[Federal Register Volume 76, Number 166 (Friday, August 26, 2011)]
[Rules and Regulations]
[Pages 53596-53629]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-21378]
[[Page 53595]]
Vol. 76
Friday,
No. 166
August 26, 2011
Part IV
Federal Housing Finance Board
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12 CFR Part 908
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Federal Housing Finance Agency
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12 CFR Part 1209
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Department of Housing and Urban Development
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Office of Federal Housing Enterprise Oversight
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12 CFR Part 1780
Rules of Practice and Procedure; Final Rule
Federal Register / Vol. 76 , No. 166 / Friday, August 26, 2011 /
Rules and Regulations
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FEDERAL HOUSING FINANCE BOARD
12 CFR Part 908
FEDERAL HOUSING FINANCE AGENCY
12 CFR Part 1209
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of Federal Housing Enterprise Oversight
12 CFR Part 1780
RIN 2590-AA14
Rules of Practice and Procedure
AGENCIES: Federal Housing Finance Board; Federal Housing Finance
Agency; and Office of Federal Housing Enterprise Oversight.
ACTION: Final rule.
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SUMMARY: The Federal Housing Finance Agency (FHFA) is adopting a final
rule to implement the Housing and Economic Recovery Act of 2008 (HERA)
amendments to the Federal Housing Enterprises Financial Safety and
Soundness Act of 1992 (Safety and Soundness Act) and the Federal Home
Loan Bank Act (Bank Act) governing civil administrative enforcement
actions by FHFA, under which FHFA's authority was consolidated to
initiate enforcement proceedings against the Federal National Mortgage
Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation
(Freddie Mac) (together, the Enterprises), the Federal Home Loan Banks
(the Banks) (collectively, the regulated entities), and their entity-
affiliated parties. This rule removes the existing Rules of Practice
and Procedure of the Federal Housing Finance Board (Finance Board) and
the Office of Federal Housing Enterprise Oversight (OFHEO), and
establishes new FHFA regulations.
DATES: This rule is effective September 26, 2011.
FOR FURTHER INFORMATION CONTACT: Stephen E. Hart, Managing Associate
General Counsel, Federal Housing Finance Agency, 1700 G Street, NW.,
Fourth Floor, Washington, DC 20552, telephone (202) 414-8960 (not a
toll-free number). The telephone number for the Telecommunications
Device for the Deaf is: (800) 877-8339.
SUPPLEMENTARY INFORMATION: The Supplementary Information is organized
according to this table of contents:
I. Background
II. Summary of Comments
III. Final Rule
IV. Paperwork Reduction Act
V. Regulatory Flexibility Act
I. Background
A. Regulatory History
On August 12, 2010, FHFA published for comment a proposed rule to
implement the provisions of HERA authorizing FHFA to take civil
enforcement actions in accordance with sections 1371 through 1379D of
the Safety and Soundness Act under specified conditions. 75 FR 49314
(proposed rule). The proposed rule included proposed Rules of Practice
and Procedure for hearings on the record in enforcement actions, rules
of practice governing individuals who practice before FHFA, provisions
for periodic civil money penalty adjustments, and the rules governing
suspension or removal of an entity-affiliated party charged with a
felony. The comment period closed on October 12, 2010.
FHFA received two comment letters on the proposed rule, one from
the 12 Banks and the other from two trade associations, that generally
were supportive of the proposal, and recommended ways in which the
regulation could be amended to better achieve its objectives. A
discussion of those comments follows. The key substantive issues raised
by the comment letters focused principally on procedural refinements,
whether the procedures for hearings would apply to enforcement actions
on housing goals, and whether the rule was intended to cover
investigative subpoenas. In this final rule, FHFA has incorporated
certain revisions suggested by these commenters, but in other respects
retains the substance of the proposed rule for the reasons stated in
the comment summary below.
B. HERA Amendments
On July 30, 2008, HERA, Public Law No. 110-289, 122 Stat. 2654,
became law and created FHFA as an independent agency of the Federal
government.\1\ Among other things, HERA transferred to FHFA the
supervisory and oversight responsibilities over the Enterprises,
previously vested in OFHEO, and the Banks, which had been regulated by
the Finance Board. HERA established FHFA as the financial safety and
soundness regulator to oversee the prudential operations of the
regulated entities and to ensure that they operate in a safe and sound
manner; remain adequately capitalized; foster liquid, efficient,
competitive and resilient national housing finance markets; comply with
the Safety and Soundness Act and their respective authorizing statutes,
as well as all rules, regulations, guidelines, and orders issued under
law; and carry out their missions through activities that are
authorized by law and are consistent with the public interest. See 12
U.S.C. 4513. The Enterprises and Banks continue to operate under
regulations promulgated by OFHEO and the Finance Board, respectively,
until such time as the existing regulations are supplanted by
regulations promulgated by FHFA.\2\
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\1\ See generally, HERA, Division A, Titles I-III, Public Law
110-289, 122 Stat. 2654, sections 1101 et seq. (July 30, 2008).
Specifically, section 1101 of HERA amended section 1311(a) of the
Safety and Soundness Act, Title XIII, Public Law 102-550, 106 Stat.
3672, 3941-4012, sections 1301 et seq. (1992), to establish FHFA as
an independent agency of the Federal government. See 12 U.S.C.
4511(a).
\2\ The existing regulations are enforceable by the Director,
until such time as they are modified, terminated, set aside, or
superseded by the Director, as provided by HERA sections 1302 and
1312, 122 Stat. 2795, 2798. See also 75 FR 49314, 49315, n. 6.
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C. HERA-Enhanced Enforcement Authority
Because the regulated entities play a key role in housing finance
and the U.S. economy, and FHFA's mission is to provide effective
supervision, regulation, and housing mission oversight of the
Enterprises and the Banks, HERA amended the Safety and Soundness Act to
make explicit the general regulatory and supervisory authority of FHFA
and the Director. See generally, 12 U.S.C. 4511, 4513, 4517, 4518, and
4526. The HERA amendments to sections 1371 through 1379D of the Safety
and Soundness Act (12 U.S.C. 4631 through 4641) authorize the Director
to initiate administrative enforcement proceedings to issue cease and
desist orders and temporary cease and desist orders and to impose civil
money penalties against regulated entities, entity-affiliated parties,
and the Office of Finance of the Federal Home Loan Bank System, in
accordance with applicable law.
Additionally, the HERA provisions in section 1377(a) of the Safety
and Soundness Act (12 U.S.C. 4636a(a)), give the Director express
authority to suspend or remove from office, or to prohibit any further
participation in the conduct of the affairs of a regulated entity, an
entity-affiliated party, or any officer, director, or management of the
Office of Finance, for any violation, practice, or breach of such
party's fiduciary duty, as set forth therein. Thus, in accordance with
section 1377(b) of the Safety and Soundness Act (12 U.S.C. 4636a(b)),
the Director can
[[Page 53597]]
take immediate action to suspend or remove from office, or to prohibit
the participation in any manner in the conduct of the affairs of the
regulated entity, any party subject to an action under section 1377(a)
of the Safety and Soundness Act.
Moreover, under section 1377(h) of the Safety and Soundness Act (12
U.S.C. 4636a(h)), with respect to any entity-affiliated party who is
charged with a Federal or state crime involving dishonesty or breach of
trust, which is punishable by imprisonment for more than one year, in
any criminal information, indictment or complaint, the Director is
authorized to suspend such party from office or prohibit him or her
from any further involvement in the conduct of the affairs of a
regulated entity if continued service or participation by such party
could pose a threat to, or impair public confidence in, the regulated
entity. See 12 U.S.C. 4636a(h)(1)(A). The statute prescribes that a
copy of the suspension notice shall be served on each relevant
regulated entity, see 12 U.S.C. 4636a(h)(1)(B)(i), and specifies
streamlined procedures for such actions.
Prior to HERA section 1379B of the Safety and Soundness Act (12
U.S.C. 4641) established the subpoena power of the Director in
administrative proceedings. Under the HERA amendments, section 1379D of
the Safety and Soundness Act makes explicit agency subpoena powers in
investigations and examinations, and authorizes any designated
representative of the Director to issue, revoke, quash, or modify a
subpoena or subpoena duces tecum, as follows:
In the course of or in connection with any proceeding,
examination, or investigation under this chapter, the Director or
any designated representative thereof, including any person
designated to conduct any hearing under this subchapter shall have
the authority * * * to revoke, quash, or modify subpoenas and
subpoenas duces tecum.
12 U.S.C. 4641. This provision, however, should not be read to subject
investigative subpoenas, subpoenas issued in connection with an
examination, or conservator and receiver subpoenas to the procedural
requirements that would apply in administrative enforcement
proceedings.
Thus, under these enhanced powers, the Director has at his or her
disposal a broad range of enforcement mechanisms to enforce, as needed,
applicable law, rules, orders, and agreements pertaining to the safe
and sound operation of the Enterprises and Banks.\3\ In fact, much of
FHFA's enforcement authority parallels that of the Federal bank and
thrift regulators who adopted uniform rules of practice and procedure
for enforcement actions pursuant to section 916 of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA),
Public Law 101-73, 103 Stat. 183 (1989) (Uniform Rules). The Uniform
Rules set the standard for formal enforcement proceedings, and served
as the model for the enforcement regulations adopted by the Finance
Board in 2002 (12 CFR part 908) and OFHEO in 1999 (as amended in 2001)
(12 CFR part 1780).\4\
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\3\ The Director has broad safety and soundness enforcement
authority under sections 1371 through 1379D of the Safety and
Soundness Act, (subtitle C--Enforcement Provisions) (12 U.S.C. 4631
through 4641), in furtherance of the Director's general safety and
soundness regulatory authority. Additionally, the Director has
authority under subtitle B of the Safety and Soundness Act (sections
1361 through 1369E) to set and enforce capital levels or to appoint
FHFA as conservator or receiver for a regulated entity. More
important, as amended by HERA, section 1311(c) of the Safety and
Soundness Act expressly preserves these powers in addition to the
Director's general supervisory and regulatory authority under
subsection (b) of section 1311 of the Safety and Soundness Act, as
amended: ``[t]he authority of the Director to take actions under
subtitles B and C shall not in any way limit the general supervisory
and regulatory authority granted to the Director under subsection
(b).'' See 12 U.S.C. 4511(c).
\4\ The proposed rule included a discussion of its origin in the
Uniform Rules. See 75 FR 49314, 49316-17.
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FHFA has determined mainly to adopt these procedures, with some
changes that reflect the differences in the respective regulatory
structures. Thus, the final rule builds upon the Uniform Rules and the
rules previously adopted by the Finance Board and OFHEO.
Cease and desist enforcement proceedings are commenced by serving a
notice of charges that is to set forth the facts constituting the
practice or violation and fix a time and place for a hearing to
determine on the record whether an order to cease and desist from such
practice or violation should issue. See 12 U.S.C. 4631(c)(1). Such
hearings are governed by section 1373 of the Safety and Soundness Act.
See generally, 12 U.S.C. 4633. In fact, section 1373(a)(1) of the
Safety and Soundness Act (12 U.S.C. 4633(a)(1)) requires that any
hearing under sections 1371 (cease and desist order), 1376(c) (civil
money penalty assessment), or 1377 (removal or suspension orders;
except removal actions under section 1377(h) of the Safety and
Soundness Act) be held on the record and conducted in accordance with
sections 554, 556, and 557 of the Administrative Procedure Act
(APA).\5\ See 12 U.S.C. 4633(a)(1), (3).
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\5\ Public Law 89-554, 80 Stat. 381 (1966) (codified at 5 U.S.C.
551-559; 701-706). Formal adjudications (i.e., hearings ``on the
record'') are governed by chapters 5 and 7 of the APA (5 U.S.C. 554,
556, and 557). The APA grants each agency ``the authority necessary
to comply with the requirements of [chapter 5] through the issuance
of rules or otherwise.'' See 5 U.S.C. 559.
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Therefore, prior to issuing a cease-and-desist order, imposing
civil money penalties, or ordering the suspension or removal of an
entity-affiliated party or any officer, director, or management of the
Office of Finance, FHFA must conduct a hearing on the record and
provide the subject of such an order with notice and the opportunity to
participate in a formal hearing. The final rule establishes the
procedural requirements for any such hearing on the record.\6\
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\6\ No hearing on the record is required prior to the issuance
of an order under section 1377(h) of the Safety and Soundness Act
(12 U.S.C. 4636a(h)), for the suspension or removal of an entity-
affiliated party charged with a felony. Once served, the subject may
timely submit a written request to appear before the Director to
show the continued service would not pose a threat to the interests
of the regulated entity or threaten to impair public confidence in
the regulated entity. This provision does not authorize or require a
formal hearing on the record; therefore, the subpart C provisions of
the proposed rule do not govern such proceedings.
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D. The Proposed Rule
The proposed rule was to govern administrative hearings on the
following matters that FHFA by law must conduct on the record under APA
formal hearing requirements:
(1) Enforcement proceedings under sections 1371 through 1379D of
the Safety and Soundness Act (12 U.S.C. 4631 through 4641) (except
section 1377(h) (12 U.S.C. 4636a));
(2) Removal, prohibition, and civil money penalty proceedings for
violations of post-employment restrictions imposed by applicable law;
and
(3) Proceedings under section 102 of the Flood Disaster Protection
Act of 1973, as amended (42 U.S.C. 4012a), to assess civil money
penalties.
Because the procedural framework for formal hearings on the record
is appropriate for other types of enforcement actions, the formal
hearing procedures were enumerated separately in subpart C of the
proposed rule. The procedural framework established in subpart C of the
proposed rule may accommodate formal enforcement actions under sections
1341 and 1345 of the Safety and Soundness Act pertaining to the
achievement of housing goals and enforcement actions to enforce the
regulated entities' reporting requirements under section
[[Page 53598]]
1314 of the Safety and Soundness Act (12 U.S.C. 4514).
As proposed, the rule would have replaced the Rules of Practice and
Procedure previously adopted by OFHEO (12 CFR part 1780) and the
Finance Board (12 CFR part 908).\7\ Many of the existing procedures
were retained in the proposed rule without significant revisions. The
proposed rule set out the requirements for the commencement of an
enforcement proceeding by service of a notice of charges; the
appointment of a presiding officer; hearing procedures and permissible
activities; the conduct of the trial-like testimonial phase of the
hearing process; the presiding officer's filing with the Director of a
recommended decision and order, along with the hearing record; the
decision by the Director; and the qualifications and disciplinary rules
for practice before FHFA.\8\
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\7\ See 75 FR 49314, 49317, n. 17, 18.
\8\ See id. at n. 19.
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The proposed process was similar to the existing rules in that
during the course of the hearing, the presiding officer would control
virtually all aspects of the proceeding. In particular, the proposed
rule would have established that the presiding officer would determine
the hearing schedule; preside over all conferences; rule on non-
dispositive motions, discovery, and evidentiary issues; and ensure that
the proceeding is prompt, fair, and impartial, and allows for the
creation of a written record upon which the recommended decision is
based.\9\
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\9\ See id. at n. 20.
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The proposed rule retained the existing requirement that the
Director issue a final ruling within 90 days of the date on which the
Director serves notice upon the parties that the hearing record is
complete and the case has been submitted for final decision. The
proposed rule similarly would have reserved to the Director the
authority to dismiss the proceeding, in whole or in part, or to make a
final determination of the merits of the proceeding.
Informed by OFHEO's prior experience in conducting enforcement
proceedings under its existing Rules of Practice and Procedure, FHFA
identified certain issues for clarification in its revised rule.
Accordingly, the proposed rule would have included a definition of
``notice of charges'' to establish the notice of charges as the
charging document that is served by FHFA on a regulated entity or party
as provided in sections 1371 through 1377 of the Safety and Soundness
Act (12 U.S.C. 4631 through 4636a) to initiate enforcement proceedings.
