Federal Register, Volume 76 Issue 145 (Thursday, July 28, 2011)

[Federal Register Volume 76, Number 145 (Thursday, July 28, 2011)]
[Rules and Regulations]
[Pages 45168-45174]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-19035]

=======================================================================
-----------------------------------------------------------------------

BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1080

[Docket No. CFPB-2011-0007]
RIN 3170-AA03

Rules Relating to Investigations

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Interim final rule with request for public comment.

-----------------------------------------------------------------------

SUMMARY: The Bureau of Consumer Financial Protection (``CFPB'' or
``Bureau''), pursuant to the Consumer Financial Protection Act of 2010,
is adopting its Rules Relating to Investigations in order to describe
the Bureau's procedures for investigations pursuant to section 1052 of
the Act. The Bureau invites interested members of the public to submit
written comments to this interim final rule setting 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-
0007, 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: This discussion contains the following
sections:

(a) Background
(b) Section-by-Section Summary
(c) Procedural Requirements

(a) Background

The Bureau is adopting Rules Relating to Investigations (``Rules'')
that implement provisions of the Consumer Financial Protection Act of
2010 (``Act'') \1\ that relate to the Bureau's investigations.
Specifically, these Rules will govern investigations undertaken
pursuant to section 1052 of the Act, 12 U.S.C. 5562, which authorizes
the Bureau to investigate whether persons have engaged in conduct that
violates any provision of Federal consumer financial law.
---------------------------------------------------------------------------

\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.
---------------------------------------------------------------------------

In developing these Rules, the Bureau considered the investigative
procedures of other law enforcement agencies. Specifically, the Bureau
reviewed the procedures currently used by the Federal Trade Commission
(``FTC''), the Securities and Exchange Commission (``SEC''), and the
prudential regulators for guidance. In light of the similarities
between section 1052 of the Act and section 20 of the Federal Trade
Commission Act (``FTC Act''), 15 U.S.C. 41 et seq., the Bureau drew
most heavily from the FTC's nonadjudicative procedures in constructing
the Rules.
The Rules describe a number of Bureau policies and procedures that
apply in a nonadjudicative setting. Among other things, these Rules set
forth (1) the Bureau's authority to conduct investigations, and (2) the
rights of persons from whom the Bureau seeks to compel information in
investigations.
In particular, the Rules lay out the Bureau's authority to conduct
investigations before instituting judicial or administrative
adjudicatory proceedings under Federal consumer financial law. The
Rules authorize the Assistant Director of the Division of Enforcement
to issue civil investigative demands for documentary material, tangible
things, written reports or answers to questions, and oral testimony,
which may be enforced in district court by either the General Counsel
or the Assistant Director of the Division of Enforcement. The Rules
also detail the authority of the Bureau's investigators to conduct
investigations and hold investigational hearings pursuant to civil
investigative demands for oral testimony.
Furthermore, the Rules set forth the rights of persons from whom
the Bureau seeks to compel information in an investigation.
Specifically, the Rules describe how such persons should be notified of
the purpose of the Bureau's investigation. The Rules detail the
procedures for filing a petition for an order modifying or setting
aside a civil investigative demand, which will be ruled upon by the
Bureau Director. They also describe the process for obtaining copies of
or access to documents or testimony provided to the Bureau. In
addition, the Rules describe a person's right to counsel at
investigational hearings.

[[Page 45169]]

(b) Section-by-Section Summary

Section 1080.1 Scope

This section describes the scope of the Rules. It makes clear that
these Rules only apply to investigations under section 1052 of the Act.

Section 1080.2 Definitions

This section defines several terms used throughout the Rules. Many
of these definitions also may be found in section 1051 of the Act.

Section 1080.3 Policy as to Private Controversies

This section states the Bureau's policy of pursuing investigations
that are in the public interest. Section 1080.3 is consistent with the
Bureau's mission to protect consumers by investigating potential
violations of Federal consumer financial law.

Section 1080.4 By Whom Conducted

This section explains that Bureau investigators are authorized to
conduct investigations pursuant to section 1052 of the Act.

Section 1080.5 Notification of Purpose

This section provides that a person compelled to provide
information to the Bureau or testify in an investigational hearing must
be advised of the nature of the conduct constituting the alleged
violation under investigation and the applicable provisions of law.
This section implements the requirements for civil investigative
demands described in section 1052(c)(2) of the Act.

