[Federal Register Volume 76, Number 145 (Thursday, July 28, 2011)]
[Rules and Regulations]
[Pages 45338-45369]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-19032]



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Vol. 76

Thursday,

No. 145

July 28, 2011

Part II





Bureau of Consumer Financial Protection





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12 CFR Part 1081





Rules of Practice for Adjudication Proceedings; Final Rule

  Federal Register / Vol. 76, No. 145 / Thursday, July 28, 2011 / Rules 
and Regulations  

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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1081

[Docket No. CFPB-2011-0006]
RIN 3170-AA05


Rules of Practice for Adjudication Proceedings

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Interim final rule with request for public comment.

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SUMMARY: Section 1053(e) of the Consumer Financial Protection Act of 
2010 requires the Bureau of Consumer Financial Protection (``CFPB'' or 
``Bureau'') to prescribe rules establishing procedures for the conduct 
of adjudication proceedings conducted pursuant to section 1053. This 
interim final rule with a request for public comment sets forth those 
rules.

DATES: This interim final rule is effective on July 28, 2011. Written 
comments must be received on or before September 26, 2011.

ADDRESSES: You may submit comments, identified by Docket No. CFPB-2011-
0006, by any of the following methods:
     Electronic: http://www.regulations.gov. Follow the 
instructions for submitting comments.
     Mail or Hand Delivery/Courier in Lieu of Mail: Monica 
Jackson, Office of the Executive Secretary, Consumer Financial 
Protection Bureau, 1801 L Street, NW., Washington, DC 20036.
    All submissions must include the agency name and docket number or 
Regulatory Information Number (RIN) for this rulemaking. In general, 
all comments received will be posted without change to http://www.regulations.gov. In addition, comments will be available for public 
inspection and copying at 1801 L Street, NW., Washington, DC 20036, on 
official business days between the hours of 10 a.m. and 5 p.m. Eastern 
Time. You can make an appointment to inspect the documents by 
telephoning (202) 435-7275.
    All comments, including attachments and other supporting materials, 
will become part of the public record and subject to public disclosure. 
Sensitive personal information, such as account numbers or social 
security numbers, should not be included. Comments will not be edited 
to remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: Monica Jackson, Office of the 
Executive Secretary, Consumer Financial Protection Bureau, 1801 L 
Street, NW., Washington, DC 20036, (202) 435-7275.

SUPPLEMENTARY INFORMATION: 
    The Bureau herein promulgates its Rules of Practice Governing 
Adjudication Proceedings (``Rules''), pursuant to section 1053(e) of 
the Consumer Financial Protection Act of 2010 (``Act''),\1\ 12 U.S.C. 
5563(e). The Rules are promulgated as interim final rules with a 
request for comment. The Bureau invites interested members of the 
public to submit written comments addressing the issues raised herein.
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    \1\ The Act is Title X of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act, as amended, Public Law 111-203 (July 21, 
2010), Title X, 12 U.S.C. 5481 et seq. Section 1066 of the Act 
grants the Secretary of the Treasury interim authority to perform 
certain functions of the CFPB. Pursuant to that authority, Treasury 
publishes these Rules on behalf of the CFPB.
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A. Background

    The Rules will govern proceedings brought under section 1053 of the 
Act, 12 U.S.C. 5563, which authorizes the Bureau to use administrative 
adjudications to ensure or enforce compliance with (a) the provisions 
of the Act, (b) the rules prescribed by the Bureau under the Act, and 
(c) any other Federal law or regulation that the Bureau is authorized 
to enforce. The Rules do not apply to the issuance of temporary cease-
and-desist proceedings pursuant to section 1053(c) of the Act, but the 
Bureau invites comments as to whether special rules governing such 
proceedings are necessary and, if so, what they should provide. The 
Rules are modeled on the uniform rules and procedures for 
administrative hearings (``Uniform Rules'') adopted by the prudential 
regulators pursuant to section 916 of the Financial Institutions 
Reform, Recovery, and Enforcement Act of 1989 (``FIRREA''), 56 FR 38024 
(Aug. 9, 1991); \2\ the Federal Trade Commission's (``FTC'') Rules of 
Practice for Adjudicative Proceedings (``FTC Rules''), 16 CFR part 3; 
and the Security and Exchange Commission's (``SEC'') Rules of Practice 
(``SEC Rules''), 17 CFR part 201. The Bureau has also looked to the 
Model Adjudication Rules prepared by the Administrative Conference of 
the United States. See Michael P. Cox, The Model Adjudication Rules 
(MARs), 11 T.M. Cooley L. Rev. 75 (1994).
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    \2\ For ease of reference, citations to the Uniform Rules herein 
are to the Uniform Rules as adopted by the Office of the Comptroller 
of the Currency, which are codified at 12 CFR part 19.
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    In drafting these Rules, the Bureau endeavored to create a process 
that simultaneously provides for expeditious resolution of claims and 
ensures that parties who appear before the Bureau receive a fair 
hearing. Notably, in the last several decades, both the SEC and the FTC 
revised their rules of practice relating to administrative proceedings 
to make the adjudicatory process more efficient. In 1990, the SEC 
created a task force ``to review the rules and procedures relating to 
[SEC] administrative proceedings, to identify sources of delay in those 
proceedings and to recommend steps to make the adjudicatory process 
more efficient and effective.'' 60 FR 32738, 32738 (June 23, 1995). The 
result was a comprehensive revision of the SEC Rules in 1995. See id. 
Similarly, when the FTC proposed revisions to its Rules of Practice for 
Adjudicative Proceedings in 2008, the FTC's Notice of Proposed 
Rulemaking stated: ``In particular, the [FTC's] Part 3 adjudicatory 
process has long been criticized as being too protracted * * * The 
[FTC] believes that these comprehensive proposed rule revisions would 
strike an appropriate balance between the need for fair process and 
quality decision-making, the desire for efficient and speedy resolution 
of matters, and the potential costs imposed on the Commission and the 
parties.'' 73 FR 58831, 58832-33 (Oct. 7, 2008). The Rules adopted 
herein are animated by the experiences of these agencies. Drawing from 
best practices of existing agency adjudication processes, these Rules 
look to learn from and improve upon other agencies' efforts to 
streamline their processes while protecting parties' rights to fair and 
impartial proceedings. The following discussion outlines some 
significant aspects of the Rules.
    The Rules adopt a decision-making procedure that incorporates 
elements of the SEC Rules, FTC Rules, and Uniform Rules. The Rules 
implement a procedure, like that of the Uniform Rules, whereby a 
hearing officer will issue a recommended decision in each 
administrative adjudication. Like the FTC Rules, the Bureau's Rules 
provide any party the right to contest the recommended decision by 
filing a notice of appeal to the Director and perfecting the appeal by 
later filing an opening brief. In the event a party fails to timely 
file or perfect an appeal, the Director may either adopt the 
recommended decision as the Bureau's final decision or order further 
briefing with respect to any findings of fact or conclusions of law 
contained in the recommended decision. The Bureau believes this 
approach best balances the need for expeditious decision-making with 
protecting the parties' rights to ultimate consideration of a matter by 
the Director.
    In keeping with this approach, the Rules also provide that the 
hearing

[[Page 45339]]

officer will decide dispositive motions in the first instance, subject 
to the same right of review provided for recommended decisions in the 
event that the ruling upon such a motion disposes of the case. The 
Bureau has adopted this model because it provides for the most 
expeditious resolution of matters while preserving all parties' rights 
to review by the Director.
    The Rules set deadlines for both the recommended decision of the 
hearing officer and the final decision of the Director. The Bureau has 
adopted an approach, similar to that used by the SEC, wherein the 
hearing officer is permitted a specified period of time--300 days, 
beginning with service of the notice of charges--to issue a recommended 
decision. The Rules also require the hearing officer to convene a 
scheduling conference soon after the respondent files its answer to 
craft a schedule appropriate to the particular proceeding. This 
construct gives the hearing officer considerable discretion in 
conducting proceedings and the flexibility to respond to the nuances of 
individual matters while ensuring that each case concludes within a 
fixed number of days. The Rules do permit hearing officers to request 
an extension of the 300-day deadline, but the Bureau's intent is that 
such extensions will be requested of and granted by the Director only 
in rare circumstances.
    The Rules for the timing of the Director's decision on appeal or 
review are guided by the language of section 1053 of the Act, 12 U.S.C. 
5563. If a recommended decision is appealed to the Director, or the 
Director orders additional briefing regarding the recommended decision, 
the Rules provide that the Director must notify the parties that the 
case has been submitted for final Bureau decision at the expiration of 
the time permitted for filing reply briefs with the Director. The 
Director then must issue his or her final decision within 90 days of 
providing such notice to the parties. See 12 U.S.C. 5563(b)(3). In 
keeping with the goal of providing for the expeditious resolution of 
claims, the Rules also adopt the SEC's standard governing extensions of 
time, which makes it clear that such extensions are generally 
disfavored.
    The Bureau has adopted the SEC's affirmative disclosure approach to 
fact discovery in administrative adjudications. See generally 17 CFR 
201.230. Thus, the Rules provide that the Division of Enforcement will 
provide any party in an adjudication proceeding with an opportunity to 
inspect and copy certain categories of documents obtained by the 
Division of Enforcement from persons not employed by the Bureau, as 
that term is defined in the Rules, in connection with the investigation 
leading to the institution of the proceedings and certain categories of 
documents created by the Bureau, provided such material is not 
privileged or otherwise protected from disclosure. The Division of 
Enforcement's obligation under this rule relates only to documents 
obtained by the Division of Enforcement; documents located only in the 
files of other divisions or offices of the Bureau are beyond the scope 
of this rule. As set forth in greater detail in the section-by-section 
analysis below, the Bureau has modified the SEC rule slightly, by 
eliminating any reference to Brady v. Maryland while retaining an 
obligation to turn over material exculpatory information in the 
Division of Enforcement's possession, and by providing that nothing in 
the rule shall require the Division of Enforcement to provide reports 
of examination to parties to whom the reports do not relate.
    The goal in adopting the SEC's approach in this regard is to ensure 
that respondents have access to all of the material facts underlying 
Enforcement Counsel's decision to commence enforcement proceedings and 
have a fair opportunity to prepare and present a defense, while 
eliminating much of the expense and delay often associated with pre-
trial discovery in civil matters. Recognizing that administrative 
adjudications will take place after a Bureau investigation intended to 
gather relevant evidence, and in light of the affirmative obligation 
that the Rules place on Enforcement Counsel to provide access to 
materials gathered in the course of the investigation, the Rules do not 
provide for many other traditional forms of pre-trial discovery, such 
as interrogatories and depositions. The Rules do provide for the 
deposition of witnesses unavailable for trial, the use of subpoenas to 
compel the production of documentary or tangible evidence, and, in 
appropriate cases, expert discovery, thus ensuring that respondents 
have an adequate opportunity to marshal evidence in support of their 
defense. We believe this approach will promote the fair and speedy 
resolution of claims while ensuring that parties have access to the 
relevant information necessary to prepare a defense.

B. Section-by-Section Summary

Subpart A--General Rules

Section 1081.100 Scope of the Rules of Practice

    This section sets forth the scope of the Rules and states that they 
apply to adjudication proceedings brought under section 1053 of the 
Act. Pursuant to the definition of the term ``adjudication proceeding'' 
in Sec.  103 of the Rules, the Rules do not apply to proceedings 
intended to lead to the formulation of a temporary cease-and-desist 
order pursuant to section 1053(c) of the Act, although they would apply 
to subsequent proceedings initiated by a notice of charges seeking a 
permanent cease-and-desist order or other relief. The Rules do not 
apply to Bureau investigations, rulemakings, or other proceedings.

Section 1081.101 Expedition and Fairness of Proceedings

    This section, which is modeled on the FTC Rules, 16 CFR 3.1, sets 
forth the Bureau's policy to avoid delays in any stage of an 
adjudication proceeding while still ensuring fairness to all parties. 
It further permits the hearing officer or the Director to shorten time 
periods set by the Rules, provided that the parties consent to 
shortened time periods. This authority could be used in proceedings 
where expedited hearings would serve the public interest or where the 
issues do not require expert discovery or extended evidentiary 
hearings.

Section 1081.102 Rules of Construction

    This section, drawn from the Uniform Rules, 12 CFR 19.2, makes 
clear that the use of any term in the Rules includes either its 
singular or plural form, as appropriate, and that the use of the 
masculine, feminine, or neuter gender shall, if appropriate, be read to 
encompass all three. This section also explicitly states that, unless 
otherwise indicated, any action required to be taken by a party to a 
proceeding may be taken by the party's counsel. Finally, this section 
provides that terms not otherwise defined by Sec.  103 should be 
defined in accordance with the Act.

Section 1081.103 Definitions

    This section sets forth definitions of certain terms used in the 
Rules. It defines ``adjudication proceeding'' to include any proceeding 
conducted pursuant to section 1053 of the Act, except for proceedings 
to obtain a temporary cease-and-desist order pursuant to section 
1053(c). The Bureau intends for the term ``counsel'' to

[[Page 45340]]

include any individual representing a party, including, as appropriate, 
an individual representing himself or herself. The term ``Director'' 
has been defined to include the Director, as well as any person 
authorized to perform the functions of the Director in accordance with 
the law. This is intended to allow the Deputy Director or Acting 
Director, or a delegee of the Director, as appropriate, to perform the 
functions of the Director. It is also intended to allow the Secretary 
of the Treasury to perform certain functions of the Director in 
accordance with section 1066 of the Act. The term ``person employed by 
the Bureau'' is defined to include Bureau employees and contractors as 
well as others working under the direction of Bureau personnel, and is 
intended to encompass, among other things, consulting experts.

Section 1081.104 Authority of the Hearing Officer

    This section enumerates powers granted to the hearing officer 
subsequent to appointment. The list of powers in paragraph (b) is not 
intended to be exhaustive. The hearing officer is permitted to take any 
other action necessary and appropriate to discharge the duties of a 
presiding officer. All powers granted by this provision are intended to 
further the Bureau's goal of an expeditious, fair, and impartial 
hearing process. The powers set forth in this section are generally 
drawn from the Administrative Procedure Act (``APA''), 5 U.S.C. 556, 
557, and are similar to the powers granted to hearing officers and 
administrative law judges under the Uniform Rules, the SEC Rules, and 
the FTC Rules.
    This section provides the hearing officer with the explicit 
authority to issue sanctions against parties or their counsel as may be 
necessary to deter sanctionable conduct, provided that any person to be 
sanctioned first has an opportunity to show cause as to why no sanction 
should issue. The Bureau believes such authority is included within the 
hearing officer's authority to regulate the course of the hearing, 5 
U.S.C. 556(c)(5), but considers it appropriate to explicitly authorize 
the exercise of such authority in the Rules. The Bureau notes that the 
MARs provide adjudicators with the authority ``to impose appropriate 
sanctions against any party or person failing to obey his/her order, 
refusing to adhere to reasonable standards of orderly and ethical 
conduct, or refusing to act in good faith.'' See MARs, 11 T. M. Cooley 
L. Rev. at 83.

Section 1081.105 Assignment, Substitution, Performance, 
Disqualification of Hearing Officer

    This section is modeled on the FTC and the SEC Rules setting forth 
the process for assigning hearing officers in the event that more than 
one hearing officer is available to the Bureau. See 16 CFR 3.42(b), 
(e); 17 CFR 201.110, 201.112, 201.120. Consistent with 5 U.S.C. 3105, 
hearing officers will be ``assigned to cases in rotation so far as 
practicable.'' This section also sets forth the process by which 
hearing officers may be disqualified from presiding over an 
adjudication proceeding. Section 556(b) of the APA, 5 U.S.C. 556(b), 
provides that a hearing officer may disqualify himself or herself at 
any time. The standard for making a motion to disqualify requires that 
the movant have a reasonable, good faith basis for the motion. This 
standard is intended to emphasize that there must be objective reasons 
to seek a disqualification, not just a subjective, though sincerely 
held, belief. If a hearing officer does not withdraw in response to a 
motion for withdrawal, the motion is certified to the Director for his 
or her review in accordance with the Rules' interlocutory review 
provision. Finally, this section provides the procedure for 
reassignment of a proceeding in the event a hearing officer becomes 
unavailable.

Section 1081.106 Deadlines

    This section provides that deadlines for action by the hearing 
officer established by the Rules do not confer any substantive rights 
on respondents. The SEC Rules, 17 CFR 201.360(a)(2), contain similar 
language regarding the timelines set out for certain hearing officer 
actions in SEC proceedings.

Section 1081.107 Appearance and Practice in Adjudication Proceedings

    This section is largely based on the Uniform Rules, 12 CFR 19.6, 
and sets forth the criteria for persons acting in a representative 
capacity for parties in adjudication proceedings. A notice of 
appearance is required to be filed by an individual representing any 
party, including an individual representing the Bureau, simultaneously 
with or before the submission of papers or other act of representation 
on behalf of a party. Any counsel filing a notice of appearance is 
deemed to represent that he or she agrees and is authorized to accept 
service on behalf of the represented party. The section also sets forth 
the standards of conduct expected of attorneys and others practicing 
before the Bureau. It provides that counsel may be excluded or 
suspended from proceedings, or disbarred from practicing before the 
Bureau, for engaging in sanctionable conduct during any phase of the 
adjudication proceeding.

Section 1081.108 Good Faith Certification

    This section is based on the Uniform Rules, 12 CFR 19.7, and 
requires that all filings and submissions be signed by at least one 
counsel of record, or the party if appearing on his or her own behalf. 
This section provides that, by signing a filing or submission, the 
counsel or party certifies and attests that the document has been read 
by the signer, and, to the best of his or her knowledge, is well 
grounded in fact and is supported by existing law or a good faith 
argument for the extension or modification of the existing law. In 
addition, the certification attests that the filing or submission is 
not for purposes of unnecessary delay or any improper purpose. Oral 
motions or arguments are also subject to the good faith certification: 
the act of making the oral motion or argument constitutes the required 
certification. Finally, this section makes clear that a violation of 
the good faith certification requirement would be grounds for sanctions 
under Sec.  104(b)(13). This section, which also mirrors the 
requirements of Federal Rule of Civil Procedure 11, is intended to 
ensure that parties and their counsel are not abusing the 
administrative process by making filings that are factually or legally 
unfounded or intended simply to delay or obstruct the proceeding.

Section 1081.109 Conflict of Interest

    In general, conflicts of interest in representing parties to 
adjudication proceedings are prohibited by the Rules. The hearing 
officer is empowered to take corrective steps to eliminate such 
conflicts. If counsel represents more than one party to a proceeding, 
counsel is required to file at the time he or she files his or her 
notice of appearance a certification that: (1) The potential for 
possible conflicts of interest has been fully discussed with each such 
party; and (2) the parties individually waive any right to assert any 
conflicts of interest during the proceeding. This approach is based 
upon the Uniform Rules, 12 CFR 19.8, which itself was based upon the 
Model Code of Conduct for attorneys and the District of Columbia Ethics 
Rule. See 56 FR 27790, 27793 (June 17, 1991).

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Section 1081.110 Ex Parte Communication

    This section implements the APA's prohibition on ex parte 
communications. See 5 U.S.C. 554(d)(1), 557(d)(1). Paragraphs (a)(1), 
(a)(2), and (b) are based on the Uniform Rules, 12 CFR 19.9(a), (b), 
and prohibit an ex parte communication relevant to the merits of an 
adjudication proceeding between a person not employed by the Bureau and 
the Director, hearing officer, or any decisional employee during the 
pendency of an adjudication proceeding. Paragraph (a)(3) defines the 
term ``pendency of an adjudication proceeding,'' and provides that if 
the person responsible for the communication has knowledge that a 
notice of charges will or is likely to be issued, the pendency of an 
adjudication shall be deemed to have commenced at the time of his or 
her acquisition of such knowledge. This provision implements 5 U.S.C. 
557(d)(1)(E).
    Consistent with the MARs and the practice of other agencies, 
communications regarding the status of the proceeding are expressly 
excluded from the definition of ex parte communications. See MARs, 11 
T.M. Cooley L. Rev. at 87; 12 CFR 19.9(a)(2); 16 CFR 4.7(a). If an ex 
parte communication does occur, the document itself, or if oral, a 
memorandum of the substance of the communication must be placed in the 
record. All other parties to the proceeding may have the opportunity to 
respond to the prohibited communication, and such response may include 
a recommendation for sanctions. The hearing officer or the Director, as 
appropriate, may determine whether sanctions are appropriate.
    Finally, paragraph (e) of this section provides that the hearing 
officer is not permitted to consult an interested person or a party on 
any matter relevant to the merits of the adjudication, except to the 
extent required for the disposition of ex parte matters. Consistent 
with 5 U.S.C. 554(d), this paragraph also provides that Bureau 
employees engaged in an investigational or prosecutorial function, 
other than the Director, may not participate in the decision-making 
function in the same or a factually related matter.

Section 1081.111 Filing of Papers

    This section requires the filing of papers in an adjudication 
proceeding. It specifies the papers that must be filed and addresses 
the time and manner of filing. The section provides for filing by 
electronic transmission upon the conditions specified by the Director 
or the hearing officer, recognizing that while the Bureau anticipates 
the development of an electronic filing system, it may adopt other 
means of electronic filing in the interim (e.g., e[dash]mail 
transmission). The section authorizes other methods of filing if a 
respondent demonstrates that filing via electronic transmission is not 
practical.

Section 1081.112 Formal Requirements as to Papers Filed

    This section sets forth the formal requirements for papers filed in 
adjudication proceedings. It sets forth formatting requirements, 
requires that all documents be signed in accordance with Sec.  108, and 
requires the redaction of sensitive personal information from filings 
where the filing party determines that such information is not relevant 
or otherwise necessary for the conduct of the proceeding. This section 
also sets forth the method of filing documents containing information 
for which confidential treatment has been granted or is sought, and 
requires that in addition to the filing of the confidential information 
under seal, an expurgated copy of the filing be made on the public 
record. Section 119 governs the filing of motions seeking confidential 
treatment of information and sets forth the standard to be applied by 
the hearing officer in determining whether to grant such treatment.

Section 1081.113 Service of Papers

    This section requires that every paper filed in a proceeding be 
served on all other parties to the proceeding in the manner set forth 
in the rule. Service by electronic transmission is encouraged, but is 
conditioned upon the consent of the parties. The section also sets 
forth specific methods for the Bureau to serve notices of charges, as 
well as recommended decisions and final orders. In this regard, the 
section provides that such service cannot be made by First Class mail, 
but also provides that service may be made on authorized agents for 
service of process.
    The section also provides that the Bureau may serve persons at the 
most recent business address provided to the Bureau in connection with 
a person's registration with the Bureau. Although no such registration 
requirements currently exist, the Bureau has included this provision to 
account for any such requirements in the future. In the event that a 
party is required to register with the Bureau and maintain the accuracy 
of such registration information, the Bureau should be entitled to rely 
upon such information for service of process. This provision is modeled 
on the SEC Rules, 17 CFR 201.141(a)(2)(iii).