Additionally, to avert any future confusion, the proposed rule would
have stated in a new definition in Sec. 1209.3 that a ``notice of
charges'' is to be distinguished from an ``effective notice'' within
the meaning of 12 U.S.C. 4635(a), to more clearly articulate that this
provision does not confer upon a Federal district court subject matter
jurisdiction over FHFA's administrative enforcement proceeding. That
is, although a Federal district court has authority to enforce an
effective notice or order that has been issued by FHFA, such a notice
is not the same as a notice of charges and the court does not obtain
subject matter jurisdiction over an ongoing administrative enforcement
proceeding through this provision.
The proposed rule sought to make the presiding officer's authority
more explicit in several respects. A principal revision in Sec.
1209.11(b)(1) made explicit the authority of the presiding officer to
hold an initial scheduling conference to control the proceedings and
set the date for the testimonial phase of the hearing in a scheduling
order issued in conjunction with the initial scheduling conference set
under Sec. 1209.36 of the proposed rule. As a corollary to the
authority of the presiding officer to set the date of the evidentiary
hearing in a scheduling order, Sec. 1209.23 of the proposed rule would
clarify that the notice of charges is to specify that the testimonial
hearing date will be determined when the presiding officer holds the
initial scheduling conference and issues a scheduling order within 30
to 60 days of service of the notice of charges.
Additionally, the proposed rule sought to arm the presiding officer
with sufficient autonomy to control the pace and focus of discovery to
prohibit unnecessary or burdensome discovery. First, Sec.
1209.11(b)(5) of the proposed rule confirmed that the presiding officer
has full authority to issue and enforce discovery orders. Second, Sec.
1209.11(b)(8) of the proposed rule was to effectively codify the broad
powers of the presiding officer to regulate the scope, timing, and
completion of discovery of any non-privileged matter that is materially
relevant to the charges or allowable defenses in the proceeding.
Third, the proposed rule made explicit the requirement that matters
or documents subject to discovery must be ``materially relevant'' to
the charges or allowable defenses in the proceeding. This measure of
allowable discovery was stated to support the presiding officer's
discretion and enhance his ability to deny discovery requests that seek
information having no logical connection to a consequential fact that
would tend to prove or to disprove a matter in issue. The proposed rule
thus would have included a parallel authority in Sec. 1209.11(b)(11)
to underscore that the presiding officer has ample authority to admit,
exclude, or limit evidence according to its material relevance to the
legally cognizable claims and defenses presented by a notice of
charges.
E. Differences
When promulgating any regulation that may have future affect
relating to the Banks, the Director is required by section 1201 of HERA
to consider the differences between the Banks and the Enterprises with
respect to the Banks' cooperative ownership structure; mission of
providing liquidity to members; affordable housing and community
development mission; capital structure; and joint and several
liability. See section 1201 Public Law 110-289, 122 Stat. 2782-83
(amending 12 U.S.C. 4513(f)[sic]).\10\ As noted in the preamble to the
proposed rule, the Director considered the differences between the
Banks and the Enterprises, as they relate to the above factors, and
determined that the rule is appropriate. See 75 FR 49314, 49315. FHFA
also requested comments from the public about whether differences
related to these factors should have resulted in any revisions to the
proposed rule. No comments specific to that request were received. In
sum, the five differences identified in section 1201 of HERA do not
require a different enforcement regulation for the Banks than for the
Enterprises. Therefore, the comparative analysis under section 1201 of
HERA undertaken for the proposed rule required no changes.
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\10\ So in original; no paragraphs (d) and (e) were enacted. See
12 U.S.C.A. 4513 n 1.
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On the effective date, this final rule will, among other things,
repeal and replace the current Finance Board Rules of Practice and
Procedure regulation governing formal enforcement proceedings (12 CFR
part 908), revised to implement the HERA-amended enforcement scheme.
II. Summary of Comments
FHFA received two comment letters on the proposed rule. In their
respective letters the Banks and the trade associations commented on
more than two dozen provisions and noted a number of broader issues
presented in the proposed rule. Those broader issues centered on:
whether the evidentiary standard stated in the rule is comparable to
that of the Uniform Rules; whether the rule may apply to
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enforcement of housing goals; whether some of the procedures may
provide FHFA with a tactical advantage over the responding party;
whether the rule is intended to apply to investigative subpoenas;
whether the provisions on district court jurisdiction should be
clarified; whether the rule should be revisited to impose the standards
of conduct for parties appearing before the Director on agency
employees, and whether the rule should impose on agency staff and the
presiding officer a confidentiality requirement under the Trade Secrets
Act. These issues are addressed in turn below.
Evidentiary Standard
One commenter queried whether the evidentiary standard expressed in
the proposed rule strays from the model Uniform Rules. FHFA has
considered the comment and concluded that the rule does not depart from
the evidentiary standard for discovery in enforcement hearings embodied
in the Uniform Rules. Indeed, it is fully consistent with the Federal
Deposit Insurance Corporation's rule that allows discovery of ``any
matter, not privileged, that has material relevance to the merits of
the pending action.'' 12 CFR 308.24(b). This rule adopts a similar
standard that the evidence must be materially relevant to the charges
or allowable defenses presented in the action. The ``materially
relevant'' standard ensures that the information to be introduced for
the record will have a logical connection to a consequential fact that
tends to prove or disprove a matter in issue.
The discovery requirement was made more explicit also to underscore
that in an administrative enforcement hearing the presiding officer
must have authority to frame the issues, control the pace of the
proceedings, and to admit, exclude or limit evidence according to its
materiality, relevance, and analytical usefulness in the context of the
claims and available defenses. This standard for discovery matters is
fully consistent with the APA requirement for formal administrative
hearings that an agency ``as a matter of policy shall provide for the
exclusion of irrelevant, immaterial, or unduly repetitive evidence.''
See 5 U.S.C. 556(d). Moreover, it fosters conclusions based on a
hearing record that comprises ``reliable, probative, and substantial
evidence.'' See id. It is, therefore, essential for evidentiary probity
to make express this clear standard in order to promote the fair
resolution of issues in an equitable and timely fashion, and for the
conservation of the resources of the presiding officer. This issue also
is discussed below in response to a comment on Sec. 1209.11(b) of the
proposed rule.
Enforcement of Enterprise Housing Goals
The grounds and remedies for cease and desist enforcement
proceedings relative to Enterprise housing goals (exclusive of the
requirements pertaining to underserved markets) in 12 U.S.C. 4581
differ from those for cease and desist enforcement proceedings under 12
U.S.C. 4631, but the hearing process called for in 12 U.S.C. 4582 for
enforcement of housing goals is essentially identical to the hearing
procedure requirements set out in 12 U.S.C. 4633. Therefore, the
proposed rule allowed that in the future the hearing procedures in
subpart C of the proposed rule might be utilized for housing goals
enforcement hearings.
One commenter opined that application of the hearing procedures in
subpart C of the proposed rule to Enterprise housing goals enforcement
proceedings ``appears sensible,'' but recommended that FHFA should be
clear about which subpoena authority would be used in such actions
because the subpoena authority in 12 U.S.C. 4588 differs in certain
respects. For example, the treatment of witness fees in 12 U.S.C. 4588
has provisions not found in the subpoena authority in 12 U.S.C. 4641.
Moreover, following the HERA amendments, 12 U.S.C. 4641 applies to
administrative enforcement actions, examinations, and investigations.
Compare 12 U.S.C. 4588 with 12 U.S.C. 4641. Without presaging every
possible scenario, 12 U.S.C. 4588, the subpoena authority for housing
goals administrative enforcement proceedings under 12 U.S.C. 4581,
appears to be controlling in such actions. Without more information,
specific guidance on such issues in advance of potential future
rulemakings would be premature.
Tactical Advantages
One commenter questioned whether certain provisions of the proposed
rule provided for symmetrical treatment of parties or their counsel in
an enforcement action, in particular with respect to the filing of
documents under seal (Sec. 1209.12(c)), requesting a closed hearing
(Sec. 1209.12(d)), and authority to sanction counsel for ex parte
contact of decisional employees (Sec. Sec. 1209.14 and 1209.70). These
sections are not unfairly weighted in favor of FHFA counsel of record.
First, whether a proceeding should be open to the public or a document
should be filed under seal is vested exclusively in the agency by the
statutory authority reserved to the Director to determine if disclosure
would be contrary to the public interest. Therefore, to file a document
under seal, FHFA counsel of record must make a written determination
that disclosure of the document would be contrary to the public
interest; at the same time the presiding officer is authorized to issue
orders or close hearings in whole or in part to ensure the
confidentiality of the material is preserved. Thus, the proposed rule
would have entrusted to the presiding officer the responsibility to
maintain the confidentiality of information. These standards are
consistent with due process and the Uniform Rules. Furthermore, all
parties' rights to protect confidential information are preserved
because any party to a proceeding may request confidential treatment of
information, such as personal financial information, in the form of a
protective order.
Second, the standards set forth in Subpart D governing
representational conduct before the agency are to promote the
expeditious, fair resolution of adjudications or matters defined as
``practice before FHFA,'' including enforcement proceedings. FHFA
counsel of record appearing before the presiding officer in an
enforcement proceeding would of course be subject to these
requirements. In addition, FHFA employees are held to standards of
conduct and ethical requirements that are set forth and redressed under
Title 5 of the United States Code. The procedures in subpart C of the
proposed rule would not govern such matters. Notwithstanding the
express authority of the presiding officer to take remedial action or
sanction a party or representative for prohibited acts in a proceeding,
the overall authority of the presiding officer and Director to take
action or impose restrictions or sanctions authorized under applicable
statute or regulations is preserved by Sec. 1209.74(c)(4).
Investigative Subpoenas
One commenter asked for clarification on whether the proposed rule
is intended to govern investigatory subpoenas. The commenter attributed
the confusion, in part, to the fact that 12 U.S.C. 4641 contains
authority for the issuance of subpoenas in examinations and
investigations, in addition to adjudications. To be clear, 12 U.S.C.
4641 is included in the citation as support for the rule because it
contains the authority for adjudicative subpoenas; there was no
intention to suggest the proposed rule for enforcement proceedings
would apply to investigations or examinations. The commenter posited
that the proposed
[[Page 53600]]
rule would not apply to examinations or investigations because: (1)
FHFA has authority to issue (only) two types of subpoenas,
investigative and adjudicatory; and (2) routine examinations generally
would not involve the issuance of subpoenas, and if the subpoena
authority is exercised ``it is commonly called a formal
investigation.'' FHFA has considered these comments, and notes that
express examination subpoena power is established by the HERA
amendments in 12 U.S.C. 4641. In addition, FHFA agrees with the
conclusion that the proposed rule does not establish a process for
formal investigations, and thus further clarification would be
unnecessary. Finally, by law, FHFA as conservator or receiver may issue
subpoenas pursuant to 12 U.S.C. 4617(b)(2)(I). Therefore, FHFA has
determined that no changes to the proposed rule are required.
Judicial Enforcement of Administrative Subpoenas
One commenter recommended removal of the last sentence in the
provision that governs discovery of parties, Sec. 1209.30(h)(2), which
states that the jurisdiction of district courts to enforce
administrative subpoenas is as provided by 12 U.S.C. 4641(c)(2).
Specifically, the proposed rule would have added a new sentence citing
the limitations on district court jurisdiction that are found in 12
U.S.C. 4635(b), to underscore that a district court when called upon to
enforce an administrative subpoena does not obtain subject matter
jurisdiction over the administrative enforcement action.\11\ In sum,
the statute makes express that the district court's jurisdiction is
limited to determining whether the subpoena is legally enforceable and
to order compliance. But because no corollary sentence was added to the
section on discovery of nonparties in Sec. 1209.31, FHFA has deleted
the last sentence in Sec. 1209.30(h)(2) from the final rule to avoid
any potential for confusion.
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\11\ 12 U.S.C. 4635(b) provides in pertinent part: ``Except as
otherwise provided in this subchapter and sections 4619 and 4623 of
this title, no court shall have jurisdiction to affect, by
injunction or otherwise, the issuance or enforcement of any notice
or order under section 4631, 4632, 4513b, 4636 or 4637 of this
title, or subchapter II of this chapter, or to review, modify,
suspend, terminate, or set aside any such notice or order.'' Public
Law 102-550, Title XIII, Sec. 1375, Oct. 28, 1992, 106 Stat. 3990;
Public Law 110-289, Div. A, Title I, Sec. 1154, 122 Stat. 2775,
July 30, 2008.
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Sanctions
One commenter objected that the proposed rule would permit
dissimilar treatment of agency counsel for prohibited conduct and
requested that agency counsel should be expressly barred from engaging
in ex parte communications and from conferring with decisional staff on
settlement offers. Additionally, the commenter recommended that the
presiding officer should have express authority under the subpart D
provisions to sanction agency counsel for prohibited conduct. Ex parte
communications are prohibited in Sec. 1209.14 of the proposed rule.
The commenter objected that the proposed rule fails to act as a
deterrent to both parties, because it does not expressly subject agency
counsel to the sanctions applicable to prohibited communications.
Contrary to the commenter's assertion, the rule anticipates that
agency counsel would refrain from improper conduct and ex parte
communications with the presiding officer. Any party or representative
appearing in an administrative enforcement hearing, including FHFA
counsel of record, is subject to the bar on ex parte communications and
the corresponding authority of the presiding officer. Nevertheless, the
rule does allow for the agency head to be briefed on matters that may
relate to settlement issues and complex supervisory or regulatory
matters by those employees who best know the subject matter, even if
the subject matter bears on the proceeding. FHFA does not agree that,
in such situations FHFA counsel of record should be so prohibited and
subject to disciplinary action. Where the Director must rely on the
expertise of agency staff, the Director should not be denied advice of
counsel. For these reasons, FHFA declines to revise the final rule.
Trade Secrets Act Reminder
One commenter remarked that more protections for confidential
information should be afforded where discovery requests often may seek
the production of confidential financial or other proprietary materials
from parties and nonparties. The commenter notes that the Trade Secrets
Act prohibits Federal employees from divulging trade secrets obtained
in the course of their Federal employment, and notwithstanding the
precautions taken by FHFA employees, the rule should contain a reminder
of these prohibitions. Neither the Uniform Rules nor the current
respective agency Rules of Practice and Procedure include a reference
to the Trade Secrets Act. Several factors dictate against adding a
specific reference to the Trade Secrets Act in the final rule.
First, the Trade Secrets Act prohibits officers and employees of
Federal agencies from publishing or disclosing trade secrets and other
confidential business information ``to any extent not authorized by
law.'' This prohibition on the public disclosure of trade secrets
material unquestionably applies to FHFA employees. Following a 1992
amendment, the Trade Secrets Act also applied to ``any person acting on
behalf the Office of Federal Housing Enterprise Oversight.'' (See
Public Law 102-550, Title. XIII, Sec. 1353, 106 Stat. at 3970).
Thereafter, section 1161(d) of HERA substituted FHFA for OFHEO in this
provision. Thus, FHFA's employees, contractors and agents are subject
to criminal penalties for the unauthorized public disclosure of trade
secrets material.
Second, existing regulations govern the disclosure of confidential
or proprietary information, even where the Trade Secrets Act would not
bar disclosure. See 12 CFR part 1703. In short, the regulations
currently in effect prohibit agency employees from disclosing or
permitting the disclosure of unpublished FHFA information absent
authorization of the Director. Any person or entity that releases,
discloses, or uses any unpublished information, except as expressly
authorized, may be subject to the penalties provided in 18 U.S.C. 641
and other applicable laws. A current FHFA employee also may be subject
to administrative or disciplinary proceedings under existing OFHEO and
Finance Board regulations that remain in effect until FHFA issues a
comprehensive regulation.
Third, apart from the Trade Secrets Act and FHFA's information
disclosure regulation(s), there are provisions in the Rules of Practice
and Procedure sufficient to ensure that sensitive, confidential
materials will not be inadvertently disclosed in the course of an
enforcement hearing. The rule as proposed includes these safeguards for
the protection of confidential financial and trade secrets information.
