and take all appropriate steps to preserve the
confidentiality of such documents in whole or in part, including
closing any portion of a hearing to the public or issuing a protective
order under such terms as may be acceptable to FHFA counsel of record.
(d) Procedures for closed hearing. An evidentiary hearing, or any
part thereof, that is closed for the purpose of offering into evidence
testimony or documents filed under seal as provided in paragraph (c) of
this section shall be conducted under procedures that may include:
prior notification to the submitter of confidential information;
provisions for sealing portions of the record, briefs, and decisions;
in camera arguments, offers of proof, and testimony; and limitations on
representatives of record or other participants, as the presiding
officer may designate. Additionally, at such proceedings the presiding
officer may make an opening statement as to the confidentiality and
limitations and deliver an oath to the parties, representatives of
record, or other approved participants as to the confidentiality of the
proceedings.
Sec. 1209.13 Good faith certification.
(a) General requirement. Every filing or submission of record
following the issuance of a notice of charges by the Director shall be
signed by at least one representative of record in his individual name
and shall state that representative's business contact information
which shall include his address, electronic mail address, and telephone
number; and the names, addresses and telephone numbers of all other
representatives of record for the person making the filing or
submission.
(b) Effect of signature.--(1) By signing a document, a
representative of record or party appearing pro se certifies that:
(i) The representative of record or party has read the filing or
submission of record;
(ii) To the best of his knowledge, information and belief formed
after reasonable inquiry, the filing or submission of record is well-
grounded in fact and is warranted by existing law or a good faith, non-
frivolous argument for the extension, modification, or reversal of
existing law, regulation, or FHFA order or policy; and
(iii) The filing or submission of record is not made for any
improper purpose, such as to harass or to cause unnecessary delay or
needless increase in the cost of litigation.
(2) If a filing or submission of record is not signed, the
presiding officer shall strike the filing or submission of record,
unless it is signed promptly after the omission is called to the
attention of the pleader or movant.
(c) Effect of making oral motion or argument. The act of making any
oral motion or oral argument by any representative or party shall
constitute a certification that to the best of his knowledge,
information, and belief, formed after reasonable inquiry, his
statements are well-grounded in fact and are warranted by existing law
or a good faith, non-frivolous argument for the extension,
modification, or reversal of existing law, regulation, or FHFA order or
policy, and are not made for any improper purpose, such as to harass or
to cause unnecessary delay or to needlessly increase litigation-related
costs.
Sec. 1209.14 Ex parte communications.
(a) Definition.--(1) Ex parte communication means any material oral
or written communication relevant to an adjudication of the merits of
any proceeding under this subpart, that was neither on the record nor
on reasonable prior notice to all parties that takes place between:
(i) An interested person outside FHFA (including the person's
representative); and
(ii) The presiding officer handling that proceeding, the Director,
a decisional employee assigned to that proceeding, or any other person
who is or may be reasonably expected to be involved in the decisional
process.
(2) A communication that is procedural in that it does not concern
[[Page 49336]]
the merits of an adjudicatory proceeding, such as a request for status
of the proceeding, does not constitute an ex parte communication.
(b) Prohibition of ex parte communications. From the time a notice
of charges commencing a proceeding under this part is issued by the
Director until the date that the Director issues his final decision
pursuant to Sec. 1209.55, no person referred to in paragraph (a)(1)(i)
of this section shall knowingly make or cause to be made an ex parte
communication with the Director or the presiding officer. The Director,
presiding officer, or a decisional employee shall not knowingly make or
cause to be made an ex parte communication.
(c) Procedure upon occurrence of ex parte communication. If an ex
parte communication is received by any person identified in paragraph
(a) of this section, that person shall cause all such written
communications (or, if the communication is oral, a memorandum stating
the substance of the communication) to be placed on the record of the
proceeding and served on all parties. All parties to the proceeding
shall have an opportunity within ten (10) days of receipt of service of
the ex parte communication, to file responses thereto, and to recommend
sanctions that they believe to be appropriate under the circumstances,
in accordance with paragraph (d) of this section.
(d) Sanctions. Any party or representative for a party who makes an
ex parte communication, or who encourages or solicits another to make
an ex parte communication, may be subject to any appropriate sanction
or sanctions imposed by the Director or the presiding officer,
including, but not limited to, exclusion from the proceedings, an
adverse ruling on the issue that is the subject of the prohibited
communication, or other appropriate and commensurate action(s).
(e) Consultations by presiding officer. Except to the extent
required for the disposition of ex parte matters as authorized by law,
the presiding officer may not consult a person or party on any matter
relevant to the merits of the adjudication, unless upon notice to and
opportunity for all parties to participate.
(f) Separation of functions. An employee or agent engaged in the
performance of any investigative or prosecuting function for FHFA in a
case may not, in that or in a factually related case, participate or
advise in the recommended decision, the Director's review under Sec.
1209.55 of the recommended decision, or the Director's final
determination on the merits based upon his review of the recommended
decision, except as a witness or counsel in the adjudicatory
proceedings. This section shall not prohibit FHFA counsel from
providing necessary and appropriate legal advice to the Director on
supervisory or regulatory matters.
Sec. 1209.15 Filing of papers.
(a) Filing. All pleadings, motions, memoranda, and any other
submissions or papers required to be filed in the proceeding shall be
addressed to the presiding officer and filed with FHFA, 1700 G Street,
NW., Fourth Floor, Washington, DC 20552, in accordance with paragraphs
(b) and (c) of this section.
(b) Manner of filing. Unless otherwise specified by the Director or
the presiding officer, filing shall be accomplished by:
(1) Overnight delivery. Overnight U.S. Postal Service delivery or
delivery by a reliable commercial delivery service for same day or
overnight delivery to the address stated above; or
(2) U.S. Mail. First class, registered, or certified mail via the
U.S. Postal Service; and
(3) Electronic media. Transmission by electronic media shall be
required by and upon any conditions specified by the Director or the
presiding officer. FHFA shall provide a designated site for the
electronic filing of all papers in a proceeding in accordance with any
conditions specified by the presiding officer. All papers filed by
electronic media shall be filed concurrently in a manner set out above
and in accordance with paragraph (c) of this section.
(c) Formal requirements as to papers filed.--(1) Form. To be filed,
all papers must set forth the name, address, telephone number, and
electronic mail address of the representative or party seeking to make
the filing. Additionally, all such papers must be accompanied by a
certification setting forth when and how service has been made on all
other parties. All papers filed must be double-spaced on 8\1/2\ x 11-
inch paper and must be clear, legible, and formatted as required by
paragraph (c)(5) of this section.
(2) Signature. All papers filed must be dated and signed as
provided in Sec. 1209.13.
(3) Caption. All papers filed must include at the head thereof, or
on a title page, the FHFA caption, title and docket number of the
proceeding, the name of the filing party, and the subject of the
particular paper.
(4) Number of copies. Unless otherwise specified by the Director or
the presiding officer, an original and one copy of all pleadings,
motions and memoranda, or other such papers shall be filed, except that
only one copy of transcripts of testimony and exhibits shall be filed.
(5) Content format. All papers filed shall be formatted in such
program(s) (e.g., MS WORD(copyright), MS Excel(copyright), or
WordPerfect(copyright)) as the presiding officer or Director shall
specify.
Sec. 1209.16 Service of papers.
(a) Except as otherwise provided, a party filing papers or serving
a subpoena shall serve a copy upon the representative of record for
each party to the proceeding so represented, and upon any party who is
not so represented, in accordance with the requirements of this
section.
(b) Except as provided in paragraphs (c)(2) and (d) of this
section, a serving party shall use one or more of the following methods
of service:
(1) Personal service;
(2) Overnight U.S. Postal Service delivery or delivery by a
reliable commercial delivery service for same day or overnight delivery
to the parties' respective street addresses; or
(3) First class, registered, or certified mail via the U.S. Postal
Service; and
(4) For transmission by electronic media, each party shall promptly
provide the presiding officer and all parties, in writing, an active
electronic mail address where service will be accepted on behalf of
such party. Any document transmitted via electronic mail for service on
a party shall comply in all respects with the requirements of Sec.
1209.15(c).
(5) Service of pleadings or other papers made by facsimile may not
exceed a total page count of thirty (30) pages. Any paper served by
facsimile transmission shall meet the requirements of Sec. 1209.15(c).
(6) Any party serving a pleading or other paper by electronic media
under paragraph (4) of this section also shall concurrently serve that
pleading or paper by one of the methods specified in paragraphs (1)
through (5) of this section.
(c) By the Director or the presiding officer.--(1) All papers
required to be served by the Director or the presiding officer upon a
party who has appeared in the proceeding in accordance with Sec.
1209.72 shall be served by the means specified in paragraph (b) of this
section.
(2) If a notice of appearance has not been filed in the proceeding
for a party in accordance with Sec. 1209.72, the Director or the
presiding officer shall make service upon the party by any of the
following methods:
(i) By personal service;
(ii) If the person to be served is an individual, by delivery to a
person of
[[Page 49337]]
suitable age and discretion at the physical location where the
individual resides or works;
(iii) If the person to be served is a corporation or other
association, by delivery to an officer, managing or general agent, or
to any other agent authorized by appointment or by law to receive
service and, if the agent is one authorized by statute to receive
service and the statute so requires, by also mailing a copy to the
party;
(iv) By registered or certified mail addressed to the person's last
known address; or
(v) By any other method reasonably calculated to give actual
notice.
(d) Subpoenas. Service of a subpoena may be made:
(1) By personal service;
(2) If the person to be served is an individual, by delivery to a
person of suitable age and discretion at the physical location where
the individual resides or works;
(3) If the person to be served is a corporation or other
association, by delivery to an officer, managing or general agent, or
to any other agent authorized by appointment or by law to receive
service and, if the agent is one authorized by statute to receive
service and the statute so requires, by also mailing a copy to the
party;
(4) By registered or certified mail addressed to the person's last
known address; or
(5) By any other method reasonably calculated to give actual
notice.
(e) Area of service. Service in any State or the District of
Columbia, or any commonwealth, possession, territory or other place
subject to the jurisdiction of the United States, or on any person
doing business in any State or the District of Columbia, or any
commonwealth, possession, territory or other place subject to the
jurisdiction of the United States, or on any person as otherwise
permitted by law, is effective without regard to the place where the
hearing is held.
(f) Proof of service. Proof of service of papers filed by a party
shall be filed before action is taken thereon. The proof of service,
which shall serve as prima facie evidence of the fact and date of
service, shall show the date and manner of service and may be by
written acknowledgment of service, by declaration of the person making
service, or by certificate of a representative of record. However,
failure to file proof of service contemporaneously with the papers
shall not affect the validity of actual service.
The presiding officer may allow the proof to be amended or
supplied, unless to do so would result in material prejudice to a
party.
Sec. 1209.17 Time computations.
(a) General rule. In computing any period of time prescribed or
allowed under this part, the date of the act or event that commences
the designated period of time is not included. Computations shall
include the last day of the time period, unless the day falls on a
Saturday, Sunday, or Federal holiday. When the last day is a Saturday,
Sunday or Federal holiday, the period of time shall run until the end
of the next day that is not a Saturday, Sunday, or Federal holiday.