Section 1080.6 Civil Investigative Demands

This section lays out the Bureau's procedures for issuing civil
investigative demands. It authorizes the Assistant Director of the
Division of Enforcement to issue civil investigative demands for
documentary material, tangible things, written reports or answers to
questions, and oral testimony. This section details the information
that must be included in civil investigative demands and the
requirement that responses be made under a sworn certificate. Section
1080.6 also authorizes the Assistant Director of the Division of
Enforcement to negotiate and approve the terms of compliance with civil
investigative demands and grant extensions for good cause. Finally,
this section describes the procedures for seeking an order to modify or
set aside a civil investigative demand, which will be ruled upon by the
Bureau Director.

Section 1080.7 Investigational Hearings

This section describes the procedures for investigational hearings
initiated pursuant to a civil investigative demand for oral testimony.
It also lays out the roles and responsibilities of the Bureau
investigator conducting the investigational hearing, which include
excluding unauthorized persons from the hearing room and ensuring that
the investigational hearing is transcribed, the witness is duly sworn,
the transcript is a true record of the testimony, and the transcript is
provided to the designated custodian.

Section 1080.8 Withholding Requested Material

This section describes the procedures that apply when persons
withhold material responsive to a civil investigative demand. It
requires that they assert a privilege by the production date and, if so
directed in the civil investigative demand, also submit a detailed
schedule of the items withheld. Section 1080.8 also sets forth the
procedures for handling the disclosure of privileged or protected
information or communications.

Section 1080.9 Rights of Witnesses in Investigations

This section describes the rights of persons compelled to submit
information or provide testimony in an investigation. It details the
procedures for obtaining a copy of submitted documents or a copy of or
access to a transcript of the person's testimony. This section also
describes a witness's right to make changes to his or her transcript
and the rules for signing the transcript.
Section 1080.9 lays out a person's right to counsel at an
investigational hearing and describes his or her counsel's right to
advise the witness as to any question posed for which an objection may
properly be made. It also describes the witness's or counsel's rights
to object to questions or requests that the witness is privileged to
refuse to answer. This section states that counsel for the witness may
not otherwise object to questions or interrupt the examination to make
statements on the record but may request that the witness have an
opportunity to clarify any of his or her answers. Finally, this section
authorizes the Bureau investigator to take all necessary action during
the course of the hearing to avoid delay and to prevent or restrain
disorderly, dilatory, obstructionist, or contumacious conduct, or
contemptuous language.

Section 1080.10 Noncompliance With Civil Investigative Demands

This section authorizes the Assistant Director of the Division of
Enforcement, the General Counsel, or their delegees, to initiate an
action to enforce a civil investigative demand in connection with the
failure or refusal of a person to comply with, or to obey, a civil
investigative demand. In addition, they are authorized to seek civil
contempt or other appropriate relief in cases where a court order
enforcing a civil investigative demand has been violated.

Section 1080.11 Disposition

This section explains that an enforcement action may be instituted
in federal or state court or through administrative proceedings when
warranted by the facts disclosed by an investigation. This section
further provides that the Bureau may refer investigations to
appropriate federal, state, or foreign government agencies as
appropriate. It also authorizes the Assistant Director of the Division
of Enforcement to close the investigation when the facts of an
investigation indicate an enforcement action is not necessary or
warranted in the public interest.

Section 1080.12 Orders Requiring Witnesses To Testify or Provide Other
Information and Granting Immunity

This section authorizes the Assistant Director of the Division of
Enforcement to request approval from the Attorney General for the
issuance of an order requiring a witness to testify or provide other
information and granting immunity under 18 U.S.C. 6004. It also sets
forth the Bureau's right to review the exercise of these functions, and
states that the Bureau will entertain an appeal from an order requiring
a witness to testify or provide other information only upon a showing
that a substantial question is involved, the determination of which is
essential to serve the interests of justice. Finally, this section
describes the applicable rules and time limits for such appeals.

Section 1080.13 Custodians

This section describes the procedures for designating a custodian
and deputy custodian for material produced pursuant to a civil
investigative demand in an investigation. It also states that these
materials are for the official use of the Bureau, but, upon notice to
the custodian, must be made available for examination during regular
office hours by the person who produced them.

[[Page 45170]]

Section 1080.14 Confidential Treatment of Demand Material and Non-
Public Nature of Investigations

Section 1080.14 explains that documentary materials and tangible
things obtained by the Bureau pursuant to a civil investigative demand
are subject to the requirements and procedures relating to disclosure
of records and information in part 1070 of this title. This section
also states that investigations generally are non-public. A Bureau
investigator may disclose the existence of an investigation to the
extent necessary to advance the investigation.