For example, a party (or non-party) who provides discovery materials
that are considered confidential may apply for a protective order to
preserve the confidentiality of the information. In addition, FHFA
counsel of record may file or require the filing of a document under
seal if he or she provides a written determination that disclosure of
the document or portion of the document would be contrary to the public
interest in accordance with Sec. 1209.12(c) of the proposed rule.
Moreover, a respondent may move for a closed hearing under Sec.
1209.12(b); the presiding officer then forwards a recommended decision
to the Director
[[Page 53601]]
for his determination. And, the proceeding itself may be closed to
entertain the introduction of sealed materials under Sec. 1209.12(c).
FHFA finds that there are sufficient safeguards in the rule for the
protection of materials characterized as trade secrets.
Finally, the Safety and Soundness Act authorizes the Director to
make disclosures that are, in his or her exclusive discretion, in the
best interest of the public. For example, the Director has the
authority to determine that information sharing with other Federal
agencies is appropriate where it is necessary for the performance of
official duties, and to determine when it is in the public interest to
make information public. Therefore, FHFA concludes that it is not
necessary to add a specific reference to the Trade Secrets Act in the
final rule.
Specific Provisions
The commenters also raised points relating to specific provisions
of the proposed rule. To the extent that FHFA either adopts revisions
in the final rule in response to those comments or declines to adopt
comments on the proposed rule, those matters are addressed below as
part of the discussion of those sections in the final rule. Sections of
the proposed rule that raised no issues or received no comments are to
be adopted in the final rule as proposed.
III. Final Rule
A. General
The proposed rule would have adopted many provisions of the Finance
Board's and OFHEO's enforcement rules, which are nearly identical
procedurally, without substantive changes, to be codified in a new part
1209 that would supersede the existing OFHEO and Finance Board Rules of
Practice and Procedure. In the final rule, FHFA is adopting most of
those provisions of the proposed rule without any further substantive
changes. Thus, most of the provisions of the final rule that are
located in Subpart A (Scope and Authority), Subpart B (Enforcement
Proceedings under sections 1371 through 1379D of the Safety and
Soundness Act), Subpart C (Rules of Practice and Procedure), Subpart D
(Parties and Representational Practice before the Federal Housing
Finance Agency; Standards of Conduct), Subpart E (Civil Money Penalty
Inflation Adjustments), and Subpart F (Suspension or Removal of Entity-
Affiliated Party Charged with Felony), are unchanged from the proposed
rule. Described separately below are all instances where FHFA adopts or
declines to adopt revisions in response to comments on specific
sections in the proposed rule.
B. Subpart A--Scope and Authority
Section 1209.3--Definitions
The proposed rule would have carried over into Sec. 1209.3,
without substantive edits, nearly all of the existing definitions from
the OFHEO and Finance Board regulations that are applicable to
regulations in this part, but would have revised certain definitions
and added a number of new definitions to implement the statutory
amendments or provide greater clarity. Except as described below, the
final rule adopts the definitions from the proposed rule without
further change.
The proposed rule included a new definition of ``associated with
the regulated entity,'' to address the HERA amendments in section 1379
of the Safety and Soundness Act that established a six-year ``look-
back'' period and expanded the scope of the parties subject to FHFA
enforcement jurisdiction. (See 12 U.S.C. 4637). In particular, the law
provides that the Director may issue a notice and proceed ``against any
such entity-affiliated party, if such notice is served before the end
of the six-year period beginning on the date such entity-affiliated
party ceases to be associated with the regulated entity.'' See id. The
proposed rule would have included a definition of ``associated with the
regulated entity'' to provide descriptive guidance as to the type of
activities meant by the phrase ``associated with.'' One commenter
opined that ``associated with the regulated entity'' appears to be
broader than ``entity-affiliated party,'' and does not appear elsewhere
in the proposed rule. That commenter suggested that the six-year period
should begin ``on the date such entity-affiliated party would no longer
be deemed to be an entity-affiliated party.''
FHFA disagrees with this suggestion. First, section 1379 of the
Safety and Soundness Act statute was amended precisely for that
reason--to hold a wider class of persons accountable for their actions
under the Safety and Soundness Act. Under HERA, the revised provision
reads: ``The resignation, termination of employment or participation,
or separation of an entity-affiliated party,'' whereas prior to HERA it
read: ``Director or executive officer of an enterprise.'' Second, the
suggested language falls short of setting a hard deadline. Because it
is too subjective, it may actually extend the reach of the look-back
further than Congress intended. Third, by conflating ``entity-
affiliated party'' with ``associated with,'' the provision would read:
When an entity-affiliated party ceases to be an entity-affiliated
party. Such a reading would strip the phrase of any logical meaning and
dilute the prerequisite. Therefore, the final rule adopts the
definition as proposed.
C. Subpart B-Enforcement Proceedings Under Sections 1371 Through 1379D
of the Safety and Soundness Act
Section 1209.4--Scope and Authority
This section states the authority for administrative enforcement
proceedings in accordance with sections 1371 through 1379D of the
Safety and Soundness Act (12 U.S.C. 4631 through 4641), which under
section 1373 of the Safety and Soundness Act (12 U.S.C. 4633) must be
held on the record, as follows: (1) Cease and desist and temporary
cease and desist proceedings under sections 1371 through 1372 of the
Safety and Soundness Act (12 U.S.C. 4631 through 4633); (2) civil money
penalty assessment proceedings under section 1376 of the Safety and
Soundness Act (12 U.S.C. 4636); and (3) the removal and prohibition
proceedings under section 1377 of the Safety and Soundness Act (12
U.S.C. 4636a) (except proceedings under section 1377(h) of the Safety
and Soundness Act for the suspension or removal of an entity-affiliated
party charged with a felony (12 U.S.C. 4636a(h)).
Additionally, it reiterates that, pursuant to sections 1336(c) and
1371(a)(2) of the Safety and Soundness Act (12 U.S.C. 4566(c) and 12
U.S.C. 4631(a)(2)), actions to enforce housing goals must proceed under
sections 1341 and 1345 of the Safety and Soundness Act. See 12 U.S.C.
4581, 4585.\12\ It is necessary to make this distinction clear because
the grounds for initiating cease and desist proceedings relative to
housing goals under 12 U.S.C. 4581 differ from the cease and desist
powers under 12 U.S.C. 4631. Similarly, the civil money penalties for
housing goals violations differ from the civil money penalty provisions
in 12 U.S.C. 4636. See 12 U.S.C. 4585. The process for
[[Page 53602]]
conducting housing goals enforcement actions, however, is
indistinguishable--a notice of charges is served and a hearing is
conducted on the record. See 12 U.S.C. 4582(a)(1)). For that reason,
the formal hearing procedures set out in subpart C of part 1209 as
proposed are well-suited to govern housing goals enforcement
proceedings. One commenter offered that combining the hearing
procedures appeared sensible. FHFA has concluded that promoting use of
the subpart C procedures for housing goals enforcement proceedings
supports both an economies of scale approach to regulation, and
provides certainty with respect to the process. Therefore, the
provision is to be adopted in final as proposed.
---------------------------------------------------------------------------
\12\ Section 1371(a)(2) of the Safety and Soundness Act (12
U.S.C. 4631(a)(2)) states in pertinent part that the Director may
not proceed under that section to ``enforce compliance with any
housing goal established under [sections 1331 through 1348 of the
Safety and Soundness Act], with section 1336 or 1337 of this title,
with subsection (m) or (n) of section 309 [of Fannie Mae's
authorizing statute] (12 U.S.C. 1723a(m), (n)), with subsection (e)
or (f) of section 307 [of Freddie Mac's authorizing statute] (12
U.S.C. 1456(e), (f)), or with paragraph (5) of section 10(j) of the
Federal Home Loan Bank Act (12 U.S.C. 1430(j)).''
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Section 1209.5--Cease and Desist Proceedings
Section 1209.5 of the proposed rule closely followed the
requirements of section 1371 of the Safety and Soundness Act (12 U.S.C.
4631). That statutory provision, as amended by section 1151 of HERA,
sets out the authority and establishes several requirements for cease
and desist enforcement proceedings. In the final rule, FHFA has
retained the language of the proposed rule regarding the general
requirements, but has also made certain revisions in response to the
comments. In particular, Sec. 1209.5(a)(1)(i) in the final rule has
been edited to state more specifically the requisite conditions of
section 1371(a)(1) of the Safety and Soundness Act (12 U.S.C.
4631(a)(1)). Additionally, Sec. 1209.5(a)(i) has been edited lightly
to underscore that the cease and desist/civil money penalty provisions
set out in sections 1371 and 1376 of the Safety and Soundness Act (12
U.S.C. 4631, 4636) are not to be applied to the enforcement of housing
goals. Also in response to a comment, Sec. 1209.5(a)(2) in the final
rule has been revised to state more expressly the discretion and
authority of the Director to deem a regulated entity to be engaging in
an unsafe or unsound practice on the basis of a less than satisfactory
rating in its most recent report of examination with respect to asset
quality, management, earnings, or liquidity, where the Director finds
that the deficiency has not been corrected.
Section 1209.5 of the proposed rule summarizes the statutory cease
and desist authority under section 1371 of the Safety and Soundness Act
(12 U.S.C. 4631), which provides in section 1371(f) of the Safety and
Soundness Act (12 U.S.C. 4631(f)) that a cease and desist order shall
remain effective and enforceable as provided in the order, except to
the extent that the order is stayed, modified, terminated, or set aside
by the Director or otherwise as provided under the Safety and Soundness
Act. One commenter recommended revising Sec. 1209.5 of the proposed
rule to include a reference to the availability of judicial review to
make it consistent with Sec. Sec. 1209.6(d) and 1209.7(d) in the
proposed rule. This suggestion, which is misplaced in one respect, has
merit for another reason: To reinforce that section 1374 of the Safety
and Soundness Act (12 U.S.C. 4634) governs judicial review of a final
cease and desist order. Section 1209.5 of the final rule is being
revised to add a new paragraph (d)(2), to state that judicial review is
governed by section 1374 of the Safety and Soundness Act (12 U.S.C.
4634), as provided for in section 1371(f) of the Safety and Soundness
Act (12 U.S.C. 4631(f)).
FHFA notes that this revision to Sec. 1209.5(d) of the final rule
is not made for the purpose of consistency with Sec. 1209.6(d) of the
rule, as the commenter posited. In fact, Sec. 1209.6(d) refers to an
entirely different judicial authority: The authority of a district
court to issue an injunction to set aside, limit, or suspend the
enforcement of a temporary cease and desist order pending the
completion of administrative proceedings on a notice of charges under
section 1372(d) of the Safety and Soundness Act (12 U.S.C. 4632(d)).
Section 1376(c)(3) of the Safety and Soundness Act (12 U.S.C.
4636(c)(3)) makes clear that a district court does not have
jurisdiction to review a final order imposing a civil money penalty:
The order of the Director imposing a penalty under this section shall
not be subject to review, except as provided in section 1374 of the
Safety and Soundness Act (12 U.S.C. 4634), which vests exclusive
jurisdiction in the United States Court of Appeals for the District of
Columbia to review any final order issued under sections 1313B, 1371,
1376, or 1377 of the Safety and Soundness Act (12 U.S.C. 4513b, 4631,
4636, 4636a). In fact, section 1376(d) of the Safety and Soundness Act
expressly bars a district court from putting at issue the validity and
appropriateness of a civil money penalty order in an action under this
subsection to enforce a civil money penalty by obtaining a monetary
judgment in district court. See 12 U.S.C. 4636(d).
For additional clarity, minor edits also have been made to
Sec. Sec. 1209.55(c), 1209.56, and 1209.57 in the final rule to
underscore the authority of the Director to modify, terminate, or set
aside an order as provided by section 1373(b)(2) of the Safety and
Soundness Act (12 U.S.C. 4633(b)(2)), to require a party to exhaust
administrative remedies as a precondition to judicial review of any
final decision and order, and to state that judicial review of a final
order is available in accordance with section 1374 of the Safety and
Soundness Act (12 U.S.C. 4634).
Section 1209.6--Temporary Cease and Desist Orders
Section 1209.6 of the proposed rule implements section 1372(a) of
the Safety and Soundness Act (12 U.S.C. 4632(a)) governing the issuance
of a temporary cease and desist order. Section 1372(a) provides that,
in connection with a notice of charges served under section 1371(a) or
(b) of the Safety and Soundness Act, if the Director determines that
the actions specified in the notice of charges served upon a regulated
entity or any entity-affiliated party, or the continuation thereof, are
likely to cause insolvency or significant dissipation of assets or
earnings of that entity, or to weaken the condition of that entity
prior to the completion of the proceedings conducted pursuant to
sections 1371 and 1373 of the Safety and Soundness Act (12 U.S.C. 4631,
4633), the Director may issue a temporary order requiring the regulated
entity or entity-affiliated party to cease and desist from any such
violation or practice, and take affirmative action to prevent or remedy
such insolvency, dissipation, condition, or prejudice pending
completion of the cease and desist proceedings.
One commenter suggested that Sec. Sec. 1209.6 and 1209.7 of the
proposed rule should ``specify that the notice of charges in a civil
money penalty proceeding must conform with Sec. 1209.23,'' and
incorporate parallels to Sec. Sec. 1209.5(a)(1) and 1209.8(a)(1). FHFA
agrees that a notice in a civil money penalty action must provide the
same type of information as required of a notice of charges.
Accordingly, Sec. 1209.7 will be revised in the final rule to specify
that the notice in a civil money penalty action must provide the same
information as required of a notice of charges and conform to the
requirements of Sec. 1209.23. No changes to Sec. 1209.6 are
contemplated because the operative notice of charges in a temporary
cease and desist proceeding would be subject to Sec. 1209.5, which, as
stated, requires conformity with the requirements of Sec. 1209.23.
Section 1209.7--Civil Money Penalties
Section 1209.7 of the proposed rule implemented the provisions of
section 1376 of the Safety and Soundness Act that govern civil money
penalty
[[Page 53603]]
enforcement proceedings under the Safety and Soundness Act. See 12
U.S.C. 4636(a). For the commencement of such proceedings section
1376(c) of the Safety and Soundness Act requires the Director to
establish standards and procedures that, among other things, provide
for the Director to notify the regulated entity or entity-affiliated
party in writing of the Director's determination to impose a penalty. A
hearing on the record under section 1373 of the Safety and Soundness
Act is required. One commenter suggested that the proposed rule should
be revised to specify that the notice should comply with the
requirements of Sec. 1209.23 of the proposed rule that dictates the
content of a notice of charges in order to bring the civil money
penalty notice in parallel with a notice of charges issued under the
cease and desist or a notice issued under the removal and prohibition
provisions.
The suggestion has merit. Like a notice of charges issued under
section 1371(c)(1) of the Safety and Soundness Act (12 U.S.C.
4631(c)(1)), or a notice of intention to remove or suspend a party
under section 1377(c)(1) of the Safety and Soundness Act (12 U.S.C.
4636a(a)), a notice of intent to impose a civil money penalty under
section 1376 of the Safety and Soundness Act (12 U.S.C. 4636) should
contain a statement of facts constituting grounds for such an action,
and fix a time and place for the hearing. Under applicable law, each of
these pleadings must give sufficient notice of the facts and authority
underlying the respective proceeding, and Sec. 1209.23 was drafted
with that premise in mind. Therefore, FHFA has determined to edit Sec.
1209.7(a)(1) in the final rule to require that such notices shall
conform to Sec. 1209.23.
One commenter noted that Sec. 1209.7(a)(2) of the proposed rule
omits a reference to the daily penalty cap. The proposed rule cited to
but did not recite the statutory authority for Tier I violations that
includes that reference. FHFA agrees that for the sake of clarity Sec.
1209.7(a)(2) in the final rule should be revised to include that
reference.