Intermediate Saturdays, Sundays and Federal holidays are included in
the computation of time. However, when the time period within which an
act is to be performed is ten (10) days or less, not including any
additional time allowed for in paragraph (c) of this section,
intermediate Saturdays, Sundays and Federal holidays are not included.
(b) When papers are deemed to be filed or served.[boxh](1) Filing
or service are deemed to be effective:
(i) In the case of personal service or same day reliable commercial
delivery service, upon actual service;
(ii) In the case of U.S. Postal Service or reliable commercial
overnight delivery service, or first class, registered, or certified
mail, upon deposit in or delivery to an appropriate point of
collection;
(iii) In the case of transmission by electronic media, as specified
by the authority receiving the filing, in the case of filing; or
(iv) In the case of transmission by electronic media or facsimile,
when the device through which the document was sent provides a reliable
indicator that the document has been received by the opposing party, in
the case of service.
(2) The effective filing and service dates specified in paragraph
(b)(1) of this section may be modified by the Director or the presiding
officer, or by agreement of the parties in the case of service.
(c) Calculation of time for service and filing of responsive
papers. Whenever a time limit is measured by a prescribed period from
the service of any notice, pleading or paper, the applicable time
limits shall be calculated as follows:
(1) If service was made by delivery to the U.S. Postal Service for
longer than overnight delivery service by first class, registered, or
certified mail, add three (3) calendar days to the prescribed period
for the responsive pleading or other filing.
(2) If service was personal, or was made by delivery to the U.S.
Postal Service or any reliable commercial delivery service for
overnight delivery, add one (1) calendar-day to the prescribed period
for the responsive pleading or other filing.
(3) If service was made by electronic media transmission or
facsimile, add one (1) calendar-day to the prescribed period for the
responsive pleading or other filing--unless otherwise determined by the
Director or the presiding officer sua sponte, or upon motion of a party
in the case of filing or by prior agreement among the parties in the
case of service.
Sec. 1209.18 Change of time limits.
Except as otherwise by law required, the presiding officer may
extend any time limit that is prescribed above or in any notice or
order issued in the proceedings. After the referral of the case to the
Director pursuant to Sec. 1209.53, the Director may grant extensions
of the time limits for good cause shown. Extensions may be granted on
the motion of a party after notice and opportunity to respond is
afforded all nonmoving parties, or on the Director's or the presiding
officer's own motion.
Sec. 1209.19 Witness fees and expenses.
Witnesses (other than parties) subpoenaed for testimony (or for a
deposition in lieu of personal appearance at a hearing) shall be paid
the same fees for attendance and mileage as are paid in the United
States district courts in proceedings in which the United States is a
party, provided that, in the case of a discovery subpoena addressed to
a party, no witness fees or mileage shall be paid. Fees for witnesses
shall be tendered in advance by the party requesting the subpoena,
except that fees and mileage need not be tendered in advance where FHFA
is the party requesting the subpoena. FHFA shall not be required to pay
any fees to or expenses of any witness who was not subpoenaed by FHFA.
Sec. 1209.20 Opportunity for informal settlement.
Any respondent may, at any time in the proceeding, unilaterally
submit to FHFA's counsel of record written offers or proposals for
settlement of a proceeding without prejudice to the rights of any of
the parties. No such offer or proposal shall be made to any FHFA
representative other than FHFA's counsel of record. Submission of a
written settlement offer does not provide a basis for adjourning,
deferring or otherwise delaying all or any portion
[[Page 49338]]
of a proceeding under this part. No settlement offer or proposal, or
any subsequent negotiation or resolution, is admissible as evidence in
any proceeding.
Sec. 1209.21 Conduct of examination.
Nothing in this part limits or constrains in any manner any duty,
authority, or right of FHFA to conduct or to continue any examination,
investigation, inspection, or visitation of any regulated entity or
entity-affiliated party.
Sec. 1209.22 Collateral attacks on adjudicatory proceeding.
If an interlocutory appeal or collateral attack is brought in any
court concerning all or any part of an adjudicatory proceeding, the
challenged adjudicatory proceeding shall continue without regard to the
pendency of that court proceeding. No default or other failure to act
as directed in the adjudicatory proceeding within the times prescribed
in subpart C of this part shall be excused based on the pendency before
any court of any interlocutory appeal or collateral attack.
Sec. 1209.23 Commencement of proceeding and contents of notice of
charges.
Proceedings under subpart C of this part are commenced by the
Director by the issuance of a notice of charges, as defined in Sec.
1209.3(p), that must be served upon a respondent. A notice of charges
shall state all of the following:
(a) The legal authority for the proceeding and for FHFA's
jurisdiction over the proceeding;
(b) A statement of the matters of fact or law showing that FHFA is
entitled to relief;
(c) A proposed order or prayer for an order granting the requested
relief;
(d) Information concerning the nature of the proceeding and
pertinent procedural matters, including: The requirement that the
hearing shall be held in the District of Columbia; the presiding
officer will set the date and location for an evidentiary hearing in a
scheduling order to be issued not less than thirty (30) days or more
than sixty (60) days after service of the notice of charges; contact
information for FHFA enforcement counsel and the presiding officer, if
known; submission information for filings and appearances, the time
within which to request a hearing, and citation to FHFA Rules of
Practice and Procedure; and
(e) Information concerning proper filing of the answer, including
the time within which to file the answer as required by law or
regulation, a statement that the answer shall be filed with the
presiding officer or with FHFA as specified therein, and the address
for filing the answer (and request for a hearing, if applicable).
Sec. 1209.24 Answer.
(a) Filing deadline. Unless otherwise specified by the Director in
the notice, respondent shall file an answer within twenty (20) days of
service of the notice of charges initiating the enforcement action.
(b) Content of answer. An answer must respond specifically to each
paragraph or allegation of fact contained in the notice of charges and
must admit, deny, or state that the party lacks sufficient information
to admit or deny each allegation of fact. A statement of lack of
information has the effect of a denial. Denials must fairly meet the
substance of each allegation of fact denied; general denials are not
permitted. When a respondent denies part of an allegation, that part
must be denied and the remainder specifically admitted. Any allegation
of fact in the notice that is not denied in the answer is deemed
admitted for purposes of the proceeding. A respondent is not required
to respond to the portion of a notice that constitutes the prayer for
relief or proposed order. The answer must set forth affirmative
defenses, if any, asserted by the respondent.
(c) Default. Failure of a respondent to file an answer required by
this section within the time provided constitutes a waiver of such
respondent's right to appear and contest the allegations in the notice.
If no timely answer is filed, FHFA's counsel of record may file a
motion for entry of an order of default. Upon a finding that no good
cause has been shown for the failure to file a timely answer, the
presiding officer shall file with the Director a recommended decision
containing the findings and the relief sought in the notice. Any final
order issued by the Director based upon a respondent's failure to
answer is deemed to be an order issued upon consent.
Sec. 1209.25 Amended pleadings.
(a) Amendments. The notice or answer may be amended or supplemented
at any stage of the proceeding. The respondent must answer an amended
notice within the time remaining for the respondent's answer to the
original notice, or within ten (10) days after service of the amended
notice, whichever period is longer, unless the Director or presiding
officer orders otherwise for good cause shown.
(b) Amendments to conform to the evidence. When issues not raised
in the notice or answer are tried at the hearing by express or implied
consent of the parties, or as the presiding officer may allow for good
cause shown, such issues will be treated in all respects as if they had
been raised in the notice or answer, and no formal amendments are
required. If evidence is objected to at the hearing on the ground that
it is not within the issues raised by the notice or answer, the
presiding officer may admit the evidence when admission is likely to
assist in adjudicating the merits of the action. The presiding officer
will do so freely when the determination of the merits of the action is
served thereby and the objecting party fails to satisfy the presiding
officer that the admission of such evidence would unfairly prejudice
that party's action or defense upon the merits. The presiding officer
may grant a continuance to enable the objecting party to meet such
evidence.
Sec. 1209.26 Failure to appear.
Failure of a respondent to appear in person at the hearing or by a
duly authorized representative of record constitutes a waiver of
respondent's right to a hearing and is deemed an admission of the facts
as alleged and consent to the relief sought in the notice. Without
further proceedings or notice to the respondent, the presiding officer
shall file with the Director a recommended decision containing the
agency findings and the relief sought in the notice.
Sec. 1209.27 Consolidation and severance of actions.
(a) Consolidation. On the motion of any party, or on the presiding
officer's own motion, the presiding officer may consolidate, for some
or all purposes, any two or more proceedings, if each such proceeding
involves or arises out of the same transaction, occurrence or series of
transactions or occurrences, or involves at least one common respondent
or a material common question of law or fact, unless such consolidation
would cause unreasonable delay or injustice. In the event of
consolidation under this section, appropriate adjustment to the pre-
hearing schedule must be made to avoid unnecessary expense,
inconvenience, or delay.
(b) Severance. The presiding officer may, upon the motion of any
party, sever the proceeding for separate resolution of the matter as to
any respondent only if the presiding officer finds that undue prejudice
or injustice to the moving party would result from not severing the
proceeding and such undue prejudice or injustice would outweigh the
interests of judicial
[[Page 49339]]
economy and expedition in the complete and final resolution of the
proceeding.
Sec. 1209.28 Motions.
(a) In writing.--(1) Except as otherwise provided herein, an
application or request for an order or ruling must be made by written
motion.
(2) All written motions must state with particularity the relief
sought and must be accompanied by a proposed order.
(3) No oral argument may be held on written motions except as
otherwise directed by the presiding officer. Written memoranda, briefs,
affidavits, or other relevant material or documents may be filed in
support of or in opposition to a motion.
(b) Oral motions. A motion may be made orally on the record, unless
the presiding officer directs that such motion be reduced to writing,
in which case the motion will be subject to the requirements of this
section.
(c) Filing of motions. Motions must be filed with the presiding
officer and served on all parties; except that following the filing of
a recommended decision, motions must be filed with the Director.
Motions for pre-trial relief such as motions in limine or objections to
offers of proof or experts shall be filed not less than ten (10) days
prior to the date of the evidentiary hearing, except as provided with
the consent of the presiding officer for good cause shown.
(d) Responses and replies.--(1) Except as otherwise provided
herein, (i) any party may file a written response to a non-dispositive
motion within ten (10) days after service of any written motion, or
within such other period of time as may be established by the presiding
officer or the Director; and (ii) the moving party may file a written
reply to a written response to a non-dispositive motion within five (5)
days after the service of the response, unless some other period is
ordered by the presiding officer or the Director. The presiding officer
shall not rule on any oral or written motion before each party with an
interest in the motion has had an opportunity to respond as provided in
this section.
(2) The failure of a party to oppose a written motion or an oral
motion made on the record is deemed as consent by that party to the
entry of an order substantially in the form of the order accompanying
the motion.
(e) Dilatory motions. Frivolous, dilatory, or substantively
repetitive motions are prohibited. The filing of such motions may form
the basis for sanctions.
(f) Dispositive motions. Dispositive motions are governed by
Sec. Sec. 1209.34 and 1209.35.