(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
Administrative Procedure Act, 5 U.S.C. 551 et seq. 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
\2\ 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.\3\
---------------------------------------------------------------------------

\2\ 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.
\3\ 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, on balance, the Rules are beneficial to
consumers and covered persons alike. The Rules do not impose any
obligations on consumers or have any direct impact on their access to
credit. Conversely, they provide a clear, efficient mechanism for
investigating compliance with the Federal consumer financial laws,
which benefits consumers because the Rules offer a systematic process
for protecting them from unlawful behavior.
The Rules impose certain obligations on covered persons who receive
civil investigative demands in Bureau investigations. Specifically, as
described above, the Rules set forth the process for complying with or
objecting to civil investigative demands for documentary material,
tangible things, written reports or answers to questions, and oral
testimony. The obligations in the Rules stem from express language in
the Act. As such, the Rules do not impose additional burdens on covered
persons beyond those Congress imposed in the Act. In fact, the Rules
implement the statutory requirements and provide clear guidelines to
recipients of civil investigative demands, providing a level of clarity
and certainty that is beneficial to those obligated under the Act to
comply with such demands. Moreover, ensuring compliance with Federal
consumer financial law ultimately benefits covered persons by ensuring
that scrupulous actors are not competitively disadvantaged in the
marketplace.
Furthermore, because section 1052 of the Act and the Rules are
largely based on section 20 of the FTC Act and its corresponding
regulations, they present an existing, stable model of investigatory
procedures that should not impose new compliance costs. The entities
subject to the Bureau's jurisdiction are accustomed to complying with
these or similar procedures for responding to demands for information
or testimony from regulators. Thus, they do not face a significant cost
of adjusting to a new procedural landscape for investigations; rather,
they benefit from the Bureau's adoption of an existing model.
The Rules contemplate that the Bureau will exercise its discretion
to modify demands or extend the time for compliance for good cause. The
Bureau can assess the cost of compliance with a civil investigative
demand in a particular circumstance and take appropriate steps to
mitigate any unreasonable compliance burden, a process providing
flexibility that benefits 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 1080

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

For the reasons set forth above, the Bureau of Consumer Financial
Protection adds part 1080 to Chapter X in Title 12 of the Code of
Federal Regulations to read as set forth below.

TITLE 12--BANKS AND BANKING

CHAPTER X--BUREAU OF CONSUMER FINANCIAL PROTECTION

PART 1080--RULES RELATING TO INVESTIGATIONS

Sec.
1080.1 Scope.
1080.2 Definitions.
1080.3 Policy as to private controversies.
1080.4 By whom conducted.
1080.5 Notification of purpose.
1080.6 Civil investigative demands.
1080.7 Investigational hearings.
1080.8 Withholding requested material.
1080.9 Rights of witnesses in investigations.
1080.10 Noncompliance with civil investigative demands.
1080.11 Disposition.
1080.12 Orders requiring witnesses to testify or provide other
information and granting immunity.
1080.13 Custodians.
1080.14 Confidential treatment of demand material and non-public
nature of investigations.

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

Sec. 1080.1 Scope.

The rules of this part apply to Bureau investigations conducted
pursuant to section 1052 of the Act, 12 U.S.C. 5562.

Sec. 1080.2 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 111-203 (July 21, 2010), Title X, 12 U.S.C. 5481 et
seq.
Assistant Director of the Division of Enforcement means the head of
the Division of Enforcement or any Bureau employee to whom the
Assistant Director of the Division of Enforcement has delegated
authority to act under this part.
Bureau means the Bureau of Consumer Financial Protection.
Bureau investigation means any inquiry conducted by a Bureau
investigator for the purpose of ascertaining whether any person is or
has been engaged in any conduct that is a violation.
Bureau investigator means any attorney or investigator employed by
the

[[Page 45171]]

Bureau who is charged with the duty of enforcing or carrying into
effect any Federal consumer financial law.
Custodian means the custodian or any deputy custodian designated by
the Bureau for the purpose of maintaining custody of information
produced pursuant to 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.
Documentary material means the original or any copy of any book,
document, record, report, memorandum, paper, communication, tabulation,
chart, logs, electronic files, or other data or data compilations
stored in any medium, including electronically-stored information.
Electronically stored information (ESI) means any information
stored in any electronic medium from which information can be obtained
either directly or, if necessary, after translation by the responding
party into a reasonably usable form.
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.
Person means an individual, partnership, company, corporation,
association (incorporated or unincorporated), trust, estate,
cooperative organization, or other entity.
Violation means any act or omission that, if proved, would
constitute a violation of any provision of Federal consumer financial
law.