Section 1209.8--Removal and Suspension Proceedings
The statutory authority and requirements for removal and suspension
enforcement proceedings are set forth in section 1377 of the Safety and
Soundness Act (12 U.S.C. 4636a). The removal or suspension of an
entity-affiliated party, or the officers, directors, or management of
the Office of Finance, a joint office of the Banks-- where the
requisite conditions are met--is initiated by service of a notice, and
a hearing on the record is held to determine whether the grounds are
satisfied, as provided by section 1373(a)(1) of the Safety and
Soundness Act (12 U.S.C. 4633(a)(1)). In particular, section 1377(a)(1)
of the Safety and Soundness Act authorized the Director to serve upon a
party described in paragraph (a)(2) of the section, or any officer,
director, or management of the Office of Finance, written notice of the
intention of the Director to suspend or remove such party from office,
or prohibit any further participation by such party, in any manner, in
the conduct of the affairs of a regulated entity. See 12 U.S.C.
4636a(a)(1).
Section 1209.8(a)(1) of the proposed rule was drafted to implement
12 U.S.C. 4636a(a)(1). One commenter noted that Sec. Sec. 1209.8(a)(1)
and (c)(1) may present confusing redundancies by repeating the
requirement for notices to conform to Sec. 1209.23. To avoid any
potential confusion FHFA has determined to remove the reference to
Sec. 1209.23 from Sec. 1209.8(a)(1) in the final rule. Section
1209.8(c)(1) will be adopted in the final rule as proposed.
Section 1209.8(b) of the proposed rule was drafted to implement
section 1377(b) of the Safety and Soundness Act (12 U.S.C. 4636a(b)).
Section 1377(b)(2)(B) of the Safety and Soundness Act (12 U.S.C.
4636a(b)(2)(B)) provides that unless stayed by a court under paragraph
(g) of section 1377 of the Safety and Soundness Act (12 U.S.C.
4636a(g)), any suspension order issued under paragraph (b) shall remain
in effect and enforceable until the Director dismisses the charges set
out in the notice served under paragraph (a)(1) of this section or the
effective date of the order issued under paragraph (b) [sic].\13\ This
is a drafting error in the statute; the reference should be to
paragraph (c) of section 1377. See 12 U.S.C. 4636a(b)(2)(B)(ii)).
---------------------------------------------------------------------------
\13\ The reference should be to section 1377(c) of the Safety
and Soundness Act (12 U.S.C. 4636a(c)), which concerns final orders.
---------------------------------------------------------------------------
Noting this technical error, one commenter posited that Sec.
1209.8 of the proposed rule, which refers to the applicable provision,
``leaves unclear the distinction between an immediate suspension/
prohibition order issued pursuant to Sec. 1209.8(b) and a final
suspension/prohibition order issued pursuant to Sec. 1209.8(c).'' To
give the statute logical meaning the commenter would make an explicit
reference to paragraph (c) in Sec. 1209.8(b)(2) of the final rule to
specify ``that the effective period of a suspension order issued under
Sec. 1209.8(b) commences upon service and unless a court issues a
stay, remains effective until the Director either dismisses the
charges, or pursuant to Sec. 1209.8(c), the Director issues a final
order.'' FHFA agrees that the intent of the law is that an order issued
under section 1377(b) of the Safety and Soundness Act (12 U.S.C.
4636a(b)) is effective immediately upon service and, absent a court-
ordered stay, remains in effect and enforceable until the Director
dismisses the charges or the effective date of an order issued under
section 1377(c) of the Safety and Soundness Act. See 12 U.S.C.
4636a(b)(2). Accordingly, to more specifically convey the intent of the
law, Sec. 1209.8(b)(2) (effective period) in the final rule has been
revised to that effect.
Section 1209.8(d)(3) of the proposed rule was written to implement
the provisions of section 1377(e) of the Safety and Soundness Act (12
U.S.C. 4636a(e)) that impose industry-wide restrictions on anyone who
has been removed or suspended from office (or barred from participating
in the affairs of a regulated entity or the Office of Finance), absent
the written consent of the Director in accordance with section
1377(e)(2) of the Safety and Soundness Act (12 U.S.C. 4636a(e)(2)).
Such consent is committed to the discretion of the Director by law. The
provision is silent on any process or procedures for obtaining that
written consent, other than to require that the consent be publicly
disclosed.
One commenter suggested that Sec. 1209.8(d)(3)(ii) of the proposed
rule was inadvertent in stating that the Director's refusal to consent
shall not be a final agency action, because that effectively would bar
access to judicial review. In truth, the draft rule provision is not a
mistake, and FHFA disagrees with the premise of the commenter's
suggestion because there is no provision for judicial review. Section
1377(e) of the Safety and Soundness Act (12 U.S.C. 4636a(e)) does not
provide for judicial review of the Director's decision whether to
permit a person subject to a removal or suspension order to continue,
resume, or undertake participation in the affairs of a regulated entity
or the Office of Finance. In fact, section 1377 of the Safety and
Soundness Act provides only two judicial remedies. First, for orders
issued under section 1377(b) of the Safety and Soundness Act, the
subject may pursue a stay of the order through an action in district
court under section 1377(g) of the Safety and Soundness Act (12 U.S.C.
4636a(b), (g)). Second, a final suspension/removal/prohibition order
issued under section 1377(c) of the Safety and Soundness Act (12 U.S.C.
[[Page 53604]]
4636a(c)) is subject to judicial review in the court of appeals in
accordance with section 1374 of the Safety and Soundness Act (12 U.S.C.
4634). Third, the public purpose of the industry-wide prohibition set
out in section 1377(e)(1) of the Safety and Soundness Act (12 U.S.C.
4636a(e)(1)), taken together with the prohibitions on certain specified
activities in section 1377(d) of the Safety and Soundness Act (12
U.S.C. 4636a(d)), must be given weight. Fourth, the decision whether to
permit an entity-affiliated party to participate in the affairs of a
regulated entity or the Office of Finance is committed to the
discretion of the Director by law. Fifth, under the general precepts of
statutory construction, where a provision (such as the right of
judicial review) is included in one portion of an act, but excluded in
other sections, implying a legislative intent to include the missing
provision where it is omitted is unsupported.\14\
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\14\ See generally, Singer, N., Statutes and Statutory
Construction (Sixth Ed.), Sec. 67:9.
---------------------------------------------------------------------------
Moreover, in the context of a final order under section 1377(c) of
the Safety and Soundness Act (12 U.S.C. 4636a(c)), where a court of
appeals has already ruled on the appropriateness of a final order, the
subject should not then be permitted to seek district court review of
the Director's refusal to consent to the subject's proposed
participation in a regulated entity or the Office of Finance. The
statute includes no such provision of jurisdiction, and to read in such
a right potentially would allow a subject to circumvent a final order.
As stated, district court jurisdiction is limited by section 1377(g) of
the Safety and Soundness Act (12 U.S.C. 4636a(g)) to ordering a stay of
a suspension or prohibition order pending the completion of an
administrative hearing under section 1377(c) of the Safety and
Soundness Act (12 U.S.C. 4636a(c)). Finally, to upend the finality of a
final order issued under section 1377(c) of the Safety and Soundness
Act (12 U.S.C. 4636a(c)), that was affirmed by the appellate court,
would run contrary to the statutory intent to let the Director exercise
his advanced knowledge of the Enterprises, the Banks, and the Office of
Finance to determine what is in the best interests of these entities.
Therefore, having considered the issues, FHFA declines to remove the
word ``not'' from Sec. 1209.8(d)(3)(ii) in the final rule as was
suggested by the commenter.
D. Subpart C--Rules of Practice and Procedure for Hearings on the
Record
Section 1209.11--Authority of the Presiding Officer
This section states that hearings are to be held in accordance with
the APA, and provides that the presiding officer is to have complete
charge of the proceedings, to act in a fair and impartial manner, and
to ensure that a full and complete record of the proceeding is made.
The powers of the presiding officer to control proceedings are
specified. Several commenters noted that Sec. 1209.11(b)(11) of the
proposed rule provides that the presiding officer may receive
``materially relevant'' evidence, and characterized this as a stricter
evidentiary standard than is provided for in the Uniform Rules. One
commenter suggested that this could create uncertainty and disparity in
the administrative process, ultimately resulting in unnecessary
judicial review of the standard.
In fact, to ensure that the record is complete and accurate, the
presiding officer has broad authority under the proposed rule to take
all lawful actions necessary to regulate the scope, timing, and
completion of discovery of any non-privileged matter that is materially
relevant to the charges or allowable defenses; rule upon the
admissibility of evidence, and exclude or limit evidence; regulate the
course of the testimonial phase of the hearing; examine witnesses; and,
upon motion of a party, take judicial notice of a fact. (See Sec.
1209.11(b)).
FHFA has considered the comment and concludes that it misconstrues
the standard embodied in the Uniform Rules. Section 1209.11(b) of the
proposed rule reflects the analogous provisions in the Uniform Rules;
and, while it may be an extension of the standard, it does not create a
disparity. For example, the Uniform Rules of the Federal Deposit
Insurance Corporation (12 CFR part 308, Subpart A) (FDIC rule) provide
that the powers of the administrative law judge include the power ``to
receive relevant evidence * * *'' (12 CFR 308.5(b)(3)). And relevance
is more specifically defined in the discovery rule governing relevance
that limits discovery to ``any matter not privileged that has material
relevance to the merits of the pending action.'' (12 CFR 308.25(a),
(b)). The proposed rule would adopt the same standard. It is necessary
and appropriate to expect that evidence have a logical connection to a
consequential fact that tends to prove or disprove a matter in issue
relative to the charges or allowable defenses in the pending action.
This is to enable the presiding officer to ensure that the case is not
sidetracked by unnecessary discovery, that discovery is focused on the
salient issues, and that an accurate, thorough administrative record is
timely created. Accordingly, FHFA declines to revise this provision in
the final rule.
Section 1209.12--Public Hearings; Closed Hearings
Generally, appearance hearings are to be open to the public. But
this section also reflects the authority of the Director, under section
1379B(b) of the Safety and Soundness Act (12 U.S.C. 4639(b)), to
determine that holding an open hearing would be contrary to the public
interest, and provides appropriate mechanisms for making and
implementing such determinations. Section 1209.12(c) of the proposed
rule reserves to FHFA counsel of record the authority to file documents
under seal, or to require that a document be filed under seal, upon a
written determination that the disclosure of the document would be
contrary to the public interest. Furthermore, the presiding officer
must preserve the confidentiality of the document and, if needed, issue
a protective order that is acceptable to FHFA counsel of record. If a
hearing is to be closed for the purpose of introducing testimony or
documents filed under seal, certain procedures for handling
confidential information are to be followed.
One commenter objected to this process arguing that the rule should
provide authority to respondent's counsel to file documents under seal
voluntarily to preserve a private (or public) need to protect filings
from public disclosure. FHFA has considered the comment and determined
that a respondent's right to protect confidential information is
procedurally ensured because any party to a proceeding may request
confidential treatment of information, such as personal financial
information, in the form of a protective order. Therefore, FHFA has
determined not to change the provision in the final rule.
One commenter mistakenly cited Sec. 1209.12(d) in objecting to the
requirement in Sec. 1209.12(c) of the proposed rule that a protective
order issued by the presiding officer to protect the confidentiality of
sensitive information should be acceptable to FHFA counsel of record.
FHFA sees no inconsistency in this requirement. The Agency has a vital
interest in ensuring the confidentiality of sensitive commercial and
financial information of the regulated entities. Respondent's counsel
would find similar protections
[[Page 53605]]
available where a private hearing is authorized. Section 1209.12(b) of
the proposed rule permits any party to request a private hearing; the
determination is committed to the discretion of the Director, which is
consistent with 12 U.S.C. 4639(b), (d). Having considered the issues,
FHFA declines to revise Sec. 1209.12(c) in the final rule.
Section 1209.14--Ex Parte Communications
This section defines and prohibits ex parte communications, and
provides for procedures for dealing with such communications, including
sanctions. This section also provides for the separation of functions
of Agency personnel. Any employee or agent of FHFA who participated in
the examination, investigative, or prosecutorial functions on the case
may not participate in or advise in the recommended decision or the
Director's decision on the final determination. One commenter objected
that analysis of settlement offers and regulatory or supervisory
matters are exempt from this prohibition. This reasonable carve out
anticipates situations where FHFA counsel of record may be the staff
possessed of the detailed knowledge of an issue that could be relied
upon to provide context, content, and legal advice to the Director on a
supervisory or regulatory matter, or the basis for appropriately
resolving an enforcement action.
Section 1209.29--Discovery
Section 1209.29 of the rule provides that the presiding officer is
charged with restricting discovery to any matter not privileged that is
materially relevant to the charges or allowable defenses in a pending
proceeding. One commenter objected to the standard and stated that it
differs from the evidentiary standard in the Uniform Rules. The
identical concern was raised with respect to Sec. 1209.11(b) of the
proposed rule. For the reasons stated in response to the comment on
Sec. 1209.11(b), FHFA has determined not to revise these provisions in
the final rule. This evidentiary standard is in addition to other
measures that are designed to assist the presiding officer in
controlling the proceeding, such as a new meet and confer requirement
in Sec. 1209.29(a)(2) of the proposed rule that requires the parties
to meet and confer in good faith and to submit a discovery plan to the
presiding officer for his or her approval.
Discovery is limited to document requests; no other form of
discovery is permitted. That is, with the exception of depositions to
preserve testimony of a witness unavailable for a hearing (Sec.
1209.32 of the proposed rule), depositions are prohibited. And, Sec.
1209.29(c) of the proposed rule reiterates that privileged documents
are not discoverable. Applicable privileges include: Attorney client,
work product, and privileges available to government agencies (e.g.,
deliberative process; examination; investigative; or any other
privileges available under the U.S. Constitution, Federal law, or the
principles of Federal common law). To preserve such privileges in
productions, a new provision, Sec. 1209.29(d)(1)(ii) of the proposed
rule, would have provided that the parties may enter into so-called
``claw back'' agreements, and that the presiding officer shall enter an
order to ensure the enforceability of such agreements. One commenter
suggested the provision be revised to permit the presiding officer to
order claw back procedures where parties did not reach such an
agreement prior to production. As proposed, however, the section allows
any party to petition the presiding officer to issue claw back
procedures, which should address the commenter's concern. FHFA has
considered the issue and determined not to revise this section in the
final rule.
Section 1209.30--Request for Document Discovery From Parties
This section in the proposed rule would have established the
requirements for document discovery from parties, and stated that such
discovery must be consistent with the discovery plan approved by the
presiding officer under Sec. 1209.29. Among other things, the proposed
rule set deadlines for objections to discovery requests or assertion of
privilege claims, and addressed the complexities and costs associated
with the discovery of electronically-stored information (e-discovery)
to encourage transparency and cooperation of the parties to avoid the
costly issues commonly encountered in e-discovery.
Under Sec. 1209.30(h) of the proposed rule, pertaining to the
enforcement of a document discovery subpoena, the Director or a party
who obtained the subpoena may seek enforcement to the extent authorized
under section 1379D(c)(1) of the Safety and Soundness Act (12 U.S.C.
4641(c)(1)) by seeking an order from the appropriate United States
district court. Section 1209.30(h)(2) of the proposed rule would have
dedicated a sentence to state the limitations on a district court's
jurisdiction under section 1375(b) of the Safety and Soundness Act (12
U.S.C. 4635(b)). A district court that is reviewing a subpoena does not
obtain jurisdiction over the enforcement action itself, because section
1375(b) of the Safety and Soundness Act (12 U.S.C. 4635(b)) provides
that a court may not affect by injunction or otherwise the issuance or
enforcement of any effective and outstanding notice or order issued by
the Director under sections 4513b, 4631, 4632, 4636, and 4637 of Title
12 of the United States Code. The same provision also bars a district
court from enjoining or otherwise affecting the issuance or enforcement
of an order issued under subchapter II of the Safety and Soundness Act
(pertaining to required capital levels, special enforcement powers, and
reviews of assets and liabilities), or otherwise to review, modify,
suspend, terminate, or set aside any such effective and outstanding
notice or order. That is, the jurisdiction of a district court charged
with enforcing a subpoena (or declining to do so) would run only to the
appropriateness of the subpoena.