Section 1081.114 Construction of Time Limits

    This section provides common rules for computing time limits, 
taking into account the effect of weekends and holidays on time periods 
that are 10 days or less. This section also sets forth when filing or 
service is effective. With regard to time limits for responsive 
pleadings or papers, the Rules incorporate a three-day extension for 
mail service, similar to the Federal Rules of Civil Procedure, and a 
one-day extension for overnight delivery, as contained in some 
agencies' existing rules. A one-day extension for service by electronic 
transmission is consistent with the Uniform Rules and reflects that 
electronic transmission may result in delays in actual receipt by the 
person served.

Section 1081.115 Change of Time Limits

    This section is modeled on the SEC Rules, 17 CFR 201.161, and is 
intended to limit extensions of time to those necessary to prevent 
substantial prejudice. The section is intended to further the Bureau's 
goal of ensuring the timely conclusion of adjudication proceedings. The 
section generally provides the hearing officer and the Director with 
the authority to extend the time limits prescribed by the Rules in 
certain defined circumstances. In keeping with the goal of expeditious 
resolution of proceedings, this section provides that motions for 
extension of time are strongly disfavored and may only be granted after 
consideration of various enumerated factors, provided that the 
requesting party makes a strong showing that denial of the motion would 
substantially prejudice its case. The section also provides that any 
extension of time shall not exceed 21 days unless the hearing officer 
or Director, as appropriate, states on the record or in a written order 
the reasons why a longer extension of time is necessary. Finally, the 
section provides that the granting of a motion for an extension of time 
does not affect the deadline for the recommended decision of the 
hearing officer, which must be filed no later than the earlier of 300 
days after the filing of the notice or charges or 90 days after the end 
of post-hearing briefing (unless separately extended by the Director as 
provided for in Sec.  400).

Section 1081.116 Witness Fees and Expenses

    This section provides that fees and expenses for non-party 
witnesses subpoenaed pursuant to these Rules

[[Page 45342]]

shall be the same as for witnesses in United States district courts.

Section 1081.117 Bureau's Right To Conduct Examination, Collect 
Information

    This section, which is modeled on the Uniform Rules, 12 CFR 19.16, 
states that nothing contained in the Rules shall be construed to limit 
the right of the Bureau to conduct examinations or visitations of any 
person, or the right of the Bureau to conduct any form of investigation 
authorized by law, or to take other actions the Bureau is authorized to 
take outside the context of conducting adjudication proceedings. This 
section is intended to clarify that the pendency of an adjudication 
proceeding with respect to a person shall not affect the Bureau's 
authority to exercise any of its powers with respect to that person.

Section 1081.118 Collateral Attacks on Adjudication Proceedings

    This section, which is modeled on the Uniform Rules, 12 CFR 19.17, 
is intended to preclude the use of collateral attacks to circumvent or 
delay the administrative process.

Section 1081.119 Confidential Information; Protective Orders

    This section sets forth the means by which a party or another 
person may seek a protective order shielding confidential information. 
While generally modeled on the SEC Rules, 17 CFR 201.322, the section 
adopts the substantive standard set forth in the FTC Rules, 16 CFR 
3.45(b), which provides that the hearing officer may grant a protective 
order only upon a finding that public disclosure will likely result in 
a clearly defined, serious injury to the person requesting confidential 
treatment or after finding that the material constitutes sensitive 
personal information. The Rule adopts the FTC's standard because it 
comports with the Bureau's goals of providing as much transparency in 
the adjudicative process as possible, while also protecting 
confidential business information or other sensitive information of 
parties appearing before the Bureau or third parties whose information 
may be introduced into evidence. The Bureau expects that the standard 
set forth in this section will be met in cases where the disclosure of 
trade secrets or other information to the public or to parties is 
likely to result in harm, but that the standard will not be met simply 
because the information at issue is deemed ``confidential'' or 
``proprietary'' by the movant. To the extent that a movant can identify 
a clearly defined, serious injury likely to result from the disclosure 
of such particular information, it will be protected; generalized 
claims of competitive or other injury generally will not suffice. This 
section provides that documents subject to a motion for confidential 
treatment will be maintained under seal until the motion is decided.

Section 1081.120 Settlement

    This section is based on the SEC Rules, 17 CFR 201.240. It 
addresses offers of settlement made both prior to and after the 
institution of proceedings. Any person who is notified that a 
proceeding may or will be instituted against him or her, or any party 
to a proceeding, may make an offer of settlement in writing at any 
time. Any settlement offer shall be presented to the Director with a 
recommendation, except that, if the recommendation is unfavorable, the 
offer shall not be presented to the Director unless the person making 
the offer so requests.
    The section requires that each offer of settlement recite or 
incorporate as part of the offer the provisions of paragraphs (c)(3) 
and (c)(4). Because certain facts necessary for the Director to make a 
reasoned judgment as to whether a particular settlement offer is in the 
public interest will often be available only to the Bureau employee 
that negotiated the proposed settlement, paragraph (c)(4)(i) requires 
waiver of any provisions, under the Rules or otherwise, that may be 
construed to prohibit ex parte communications regarding the settlement 
offer between the Director and Bureau employee involved in litigating 
the proceeding. Paragraph (c)(4)(ii) requires waiver of any right to 
claim bias or prejudgment by the Director arising from the Director's 
consideration or discussions concerning settlement of all or any part 
of the proceeding. If the Director rejects the offer of settlement, the 
person making the offer shall be notified of the Director's action. The 
rejection of the offer of settlement shall not affect the continued 
validity of the waivers pursuant to paragraph (c)(4).

Section 1081.121 Cooperation With Other Agencies

    This section sets forth the policy of the Bureau to cooperate with 
other governmental agencies to avoid unnecessary overlapping or 
duplication of regulatory functions.

Subpart B--Initiation of Proceedings and Prehearing Rules

Section 1081.200 Commencement of Proceedings and Contents of Notice of 
Charges

    This section, similar to the comparable Uniform Rule, 12 CFR 19.18, 
contains the requirements relating to the initiation of adjudication 
proceedings, including the required content of a notice of charges 
initiating a hearing. In provisions modeled on the MARs and the Federal 
Rules of Civil Procedure, see MARs, 11 T.M. Cooley L. Rev. at 96; Fed. 
R. Civ. P. 41(a), this section also sets forth the circumstances under 
which the Bureau may voluntarily dismiss an adjudication proceeding, 
either on its own motion before the respondent(s) serve an answer, or 
by filing a stipulation of dismissal signed by all parties who have 
appeared. Unless the notice or stipulation of dismissal states 
otherwise, a dismissal pursuant to this section is without prejudice. 
In keeping with the principle that Bureau proceedings are presumed to 
be public, this section also provides that a notice of charges shall be 
released to the public after affording the respondent or others an 
opportunity to seek a protective order to shield confidential 
information.

Section 1081.201 Answer

    This section requires a respondent to file an answer in all cases. 
The Bureau considered, but rejected, the approach set forth in the SEC 
Rules, 17 CFR 201.220(a), whereby an answer is required only if 
specified in the notice of charges. The Bureau believes that an answer 
can help focus and narrow the matters at issue. Respondents must file 
an answer within 14 days of service of the notice of charges. The 14-
day time period is adopted from the FTC Rules, 16 CFR 3.12. As in the 
Uniform Rules, 12 CFR 19.19(c), failure to file a timely answer is 
deemed to be a waiver of the right to appear and a consent to the entry 
of an order granting the relief sought by the Bureau in the notice of 
charges. This section provides that in the case of default, the hearing 
officer is authorized, without further proceedings, to find the facts 
to be as alleged in the notice of charges and to enter a recommended 
decision containing appropriate findings and conclusions.
    This section adopts the procedure from the SEC Rules for a motion 
to set aside a default, 17 CFR 201.155. It also provides that the 
hearing officer, prior to the filing of the recommended decision, or 
the Director, at any time, may set aside a default for good cause 
shown.

[[Page 45343]]

Section 1081.202 Amended Pleadings

    This section provides that the parties may amend the notice of 
charges or the answer at any stage of the proceeding. Formal amendments 
to the notice of charges and answer are not required when an issue not 
raised by the notice of charges or answer is tried at the hearing by 
express or implied consent of the parties. In the event that a party 
seeks to introduce evidence at a hearing that is outside the scope of 
matters raised in the notice of charges or answer, the hearing officer 
may admit the evidence when admission is likely to assist in 
adjudicating the merits of the action unless the objecting party 
demonstrates that admission of such evidence would unfairly prejudice 
that party's action or defense upon the merits. The Bureau has adopted 
this liberal standard to the amendment of the pleadings to promote 
adjudication on the merits, and believes that the standard set forth in 
the rule should adequately protect parties from undue prejudice.

Section 1081.203 Scheduling Conference

    This section requires the parties to meet before the initial 
scheduling conference to discuss the nature and basis of their claims 
and defenses, the possibilities for a prompt settlement or resolution 
of the case, and other matters to be determined at the scheduling 
conference.
    Within 20 days of the service of the notice of charges, or at 
another time if the parties agree, the hearing officer and the parties 
are to have a scheduling conference. This section sets forth the issues 
to be discussed at the scheduling conference. These issues are drawn 
from those the parties are required to discuss at scheduling and 
prehearing conferences under the Uniform Rules, 12 CFR 19.31, the SEC 
Rules, 17 CFR 201.221, and the FTC Rules, 16 CFR 3.21. Paragraph (b)(1) 
provides that the parties shall be prepared to address the 
determination of hearing dates and location, and whether, in 
proceedings under section 1053(b) of the Act, the hearing should 
commence later than 60 days after service of the notice of charges. 
This provision was added to account for the requirement in section 
1053(b) of the Act that the hearing be held no earlier than 30 days nor 
later than 60 days after the date of service of the notice of charges, 
unless an earlier or later date is set by the Bureau at the request of 
any party so served. It is expected that the parties shall discuss a 
hearing date at the scheduling conference, and that this would afford 
respondents the opportunity to request a hearing date outside the 30-
to-60 day timeframe.
    It is also expected that at or before the scheduling conference, 
the parties will discuss any issues related to the production of 
documents pursuant to Sec.  206, any anticipated motions for witness 
statements pursuant to Sec.  207, whether either party intends to issue 
documentary subpoenas, and whether either party believes that 
depositions will be necessary to preserve the testimony of witnesses 
who will be unavailable for the hearing. The parties are also expected 
to discuss the need and a schedule for any expert discovery.
    The hearing officer is required to issue a scheduling order at or 
within five days of the conclusion of the scheduling hearing, setting 
forth the date and location of the hearing, as well as other procedural 
determinations made. It is expected that the hearing officer will 
establish any dates for expert discovery in the scheduling order, or 
else expressly find that such discovery is not necessary or reasonable 
in a particular case. This scheduling order will govern the course of 
the proceedings, unless later modified by the hearing officer.
    Provision for a prompt scheduling conference followed by prompt 
issuance of a scheduling order is necessary in order to allow for the 
orderly course of proceedings on the timeline set forth elsewhere in 
the Rules. Particularly in cases brought pursuant to section 1053(b) of 
the Act in which the respondent does not request a hearing date outside 
the 30-to-60 day timeframe set forth in the statute, it is essential 
that the hearing officer and the parties have a clear understanding of 
the applicable schedule at the earliest possible date.
    As provided for in the SEC Rules, 17 CFR 201.221(f), this section 
provides that any person named as a respondent in a notice of charges 
who fails to appear at a scheduling conference may be deemed in default 
pursuant to Sec.  201(d)(1). Finally, like the FTC Rules, 16 CFR 
3.21(g), this section provides that scheduling conferences are 
presumptively public unless the hearing officer determines otherwise 
based on the standard set forth in Sec.  119.

Section 1081.204 Consolidation and Severance of Actions

    This section, modeled after the Uniform Rules, 12 CFR 19.22, allows 
the consolidation of actions if the proceedings arise out of the same 
transaction, occurrence, or series of transactions or occurrences or if 
the proceedings involve at least one common respondent or a material 
common question of law or fact. Proceedings are not to be consolidated 
if to do so would unreasonably delay the proceeding or cause 
significant injustice.
    Severance, on the other hand, may be granted by the hearing officer 
only if he or she determines that undue prejudice or injustice would 
result from a consolidated proceeding and if such prejudice or 
injustice would outweigh the interests of judicial economy and speed in 
the adjudication of actions. This is a higher standard than is required 
for the consolidation of actions.

Section 1081.205 Non-Dispositive Motions

    This section governs all motions other than motions to dismiss or 
motions for summary disposition, which are governed by Sec.  212. The 
section generally sets forth the requirements for filing a non-
dispositive motion, and requires that all such motions must be in 
writing, state with particularity the relief sought, and include a 
proposed order. This section also makes clear that motions filed 
pursuant to sections that impose different requirements should follow 
those requirements, and the requirements of Sec.  205 to the extent 
they are not inconsistent. For example, Sec.  208(g), which relates to 
motions to quash subpoenas, provides for a shorter time period for the 
filing of a responsive brief and prohibits the filing of a reply unless 
requested by the hearing officer. These conditions govern motions to 
quash, but such motions are still subject to other provisions of Sec.  
205, including, inter alia, the need to meet and confer, deadlines for 
the hearing officer's ruling, and length limitations of the briefs.
    Like the Uniform Rules and the FTC Rules, 12 CFR 19.23(d)(1); 16 
CFR 3.22(d), this section gives a party 10 days after service of a non-
dispositive motion to respond to such motion in writing. It provides 
for reply briefs, which must be filed within three days after service 
of the response. A party's failure to respond to a motion shall waive 
that party's right to oppose such motion and constitutes consent to the 
entry of an order substantially in the form of the order accompanying 
that motion. This section adopts the SEC's 15-page length limitation 
for non-dispositive motions and oppositions, 17 CFR 201.154(c), and a 
six page length limitation for reply briefs. The Bureau has adopted 
these time and length limitations because they provide parties ample 
opportunity to express their views on matters that do not concern the 
ultimate disposition of the action.

[[Page 45344]]

    The section also requires parties to make a good faith effort to 
meet and confer prior to the filing of a non-dispositive motion in an 
effort to resolve the controversy by agreement. The Bureau has included 
the meet-and-confer requirement because it believes that such 
conferences can help obviate the need for, or narrow the scope of, 
disputed motions, thus saving both the parties and the hearing officer 
time and resources.
    This section provides that the hearing officer shall rule on a non-
dispositive motion, and shall do so within 14 days after the expiration 
of the time for filing of all motions papers authorized by this 
section, and that the pendency of a motion shall not stay proceedings. 
This time limitation is based on the FTC Rules, 16 CFR 3.22(e), and is 
intended to ensure the timely resolution of disputes so that the 
proceeding as a whole can conclude in a fair and expeditious manner. As 
noted above, both the FTC and the SEC have revised their rules of 
practice to provide for the more expeditious resolution of 
administrative adjudications, and the incorporation of a time period in 
which the hearing officer must rule on a non-dispositive motion is, in 
the views of the Bureau, a critical part of that effort. See 73 FR 
58831, 58836 (Oct. 7, 2008) (FTC expects that provision requiring ALJs 
to decide motions within 14 days will expedite cases).

Section 1081.206 Availability of Documents for Inspection and Copying

    Modeled primarily after the SEC Rules, 17 CFR 201.230, this section 
adopts the SEC's affirmative disclosure approach to fact discovery in 
administrative adjudications. Generally, this section requires that the 
Division of Enforcement make available for inspection and copying 
certain categories of documents obtained by the Division of Enforcement 
prior to the institution of proceedings from persons not employed by 
the Bureau, in connection with the investigation leading to the 
institution of proceedings.
    The Bureau believes that this section will promote the fair and 
efficient resolution of administrative proceedings. A respondent's 
right to inspect and copy documents under this section is automatic; 
the respondent does not need to make a formal request for access 
through the hearing officer. Pursuant to this section, the Division of 
Enforcement will turn over information from its investigatory file that 
was obtained from persons not employed by the Bureau as part of the 
investigation resulting in the Bureau's decision to institute 
proceedings. The respondent will have access to the documents, 
testimony, and other information that the Bureau relied upon in 
determining to file a notice of charges, in addition to evidence that 
the Bureau will rely upon at the hearing.
    This approach has several advantages. By automatically providing 
respondents with the factual information gathered by the Division of 
Enforcement in the course of the investigation leading to the 
institution of proceedings, this provision helps ensure that 
respondents have a complete understanding of the basis for the Bureau's 
action and can more accurately and efficiently determine the nature of 
their defenses or whether they wish to seek settlement. Because this 
approach renders traditional document discovery largely unnecessary, it 
will lead to a faster and more efficient resolution of Bureau 
administrative proceedings, saving both the Bureau and respondents the 
resources typically expended in the civil discovery process.
    The section adopts most of the procedures and conditions set forth 
in the SEC Rules, as discussed below.
    Pursuant to paragraph (a)(1), the Division of Enforcement's 
obligation under this section relates to documents obtained by the 
Division of Enforcement. Documents located only in the files of other 
divisions or offices are beyond the scope of the rule. The term 
``documents'' has been defined in the same manner as the term 
``documentary material'' in section 1051(4) of the Act, and 
encompasses, among other things, electronic files or other data or data 
compilations stored in any medium.
    Paragraph (a)(1) also provides that the Division of Enforcement 
will make the documents available for inspection and copying. This 
provision is modeled after the SEC Rules and the Federal Rules of Civil 
Procedure. The Bureau anticipates that in most cases it will simply 
provide either paper or electronic copies of the material at issue to 
respondents, but has adopted the formulation in the rule to preserve 
flexibility and the Division of Enforcement's right to require 
inspection and copying in appropriate cases.
    Paragraphs (a)(1)(i), (a)(1)(ii), and (a)(1)(iii) describe the 
types of documents that are subject to the disclosure requirement of 
paragraph (a)(1). Paragraph (a)(2) provides that the Division of 
Enforcement shall also make available each civil investigative demand 
or other written request to provide documents or to be interviewed 
issued by the Division of Enforcement in connection with the 
investigation leading to the institution of proceedings. The Division 
of Enforcement shall also make available any final examination or 
inspection reports prepared by any other Division of the Bureau if the 
Division of Enforcement either intends to introduce any such report 
into evidence or to use any such report to refresh the recollection of, 
or impeach, any witness. The provisions of paragraph (a)(2) are 
included in the SEC Rules, but have been broken out into a separate 
paragraph of this section because they do not comprise documents that 
the Division of Enforcement obtained from persons not employed by the 
Bureau, and thus do not technically fall within the scope of paragraph 
(a)(1).
    Pursuant to Sec.  1081.208, a respondent may seek production of 
other documents pursuant to subpoena. Paragraph (a)(3) is intended to 
make clear that the affirmative disclosure obligation set forth in 
paragraphs (a)(1) and (a)(2) does not preclude the availability of 
subpoenas as separately provided by the Rules.
    Paragraph (a)(4) provides that this section does not require the 
Division of Enforcement to produce a final examination or inspection 
report prepared by any other Division of the Bureau to a respondent who 
is not the subject of that report. The Bureau has added this provision, 
which does not appear in the SEC Rules, out of concern for the 
privileged and confidential nature of examination and inspection 
reports and to make clear that respondents cannot rely upon the 
Bureau's affirmative disclosure obligation to require the production of 
supervision or examination reports concerning other persons. Although 
the disclosure obligation as drafted would not require the production 
of such reports, the Bureau is adding this provision to remove any 
question regarding the issue.
    Paragraph (b)(1) of this section permits the Division of 
Enforcement to withhold documents that would otherwise be produced 
under paragraph (a) under five exceptions. Exception (i) shields 
information subject to a claim of privilege. Exception (ii) protects as 
work product internal documents prepared by persons employed by the 
Bureau, including consulting experts, which will not be offered in 
evidence. Work product includes any notes, working papers, memoranda or 
other similar materials, prepared by an attorney or under an attorney's 
direction in anticipation of litigation. See Hickman v. Taylor, 329 
U.S. 495 (1947); see also Fed. R. Civ. P. 26(b)(3) and (b)(5). 
Accountants, paralegals, investigators, and consulting experts who work 
on an

[[Page 45345]]

investigation do so at the direction of the Director, an associate 
director, or another supervisory attorney, and their work product is 
therefore shielded by the rule. Although such material would not fall 
within the purview of paragraphs (a)(1) and (a)(2), the Bureau has 
retained this provision of the SEC Rule to make clear that such work 
product is not subject to the affirmative disclosure obligation. An 
examination or inspection report prepared by one of the Bureau's 
Supervision Divisions, which the Division of Enforcement intends to 
introduce into evidence or to use to refresh the recollection of, or 
impeach, a witness, is explicitly excluded from the materials that may 
be withheld pursuant to this exception.
    Exception (iii) protects the identity of a confidential source. See 
5 U.S.C. 552(b)(7)(C) and (D). Exception (iv) provides that documents 
need not be produced where applicable law prohibits their production. 
Exception (v) protects any other document or category of documents that 
the hearing officer determines may be withheld as not relevant to the 
subject matter of the proceeding, or otherwise for good cause shown. 
This exception is intended to provide the hearing officer with the 
flexibility to adjust the Bureau's affirmative disclosure obligation to 
the particular contours of a proceeding. For example, this exception 
could be used in a situation where a single investigation involves a 
discrete segment or segments that are related only indirectly, or not 
at all, to the recommendations ultimately made to the Director with 
respect to the particular respondents in a specific proceeding. To 
require that documents not relevant to the subject matter of the 
proceeding be made available, simply because they were obtained as part 
of a broad investigation, burdens the respondent as well as the 
Division of Enforcement with unnecessary costs and delay.
    Paragraph (b)(2) of this section provides that paragraph (b) does 
not authorize the Division of Enforcement to withhold material 
exculpatory evidence in the possession of the Division of Enforcement 
that would otherwise be subject to disclosure pursuant to paragraph 
(a). Pursuant to this section, the Division of Enforcement will provide 
respondents with material exculpatory evidence it has obtained from 
persons not employed by the Bureau even if such evidence is contained 
in documents that the Division of Enforcement is otherwise permitted to 
withhold pursuant to paragraph (b)(1).
    The Bureau has declined to adopt the SEC Rules' explicit reference 
to Brady v. Maryland, 373 U.S. 83 (1963) in this context. Proceedings 
under this part are civil in nature, not criminal, and the requirements 
of Brady are therefore inapplicable. The Division of Enforcement will 
turn over information from its investigatory file that was obtained 
from persons not employed by the Bureau as part of the investigation 
resulting in the Bureau's decision to institute proceedings, including 
any material exculpatory evidence so obtained. The Bureau understands 
this approach to be consistent with that provided for in the SEC Rules.
    The Bureau has also added the clause ``that would otherwise be 
required to be produced pursuant to paragraph (a) of this section'' to 
paragraph (b) to make clear that the material exculpatory evidence 
provision works in concert with paragraph (a), and does not impose a 
separate, free-standing obligation to disclose exculpatory evidence 
that is not otherwise within the scope of paragraph (a).
    Paragraph (c) provides that the hearing officer may require the 
Division of Enforcement to submit a withheld document list, and may 
order that a withheld document be made available for inspection and 
copying.
    Pursuant to paragraph (d), the Division of Enforcement is required 
to make the material governed by this section available for inspection 
and copying no later than seven days after service of the notice of 
charges. The Bureau has considered requiring production of the covered 
material at the time the notice of charges is served, but has decided 
against such an approach. A provision for a delay of no more than seven 
days will allow for the entry of any appropriate protective orders and 
is consistent with the SEC's approach in this regard. See 17 CFR 
201.230(d). It is the Bureau's expectation that the Division of 
Enforcement will make this material available as soon as possible in 
every case.
    Paragraphs (e) and (f) set forth the procedure to obtain copies of 
documents and the costs of such copies. As noted above, the Bureau 
anticipates providing electronic copies of the documents to respondents 
in most cases, and paragraph (f) accounts for such a provision of 
electronic documents. In order to preserve the discretion of the 
Division of Enforcement, however, this paragraph includes provisions 
governing the inspection and copying of documents. In order to provide 
for the safekeeping of documents subject to inspection, and to control 
costs associated with the implementation of this section, paragraph (e) 
provides that documents shall be made available for inspection and 
copying at the Bureau office where they are ordinarily maintained, or 
at such other place as the parties may agree. In cases in which 
electronic production is unwarranted, this process appears more likely 
to result in prompt access to documents obtained by the Division of 
Enforcement that are the basis of the allegations contained in the 
notice of charges.
    In a provision added by the Bureau, paragraph (g) of this section 
imposes upon the Division of Enforcement a duty to supplement its 
disclosures under paragraph (a)(1) of this section if it acquires 
information after making its disclosures that it intends to rely upon 
at a hearing.
    Like the SEC Rules, 17 CFR 201.230(h), paragraph (h) provides for a 
``harmless error'' standard in the event the Division of Enforcement 
fails to make available to a respondent a document required to be made 
available by this section.
    Finally, paragraph (i) is modeled on the FTC Rules, 16 CFR 3.31(g), 
and provides a ``claw back'' mechanism whereby inadvertent disclosure 
of privileged or protected information or communications shall not 
constitute a waiver of the privilege or protection, provided that the 
party took reasonable steps to prevent disclosure and promptly took 
reasonable steps to rectify the error. Furthermore, paragraph (i) 
provides that disclosure of privileged or protected information or 
communications shall waive the privilege only if the waiver was 
intentional and that the scope of such waiver is limited to the 
undisclosed information or communications concerning the same subject 
matter, which in fairness ought to be considered together with the 
disclosed information or communications. Paragraph (i) expressly 
applies to disclosures made by any party during an adjudication 
proceeding.