Sec. 1080.3 Policy as to private controversies.

The Bureau shall act only in the public interest and will not
initiate an investigation or take other enforcement action when the
alleged violation is merely a matter of private controversy and does
not tend to affect adversely the public interest.

Sec. 1080.4 By whom conducted.

Bureau investigations are conducted by Bureau investigators
designated and duly authorized under section 1052 of the Act, 12 U.S.C.
5562, to conduct such investigations.

Sec. 1080.5 Notification of purpose.

Any person compelled to furnish documentary material, tangible
things, written reports or answers to questions, oral testimony, or any
combination of such material, answers, or testimony to the Bureau shall
be advised of the nature of the conduct constituting the alleged
violation that is under investigation and the provisions of law
applicable to such violation.

Sec. 1080.6 Civil investigative demands.

(a) In general. In accordance with section 1052(c) of the Act, the
Assistant Director of the Division of Enforcement may issue a civil
investigative demand in any Bureau investigation directing the person
named therein to produce documentary material for inspection and
copying or reproduction in the form or medium requested by the Bureau;
to submit tangible things; to provide a written report or answers to
questions; to appear before a designated representative at a designated
time and place to testify about documentary material, tangible things,
or other information; and to furnish any combination of such material,
things, answers, or testimony.
(1) Documentary material.
(i) Civil investigative demands for the production of documentary
material shall describe each class of material to be produced with such
definiteness and certainty as to permit such material to be fairly
identified, prescribe a return date or dates that will provide a
reasonable period of time within which the material so demanded may be
assembled and made available for inspection and copying or
reproduction, and identify the custodian to whom such material shall be
made available. Documentary material for which a civil investigative
demand has been issued shall be made available as prescribed in the
civil investigative demand.
(ii) Production of documentary material in response to a civil
investigative demand shall be made under a sworn certificate, in such
form as the demand designates, by the person to whom the demand is
directed or, if not a natural person, by any person having knowledge of
the facts and circumstances relating to such production, to the effect
that all of the documentary material required by the demand and in the
possession, custody, or control of the person to whom the demand is
directed has been produced and made available to the custodian.
(2) Tangible things.
(i) Civil investigative demands for tangible things shall describe
each class of tangible things to be produced with such definiteness and
certainty as to permit such things to be fairly identified, prescribe a
return date or dates which will provide a reasonable period of time
within which the things so demanded may be assembled and submitted, and
identify the custodian to whom such things shall be submitted.
(ii) Submissions of tangible things in response to a civil
investigative demand shall be made under a sworn certificate, in such
form as the demand designates, by the person to whom the demand is
directed or, if not a natural person, by any person having knowledge of
the facts and circumstances relating to such production, to the effect
that all of the tangible things required by the demand and in the
possession, custody, or control of the person to whom the demand is
directed have been submitted to the custodian.
(3) Written reports or answers to questions.
(i) Civil investigative demands for written reports or answers to
questions shall propound with definiteness and certainty the reports to
be produced or the questions to be answered, prescribe a date or dates
at which time written reports or answers to questions shall be
submitted, and identify the custodian to whom such reports or answers
shall be submitted.
(ii) Each reporting requirement or question in a civil
investigative demand shall be answered separately and fully in writing
under oath. Responses to a civil investigative demand for a written
report or answers to questions shall be made under a sworn certificate,
in such form as the demand designates, by the person to whom the demand
is directed or, if not a natural person, by any person responsible for
answering each reporting requirement or question, to the effect that
all of the information required by the demand and in the possession,
custody, control, or knowledge of the person to whom the demand is
directed has been submitted to the custodian.
(4) Oral testimony.
(i) Civil investigative demands for the giving of oral testimony
shall prescribe a date, time, and place at which oral testimony shall
be commenced, and identify a Bureau investigator who shall conduct the
investigation and the custodian to whom the transcript of such
investigation shall be submitted. Oral testimony in response to a civil
investigative demand shall be taken in accordance with the procedures
for investigational hearings prescribed by Sec. Sec. 1080.7 and 1080.9
of this part.
(ii) Where a civil investigative demand requires oral testimony
from an entity, the civil investigative demand shall describe with
reasonable particularity the matters for examination and the entity
must designate one or more officers, directors, or managing agents, or
designate other persons who consent to testify on its behalf. Unless