Several commenters objected that that sentence in the proposed rule
was misleading or overbroad in referring to ``subtitle C of the Safety
and Soundness Act,'' and that the provision otherwise appeared to
govern discovery of non-parties as well. To resolve any confusion, the
commenter recommended that FHFA remove that sentence from Sec.
1209.30(h)(2). In considering the comments, FHFA notes that the
jurisdictional bar in section 1375(b) of the Safety and Soundness Act
(12 U.S.C. 4635(b)) is set out as a matter of law. To avoid redundancy
and foreclose any confusion, FHFA has removed the sentence from the
final rule.
Section 1209.31--Document Discovery Subpoenas to Non-Parties
Section 1209.31 of the proposed rule governs document discovery
subpoenas to non-parties. The proposed rule would adopt the existing
rule with minor changes to headings and the addition of text requiring
that the subpoenaing party seek only documents that are materially
relevant to the charges and issues presented in the action, state its
unequivocal intention to pay for document discovery of a non-party, and
serve all other parties with the subpoena. The edits also make clear
the discretion of the presiding officer to refuse to issue a subpoena
to a non-party where the party's application for the subpoena does not
set forth a valid basis of its issuance, or where the request is
otherwise objectionable under Sec. 1209.29(b).
One commenter suggested the evidentiary standard be revised to one
[[Page 53606]]
of ``general relevance.'' Here, again, the proposed rule specifies a
materially relevant standard to keep the Rules of Practice and
Procedure aligned with the material and relevant standard adopted by
the Federal banking agencies in the Uniform Rules, and to mirror the
generally accepted standards of materiality and relevance embodied in
Federal law. This standard best takes into account the importance of a
transparent discovery process in expeditiously resolving the issues
presented by the claims and defenses in a case. FHFA rejects the
suggestion that this standard differs from the Uniform Rules, and is
issuing this provision in the final rule as proposed.
Section 1209.31(b) of the proposed rule governs motions to quash or
modify a document subpoena, and adds a provision to allow a non-party
to enter a limited appearance in the proceeding to challenge the
subpoena directed to it. The non-party may raise the same types of
objections that may be raised by a party under Sec. 1209.30, and
within the same time deadlines. The revised provision permits the party
seeking the subpoena to respond to the non-party's objections within 10
days of service of a motion to quash or modify. Absent express leave of
the presiding officer, no other party may respond to the non-party's
motion. Additionally, the pending motion shall not operate as a stay on
the proceeding or in any way limit the presiding officer's authority to
impose sanctions on a party who induces another to fail to comply with
a subpoena. No party may rely on the pendency of a motion to quash or
modify to excuse performance of any action required of that party under
this part.
One commenter argued that any party should be permitted to object
to any subpoena to a non-party for the purpose of asserting that
party's rights with respect to the subpoenaed materials, such as the
confidentiality of commercial information. FHFA has considered the
comment in the context of the overall discovery process and the
discretion of the presiding officer to control the proceedings.
Additionally, it should be noted that any party may seek a protective
order. FHFA is of the view that the mechanisms in place sufficiently
protect the rights of parties who may be concerned about the possible
disclosure of sensitive or personal information. Therefore, FHFA has
determined not to revise the provision in the final rule.
Finally, enforcement of document subpoenas to non-parties also is
authorized pursuant to section 1379D(c) of the Safety and Soundness Act
(12 U.S.C. 4641(c)). Section 1209.31(c)(2) of the proposed rule
provides that there is no automatic stay in the event that a subpoena
enforcement action is initiated. In an apparent misreading of the
proposed rule, one commenter argued that the presiding officer should
have discretion to order a stay. As in Sec. 1209.30(h)(3) of the
proposed rule, the provision would allow for a discretionary stay of
the proceedings by the presiding officer or the Director for a
reasonable period in the interests of the parties or justice. The
presiding presumably will ensure that the stay does not interfere with
the pace and independence of the enforcement proceeding. This is to
ensure the agency process can go forward without delay due to discovery
disputes so that the proceedings are not derailed and no hardships are
imposed on the parties who seek a speedy adjudication. Therefore, FHFA
has determined to promulgate the provision in the final rule as
proposed.
E. Subpart D--Parties and Representational Practice Before the Federal
Housing Finance Agency; Standards of Conduct
Section 1209.70--Scope
Subpart D of this part contains rules governing practice by parties
or their representatives before FHFA in an adjudicatory proceeding and
standards of conduct under this part and in any appearance before the
Director or any agency representative. This subpart outlines the
sanctions that may be prescribed by a presiding officer or the Director
against parties or their representatives who fail to conform to the
requirements and conduct guidelines; such representation includes, but
is not limited to, the practice of attorneys and accountants.
This provision also states that employees of FHFA are not subject
to disciplinary proceedings under this subpart, which is a carry-over
from the existing enforcement regulations. One commenter mistakenly
assumed from this provision that the presiding officer could not
sanction agency counsel for violating the rules of practice, but should
have discretion to do so. In fact, the presiding officer has exactly
that discretionary authority. This provision underscores that employee
disciplinary matters proceed under the applicable rules in Title 5 of
the United States Code. Disciplinary matters are to be distinguished
from conduct that violates the rules of practice for matters before the
Director or the presiding officer. If FHFA counsel of record is found
to have engaged in prohibited contumacious conduct in the course of an
enforcement proceeding, FHFA is of the view that this subpart provides
sufficient discretion and guidance for the presiding officer to deal
with it, and is adopting the provision in the final rule as proposed.
Moreover, this subpart should not be read to preclude the Director from
taking any other action or imposing any restriction or sanction
authorized by applicable law, rule, order or regulation.
F. Subpart F--Suspension or Removal of Entity-Affiliated Party Charged
With Felony
Section 1209.102--Hearing on Removal or Suspension
Section 1209.102 of the proposed rule sets forth the requirements
for an informal hearing on a removal or suspension under section
1377(h) of the Safety and Soundness Act (12 U.S.C. 4636a(h)), and the
timing and procedural matters of such hearings. Because the Safety and
Soundness Act does not require a formal APA-type full evidentiary
hearing on the record, the process is less formal. Nevertheless, the
procedure provides the requisite due process requirements of notice and
opportunity to respond. This provision in the proposed rule specified
the requirements as to form, timing, conduct, submissions, and the
record of the hearing.
The proposed rule allowed that an entity-affiliated party could
have elected in writing to waive his or her right to appear in person
or through counsel to make a statement, and to have the matter
determined solely on the basis of a written submission, thus obviating
an appearance hearing. Additionally, as proposed, the rule provided
that the Director or his designee would have the discretion to
determine to deny, permit, or limit oral testimony in a hearing. The
sole purpose of the informal hearing is to determine whether the
suspension or prohibition will be continued, modified, or terminated,
or whether an order removing such party or prohibiting the party from
participation in the affairs of the regulated entity will be rescinded
or modified.
One commenter argued that: (1) The presiding officer should not
have the power to determine whether to admit or exclude witness
testimony, and (2) the rule should require the creation of a hearing
transcript. FHFA disagrees with these comments for the reason that the
Director has the authority to make such a determination, and written
submissions may constitute the full record in the absence of an
appearance. In any case, the recommended decision
[[Page 53607]]
would reflect all materials or testimony and be transmitted to the
Director, who makes the final determination. These steps are sufficient
in the context of this process to adequately protect the parties.
Therefore, to provide for the efficient operation of the rule, FHFA is
not adopting the modifications suggested by the commenter.
IV. Paperwork Reduction Act
The Paperwork Reduction Act (44 U.S.C. 3501 et seq.) requires that
regulations involving the collection of information receive clearance
from OMB. This rule contains no such collection of information
requiring OMB approval under the Paperwork Reduction Act. Consequently,
no information has been submitted to OMB for review.
V. Regulatory Impact
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that
a regulation that has a significant economic impact on a substantial
number of small entities, small businesses, or small organizations must
include an initial regulatory flexibility analysis describing the
regulation's impact on small entities. Such an analysis need not be
undertaken if the agency has certified that the regulation will not
have a significant economic impact on a substantial number of small
entities. 5 U.S.C. 605(b). FHFA has considered the impact of the
proposed regulation under the Regulatory Flexibility Act. FHFA
certifies that the final regulation is not likely to have a significant
economic impact on a substantial number of small business entities
because the regulation applies to the Enterprises and Banks, which are
not small entities for purposes of the Regulatory Flexibility Act. 5
U.S.C. 605(b).
List of Subjects
12 CFR Part 908
Administrative practice and procedure, Federal home loan banks,
Penalties.
12 CFR Part 1209
Administrative practice and procedure, Federal home loan banks.
12 CFR Part 1780
Administrative practice and procedure, Penalties.
Accordingly, for the reasons set forth in the preamble, under the
authority of 12 U.S.C. 4513b and 4526, the Federal Housing Finance
Agency amends chapters IX, XII, and XVII of Title 12, Code of Federal
Regulations, as follows:
CHAPTER IX--FEDERAL HOUSING FINANCE BOARD
Subchapter B--Federal Housing Finance Board Organization and Operations
PART 908--[REMOVED]
0
1. Remove part 908.
CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY
Subchapter A-Organization and Operations
0
2. Add part 1209 to subchapter A to read as follows:
PART 1209--RULES OF PRACTICE AND PROCEDURE
Subpart A--Scope and Authority
Sec.
1209.1 Scope.
1209.2 Rules of construction.
1209.3 Definitions.
Subpart B--Enforcement Proceedings Under Sections 1371 Through 1379D of
the Safety and Soundness Act
1209.4 Scope and authority.
1209.5 Cease and desist proceedings.
1209.6 Temporary cease and desist orders.
1209.7 Civil money penalties.
1209.8 Removal and prohibition proceedings.
1209.9 Supervisory actions not affected.
Subpart C--Rules of Practice and Procedure
1209.10 Authority of the Director.
1209.11 Authority of the Presiding Officer.
1209.12 Public hearings; closed hearings.
1209.13 Good faith certification.
1209.14 Ex parte communications.
1209.15 Filing of papers.
1209.16 Service of papers.
1209.17 Time computations.
1209.18 Change of time limits.
1209.19 Witness fees and expenses.
1209.20 Opportunity for informal settlement.
1209.21 Conduct of examination.
1209.22 Collateral attacks on adjudicatory proceeding.
1209.23 Commencement of proceeding and contents of notice of
charges.
1209.24 Answer.
1209.25 Amended pleadings.
1209.26 Failure to appear.
1209.27 Consolidation and severance of actions.
1209.28 Motions.
1209.29 Discovery.
1209.30 Request for document discovery from parties.
1209.31 Document discovery subpoenas to non-parties.
1209.32 Deposition of witness unavailable for hearing.
1209.33 Interlocutory review.
1209.34 Summary disposition.
1209.35 Partial summary disposition.
1209.36 Scheduling and pre-hearing conferences.
1209.37 Pre-hearing submissions.
1209.38 Hearing subpoenas.
1209.39-1209.49 [Reserved].
1209.50 Conduct of hearings.
1209.51 Evidence.
1209.52 Post-hearing filings.
1209.53 Recommended decision and filing of record.
1209.54 Exceptions to recommended decision.
1209.55 Review by Director.
1209.56 Exhaustion of administrative remedies.
1209.57 Judicial review; no automatic stay.
1209.58-1209.69 [Reserved].
Subpart D--Parties and Representational Practice Before the Federal
Housing Finance Agency; Standards of Conduct
1209.70 Scope.
1209.71 Definitions.
1209.72 Appearance and practice in adjudicatory proceedings.
1209.73 Conflicts of interest.
1209.74 Sanctions.
1209.75 Censure, suspension, disbarment, and reinstatement.
1209.76-1209.79 [Reserved].
Subpart E--Civil Money Penalty Inflation Adjustments
1209.80 Inflation adjustments.
1209.81 Applicability.
1209.82-1209.99 [Reserved].
Subpart F--Suspension or Removal of an Entity-Affiliated Party Charged
With Felony
1209.100 Scope.
1209.101 Suspension, removal, or prohibition.
1209.102 Hearing on removal or suspension.
1209.103 Recommended and final decisions.
Authority: 5 U.S.C. 554, 556, 557, and 701 et seq.; 12 U.S.C.
4501, 4503, 4511, 4513, 4513b, 4517, 4526, 4531, 4535, 4536, 4581,
4585, 4631-4641; and 28 U.S.C. 2461 note.
Subpart A--Scope and Authority
Sec. 1209.1 Scope.
(a) Authority. This part sets forth the Rules of Practice and
Procedure for hearings on the record in administrative enforcement
proceedings in accordance with the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992, Title XIII of the Housing
and Community Development Act of 1992, Public Law 102-550, sections
1301 et seq., codified at 12 U.S.C. 4501 et seq., as amended (the
``Safety and Soundness Act''), as stated in Sec. 1209.4 of this
part.\1\
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\1\ As used in this part, the ``Safety and Soundness Act'' means
the Federal Housing Enterprise Financial Safety and Soundness Act of
1992, as amended. See Sec. 1209.3. The Safety and Soundness Act was
amended by the Housing and Economic Recovery Act of 2008, Public Law
No. 110-289, sections 1101 et seq., 122 Stat. 2654 (July 30, 2008)
(HERA). Specifically, sections 1151 through 1158 of HERA amended
sections 1371 through 1379D of the Safety and Soundness Act,
(codified at 12 U.S.C. 4631 through 4641) (hereafter, ``Enforcement
Proceedings'').
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[[Page 53608]]
(b) Enforcement Proceedings. Subpart B of this part (Enforcement
Proceedings Under sections 1371 through 1379D of the Safety and
Soundness Act) sets forth the statutory authority for enforcement
proceedings under sections 1371 through 1379D of the Safety and
Soundness Act (12 U.S.C. 4631 through 4641) (Enforcement Proceedings).
(c) Rules of Practice and Procedure. Subpart C of this part (Rules
of Practice and Procedure) prescribes the general rules of practice and
procedure applicable to adjudicatory proceedings that the Director is
required by statute to conduct on the record after opportunity for a
hearing under the Administrative Procedure Act, 5 U.S.C. 554, 556, and
557, under the following statutory provisions:
(1) Enforcement proceedings under sections 1371 through 1379D of
the Safety and Soundness Act, as amended (12 U.S.C. 4631 through 4641);
(2) Removal, prohibition, and civil money penalty proceedings for
violations of post-employment restrictions imposed by applicable law;
and
(3) Proceedings under section 102 of the Flood Disaster Protection
Act of 1973, as amended (42 U.S.C. 4012a) to assess civil money
penalties.
(d) Representation and conduct. Subpart D of this part (Parties and
Representational Practice before the Federal Housing Finance Agency;
Standards of Conduct) sets out the rules of representation and conduct
that shall govern any appearance by any person, party, or
representative of any person or party, before a presiding officer, the
Director of FHFA, or a designated representative of the Director or
FHFA staff, in any proceeding or matter pending before the Director.
(e) Civil money penalty inflation adjustments. Subpart E of this
part (Civil Money Penalty Inflation Adjustments) sets out the
requirements for the periodic adjustment of maximum civil money penalty
amounts under the Federal Civil Penalties Inflation Adjustment Act of
1990, as amended (Inflation Adjustment Act) on a recurring four-year
cycle.\2\
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\2\ Public Law 101-410, 104 Stat. 890, as amended by the Debt
Collection Improvement Act of 1996, Public Law 104-134, Title III,
sec. 31001(s)(1), Apr. 26, 1996, 110 Stat. 1321-373; Public Law 105-
362, Title XIII, sec. 1301(a), Nov. 10, 1998, 112 Stat. 3293 (28
U.S.C. 2461 note).
---------------------------------------------------------------------------
(f) Informal proceedings. Subpart F of this part (Suspension or
Removal of an Entity-Affiliated Party Charged with Felony) sets out the
scope and procedures for the suspension or removal of an entity-
affiliated party charged with a felony under section 1377(h) of the
Safety and Soundness Act (12 U.S.C. 4636a(h)), which provides for an
informal hearing before the Director.
Sec. 1209.2 Rules of construction.