Sec. 1209.29 Discovery.
(a) General rule.--(1) Limits on discovery. Subject to the
limitations set out in paragraphs (a)(2), (b), (d), and (e) of this
section, a party to a proceeding under this part may obtain document
discovery by serving upon any other party in the proceeding a written
request to produce documents. For purposes of such requests, the term
``documents'' may be defined to include records, drawings, graphs,
charts, photographs, recordings, or data stored in electronic form or
other data compilations from which information can be obtained or
translated, if necessary, by the parties through detection devices into
reasonably usable form (e.g., electronically stored information), as
well as written material of all kinds.
(2) Discovery plan.--(i) In the initial scheduling conference held
in accordance with Sec. 1209.36, or otherwise at the earliest
practicable time, the presiding officer shall require the parties to
confer in good faith to develop and submit a joint discovery plan for
the timely, cost-effective management of document discovery (including,
if applicable, electronically stored information). The discovery plan
should provide for the coordination of similar discovery requests by
multiple parties, if any, and specify how costs are to be apportioned
among those parties. The discovery plan shall specify the form of
electronic productions, if any. Documents are to be produced in
accordance with the technical specifications described in the discovery
plan.
(ii) Discovery in the proceeding may commence upon the approval of
the discovery plan by the presiding officer. Thereafter, the presiding
officer may interpret or modify the discovery plan for good cause shown
or in his discretion due to changed circumstances.
(iii) Nothing in this paragraph shall be interpreted or deemed to
require the production of documents that are privileged or not
reasonably accessible because of undue burden or cost, or to require
any document production otherwise inconsistent with the limitations on
discovery set forth in this part.
(b) Relevance and scope.--(1) A party may obtain document discovery
regarding any matter not privileged that is materially relevant to the
charges or allowable defenses raised in the pending proceeding.
(2) The scope of available discovery shall be limited in accordance
with subpart C of this part. Any request for the production of
documents that seeks to obtain privileged information or documents not
materially relevant under paragraph (b)(1) of this section, or that is
unreasonable, oppressive, excessive in scope, unduly burdensome,
cumulative, or repetitive of any prior discovery requests, shall be
denied or modified.
(3) A request for document discovery is unreasonable, oppressive,
excessive in scope, or unduly burdensome--and shall be denied or
modified--if, among other things, the request:
(i) Fails to specify justifiable limitations on the relevant
subject matter, time period covered, search parameters, or the
geographic location(s) or data repositories to be searched;
(ii) Fails to identify documents with sufficient specificity;
(iii) Seeks material that is duplicative, cumulative, or obtainable
from another source that is more accessible, cost-effective, or less
burdensome;
(iv) Calls for the production of documents to be delivered to the
requesting party or his designee and fails to provide a written
agreement by the requestor to pay in advance for the costs of
production in accordance with Sec. 1209.30, or otherwise fails to take
into account costs associated with processing electronically stored
information or any cost-sharing agreements between the parties;
(v) Fails to afford the responding party adequate time to respond;
or
(vi) Fails to take into account retention policies or security
protocols with respect to Federal information systems.
(c) Forms of discovery. Discovery shall be limited to requests for
production of documents for inspection and copying. No other form of
discovery shall be allowed. Discovery by use of interrogatories is not
permitted. This paragraph shall not be interpreted to require the
creation of a document.
(d) Privileged matter.--(1) Privileged documents are not
discoverable.
(i) Privileges include the attorney-client privilege, work-product
privilege, any government's or government agency's deliberative process
privilege and any other privileges provided by the Constitution, any
applicable act of Congress, or the principles of common law.
(ii) The parties may enter into a written agreement to permit a
producing party to assert applicable privileges of a document even
after its production and to request the return or destruction of
privileged matter (clawback agreement).
[[Page 49340]]
The parties shall file the clawback agreement with the presiding
officer. To ensure the enforceability of the terms of any such clawback
agreement, the presiding officer shall enter an order. Any party may
petition the presiding officer for an order specifying clawback
procedures for good cause shown.
(2) No effect on examination authority. The limitations on
discoverable matter provided for in this part are not intended and
shall not be construed to limit or otherwise affect the examination,
regulatory or supervisory authority of FHFA.
(e) Time limits. All discovery matters, including all responses to
discovery requests, shall be completed at least twenty (20) days prior
to the date scheduled for the commencement of the testimonial phase of
the hearing. No exception to this discovery time limit shall be
permitted, unless the presiding officer finds on the record that good
cause exists for waiving the twenty (20) day requirement of this
paragraph.
(f) Production. Documents must be produced as they are kept in the
usual course of business, or labeled and organized to correspond with
the categories in the request, or otherwise produced in a manner
determined by mutual agreement between the requesting party and the
party or non-party to whom the request is directed in accordance with
this part.
Sec. 1209.30 Request for document discovery from parties.
(a) General rule. Each request for the production of documents must
conform to the requirements of this part.
(1) Limitations. Subject to applicable limitations on discovery in
this part, a party may serve (requesting party) a request on another
party (responding party) for the production of any non-privileged,
discoverable documents in the possession, custody, or control of the
responding party. A requesting party shall serve a copy of any such
document request on all other parties. Each request for the production
of documents must, with reasonable particularity, identify or describe
the documents to be produced, either by individual item or by category,
with sufficient specificity to enable the responding party to respond
consistent with the requirements of this part.
(2) Discovery plan. Document discovery under subpart C of this part
shall be consistent with any discovery plan approved by the presiding
officer under Sec. 1209.29.
(b) Production and costs.--(1) General rule. Subject to the
applicable limitations on discovery in this part and the discovery
plan, the requesting party shall specify a reasonable time, place and
manner for the production of documents and the performance of any
related acts. The responding party shall produce documents to the
requesting party in a manner consistent with the discovery plan.
(2) Costs. All costs associated with document productions--
including, without limitation, photocopying (as specified in paragraph
(b)(4) of this section) or electronic processing (as specified in
paragraph (b)(5) of this section)--shall be borne by the requesting
party, or otherwise in accordance with any discovery plan approved by
the presiding officer that may require such costs be apportioned
between parties, or as otherwise ordered by the presiding officer. If
consistent with the discovery plan approved by the presiding officer,
the responding party may require receipt of payment of any such
document production costs in advance before any such production of
responsive documents.
(3) Organization. Unless otherwise provided for in any discovery
plan approved by the presiding officer under Sec. 1209.29, or by order
of the presiding officer, documents must be produced as they are kept
in the usual course of business or they shall be labeled and organized
to correspond with the categories in the document request.
(4) Photocopying charges. Photocopying charges are to be set at the
current rate per page imposed by FHFA under the fee schedule pursuant
to Sec. 1202.11(c) of this chapter for requests for documents filed
under the Freedom of Information Act, 5 U.S.C. 552.
(5) Electronic processing. In the event that any party seeks the
production of electronically stored information (i.e., information
created, stored, communicated, or used in digital format requiring the
use of computer hardware and software), the parties shall confer in
good faith to resolve common discovery issues related to electronically
stored information, such as preservation, search methodology,
collection, and need for such information; the suitability of
alternative means to obtain it; and the format of production.
Consistent with the discovery plan approved by the presiding officer
under Sec. 1209.29, costs associated with the processing of such
electronic information (i.e., imaging; scanning; conversion of
``native'' files to images that are viewable and searchable; indexing;
coding; database or Web-based hosting; searches; branding of
endorsements, such as ``confidential'' or document control numbering;
privilege reviews; and copies of production discs) and delivery of any
such document production, shall be borne by the requesting party,
apportioned among the parties, or as otherwise ordered by the presiding
officer. Nothing in this part shall be deemed to require FHFA to
produce privileged documents or any electronic records in violation of
applicable Federal law or security protocols.
(c) Obligation to update responses. A party who has responded to a
discovery request is not required to supplement the response, unless:
(1) The responding party learns that in some material respect the
information disclosed is incomplete or incorrect, and
(2) The additional or corrective information has not otherwise been
made known to the other parties during the discovery process or in
writing.
(d) Motions to strike or limit discovery requests.--(1) Any party
served with a document discovery request may object within thirty (30)
days of service of the request by filing a motion to strike or limit
the request in accordance with the provisions of Sec. 1209.28. No
other party may file an objection. If an objection is made only to a
portion of an item or category in a request, the objection shall
specify that portion. Any objections not made in accordance with this
paragraph and Sec. 1209.28 are waived.
(2) The party who served the request that is the subject of a
motion to strike or limit may file a written response in accordance
with the provisions of Sec. 1209.28. A reply by the moving party, if
any, shall be governed by Sec. 1209.28. No other party may file a
response.
(e) Privilege. At the time other documents are produced, all
documents withheld on a claim of privilege must be reasonably
identified, together with a statement of the basis for the assertion of
privilege on a privilege log. When similar documents that are protected
by the government's deliberative process, investigative or examination
privilege; the attorney work-product doctrine, or the attorney-client
privilege are voluminous, such documents may be identified on the log
by category instead of by individual document. The presiding officer
has discretion to determine when the identification by category is
sufficient.
(f) Motions to compel production.--(1) If a party withholds any
document as privileged or fails to comply fully with a document
discovery request, the requesting party may, within ten (10) days of
the assertion of privilege or of the time the failure to comply becomes
known to the requesting party, file a motion in accordance with the
provisions of Sec. 1209.28 for the issuance of a subpoena compelling
the production of any such document.
[[Page 49341]]
(2) The party who asserted the privilege or failed to comply with
the request may, within five (5) days of service of a motion for the
issuance of a subpoena compelling production, file a written response
to the motion. No other party may file a response.
(g) Ruling on motions.--(1) Appropriate protective orders. After
the time for filing a response to a motion to compel pursuant to this
section has expired, the presiding officer shall rule promptly on all
such motions. The presiding officer may deny, grant in part, or
otherwise modify any request for the production of documents, if he
determines that a discovery request, or any one or more of its terms,
seeks to obtain the production of documents that are privileged or
otherwise not within the scope of permissible discovery under Sec.
1209.29(b), and may issue appropriate protective orders, upon such
conditions as justice may require.
(2) No stay. The pendency of a motion to strike or limit discovery,
or to compel the production of any document, shall not stay or continue
the proceeding, unless otherwise ordered by the presiding officer.
Notwithstanding any other provision in this part, the presiding officer
may not release, or order any party to produce, any document withheld
on the basis of privilege, if the withholding party has stated to the
presiding officer its intention to file with the Director a timely
motion for interlocutory review of the presiding officer's privilege
determination or order to produce the documents, until the Director has
rendered a decision on the motion for interlocutory review.
(3) Interlocutory review by the Director. Interlocutory review of a
privilege determination or document discovery subpoena of the presiding
officer shall be in accordance with Sec. 1209.33. To the extent
necessary to rule promptly on such matters, the Director may request
that the presiding officer provide additional information from the
record. As provided by Sec. 1209.33, a pending interlocutory review of
a privilege determination or document discovery subpoena shall not stay
the proceedings, unless otherwise ordered by the presiding officer or
the Director.