[[Page 45172]]

a single individual is designated by the entity, the entity must
designate the matters on which each designee will testify. The
individuals designated must testify about information known or
reasonably available to the entity and their testimony shall be binding
on the entity.
(b) Manner and form of production of ESI. When a civil
investigative demand requires the production of ESI, it shall be
produced in accordance with the instructions provided by the Bureau
regarding the manner and form of production. Absent any instructions as
to the form for producing ESI, ESI must be produced in the form in
which it is ordinarily maintained or in a reasonably usable form.
(c) Compliance. The Assistant Director of the Division of
Enforcement is authorized to negotiate and approve the terms of
satisfactory compliance with civil investigative demands and, for good
cause shown, may extend the time prescribed for compliance.
(d) Petition for order modifying or setting aside demand--in
general. Any petition for an order modifying or setting aside a civil
investigative demand shall be filed with the Executive Secretary of the
Bureau with a copy to the Assistant Director of the Division of
Enforcement within twenty (20) days after service of the civil
investigative demand, or, if the return date is less than twenty (20)
days after service, prior to the return date. Such petition shall set
forth all assertions of privilege or other factual and legal objections
to the civil investigative demand, including all appropriate arguments,
affidavits, and other supporting documentation. The attorney who
objects to a demand must sign any objections.
(1) Statement. Each petition shall be accompanied by a signed
statement representing that counsel for the petitioner has conferred
with counsel for the Bureau in a good-faith effort to resolve by
agreement the issues raised by the petition 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. The statement shall
recite the date, time, and place of each such conference between
counsel, and the names of all parties participating in each such
conference.
(2) Extensions of time. The Assistant Director of the Division of
Enforcement is authorized to rule upon requests for extensions of time
within which to file such petitions. Requests for extension of time are
disfavored.
(3) Disposition. The Director has the authority to rule upon a
petition for an order modifying or setting aside a civil investigative
demand.
(e) Stay of compliance period. The timely filing of a petition for
an order modifying or setting aside a civil investigative demand shall
stay the time permitted for compliance with the portion challenged. If
the petition is denied in whole or in part, the ruling will specify a
new return date.
(f) Public disclosure. All such petitions and the responses thereto
are part of the public records of the Bureau unless the Bureau
determines otherwise for good cause shown.

Sec. 1080.7 Investigational hearings.

(a) Investigational hearings, as distinguished from hearings in
adjudicative proceedings, may be conducted pursuant to a civil
investigative demand for the giving of oral testimony in the course of
any Bureau investigation, including inquiries initiated for the purpose
of determining whether or not a respondent is complying with an order
of the Bureau.
(b) Investigational hearings shall be conducted by any Bureau
investigator for the purpose of hearing the testimony of witnesses and
receiving documentary material, tangible things, or other information
relating to any subject under investigation. Such hearings shall be
under oath or affirmation and stenographically reported, and a
transcript thereof shall be made a part of the record of the
investigation. The Bureau investigator conducting the investigational
hearing also may direct that the testimony be recorded by audio,
audiovisual, or other means, in which case the recording shall be made
a part of the record of the investigation as well.
(c) In investigational hearings, the Bureau investigators shall
exclude from the hearing room all persons except the person being
examined, his or her counsel, the officer before whom the testimony is
to be taken, any investigator or representative of an agency with which
the Bureau is engaged in a joint investigation, and any individual
transcribing or recording such testimony. At the discretion of the
Bureau investigator, and with the consent of the person being examined,
persons other than those listed in this paragraph may be present in the
hearing room. The Bureau investigator shall certify or direct the
individual transcribing the testimony to certify on the transcript that
the witness was duly sworn and that the transcript is a true record of
the testimony given by the witness. A copy of the transcript shall be
forwarded promptly by the Bureau investigator to the custodian
designated in Sec. 1080.13.

Sec. 1080.8 Withholding requested material.