Section 1081.207 Production of Witness Statements

    Modeled after the SEC Rules, 17 CFR 201.231, this section provides 
that a respondent may request for inspection and copying any statement 
of a Division of Enforcement witness that (1) pertains to or is 
expected to pertain to his or her direct testimony; and (2) would be 
required to be produced pursuant to the Jencks Act, 18 U.S.C. 3500, if 
the adjudication proceeding were a criminal proceeding. This section is 
intended to promote the principles of transparency

[[Page 45346]]

and efficiency discussed with respect to Sec.  1081.206. Note, however, 
that the respondent is required to move for the production of these 
statements.
    The Jencks Act does not require production of a witness' prior 
statement until the witness takes the stand. The Bureau expects that in 
most cases, the Division of Enforcement will provide prehearing 
production voluntarily. Submission of a witness' prior statement, 
however, may provide a motive for intimidation of that witness or 
improper contact by a respondent with the witness. The rule provides, 
therefore, that the time for delivery of witness statements is to be 
determined by the hearing officer, so that a case-specific 
determination of such risks can be made if necessary. Upon a showing 
that there is substantial risk of improper use of a witness' prior 
statement, the hearing officer may take appropriate steps. For example, 
a hearing officer may delay production of a prior statement, or 
prohibit parties from communicating with particular witnesses.
    Like Sec.  1081.206 and the SEC Rules, this section provides for a 
``harmless error'' standard in the event the Division of Enforcement 
fails to make available a statement required to be made available by 
this section.

Section 1081.208 Subpoenas

    This section is modeled after the SEC Rules, 17 CFR 201.232, and 
provides that, in connection with a hearing, a party may request the 
issuance of a subpoena for the attendance and testimony of a witness or 
the production of documents. The availability of subpoenas for 
witnesses and documents ensures that respondents have available to them 
the necessary tools to adduce evidence in support of their defenses. A 
subpoena may only be issued by the hearing officer (as opposed to 
counsel) and the section sets forth procedures to prevent the issuance 
of subpoenas that may be unreasonable, oppressive, excessive in scope, 
or unduly burdensome. The section also sets forth procedures and 
standards applicable to a motion to quash or modify a subpoena.
    Paragraph (h) of this section also provides that, if a subpoenaed 
person fails to comply, the Bureau, on its own motion or on the motion 
of the party at whose request the subpoena was issued, may seek an 
order requiring compliance. In accordance with section 1052(b)(2) of 
the Act, which authorizes the Bureau or a Bureau investigator to seek 
enforcement of a subpoena, paragraph (h) only authorizes the Bureau--
and not the party at whose request the subpoena was issued--to seek 
judicial enforcement of the subpoena. Compare 12 CFR 19.26(c) 
(authorizing the ``subpoenaing party or any other aggrieved party'' to 
seek judicial enforcement). In a provision added by the Bureau, this 
section also provides that failure to request that the Bureau seek 
enforcement of a subpoena constitutes waiver of any claim of prejudice 
predicated upon the unavailability of the testimony or evidence sought. 
This provision was added to prevent a respondent from declining to 
request that the Bureau seek to enforce the subpoena of a witness who 
fails to comply, and later claiming that his or her defense was 
prejudiced based upon the unavailability of that witness.

Section 1081.209 Deposition of Witness Unavailable for Hearing

    This section, generally modeled after the Uniform Rules and the SEC 
Rules, 12 CFR 19.27; 17 CFR 201.233, provides that parties may seek to 
depose material witnesses unavailable for the hearing upon application 
to the hearing officer for a deposition subpoena. The application must 
state that the witness is expected to be unavailable due to age, 
illness, infirmity or other reason and that the petitioning party was 
not the cause of the witness's unavailability. The Bureau has adopted 
the Uniform Rules' formulation of this standard, which provides for 
such depositions when the witness is ``otherwise unavailable,'' to 
account for the possible unavailability of witnesses for reasons other 
than those specified in the SEC Rules.
    Paragraph (a)(2) requires a party seeking to record a deposition by 
audio-visual means to so note in the request for a deposition subpoena. 
This provision is modeled on Federal Rule of Civil Procedure 30(b)(3). 
Paragraph (a)(4) also provides that a deposition cannot be taken on 
less than 14 days' notice to the witness and all parties, absent an 
order to the contrary from the hearing officer.
    Paragraph (h) incorporates several provisions from the SEC Rules. 
It provides that the witness being deposed may have an attorney present 
during the deposition; that objections to questions of evidence shall 
be noted by the deposition officer, but that only the hearing officer 
shall have the power to decide on the competency, materiality, or 
relevance of evidence; that the deposition shall be filed with the 
Executive Secretary; and that transcripts shall be available to the 
deponent and each party for purchase.
    This section also incorporates certain procedures from Sec.  208 of 
the Rules pertaining to subpoenas. Those procedures are intended to 
protect against deposition requests that may be unreasonable, 
oppressive, excessive in scope, or unduly burdensome, and to provide a 
mechanism for signing and service of a deposition subpoena, the filing 
of a motion to quash, and for enforcing subpoenas.
    The Bureau considered whether respondents should be allowed to 
issue subpoenas for the purpose of compelling prehearing discovery 
depositions as is allowed in actions under the Federal Rules of Civil 
Procedure. Discovery under the Federal Rules of Civil Procedure, 
including deposition practice, is often a source of delay, extensive 
collateral disputes and high litigation costs. The Bureau believes 
expanding the scope of prehearing discovery to permit discovery 
depositions is not warranted for several reasons.
    First, the Bureau believes that even if limitations were placed on 
the availability of discovery depositions, there remains a significant 
potential for extensive collateral litigation over their use. Second, 
use of discovery depositions is in tension with the statutory timetable 
for hearings in cease-and-desist proceedings under section 1053(b) of 
the Act. Indeed, in part for this reason, the Rules allow the hearing 
officer to decide whether and to what extent to permit expert discovery 
in adjudication proceedings. Allowing prehearing depositions would 
present extreme scheduling difficulties in those cases in which 
respondents did not request hearing dates outside the 30-to-60 day 
timeframe set forth in the Act.
    Third, the rationale for permitting oral depositions in litigation 
under the Federal Rules of Civil Procedure does not apply equally to a 
Bureau administrative proceeding. In the typical civil action between 
private parties, where neither party can compel testimony prior to the 
filing of the complaint, oral depositions play a critical role in 
permitting evidence to be gathered prior to trial. Here, by contrast, 
the Bureau can compel such testimony and is committed to making it 
available to respondents pursuant to Sec.  1081.206.
    Finally, these Rules include three provisions that address in 
significant part a respondent's interest in obtaining discovery prior 
to the start of the hearing. Section 1081.206 mandates that the 
Division of Enforcement generally make available not only transcripts 
of testimony, but documents obtained from persons not employed by the 
Bureau during the investigation leading to the

[[Page 45347]]

proceeding as well as certain documents of the Bureau. Section 1081.208 
authorizes the issuance of subpoenas duces tecum for the production of 
documents returnable at any designated time or place. In addition, 
Sec.  1081.210 provides for expert discovery in appropriate cases. 
Given these discovery mechanisms, the ability to subpoena witnesses to 
testify at the hearing, the ability to take the deposition of material 
witnesses unavailable for hearing, and the ability of respondents to 
conduct informal discovery, the marginal benefits of prehearing 
depositions are not justified by their likely cost in time, expense, 
collateral disputes and scheduling complexities.

Section 1081.210 Expert Discovery

    This section is modeled after the FTC Rules, 16 CFR 3.31A. Neither 
the Uniform Rules nor the SEC Rules provide for expert discovery. The 
Bureau has provided for expert discovery so that the parties may fully 
understand the other side's position prior to the hearing, which will 
enable a clearer and more efficient airing of the issues at the 
hearing, and which may also clarify the issues for a possible 
prehearing settlement. It will also enable the parties to identify 
rebuttal expert witnesses, if needed, prior to the hearing.
    Paragraph (a) provides that the hearing officer shall establish a 
date for the exchange of expert reports in the scheduling order. This 
provision is intended to allow flexibility in scheduling expert 
discovery depending on the complexity of the case and the date of the 
hearing.
    Paragraph (b) limits parties to five expert witnesses, including 
any rebuttal or surrebuttal experts, as do the FTC Rules, 16 CFR 3.31A. 
The Bureau believes this is sufficient to provide the parties with an 
opportunity to adequately present expert testimony without unduly 
delaying the proceedings. Paragraph (b) also provides that no party may 
call an expert witness unless that witness has been identified and 
provided a report in accordance with this section, unless the hearing 
officer provides otherwise at a scheduling conference. The last clause 
is intended to reflect a hearing officer's discretion, at a scheduling 
conference, to dispense with or otherwise limit expert discovery in a 
particular case (as expressly provided for in paragraph (e) of this 
section).
    Paragraph (c) sets forth the required contents of an expert report. 
This section is based upon the corresponding provisions of the FTC 
Rules.
    Paragraph (d) provides for expert depositions, which are not to 
exceed 8 hours absent agreement of the parties or an order by the 
hearing officer. These time limits are intended to provide adequate 
time to prepare for expert testimony without unduly delaying the 
proceedings. Paragraph (d) also provides that expert depositions shall 
be conducted pursuant to the procedures set forth in Sec.  1081.209. 
Finally, paragraph (d) provides that an expert's deposition shall be 
conducted after submission of the expert's report but no later than 
seven days prior to the deadline for submission of rebuttal expert 
reports. This provision is intended to allow parties to rely upon the 
deposition of an opposing party's expert in the preparation of a 
rebuttal expert report. Because, pursuant to paragraph (a), rebuttal 
reports are due 28 days after the exchange of expert reports, expert 
depositions will need to take place within that 28 day period.
    Finally, paragraph (e) authorizes the hearing officer to dispense 
with expert discovery in appropriate cases. The Bureau envisions 
hearing officers relying on this provision in cease-and-desist 
proceedings brought pursuant to section 1053(b) of the Act, where the 
respondent has not requested a hearing date outside the statutory 30-
to-60 day timeframe. In such cases, it may be appropriate to dispense 
with expert discovery for timing reasons, while allowing the parties to 
call expert witnesses.

Section 1081.211 Interlocutory Review

    This section sets forth the procedure and standards applicable to 
interlocutory review by the Director of a ruling or order of the 
hearing officer. In contrast to the practice in the federal judicial 
system, but like the SEC, the Director may take up a matter on his or 
her own motion at any time, even if a hearing officer does not certify 
it for interlocutory review.
    Paragraph (b) provides that any party may file a motion for 
certification of a ruling or order for interlocutory review within five 
days of service of the order or ruling. Responses to such motions are 
due within three days, and the hearing officer is required to rule upon 
such a motion within five days thereafter.
    Paragraph (c) sets forth the permissible bases for certifying a 
ruling or order. Certification is appropriate if the hearing officer's 
ruling would compel testimony or production of documents from Bureau 
officers or employees, or officers or employees from another 
governmental agency. This is consistent with the SEC Rules, 17 CFR 
201.400. Like FTC Rules, 16 CFR 3.23(a)(1), however, this provision 
includes officers and employees from other governmental agencies, and 
not just the Bureau, in order to afford the same treatment to other 
agencies within the federal government. Paragraph (c) also provides for 
certification of rulings or orders as to which there is a substantial 
ground for difference of opinion and an immediate review may materially 
advance the completion of the proceeding or subsequent review will be 
an inadequate remedy. The hearing officer may also certify a ruling or 
order where the ruling or order involves a motion for disqualification 
of the hearing officer or the suspension of an individual from 
appearing before the Bureau.
    Paragraph (d) provides that a party whose motion for certification 
is denied by the hearing officer may petition the Director directly for 
interlocutory review. This provision is intended to guard against a 
hearing officer's unwillingness to certify a ruling that appears to 
meet the standards set forth in the section. The Bureau expects such 
direct petitions to the Director to be used sparingly.
    Paragraph (e) governs the Director's review of matters certified 
pursuant to paragraph (c) or for which review is sought pursuant to 
paragraph (d). It sets forth the policy of the Bureau that 
interlocutory review is disfavored and provides that the Director will 
grant such review only in extraordinary circumstances.
    Paragraph (f) provides that proceedings will not be stayed by the 
filing of a motion for certification for interlocutory review or a 
grant of such review unless the hearing officer or the Director shall 
so order. This is intended to promote the expeditious resolution of 
proceedings and to deter frivolous motions for certification or review.

Section 1081.212 Dispositive Motions

    This section lays out the procedures and standards for motions to 
dismiss and motions for summary disposition. It expressly provides for 
the filing of motions to dismiss, but makes clear that filing such a 
motion does not affect a party's obligation to file an answer or take 
any other action. This is intended to ensure that motions to dismiss do 
not delay the proceedings unnecessarily. The timelines for decisions on 
dispositive motions, discussed below, should help ensure that a party 
ultimately determined to be entitled to dismissal is not required to 
engage in the adjudicative process for a lengthy period of time.
    Paragraph (b) provides that a respondent may file a motion to 
dismiss

[[Page 45348]]

asserting that, even assuming the truth of the facts alleged in the 
notice of charges, it is entitled to dismissal as a matter of law. 
Neither the SEC Rules, the FTC Rules, nor the Uniform Rules 
specifically set forth procedures or a standard applicable to motions 
to dismiss, although the FTC Rules and Uniform Rules appear to 
contemplate such motions. See 16 CFR 3.22(a) (referencing motions to 
dismiss); 12 CFR 19.5(b)(7) (same). The Bureau has determined that such 
motions are appropriate and should be provided for in the Rules, but 
should not serve to delay the proceedings.
    Paragraphs (c) and (d) govern the filing of motions for summary 
disposition. They adopt standards similar to those set forth in the 
Uniform Rules, the SEC Rules, and the FTC Rules for such motions. Any 
party to a proceeding may file a motion for summary disposition of a 
proceeding or for partial summary disposition of a proceeding if: (1) 
There is no genuine issue as to any material fact; and (2) the moving 
party is entitled to a favorable decision as a matter of law. The 
motion, which may be filed after a respondent's answer has been filed 
and documents have been made available for inspection and copying 
pursuant to Sec.  1081.206, must be accompanied by a statement of the 
uncontested material facts, a brief, and any documentary evidence in 
support of the motion.
    Any party opposing such a motion must file a statement setting 
forth those material facts as to which he or she contends a genuine 
dispute exists, supported by the same type of evidence permitted with a 
motion for summary disposition, and a brief in support of the 
contention that summary disposition would be inappropriate. These 
paragraphs are modeled after the Uniform Rules, 12 CFR 19.29.
    Pursuant to paragraphs (e), (f), and (g), motions to dismiss and 
for summary disposition are subject to a 35-page limit (modeled on the 
SEC Rules, 17 CFR 201.250(c)), responses to such motions are due within 
20 days (modeled on the Uniform Rules, 12 CFR 19.29(b)(1)), and reply 
briefs are due within five days of the response and shall not exceed 10 
pages. Oral argument is permitted at the request of any party or by 
motion of the hearing officer.
    Paragraph (h) provides that the hearing officer must decide a 
dispositive motion within 30 days of the expiration of the time for 
filing all oppositions and replies. The Uniform Rules do not set a 
deadline for a decision on dispositive motions. The FTC Rules provide 
for the Commission to decide substantive motions within 45 days, 16 CFR 
3.22(a), and the SEC Rules state that motions for summary disposition 
are to be decided ``promptly'' by the hearing officer, 17 CFR 
201.250(b). The Bureau has adopted the 30-day timeframe for decisions 
on dispositive motions in keeping with its emphasis on expeditious 
decision-making in administrative proceedings. The Bureau believes that 
30 days affords sufficient time for the hearing officer to properly 
assess the merits of the motion and draft either a ruling denying the 
motion or a recommended decision granting it.
    If the hearing officer finds that a party is not entitled to 
dismissal or summary disposition, he or she shall make a ruling denying 
that motion. This ruling would not be subject to interlocutory appeal 
unless such an appeal was granted pursuant to the procedures and 
standards set forth in Sec.  1081.211. If the hearing officer 
determines that dismissal or summary adjudication is appropriate, he or 
she will issue a recommended decision to that effect. If a party, for 
good cause shown, cannot yet present facts essential to justify 
opposition to the motion, the hearing officer is to deny or defer the 
motion.

Section 1081.213 Partial Summary Disposition

    This section is modeled on the FTC Rules, 16 CFR 3.24(a)(5). It 
permits a hearing officer who denies summary adjudication of the whole 
case nevertheless to issue an order specifying the facts that appear 
without substantial controversy. Those facts will be deemed established 
in the proceeding. This section enables the hearing officer to narrow 
the dispute between the parties so that the hearing can proceed as 
efficiently as possible.

Section 1081.214 Prehearing Conferences

    This section sets forth the procedures for a prehearing conference, 
which the hearing officer may convene on his own motion or at the 
request of a party. It sets forth matters that may be discussed at a 
prehearing conference. As with a scheduling conference pursuant to 
Sec.  203, the conference is presumptively public unless the hearing 
officer determines otherwise under the standard set forth in Sec.  
1081.119.

Section 1081.215 Prehearing Submissions

    This section is modeled primarily after the Uniform Rules, 12 CFR 
19.32, which provide for mandatory prehearing submissions by the 
parties. Section 215 requires that the following documents be served 
upon the other parties no later than 10 days prior to the start of the 
hearing: A prehearing statement; a final list of witnesses to be called 
to testify that includes a description of the expected testimony of 
each witness; any prior sworn statements that a party intends to admit 
into evidence pursuant to Sec.  1081.303; a list of exhibits along with 
a copy of each exhibit; and any stipulations of fact or liability. The 
failure of a party to comply with this provision will preclude the 
party from presenting any witnesses or exhibits not listed in its 
prehearing submission at the hearing, except for good cause shown. To 
account for cases in which the hearing officer has dispensed with 
expert discovery, this section also requires that a statement of any 
expert's qualifications and other information concerning the expert be 
turned over if it has not been provided pursuant to Sec.  1081.210.
    The FTC Rules do not provide for a prehearing submission, and the 
SEC Rules, 17 CFR 201.222, do not make such a submission mandatory. The 
Bureau has followed the Uniform Rules' model as it believes that 
prehearing submissions will assist the parties in clarifying and 
narrowing the issues to be adjudicated at the hearing, which is 
especially important under the expedited hearing schedule provided for 
by section 1053(b) of the Act and these Rules.

Section 1081.216 Amicus Participation

    This section, based upon the SEC Rules, 17 CFR 201.210, allows for 
amicus briefs in proceedings under this part, but only under certain 
circumstances. An amicus brief may be allowed when a motion for leave 
to file the brief has been granted; the brief is accompanied by written 
consent of all parties; the brief is filed at the request of the 
Director or the hearing officer, as appropriate; or the brief is 
presented by the United States or an officer or agency thereof, or by a 
State (defined to include territories or possessions of the United 
States, the District of Columbia, the Commonwealth of Puerto Rico, the 
Commonwealth of the Northern Mariana Islands, Guam, American Samoa or 
any federally recognized Indian tribe), or a political subdivision 
thereof.
    A motion to file an amicus brief is subject to the procedural 
requirements set forth in Sec.  1081.205. An amicus will be granted 
oral argument only for extraordinary reasons.
    The Bureau considered incorporating other provisions of the SEC 
Rules regarding participation but decided against doing so. The Bureau 
believes that allowing intervention by other parties will serve to 
delay the

[[Page 45349]]

proceedings with little or no attendant benefit, particularly in light 
of the allowance for amicus participation. The Bureau has also decided 
against including a provision providing for the limited participation 
of federal or state criminal prosecutors for the purpose of seeking 
stays during the pendency of criminal investigations or prosecutions 
arising out of the same or similar facts as are at issue in an 
adjudication proceeding. The Bureau believes that such stays can be 
appropriately sought by Enforcement Counsel upon request of Federal or 
state agencies.

Subpart C--Hearings

Section 1081.300 Public Hearings

    This section provides that hearings before the Bureau will be 
presumptively public, a practice that is consistent with the provisions 
of the FTC Rules, 16 CFR 3.41(a), SEC Rules, 17 CFR 201.301, and the 
Uniform Rules, 12 CFR 19.33(a). Specifically, hearings will be public 
unless a confidentiality order is entered by the hearing officer 
according to the standard set forth in Sec.  1081.119, or unless the 
Director otherwise orders a non-public hearing on the ground that 
holding an open hearing would be contrary to the public interest.

Section 1081.301 Failure To Appear

    This section, which is modeled after the Uniform Rules, 12 CFR 
19.21, provides that the failure of a respondent to appear in person or 
by duly authorized counsel at the hearing may constitute a waiver of 
the respondent's right to a hearing and may be deemed an admission of 
the facts alleged and a consent to the relief sought in the notice of 
charges. Without further notice to the respondent, the hearing officer 
shall file a recommended decision addressing the relief sought in the 
notice of charges.