(h) Enforcement of document discovery subpoenas.--(1) Authority. If
the presiding officer or Director issues a subpoena compelling
production of documents by a party in a proceeding under this part, in
the event of noncompliance with the subpoena and to the extent
authorized by section 1379D(c)(1) of the Safety and Soundness Act (12
U.S.C. 4641(c)(1)), the Director or the subpoenaing party may apply to
the appropriate United States district court for an order requiring
compliance with the subpoena.
(2) United States district court jurisdiction. As provided by
section 1379D(c)(2) of the Safety and Soundness Act (12 U.S.C.
4641(c)(2)), the appropriate United States district court has the
jurisdiction and power to order and to require compliance with any
discovery subpoena issued under this part. Notwithstanding any other
provision in this part, as provided by section 1375(b) of the Safety
and Soundness Act (12 U.S.C. 4635(b)), in connection with the
enforcement of a subpoena under this part, no district court has
jurisdiction to affect by injunction or otherwise the issuance or
enforcement of any effective and outstanding notice or order issued
under section 1313B, subtitle B, or subtitle C of the Safety and
Soundness Act, or to review, modify, suspend, terminate, or set aside
any such effective and outstanding notice or order.
(3) No stay; sanctions. The judicial enforcement of a discovery
subpoena shall not operate as a stay of the proceedings, unless the
presiding officer or the Director orders a stay of such duration as the
presiding officer or Director may find reasonable and in the best
interest of the parties or as justice may require. A party's right to
seek judicial enforcement of a subpoena shall not in any manner limit
the sanctions that may be imposed by the presiding officer or Director
against a party who fails to produce or induces another to fail to
produce subpoenaed documents.
Sec. 1209.31 Document discovery subpoenas to nonparties.
(a) General rules.--(1) Application for subpoena. As provided under
this part, any party may apply to the presiding officer for the
issuance of a document discovery subpoena addressed to any person who
is not a party to the proceeding. The application must contain the
proposed document subpoena, and a brief statement of facts
demonstrating that the documents are materially relevant to the charges
and issues presented in the proceeding and the reasonableness of the
scope of the document request. The subpoenaing party shall specify a
reasonable time, place, and manner for production in response to the
subpoena, and state its unequivocal intention to pay for the production
of the documents as provided in this part.
(2) Service of subpoena. A party shall apply for a document
subpoena under this section only within the time period during which
such party could serve a discovery request under Sec. 1209.30. The
party obtaining the document subpoena is responsible for serving it on
the subpoenaed person and for serving copies on all other parties.
Document subpoenas may be served in the District of Columbia, or any
State, Territory, possession, or other place subject to the
jurisdiction of the United States, or as otherwise provided by law.
(3) Presiding officer's discretion. The presiding officer shall
issue promptly any document subpoena applied for under this section
subject to the application conditions set forth in this section and his
discretion. If the presiding officer determines that the application
does not set forth a valid basis for the issuance of the requested
document subpoena, or that any of its terms are unreasonable,
oppressive, excessive in scope, unduly burdensome, or otherwise
objectionable under Sec. 1209.29(b), he may refuse to issue the
requested document subpoena or may issue it in a modified form upon
such additional conditions as may be determined by the presiding
officer.
(b) Motion to quash or modify.--(1) Limited appearance. Any non-
party to a pending proceeding to whom a document subpoena is directed
may enter a limited appearance, through a representative or on his own
behalf, before the presiding officer to file with the presiding officer
a motion to quash or modify such subpoena, accompanied by a statement
of the basis for quashing or modifying the subpoena.
(2) Objections. Any motion to quash or modify a document subpoena
must be filed on the same basis, including the assertion of any
privileges, upon which a party could object to a discovery document
request under Sec. 1209.30 and during the same time limits during
which such an objection could be filed.
(3) Responses and replies. The party who obtained the subpoena may
respond to such motion within ten (10) days of service of the motion;
the response shall be served on the non-party in accordance with this
part. Absent express leave of the presiding officer, no other party may
respond to the non-party's motion. The non-party may file a reply
within five (5) days of service of a response.
(4) No stay. A non-party's right to seek to quash or modify a
document subpoena shall not stay the proceeding, or limit in any manner
the sanctions that may be imposed by the presiding officer against a
party who induces another to fail to produce any such subpoenaed
documents. No party may rely upon the pendency of a non-party's motion
to quash or modify a document subpoena to excuse performance of any
[[Page 49342]]
action required of that party under this part.
(c) Enforcing document subpoenas to non-parties.--(1) Application
for enforcement of subpoena. If a non-party fails to comply with any
subpoena issued pursuant to this section or with any order of the
presiding officer that directs compliance with all or any portion of a
document subpoena issued pursuant to this section, the subpoenaing
party or any other aggrieved party to the proceeding may, to the extent
authorized by section 1379D(c) of the Safety and Soundness Act (12
U.S.C. 4641(c)), apply to an appropriate United States district court
for an order requiring compliance with the subpoena.
(2) No stay. A party's right to seek district court enforcement of
a non-party document production subpoena under this section shall not
stay automatically an enforcement proceeding under of the Safety and
Soundness Act.
(3) Sanctions. A party's right to seek district court enforcement
of a non-party document subpoena shall in no way limit the sanctions
that may be imposed by the presiding officer on a party who induces
another to fail to comply with any subpoena issued under this section.
Sec. 1209.32 Deposition of witness unavailable for hearing.
(a) General rules.--(1) If a witness will not be available for the
hearing, a party desiring to preserve that witness' testimony for the
record may apply to the presiding officer in accordance with the
procedures set forth in paragraph (a)(2) of this section for the
issuance of a subpoena or subpoena duces tecum requiring the attendance
of the witness at a deposition for the purpose of preserving that
witness' testimony. The presiding officer may issue a deposition
subpoena under this section upon a showing that:
(i) The witness will be unable to attend or may be prevented from
attending the testimonial phase of the hearing because of age,
sickness, or infirmity, or will be otherwise unavailable;
(ii) The subpoenaing party did not cause or contribute to the
unavailability of the witness for the hearing;
(iii) The witness has personal knowledge and the testimony is
reasonably expected to be materially relevant to claims, defenses, or
matters determined to be at issue in the proceeding; and
(iv) Taking the deposition will not result in any undue burden to
any other party and will not cause undue delay of the proceeding.
(2) The application must contain a proposed deposition subpoena and
a brief statement of the reasons for the issuance of the subpoena. The
subpoena must name the witness whose deposition is to be taken and
specify the time and place for taking the deposition. A deposition
subpoena may require the witness to be deposed anywhere within the
United States, or its Territories and possessions, in which that
witness resides or has a regular place of employment or such other
convenient place as the presiding officer shall fix.
(3) Subpoenas must be issued promptly upon request, unless the
presiding officer determines that the request fails to set forth a
valid basis under this section for its issuance. Before making a
determination that there is no valid basis for issuing the subpoena,
the presiding officer shall require a written response from the party
requesting the subpoena or require attendance at a conference to
determine whether there is a valid basis upon which to issue the
requested subpoena.
(4) The party obtaining a deposition subpoena is responsible for
serving it on the witness and for serving copies on all parties. Unless
the presiding officer orders otherwise, no deposition under this
section shall be taken on fewer than ten (10) days' notice to the
witness and all parties. Deposition subpoenas may be served anywhere
within the United States or its Territories and possessions, or on any
person doing business anywhere within the United States or its
Territories and possessions, or as otherwise permitted by law.
(b) Objections to deposition subpoenas.--(1) The witness and any
party who has not had an opportunity to oppose a deposition subpoena
issued under this section may file a motion with the presiding officer
under Sec. 1209.28 to quash or modify the subpoena prior to the time
for compliance specified in the subpoena, but not more than ten (10)
days after service of the subpoena.
(2) A statement of the basis for the motion to quash or modify a
subpoena issued under this section must accompany the motion. The
motion must be served on all parties.
(c) Procedure upon deposition.--(1) Each witness testifying
pursuant to a deposition subpoena must be duly sworn and each party
shall have the right to examine the witness. Objections to questions or
documents must be in short form, stating the grounds for the objection.
Failure to object to questions or documents is not deemed a waiver
except where the ground for objection might have been avoided if the
objection had been presented timely. All questions, answers and
objections must be recorded and transcribed. Videotaped depositions
must be transcribed for the record; copies and transcriptions must be
supplied to each party.
(2) Any party may move before the presiding officer for an order
compelling the witness to answer any questions the witness has refused
to answer or submit any evidence that, during the deposition, the
witness has refused to submit.
(3) The deposition transcript must be subscribed by the witness,
unless the parties and the witness, by stipulation, have waived the
signing, or the witness is ill, cannot be found, or has refused to
sign. If the deposition is not subscribed by the witness, the court
reporter taking the deposition shall certify that the transcript is a
true and complete transcript of the deposition.
(d) Enforcing subpoenas. If a subpoenaed person fails to comply
with any subpoena issued pursuant to this section or with any order of
the presiding officer made upon motion under paragraph (c)(2) of this
section, the subpoenaing party or other aggrieved party may, to the
extent authorized by section 1379D(c) of the Safety and Soundness Act
(12 U.S.C. 4641(c)), apply to an appropriate United States district
court for an order requiring compliance with the portions of the
subpoena that the presiding officer has ordered enforced. A party's
right to seek court enforcement of a deposition subpoena in no way
limits the sanctions that may be imposed by the presiding officer on a
party who fails to comply with or induces a failure to comply with a
subpoena issued under this section.
Sec. 1209.33 Interlocutory review.
(a) General rule. The Director may review a ruling of the presiding
officer prior to the certification of the record to the Director only
in accordance with the procedures set forth in this section.
(b) Scope of review. The Director may exercise interlocutory review
of a ruling of the presiding officer if the Director finds that--
(1) The ruling involves a controlling question of law or policy as
to which substantial grounds exist for a difference of opinion;
(2) Immediate review of the ruling may materially advance the
ultimate termination of the proceeding;
(3) Subsequent modification of the ruling at the conclusion of the
proceeding would be an inadequate remedy; or
(4) Subsequent modification of the ruling would cause unusual delay
or expense.
[[Page 49343]]
(c) Procedure. Any motion for interlocutory review shall be filed
by a party with the presiding officer within ten (10) days of his
ruling. Upon the expiration of the time for filing all responses, the
presiding officer shall refer the matter to the Director for final
disposition. In referring the matter to the Director, the presiding
officer may indicate agreement or disagreement with the asserted
grounds for interlocutory review of the ruling in question.
(d) Suspension of proceeding. Neither a request for interlocutory
review nor any disposition of such a request by the Director under this
section suspends or stays the proceeding unless otherwise ordered by
the presiding officer or the Director.
Sec. 1209.34 Summary disposition.
(a) In general. The presiding officer shall recommend that the
Director issue a final order granting a motion for summary disposition
if the undisputed pleaded facts, admissions, affidavits, stipulations,
documentary evidence, matters as to which official notice may be taken
and any other evidentiary materials properly submitted in connection
with a motion for summary disposition show that:
(1) There is no genuine issue as to any material fact; and
(2) The movant is entitled to a decision in its favor as a matter
of law.