(a) Any person withholding material responsive to a civil
investigative demand or any other request for production of material
shall assert a claim of privilege not later than the date set for the
production of material. Such person shall, if so directed in the civil
investigative demand or other request for production, submit, together
with such claim, a schedule of the items withheld which states, as to
each such item, the type, specific subject matter, and date of the
item; the names, addresses, positions, and organizations of all authors
and recipients of the item; and the specific grounds for claiming that
the item is privileged. The person who submits the schedule and the
attorney stating the grounds for a claim that any item is privileged
must sign it.
(b) A person withholding material solely for reasons described in
this subsection shall comply with the requirements of this subsection
in lieu of filing a petition for an order modifying or setting aside a
civil investigative demand pursuant to Sec. 1080.6(d).
(c) Disclosure of privileged or protected information or
communications produced pursuant to a civil investigative demand shall
be handled as follows:
(1) The disclosure of privileged or protected information or
communications shall not operate as a waiver if:
(i) The disclosure was inadvertent;
(ii) The holder of the privilege or protection took reasonable
steps to prevent disclosure; and
(iii) The holder promptly took reasonable steps to rectify the
error, including notifying a Bureau investigator of the claim and the
basis for it.
(2) After being notified, the Bureau investigator must promptly
return, sequester, or destroy the specified information and any copies;
must not use or disclose the information until the claim is resolved;
must take reasonable steps to retrieve the information if he or she
disclosed it before being notified; and, if appropriate, may sequester
such material until such time as a hearing officer or court rules on
the merits of the claim of privilege or protection. The producing party
must preserve the information until the claim is resolved.
(3) The disclosure of privileged or protected information or
communications shall waive the

[[Page 45173]]

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. 1080.9 Rights of witnesses in investigations.

(a) Any person compelled to submit documentary material, tangible
things, or written reports or answers to questions to the Bureau, or to
testify in an investigational hearing, shall be entitled to retain a
copy or, on payment of lawfully prescribed costs, request a copy of the
materials, things, reports, or written answers submitted, or a
transcript of his or her testimony. The Bureau, however, may for good
cause deny such a request and limit the witness to inspection of the
official transcript of the testimony. Upon completion of transcription
of the testimony of the witness, the witness shall be offered an
opportunity to read the transcript of his or her testimony. Any changes
in form or substance that the witness desires to make shall be entered
and identified upon the transcript by the Bureau investigator with a
statement of the reasons given by the witness for making such changes.
The transcript shall then be signed by the witness unless the witness
cannot be found, is ill, waives in writing his or her right to
signature, or refuses to sign. If the transcript is not signed by the
witness within thirty (30) days of being afforded a reasonable
opportunity to review it, the Bureau investigator, or the individual
transcribing the testimony acting at the Bureau investigator's
direction, shall sign the transcript and state on the record the fact
of the waiver, illness, absence of the witness, or the refusal to sign,
together with any reasons given for the failure to sign.
(b) Any witness compelled to appear in person at an investigational
hearing may be accompanied, represented, and advised by counsel as
follows:
(1) Counsel for a witness may advise the witness, in confidence and
upon the initiative of either counsel or the witness, with respect to
any question asked of the witness for which an objection pursuant to
paragraph (b) (2) of this section may properly be made. If the witness
refuses to answer a question, counsel may briefly state on the record
if he or she has advised the witness not to answer the question and the
legal grounds for such refusal.
(2) Where it is claimed that a witness is privileged to refuse to
answer a question or to produce other evidence, the witness or counsel
for the witness shall object on the record to the question or
requirement and may state briefly and precisely the ground therefor.
The witness and his or her counsel shall not otherwise object to or
refuse to answer any question, and they shall not otherwise interrupt
the oral examination.
(3) Any objections made under the rules in this part will be
treated as continuing objections and preserved throughout the further
course of the hearing without the necessity for repeating them as to
any similar line of inquiry. Cumulative objections are unnecessary.
Repetition of the grounds for any objection will not be allowed.
(4) Counsel for a witness may not, for any purpose or to any extent
not allowed by paragraphs (b)(1) and (2) of this section, interrupt the
examination of the witness by making any objections or statements on
the record. Petitions challenging the Bureau's authority to conduct the
investigation or the sufficiency or legality of the civil investigative
demand shall be addressed to the Bureau in advance of the hearing.
Copies of such petitions may be filed as part of the record of the
investigation with the Bureau investigator conducting the
investigational hearing, but no arguments in support thereof will be
allowed at the hearing.
(5) Following completion of the examination of a witness, counsel
for the witness may, on the record, request that the Bureau
investigator conducting the investigational hearing permit the witness
to clarify any of his or her answers. The grant or denial of such
request shall be within the sole discretion of the Bureau investigator
conducting the hearing.
(6) The Bureau investigator conducting the hearing shall take all
necessary action to regulate the course of the hearing to avoid delay
and to prevent or restrain disorderly, dilatory, obstructionist, or
contumacious conduct, or contemptuous language. Such Bureau
investigator shall, for reasons stated on the record, immediately
report to the Bureau any instances where an attorney has allegedly
refused to comply with his or her obligations under the rules in this
part, or has allegedly engaged in disorderly, dilatory, obstructionist,
or contumacious conduct, or contemptuous language in the course of the
hearing. The Bureau will thereupon take such further action, if any, as
the circumstances warrant, including suspension or disbarment of the
attorney from further practice before the Bureau or exclusion from
further participation in the particular investigation.