Section 1081.302 Conduct of Hearings

    This section provides general principles for the conduct of 
hearings and the order in which the parties are to present their cases. 
The first sentence emphasizing the goals of fairness, impartiality, 
expediency, and orderliness is drawn from the SEC Rules, 17 CFR 
201.300. The remainder of the section, which governs the order in which 
the parties are to present their cases, is modeled after the Uniform 
Rules, 12 CFR 19.35.

Section 1081.303 Evidence

    This section sets forth rules regarding the offering and 
admissibility of evidence at hearings, and adopts evidentiary standards 
similar to those set forth in the FTC Rules, SEC Rules, and the Uniform 
Rules.
    The section provides that Enforcement Counsel shall bear the burden 
of proving the ultimate issue(s) of the Bureau's claims at the hearing.
    Consistent with general administrative practice, this section 
provides that evidence that is relevant, material, reliable, and not 
unduly repetitive shall be admissible to the fullest extent authorized 
by the APA and other applicable law, and that evidence shall not be 
excluded solely on the basis of its being hearsay if it is otherwise 
admissible and bears satisfactory indicia of reliability.
    This section provides that official notice may be taken of any 
material fact that is not subject to reasonable dispute in that it is 
either generally known or capable of accurate and ready determination 
by resort to sources whose accuracy cannot reasonably be questioned. It 
provides further that duplicate copies of documents are admissible to 
the same extent as originals unless a genuine issue is raised about the 
veracity or legibility of a document. Parties may, at any stage of the 
proceeding, stipulate as to any relevant matters of fact or the 
authentication of any relevant documents. Such stipulations may be 
received in evidence at the hearing and are binding on the parties. 
This section also provides that documents generated by respondents that 
come from their own files are presumed authentic and kept in the 
regular course of business and that the burden of proof is on the 
respondent to introduce evidence to rebut such a presumption.
    Objections to the admissibility of evidence must be timely made and 
a failure to object to the admission of evidence shall constitute a 
waiver of the objection. Parties are entitled to present their cases or 
defenses by sworn oral testimony and documentary evidence. Witnesses at 
a hearing are required to testify under oath or affirmation.
    The provisions in this section about introducing prior sworn 
statements of witnesses into the record are modeled after the SEC 
Rules, 17 CFR 201.235. The section specifies the circumstances under 
which prior sworn statements by a non-party witness are admissible into 
the record. These statements can be admitted if a witness is dead, 
outside of the United States, unable to attend because of age, 
sickness, infirmity, imprisonment or other disability, or if the party 
offering the sworn statement is unable to procure the attendance of the 
witness by subpoena. Even if these conditions are not met, a prior 
sworn statement may be introduced into the record in the discretion of 
the hearing officer.

Section 1081.304 Record of the Hearing

    Modeled on the FTC Rules, 16 CFR 3.44, this section provides that 
hearings will be stenographically reported and transcribed and that the 
original transcript shall be part of the record. It outlines the 
procedure by which a party may request correction of the transcript. 
Finally, it states that upon completion of the hearing, the hearing 
officer will issue an order closing the record after giving the parties 
three days to determine whether the record is complete or requires 
supplementation.

Section 1081.305 Post-Hearing Filings

    This section is drawn largely from the Uniform Rules, 12 CFR 19.37, 
and provides that the parties may file proposed findings of fact, 
proposed conclusions of law, and a proposed order within 30 days 
following service of a notice on the parties that the transcript has 
been properly filed or within such longer period as the hearing officer 
may order. Proposed findings and conclusions must be supported by 
citation to any relevant authorities, and by page references to any 
relevant portions of the record. Responsive briefs may be filed to 
these proposed findings and conclusions within 15 days after the 
deadline for the proposed findings and conclusions, provided that the 
party responding has filed its own proposed findings and conclusions. 
The hearing officer shall not order the filing by any party of any 
post-hearing brief or responsive brief in advance of the other party's 
filing of its post-hearing brief.

Section 1081.306 Record in Proceedings Before Hearing Officer; 
Retention of Documents; Copies

    This section, drawn from the SEC Rules, 17 CFR 201.350, lists the 
documents that comprise the record of a proceeding before the hearing 
officer. It provides that those documents excluded from evidence should 
be excluded from the record but retained until either a decision of the 
Bureau has become final, or the conclusion of any judicial review of 
the Director's final order. This section also states that a copy of a 
document in the record may be substituted for an original.

Subpart D--Decision and Appeal

Section 1081.400 Recommended Decision of the Hearing Officer

    This section adopts the general framework governing decisions by 
the hearing officer from the SEC Rules, 17 CFR 201.360. It provides 
that the hearing officer will file a recommended decision in each case 
within a specified

[[Page 45350]]

time frame. Unlike the SEC Rule, which provides that the hearing 
officer will issue an ``initial decision,'' this section provides that 
the hearing officer's decision will be a recommended decision to the 
Director.
    This section also deviates from the SEC model in that it does not 
provide for multiple ``tracks'' or timelines, but just one. This 
section provides that the hearing officer will file a recommended 
decision in each case no later than 90 days after the deadline for 
filing post-hearing responsive briefs and in no event later than 300 
days after service of the notice of charges. The 300-day timeframe is 
taken from the SEC Rules, 17 CFR 201.360(a)(2), and the 90-day 
timeframe is modeled on the FTC Rules, 16 CFR 3.51(a). Requests by the 
hearing officer for extensions of this time frame must be made to the 
Director and will be granted only if the Director determines that 
additional time is necessary or appropriate in the public interest. The 
Bureau anticipates such requests and extensions to be rare. As noted 
above, this provision was adopted to ensure the timely resolution of 
adjudication proceedings in light of the experience of other agencies. 
The Bureau believes that the 90-day and 300-day timelines set forth in 
this section provide sufficient time for the hearing officer to conduct 
appropriate proceedings and issue an informed recommended decision.
    Paragraph (c) of this section is modeled on the SEC Rules, 17 CFR 
201.360(b), and sets forth the contents of the recommended decision, 
providing that the recommended decision shall include a statement of 
findings of fact and conclusions of law, as well as the reasons or 
basis therefore, and an appropriate order, sanction, relief or denial 
thereof. The recommended decision shall also state that a notice of 
appeal may be filed within 10 days after service of the recommended 
decision, and shall include a statement that the Director may issue a 
final decision and order adopting the recommended decision, unless a 
party timely files and perfects a notice of appeal. The recommended 
decision shall be filed with the Executive Secretary, who will promptly 
serve the recommended decision on the parties.
    Drawing from the FTC Rules, 16 CFR 3.51(d), paragraph (d) of this 
section provides that the recommended decision shall be made by the 
hearing officer who presided over the hearing, except when he or she 
has become unavailable to the Bureau. Paragraph (e) provides that the 
hearing officer may reopen proceedings for receipt of further evidence 
upon a showing of good cause until the close of the hearing record. 
With the exception of correcting clerical errors or addressing a remand 
from the Director, the hearing officer's jurisdiction terminates upon 
the filing of the recommended decision.

Section 1081.401 Transmission of Documents to Director; Record Index; 
Certification

    Modeled on the Uniform Rules, 12 CFR 19.38(b) and the SEC Rules, 17 
CFR 201.351(c), this section directs the hearing officer to furnish to 
the Director a certified index for the case at the same time that the 
hearing officer files the recommended decision. It also establishes the 
process by which the record is transmitted to the Director for review 
on appeal.

Section 1081.402 Notice of Appeal; Review by the Director

    This section contains the process for review of a recommended 
decision by the Director. Paragraph (a) is drawn from the FTC Rules, 16 
CFR 3.52(b), and states that any party may object to the recommended 
decision of the hearing officer by filing a notice of appeal to the 
Director within 10 days of the recommended decision and perfecting that 
notice of appeal by filing an opening brief within 30 days of the 
recommended decision. Any party may respond to the opening brief by 
filing an answering brief within 30 days of service of the opening 
brief, and reply briefs may be filed within seven days after that. 
Appeals to the Director are available as of right in all cases where 
the hearing officer has issued a recommended decision.
    This section also provides that within 40 days after the date of 
service of the recommended decision, the Director, on his or her own 
initiative, may order further briefing or argument with respect to any 
recommended decision or portion of any recommended decision or issue a 
final decision and order adopting the recommended decision. The 40-day 
time period is intended to provide the Director with the benefit of 
knowing whether any party has filed and perfected an appeal before 
determining whether further briefing and argument regarding a 
recommended decision is necessary. Any such order shall set forth the 
scope of further review and the issues that will be considered and will 
provide for the filing of briefs if the Director deems briefing 
appropriate.
    Finally, this section provides that, pursuant to 5 U.S.C. 704, a 
perfected appeal to the Director of a recommended decision is a 
prerequisite to the seeking of judicial review of a final decision and 
order, unless the Director issues a final decision and order that does 
not incorporate the recommended decision, in which case judicial review 
shall be available to the extent that the Director's final decision and 
order does not adopt the recommended decision.

Section 1081.403 Briefs Filed With the Director

    This section outlines the requirements for briefs filed with the 
Director. Paragraph (a) is modeled on the SEC Rules, 17 CFR 201.350(b), 
and governs the content of briefs. Paragraph (b) is also drawn from the 
SEC Rules, 17 CFR 201.350(c), and sets forth length limitations for 
briefs. Unlike the SEC and the FTC, the Bureau has placed page limits--
rather than word limits--on briefs. This change is intended to simplify 
the Rules and place less of a burden upon the parties but should have 
no substantive impact.

Section 1081.404 Oral Argument Before the Director

    This section adopts the SEC's policy for oral argument on appeal 
wherein the Director will consider appeals, motions, and other matters 
on the basis of the papers filed without oral argument unless the 
Director determines that the presentation of facts and legal arguments 
in the briefs and record and the decisional process would be 
significantly aided by oral argument. A party who seeks oral argument 
is directed to indicate such a request on the first page of its opening 
or answering brief. Oral argument shall be public unless otherwise 
ordered by the Director.

Section 1081.405 Decision of the Director

    This section contains rules regarding the final decision and order 
of the Director. Paragraph (a) provides for the scope of the Director's 
review and defines the record before the Director as consisting of all 
items that were part of the record below in accordance with Sec.  
1081.306; any notices of appeal or order directing review; all briefs, 
motions, submissions, and other papers filed on appeal or review; and 
the transcript of any oral argument held.
    The Director may have the advice and assistance of decisional 
employees in considering and disposing of a case. In rendering a final 
decision, the Director will affirm, adopt, modify, set aside, or remand 
for further proceedings the recommended decision and will include in 
the decision a statement of the reasons or basis for the Director's

[[Page 45351]]

actions and the findings of fact relied upon.
    In accordance with section 1053 of the Act, this section provides 
that, at the expiration of the time permitted for the filing of reply 
briefs with the Director, the Executive Secretary will notify the 
parties that the case has been submitted for final Bureau decision by 
the Director. The Director will then issue a final decision and order 
within 90 days of such notification to the parties. This policy ensures 
a timely final resolution to all administrative adjudications.
    Copies of final decisions and orders by the Director will be served 
on each party, upon other persons required by statute, and, if directed 
by the Director or required by statute, upon any appropriate state or 
Federal supervisory authority. The final decision and order will also 
be published on the Bureau's Web site or as otherwise deemed 
appropriate by the Bureau.

Section 1081.406 Reconsideration

    This section permits parties to file petitions for reconsideration 
of a final decision and order within 14 days after service of the 
decision and order. The Bureau has adopted the practice set forth in 
the SEC Rules, 17 CFR 201.470, pursuant to which no response to a 
petition for reconsideration will be filed unless requested by the 
Director, and the Bureau has added a provision providing that the 
Director will request such a response before granting any motion for 
reconsideration. This is intended to lessen the burden on prevailing 
parties while preserving their opportunity to be heard if the Director 
is considering granting a motion for reconsideration.

Section 1081.407 Effective Date; Stays Pending Judicial Review

    This section governs the effective date of the Director's final 
orders. We have incorporated the requirement in section 1053(b) of the 
Act that orders to cease and desist shall become effective 30 days 
after the date of service of the Director's final decision and order.
    This section also contains the rules and procedures regarding stays 
of Bureau orders. Any party subject to a final order, other than a 
consent order, may apply to the Director for a stay of all or part of 
that order pending judicial review. Such a motion must be made within 
30 days of service of the Director's final decision and order. A motion 
for a stay shall address the likelihood of the movant's success on 
appeal, whether the movant will suffer irreparable harm if a stay is 
not granted, the degree of injury to other parties if a stay is 
granted, and why the stay is in the public interest.
    Finally, this section adopts the provision from the Uniform Rules, 
12 CFR 19.41, providing that the commencement of proceedings for 
judicial review of a final decision and order of the Director does not, 
unless specifically ordered by the Director or a reviewing court, 
operate as a stay of any order issued by the Director.

C. Procedural Requirements

1. Regulatory Requirements
    The Rules relate solely to agency procedure and practice and, thus, 
are not subject to the notice and comment requirements of the APA. See 
5 U.S.C. 553(b). Although the Rules are exempt from these requirements, 
the Bureau invites comment on them. Because no notice of proposed 
rulemaking is required, the requirements of the Regulatory Flexibility 
Act, 5 U.S.C. 601(2) do not apply.
2. Section 1022(b)(2) Provisions
    The CFPB has conducted an analysis of benefits, costs, and impacts 
\3\ and consulted with the prudential regulators, the Department of 
Housing and Urban Development, the Securities and Exchange Commission, 
the Department of Justice, and the Federal Trade Commission, including 
with respect to whether the Rules are consistent with any relevant 
prudential, market, and systemic objectives administered by such 
agencies.\4\
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    \3\ Section 1022(b)(2)(A) addresses the consideration of the 
potential benefits and costs of regulation to consumers and 
industry, including the potential reduction of access by consumers 
to consumer financial products or services; the impact of proposed 
rules on depository institutions and credit unions with $10 billion 
or less in total assets as described in Section 1026 of the Dodd-
Frank Act; and the impact on consumers in rural areas.
    \4\ The President's July 11, 2011, Executive Order 13579 
entitled ``Regulation and Independent Regulatory Agencies,'' asks 
the independent agencies to follow the cost-saving, burden-reducing 
principles in Executive Order 13563; harmonization and 
simplification of rules; flexible approaches that reduce costs; and 
scientific integrity. In the spirit of Executive Order 13563, the 
CFPB has consulted with the Office of Management and Budget 
regarding this interim final rule.
---------------------------------------------------------------------------

    The Bureau concludes that the Rules will benefit consumers and 
covered persons alike. The Rules do not impose any obligations on 
consumers or covered persons, nor do they have any direct relevance to 
consumers' access to consumer financial products and services. Rather, 
they provide a clear, efficient mechanism for the conduct of 
adjudication proceedings, which benefits consumers because the Rules 
offer a systematic process for protecting them from unlawful behavior. 
The Rules are intended to provide an expeditious decision-making 
process, which will benefit both consumers and covered persons. The 
Rules adopt an affirmative disclosure approach to fact discovery, 
pursuant to which the Bureau will make available to respondents the 
information obtained by the Division of Enforcement from persons not 
employed by the Bureau prior to the institution of proceedings, in 
connection with the investigation leading to the institution of 
proceedings. This affirmative disclosure obligation substitutes for the 
traditional civil discovery process, which can be both time-consuming 
and expensive. The Bureau believes that the Rules, on the whole, will 
afford covered persons with a relatively inexpensive way to have their 
cases heard. The Rules are based upon, and drawn from, existing rules 
of the prudential regulators, the Federal Trade Commission, and the 
Securities and Exchange Commission. Their grounding in rules likely 
familiar to practitioners should further reduce the expense of 
administrative adjudication for covered persons.
    Further, the Rules have no unique impact on insured depository 
institutions or insured credit unions with less than $10 billion in 
assets described in section 1026(a) of the Act, and do not have a 
unique impact on rural consumers.

List of Subjects in 12 CFR Part 1801

    Administrative practice and procedure, Banks, banking, Consumer 
protection, Credit, Credit unions, Federal Reserve System, Law 
enforcement, National banks, Savings associations, Trade practices.

    For the reasons set forth above, the Bureau of Consumer Financial 
Protection adds part 1081 to 12 CFR Chapter X to read as set forth 
below.



TITLE 12--BANKS AND BANKING

CHAPTER X--BUREAU OF CONSUMER FINANCIAL PROTECTION

PART 1081--RULES OF PRACTICE FOR ADJUDICATION PROCEEDINGS

Subpart A--General Rules
Sec.
1081.100 Scope of the rules of practice
1081.101 Expedition and fairness of proceedings
1081.102 Rules of construction
1081.103 Definitions
1081.104 Authority of the hearing officer
1081.105 Assignment, substitution, performance, disqualification of 
hearing officer
1081.106 Deadlines

[[Page 45352]]

1081.107 Appearance and practice in adjudication proceedings
1081.108 Good faith certification
1081.109 Conflict of interest
1081.110 Ex parte communication
1081.111 Filing of papers
1081.112 Formal requirements as to papers filed
1081.113 Service of papers
1081.114 Construction of time limits
1081.115 Change of time limits
1081.116 Witness fees and expenses
1081.117 Bureau's right to conduct examination, collect information
1081.118 Collateral attacks on adjudication proceedings
1081.119 Confidential information; protective orders
1081.120 Settlement
1081.121 Cooperation with other agencies
Subpart B--Initiation of Proceedings and Prehearing Rules
1081.200 Commencement of proceeding and contents of notice of 
charges
1081.201 Answer
1081.202 Amended pleadings
1081.203 Scheduling conference
1081.204 Consolidation and severance of actions
1081.205 Non-dispositive motions
1081.206 Availability of documents for inspection and copying
1081.207 Production of witness statements
1081.208 Subpoenas
1081.209 Deposition of witness unavailable for hearing
1081.210 Expert discovery
1081.211 Interlocutory review
1081.212 Dispositive motions
1081.213 Partial summary disposition
1081.214 Prehearing conferences
1081.215 Prehearing submissions
1081.216 Amicus participation
Subpart C--Hearings
1081.300 Public hearings
1081.301 Failure to appear
1081.302 Conduct of hearings
1081.303 Evidence
1081.304 Record of the hearing
1081.305 Post-hearing filings
1081.306 Record in proceedings before hearing officer; retention of 
documents; copies
Subpart D--Decision and Appeals
1081.400 Recommended decision of the hearing officer
1081.401 Transmission of documents to Director; record index; 
certification
1081.402 Notice of appeal; review by the Director
1081.403 Briefs filed with the Director
1081.404 Oral argument before the Director
1081.405 Decision of the Director
1081.406 Reconsideration
1081.407 Effective date; stays pending judicial review

    Authority: Pub. L. 111-203, Title X.

Subpart A--General Rules


Sec.  1081.100  Scope of the rules of practice.

    This part prescribes rules of practice and procedure applicable to 
adjudication proceedings authorized by section 1053 of the Consumer 
Financial Protection Act of 2010 (``Act'') to ensure or enforce 
compliance with the provisions of the Act, rules prescribed by the 
Bureau under the Act, and any other Federal law or regulation that the 
Bureau is authorized to enforce. These rules of practice do not govern 
the conduct of Bureau investigations, investigational hearings or other 
proceedings that do not arise from proceedings after a notice of 
charges.


Sec.  1081.101  Expedition and fairness of proceedings.

    To the extent practicable, consistent with requirements of law, the 
Bureau's policy is to conduct such adjudication proceedings fairly and 
expeditiously. In the conduct of such proceedings, the hearing officer 
and counsel for all parties shall make every effort at each stage of a 
proceeding to avoid delay. With the consent of the parties, the 
Director, at any time, or the hearing officer at any time prior to the 
filing of his or her recommended decision, may shorten any time limit 
prescribed by this part.


Sec.  1081.102  Rules of construction.

    For the 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 neutral gender encompasses 
all three, if such use would be appropriate;
    (c) Unless context requires otherwise, a party's counsel of record, 
if any, may, on behalf of that party, take any action required to be 
taken by the party.
    (d) To the extent this part uses terms defined by the Act, such 
terms shall have the same meaning as set forth in the Act, unless 
defined differently by Sec.  1081.103.


Sec.  1081.103  Definitions.

    For the purposes of this part, unless explicitly stated to the 
contrary:
    Act means the Consumer Financial Protection Act of 2010, as 
amended, Public Law No. 111-203 (July 21, 2010), Title X, 12 U.S.C. 
5481 et seq.
    Adjudication proceeding means a proceeding conducted pursuant to 
section 1053 of the Act and intended to lead to the formulation of a 
final order other than a temporary cease and desist order issued 
pursuant to section 1053(c) of the Act.
    Bureau means the Bureau of Consumer Financial Protection.
    Chief hearing officer means the hearing officer charged with 
assigning hearing officers to specific proceedings, in the event there 
is more than one hearing officer available to the Bureau.
    Counsel means any attorney representing a party or any other person 
representing a party pursuant to Sec.  1081.107.
    Decisional employee means any employee of the Bureau who has not 
engaged in an investigative or prosecutorial role in a proceeding and 
who may assist the Director or the hearing officer, respectively, in 
preparing orders, recommended decisions, decisions, and other documents 
under this part.
    Director means the Director of the Bureau or a person authorized to 
perform the functions of the Director in accordance with the law.
    Division of Enforcement means the division of the Bureau 
responsible for enforcement of Federal consumer financial law.
    Enforcement Counsel means any individual who files a notice of 
appearance as counsel on behalf of the Bureau in an adjudication 
proceeding.
    Executive Secretary means the Executive Secretary of the Bureau.
    Final order means an order issued by the Bureau with or without the 
consent of the respondent, which has become final, without regard to 
the pendency of any petition for reconsideration or review.
    General Counsel means the General Counsel of the Bureau or any 
Bureau employee to whom the General Counsel has delegated authority to 
act under this part.
    Hearing officer means an administrative law judge or any other 
person duly authorized to preside at a hearing.
    Notice of charges means the pleading that commences an adjudication 
proceeding, as described in Sec.  1081.200 of this part.
    Party means the Bureau and any person named as a party in any 
notice of charges issued pursuant to this part.
    Person means an individual, partnership, company, corporation, 
association (incorporated or unincorporated), trust, estate, 
cooperative organization, or other entity.
    Person employed by the Bureau means Bureau employees, contractors, 
agents, and others acting for or on behalf of the Bureau, or at its 
direction, including consulting experts.
    Respondent means any party other than the Bureau.
    State means any State, territory, or possession of the United 
States, the District of Columbia, the Commonwealth of Puerto Rico, the 
Commonwealth of the Northern Mariana

[[Page 45353]]

Islands, Guam, American Samoa, or the United States Virgin Islands or 
any federally recognized Indian tribe, as defined by the Secretary of 
the Interior under section 104(a) of the Federally Recognized Indian 
Tribe List Act of 1994 (25 U.S.C. 479a-1(a)).


Sec.  1081.104  Authority of the hearing officer.