(b) Filing of motions and responses.--(1) Any party who believes
there is no genuine issue of material fact to be determined and that
such party is entitled to a decision as a matter of law may move at any
time for summary disposition in its favor of all or any part of the
proceeding. Any party, within thirty (30) days after service of such
motion or within such time period as allowed by the presiding officer,
may file a response to such motion.
(2) A motion for summary disposition must be accompanied by a
statement of material facts as to which the movant contends there is no
genuine issue. Such motion must be supported by documentary evidence,
which may take the form of admissions in pleadings, stipulations,
depositions, investigatory depositions, transcripts, affidavits and any
other evidentiary materials that the movant contends support its
position. The motion must also be accompanied by a brief containing the
points and authorities in support of the contention of the movant. Any
party opposing a motion for summary disposition must file a statement
setting forth those material facts as to which the party contends a
genuine dispute exists. Such opposition must be supported by evidence
of the same type as that submitted with the motion for summary
disposition and a brief containing the points and authorities in
support of the contention that summary disposition would be
inappropriate.
(c) Hearing on motion. At the request of any party or on his own
motion, the presiding officer may hear oral argument on the motion for
summary disposition.
(d) Decision on motion. Following receipt of a motion for summary
disposition and all responses thereto, the presiding officer shall
determine whether the movant is entitled to summary disposition. If the
presiding officer determines that summary disposition is warranted, the
presiding officer shall submit a recommended decision to that effect to
the Director, under Sec. 1209.53. If the presiding officer finds that
the moving party is not entitled to summary disposition, the presiding
officer shall make a ruling denying the motion.
Sec. 1209.35 Partial summary disposition.
If the presiding officer determines that a party is entitled to
summary disposition as to certain claims only, he shall defer
submitting a recommended decision to the Director as to those claims. A
hearing on the remaining issues must be ordered. Those claims for which
the presiding officer has determined that summary disposition is
warranted will be addressed in the recommended decision filed at the
conclusion of the hearing.
Sec. 1209.36 Scheduling and pre-hearing conferences.
(a) Scheduling conference. After service of a notice of charges
commencing a proceeding under this part, the presiding officer shall
order the representative(s) of record for each party, and any party not
so represented who is appearing pro se, to meet with him in person or
to confer with him by telephone at a specified time within thirty (30)
days of service of such notice for the purpose of setting the time and
place of the testimonial hearing on the record to be held within the
District of Columbia and scheduling the course and conduct of the
proceeding (the ``scheduling conference''). The identification of
potential witnesses, the time for and manner of discovery and the
exchange of any pre-hearing materials including witness lists,
statements of issues, stipulations, exhibits, and any other materials
also may be determined at the scheduling conference.
(b) Pre-hearing conferences. The presiding officer may, in addition
to the scheduling conference, on his own motion or at the request of
any party, direct representatives for the parties to meet with him (in
person or by telephone) at a pre-hearing conference to address any or
all of the following:
(1) Simplification and clarification of the issues;
(2) Stipulations, admissions of fact and the contents, authenticity
and admissibility into evidence of documents;
(3) Matters of which official notice may be taken;
(4) Limitation of the number of witnesses;
(5) Summary disposition of any or all issues;
(6) Resolution of discovery issues or disputes;
(7) Amendments to pleadings; and
(8) Such other matters as may aid in the orderly disposition of the
proceeding.
(c) Transcript. The presiding officer, in his discretion, may
require that a scheduling or pre-hearing conference be recorded by a
court reporter. A transcript of the conference and any materials filed,
including orders, becomes part of the record of the proceeding. A party
may obtain a copy of the transcript at such party's expense.
(d) Scheduling or pre-hearing orders. Within a reasonable time
following the conclusion of the scheduling conference or any pre-
hearing conference, the presiding officer shall serve on each party an
order setting forth any agreements reached and any procedural
determinations made.
Sec. 1209.37 Pre-hearing submissions.
(a) Within the time set by the presiding officer, but in no case
later than ten (10) days before the start of the hearing, each party
shall serve on every other party the serving party's:
(1) Pre-hearing statement;
(2) Final list of witnesses to be called to testify at the hearing;
including name and address of each witness and a short summary of the
expected testimony of each witness;
(3) List of the exhibits to be introduced at the hearing along with
a copy of each exhibit; and
(4) Stipulations of fact, if any.
(b) Effect of failure to comply. No witness may testify and no
exhibit may be introduced at the hearing that is not listed in the pre-
hearing submissions pursuant to paragraph (a) of this section, except
for good cause shown.
Sec. 1209.38 Hearing subpoenas.
(a) Issuance.--(1) Upon application of a party to the presiding
officer showing relevance and reasonableness of scope
[[Page 49344]]
of the testimony or other evidence sought, the presiding officer may
issue a subpoena or a subpoena duces tecum requiring the attendance of
a witness at the hearing or the production of documentary or physical
evidence at such hearing. The application for a hearing subpoena must
also contain a proposed subpoena specifying the attendance of a witness
or the production of evidence from any place within the United States
or its territories and possessions, or as otherwise provided by law, at
the designated place where the hearing is being conducted. The party
making the application shall serve a copy of the application and the
proposed subpoena on every other party.
(2) A party may apply for a hearing subpoena at any time before the
commencement of or during a hearing. During a hearing, a party may make
an application for a subpoena orally on the record before the presiding
officer.
(3) The presiding officer shall promptly issue any hearing subpoena
applied for under this section; except that, if the presiding officer
determines that the application does not set forth a valid basis for
the issuance of the subpoena, or that any of its terms are
unreasonable, oppressive, excessive in scope, or unduly burdensome, he
may refuse to issue the subpoena or may issue the subpoena in a
modified form upon any conditions consistent with subpart C of this
part. Upon issuance by the presiding officer, the party making the
application shall serve the subpoena on the person named in the
subpoena and on each party.
(b) Motion to quash or modify.--(1) Any person to whom a hearing
subpoena is directed or any party may file a motion to quash or modify
such subpoena, accompanied by a statement of the basis for quashing or
modifying the subpoena. The movant must serve the motion on each party
and on the person named in the subpoena. Any party may respond to the
motion within ten (10) days of service of the motion.
(2) Any motion to quash or modify a hearing subpoena must be filed
prior to the time specified in the subpoena for compliance, but no more
than ten (10) days after the date of service of the subpoena upon the
movant.
(c) Enforcing subpoenas. If a subpoenaed person fails to comply
with any subpoena issued pursuant to this section or any order of the
presiding officer that directs compliance with all or any portion of a
hearing subpoena, the subpoenaing party or any other aggrieved party
may seek enforcement of the subpoena pursuant to Sec. 1209.31. A
party's right to seek court enforcement of a hearing subpoena shall in
no way limit the sanctions that may be imposed by the presiding officer
on a party who induces a failure to comply with subpoenas issued under
this section.
Sec. Sec. 1209.39 through 1209.49 [Reserved]
Sec. 1209.50 Conduct of hearings.
(a) General rules.--(1) Conduct. Hearings shall be conducted in
accordance with 5 U.S.C. chapter 5 and other applicable law and so as
to provide a fair and expeditious presentation of the relevant disputed
issues. Except as limited by this subpart, each party has the right to
present its case or defense by oral and documentary evidence and to
conduct such cross examination as may be required for full disclosure
of the facts.
(2) Order of hearing. FHFA's counsel of record shall present its
case-in-chief first, unless otherwise ordered by the presiding officer
or unless otherwise expressly specified by law or regulation. FHFA's
counsel of record shall be the first party to present an opening
statement and a closing statement and may make a rebuttal statement
after the respondent's closing statement. If there are multiple
respondents, respondents may agree among themselves as to their order
or presentation of their cases, but if they do not agree, the presiding
officer shall fix the order.
(3) Examination of witnesses. Only one representative for each
party may conduct an examination of a witness, except that in the case
of extensive direct examination, the presiding officer may permit more
than one representative for the party presenting the witness to conduct
the examination. A party may have one representative conduct the direct
examination and another representative conduct re-direct examination of
a witness, or may have one representative conduct the cross examination
of a witness and another representative conduct the re-cross
examination of a witness.
(4) Stipulations. Unless the presiding officer directs otherwise,
all documents that the parties have stipulated as admissible shall be
admitted into evidence upon commencement of the hearing.
(b) Transcript. The hearing shall be recorded and transcribed. The
transcript shall be made available to any party upon payment of the
cost thereof. The presiding officer shall have authority to order the
record corrected, either upon motion to correct, upon stipulation of
the parties, or following notice to the parties upon the presiding
officer's own motion.
Sec. 1209.51 Evidence.
(a) Admissibility.--(1) Except as is otherwise set forth in this
section, relevant, material and reliable evidence that is not unduly
repetitive is admissible to the fullest extent authorized by the
Administrative Procedure Act (5 U.S.C. 552 et seq.) and other
applicable law.
(2) Evidence that would be admissible under the Federal Rules of
Evidence is admissible in a proceeding conducted pursuant to subpart C
of this part.
(3) Evidence that would be inadmissible under the Federal Rules of
Evidence may not be deemed or ruled to be inadmissible in a proceeding
conducted pursuant to subpart C of this part if such evidence is
relevant, material, probative and reliable, and not unduly repetitive.
(b) Official notice.--(1) Official notice may be taken of any
material fact that may be judicially noticed by a United States
district court and any materially relevant information in the official
public records of any Federal or State government agency.
(2) All matters officially noticed by the presiding officer or the
Director shall appear on the record.
(3) If official notice is requested of any material fact, the
parties, upon timely request, shall be afforded an opportunity to
object.
(c) Documents.--(1) A duplicate copy of a document is admissible to
the same extent as the original, unless a genuine issue is raised as to
whether the copy is in some material respect not a true and legible
copy of the original.
(2) Subject to the requirements of paragraph (a)(1) of this
section, any document, including a report of examination, oversight
activity, inspection or visitation prepared by FHFA or by another
Federal or State financial institutions regulatory agency, is
admissible either with or without a sponsoring witness.
(3) Witnesses may use existing or newly created charts, exhibits,
calendars, calculations, outlines, or other graphic material to
summarize, illustrate, or simplify the presentation of testimony. Such
materials may, subject to the presiding officer's discretion, be used
with or without being admitted into evidence.
(d) Objections.--(1) Objections to the admissibility of evidence
must be timely made and rulings on all objections must appear in the
record.
(2) When an objection to a question or line of questioning is
sustained, the examining representative of record may make a specific
proffer on the record of what he expected to prove by the expected
testimony of the witness. The
[[Page 49345]]
proffer may be by representation of the representative or by direct
interrogation of the witness.
(3) The presiding officer shall retain rejected exhibits,
adequately marked for identification, for the record and transmit such
exhibits to the Director.
(4) Failure to object to admission of evidence or to any ruling
constitutes a waiver of the objection.
(e) Stipulations. The parties may stipulate as to any relevant
matters of fact or the authentication of any document to be admitted
into evidence. Such stipulations must be received in evidence at a
hearing, are binding on the parties with respect to the matters therein
stipulated, and shall be made part of the record.