For purposes of this part:
(a) Any term in the singular includes the plural and the plural
includes the singular, if such use would be appropriate;
(b) Any use of a masculine, feminine, or neuter gender encompasses
all three, if such use would be appropriate; and
(c) Unless the context requires otherwise, a party's representative
of record, if any, on behalf of that party, may take any action
required to be taken by the party.
Sec. 1209.3 Definitions.
For purposes of this part, unless explicitly stated to the
contrary:
Adjudicatory proceeding means a proceeding conducted pursuant to
these rules, on the record, and leading to the formulation of a final
order other than a regulation.
Agency has the meaning defined in section 1303(2) of the Safety and
Soundness Act (12 U.S.C. 4502(2)).
Associated with the regulated entity means, for purposes of section
1379 of the Safety and Soundness Act (12 U.S.C. 4637), any direct or
indirect involvement or participation in the conduct of operations or
business affairs of a regulated entity, including engaging in
activities related to the operations or management of, providing advice
or services to, consulting or contracting with, serving as agent for,
or in any other way affecting the operations or business affairs of a
regulated entity--with or without regard to--any direct or indirect
payment, promise to make payment, or receipt of any compensation or
thing of value, such as money, notes, stock, stock options, or other
securities, or other benefit or remuneration of any kind, by or on
behalf of the regulated entity, except any payment made pursuant to a
retirement plan or deferred compensation plan, which is determined by
the Director to be permissible under section 1318(e) of the Safety and
Soundness Act (12 U.S.C. 4518(e)), or by reason of the death or
disability of the party, in the form and manner commonly paid or
provided to retirees of the regulated entity, unless such payment,
compensation, or such benefit is promised or provided to or for the
benefit of said party for the provision of services or other benefit to
the regulated entity.
Authorizing statutes has the meaning defined in section 1303(3) of
the Safety and Soundness Act (12 U.S.C. 4502(3)).
Bank Act means the Federal Home Loan Bank Act, as amended (12
U.S.C. 1421 et seq.).
Board or Board of Directors means the board of directors of any
Enterprise or Federal Home Loan Bank (Bank), as provided for in the
respective authorizing statutes.
Decisional employee means any member of the Director's or the
presiding officer's staff who has not engaged in an investigative or
prosecutorial role in a proceeding and who may assist the Director or
the presiding officer, respectively, in preparing orders, recommended
decisions, decisions, and other documents under subpart C of this part.
Director has the meaning defined in section 1303(9) of the Safety
and Soundness Act (12 U.S.C. 4502(9)); except, as the context requires
in this part, ``director'' may refer to a member of the Board of
Directors or any Board committee of an Enterprise, a Federal Home Loan
Bank, or the Office of Finance.
Enterprise has the meaning defined in section 1303(10) of the
Safety and Soundness Act (12 U.S.C. 4502(10)).
Entity-affiliated party has the meaning defined in section 1303(11)
of the Safety and Soundness Act (12 U.S.C. 4502(11)), and may include
an executive officer, any director, or management of the Office of
Finance, as applicable under relevant provisions of the Safety and
Soundness Act or FHFA regulations.
Executive officer has the meaning defined in section 1303(12) of
the Safety and Soundness Act (12 U.S.C. 4502(12)), and may include an
executive officer of the Office of Finance, as applicable under
relevant provisions of the Safety and Soundness Act or FHFA
regulations.
FHFA means the Federal Housing Finance Agency as defined in section
1303(2) of the Safety and Soundness Act (12 U.S.C. 4502(2)).
Notice of charges means the charging document served by FHFA to
commence an enforcement proceeding under this part for the issuance of
a cease and desist order; removal, suspension, or prohibition order; or
an order to assess a civil money penalty, under 12 U.S.C. 4631 through
4641 and Sec. 1209.23. A ``notice of charges,'' as used or referred to
as such in this part, is not an ``effective notice'' under section
1375(a) of the Safety and Soundness Act (12 U.S.C. 4635(a)).
Office of Finance has the meaning defined in section 1303(19) of
the Safety and Soundness Act (12 U.S.C. 4502(19)).
[[Page 53609]]
Party means any person named as a respondent in any notice of
charges, or FHFA, as the context requires in this part.
Person means an individual, sole proprietor, partnership,
corporation, unincorporated association, trust, joint venture, pool,
syndicate, organization, regulated entity, entity-affiliated party, or
other entity.
Presiding officer means an administrative law judge or any other
person appointed by or at the request of the Director under applicable
law to conduct an adjudicatory proceeding under this part.
Regulated entity has the meaning defined in section 1303(20) of the
Safety and Soundness Act (12 U.S.C. 4502(20)).
Representative of record means an individual who is authorized to
represent a person or is representing himself and who has filed a
notice of appearance and otherwise has complied with the requirements
under Sec. 1209.72. FHFA's representative of record may be referred to
as FHFA counsel of record, agency counsel or enforcement counsel.
Respondent means any party that is the subject of a notice of
charges under this part.
Safety and Soundness Act means Title XIII of the Housing and
Community Development Act of 1992, Public Law 102-550, known as the
Federal Housing Enterprises Financial Safety and Soundness Act of 1992,
as amended (12 U.S.C. 4501 et seq.)
Violation has the meaning defined in section 1303(25) of the Safety
and Soundness Act (12 U.S.C. 4502(25)).
Subpart B--Enforcement Proceedings Under Sections 1371 Through
1379D of the Safety and Soundness Act
Sec. 1209.4 Scope and authority.
The rules of practice and procedure set forth in Subpart C (Rules
of Practice and Procedure) of this part shall be applicable to any
hearing on the record conducted by FHFA in accordance with sections
1371 through 1379D of the Safety and Soundness Act (12 U.S.C. 4631
through 4641), as follows:
(a) Cease-and-desist proceedings under sections 1371 and 1373 of
the Safety and Soundness Act, (12 U.S.C. 4631, 4633);
(b) Civil money penalty assessment proceedings under sections 1373
and 1376 of the Safety and Soundness Act, (12 U.S.C. 4633, 4636); and
(c) Removal and prohibition proceedings under sections 1373 and
1377 of the Safety and Soundness Act, (12 U.S.C. 4633, 4636a), except
removal proceedings under section 1377(h) of the Safety and Soundness
Act, (12 U.S.C. 4636a(h)).
Sec. 1209.5 Cease and desist proceedings.
(a) Cease and desist proceedings.--(1) Authority.--(i) In general.
As prescribed by section 1371(a) of the Safety and Soundness Act (12
U.S.C. 4631(a)), if in the opinion of the Director, a regulated entity
or any entity-affiliated party is engaging or has engaged, or the
Director has reasonable cause to believe that the regulated entity or
any entity-affiliated party is about to engage, in an unsafe or unsound
practice in conducting the business of the regulated entity or the
Office of Finance, or is violating or has violated, or the Director has
reasonable cause to believe is about to violate, a law, rule,
regulation, or order, or any condition imposed in writing by the
Director in connection with the granting of any application or other
request by the regulated entity or the Office of Finance or any written
agreement entered into with the Director, the Director may issue and
serve upon the regulated entity or entity-affiliated party a notice of
charges (as described in Sec. 1209.23) to institute cease and desist
proceedings, except with regard to the enforcement of any housing goal
that must be addressed under sections 1341 and 1345 of the Safety and
Soundness Act (12 U.S.C. 4581, 4585).
(ii) Hearing on the record. In accordance with section 1373 of the
Safety and Soundness Act (12 U.S.C. 4633), a hearing on the record
shall be held in the District of Columbia. Subpart C of this part shall
govern the hearing procedures.
(iii) Consent to order. Unless the party served with a notice of
charges shall appear at the hearing personally or through an authorized
representative of record, the party shall be deemed to have consented
to the issuance of the cease and desist order.
(2) Unsatisfactory rating. In accordance with section 1371(b) of
the Safety and Soundness Act (12 U.S.C. 4631(b)), if a regulated entity
receives, in its most recent report of examination, a less-than-
satisfactory rating for asset quality, management, earnings, or
liquidity, the Director may deem the regulated entity to be engaging in
an unsafe or unsound practice within the meaning of section 1371(a) of
the Safety and Soundness Act (12 U.S.C. 4631(a)), if any such
deficiency has not been corrected.
(3) Order. As provided by section 1371(c)(2) of the Safety and
Soundness Act (12 U.S.C. 4631(c)(2)), if the Director finds on the
record made at a hearing in accordance with section 1373 of the Safety
and Soundness Act (12 U.S.C. 4633) that any practice or violation
specified in the notice of charges has been established (or the
regulated entity or entity-affiliated party consents pursuant to
section 1373(a)(4) of the Safety and Soundness Act (12 U.S.C.
4633(a)(4)), the Director may issue and serve upon the regulated
entity, executive officer, director, or entity-affiliated party, an
order (as set forth in Sec. 1209.55) requiring such party to cease and
desist from any such practice or violation and to take affirmative
action to correct or remedy the conditions resulting from any such
practice or violation.
(b) Affirmative action to correct conditions resulting from
violations or activities. The authority to issue a cease and desist
order or a temporary cease and desist order requiring a regulated
entity, executive officer, director, or entity-affiliated party to take
affirmative action to correct or remedy any condition resulting from
any practice or violation with respect to which such cease and desist
order or temporary cease and desist order is set forth in section
1371(a), (c)(2), and (d) of the Safety and Soundness Act (12 U.S.C.
4631(a), (c)(2), and (d)), and includes the authority to:
(1) Require the regulated entity or entity-affiliated party to make
restitution, or to provide reimbursement, indemnification, or guarantee
against loss, if--
(i) Such entity or party or finance facility was unjustly enriched
in connection with such practice or violation, or
(ii) The violation or practice involved a reckless disregard for
the law or any applicable regulations, or prior order of the Director;
(2) Require the regulated entity to seek restitution, or to obtain
reimbursement, indemnification, or guarantee against loss; as
(3) Restrict asset or liability growth of the regulated entity;
(4) Require the regulated entity to obtain new capital;
(5) Require the regulated entity to dispose of any loan or asset
involved;
(6) Require the regulated entity to rescind agreements or
contracts;
(7) Require the regulated entity to employ qualified officers or
employees (who may be subject to approval by the Director at the
direction of the Director); and
(8) Require the regulated entity to take such other action, as the
Director determines appropriate, including limiting activities.
(c) Authority to limit activities. As provided by section 1371(e)
of the Safety and Soundness Act (12 U.S.C. 4631(e)), the authority of
the Director to issue a cease and desist order under section 1371 of
the Safety and
[[Page 53610]]
Soundness Act (12 U.S.C. 4631) or a temporary cease and desist order
under section 1372 of the Safety and Soundness Act (12 U.S.C. 4632),
includes the authority to place limitations on the activities or
functions of the regulated entity or entity-affiliated party or any
executive officer or director of the regulated entity or entity-
affiliated party.
(d) Effective date of order; judicial review.--(1) Effective date.
The effective date of an order is as set forth in section 1371(f) of
the Safety and Soundness Act (12 U.S.C. 4631(f)).
(2) Judicial review. Judicial review is governed by section 1374 of
the Safety and Soundness Act (12 U.S.C. 4634).
Sec. 1209.6 Temporary cease and desist orders.
(a) Temporary cease and desist orders.--(1) Grounds for issuance.
The grounds for issuance of a temporary cease and desist order are set
forth in section 1372(a) of the Safety and Soundness Act (12 U.S.C.
4632(a)). In accordance with section 1372(a) of the Safety and
Soundness Act (12 U.S.C. 4632(a)), the Director may:
(i) Issue a temporary order requiring that regulated entity or
entity-affiliated party to cease and desist from any violation or
practice specified in the notice of charges; and
(ii) Require that regulated entity or entity-affiliated party to
take affirmative action to prevent or remedy any insolvency,
dissipation, condition, or prejudice, pending completion of the
proceedings.
(2) Additional requirements. As provided by section 1372(a)(2) of
the Safety and Soundness Act (12 U.S.C. 4632(a)(2)), an order issued
under section 1372(a)(1) of the Safety and Soundness Act (12 U.S.C.
4632(a)(1)) may include any requirement authorized under section
1371(d) of the Safety and Soundness Act (12 U.S.C. 4631(d)).
(b) Effective date of temporary order. The effective date of a
temporary order is as provided by section 1372(b) of the Safety and
Soundness Act (12 U.S.C. 4632(b)). And, unless set aside, limited, or
suspended by a court in proceedings pursuant to the judicial review
provisions of section 1372(d) of the Safety and Soundness Act (12
U.S.C. 4632(d)), shall remain in effect and enforceable pending the
completion of the proceedings pursuant to such notice of charges, and
shall remain effective until the Director dismisses the charges
specified in the notice or until superseded by a cease-and-desist order
issued pursuant to section 1371 of the Safety and Soundness Act (12
U.S.C. 4631).
(c) Incomplete or inaccurate records.--(1) Temporary order. As
provided by section 1372(c) of the Safety and Soundness Act (12 U.S.C.
4632(c)), if a notice of charges served under section 1371(a) or (b) of
the Safety and Soundness Act (12 U.S.C. 4631(a), (b)), specifies on the
basis of particular facts and circumstances that the books and records
of the regulated entity served are so incomplete or inaccurate that the
Director is unable, through the normal supervisory process, to
determine the financial condition of the regulated entity or the
details or the purpose of any transaction or transactions that may have
a material effect on the financial condition of that regulated entity,
the Director may issue a temporary order requiring:
(i) The cessation of any activity or practice that gave rise,
whether in whole or in part, to the incomplete or inaccurate state of
the books or records; or
(ii) Affirmative action to restore the books or records to a
complete and accurate state.
(2) Effective period. Any temporary order issued under section
1372(c)(1) of the Safety and Soundness Act (12 U.S.C. 4632(c)(1)) shall
become effective upon service, and remain in effect and enforceable
unless set aside, limited, or suspended in accordance with section
1372(d) of the Safety and Soundness Act (12 U.S.C. 4632(d)), as
provided by section 1372(c)(2) of the Safety and Soundness Act (12
U.S.C. 4632(c)(2)).
(d) Judicial review. Section 1372(d) of the Safety and Soundness
Act (12 U.S.C. 4632(d)), authorizes a regulated entity, executive
officer, director, or entity-affiliated party that has been served with
a temporary order pursuant to section 1372(a) or (b) of the Safety and
Soundness Act (12 U.S.C. 4632(a), (b)) to apply to the United States
District Court for the District of Columbia within 10 days after
service of the temporary order for an injunction setting aside,
limiting, or suspending the enforcement, operation, or effectiveness of
the temporary order, pending the completion of the administrative
enforcement proceeding. The district court has jurisdiction to issue
such injunction.
(e) Enforcement of temporary order. As provided by section 1372(e)
of the Safety and Soundness Act (12 U.S.C. 4632(e)), in the case of any
violation, threatened violation, or failure to obey a temporary order
issued pursuant to this section, the Director may bring an action in
the United States District Court for the District of Columbia for an
injunction to enforce a temporary order, and the district court is to
issue such injunction upon a finding made in accordance with section
1372(e) of the Safety and Soundness Act (12 U.S.C. 4632(e)).
Sec. 1209.7 Civil money penalties.
(a) Civil money penalty proceedings.--(1) In general. Section 1376
of the Safety and Soundness Act (12 U.S.C. 4636) governs the imposition
of civil money penalties. Upon written notice, which shall conform to
the requirements of Sec. 1209.23 of this part, and a hearing on the
record to be conducted in accordance with subpart C of this part, the
Director may impose a civil money penalty on any regulated entity or
any entity-affiliated party as provided by section 1376 of the Safety
and Soundness Act for any violation, practice, or breach addressed
under sections 1371, 1372, or 1376 of the Safety and Soundness Act (12
U.S.C. 4631, 4632, 4636), except with regard to the enforcement of
housing goals that are addressed separately under sections 1341 and
1345 of the Safety and Soundness Act (12 U.S.C. 4581, 4585).
(2) Amount of penalty.--(i) First Tier. Section 1376(b)(1) of the
Safety and Soundness Act (12 U.S.C. 4636(b)(1)) prescribes the civil
penalty for violations as stated therein, in the amount of $10,000 for
each day during which a violation continues.