Sec. 1080.10 Noncompliance with civil investigative demands.

(a) In cases of failure to comply in whole or in part with Bureau
civil investigative demands, appropriate action may be initiated by the
Bureau, including actions for enforcement.
(b) The Assistant Director of the Division of Enforcement and the
General Counsel are authorized to:
(1) Institute, on behalf of the Bureau, an enforcement proceeding
in the district court of the United States for any judicial district in
which a person resides, is found, or transacts business, in connection
with the failure or refusal of such person to comply with, or to obey,
a civil investigative demand in whole or in part if the return date or
any extension thereof has passed; and
(2) Seek civil contempt or other appropriate relief in cases where
a court order enforcing a civil investigative demand has been violated.

Sec. 1080.11 Disposition.

(a) When the facts disclosed by an investigation indicate that an
enforcement action is warranted, further proceedings may be instituted
in federal or state court or pursuant to the Bureau's administrative
adjudicatory process. Where appropriate, the Bureau also may refer
investigations to appropriate federal, state, or foreign governmental
agencies.
(b) When the facts disclosed by an investigation indicate that an
enforcement action is not necessary or would not be in the public
interest, the investigational file will be closed. The matter may be
further investigated, at any time, if circumstances so warrant.
(c) The Assistant Director of the Division of Enforcement is
authorized to close Bureau investigations.

Sec. 1080.12 Orders requiring witnesses to testify or provide other
information and granting immunity.

(a) The Assistant Director of the Division of Enforcement is hereby
authorized to request approval from the Attorney General of the United
States for the issuance of an order requiring a witness to testify or
provide other information granting immunity under 18 U.S.C. 6004.
(b) The Bureau retains the right to review the exercise of any of
the functions delegated under paragraph (a) of this section. Appeals to
the Bureau from an order requiring a witness to testify or provide
other information will be entertained by the Bureau only upon a showing
that a substantial question is involved, the determination of which is

[[Page 45174]]

essential to serve the interests of justice. Such appeals shall be made
on the record and shall be in the form of a brief not to exceed fifteen
(15) pages in length and shall be filed within five (5) days after
notice of the complained of action. The appeal shall not operate to
suspend the hearing unless otherwise determined by the Bureau
investigator conducting the hearing or ordered by the Bureau.

Sec. 1080.13 Custodians.

(a) The Bureau shall designate a custodian and one or more deputy
custodians for material to be delivered pursuant to a civil
investigative demand in an investigation. The custodian shall have the
powers and duties prescribed by section 1052 of the Act, 12 U.S.C.
5562. Deputy custodians may perform all of the duties assigned to
custodians.
(b) Material produced pursuant to a civil investigative demand,
while in the custody of the custodian, shall be for the official use of
the Bureau in accordance with the Act; but such material shall upon
reasonable notice to the custodian be made available for examination by
the person who produced such material, or his or her duly authorized
representative, during regular office hours established for the Bureau.

Sec. 1080.14 Confidential treatment of demand material and non-public
nature of investigations.

(a) Documentary materials and tangible things the Bureau receives
pursuant to a civil investigative demand are subject to the
requirements and procedures relating to the disclosure of records and
information set forth in part 1070 of this chapter.
(b) Bureau investigations generally are non-public. Bureau
investigators may disclose the existence of an investigation to
potential witnesses or third parties to the extent necessary to advance
the investigation.

Dated: July 22, 2011.
Sam Valverde,
Deputy Executive Secretary, Department of the Treasury.
[FR Doc. 2011-19035 Filed 7-25-11; 4:15 pm]
BILLING CODE 4810-25-P