(f) Depositions of unavailable witnesses.--(1) If a witness is
unavailable to testify at a hearing and that witness has testified in a
deposition in accordance with Sec. 1209.32, a party may offer as
evidence all or any part of the transcript of the deposition, including
deposition exhibits, if any.
(2) Such deposition transcript is admissible to the same extent
that testimony would have been admissible had that person testified at
the hearing, provided that if a witness refused to answer proper
questions during the depositions, the presiding officer may, on that
basis, limit the admissibility of the deposition in any manner that
justice requires.
(3) Only those portions of a deposition or related exhibits
received in evidence at the hearing in accordance with this section
shall constitute a part of the record.
Sec. 1209.52 Post-hearing filings.
(a) Proposed findings and conclusions and supporting briefs.--(1)
Using the same method of service for each party, the presiding officer
shall serve notice upon each party that the certified transcript,
together with all hearing exhibits and exhibits introduced but not
admitted into evidence at the hearing, has been filed with the
presiding officer. Any party may file with the presiding officer
proposed findings of fact, proposed conclusions of law and a proposed
order within thirty (30) days after the parties have received notice
that the transcript has been filed with the presiding officer, unless
otherwise ordered by the presiding officer.
(2) Proposed findings and conclusions must be supported by citation
to any relevant authorities and by page and line references to any
relevant portions of the record. A post-hearing brief may be filed in
support of proposed findings and conclusions, either as part of the
same document or in a separate document.
(3) A party is deemed to have waived any issue not raised in
proposed findings or conclusions timely filed by that party.
(b) Reply briefs. Reply briefs may be filed within fifteen (15)
days after the date on which the parties' proposed findings and
conclusions and proposed order are due. Reply briefs shall be limited
strictly to responding to new matters, issues, or arguments raised by
another party in papers filed in the proceeding. A party who has not
filed proposed findings of fact and conclusions of law or a post-
hearing brief may not file a reply brief.
(c) Simultaneous filing required. The presiding officer shall not
order the filing by any party of any brief or reply brief supporting
proposed findings and conclusions in advance of the other party's
filing of its brief.
Sec. 1209.53 Recommended decision and filing of record.
(a) Filing of recommended decision and record. Within forty-five
(45) days after expiration of the time allowed for filing reply briefs
under Sec. 1209.52(b), the presiding officer shall file with and
certify to the Director, for decision, the record of the proceeding.
The record must include the presiding officer's recommended decision,
recommended findings of fact and conclusions of law, and proposed
order; all pre-hearing and hearing transcripts, exhibits and rulings;
and the motions, briefs, memoranda and other supporting papers filed in
connection with the hearing. The presiding officer shall serve upon
each party the recommended decision, recommended findings and
conclusions, and proposed order.
(b) Filing of index. At the same time the presiding officer files
with and certifies to the Director, for final determination, the record
of the proceeding, the presiding officer shall furnish to the Director
a certified index of the entire record of the proceeding. The certified
index shall include, at a minimum, an entry for each paper, document or
motion filed with the presiding officer in the proceeding, the date of
the filing, and the identity of the filer. The certified index shall
also include an exhibit index containing, at a minimum, an entry
consisting of exhibit number and title or description for: Each exhibit
introduced and admitted into evidence at the hearing; each exhibit
introduced but not admitted into evidence at the hearing; each exhibit
introduced and admitted into evidence after the completion of the
hearing; and each exhibit introduced but not admitted into evidence
after the completion of the hearing.
Sec. 1209.54 Exceptions to recommended decision.
(a) Filing exceptions. Within thirty (30) days after service of the
recommended decision, recommended findings and conclusions, and
proposed order under Sec. 1209.53, a party may file with the Director
written exceptions to the presiding officer's recommended decision,
recommended findings and conclusions, and proposed order; to the
admission or exclusion of evidence; or to the failure of the presiding
officer to make a ruling proposed by a party. A supporting brief may be
filed at the time the exceptions are filed, either as part of the same
document or in a separate document.
(b) Effect of failure to file or raise exceptions.--(1) Failure of
a party to file exceptions to those matters specified in paragraph (a)
of this section within the time prescribed is deemed a waiver of
objection thereto.
(2) No exception need be considered by the Director if the party
taking exception had an opportunity to raise the same objection, issue,
or argument before the presiding officer and failed to do so.
(c) Contents.--(1) All exceptions and briefs in support of such
exceptions must be confined to the particular matters in or omissions
from the presiding officer's recommendations to which that party takes
exception.
(2) All exceptions and briefs in support of exceptions must set
forth page or paragraph references to the specific parts of the
presiding officer's recommendations to which exception is taken, the
page or paragraph references to those portions of the record relied
upon to support each exception and the legal authority relied upon to
support each exception. Exceptions and briefs in support shall not
exceed a total of 30 pages, except by leave of the Director on motion.
(3) One reply brief may be submitted by each party opposing the
exceptions within ten (10) days of service of exceptions and briefs in
support of exceptions. Reply briefs shall not exceed fifteen (15)
pages, except by leave of the Director on motion.
Sec. 1209.55 Review by Director.
(a) Notice of submission to the Director. When the Director
determines that the record in the proceeding is complete, the Director
shall serve notice upon the parties that the case has been submitted to
the Director for final decision.
[[Page 49346]]
(b) Oral argument before the Director. Upon the initiative of the
Director or on the written request of any party filed with the Director
within the time for filing exceptions, the Director may order and hear
oral argument on the recommended findings, conclusions, decision and
order of the presiding officer. A written request by a party must show
good cause for oral argument and state reasons why arguments cannot be
presented adequately in writing. A denial of a request for oral
argument may be set forth in the Director's final decision. Oral
argument before the Director must be transcribed.
(c) Director's final decision.--(1) Decisional employees may advise
and assist the Director in the consideration and disposition of the
case. The final decision of the Director will be based upon review of
the entire record of the proceeding, except that the Director may limit
the issues to be reviewed to those findings and conclusions to which
opposing arguments or exceptions have been filed by the parties.
(2) The Director shall render a final decision and issue an
appropriate order within ninety (90) days after notification to the
parties that the case has been submitted for final decision, unless the
Director orders that the action or any aspect thereof be remanded to
the presiding officer for further proceedings. Copies of the final
decision including findings of fact and an appropriate order of the
Director shall be served upon each party to the proceeding and upon
other persons as required by statute.
Sec. 1209.56 Exhaustion of administrative remedies.
To exhaust administrative remedies as to any issue on which a party
disagrees with the presiding officer's recommendations, a party must
file exceptions with the Director under Sec. 1209.54. A party must
exhaust administrative remedies as a precondition to seeking judicial
review of any decision issued under subpart C of this part.
Sec. 1209.57 Stays pending judicial review.
The commencement of proceedings for judicial review of a final
decision and order of the Director may not, unless specifically ordered
by the Director or a reviewing court, operate as a stay of any order
issued by the Director. The Director may, in his discretion and on such
terms as he finds just, stay the effectiveness of all or any part of an
order of the Director pending a final decision on a petition for review
of that order.
Sec. Sec. 1209.58 through 1209.69 [Reserved].
Subpart D--Parties and Representational Practice Before the Federal
Housing Finance Agency; Standards of Conduct
Sec. 1209.70 Scope.
Subpart D contains rules governing practice by parties or their
representatives before FHFA. This subpart addresses the imposition of
sanctions by the presiding officer or the Director against parties or
their representatives in an adjudicatory proceeding under this part.
This subpart also covers other disciplinary sanctions--censure,
suspension or disbarment--against individuals who appear before FHFA in
a representational capacity either in an adjudicatory proceeding under
this part or in any other matters connected with presentations to FHFA
relating to a client's or other principal's rights, privileges, or
liabilities. This representation includes, but is not limited to, the
practice of attorneys and accountants. Employees of FHFA are not
subject to disciplinary proceedings under this subpart.
Sec. 1209.71 Definitions.
Practice before FHFA for the purposes of subpart D of this part,
includes, but is not limited to, transacting any business with FHFA as
counsel, representative or agent for any other person, unless the
Director orders otherwise. Practice before FHFA also includes the
preparation of any statement, opinion, or other paper by a counsel,
representative or agent that is filed with FHFA in any certification,
notification, application, report, or other document, with the consent
of such counsel, representative or agent. Practice before FHFA does not
include work prepared for a regulated entity or entity-affiliated party
solely at the request of such party for use in the ordinary course of
its business.
Sec. 1209.72 Appearance and practice in adjudicatory proceedings.
(a) Appearance before FHFA or a presiding officer.--(1) By
attorneys. A party may be represented by an attorney who is a member in
good standing of the bar of the highest court of any State,
commonwealth, possession, territory of the United States, or the
District of Columbia and who is not currently suspended or disbarred
from practice before FHFA.
(2) By non-attorneys. An individual may appear on his own behalf,
pro se. A member of a partnership may represent the partnership and a
duly authorized officer, director, employee, or other agent of any
corporation or other entity not specifically listed herein may
represent such corporation or other entity; provided that such officer,
director, employee, or other agent is not currently suspended or
disbarred from practice before FHFA. A duly authorized officer or
employee of any Government unit, agency, or authority may represent
that unit, agency, or authority.
(b) Notice of appearance. Any person appearing in a representative
capacity on behalf of a party, including FHFA, shall execute and file a
notice of appearance with the presiding officer at or before the time
such person submits papers or otherwise appears on behalf of a party in
the adjudicatory proceeding. Such notice of appearance shall include a
written declaration that the individual is currently qualified as
provided in paragraph (a)(1) or (a)(2) of this section and is
authorized to represent the particular party. By filing a notice of
appearance on behalf of a party in an adjudicatory proceeding, the
representative thereby agrees and represents that he is authorized to
accept service on behalf of the represented party and that, in the
event of withdrawal from representation, he or she will, if required by
the presiding officer, continue to accept service until a new
representative has filed a notice of appearance or until the
represented party indicates that he or she will proceed on a pro se
basis. Unless the representative filing the notice is an attorney, the
notice of appearance shall also be executed by the person represented
or, if the person is not an individual, by the chief executive officer,
or duly authorized officer of that person.
Sec. 1209.73 Conflicts of interest.
(a) Conflict of interest in representation. No representative shall
represent another person in an adjudicatory proceeding if it reasonably
appears that such representation may be limited materially by that
representative's responsibilities to a third person or by that
representative's own interests. The presiding officer may take
corrective measures at any stage of a proceeding to cure a conflict of
interest in representation, including the issuance of an order limiting
the scope of representation or disqualifying an individual from
appearing in a representative capacity for the duration of the
proceeding.
(b) Certification and waiver. If any person appearing as counsel or
other representative represents two or more parties to an adjudicatory
proceeding, or also represents a nonparty on a matter
[[Page 49347]]
relevant to an issue in the proceeding, that representative must
certify in writing at the time of filing the notice of appearance
required by Sec. 1209.72 as follows:
(1) That the representative has personally and fully discussed the
possibility of conflicts of interest with each such party and nonparty;
and
(2) That each such party and nonparty waives any right it might
otherwise have had to assert any known conflicts of interest or to
assert any non-material conflicts of interest during the course of the
proceeding.