(ii) Second Tier. Section 1376(b)(2) of the Safety and Soundness
Act (12 U.S.C. 4636(b)(2)) provides that notwithstanding paragraph
(b)(1) thereof, a regulated entity or entity-affiliated party shall
forfeit and pay a civil penalty of not more than $50,000 for each day
during which a violation, practice, or breach continues, if the
regulated entity or entity-affiliated party commits any violation
described in (b)(1) thereof, recklessly engages in an unsafe or unsound
practice, or breaches any fiduciary duty, and the violation, practice,
or breach is part of a pattern of misconduct; causes or is likely to
cause more than a minimal loss to the regulated entity; or results in
pecuniary gain or other benefit to such party.
(iii) Third Tier. Section 1376(b)(3) of the Safety and Soundness
Act (12 U.S.C. 4636(b)(3)) provides that, notwithstanding paragraphs
(b)(1) and (b)(2) thereof, any regulated entity or entity-affiliated
party shall forfeit and pay a civil penalty, in accordance with section
1376(b)(4) of the Safety and Soundness Act (12 U.S.C. 4636(b)(4)), for
each day during which such violation, practice, or breach continues, if
such regulated entity or entity-affiliated party:
[[Page 53611]]
(A) Knowingly--
(1) Commits any violation described in any subparagraph of section
1376(b)(1) of the Safety and Soundness Act;
(2) Engages in any unsafe or unsound practice in conducting the
affairs of the regulated entity; or
(3) Breaches any fiduciary duty; and
(B) Knowingly or recklessly causes a substantial loss to the
regulated entity or a substantial pecuniary gain or other benefit to
such party by reason of such violation, practice, or breach.
(b) Maximum amounts.--(1) Maximum daily penalty. Section 1376(b)(4)
of the Safety and Soundness Act (12 U.S.C. 4636(b)(4)), prescribes the
maximum daily amount of a civil penalty that may be assessed for any
violation, practice, or breach pursuant to section 1376(b)(3) of the
Safety and Soundness Act (12 U.S.C. 4636(b)(3)), in the case of any
entity-affiliated party (not to exceed $2,000,000.00), and in the case
of any regulated entity ($2,000,000.00).
(2) Inflation Adjustment Act. The maximum civil penalty amounts are
subject to periodic adjustment under the Federal Civil Penalties
Inflation Adjustment Act of 1990, as amended (28 U.S.C. 2461 note), as
provided in subpart E of this part.
(c) Factors in determining amount of penalty. In accordance with
section 1376(c)(2) of the Safety and Soundness Act (12 U.S.C.
4636(c)(2)), in assessing civil money penalties on a regulated entity
or an entity-affiliated party in amounts as provided in section 1376(b)
of the Safety and Soundness Act (12 U.S.C. 4636(b)), the Director shall
give consideration to such factors as:
(1) The gravity of the violation, practice, or breach;
(2) Any history of prior violations or supervisory actions, or any
attempts at concealment;
(3) The effect of the penalty on the safety and soundness of the
regulated entity or the Office of Finance;
(4) Any loss or risk of loss to the regulated entity or to the
Office of Finance;
(5) Any benefits received or derived, whether directly or
indirectly, by the respondent(s);
(6) Any injury to the public;
(7) Any deterrent effect on future violations, practices, or
breaches;
(8) The financial capacity of the respondent(s), or any unusual
circumstance(s) of hardship upon an executive officer, director, or
other individual;
(9) The promptness, cost, and effectiveness of any effort to remedy
or ameliorate the consequences of the violation, practice, or breach;
(10) The candor and cooperation, if any, of the respondent(s); and
(11) Any other factors the Director may determine by regulation to
be appropriate.
(d) Review of imposition of penalty. Section 1376(c)(3) of the
Safety and Soundness Act (12 U.S.C. 4636(c)(3)) governs judicial review
of a penalty order under section 1374 of the Safety and Soundness Act
(12 U.S.C. 4634).
Sec. 1209.8 Removal and prohibition proceedings.
(a) Removal and prohibition proceedings.--(1) Authority to issue
order. As provided by section 1377(a)(1) of the Safety and Soundness
Act (12 U.S.C. 4636a(a)(1)), the Director may serve upon a party
described in paragraph (a)(2) of this section, or any officer,
director, or management of the Office of Finance, a notice of the
intention of the Director to suspend or remove such party from office,
or to prohibit any further participation by such party in any manner in
the conduct of the affairs of the regulated entity or the Office of
Finance.
(2) Applicability. As provided by section 1377(a)(2) of the Safety
and Soundness Act (12 U.S.C. 4636a(a)(2)), a party described in this
paragraph is an entity-affiliated party or any officer, director, or
management of the Office of Finance, if the Director determines that:
(i) That party, officer, or director has, directly or indirectly--
(A) Violated--
(1) Any law or regulation;
(2) Any cease and desist order that has become final;
(3) Any condition imposed in writing by the Director in connection
with an application, notice, or other request by a regulated entity; or
(4) Any written agreement between such regulated entity and the
Director;
(B) Engaged or participated in any unsafe or unsound practice in
connection with any regulated entity or business institution; or
(C) Committed or engaged in any act, omission, or practice which
constitutes a breach of such party's fiduciary duty;
(ii) By reason of such violation, practice, or breach--
(A) Such regulated entity or business institution has suffered or
likely will suffer financial loss or other damage; or
(B) Such party directly or indirectly received financial gain or
other benefit; and
(iii) The violation, practice, or breach described in subparagraph
(i) of this section--
(A) Involves personal dishonesty on the part of such party; or
(B) Demonstrates willful or continuing disregard by such party for
the safety or soundness of such regulated entity or business
institution.
(3) Applicability to business entities. Under section 1377(f) of
the Safety and Soundness Act (12 U.S.C. 4636a(f)), this remedy applies
only to a person who is an individual, unless the Director specifically
finds that it should apply to a corporation, firm, or other business
entity.
(b) Suspension order.--(1) Suspension or prohibition authorized. If
the Director serves written notice under section 1377(a) of the Safety
and Soundness Act (12 U.S.C. 4636a(a)) upon a party subject to that
section, the Director may, by order, suspend or remove such party from
office, or prohibit such party from further participation in any manner
in the conduct of the affairs of the regulated entity or the Office of
Finance, if the Director:
(i) Determines that such action is necessary for the protection of
the regulated entity or the Office of Finance; and
(ii) Serves such party with written notice of the order.
(2) Effective period. The effective period of any order under
section 1377(b)(1) of the Safety and Soundness Act (12 U.S.C.
4636a(b)(1)) is specified in section 1377(b)(2) of the Safety and
Soundness Act (12 U.S.C. 4636a(b)(2)). An order of suspension shall
become effective upon service and, absent a court-ordered stay, remains
effective and enforceable until the date the Director dismisses the
charges or the effective date of an order issued by the Director under
section 1377(c)(4) of the Safety and Soundness Act (12 U.S.C.
4636a(c)(4),(5)).
(3) Copy of order to be served on regulated entity. In accordance
with section 1377(b)(3) of the Safety and Soundness Act (12 U.S.C.
4636a(b)(3)), the Director will serve a copy of any order to suspend,
remove, or prohibit participation in the conduct of the affairs on the
Office of Finance or any regulated entity with which such party is
affiliated at the time such order is issued.
(c) Notice; hearing and order.--(1) Written notice. A notice of the
intention of the Director to issue an order under sections 1377(a) and
(c) of the Safety and Soundness Act, (12 U.S.C. 4636a(a), (c)), shall
conform with Sec. 1209.23, and may include any such additional
information as the Director may require.
(2) Hearing. A hearing on the record shall be held in the District
of Columbia in accordance with sections 1373(a)(1) and 1377(c)(2) of
the Safety and Soundness Act. See 12 U.S.C. 4633(a)(1), 4636a(c)(2).
[[Page 53612]]
(3) Consent. As provided by section 1377(c)(3) of the Safety and
Soundness Act (12 U.S.C. 4636a(c)(3)), unless the party that is the
subject of a notice delivered under paragraph (a) of this section
appears in person or by a duly authorized representative of record, in
the adjudicatory proceeding, such party shall be deemed to have
consented to the issuance of an order under this section.
(4) Issuance of order of suspension or removal. As provided by
section 1377(c)(4) of the Safety and Soundness Act (12 U.S.C.
4636a(c)(4)), the Director may issue an order under this part, as the
Director may deem appropriate, if:
(i) A party is deemed to have consented to the issuance of an order
under paragraph (d); or
(ii) Upon the record made at the hearing, the Director finds that
any of the grounds specified in the notice have been established.
(5) Effectiveness of order. As provided by section 1377(c)(5) of
the Safety and Soundness Act (12 U.S.C. 4636a(c)(5)), any order issued
and served upon a party in accordance with this section shall become
effective at the expiration of 30 days after the date of service upon
such party and any regulated entity or entity-affiliated party. An
order issued upon consent under paragraph (c)(3) of this section,
however, shall become effective at the time specified therein. Any such
order shall remain effective and enforceable except to such extent as
it is stayed, modified, terminated, or set aside by action of the
Director or a reviewing court.
(d) Prohibition of certain activities and industry-wide
prohibition.--(1) Prohibition of certain activities. As provided by
section 1377(d) of the Safety and Soundness Act (12 U.S.C. 4636a(d)),
any person subject to an order issued under subpart B of this part
shall not--
(i) Participate in any manner in the conduct of the affairs of any
regulated entity or the Office of Finance;
(ii) Solicit, procure, transfer, attempt to transfer, vote, or
attempt to vote any proxy, consent, or authorization with respect to
any voting rights in any regulated entity;
(iii) Violate any voting agreement previously approved by the
Director; or
(iv) Vote for a director, or serve or act as an entity-affiliated
party of a regulated entity or as an officer or director of the Office
of Finance.
(2) Industry-wide prohibition. As provided by section 1377(e)(1) of
the Safety and Soundness Act (12 U.S.C. 4636a(e)(1)), except as
provided in section 1377(e)(2) of the Safety and Soundness Act (12
U.S.C. 4636a(e)(2)), any person who, pursuant to an order issued under
section 1377 of the Safety and Soundness Act (12 U.S.C. 4636a), has
been removed or suspended from office in a regulated entity or the
Office of Finance, or prohibited from participating in the conduct of
the affairs of a regulated entity or the Office of Finance, may not,
while such order is in effect, continue or commence to hold any office
in, or participate in any manner in the conduct of the affairs of, any
regulated entity or the Office of Finance.
(3) Relief from industry-wide prohibition at the discretion of the
Director.--(i) Relief from order. As provided by section 1377(e)(2) of
the Safety and Soundness Act (12 U.S.C. 4636a(e)(2)), if, on or after
the date on which an order has been issued under section 1377 of the
Safety and Soundness Act (12 U.S.C. 4636a) that removes or suspends
from office any party, or prohibits such party from participating in
the conduct of the affairs of a regulated entity or the Office of
Finance, such party receives the written consent of the Director, the
order shall cease to apply to such party with respect to the regulated
entity or the Office of Finance to the extent described in the written
consent. Such written consent shall be on such terms and conditions as
the Director therein may specify in his discretion. Any such consent
shall be publicly disclosed.
(ii) No private right of action; no final agency action. Nothing in
this paragraph shall be construed to require the Director to entertain
or to provide such written consent, or to confer any rights to such
consideration or consent upon any party, regulated entity, entity-
affiliated party, or the Office of Finance. Additionally, whether the
Director consents to relief from an outstanding order under this part
is committed wholly to the discretion of the Director, and such
determination shall not be a final agency action for purposes of
seeking judicial review.
(4) Violation of industry-wide prohibition. As provided by section
1377(e)(3) of the Safety and Soundness Act (12 U.S.C. 4636a(e)(3)), any
violation of section 1377(e)(1) of the Safety and Soundness Act (12
U.S.C. 4636a(e)(1)) by any person who is subject to an order issued
under section 1377(h) of the Safety and Soundness Act (12 U.S.C.
4636a(h)) (suspension or removal of entity-affiliated party charged
with felony) shall be treated as a violation of the order.
(e) Stay of suspension or prohibition of entity-affiliated party.
As provided by section 1377(g) of the Safety and Soundness Act (12
U.S.C. 4636a(g)), not later than 10 days after the date on which any
entity-affiliated party has been suspended from office or prohibited
from participation in the conduct of the affairs of a regulated entity,
such party may apply to the United States District Court for the
District of Columbia, or the United States district court for the
judicial district in which the headquarters of the regulated entity is
located, for a stay of such suspension or prohibition pending the
completion of the administrative enforcement proceeding pursuant to
section 1377(c) of the Safety and Soundness Act (12 U.S.C. 4636a(c)).
The court shall have jurisdiction to stay such suspension or
prohibition, but such jurisdiction does not extend to the
administrative enforcement proceeding.
Sec. 1209.9 Supervisory actions not affected.
As provided by section 1311(c) of the Safety and Soundness Act (12
U.S.C. 4511(c)), the authority of the Director to take action under
subtitle A of the Safety and Soundness Act (12 U.S.C. 4611 et seq.)
(e.g., the appointment of a conservator or receiver for a regulated
entity; entering into a written agreement or pursuing an informal
agreement with a regulated entity as the Director deems appropriate;
and undertaking other such actions as may be applicable to
undercapitalized, significantly undercapitalized or critically
undercapitalized regulated entities), or to initiate enforcement
proceedings under subtitle C of the Safety and Soundness Act (12 U.S.C.
4631 et seq.), shall not in any way limit the general supervisory or
regulatory authority granted the Director under section 1311(b) of the
Safety and Soundness Act (12 U.S.C. 4511(b)). The selection and form of
regulatory or supervisory action under the Safety and Soundness Act is
committed to the discretion of the Director, and the selection of one
form of action or a combination of actions does not foreclose the
Director from pursuing any other supervisory action authorized by law.
Subpart C--Rules of Practice and Procedure
Sec. 1209.10 Authority of the Director.
The Director may, at any time during the pendency of a proceeding,
perform, direct the performance of, or waive performance of any act
that could be done or ordered by the presiding officer.
Sec. 1209.11 Authority of the Presiding Officer.
(a) General rule. All proceedings governed by subpart C of this
part shall be conducted consistent with the provisions of chapter 5 of
Title 5 of the
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United States Code. The presiding officer shall have complete charge of
the adjudicative proceeding, conduct a fair and impartial hearing,
avoid unnecessary delay, and assure that a complete record of the
proceeding is made.
(b) Powers. The presiding officer shall have all powers necessary
to conduct the proceeding in accordance with paragraph (a) of this
section and 5 U.S.C. 556(c). The presiding officer is authorized to:
(1) Control the proceedings. (i) Upon reasonable notice to the
parties, not earlier than 30 days or later than 60 days after service
of a notice of charges under the Safety and Soundness Act, set a date,
time, and place for an evidentiary hearing on the record, within the
District of Columbia, as provided in section 1373 of the Safety and
Soundness Act (12 U.S.C. 4633), in a scheduling order that may be
issued in conjunction with the initial scheduling conference set under
Sec. 1209.36, or otherwise as the presiding officer finds in the best
interest of justice, in accordance with this part; and
(ii) Upon reasonable notice to the parties, reset or change the
date, time, or place (within the District of Columbia) of an
evidentiary hearing;
(2) Continue or recess the hearing in whole or in part for a
reasonable period of time;
(3) Hold conferences to address legal or factual issues, or
evidentiary matters materially relevant to the charges or allowable
defenses; to regulate the timing and scope of discovery and rule on
discovery plans; or otherwise to consider matters that may facilitate
an effective, fair, and expeditious disposition of the proceeding;
(4) Administer oaths and affirmations;
(5) Issue and enforce subpoenas, subpoenas duces tecum, discovery
and protective orders, as authorized by this part, and to revoke,
quash, or modify such subpoenas issued by the presiding officer;
(6) Take and preserve testimony under oath;
(7) Rule on motions and other procedural matters appropriate in an
adjudicatory proceeding, except that only the Director shall have the
power to grant summary disposition or any motion to dismiss the
proceeding or to make a final determination of the merits of the
proceeding;
(8) Take all actions authorized under this part to regulate the
scope, timing, and completion of discovery of any non-privileged
documents that are materially relevant to the charges or allowable
defenses;
(9) Regulate the course of the hearing and the conduct of
representatives and parties;
(10) Examine witnesses;
(11) Receive materially relevant evidence, and rule upon the
admissibility of evidence or exclude, limit, or otherwise rule on
offers of proof;
(12) Upon motion of a party, take official notice of facts;
(13) Recuse himself upon his own motion or upon motion made by a
party;
(14) Prepare and present to the Director a recommended decision as
provided in this part;
(15) Establish time, place, and manner limitations on the
attendance of the public and the media for any public hearing; and
(16) Do all other things necessary or appropriate to discharge the
duties of a presiding officer.