    (a) General Rule. The hearing officer shall have all powers 
necessary to conduct a proceeding in a fair and impartial manner and to 
avoid unnecessary delay. No provision of this part shall be construed 
to limit the powers of the hearing officers provided by the 
Administrative Procedure Act, 5 U.S.C. 556, 557.
    (b) Powers. The powers of the hearing officer include but are not 
limited to the power:
    (1) To administer oaths and affirmations;
    (2) To issue subpoenas, subpoenas duces tecum, and protective 
orders, as authorized by this part, and to quash or modify any such 
subpoenas or orders;
    (3) To take depositions or cause depositions to be taken;
    (4) To receive relevant evidence and to rule upon the admission of 
evidence and offers of proof;
    (5) To regulate the course of a proceeding and the conduct of 
parties and their counsel;
    (6) To reject written submissions that fail to comply with the 
requirements of this part, and to deny confidential status to documents 
and testimony without prejudice until a party complies with all 
relevant rules;
    (7) To hold conferences for settlement, simplification of the 
issues, or any other proper purpose and require the attendance at any 
such conference of at least one representative of each party who has 
authority to negotiate concerning the resolution of issues in 
controversy;
    (8) To inform the parties as to the availability of one or more 
alternative means of dispute resolution, and to encourage the use of 
such methods;
    (9) To certify questions to the Director for his or her 
determination in accordance with the rules of this part;
    (10) To consider and rule upon, as justice may require, all 
procedural and other motions appropriate in adjudication proceedings;
    (11) To issue and file recommended decisions;
    (12) To recuse himself or herself by motion made by a party or on 
his or her own motion;
    (13) To issue such sanctions against parties or their counsel as 
may be necessary to deter repetition of sanctionable conduct or 
comparable conduct by others similarly situated, as provided for in 
this part or as otherwise necessary to the appropriate conduct of 
hearings and related proceedings, provided that no sanction shall be 
imposed before providing the sanctioned person an opportunity to show 
cause why no such sanction should issue; and
    (14) To do all other things necessary and appropriate to discharge 
the duties of a presiding officer.


Sec.  1081.105  Assignment, substitution, performance, disqualification 
of hearing officer.

    (a) How assigned. In the event that more than one hearing officer 
is available to the Bureau for the conduct of proceedings under this 
part, the presiding hearing officer shall be designated by the chief 
hearing officer, who shall notify the parties of the hearing officer 
designated.
    (b) Interference. Hearing officers shall not be responsible or 
subject to the supervision or direction of any officer, employee, or 
agent engaged in the performance of investigative or prosecuting 
functions for the Bureau, and all direction by the Bureau to the 
hearing officer concerning any adjudication proceedings shall appear in 
and be made part of the record.
    (c) Disqualification of hearing officers.
    (1) When a hearing officer deems himself or herself disqualified to 
preside in a particular proceeding, he or she shall issue a notice 
stating that he or she is withdrawing from the matter and setting forth 
the reasons therefore.
    (2) Any party who has a reasonable, good faith basis to believe 
that a hearing officer has a personal bias, or is otherwise 
disqualified from hearing a case, may make a motion to the hearing 
officer that the hearing officer withdraw. The motion shall be 
accompanied by an affidavit setting forth the facts alleged to 
constitute grounds for disqualification. Such motion shall be filed at 
the earliest practicable time after the party learns, or could 
reasonably have learned, of the alleged grounds for disqualification. 
If the hearing officer does not disqualify himself or herself within 10 
days, he or she shall certify the motion to the Director pursuant to 
Sec.  1081.211, together with any statement he or she may wish to have 
considered by the Director. The Director shall promptly determine the 
validity of the grounds alleged, either directly or on the report of 
another hearing officer appointed to conduct a hearing for that 
purpose, and shall either direct the reassignment of the matter or 
confirm the hearing officer's continued role in the matter.
    (d) Unavailability of hearing officer. In the event that the 
hearing officer withdraws or is otherwise unable to perform the duties 
of the hearing officer, the chief hearing officer or the Director shall 
designate another hearing officer to serve.


Sec.  1081.106  Deadlines.

    The deadlines for action by the hearing officer established by 
Sec. Sec.  1081.203, 1081.205, 1081.211, 1081.212, and 1081.400, or 
elsewhere in this part, confer no substantive rights on respondents.


Sec.  1081.107  Appearance and practice in adjudication proceedings.

    (a) Appearance before the Bureau or a hearing officer.
    (1) By attorneys. Any member in good standing of the bar of the 
highest court of any state may represent others before the Bureau if 
such attorney is not currently suspended or debarred from practice 
before the Bureau.
    (2) By non-attorneys. So long as such individual is not currently 
suspended or debarred from practice before the Bureau:
    (i) An individual may appear on his or her own behalf;
    (ii) A member of a partnership may represent the partnership;
    (iii) A duly authorized officer of a corporation, trust or 
association may represent the corporation, trust or association; and
    (iv) A duly authorized officer or employee of any government unit, 
agency, or authority may represent that unit, agency, or authority.
    (3) Notice of appearance. Any individual acting as counsel on 
behalf of a party, including the Bureau, shall file a notice of 
appearance at or before the time that the individual submits papers or 
otherwise appears on behalf of a party in the adjudication proceeding. 
The notice of appearance must 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, and, if applicable, include the attorney's jurisdiction of 
admission or qualification, attorney identification number, and a 
statement by the appearing attorney attesting to his or her good 
standing within the legal profession. By filing a notice of appearance 
on behalf of a party in an adjudication proceeding, the counsel agrees 
and represents that he or she 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 hearing officer, 
continue

[[Page 45354]]

to accept service until a new counsel has filed a notice of appearance 
or until the represented party indicates that he or she will proceed on 
a pro se basis. The notice of appearance shall provide the 
representative's email address, telephone number and business address 
and, if different from the representative's addresses, electronic or 
U.S. mail addresses at which the represented party may be served.
    (b) Sanctions. Dilatory, obstructionist, egregious, contemptuous or 
contumacious conduct at any phase of any adjudication proceeding may be 
grounds for exclusion or suspension of counsel from the proceeding. An 
order imposing a sanction must describe the sanctioned conduct and 
explain the basis for the sanction.
    (c) Standards of conduct; disbarment.
    (1) All attorneys practicing before the Bureau shall conform to the 
standards of ethical conduct required by the bars of which the 
attorneys are members.
    (2) If for good cause shown, the Director believes that any 
attorney is not conforming to such standards, or that an attorney or 
counsel to a party has been otherwise engaged in conduct warranting 
disciplinary action, the Director may issue an order requiring such 
person to show cause why he should not be suspended or disbarred from 
practice before the Bureau. The alleged offender shall be granted due 
opportunity to be heard in his or her own defense and may be 
represented by counsel. Thereafter, if warranted by the facts, the 
Director may issue against the attorney or counsel an order of 
reprimand, suspension, or disbarment.


Sec.  1081.108  Good faith certification.

    (a) General requirement. Every filing or submission of record 
following the issuance of a notice of charges shall be signed by at 
least one counsel of record in his or her individual name and shall 
state counsel's address, email address, and telephone number. A party 
who acts as his or her own counsel shall sign his or her individual 
name and state his or her address, e-mail address, and telephone number 
on every filing or submission of record. Papers filed by electronic 
transmission may be signed with an ``/s/'' notation, which shall be 
deemed the signature of the party or representative whose name appears 
below the signature line.
    (b) Effect of signature.
    (1) The signature of counsel or a party shall constitute a 
certification that: the counsel or party has read the filing or 
submission of record; to the best of his or her 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 argument for the extension, modification, or reversal of 
existing law; and 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 hearing 
officer shall strike the filing or submission of record, unless it is 
signed promptly after the omission is called to the attention of the 
filer.
    (c) Effect of making oral motion or argument. The act of making any 
oral motion or oral argument by any counsel or party constitutes a 
certification that to the best of his or her knowledge, information, 
and belief formed after reasonable inquiry, his or her statements are 
well-grounded in fact and are warranted by existing law or a good faith 
argument for the extension, modification, or reversal of existing law, 
and are not made for any improper purpose, such as to harass or to 
cause unnecessary delay or needless increase in the cost of litigation.
    (d) Sanctions. Counsel or a party that fails to abide by the 
requirements of this section may be subject to sanctions pursuant to 
Sec.  1081.104(b)(13) of this part.


Sec.  1081.109  Conflict of interest.

    (a) Conflict of interest in representation. No person shall appear 
as counsel for another person in an adjudication proceeding if it 
reasonably appears that such representation may be materially limited 
by that counsel's responsibilities to a third person or by the 
counsel's own interests. The hearing 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 
represents two or more parties to an adjudication proceeding or also 
represents a non-party on a matter relevant to an issue in the 
proceeding, counsel must certify in writing at the time of filing the 
notice of appearance required by Sec.  1081.107(a)(3):
    (1) That the counsel has personally and fully discussed the 
possibility of conflicts of interest with each such party and non-
party; and
    (2) That each such party and/or non-party waives any right it might 
otherwise have had to assert any known conflicts of interest or to 
assert any conflicts of interest during the course of the proceeding.


Sec.  1081.110  Ex parte communication.

    (a) Definitions.
    (1) For purposes of this section, ex parte communication means any 
material oral or written communication relevant to the merits of an 
adjudication proceeding that was neither on the record nor on 
reasonable prior notice to all parties that takes place between:
    (i) An interested person not employed by the Bureau (including such 
person's counsel); and
    (ii) The hearing officer handling the proceeding, the Director, or 
a decisional employee.
    (2) Exception. A request for status of the proceeding does not 
constitute an ex parte communication.
    (3) Pendency of an adjudication proceeding means the time from when 
the Bureau issues a notice of charges, unless the person responsible 
for the communication has knowledge that a notice of charges will be or 
is likely to be issued, in which case the pendency of an adjudication 
shall commence at the time of his or her acquisition of such knowledge, 
or from when an order by a court of competent jurisdiction remanding a 
Bureau decision and order for further proceedings becomes effective, 
until the time the Director enters his or her final decision and order 
in the proceeding and the time permitted to seek reconsideration of 
that decision and order has elapsed. For purposes of this section, an 
order of remand by a court of competent jurisdiction shall be deemed to 
become effective when the Bureau determines not to file an appeal or a 
petition for a writ of certiorari, or when the time for filing such an 
appeal or petition has expired without an appeal or petition having 
been filed, or when such a petition has been denied. If a petition for 
reconsideration of a Bureau decision is filed pursuant to Sec.  
1081.406, the matter shall be considered to be a pending adjudication 
proceeding until the time the Bureau enters an order disposing of the 
petition.
    (b) Prohibited ex parte communications. During the pendency of an 
adjudication proceeding, except to the extent required for the 
disposition of ex parte matters as authorized by law or as otherwise 
authorized by this part:
    (1) No interested person not employed by the Bureau shall make or 
knowingly cause to be made to the Director, or to the hearing officer, 
or to any decisional employee, an ex parte communication; and

[[Page 45355]]

    (2) The Director, the hearing officer, or any decisional employee 
shall not make or knowingly cause to be made to any interested person 
not employed by the Bureau any ex parte communication.
    (c) Procedure upon occurrence of ex parte communication. If an ex 
parte communication prohibited by paragraph (b) of this section is 
received by the hearing officer, the Director, or any decisional 
employee, 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 other parties to the proceeding shall have an 
opportunity, within 10 days of receipt of service of the ex parte 
communication, to file responses thereto and to recommend any 
sanctions, in accordance with paragraph (d) of this section, that they 
believe to be appropriate under the circumstances.
    (d) Sanctions.
    (1) Adverse action on claim. Upon receipt of an ex parte 
communication knowingly made or knowingly caused to be made by a party 
and prohibited by paragraph (b) of this section, the Director or 
hearing officer, as appropriate, may, to the extent consistent with the 
interests of justice and the policy of the underlying statutes, require 
the party to show cause why his claim or interest in the proceeding 
should not be dismissed, denied, disregarded, or otherwise adversely 
affected on account of such violation.
    (2) Discipline of persons practicing before the Bureau. The 
Director may, to the extent not prohibited by law, censure, suspend, or 
revoke the privilege to practice before the Bureau of any person who 
makes, or solicits the making of, an unauthorized ex parte 
communication.
    (e) Separation of functions. Except to the extent required for the 
disposition of ex parte matters as authorized by law, the hearing 
officer may not consult a person or party on any matter relevant to the 
merits of the adjudication, unless on notice and opportunity for all 
parties to participate. An employee or agent engaged in the performance 
of investigative or prosecuting functions for the Bureau in a case, 
other than the Director, may not, in that or a factually related case, 
participate or advise in the decision, recommended decision, or agency 
review of the recommended decision, except as witness or counsel in 
public proceedings.


Sec.  1081.111  Filing of papers.

    (a) Filing. The following papers must be filed by parties in an 
adjudication proceeding: the notice of charges, notices of appearance, 
answer, motion, brief, request for issuance or enforcement of a 
subpoena, response, opposition, reply, notice of appeal, or petition 
for reconsideration. The hearing officer shall file all written orders, 
rulings, notices, or requests. Any papers required to be filed shall be 
filed with the Executive Secretary, except as otherwise provided 
herein.
    (b) Manner of filing. Unless otherwise specified by the Director or 
the hearing officer, filing may be accomplished by:
    (1) Electronic transmission upon any conditions specified by the 
Director or the hearing officer, or
    (2) Any of the following methods if respondent demonstrates 
electronic filing is not practicable:
    (i) Personal delivery to the Bureau's headquarters;
    (ii) Delivery to a reliable commercial courier service or overnight 
delivery service; or
    (iii) Mailing the papers by first class, registered, certified, or 
Express mail.


Sec.  1081.112  Formal requirements as to papers filed.

    (a) Form. All papers filed by parties must:
    (1) Set forth the name, address, telephone number, and e-mail 
address of the counsel or party making the filing;
    (2) Be double-spaced (except for single-spaced footnotes and 
single-spaced indented quotations) and printed or typewritten on 8\1/
2\; x 11 inch paper in 12-point or larger font;
    (3) Include at the head of the paper, or on a title page, a caption 
setting forth the title of the case, the docket number of the 
proceeding, and a brief descriptive title indicating the purpose of the 
paper;
    (4) Be paginated with margins at least 1 inch wide; and
    (5) If filed by other than electronic means, be stapled, clipped or 
otherwise fastened in a manner that lies flat when opened.
    (b) Signature. All papers must be dated and signed as provided in 
Sec.  1081.108.
    (c) Number of copies. Unless otherwise specified by the Director or 
the hearing officer, one copy of all documents and papers shall be 
filed if filing is by electronic transmission. If filing is 
accomplished by any other means, an original and one copy of all 
documents and papers shall be filed, except that only one copy of 
transcripts of testimony and exhibits must be filed.
    (d) Authority to reject document for filing. The Executive 
Secretary or the hearing officer may reject a document for filing that 
fails to comply with these rules.
    (e) Sensitive personal information. Sensitive personal information, 
including but not limited to an individual's Social Security number, 
taxpayer identification number, financial account number, credit card 
or debit card number, driver's license number, state-issued 
identification number, passport number, date of birth (other than 
year), and any sensitive health information identifiable by individual, 
such as an individual's medical records, shall not be included in, and 
must be redacted or omitted from, filings where the filing party 
determines that such information is not relevant or otherwise necessary 
for the conduct of the proceeding.
    (f) Confidential treatment of information in certain filings. A 
party seeking confidential treatment of information contained in a 
filing must contemporaneously file either a motion requesting such 
treatment in accordance with Sec.  1081.119 of this part or a copy of 
the order from the Director, hearing officer, or federal court 
authorizing such confidential treatment. The filing must be accompanied 
by:
    (1) A complete, sealed copy of the documents containing the 
materials as to which confidential treatment is sought, with the 
allegedly confidential material clearly marked as such, and with the 
first page of the document labeled ``Under Seal.'' If the movant seeks 
or has obtained a protective order against disclosure to other parties 
as well as the public, copies of the documents shall not be served on 
other parties; and
    (2) An expurgated copy of the materials as to which confidential 
treatment is sought, with the allegedly confidential materials 
redacted. The redacted version shall indicate any omissions with 
brackets or ellipses, and its pagination and depiction of text on each 
page shall be identical to that of the sealed version.
    (g) Certificate of service. Any papers filed in an adjudicative 
proceeding shall contain proof of service on all other parties or their 
counsel in the form of a statement of the date and manner of service 
and of the names of the persons served, certified by the person who 
made service. The certificate of service must be affixed to the papers 
filed and signed in accordance with Sec.  1081.108 of this part.

[[Page 45356]]

Sec.  1081.113  Service of papers.

    (a) When required. In every adjudication proceeding, each paper 
required to be filed by Sec.  1081.111 of this part shall be served 
upon each party in the proceeding in accordance with the provisions of 
this section; provided, however, that absent an order to the contrary, 
no service shall be required for motions which are to be heard ex 
parte.
    (b) Upon a person represented by counsel. Whenever service is 
required to be made upon a person represented by counsel who has filed 
a notice of appearance pursuant to Sec.  1081.107(a)(3) of this part, 
service shall be made pursuant to paragraph (c) of this section upon 
counsel, unless service upon the person represented is ordered by the 
Director or the hearing officer, as appropriate.
    (c) Method of service. Except as provided in paragraph (d) of this 
section, service shall be made by delivering a copy of the filing by 
one of the following methods:
    (1) Transmitting the papers by electronic transmission where the 
persons so serving each other have consented to service by specified 
electronic transmission and provided the Bureau and the parties with 
notice of the means for service by electronic transmission (e.g., email 
address or facsimile number);
    (2) Personal service. Handing a copy to the person required to be 
served; or leaving a copy at the person's office with a clerk or other 
person in charge thereof, or, if there is no one in charge, leaving it 
in a conspicuous place therein; or, if the office is closed or the 
person to be served has no office, leaving it at the person's dwelling 
or usual place of abode with some person of suitable age and discretion 
then residing therein;
    (3) Mailing the papers through the U.S. Postal Service by first 
class, registered, or certified mail or Express Mail delivery addressed 
to the person; or
    (4) Sending the papers through a commercial courier service or 
express delivery service.
    (d) Service of certain papers by the Bureau. Service of the notice 
of charges, recommended decisions and final orders of the Bureau shall 
be effected as follows:
    (1) Service of a notice of charges.
    (i) To individuals. Notice of a proceeding shall be made to an 
individual by delivering a copy of the notice of charges to the 
individual or to an agent authorized by appointment or by law to 
receive such notice. Delivery, for purposes of this paragraph, means 
handing a copy of the notice to the individual; or leaving a copy at 
the individual's office with a clerk or other person in charge thereof; 
or leaving a copy at the individual's dwelling house or usual place of 
abode with some person of suitable age and discretion then residing 
therein; or sending a copy of the notice addressed to the individual by 
U.S. Postal Service certified, registered or Express Mail, or by third-
party commercial carrier, for overnight delivery and obtaining a 
confirmation of receipt.
    (ii) To corporations or entities. Notice of a proceeding shall be 
made to a person other than a natural person by delivering a copy of 
the notice of charges to an officer, managing or general agent, or any 
other agent authorized by appointment or law to receive such notice, by 
any method specified in paragraph (d)(1)(i) of this section.
    (iii) Upon persons registered with the Bureau. In addition to any 
other method of service specified in paragraph (d)(1) of this section, 
notice may be made to a person currently registered with the Bureau by 
sending a copy of the notice of charges addressed to the most recent 
business address shown on the person's registration form by U.S. Postal 
Service certified, registered or Express Mail and obtaining a 
confirmation of attempted delivery.
    (iv) Upon persons in a foreign country. Notice of a proceeding to a 
person in a foreign country may be made by any method specified in 
paragraph (d)(1) of this section, or by any other method reasonably 
calculated to give notice, provided that the method of service used is 
not prohibited by the law of the foreign country.
    (v) Record of service. The Bureau shall maintain a record of 
service of the notice of charges on parties, identifying the party 
given notice, the method of service, the date of service, the address 
to which service was made, and the person who made service. If service 
is made in person, the certificate of service shall state, if 
available, the name of the individual to whom the notice of charges was 
given. If service is made by U.S. Postal Service certified or Express 
Mail, the Bureau shall maintain the confirmation of receipt or of 
attempted delivery. If service is made to an agent authorized by 
appointment to receive service, the certificate of service shall be 
accompanied by evidence of the appointment.
    (vi) Waiver of service. In lieu of service as set forth in 
paragraph (d)(1) of this section, the party may be provided a copy of 
the notice of charges by first class mail or other reliable means if a 
waiver of service is obtained from the party and placed in the record.
    (2) Service of recommended decisions and final orders. Recommended 
decisions issued by the hearing officer and final orders issued by the 
Bureau shall be served promptly on each party pursuant to any method of 
service authorized under paragraph (d)(1) of this section. Such 
decisions and orders may also be served by electronic transmission if 
the party to be served has agreed to accept such service in writing, 
signed by the party or its counsel, and has provided the Bureau with 
information concerning the manner of electronic transmission.


Sec.  1081.114  Construction of time limits.

    (a) General rule. In computing any period of time prescribed by 
this part, by order of the Director or a hearing officer, or by any 
applicable statute, the date of the act or event that commences the 
designated period of time is not included. The last day so computed is 
included unless it is a Saturday, Sunday, or Federal holiday as set 
forth in 5 U.S.C. 6103(a). When the last day is a Saturday, Sunday, or 
Federal holiday, the period runs 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, 
except when the time period within which an act is to be performed is 
10 days or less, not including any additional time allowed for in 
paragraph (c) of this section.
    (b) When papers are deemed to be filed or served. Filing and 
service are deemed to be effective:
    (1) In the case of personal service or same day commercial courier 
delivery, upon actual receipt by person served;
    (2) In the case of overnight commercial delivery service, U.S. 
Express Mail delivery, or first class, registered, or certified mail, 
upon deposit in or delivery to an appropriate point of collection;
    (3) In the case of electronic transmission, upon transmission.
    (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 or paper, the applicable time limits are 
calculated as follows:
    (1) If service is made by first class, registered, or certified 
mail, add three calendar days to the prescribed period;
    (2) If service is made by express mail or overnight delivery 
service, add one calendar day to the prescribed period; or
    (3) If service is made by electronic transmission, add one calendar 
day to the prescribed period.

[[Page 45357]]

Sec.  1081.115  Change of time limits.

    (a) Except as otherwise provided by law, the hearing officer may, 
in any proceeding before him or her, for good cause shown, extend the 
time limits prescribed by this part or by any notice or order issued in 
the proceedings. After appeal to the Director pursuant to Sec.  
1081.402, the Director may grant extensions of the time limits for good 
cause shown. Extensions may be granted at the motion of a party after 
notice and opportunity to respond is afforded all non-moving parties or 
on the Director's or the hearing officer's own motion, as appropriate.
    (b) Considerations in determining whether to extend time limits or 
grant postponements, adjournments and extensions. In considering all 
motions for extensions of time filed pursuant to paragraph (a) of this 
section, the Director or the hearing officer should adhere to a policy 
of strongly disfavoring granting such motions, except in circumstances 
where the moving party makes a strong showing that the denial of the 
motion would substantially prejudice its case. In determining whether 
to grant any motions, the Director or hearing officer, as appropriate, 
shall consider, in addition to any other relevant factors:
    (1) The length of the proceeding to date;
    (2) The number of postponements, adjournments or extensions already 
granted;
    (3) The stage of the proceedings at the time of the motion;
    (4) The impact of the motion on the hearing officer's ability to 
complete the proceeding in the time specified by Sec.  1081.400(a); and
    (5) Any other matters as justice may require.
    (c) Time limit. Postponements, adjournments, or extensions of time 
for filing papers shall not exceed 21 days unless the Director or the 
hearing officer, as appropriate, states on the record or sets forth in 
a written order the reasons why a longer period of time is necessary.
    (d) No effect on deadline for recommended decision. The granting of 
any extension of time pursuant to this section shall not affect any 
deadlines set pursuant to Sec.  1081.400(a).