Sec. 1209.74 Sanctions.
(a) General rule. Appropriate sanctions may be imposed during the
course of any proceeding when any party or representative of record has
acted or failed to act in a manner required by applicable statute,
regulation, or order, and that act or failure to act--
(1) Constitutes contemptuous conduct. Contemptuous conduct includes
dilatory, obstructionist, egregious, contumacious, unethical, or other
improper conduct at any phase of any proceeding, hearing, or appearance
before a presiding officer or the Director;
(2) Has caused some other party material and substantive injury,
including, but not limited to, incurring expenses including attorney's
fees or experiencing prejudicial delay;
(3) Is a clear and unexcused violation of an applicable statute,
regulation, or order; or
(4) Has delayed the proceeding unduly.
(b) Sanctions. Sanctions that may be imposed include, but are not
limited to, any one or more of the following:
(1) Issuing an order against a party;
(2) Rejecting or striking any testimony or documentary evidence
offered, or other papers filed, by the party;
(3) Precluding the party from contesting specific issues or
findings;
(4) Precluding the party from offering certain evidence or from
challenging or contesting certain evidence offered by another party;
(5) Precluding the party from making a late filing or conditioning
a late filing on any terms that may be just; or
(6) Assessing reasonable expenses, including attorney's fees,
incurred by any other party as a result of the improper action or
failure to act.
(c) Procedure for imposition of sanctions.--(1) The presiding
officer, on the motion of any party, or on his own motion, and after
such notice and responses as may be directed by the presiding officer,
may impose any sanction authorized by this section. The presiding
officer shall submit to the Director for final ruling any sanction that
would result in a final order that terminates the case on the merits or
is otherwise dispositive of the case.
(2) Except as provided in paragraph (d) of this section, no
sanction authorized by this section, other than refusing to accept late
papers, shall be imposed without prior notice to all parties and an
opportunity for any representative or party against whom sanctions may
be imposed to be heard. The presiding officer shall determine and
direct the appropriate notice and form for such opportunity to be
heard. The opportunity to be heard may be limited to an opportunity to
respond verbally immediately after the act or inaction in question is
noted by the presiding officer.
(3) For purposes of interlocutory review, motions for the
imposition of sanctions by any party and the imposition of sanctions
shall be treated the same as motions for any other ruling by the
presiding officer.
(4) Nothing in this section shall be read to preclude the presiding
officer or the Director from taking any other action or imposing any
other restriction or sanction authorized by any applicable statute or
regulation.
(d) Sanctions for contemptuous conduct. If, during the course of
any proceeding, a presiding officer finds any representative or any
individual representing himself to have engaged in contemptuous
conduct, the presiding officer may summarily suspend that individual
from participating in that or any related proceeding or impose any
other appropriate sanction.
Sec. 1209.75 Censure, suspension, disbarment, and reinstatement.
(a) Discretionary censure, suspension and disbarment.--(1) The
Director may censure any individual who practices or attempts to
practice before FHFA or suspend or revoke the privilege to appear or
practice before FHFA of such individual if, after notice of and
opportunity for hearing in the matter, that individual is found by the
Director--
(i) Not to possess the requisite qualifications or competence to
represent others;
(ii) To be seriously lacking in character or integrity or to have
engaged in material unethical or improper professional conduct;
(iii) To have caused unfair and material injury or prejudice to
another party, such as prejudicial delay or unnecessary expenses
including attorney's fees;
(iv) To have engaged in, or aided and abetted, a material and
knowing violation of the Safety and Soundness Act, the Federal Home
Loan Mortgage Corporation Act, the Federal National Mortgage
Association Charter Act, or the rules or regulations issued under those
statutes, or any other applicable law or regulation;
(v) To have engaged in contemptuous conduct before FHFA;
(vi) With intent to defraud in any manner, to have willfully and
knowingly deceived, misled, or threatened any client or prospective
client; or
(vii) Within the last ten (10) years, to have been convicted of an
offense involving moral turpitude, dishonesty or breach of trust, if
the conviction has not been reversed on appeal. A conviction within the
meaning of this paragraph shall be deemed to have occurred when the
convicting court enters its judgment or order, regardless of whether an
appeal is pending or could be taken and includes a judgment or an order
on a plea of nolo contendere or on consent, regardless of whether a
violation is admitted in the consent.
(2) Suspension or revocation on the grounds set forth in paragraphs
(a)(1)(ii) through (vii) of this section shall only be ordered upon a
further finding that the individual's conduct or character was
sufficiently egregious as to justify suspension or revocation.
Suspension or disbarment under this paragraph shall continue until the
applicant has been reinstated by the Director for good cause shown or
until, in the case of a suspension, the suspension period has expired.
(3) If the final order against the respondent is for censure, the
individual may be permitted to practice before FHFA, but such
individual's future representations may be subject to conditions
designed to promote high standards of conduct. If a written letter of
censure is issued, a copy will be maintained in FHFA's files.
(b) Mandatory suspension and disbarment.--(1) Any counsel who has
been and remains suspended or disbarred by a court of the United States
or of any State, commonwealth, possession, territory of the United
States or the District of Columbia; any accountant or other licensed
expert whose license to practice has been revoked in any State,
commonwealth, possession, territory of the United States or the
District of Columbia; any person who has been and remains suspended or
barred from practice by or before the Department of Housing and Urban
Development, the Office of the Comptroller of the Currency, the Board
[[Page 49348]]
of Governors of the Federal Reserve System, the Office of Thrift
Supervision, the Federal Deposit Insurance Corporation, the National
Credit Union Administration, the Federal Housing Finance Board, the
Farm Credit Administration, the Securities and Exchange Commission, or
the Commodity Futures Trading Commission is also suspended
automatically from appearing or practicing before FHFA. A disbarment or
suspension within the meaning of this paragraph shall be deemed to have
occurred when the disbarring or suspending agency or tribunal enters
its judgment or order, regardless of whether an appeal is pending or
could be taken and regardless of whether a violation is admitted in the
consent.
(2) A suspension or disbarment from practice before FHFA under
paragraph (b)(1) of this section shall continue until the person
suspended or disbarred is reinstated under paragraph (d)(2) of this
section.
(c) Notices to be filed.--(1) Any individual appearing or
practicing before FHFA who is the subject of an order, judgment,
decree, or finding of the types set forth in paragraph (b)(1) of this
section shall file promptly with the Director a copy thereof, together
with any related opinion or statement of the agency or tribunal
involved.
(2) Any individual appearing or practicing before FHFA who is or
within the last 10 years has been convicted of a felony or of a
misdemeanor that resulted in a sentence of prison term or in a fine or
restitution order totaling more than $5,000 promptly shall file a
notice with the Director. The notice shall include a copy of the order
imposing the sentence or fine, together with any related opinion or
statement of the court involved.
(d) Reinstatement.--(1) Unless otherwise ordered by the Director,
an application for reinstatement for good cause may be made in writing
by a person suspended or disbarred under paragraph (a)(1) of this
section at any time more than three (3) years after the effective date
of the suspension or disbarment and, thereafter, at any time more than
one year after the person's most recent application for reinstatement.
An applicant for reinstatement hereunder may, in the Director's sole
discretion, be afforded a hearing.
(2) An application for reinstatement for good cause by any person
suspended or disbarred under paragraph (b)(1) of this section may be
filed at any time, but not less than one (1) year after the applicant's
most recent application. An applicant for reinstatement for good cause
hereunder may, in the Director's sole discretion, be afforded a
hearing. If, however, all the grounds for suspension or disbarment
under paragraph (b)(1) of this section have been removed by a reversal
of the order of suspension or disbarment or by termination of the
underlying suspension or disbarment, any person suspended or disbarred
under paragraph (b)(1) of this section may apply immediately for
reinstatement and shall be reinstated by FHFA upon written application
notifying FHFA that the grounds have been removed.
(e) Conferences.--(1) General. Counsel for FHFA may confer with a
proposed respondent concerning allegations of misconduct or other
grounds for censure, disbarment or suspension, regardless of whether a
proceeding for censure, disbarment or suspension has been commenced. If
a conference results in a stipulation in connection with a proceeding
in which the individual is the respondent, the stipulation may be
entered in the record at the request of either party to the proceeding.
(2) Resignation or voluntary suspension. In order to avoid the
institution of or a decision in a disbarment or suspension proceeding,
a person who practices before FHFA may consent to censure, suspension
or disbarment from practice. At the discretion of the Director, the
individual may be censured, suspended or disbarred in accordance with
the consent offered.
(f) Hearings under this section. Hearings conducted under this
section shall be conducted in substantially the same manner as other
hearings under this part, provided that in proceedings to terminate an
existing FHFA suspension or disbarment order, the person seeking the
termination of the order shall bear the burden of going forward with an
application and with proof and that the Director may, in the Director's
sole discretion, direct that any proceeding to terminate an existing
suspension or disbarment by FHFA be limited to written submissions. All
hearings held under this section shall be closed to the public unless
the Director, on the Director's own motion or upon the request of a
party, otherwise directs.
Sec. Sec. 1209.76 through 1209.79 [Reserved].
Subpart E--Civil Money Penalty Inflation Adjustments
Sec. 1209.80 Inflation adjustments.
The maximum amount of each civil money penalty within FHFA's
jurisdiction, as set by the Act and thereafter adjusted in accordance
with the Inflation Adjustment Act, on a recurring four-year cycle, is
as follows:
------------------------------------------------------------------------
Adjusted maximum
U.S. code citation Description penalty amount
------------------------------------------------------------------------
12 U.S.C. 4636(b)(1).......... First Tier............ 10,000
12 U.S.C. 4636(b)(2).......... Second Tier........... 50,000
12 U.S.C. 4636(b)(4).......... Third Tier (Entity- 2,000,000
Affiliated party).
12 U.S.C. 4636(b)(4).......... Third Tier (Regulated 2,000,000
entity).
------------------------------------------------------------------------
Sec. 1209.81 Applicability.
The inflation adjustments set out in Sec. 1209.80 shall apply to
civil money penalties assessed in accordance with the provisions of the
Safety and Soundness Act, 12 U.S.C. 4636, and subparts B and C of this
part, for violations occurring after the effective date of July 30,
2008.
Sec. Sec. 1209.82 through 1209.99 [Reserved].
Subpart F--Suspension or Removal of an Entity-Affiliated Party
Charged with Felony
Sec. 1209.100 Scope.
Subpart F of this part applies to informal hearings afforded to any
entity-affiliated party who has been suspended, removed or prohibited
from further participation in the business affairs of a regulated
entity by a notice or order issued by the Director under section
1377(h) of the Safety and Soundness Act (12 U.S.C. 4636a(h)).
Sec. 1209.101 Suspension, removal, or prohibition.
(a) Notice of suspension or prohibition.--(1) As provided by
section 1377(h)(1) of the Safety and Soundness
[[Page 49349]]
Act (12 U.S.C. 4636a(h)(1)), if an entity-affiliated party is charged
in any information, indictment, or complaint, with the commission of or
participation in a crime that involves dishonesty or breach of trust
that is punishable by imprisonment for more than one (1) year under
State or Federal law, the Director may, if continued service or
participation by such party may pose a threat to the regulated entity
or impair public confidence in the regulated entity, by written notice
served upon such party, suspend such party from office or prohibit such
party from further participation in any manner in the conduct of the
affairs of any regulated entity.