Sec.  1081.116  Witness fees and expenses.

    Respondents shall pay to witnesses subpoenaed for testimony or 
depositions on their behalf 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 
deposition subpoena addressed to a party, no witness fees or mileage 
need be paid. Fees for witnesses shall be tendered in advance by any 
respondent requesting the issuance of a subpoena, except that fees and 
mileage need not be tendered in advance where the Bureau is the party 
requesting the subpoena. The Bureau shall pay to witnesses subpoenaed 
for testimony or depositions on behalf of the Division of Enforcement 
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, but the Bureau need not tender such fees in advance.


Sec.  1081.117  Bureau's right to conduct examination, collect 
information.

    Nothing contained in this part limits in any manner the right of 
the Bureau to conduct any examination, inspection, or visitation of any 
person, to conduct or continue any form of investigation authorized by 
law, to collect information in order to monitor the market for risks to 
consumers in the offering or provision of consumer financial products 
or services, or to otherwise gather information in accordance with law.


Sec.  1081.118  Collateral attacks on adjudication proceedings.

    Unless a court of competent jurisdiction, or the Director for good 
cause, so directs, if an interlocutory appeal or collateral attack is 
brought in any court concerning all or any part of an adjudication 
proceeding, the challenged adjudication proceeding shall continue 
without regard to the pendency of that court proceeding. No default or 
other failure to act as directed in the adjudication proceeding within 
the times prescribed in this part shall be excused based on the 
pendency before any court of any interlocutory appeal or collateral 
attack.


Sec.  1081.119  Confidential information; protective orders.

    (a) Procedure. In any adjudication proceeding, a party; any person 
who is the owner, subject, or creator of a document subject to subpoena 
or which may be introduced as evidence; or any witness who testifies at 
a hearing or in a deposition pursuant to Sec.  1081.209 may file a 
motion requesting a protective order to limit from disclosure to other 
parties or to the public documents or testimony that contain 
confidential information. The motion should include a general summary 
or extract of the documents or testimony without revealing confidential 
details. A motion for confidential treatment of documents should be 
filed in accordance with Sec.  1081.112(f).
    (b) Basis for issuance. Documents and testimony introduced in a 
public hearing are presumed to be public. A motion for a protective 
order shall be granted only upon a finding that public disclosure will 
likely result in a clearly defined, serious injury to the person 
requesting confidential treatment or after finding that the material 
constitutes sensitive personal information, as defined in Sec.  
1081.112(e).
    (c) Requests for additional information supporting confidentiality. 
The hearing officer may require a movant under paragraph (a) of this 
section to furnish in writing additional information with respect to 
the grounds for confidentiality. Failure to supply the information so 
requested within five days from the date of receipt by the movant of a 
notice of the information required shall be deemed a waiver of the 
objection to public disclosure of that portion of the documents to 
which the additional information relates, unless the hearing officer 
shall otherwise order for good cause shown at or before the expiration 
of such 5-day period.
    (d) Confidentiality of documents pending decision. Pending a 
determination of a motion under this section, the documents as to which 
confidential treatment is sought and any other documents that would 
reveal the confidential information in those documents shall be 
maintained under seal and shall be disclosed only in accordance with 
orders of the hearing officer. Any order issued in connection with a 
motion under this section shall be public unless the order would 
disclose information as to which a protective order has been granted, 
in which case that portion of the order that would reveal the protected 
information shall be nonpublic.


Sec.  1081.120  Settlement.

    (a) Availability. Any person who is notified that a proceeding may 
or will be instituted against him or her, or any party to a proceeding 
already instituted, may, at any time, propose in writing an offer of 
settlement.
    (b) Procedure. An offer of settlement shall state that it is made 
pursuant to this section; shall recite or incorporate as a part of the 
offer the provisions of paragraphs (c)(3) and (4) of this section; 
shall be signed by the person making the offer, not by counsel; and 
shall be submitted to Enforcement Counsel.
    (c) Consideration of offers of settlement.
    (1) Offers of settlement shall be considered when time, the nature 
of the proceedings, and the public interest permit.

[[Page 45358]]

    (2) Any settlement offer shall be presented to the Director with a 
recommendation, except that, if the recommendation is unfavorable, the 
offer shall not be presented to the Director unless the person making 
the offer so requests.
    (3) By submitting an offer of settlement, the person making the 
offer waives, subject to acceptance of the offer:
    (i) All hearings pursuant to the statutory provisions under which 
the proceeding is to be or has been instituted;
    (ii) The filing of proposed findings of fact and conclusions of 
law;
    (iii) Proceedings before, and a recommended decision by, a hearing 
officer;
    (iv) All post-hearing procedures;
    (v) Judicial review by any court; and
    (vi) Any objection to the jurisdiction of the Bureau under section 
1053 of the Act.
    (4) By submitting an offer of settlement the person further waives:
    (i) Such provisions of this part or other requirements of law as 
may be construed to prevent any Bureau employee from participating in 
the preparation of, or advising the Director as to, any order, opinion, 
finding of fact, or conclusion of law to be entered pursuant to the 
offer; and
    (ii) Any right to claim bias or prejudgment by the Director based 
on the consideration of or discussions concerning settlement of all or 
any part of the proceeding.
    (5) If the Director rejects the offer of settlement, the person 
making the offer shall be notified of the Director's action and the 
offer of settlement shall be deemed withdrawn. The rejected offer shall 
not constitute a part of the record in any proceeding against the 
person making the offer, provided, however, that rejection of an offer 
of settlement does not affect the continued validity of waivers 
pursuant to paragraph (c)(4) of this section with respect to any 
discussions concerning the rejected offer of settlement.


Sec.  1081.121  Cooperation with other agencies.

    It is the policy of the Bureau to cooperate with other governmental 
agencies to avoid unnecessary overlap or duplication of regulatory 
functions.

Subpart B--Initiation of Proceedings and Prehearing Rules


Sec.  1081.200  Commencement of proceeding and contents of notice of 
charges.

    (a) Commencement of proceeding. A proceeding governed by this part 
is commenced by filing of a notice of charges by the Bureau in 
accordance with Sec.  1081.111 of this part. The notice of charges must 
be served by the Bureau upon the respondent in accordance with Sec.  
1081.113(d)(1) of this part.
    (b) Contents of a notice of charges. The notice of charges must set 
forth:
    (1) The legal authority for the proceeding and for the Bureau's 
jurisdiction over the proceeding;
    (2) A statement of the matters of fact and law showing that the 
Bureau is entitled to relief;
    (3) A proposed order or prayer for an order granting the requested 
relief;
    (4) The time and place of the hearing as required by law or 
regulation;
    (5) The time within which to file an answer as required by law or 
regulation;
    (6) That the answer shall be filed and served in accordance with 
subpart A of this part; and
    (7) The docket number for the adjudication proceeding.
    (c) Publication of notice of charges. Unless otherwise ordered by 
the Bureau, the notice of charges shall be given general circulation by 
release to the public, by publication on the Bureau's Web site and, 
where directed by the hearing officer or the Director, by publication 
in the Federal Register. The Bureau may publish any notice of charges 
after 10 days from the date of service except if there is a pending 
motion for a protective order filed pursuant to Sec.  1081.119.
    (d) Voluntary dismissal.
    (1) Without an order. The Bureau may voluntarily dismiss an 
adjudication proceeding without an order entered by a hearing officer 
by filing either:
    (i) A notice of dismissal before the respondent(s) serves an 
answer; or
    (ii) A stipulation of dismissal signed by all parties who have 
appeared.
    (2) Effect. Unless the notice or stipulation states otherwise, the 
dismissal is without prejudice, and does not operate as an adjudication 
on the merits.


Sec.  1081.201  Answer.

    (a) When. Within 14 days of service of the notice of charges, 
respondent shall file an answer as designated in the notice of charges.
    (b) Content of answer. An answer must specifically respond 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 of charges which is not denied in the answer must 
be deemed admitted for purposes of the proceeding. A respondent is not 
required to respond to the portion of a notice of charges that 
constitutes the prayer for relief or proposed order. The answer must 
set forth affirmative defenses, if any, asserted by the respondent.
    (c) If the allegations of the complaint are admitted. If the 
respondent elects not to contest the allegations of fact set forth in 
the notice of charges, the answer shall consist of a statement that the 
respondent admits all of the material allegations to be true. Such an 
answer shall constitute a waiver of hearings as to the facts alleged in 
the notice of charges, and together with the notice of charges will 
provide a record basis on which the hearing officer shall issue a 
recommended decision containing appropriate findings and conclusions 
and a proposed order disposing of the proceeding. In such an answer, 
the respondent may, however, reserve the right to submit proposed 
findings of fact and conclusions of law under Sec.  1081.305.
    (d) Default.
    (1) Failure of a respondent to file an answer within the time 
provided shall be deemed to constitute a waiver of the respondent's 
right to appear and contest the allegations of the notice of charges 
and to authorize the hearing officer, without further notice to the 
respondent, to find the facts to be as alleged in the notice of charges 
and to enter a recommended decision containing appropriate findings and 
conclusions. In such cases, respondent shall have no right to appeal 
pursuant to Sec.  1081.402, but must instead proceed pursuant to 
paragraph (d)(2) of this section.
    (2) A motion to set aside a default shall be made within a 
reasonable time, state the reasons for the failure to appear or defend, 
and specify the nature of the proposed defense in the proceeding. In 
order to prevent injustice and on such conditions as may be 
appropriate, the hearing officer, at any time prior to the filing of 
the recommended decision, or the Director, at any time, may for good 
cause shown set aside a default.


Sec.  1081.202  Amended pleadings.

    (a) Amendments. The notice of charges or answer may be amended or 
supplemented at any stage of the proceeding. The respondent must answer 
an amended notice of charges within the time remaining for the

[[Page 45359]]

respondent's answer to the original notice of charges, or within 10 
days after service of the amended notice of charges, whichever period 
is longer, unless the hearing officer orders otherwise for good cause.
    (b) Amendments to conform to the evidence. When issues not raised 
in the notice of charges or answer are tried at the hearing by express 
or implied consent of the parties, they will be treated in all respects 
as if they had been raised in the notice of charges 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 of charges or answer, the hearing officer may admit the evidence 
when admission is likely to assist in adjudicating the merits of the 
action and the objecting party fails to satisfy the hearing officer 
that the admission of such evidence would unfairly prejudice that 
party's action or defense upon the merits. The hearing officer may 
grant a continuance to enable the objecting party to meet such 
evidence.


Sec.  1081.203  Scheduling conference.

    (a) Meeting of the parties before scheduling conference. As early 
as practicable before the scheduling conference described in paragraph 
(b) of this section, counsel for the parties shall meet to discuss the 
nature and basis of their claims and defenses and the possibilities for 
a prompt settlement or resolution of the case. The parties shall also 
discuss and agree, if possible, on the matters set forth in paragraph 
(b) of this section.
    (b) Scheduling conference. Within 20 days of service of the notice 
of charges or such other time as the parties and hearing officer may 
agree, the hearing officer shall direct counsel for all parties to meet 
with him or her in person at a specified time and place prior to the 
hearing or to confer by telephone for the purpose of scheduling the 
course and conduct of the proceeding. This meeting or telephone 
conference is called a scheduling conference. At the scheduling 
conference, counsel for the parties shall be prepared to address:
    (1) Determination of the dates and location of the hearing, 
including, in proceedings under section 1053(b) of the Act, whether the 
hearing should commence later than 60 days after service of the notice 
of charges;
    (2) Simplification and clarification of the issues;
    (3) Amendments to pleadings;
    (4) Settlement of any or all issues;
    (5) Production of documents as set forth in Sec.  1081.206 and of 
witness statements as set forth in Sec.  1081.207, and prehearing 
production of documents in response to subpoenas duces tecum as set 
forth in Sec.  1081.208;
    (6) Whether or not the parties intend to move for summary 
disposition of any or all issues;
    (7) Whether the parties intend to seek the deposition of witnesses 
pursuant to Sec.  1081.209;
    (8) A schedule for the exchange of expert reports and the taking of 
expert depositions, if any; and
    (9) Such other matters as may aid in the orderly disposition of the 
proceeding.
    (c) Transcript. The hearing officer, in his or her discretion, may 
require that a scheduling 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 his or her expense.
    (d) Scheduling order. At or within five days following the 
conclusion of the scheduling conference, the hearing officer shall 
serve on each party an order setting forth the date and location of the 
hearing and any agreements reached and any procedural determinations 
made.
    (e) Failure to appear; default. Any person who is named in a notice 
of charges as a person against whom findings may be made or sanctions 
imposed and who fails to appear, in person or through counsel, at a 
scheduling conference of which he or she has been duly notified may be 
deemed in default pursuant to Sec.  1081.201(d)(1). A party may make a 
motion to set aside a default pursuant to Sec.  1081.201(d)(2).
    (f) Public access. The scheduling conference shall be public unless 
the hearing officer determines, based on the standard set forth in 
Sec.  1081.119(b) of this part, that the conference (or any part 
thereof) shall be closed to the public.


Sec.  1081.204  Consolidation and severance of actions.

    (a) Consolidation.
    (1) On the motion of any party, or on the hearing officer's own 
motion, the hearing 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.
    (2) In the event of consolidation under paragraph (a)(1) of this 
section, appropriate adjustment to the prehearing schedule may be made 
to avoid unnecessary expense, inconvenience, or delay.
    (b) Severance. The hearing officer may, upon the motion of any 
party, sever the proceeding for separate resolution of the matter as to 
any respondent only if the hearing officer finds that:
    (1) Undue prejudice or injustice to the moving party would result 
from not severing the proceeding; and
    (2) Such undue prejudice or injustice would outweigh the interests 
of judicial economy and expedition in the complete and final resolution 
of the proceeding.


Sec.  1081.205  Non-dispositive motions.

    (a) Scope. This section applies to all motions except motions to 
dismiss and motions for summary disposition. Non-dispositive motions 
filed pursuant to other sections of this part shall comply with any 
specific requirements of that section and this section to the extent 
these requirements are not inconsistent.
    (b) In writing.
    (1) Unless made during a hearing or conference, 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 hearing officer. Written memoranda, briefs, 
affidavits or other relevant material or documents may be filed in 
support of or in opposition to a motion.
    (c) Oral motions. The Director or the hearing officer, as 
appropriate, may order that an oral motion be submitted in writing.
    (d) Responses and replies.
    (1) Except as otherwise provided herein, within 10 days after 
service of any written motion, or within such other period of time as 
may be established by the hearing officer or the Director, as 
appropriate, any party may file a written response to a motion. The 
hearing officer shall not rule on any oral or written motion before 
each party has had an opportunity to file a response.
    (2) Reply briefs, if any, may be filed within three days after 
service of the response.
    (3) The failure of a party to oppose a written motion or an oral 
motion made on the record is deemed consent by that party to the entry 
of an order substantially in the form of the order accompanying the 
motion.
    (e) Length limitations. No motion subject to this section (together 
with the

[[Page 45360]]

brief in support of the motion) or brief in response to the motion 
shall exceed 15 pages in length, exclusive of pages containing the 
table of contents, table of authorities, and any addendum that consists 
solely of copies of applicable cases, pertinent legislative provisions 
or rules, and exhibits. No reply brief shall exceed six pages in 
length, exclusive of pages containing the table of contents, table of 
authorities, and any addendum that consists solely of copies of 
applicable cases, pertinent legislative provisions or rules, and 
exhibits. Motions for leave to file motions and briefs in excess of 
these limitations are disfavored.
    (f) Meet and confer requirements. Each motion filed under this 
section shall be accompanied by a signed statement representing that 
counsel for the moving party has conferred or made a good faith effort 
to confer with opposing counsel in a good faith effort to resolve by 
agreement the issues raised by the motion and has been unable to reach 
such an agreement. If some of the matters in controversy have been 
resolved by agreement, the statement shall specify the matters so 
resolved and the matters remaining unresolved.
    (g) Ruling on non-dispositive motions. Unless otherwise provided by 
a relevant rule, a hearing officer shall rule on non-dispositive 
motions. Such ruling shall be issued within 14 days after the 
expiration of the time period allowed for the filing of all motions 
papers authorized by this section. The Director, for good cause, may 
extend the time allowed for a ruling.
    (h) Proceedings not stayed. A motion under consideration by the 
Director or the hearing officer shall not stay proceedings before the 
hearing officer unless the Director or the hearing officer, as 
appropriate, so orders.
    (i) Dilatory motions. Frivolous, dilatory, or repetitive motions 
are prohibited. The filing of such motions may form the basis for 
sanctions.


Sec.  1081.206  Availability of documents for inspection and copying.

    For purposes of this section, the term documents shall include any 
book, document, record, report, memorandum, paper, communication, 
tabulation, chart, logs, electronic files, or other data or data 
compilations stored in any medium.
    (a) Documents to be available for inspection and copying.
    (1) Unless otherwise provided by this section, or by order of the 
hearing officer, the Division of Enforcement shall make available for 
inspection and copying by any party documents obtained by the Division 
of Enforcement prior to the institution of proceedings, from persons 
not employed by the Bureau, in connection with the investigation 
leading to the institution of proceedings. Such documents shall 
include:
    (i) Any documents turned over in response to civil investigative 
demands or other written requests to provide documents or to be 
interviewed issued by the Division of Enforcement;
    (ii) All transcripts and transcript exhibits; and
    (iii) Any other documents obtained from persons not employed by the 
Bureau.
    (2) In addition, the Division of Enforcement shall make available 
for inspection and copying by any party:
    (i) Each civil investigative demand or other written request to 
provide documents or to be interviewed issued by the Division of 
Enforcement in connection with the investigation leading to the 
institution of proceedings; and
    (ii) Any final examination or inspection reports prepared by any 
other Division of the Bureau if the Division of Enforcement either 
intends to introduce any such report into evidence or to use any such 
report to refresh the recollection of, or impeach, any witness.
    (3) Nothing in paragraph (a) of this section shall limit the right 
of the Division of Enforcement to make available any other document, or 
shall limit the right of a respondent to seek access to or production 
pursuant to subpoena of any other document, or shall limit the 
authority of the hearing officer to order the production of any 
document pursuant to subpoena.
    (4) Nothing in paragraph (a) of this section shall require the 
Division of Enforcement to produce a final examination or inspection 
report prepared by any other Division of the Bureau to a respondent who 
is not the subject of that report.
    (b) Documents that may be withheld.
    (1) The Division of Enforcement may withhold a document if:
    (i) The document is privileged;
    (ii) The document is an internal memorandum, note or writing 
prepared by a person employed by the Bureau or another government 
agency, other than an examination or supervision report as specified in 
paragraph (a)(2)(ii) of this section, or would otherwise be subject to 
the work product doctrine and will not be offered in evidence;
    (iii) The document would disclose the identity of a confidential 
source;
    (iv) Applicable law prohibits the disclosure of the document; or
    (v) The hearing officer grants leave to withhold a document or 
category of documents as not relevant to the subject matter of the 
proceeding or otherwise, for good cause shown.
    (2) Nothing in paragraph (b)(1) of this section authorizes the 
Division of Enforcement in connection with an adjudication proceeding 
to withhold material exculpatory evidence in the possession of the 
Division that would otherwise be required to be produced pursuant to 
paragraph (a) of this section.
    (c) Withheld document list. The hearing officer may require the 
Division of Enforcement to submit for review a list of documents or 
categories of documents withheld pursuant to paragraphs (b)(1)(i) 
through (b)(1)(iv) of this section or to submit any document withheld, 
and may determine whether any such document should be made available 
for inspection and copying. When similar documents are withheld 
pursuant to paragraphs (b)(1)(i) through (b)(1)(iv) of this section, 
those documents may be identified by category instead of by individual 
document. The hearing officer retains discretion to determine when an 
identification by category is insufficient.
    (d) Timing of inspection and copying. Unless otherwise ordered by 
the hearing officer, the Division of Enforcement shall commence making 
documents available to a respondent for inspection and copying pursuant 
to this section no later than seven days after service of the notice of 
charges.
    (e) Place of inspection and copying. Documents subject to 
inspection and copying pursuant to this section shall be made available 
to the respondent for inspection and copying at the Bureau office where 
they are ordinarily maintained, or at such other place as the parties, 
in writing, may agree. A respondent shall not be given custody of the 
documents or leave to remove the documents from the Bureau's offices 
pursuant to the requirements of this section other than by written 
agreement of the Division of Enforcement. Such agreement shall specify 
the documents subject to the agreement, the date they shall be returned 
and such other terms or conditions as are appropriate to provide for 
the safekeeping of the documents.
    (f) Copying costs and procedures. The respondent may obtain a 
photocopy of any documents made available for inspection or, at the 
discretion of the Division of Enforcement, electronic copies of such 
documents. The respondent shall be responsible for the cost of 
photocopying. Unless otherwise ordered, charges for copies made by the 
Division of Enforcement at the request

[[Page 45361]]

of the respondent will be at the rate charged pursuant to part 1070. 
The respondent shall be given access to the documents at the Bureau's 
offices or such other place as the parties may agree during normal 
business hours for copying of documents at the respondent's expense.
    (g) Duty to supplement. If the Division of Enforcement acquires 
information that it intends to rely upon at a hearing after making its 
disclosures under part (a)(1) of this section, the Division of 
Enforcement shall supplement its disclosures to include such 
information.
    (h) Failure to make documents available--harmless error. In the 
event that a document required to be made available to a respondent 
pursuant to this section is not made available by the Division of 
Enforcement, no rehearing or redecision of a proceeding already heard 
or decided shall be required unless the respondent establishes that the 
failure to make the document available was not harmless error.
    (i) Disclosure of privileged or protected information or 
communications; scope of waiver; obligations of receiving party.
    (1)(i) The disclosure of privileged or protected information or 
communications by any party during an adjudication proceeding shall not 
operate as a waiver if:
    (A) The disclosure was inadvertent;
    (B) The holder of the privilege or protection took reasonable steps 
to prevent disclosure; and
    (C) The holder promptly took reasonable steps to rectify the error, 
including notifying any party that received the information or 
communication of the claim and the basis for it.
    (ii) After being notified, the receiving party must promptly 
return, sequester, or destroy the specified information and any copies 
it has; must not use or disclose the information until the claim is 
resolved; must take reasonable steps to retrieve the information if the 
party disclosed it before being notified; and may promptly present the 
information to the hearing officer under seal for a determination of 
the claim. The producing party must preserve the information until the 
claim is resolved.
    (2) The disclosure of privileged or protected information or 
communications by any party during an adjudication proceeding shall 
waive the privilege or protection as to undisclosed information or 
communications only if:
    (i) The waiver is intentional;
    (ii) The disclosed and undisclosed information or communications 
concern the same subject matter; and
    (iii) They ought in fairness to be considered together.


Sec.  1081.207  Production of witness statements.

    (a) Availability. Any respondent may move that the Division of 
Enforcement produce for inspection and copying any statement of any 
person called or to be called as a witness by the Division of 
Enforcement that pertains, or is expected to pertain, to his or her 
direct testimony and that would be required to be produced pursuant to 
the Jencks Act, 18 U.S.C. 3500, if the adjudication proceeding were a 
criminal proceeding. For purposes of this section, the term 
``statement'' shall have the meaning set forth in 18 U.S.C. 3500(e). 
Such production shall be made at a time and place fixed by the hearing 
officer and shall be made available to any party, provided, however, 
that the production shall be made under conditions intended to preserve 
the items to be inspected or copied.
    (b) Failure to produce--harmless error. In the event that a 
statement required to be made available to a respondent pursuant to 
this section is not made available by the Division of Enforcement, no 
rehearing or redecision of a proceeding already heard or decided shall 
be required unless the respondent establishes that the failure to make 
the statement available was not harmless error.


Sec.  1081.208  Subpoenas.

    (a) Availability. In connection with any hearing ordered by the 
hearing officer, a party may request the issuance of one or more 
subpoenas requiring the attendance and testimony of witnesses at the 
designated time and place of the hearing, or the production of 
documentary or other tangible evidence returnable at any designated 
time or place.
    (b) Procedure. Unless made on the record at a hearing, requests for 
issuance of a subpoena shall be made in writing, and filed and served 
on each party pursuant to subpart A of this part. The request must 
contain a proposed subpoena and a brief statement showing the general 
relevance and reasonableness of the scope of testimony or documents 
sought.
    (c) Signing may be delegated. A hearing officer may authorize 
issuance of a subpoena, and may delegate the manual signing of the 
subpoena to any other person authorized to issue subpoenas.
    (d) Standards for issuance. The hearing officer shall promptly 
issue any subpoena requested pursuant to this section. However, where 
it appears to the hearing officer that the subpoena sought may be 
unreasonable, oppressive, excessive in scope, or unduly burdensome, he 
or she may, in his or her discretion, as a condition precedent to the 
issuance of the subpoena, require the person seeking the subpoena to 
show further the general relevance and reasonable scope of the 
testimony or other evidence sought. If after consideration of all the 
circumstances, the hearing officer determines that the subpoena or any 
of its terms is unreasonable, oppressive, excessive in scope, or unduly 
burdensome, he or she may refuse to issue the subpoena, or issue it 
only upon such conditions as fairness requires. In making the foregoing 
determination, the hearing officer may inquire of the other 
participants whether they will stipulate to the facts sought to be 
proved.
    (e) Service. Upon issuance by the hearing officer, the party making 
the request shall serve the subpoena on the person named in the 
subpoena and on each party in accordance with Sec.  1081.113(c). 
Subpoenas may be served in any state, on any person or company doing 
business in any state, or as otherwise permitted by law.
    (f) Tender of fees required. When a subpoena compelling the 
attendance of a person at a hearing is issued at the request of anyone 
other than an officer or agency of the United States, service is valid 
only if the subpoena is accompanied by a tender to the subpoenaed 
person of the fees for one day's attendance and mileage specified by 
Sec.  1081.116 of this part.
    (g) Motion to quash or modify.
    (1) Procedure. Any person to whom a subpoena is directed, or who is 
an owner, creator or the subject of the documents that are to be 
produced pursuant to a subpoena, or any party may, prior to the time 
specified therein for compliance, but in no event more than 10 days 
after the date of service of such subpoena, move that the subpoena be 
quashed or modified. Such motion shall be filed and served on all 
parties pursuant to subpart A of this part. Notwithstanding Sec.  
1081.205, the party on whose behalf the subpoena was issued or 
Enforcement Counsel may, within five days of service of the motion, 
file a response to the motion. Reply briefs are not permitted unless 
requested by the hearing officer. Filing a motion to modify a subpoena 
does not stay the movant's obligation to comply with those portions of 
the subpoena that the person has not sought to modify.
    (2) Standards governing motion to quash or modify. If compliance 
with the subpoena would be unreasonable,

[[Page 45362]]

oppressive, or unduly burdensome, the hearing officer shall quash or 
modify the subpoena, or may order return of the subpoena only upon 
specified conditions. These conditions may include but are not limited 
to a requirement that the party on whose behalf the subpoena was issued 
shall make reasonable compensation to the person to whom the subpoena 
was addressed for the cost of copying or transporting evidence to the 
place for return of the subpoena.
    (h) Enforcing subpoenas. If a subpoenaed person fails to comply 
with any subpoena issued pursuant to this section or any order of the 
hearing officer which directs compliance with all or any portion of a 
subpoena, the Bureau may, on its own motion or at the request of the 
party on whose behalf the subpoena was issued, apply to an appropriate 
United States district court, in the name of the Bureau but on relation 
of such party, for an order requiring compliance with so much of the 
subpoena as the hearing officer has not quashed or modified, unless, in 
the judgment of the General Counsel, the enforcement of such subpoena 
would be inconsistent with law and the policies of the Act. Failure to 
request the Bureau to seek enforcement of a subpoena constitutes a 
waiver of any claim of prejudice predicated upon the unavailability of 
the testimony or evidence sought.


Sec.  1081.209   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 request 
in accordance with the procedures set forth in this section that the 
hearing officer issue a subpoena, including a subpoena duces tecum, 
requiring the attendance of the witness at a deposition. The hearing 
officer may issue a deposition subpoena under this section upon showing 
that:
    (i) The witness will be unable to attend or may be prevented from 
attending the hearing because of age, sickness, or infirmity, or will 
otherwise be unavailable;
    (ii) The witness' unavailability was not procured or caused by the 
subpoenaing party;
    (iii) The testimony is reasonably expected to be material; 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) In addition to making a showing as required by paragraph (a)(1) 
of this section, the request for a deposition subpoena must contain a 
proposed deposition subpoena and a brief statement showing the general 
relevance and reasonableness of the scope of testimony and documents 
sought, and the time and place for taking the deposition. Any request 
to record the deposition by audio-visual means must be made in the 
request for a deposition subpoena.
    (3) Any requested deposition subpoena that sets forth a valid basis 
for its issuance must be promptly issued, unless the hearing officer on 
his or her own motion requires a written response or requires 
attendance at a conference concerning whether the requested subpoena 
should be issued. However, where it appears to the hearing officer that 
the deposition subpoena sought may be unreasonable, oppressive, 
excessive in scope, or unduly burdensome, he or she may, in his or her 
discretion, as a condition precedent to the issuance of the deposition 
subpoena, require the person seeking the deposition subpoena to show 
further the general relevance and reasonable scope of the testimony or 
other evidence sought. If after consideration of all the circumstances, 
the hearing officer determines that the deposition subpoena or any of 
its terms is unreasonable, oppressive, excessive in scope, or unduly 
burdensome, he or she may refuse to issue the deposition subpoena, or 
issue it only upon such conditions as fairness requires. In making the 
foregoing determination, the hearing officer may inquire of the other 
participants whether they will stipulate to the facts sought to be 
proved.
    (4) Unless the hearing officer orders otherwise, no deposition 
under this section shall be taken on fewer than 14 days' notice to the 
witness and all parties.
    (b) Procedure. Unless made on the record at a hearing, requests for 
issuance of a deposition subpoena shall be made in writing, and filed 
and served on each party pursuant to subpart A of this part.
    (c) Signing may be delegated. A hearing officer may authorize 
issuance of a deposition subpoena, and may delegate the manual signing 
of the deposition subpoena to any other person authorized to issue 
subpoenas.
    (d) Service. Upon issuance by the hearing officer, the party making 
the request shall serve the subpoena on the person named in the 
subpoena and on each party in accordance with Sec.  1081.113(c). 
Deposition subpoenas may be served in any state, territory, possession 
of the United States, or the District of Columbia, on any person or 
company doing business in any state, territory, possession of the 
United States, or the District of Columbia, or as otherwise permitted 
by law.
    (e) Tender of fees required. When a subpoena compelling the 
attendance of a person at a deposition is issued at the request of 
anyone other than an officer or agency of the United States, service is 
valid only if the subpoena is accompanied by a tender to the subpoenaed 
person of the fees for one day's attendance and mileage specified by 
Sec.  1081.116 of this part.
    (f) Motion to quash or modify.
    (1) Procedure. Any person to whom a deposition subpoena is 
directed, or who is an owner, creator or the subject of the documents 
that are to be produced pursuant to a deposition subpoena, or any party 
may, prior to the time specified therein for compliance, but in no 
event more than 10 days after the date of service of such subpoena, 
move that the deposition subpoena be quashed or modified. Such motion 
must include a statement of the basis for the motion to quash or modify 
the deposition subpoena, and shall be filed and served on all parties 
pursuant to subpart A of this part. Notwithstanding Sec.  1081.205, the 
party on whose behalf the deposition subpoena was issued or Enforcement 
Counsel may, within five days of service of the motion, file a response 
to the motion. Reply briefs are not permitted unless requested by the 
hearing officer.
    (2) Standards governing motion to quash or modify. If compliance 
with the deposition subpoena would be unreasonable, oppressive or 
unduly burdensome, or the deposition subpoena does not meet the 
requirements set forth in paragraph (a)(1) of this section, the hearing 
officer shall quash or modify the deposition subpoena, or may order 
return of the deposition subpoena only upon specified conditions. These 
conditions may include but are not limited to a requirement that the 
party on whose behalf the deposition subpoena was issued shall make 
reasonable compensation to the person to whom the deposition subpoena 
was addressed for the cost of copying or transporting evidence to the 
place for return of the deposition subpoena.
    (g) Procedure upon deposition.
    (1) Depositions shall be taken before any person before whom a 
deposition may be taken pursuant to the Federal Rules of Civil 
Procedure (the ``deposition officer'').
    (2) The witness being deposed may have an attorney present during 
the deposition.
    (3) Each witness testifying pursuant to a deposition subpoena must 
be duly sworn, and each party shall have the

[[Page 45363]]

right to examine the witness. Objections to questions or documents must 
be in short form, stating the grounds for the objection. Objections to 
questions of evidence shall be noted by the deposition officer upon the 
deposition, but a deposition officer other than the hearing officer 
shall not have the power to decide on the competency, materiality, or 
relevance of evidence. Failure to object to questions or documents is 
not deemed a waiver except where the ground for the objection might 
have been avoided if the objection had been timely presented. All 
questions, answers, and objections must be recorded.
    (4) The deposition 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.
    (5) The original deposition and exhibits shall be filed with the 
Executive Secretary. The cost of the transcript shall be paid by the 
party requesting the deposition. A copy of the deposition shall be 
available to the deponent and each party for purchase at prescribed 
rates.
    (h) Enforcing subpoenas. Any party may move before the hearing 
officer for an order compelling the witness to answer any questions the 
witness has refused to answer or submit any evidence the witness has 
refused to submit during the deposition. If a subpoenaed person fails 
to comply with any order of the hearing officer which directs 
compliance with all or any portion of a deposition subpoena under this 
section, the Bureau may, on its own motion or at the request of the 
party on whose behalf the subpoena was issued, apply to an appropriate 
United States district court, in the name of the Bureau but on relation 
of such party, for an order requiring compliance with so much of the 
subpoena as the hearing officer has not quashed or modified, unless, in 
the judgment of the General Counsel, the enforcement of such subpoena 
would be inconsistent with law and the policies of the Act. Failure to 
request the Bureau to seek enforcement of a subpoena constitutes a 
waiver of any claim of prejudice predicated upon the unavailability of 
the testimony or evidence sought.


Sec.  1081.210   Expert discovery.

    (a) At a date set by the hearing officer at the scheduling 
conference, each party shall serve the other with a report prepared by 
each of its expert witnesses. Each party shall serve the other parties 
with a list of any rebuttal expert witnesses and a rebuttal report 
prepared by each such witness not later than 28 days after the deadline 
for service of expert reports, unless another date is set by the 
hearing officer. A rebuttal report shall be limited to rebuttal of 
matters set forth in the expert report for which it is offered in 
rebuttal. If material outside the scope of fair rebuttal is presented, 
a party may file a motion not later than five days after the deadline 
for service of rebuttal reports, seeking appropriate relief with the 
hearing officer, including striking all or part of the report, leave to 
submit a surrebuttal report by the party's own experts, or leave to 
call a surrebuttal witness and to submit a surrebuttal report by that 
witness.
    (b) No party may call an expert witness at the hearing unless he or 
she has been listed and has provided reports as required by this 
section, unless otherwise directed by the hearing officer at a 
scheduling conference. Each side will be limited to calling at the 
hearing five expert witnesses, including any rebuttal or surrebuttal 
expert witnesses. A party may file a motion seeking leave to call 
additional expert witnesses due to extraordinary circumstances.
    (c) Each report shall be signed by the expert and contain a 
complete statement of all opinions to be expressed and the basis and 
reasons therefore; the data, materials, or other information considered 
by the witness in forming the opinions; any exhibits to be used as a 
summary of or support for the opinions; the qualifications of the 
witness, including a list of all publications authored or co-authored 
by the witness within the preceding 10 years; the compensation to be 
paid for the study and testimony; and a listing of any other cases in 
which the witness has testified or sought to testify as an expert at 
trial or by deposition within the preceding four years. A rebuttal or 
surrebuttal report need not include any information already included in 
the initial report of the witness.
    (d) A party may depose any person who has been identified as an 
expert whose opinions may be presented at trial. Unless otherwise 
ordered by the hearing officer, a deposition of any expert witness 
shall be conducted after the disclosure of a report prepared by the 
witness in accordance with paragraph (a) of this section, and at least 
seven days prior to the deadline for submission of rebuttal expert 
reports. A deposition of an expert witness shall be completed no later 
than 14 days before the hearing unless otherwise ordered by the hearing 
officer. No expert deposition shall exceed 8 hours on the record, 
absent agreement of the parties or an order of the hearing officer for 
good cause shown. Expert depositions shall be conducted pursuant to the 
procedures set forth in Sec.  1081.209.
    (e) The hearing officer shall have the discretion to dispense with 
the requirement of expert discovery in appropriate cases.


Sec.  1081.211   Interlocutory review.

    (a) Availability. The Director may, at any time, direct that any 
matter be submitted to him or her for review. Subject to paragraph (c) 
of this section, the hearing officer may, on his or her own motion or 
on the motion of any party, certify any matter for interlocutory review 
by the Director. This section is the exclusive remedy for review of a 
hearing officer's ruling or order prior to the Director's consideration 
of the entire proceeding.
    (b) Procedure. Any party's motion for certification of a ruling or 
order for interlocutory review shall be filed with the hearing officer 
within five days of service of the ruling or order, shall specify the 
ruling or order or parts thereof for which interlocutory review is 
sought, shall attach any other portions of the record on which the 
moving party relies, and shall otherwise comply with Sec.  1081.205. 
Notwithstanding Sec.  1081.205, any response to such a motion must be 
filed within three days of service of the motion. The hearing officer 
shall issue a ruling on the motion within five days of the deadline for 
filing a response.
    (c) Certification process. Unless the Director directs otherwise, a 
ruling or order may not be submitted to the Director for interlocutory 
review unless the hearing officer, upon the hearing officer's motion or 
upon the motion of a party, certifies the ruling or order in writing. 
The hearing officer shall not certify a ruling or order unless:
    (1) The ruling or order would compel testimony of Bureau officers 
or employees, or those from another governmental agency, or the 
production of documentary evidence in the custody of the Bureau or 
another governmental agency;
    (2) The ruling or order involves a motion for disqualification of 
the hearing officer pursuant to Sec.  1081.105(c)(2) of this part;
    (3) The ruling or order suspended or barred an individual from 
appearing before the Bureau pursuant to Sec.  1081.107(c) of this part; 
or
    (4) Upon motion by a party, the hearing officer is of the opinion 
that:
    (i) The ruling or order involves a controlling question of law as 
to which

[[Page 45364]]

there is substantial ground for difference of opinion; and
    (ii) An immediate review of the ruling or order is likely to 
materially advance the completion of the proceeding or subsequent 
review will be an inadequate remedy.
    (d) Interlocutory review. A party whose motion for certification 
has been denied by the hearing officer may petition the Director for 
interlocutory review.
    (e) Director review. The Director shall determine whether or not to 
review a ruling or order certified under this section or the subject of 
a petition for interlocutory review. Interlocutory review is 
disfavored, and the Director will grant a petition to review a hearing 
officer ruling or order prior to his or her consideration of a 
recommended decision only in extraordinary circumstances. The Director 
may decline to review a ruling or order certified by a hearing officer 
pursuant to paragraph (c) of this section or the petition of a party 
who has been denied certification if he or she determines that 
interlocutory review is not warranted or appropriate under the 
circumstances, in which case he or she may summarily deny the petition. 
If the Director determines to grant the review, he or she will review 
the matter and issue his or her ruling and order in an expeditious 
fashion, consistent with the Bureau's other responsibilities.
    (f) Proceedings not stayed. The filing of a motion requesting that 
the hearing officer certify any of his or her prior rulings or orders 
for interlocutory review or a petition for interlocutory review filed 
with the Director, and the grant of any such review, shall not stay 
proceedings before the hearing officer unless he or she, or the 
Director, shall so order. The Director will not consider a motion for a 
stay unless the motion shall have first been made to the hearing 
officer.


Sec.  1081.212   Dispositive motions.

    (a) Dispositive motions. This section governs the filing of motions 
to dismiss and motions for summary disposition. The filing of any such 
motion does not obviate a party's obligation to file an answer or take 
any other action required by this part or by an order of the hearing 
officer, unless expressly so provided by the hearing officer.
    (b) Motions to dismiss. A respondent may file a motion to dismiss 
asserting that, even assuming the truth of the facts alleged in the 
notice of charges, it is entitled to dismissal as a matter of law.
    (c) Motion for summary disposition. A party may make a motion for 
summary disposition asserting that 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 moving party is entitled to a decision in its favor as a 
matter of law.
    (d) Filing of motions for summary disposition and responses.
    (1) After a respondent's answer has been filed and documents have 
been made available to the respondent for inspection and copying 
pursuant to Sec.  1081.206, any party may move for summary disposition 
in its favor of all or any part of the proceeding.
    (2) A motion for summary disposition must be accompanied by a 
statement of the material facts as to which the moving party 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 moving party 
contends support his or her position. The motion must also be 
accompanied by a brief containing the points and authorities in support 
of the contention of the moving party. Any party opposing a motion for 
summary disposition must file a statement setting forth those material 
facts as to which he or she contends a genuine dispute exists. Such 
opposition must be supported by evidence of the same type as may be 
submitted in support of a motion for summary disposition and a brief 
containing the points and authorities in support of the contention that 
summary disposition would be inappropriate.
    (3) Any affidavit or declaration submitted in support of or in 
opposition to a motion for summary disposition shall set forth such 
facts as would be admissible in evidence, shall show affirmatively that 
the affiant is competent to testify to the matters stated therein, and 
must be signed under oath and penalty of perjury.
    (e) Page limitations for dispositive motions. A motion to dismiss 
or for summary disposition, together with any brief in support of the 
motion (exclusive of any declarations, affidavits, or attachments) 
shall not exceed 35 pages in length. Motions for extensions of this 
length limitation are disfavored.
    (f) Opposition and reply response time and page limitation. Any 
party, within 20 days after service of a dispositive motion, or within 
such time period as allowed by the hearing officer, may file a response 
to such motion. The length limitations set forth in paragraph (e) of 
this section shall also apply to such responses. Any reply brief filed 
in response to an opposition to a dispositive motion shall be filed 
within five days after service of the opposition. Reply briefs shall 
not exceed 10 pages.
    (g) Oral argument. At the request of any party or on his or her own 
motion, the hearing officer may hear oral argument on a dispositive 
motion.
    (h) Decision on motion. Within 30 days following the expiration of 
the time for filing all responses and replies to any dispositive 
motion, the hearing officer shall determine whether the motion shall be 
granted. If the hearing officer determines that dismissal or summary 
disposition is warranted, he or she shall issue a recommended decision 
granting the motion. If the hearing officer finds that no party is 
entitled to dismissal or summary disposition, he or she shall make a 
ruling denying the motion. If it appears that a party, for good cause 
shown, cannot present by affidavit prior to hearing facts essential to 
justify opposition to the motion, the hearing officer shall deny or 
defer the motion.


Sec.  1081.213   Partial summary disposition.

    If on a motion for summary disposition under Sec.  1081.212 a 
decision is not rendered upon the whole case or for all the relief 
asked and a hearing is necessary, the hearing officer shall issue an 
order specifying the facts that appear without substantial controversy 
and directing further proceedings in the action. The facts so specified 
shall be deemed established.


Sec.  1081.214   Prehearing conferences.

    (a) Prehearing conferences. The hearing officer may, in addition to 
the scheduling conference, on his or her own motion or at the request 
of any party, direct counsel for the parties to meet with him or her 
(in person or by telephone) at a prehearing conference for further 
discussion of the issues outlined in Sec.  1081.203, or for discussion 
of any additional matters that in the view of the hearing officer will 
aid in an orderly disposition of the proceeding, including but not 
limited to:
    (1) Identification of potential witnesses and limitation on the 
number of witnesses;
    (2) The exchange of any prehearing materials including witness 
lists, statements of issues, stipulations, exhibits, and any other 
materials;
    (3) Stipulations, admissions of fact, and the contents, 
authenticity, and admissibility into evidence of documents;

[[Page 45365]]

    (4) Matters of which official notice may be taken; and
    (5) Whether the parties intend to introduce prior sworn statements 
of witnesses as set forth in Sec.  1081.303(h).
    (b) Transcript. The hearing officer, in his or her discretion, may 
require that a prehearing 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 his or her expense.
    (c) Public access. Any prehearing conferences shall be public 
unless the hearing officer determines, based on the standard set forth 
in Sec.  1081.119(b) of this part, that the conference (or any part 
thereof) shall be closed to the public.


Sec.  1081.215   Prehearing submissions.

    (a) Within the time set by the hearing officer, but in no case 
later than 10 days before the start of the hearing, each party shall 
serve on every other party:
    (1) A prehearing statement, which shall include an outline or 
narrative summary of its case or defense, and the legal theories upon 
which it will rely;
    (2) A 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) Any prior sworn statements that a party intends to admit into 
evidence pursuant to Sec.  1081.303(h);
    (4) A list of the exhibits to be introduced at the hearing along 
with a copy of each exhibit; and
    (5) Any stipulations of fact or liability.
    (b) Expert witnesses. Each party who intends to call an expert 
witness shall also serve, in addition to the information required by 
paragraph (a)(2) of this section, a statement of the expert's 
qualifications, a listing of other proceedings in which the expert has 
given or sought to give expert testimony at trial or by deposition 
within the preceding four years, and a list of publications authored or 
co-authored by the expert within the preceding 10 years, to the extent 
such information has not already been provided pursuant to Sec.  
1081.210.
    (c) Effect of failure to comply. No witness may testify and no 
exhibits may be introduced at the hearing if such witness or exhibit is 
not listed in the prehearing submissions pursuant to paragraph (a) of 
this section, except for good cause shown.