(2) In accordance with section 1377(h)(1) of the Safety and
Soundness Act (12 U.S.C. 4636a(h)(1)), the notice of suspension or
prohibition is effective upon service. A copy of such notice will be
served on the relevant regulated entity. The notice will state the
basis for the suspension and the right of the party to request an
informal hearing as provided in Sec. 1209.102. The suspension or
prohibition is to remain in effect until the information, indictment or
complaint is finally disposed of, or until terminated by the Director,
or otherwise as provided in paragraph (c) of this section.
(b) Order of removal or prohibition. As provided by section
1377(h)(2) of the Safety and Soundness Act (12 U.S.C. 4636a(h)(2)), at
such time as a judgment of conviction is entered (or pretrial diversion
or other plea bargain is agreed to) in connection with a crime as
referred to above in paragraph (a) (the ``conviction''), and the
conviction is no longer subject to appellate review, the Director may,
if continued service or participation by such party may pose a threat
to the regulated entity or impair public confidence in the regulated
entity, issue an order removing such party from office or prohibiting
such party from further participation in any manner in the conduct of
the affairs of the regulated entity without the prior written consent
of the Director. A copy of such order will be served on the relevant
regulated entity at which time the entity-affiliated party shall
immediately cease to be director or officer of the regulated entity.
The notice will state the basis for the removal or prohibition and the
right of the party to request a hearing as provided in Sec. 1209.102.
(c) Effective period. Unless terminated by the Director, a notice
of suspension or order of removal issued under section 1377(h)(1) or
(2) of the Safety and Soundness Act (12 U.S.C. 4636a(h)(1),(2)) shall
remain effective and outstanding until the completion of any informal
hearing or appeal provided under section 1377(h)(4) of the Safety and
Soundness Act (12 U.S.C. 4636a(h)(4)). The pendency of an informal
hearing, if any, does not stay any notice of suspension or prohibition
or order of removal or prohibition under subpart F of this part.
(d) Effect of acquittal. As provided by section 1377(h)(2)(B)(ii)
of the Safety and Soundness Act (12 U.S.C. 4636a(h)(2)(B)(ii)), a
finding of not guilty or other disposition of the charge does not
preclude the Director from instituting removal, suspension, or
prohibition proceedings under section 1377(a) or (b) of the Safety and
Soundness Act (12 U.S.C. 4636a(a),(b)).
(e) Preservation of authority. Action by the Director under section
1377(h) of the Safety and Soundness Act (12 U.S.C. 4636a(h)), shall not
be deemed as a predicate or a bar to any other regulatory, supervisory,
or enforcement action under the Safety and Soundness Act.
Sec. 1209.102 Hearing on removal or suspension.
(a) Hearing requests.--(1) Deadline. An entity-affiliated party
served with a notice of suspension or prohibition or an order of
removal or prohibition, within thirty (30) days of service of such
notice or order, may submit to the Director a written request to appear
before the Director to show that his or her continued service or
participation in the affairs of the regulated entity will not pose a
threat to the interests of, or threaten to impair public confidence in,
the Enterprises or the Banks. The request must be addressed to the
Director and sent to the Federal Housing Finance Agency at 1700 G
Street, NW., Washington, DC 20552, by:
(i) Overnight U.S. Postal Service delivery or delivery by a
reliable commercial delivery service for same day or overnight delivery
to the address stated above; or
(ii) First class, registered, or certified mail via the U.S. Postal
Service.
(2) Waiver of appearance. An entity-affiliated party may elect in
writing to waive his right to appear to make a statement in person or
through counsel and have the matter determined solely on the basis of
his written submission.
(b) Form and timing of hearing.--(1) Informal hearing. Hearings
under subpart F of this part are not subject to the formal adjudication
provisions of the Administrative Procedure Act (5 U.S.C. 554 through
557), and are not conducted under subpart C of this part.
(2) Setting of the hearing. Upon receipt of a timely request for a
hearing, the Director will give written notice and set a date within
thirty (30) days for the entity-affiliated party to appear, personally
or through counsel, before the Director or his designee(s) to submit
written materials (or, at the discretion of the Director, oral
testimony and oral argument) to make the necessary showing under
paragraph (a) of this section. The entity-affiliated party may submit a
written request for additional time for the hearing to commence,
without undue delay, and the Director may extend the hearing date for a
specified time.
(3) Oral testimony. The Director or his designee, in his
discretion, may deny, permit, or limit oral testimony in the hearing.
(c) Conduct of the hearing.--(1) Hearing officer. A hearing under
this section may be presided over by the Director or one or more
designated FHFA employees, except that an officer designated by the
Director (hearing officer) to conduct the hearing may not have been
involved in an underlying criminal proceeding, a factually related
proceeding, or an enforcement proceeding in a prosecutorial or
investigative role. This provision does not preclude the Director
otherwise from seeking information on the matters at issue from
appropriate FHFA staff on an as needed basis consistent with Sec.
1209.101(d)(2).
(2) Submissions. All submissions of the requestor and agency
counsel must be received by the Director or his designee no later than
ten (10) days prior to the date set for the hearing. FHFA may respond
in writing to the requestor's submission and serve the requestor (and
any other interested party such as the regulated entity) not later than
the date fixed by the hearing officer for submissions or other time
period as the hearing officer may require.
(3) Procedures.--(i) Fact finding authority of the hearing officer.
The hearing officer shall determine all procedural matters under
subpart F of this part, permit or limit the appearance of witnesses in
accordance with paragraph (b)(3) of this section, and impose time
limits as he or she deems reasonable. All oral statements, witness
testimony, if permitted, and documents submitted that are found by the
hearing officer to be materially relevant to the proceeding and not
unduly repetitious may be considered. The hearing officer may question
any person appearing in the proceeding, and may make any ruling
reasonably necessary to ensure the full and fair presentation of
evidence and to facilitate the efficient
[[Page 49350]]
and effective operation of the proceeding.
(ii) Statements to an officer. Any oral or written statement made
to the Director, a hearing officer, or any FHFA employee under subpart
F of this part is deemed to be a statement made to a Federal officer or
agency within the meaning of 18 U.S.C. 1006.
(iii) Oral testimony. If either the requestor or agency counsel
desires to present oral testimony to supplement the party's written
submission he must make a request in writing to the hearing officer not
later than ten (10) days prior to the hearing, as provided in paragraph
(c)(2) of this section, or within a shorter time period as permitted by
the hearing officer for good cause shown. The request should include
the name of the individual(s), a statement generally descriptive of the
expected testimony, and the reasons why such oral testimony is
warranted. The hearing officer generally will not admit witnesses,
absent a strong showing of specific and compelling need. Witnesses, if
admitted, shall be sworn.
(iv) Written materials. Each party must file a copy of any
affidavit, memorandum, or other written material to be presented at the
hearing with the hearing officer and serve copies on any other
interested party (such as the affected regulated entity) not later than
ten (10) days prior to commencement of the informal hearing, as
provided in paragraph (c)(2), or within a shorter time period as
permitted by the hearing officer for good cause shown.
(v) Relief. The purpose of the hearing is to determine whether the
suspension or prohibition from participation in any manner in the
conduct of the affairs of the regulated entity will be continued,
terminated or otherwise modified, or whether the order removing such
party from office or prohibiting the party from further participation
in any manner in the conduct of the affairs of the regulated entity
will be rescinded or otherwise modified.
(vi) Ultimate question. In deciding on any request for relief from
a notice of suspension or prohibition, the hearing officer shall not
consider the ultimate question of guilt or innocence with respect to
the outstanding criminal charge(s). In deciding on a request for relief
from a removal order, the hearing officer shall not consider challenges
to or efforts to impeach the validity of the conviction. In either
case, the hearing officer may consider facts that show the nature of
the events on which the conviction or charges were based.
(4) Record. If warranted under the circumstances of the matter, the
hearing officer may require that a transcript of the proceedings be
prepared at the expense of the requesting party. The hearing officer
may order the record be kept open for a reasonable time following the
hearing, not to exceed five (5) business days, to permit the filing of
additional pertinent submissions for the record. Thereafter, no further
submissions are to be admitted to the record, absent good cause shown.
Sec. 1209.103 Recommended and final decisions.
(a) Recommended decision.--(1) Written recommended decision of the
hearing officer. Not later than twenty (20) days following the close of
the hearing (or if the requestor waived a hearing, from the deadline
for submission of the written materials), the hearing officer will
serve a copy of the recommended decision on the parties to the
proceeding. The recommended decision must include a summary of the
findings, the parties' respective arguments, and support for the
determination.
(2) Five-day comment period. Not later than five (5) business days
after receipt of the recommended decision, the parties shall submit
written comments in response to the recommended decision, if any, to
the hearing officer. The hearing officer shall not grant any extension
of the stated time for responses to a recommended decision.
(3) Recommended decision to be transmitted to the Director. The
hearing officer shall promptly forward the recommended decision, and
written comments, if any, and the record to the Director for final
determination.
(b) Decision of the Director. Within sixty (60) days of the date of
the hearing, or if the requestor waived a hearing the date fixed for
the hearing, the Director will notify the entity-affiliated party in
writing by registered mail of the disposition of his request for relief
from the notice of suspension or prohibition or the order of removal or
prohibition. The decision will state whether the suspension or
prohibition will be continued, terminated or otherwise modified, or
whether the order removing such party from any participation in the
affairs of the regulated entity will be rescinded or otherwise
modified. The decision will contain a brief statement of the basis for
an adverse determination. The Director's decision is a final and non-
appealable order.
(c) Effect of notice or order. A removal or prohibition by order
shall remain in effect until terminated by the Director. A suspension
or prohibition by notice remains in effect until the criminal charge is
disposed of or until terminated by the Director.
(d) Reconsideration. A suspended or removed entity-affiliated party
subsequently may petition the Director to reconsider the final decision
any time after the expiration of a twelve (12) month period from the
date of the decision, but no such request may be made within twelve
(12) months of a previous petition for reconsideration. An entity-
affiliated party must submit a petition for reconsideration in writing;
the petition shall state the specific grounds for relief from the
notice of suspension or order or removal and be supported by a
memorandum and any other documentation materially relevant to the
request for reconsideration. No hearing will be held on a petition for
reconsideration, and the Director will inform the requestor of the
disposition of the reconsideration request in a timely manner. A
decision on a request for reconsideration shall not constitute an
appealable order.
CHAPTER XVII--OFFICE OF FEDERAL HOUSING ENTERPRISE OVERSIGHT,
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Subchapter D--Rules of Practice and Procedure
PART 1780--[REMOVED]
3. Remove 12 CFR Part 1780.
Dated: August 3, 2010.
Edward J. DeMarco,
Acting Director, Federal Housing Finance Agency.
[FR Doc. 2010-19567 Filed 8-11-10; 8:45 am]
BILLING CODE 8070-01-P