Sec.  1081.216   Amicus participation.

    (a) Availability. An amicus brief may be filed only if:
    (1) A motion for leave to file the brief has been granted;
    (2) The brief is accompanied by written consent of all parties;
    (3) The brief is filed at the request of the Director or the 
hearing officer, as appropriate; or
    (4) The brief is presented by the United States or an officer or 
agency thereof, or by a state or a political subdivision thereof.
    (b) Procedure. An amicus brief may be filed conditionally with the 
motion for leave. The motion for leave shall identify the interest of 
the movant and shall state the reasons why a brief of an amicus curiae 
is desirable. Except as all parties otherwise consent, any amicus 
curiae shall file its brief within the time allowed the party whose 
position the amicus will support, unless the Director or hearing 
officer, as appropriate, for good cause shown, grants leave for a later 
filing. In the event that a later filing is allowed, the order granting 
leave to file shall specify when an opposing party may reply to the 
brief.
    (c) Motions. A motion for leave to file an amicus brief shall be 
subject to Sec.  1081.205.
    (d) Oral argument. An amicus curiae may move to present oral 
argument at any hearing before the hearing officer, but such motions 
will be granted only for extraordinary reasons.

Subpart C--Hearings


Sec.  1081.300  Public hearings.

    All hearings in adjudication proceedings shall be public unless a 
confidentiality order is entered by the hearing officer pursuant to 
Sec.  1081.119 or unless otherwise ordered by the Director on the 
grounds that holding an open hearing would be contrary to the public 
interest.


Sec.  1081.301  Failure to appear.

    Failure of a respondent to appear in person or by a duly authorized 
counsel at the hearing constitutes a waiver of respondent's right to a 
hearing and may be deemed an admission of the facts as alleged and 
consent to the relief sought in the notice of charges. Without further 
proceedings or notice to the respondent, the hearing officer shall file 
a recommended decision containing findings of fact and addressing the 
relief sought in the notice of charges.


Sec.  1081.302  Conduct of hearings.

    All hearings shall be conducted in a fair, impartial, expeditious, 
and orderly manner. Enforcement Counsel shall present its case-in-chief 
first, unless otherwise ordered by the hearing officer, or unless 
otherwise expressly specified by law or regulation. Enforcement Counsel 
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 of presentation of their 
cases, but if they do not agree, the hearing officer shall fix the 
order.


Sec.  1081.303  Evidence.

    (a) Burden of proof. Enforcement Counsel shall have the burden of 
proof of the ultimate issue(s) of the Bureau's claims at the hearing.
    (b) 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 and other applicable law. Irrelevant, immaterial, and 
unreliable evidence shall be excluded.
    (2) Evidence, even if relevant, may be excluded if its probative 
value is substantially outweighed by the danger of unfair prejudice or 
confusion of the issues; if the evidence would be misleading; or based 
on considerations of undue delay, waste of time, or needless 
presentation of cumulative evidence.
    (3) Evidence that constitutes hearsay may be admitted if it is 
relevant, material, and bears satisfactory indicia of reliability so 
that its use is fair. Hearsay is a statement, other than one made by 
the declarant while testifying at the hearing, offered in evidence to 
prove the truth of the matter asserted. If otherwise meeting the 
standards for admissibility described in this section, transcripts of 
depositions, investigational hearings, prior testimony in Bureau or 
other proceedings, and any other form of hearsay shall be admissible 
and shall not be excluded solely on the ground that they are or contain 
hearsay.
    (4) Evidence that would be admissible under the Federal Rules of 
Evidence is admissible in a proceeding conducted pursuant to this part. 
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 this part solely on that basis.
    (c) Official notice. Official notice may be taken of any material 
fact that is not subject to reasonable dispute in that it is either 
generally known or capable of accurate and ready determination by 
resort to sources whose accuracy cannot reasonably be questioned. If 
official notice is requested or is taken of a

[[Page 45366]]

material fact not appearing in the evidence in the record, the parties, 
upon timely request, shall be afforded an opportunity to disprove such 
noticed fact.
    (d) 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 (b) of this section, 
any document, including a report of examination, supervisory activity, 
inspection or visitation, prepared by a prudential regulator, as that 
term is defined in section 1002(24) of the Act, or by a state 
regulatory agency, is presumptively 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 hearing officer's discretion, be used 
with or without being admitted into evidence.
    (4) As respondents are in the best position to determine the nature 
of documents generated by such respondents and which come from their 
own files, the burden of proof is on the respondent to introduce 
evidence to rebut a presumption that such documents are authentic and 
kept in the regular course of business.
    (e) Objections.
    (1) Objections to the admissibility of evidence must be timely made 
and rulings on all objections must appear on the record.
    (2) Whenever evidence is excluded from the record, the party 
offering such evidence may make an offer of proof, which shall be 
included in the record. Rejected exhibits, adequately marked for 
identification, shall be retained pursuant to Sec.  1081.306(b) so as 
to be available for consideration by any reviewing authority.
    (3) Failure to object to admission of evidence or to any ruling 
constitutes a waiver of the objection.
    (f) Stipulations.
    (1) The parties may, at any stage of the proceeding, stipulate as 
to any relevant matters of fact or the authentication of any relevant 
documents. Such stipulations must be received in evidence at a hearing 
and are binding on the parties with respect to the matters therein 
stipulated.
    (2) Unless the hearing officer directs otherwise, all stipulations 
of fact and law previously agreed upon by the parties, and all 
documents, the admissibility of which have been previously stipulated, 
will be admitted into evidence upon commencement of the hearing.
    (g) Presentation of evidence.
    (1) A witness at a hearing for the purpose of taking evidence shall 
testify under oath or affirmation.
    (2) A party is entitled to present its case or defense by sworn 
oral testimony and documentary evidence, to submit rebuttal evidence, 
and to conduct such cross-examination as, in the discretion of the 
hearing officer, may be required for a full and true disclosure of the 
facts.
    (3) An adverse party, or an officer, agent, or employee thereof, 
and any witness who appears to be hostile, unwilling, or evasive, may 
be interrogated by leading questions and may also be contradicted and 
impeached by the party calling him or her.
    (4) The hearing officer shall exercise reasonable control over the 
mode and order of interrogating witnesses and presenting evidence so as 
to:
    (i) Make the interrogation and presentation effective for the 
ascertainment of the truth;
    (ii) Avoid needless consumption of time; and
    (iii) Protect witnesses from harassment or undue embarrassment.
    (5) The hearing officer may permit a witness to appear at a hearing 
via video conference or telephone for good cause shown.
    (h) Introducing prior sworn statements of witnesses into the 
record. At a hearing, any party wishing to introduce a prior, sworn 
statement of a witness, not a party, otherwise admissible in the 
proceeding, may make a motion setting forth the reasons therefore. If 
only part of a statement is offered in evidence, the hearing officer 
may require that all relevant portions of the statement be introduced. 
If all of a statement is offered in evidence, the hearing officer may 
require that portions not relevant to the proceeding be excluded. A 
motion to introduce a prior sworn statement may be granted if:
    (1) The witness is dead;
    (2) The witness is out of the United States, unless it appears that 
the absence of the witness was procured by the party offering the prior 
sworn statement;
    (3) The witness is unable to attend or testify because of age, 
sickness, infirmity, imprisonment or other disability;
    (4) The party offering the prior sworn statement has been unable to 
procure the attendance of the witness by subpoena; or
    (5) In the discretion of the hearing officer, it would be 
desirable, in the interests of justice, to allow the prior sworn 
statement to be used. In making this determination, due regard shall be 
given to the presumption that witnesses will testify orally in an open 
hearing. If the parties have stipulated to accept a prior sworn 
statement in lieu of live testimony, consideration shall also be given 
to the convenience of the parties in avoiding unnecessary expense.


Sec.  1081.304  Record of the hearing.

    (a) Reporting and transcription. Hearings shall be stenographically 
reported and transcribed under the supervision of the hearing officer, 
and the original transcript shall be a part of the record and the sole 
official transcript. The live oral testimony of each witness may be 
video recorded digitally, in which case the video recording and the 
written transcript of the testimony shall be made part of the record. 
Copies of transcripts shall be available from the reporter at 
prescribed rates.
    (b) Corrections. Corrections of the official transcript may be made 
only when they involve errors affecting substance and then only in the 
manner herein provided. Corrections ordered by the hearing officer or 
agreed to in a written stipulation signed by all counsel and parties 
not represented by counsel, and approved by the hearing officer, shall 
be included in the record, and such stipulations, except to the extent 
they are capricious or without substance, shall be approved by the 
hearing officer. Corrections shall not be ordered by the hearing 
officer except upon notice and opportunity for the hearing of 
objections. Such corrections shall be made by the official reporter by 
furnishing substitute type pages, under the usual certificate of the 
reporter, for insertion in the official record. The original 
uncorrected pages shall be retained in the files of the Bureau.
    (c) Closing of the hearing record. Upon completion of the hearing, 
the hearing officer shall issue an order closing the hearing record 
after giving the parties three days to determine if the record is 
complete or needs to be supplemented. The hearing officer shall retain 
the discretion to permit or order correction of the record as provided 
in paragraph (b) of this section.


Sec.  1081.305  Post-hearing filings.

    (a) Proposed findings and conclusions and supporting briefs.
    (1) Using the same method of service for each party, the hearing 
officer shall serve notice upon each party that the certified 
transcript, together with all

[[Page 45367]]

hearing exhibits and exhibits introduced but not admitted into evidence 
at the hearing, has been filed promptly after that filing. Any party 
may file with the hearing officer proposed findings of fact, proposed 
conclusions of law, and a proposed order within 30 days following 
service of this notice by the hearing officer or within such longer 
period as may be ordered by the hearing officer.
    (2) Proposed findings and conclusions must be supported by citation 
to any relevant authorities and by page 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.
    (b) Responsive briefs. Responsive briefs may be filed within 15 
days after the date on which the parties' proposed findings, 
conclusions, and order are due. Responsive briefs must be strictly 
limited to responding to matters, issues, or arguments raised in 
another party's papers. A party who has not filed proposed findings of 
fact and conclusions of law or a post-hearing brief may not file a 
responsive brief. Unless directed by the hearing officer, reply briefs 
are not permitted.
    (c) Order of filing. The hearing officer shall not order the filing 
by any party of any post-hearing brief or responsive brief in advance 
of the other party's filing of its post-hearing brief or responsive 
brief.


Sec.  1081.306  Record in proceedings before hearing officer; retention 
of documents; copies.

    (a) Contents of the record. The record of the proceeding shall 
consist of:
    (1) The notice of charges, the answer, and any amendments thereto;
    (2) Each motion, submission, or other paper filed in the 
proceedings, and any amendments and exceptions to or regarding them;
    (3) Each stipulation, transcript of testimony, and any document or 
other item admitted into evidence;
    (4) Any transcript of a conference or hearing before the hearing 
officer;
    (5) Any amicus briefs filed pursuant to Sec.  1081.216;
    (6) With respect to a request to disqualify a hearing officer or to 
allow the hearing officer's withdrawal under Sec.  1081.105(c), each 
affidavit or transcript of testimony taken and the decision made in 
connection with the request;
    (7) All motions, briefs, and other papers filed on interlocutory 
appeal;
    (8) All proposed findings and conclusions;
    (9) Each written order issued by the hearing officer or Director; 
and
    (10) Any other document or item accepted into the record by the 
hearing officer.
    (b) Retention of documents not admitted. Any document offered into 
evidence but excluded shall not be considered part of the record. The 
Executive Secretary shall retain any such document until the later of 
the date upon which an order by the Director ending the proceeding 
becomes final and not appealable, or upon the conclusion of any 
judicial review of the Director's order.
    (c) Substitution of copies. A true copy of a document may be 
substituted for any document in the record or any document retained 
pursuant to paragraph (b) of this section.

Subpart D--Decision and Appeals


Sec.  1081.400  Recommended decision of the hearing officer.

    (a) Time period for filing recommended decision. Subject to 
paragraph (b) of this section, the hearing officer shall file a 
recommended decision no later than 90 days after the deadline for 
filing post-hearing responsive briefs pursuant to Sec.  1081.305(b) and 
in no event later than 300 days after filing of the notice of charges.
    (b) Extension of deadlines. In the event the hearing officer 
presiding over the proceeding determines that it will not be possible 
to issue the recommended decision within the time periods specified in 
paragraph (a) of this section, the hearing officer shall submit a 
written request to the Director for an extension of the time period for 
filing the recommended decision. This request must be filed no later 
than 30 days prior to the expiration of the time for issuance of a 
recommended decision. The request will be served on all parties in the 
proceeding, who may file with the Director briefs in support of or in 
opposition to the request. Any such briefs must be filed within three 
days of service of the hearing officer's request and shall not exceed 
five pages. If the Director determines that additional time is 
necessary or appropriate in the public interest, the Director shall 
issue an order extending the time period for filing the recommended 
decision.
    (c) Content.
    (1) A recommended decision shall be based on a consideration of the 
whole record relevant to the issues decided, and shall be supported by 
reliable, probative, and substantial evidence. The recommended decision 
shall include a statement of findings of fact (with specific page 
references to principal supporting items of evidence in the record) and 
conclusions of law, as well as the reasons or basis therefore, as to 
all the material issues of fact, law, or discretion presented on the 
record and the appropriate order, sanction, relief or denial thereof. 
The recommended decision shall also state that a notice of appeal may 
be filed within 10 days after service of the recommended decision and 
include a statement that, unless a party timely files and perfects a 
notice of appeal of the recommended decision, the Director may adopt 
the recommended decision as the final decision and order of the Bureau 
without further opportunity for briefing or argument.
    (2) Consistent with paragraph (a) of this section, when more than 
one claim for relief is presented in an adjudication proceeding, or 
when multiple parties are involved, the hearing officer may direct the 
entry of a recommended decision as to one or more but fewer than all of 
the claims or parties only upon an express determination that there is 
no just reason for delay and upon an express direction for the entry of 
a recommended decision.
    (d) By whom made. The recommended decision shall be made and filed 
by the hearing officer who presided over the hearings, except when he 
or she shall have become unavailable to the Bureau.
    (e) Reopening of proceeding by hearing officer; termination of 
jurisdiction.
    (1) At any time from the close of the hearing record pursuant to 
Sec.  1081.304(c) until the filing of his or her recommended decision, 
a hearing officer may reopen the proceeding for the receipt of further 
evidence for good cause shown.
    (2) Except for the correction of clerical errors or pursuant to an 
order of remand from the Director, the jurisdiction of the hearing 
officer is terminated upon the filing of his or her recommended 
decision with respect to those issues decided pursuant to paragraph (c) 
of this section.
    (f) Filing, service, and publication. The hearing officer shall 
file the recommended decision with the Executive Secretary. The 
Executive Secretary shall promptly serve the recommended decision upon 
the parties.


Sec.  1081.401  Transmission of documents to Director; record index; 
certification.

    (a) Filing of index. At the same time the hearing officer files the 
recommended decision, the hearing officer shall furnish to the Director 
a

[[Page 45368]]

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 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 and each exhibit introduced but not admitted 
into evidence.
    (b) Final transmittal of record items to the Executive Secretary. 
After the close of the hearing, the hearing officer shall transmit to 
the Executive Secretary originals of any motions, exhibits or any other 
documents filed with, or accepted into evidence by, the hearing 
officer, or any other portions of the record that have not already been 
transmitted to the Executive Secretary.


Sec.  1081.402  Notice of appeal; review by the Director.

    (a) Notice of appeal.
    (1) Filing. Any party may file exceptions to the recommended 
decision of the hearing officer by filing a notice of appeal with the 
Executive Secretary within 10 days after service of the recommended 
decision. The notice shall specify the party or parties against whom 
the appeal is taken and shall designate the recommended decision or 
part thereof appealed from. If a timely notice of appeal is filed by a 
party, any other party may thereafter file a notice of appeal within 
five days after service of the first notice, or within 10 days after 
service of the recommended decision, whichever period expires last.
    (2) Perfecting a notice of appeal. Any party filing a notice of 
appeal must perfect its appeal by filing its opening appeal brief 
within 30 days of service of the recommended decision. Any party may 
respond to the opening appeal brief by filing an answering brief within 
30 days of service of the opening brief. Any party may file a reply to 
an answering brief within seven days of service of the answering brief. 
These briefs must conform to the requirements of Sec.  1081.403.
    (b) Director review other than pursuant to an appeal. In the event 
no party appeals the recommended decision, the Director shall, within 
40 days after the date of service of the recommended decision, either 
issue a final decision and order adopting the recommended decision, or 
order further briefing regarding any portion of the recommended 
decision. The Director's order for further briefing shall set forth the 
scope of review and the issues that will be considered and will make 
provision for the filing of briefs in accordance with the timelines set 
forth in paragraph (a)(2) of this section (except that that opening 
briefs shall be due within 30 days of service of the order of review) 
if deemed appropriate by the Director.
    (c) Exhaustion of administrative remedies. Pursuant to 5 U.S.C. 
704, a perfected appeal to the Director of a recommended decision 
pursuant to paragraph (a) of this section is a prerequisite to the 
seeking of judicial review of a final decision and order, or portion of 
the final decision and order, adopting the recommended decision..


Sec.  1081.403  Briefs filed with the Director.

    (a) Contents of briefs. Briefs shall be confined to the particular 
matters at issue. Each exception to the findings or conclusions being 
reviewed shall be stated succinctly. Exceptions shall be supported by 
citation to the relevant portions of the record, including references 
to the specific pages relied upon, and by concise argument including 
citation of such statutes, decisions, and other authorities as may be 
relevant. If the exception relates to the admission or exclusion of 
evidence, the substance of the evidence admitted or excluded shall be 
set forth in the brief, in an appendix thereto, or by citation to the 
record. Reply briefs shall be confined to matters in answering briefs 
of other parties.
    (b) Length limitation. Except with leave of the Director, opening 
and answering briefs shall not exceed 30 pages, and reply briefs shall 
not exceed 15 pages, exclusive of pages containing the table of 
contents, table of authorities, and any addendum that consists solely 
of copies of applicable cases, pertinent legislative provisions or 
rules, and exhibits. Motions to file briefs in excess of these 
limitations are disfavored.


Sec.  1081.404  Oral argument before the Director.

    (a) Availability. The Director will consider appeals, motions, and 
other matters properly before him or her on the basis of the papers 
filed by the parties without oral argument unless the Director 
determines that the presentation of facts and legal arguments in the 
briefs and record and decisional process would be significantly aided 
by oral argument, in which case the Director shall issue an order 
setting the date on which argument shall be held. A party seeking oral 
argument shall so indicate on the first page of its opening or 
answering brief.
    (b) Public arguments; transcription. All oral arguments shall be 
public unless otherwise ordered by the Director. Oral arguments before 
the Director shall be reported stenographically, unless otherwise 
ordered by the Director. Motions to correct the transcript of oral 
argument shall be made according to the same procedure provided in 
Sec.  1081.304(b).


Sec.  1081.405  Decision of the Director.

    (a) Upon appeal from or upon further review of a recommended 
decision, the Director will consider such parts of the record as are 
cited or as may be necessary to resolve the issues presented and, in 
addition, will, to the extent necessary or desirable, exercise all 
powers which he or she could have exercised if he or she had made the 
recommended decision. In proceedings before the Director, the record 
shall consist of all items part of the record below in accordance with 
Sec.  1081.306; any notices of appeal or order directing review; all 
briefs, motions, submissions, and other papers filed on appeal or 
review; and the transcript of any oral argument held. Review by the 
Director of a recommended decision may be limited to the issues 
specified in the notice(s) of appeal or the issues, if any, specified 
in the order directing further briefing. On notice to all parties, 
however, the Director may, at any time prior to issuance of his or her 
decision, raise and determine any other matters that he or she deems 
material, with opportunity for oral or written argument thereon by the 
parties.
    (b) Decisional employees may advise and assist the Director in the 
consideration and disposition of the case.
    (c) In rendering his or her decision, the Director will affirm, 
adopt, reverse, modify, set aside, or remand for further proceedings 
the recommended decision and will include in the decision a statement 
of the reasons or basis for his or her actions and the findings of fact 
upon which the decision is predicated.
    (d) At the expiration of the time permitted for the filing of reply 
briefs with the Director, the Executive Secretary will notify the 
parties that the case has been submitted for final Bureau decision. The 
Director will issue and the Executive Secretary will serve the 
Director's final decision and order within 90 days after such notice, 
unless the Director orders that the adjudication proceeding or any 
aspect thereof be remanded to the hearing officer for further 
proceedings.
    (e) Copies of the final decision and order of the Director shall be 
served upon each party to the proceeding, upon

[[Page 45369]]

other persons required by statute, and, if directed by the Director or 
required by statute, upon any appropriate state or Federal supervisory 
authority. The final decision and order will also be published on the 
Bureau's Web site or as otherwise deemed appropriate by the Bureau.


Sec.  1081.406  Reconsideration.

    Within 14 days after service of the Director's final decision and 
order, any party may file with the Director a petition for 
reconsideration, briefly and specifically setting forth the relief 
desired and the grounds in support thereof. Any petition filed under 
this section must be confined to new questions raised by the final 
decision or final order and upon which the petitioner had no 
opportunity to argue, in writing or orally, before the Director. No 
response to a petition for reconsideration shall be filed unless 
requested by the Director, who will request such response before 
granting any petition for reconsideration. The filing of a petition for 
reconsideration shall not operate to stay the effective date of the 
final decision or order or to toll the running of any statutory period 
affecting such decision or order unless specifically so ordered by the 
Director.


Sec.  1081.407  Effective date; stays pending judicial review.

    (a) Other than consent orders, which shall become effective at the 
time specified therein, an order to cease and desist or for other 
affirmative action under section 1053(b) of the Act becomes effective 
at the expiration of 30 days after the date of service pursuant to 
Sec.  1081.113(d)(2), unless the Director agrees to stay the 
effectiveness of the Order pursuant to this section.
    (b) Any party subject to a final decision and order, other than a 
consent order, may apply to the Director for a stay of all or part of 
that order pending judicial review.
    (c) A motion for stay shall state the reasons a stay is warranted 
and the facts relied upon, and shall include supporting affidavits or 
other sworn statements, and a copy of the relevant portions of the 
record. The motion shall address the likelihood of the movant's success 
on appeal, whether the movant will suffer irreparable harm if a stay is 
not granted, the degree of injury to other parties if a stay is 
granted, and why the stay is in the public interest.
    (d) A motion for stay shall be filed within 30 days of service of 
the order on the party. Any party opposing the motion may file a 
response within five days after receipt of the motion. The movant may 
file a reply brief, limited to new matters raised by the response, 
within three days after receipt of the response.
    (e) The commencement of proceedings for judicial review of a final 
decision and order of the Director does 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 or her 
discretion, and on such terms as he or she finds just, stay the 
effectiveness of all or any part of an order pending a final decision 
on a petition for judicial review of that order.

    Dated: July 22, 2011.
Sam Valverde,
Deputy Executive Secretary, Department of the Treasury.
[FR Doc. 2011-19032 Filed 7-25-11; 4:15 pm]
BILLING CODE 4810-25-P