Sec. 1209.12 Public hearings; closed hearings.
(a) General rule. As provided in section 1379B(b) of the Safety and
Soundness Act (12 U.S.C. 4639(b)), all hearings shall be open to the
public, except that the Director, in his discretion, may determine that
holding an open hearing would be contrary to the public interest. The
Director may make such determination sua sponte at any time by written
notice to all parties, or as provided in paragraphs (b) and (c) of this
section.
(b) Motion for closed hearing. Within 20 days of service of the
notice of charges, any party may file with the presiding officer a
motion for a private hearing and any party may file a pleading in reply
to the motion. The presiding officer shall forward the motion and any
reply, together with a recommended decision on the motion, to the
Director, who shall make a final determination. Such motions and
replies are governed by Sec. 1209.28 of this part. A determination
under this section is committed to the discretion of the Director and
is not a reviewable final agency action.
(c) Filing documents under seal. FHFA counsel of record, in his
discretion, may file or require the filing of any document or part of a
document under seal, if such counsel makes a written determination that
disclosure of the document would be contrary to the public interest.
The presiding officer shall issue an order to govern confidential
information, and take all appropriate steps to preserve the
confidentiality of such documents in whole or in part, including
closing any portion of a hearing to the public or issuing a protective
order under such terms as may be acceptable to FHFA counsel of record.
(d) Procedures for closed hearing. An evidentiary hearing, or any
part thereof, that is closed for the purpose of offering into evidence
testimony or documents filed under seal as provided in paragraph (c) of
this section shall be conducted under procedures that may include:
prior notification to the submitter of confidential information;
provisions for sealing portions of the record, briefs, and decisions;
in camera arguments, offers of proof, and testimony; and limitations on
representatives of record or other participants, as the presiding
officer may designate. Additionally, at such proceedings the presiding
officer may make an opening statement as to the confidentiality and
limitations and deliver an oath to the parties, representatives of
record, or other approved participants as to the confidentiality of the
proceedings.
Sec. 1209.13 Good faith certification.
(a) General requirement. Every filing or submission of record
following the issuance of a notice of charges by the Director shall be
signed by at least one representative of record in his individual name
and shall state that representative's business contact information,
which shall include his address, electronic mail address, and telephone
number; and the names, addresses and telephone numbers of all other
representatives of record for the person making the filing or
submission.
(b) Effect of signature. (1) By signing a document, a
representative of record or party appearing pro se certifies that:
(i) The representative of record or party has read the filing or
submission of record;
(ii) To the best of his knowledge, information and belief formed
after reasonable inquiry, the filing or submission of record is well-
grounded in fact and is warranted by existing law or a good faith, non-
frivolous argument for the extension, modification, or reversal of
existing law, regulation, or FHFA order or policy; and
(iii) The filing or submission of record is not made for any
improper purpose, such as to harass or to cause unnecessary delay or
needless increase in the cost of litigation.
(2) If a filing or submission of record is not signed, the
presiding officer shall strike the filing or submission of record,
unless it is signed promptly after the omission is called to the
attention of the pleader or movant.
(c) Effect of making oral motion or argument. The act of making any
oral motion or oral argument by any
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representative or party shall constitute a certification that to the
best of his knowledge, information, and belief, formed after reasonable
inquiry, his statements are well-grounded in fact and are warranted by
existing law or a good faith, non-frivolous argument for the extension,
modification, or reversal of existing law, regulation, or FHFA order or
policy, and are not made for any improper purpose, such as to harass or
to cause unnecessary delay or to needlessly increase litigation-related
costs.
Sec. 1209.14 Ex parte communications.
(a) Definition.--(1) Ex parte communication means any material oral
or written communication relevant to an adjudication of the merits of
any proceeding under this subpart that was neither on the record nor on
reasonable prior notice to all parties that takes place between:
(i) An interested person outside FHFA (including the person's
representative of record); and
(ii) The presiding officer handling that proceeding, the Director,
a decisional employee assigned to that proceeding, or any other person
who is or may be reasonably expected to be involved in the decisional
process.
(2) A communication that is procedural in that it does not concern
the merits of an adjudicatory proceeding, such as a request for status
of the proceeding, does not constitute an ex parte communication.
(b) Prohibition of ex parte communications. From the time a notice
of charges commencing a proceeding under this part is issued by the
Director until the date that the Director issues his final decision
pursuant to Sec. 1209.55 of this part, no person referred to in
paragraph (a)(1)(i) of this section shall knowingly make or cause to be
made an ex parte communication with the Director or the presiding
officer. The Director, presiding officer, or a decisional employee
shall not knowingly make or cause to be made an ex parte communication.
(c) Procedure upon occurrence of ex parte communication. If an ex
parte communication is received by any person identified in paragraph
(a) of this section, that person shall cause all such written
communications (or, if the communication is oral, a memorandum stating
the substance of the communication) to be placed on the record of the
proceeding and served on all parties. All parties to the proceeding
shall have an opportunity within 10 days of receipt of service of the
ex parte communication to file responses thereto, and to recommend
sanctions that they believe to be appropriate under the circumstances,
in accordance with paragraph (d) of this section.
(d) Sanctions. Any party or representative for a party who makes an
ex parte communication, or who encourages or solicits another to make
an ex parte communication, may be subject to any appropriate sanction
or sanctions imposed by the Director or the presiding officer,
including, but not limited to, exclusion from the proceedings, an
adverse ruling on the issue that is the subject of the prohibited
communication, or other appropriate and commensurate action(s).
(e) Consultations by presiding officer. Except to the extent
required for the disposition of ex parte matters as authorized by law,
the presiding officer may not consult a person or party on any matter
relevant to the merits of the adjudication, unless upon notice to and
opportunity for all parties to participate.
(f) Separation of functions. An employee or agent engaged in the
performance of any investigative or prosecuting function for FHFA in a
case may not, in that or in a factually related case, participate or
advise in the recommended decision, the Director's review under Sec.
1209.55 of the recommended decision, or the Director's final
determination on the merits based upon his review of the recommended
decision, except as a witness or counsel in the adjudicatory
proceedings. This section shall not prohibit FHFA counsel of record
from providing necessary and appropriate legal advice to the Director
on supervisory (including information or legal advice as to settlement
issues) or regulatory matters.
Sec. 1209.15 Filing of papers.
(a) Filing. All pleadings, motions, memoranda, and any other
submissions or papers required to be filed in the proceeding shall be
addressed to the presiding officer and filed with FHFA, 1700 G Street,
NW., Fourth Floor, Washington, DC 20552, in accordance with paragraphs
(b) and (c) of this section.
(b) Manner of filing. Unless otherwise specified by the Director or
the presiding officer, filing shall be accomplished by:
(1) Overnight delivery. Overnight U.S. Postal Service delivery or
delivery by a reliable commercial delivery service for same day or
overnight delivery to the address stated above; or
(2) U.S. Mail. First class, registered, or certified mail via the
U.S. Postal Service; and
(3) Electronic media. Transmission by electronic media shall be
required by and upon any conditions specified by the Director or the
presiding officer. FHFA shall provide a designated site for the
electronic filing of all papers in a proceeding in accordance with any
conditions specified by the presiding officer. All papers filed by
electronic media shall be filed concurrently in a manner set out above
and in accordance with paragraph (c) of this section.
(c) Formal requirements as to papers filed.--(1) Form. To be filed,
all papers must set forth the name, address, telephone number, and
electronic mail address of the representative or party seeking to make
the filing. Additionally, all such papers must be accompanied by a
certification setting forth when and how service has been made on all
other parties. All papers filed must be double-spaced on 8\1/2\ x 11-
inch paper and must be clear, legible, and formatted as required by
paragraph (c)(5) of this section.
(2) Signature. All papers filed must be dated and signed as
provided in Sec. 1209.13.
(3) Caption. All papers filed must include at the head thereof, or
on a title page, the FHFA caption, title and docket number of the
proceeding, the name of the filing party, and the subject of the
particular paper.
(4) Number of copies. Unless otherwise specified by the Director or
the presiding officer, an original and one copy of all pleadings,
motions and memoranda, or other such papers shall be filed, except that
only one copy of transcripts of testimony and exhibits shall be filed.
(5) Content format. All papers filed shall be formatted in such
program(s) (e.g., MS WORD(copyright), MS Excel(copyright), or
WordPerfect(copyright)) as the presiding officer or Director shall
specify.
Sec. 1209.16 Service of papers.
(a) Except as otherwise provided, a party filing papers or serving
a subpoena shall serve a copy upon the representative of record for
each party to the proceeding so represented, and upon any party who is
not so represented, in accordance with the requirements of this
section.
(b) Except as provided in paragraphs (c)(2) and (d) of this
section, a serving party shall use one or more of the following methods
of service:
(1) Personal service;
(2) Overnight U.S. Postal Service delivery or delivery by a
reliable commercial delivery service for same day or overnight delivery
to the parties' respective street addresses; or
(3) First class, registered, or certified mail via the U.S. Postal
Service; and
(4) For transmission by electronic media, each party shall promptly
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provide the presiding officer and all parties, in writing, an active
electronic mail address where service will be accepted on behalf of
such party. Any document transmitted via electronic mail for service on
a party shall comply in all respects with the requirements of Sec.
1209.15(c).
(5) Service of pleadings or other papers made by facsimile may not
exceed a total page count of 30 pages. Any paper served by facsimile
transmission shall meet the requirements of Sec. 1209.15(c).
(6) Any party serving a pleading or other paper by electronic media
under paragraph (4) of this section also shall concurrently serve that
pleading or paper by one of the methods specified in paragraphs (1)
through (5) of this section.
(c) By the Director or the presiding officer. (1) All papers
required to be served by the Director or the presiding officer upon a
party who has appeared in the proceeding in accordance with Sec.
1209.72 shall be served by the means specified in paragraph (b) of this
section.
(2) If a notice of appearance has not been filed in the proceeding
for a party in accordance with Sec. 1209.72, the Director or the
presiding officer shall make service upon the party by any of the
following methods:
(i) By personal service;
(ii) If the person to be served is an individual, by delivery to a
person of suitable age and discretion at the physical location where
the individual resides or works;
(iii) If the person to be served is a corporation or other
association, by delivery to an officer, managing or general agent, or
to any other agent authorized by appointment or by law to receive
service and, if the agent is one authorized by statute to receive
service and the statute so requires, by also mailing a copy to the
party;
(iv) By registered or certified mail addressed to the person's last
known address; or
(v) By any other method reasonably calculated to give actual
notice.
(d) Subpoenas. Service of a subpoena may be made:
(1) By personal service;
(2) If the person to be served is an individual, by delivery to a
person of suitable age and discretion at the physical location where
the individual resides or works;
(3) If the person to be served is a corporation or other
association, by delivery to an officer, managing or general agent, or
to any other agent authorized by appointment or by law to receive
service and, if the agent is one authorized by statute to receive
service and the statute so requires, by also mailing a copy to the
party;
(4) By registered or certified mail addressed to the person's last
known address; or
(5) By any other method reasonably calculated to give actual
notice.
(e) Area of service. Service in any State or the District of
Columbia, or any commonwealth, possession, territory or other place
subject to the jurisdiction of the United States, or on any person
doing business in any State or the District of Columbia, or any
commonwealth, possession, territory or other place subject to the
jurisdiction of the United States, or on any person as otherwise
permitted by law, is effective without regard to the place where the
hearing is held.
(f) Proof of service. Proof of service of papers filed by a party
shall be filed before action is taken thereon. The proof of service,
which shall serve as prima facie evidence of the fact and date of
service, shall show the date and manner of service and may be by
written acknowledgment of service, by declaration of the person making
service, or by certificate of a representative of record. However,
failure to file proof of service contemporaneously with the papers
shall not affect the validity of actual service. The presiding officer
may allow the proof to be amended or supplied, unless to do so would
result in material prejudice to a party.
Sec. 1209.17 Time computations.
(a) General rule. In computing any period of time prescribed or
allowed under this part, the date of the act or event that commences
the designated period of time is not included. Computations shall
include the last day of the time period, unless the day falls on a
Saturday, Sunday, or Federal holiday. When the last day is a Saturday,
Sunday or Federal holiday, the period of time shall run until the end
of the next day that is not a Saturday, Sunday, or Federal holiday.
Intermediate Saturdays, Sundays and Federal holidays are included in
the computation of time. However, when the time period within which an
act is to be performed is 10 days or less, not including any additional
time allowed for in paragraph (c) of this section, intermediate
Saturdays, Sundays and Federal holidays are not included.
(b) When papers are deemed to be filed or served. (1) Filing or
service are deemed to be effective:
(i) In the case of personal service or same day reliable commercial
delivery service, upon actual service;
(ii) In the case of U.S. Postal Service or reliable commercial
overnight delivery service, or first class, registered, or certified
mail, upon deposit in or delivery to an appropriate point of
collection;
(iii) In the case of transmission by electronic media, as specified
by the authority receiving the filing, in the case of filing; or
(iv) In the case of transmission by electronic media or facsimile,
when the device through which the document was sent provides a reliable
indicator that the document has been received by the opposing party, in
the case of service.
(2) The effective filing and service dates specified in paragraph
(b)(1) of this section may be modified by the Director or the presiding
officer, or by agreement of the parties in the case of service.
(c) Calculation of time for service and filing of responsive
papers. Whenever a time limit is measured by a prescribed period from
the service of any notice, pleading or paper, the applicable time
limits shall be calculated as follows:
(1) If service was made by delivery to the U.S. Postal Service for
longer than overnight delivery service by first class, registered, or
certified mail, add three calendar days to the prescribed period for
the responsive pleading or other filing.
(2) If service was personal, or was made by delivery to the U.S.
Postal Service or any reliable commercial delivery service for
overnight delivery, add one calendar-day to the prescribed period for
the responsive pleading or other filing.
(3) If service was made by electronic media transmission or
facsimile, add one calendar-day to the prescribed period for the
responsive pleading or other filing--unless otherwise determined by the
Director or the presiding officer sua sponte, or upon motion of a party
in the case of filing or by prior agreement among the parties in the
case of service.
Sec. 1209.18 Change of time limits.
Except as otherwise by law required, the presiding officer may
extend any time limit that is prescribed above or in any notice or
order issued in the proceedings. After the referral of the case to the
Director pursuant to Sec. 1209.53, the Director may grant extensions
of the time limits for good cause shown. Extensions may be granted on
the motion of a party after notice and opportunity to respond is
afforded all nonmoving parties, or on the Director's or the presiding
officer's own motion.
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Sec. 1209.19 Witness fees and expenses.
Witnesses (other than parties) subpoenaed for testimony (or for a
deposition in lieu of personal appearance at a hearing) shall be paid
the same fees for attendance and mileage as are paid in the United
States district courts in proceedings in which the United States is a
party, provided that, in the case of a discovery subpoena addressed to
a party, no witness fees or mileage shall be paid. Fees for witnesses
shall be tendered in advance by the party requesting the subpoena,
except that fees and mileage need not be tendered in advance where FHFA
is the party requesting the subpoena. FHFA shall not be required to pay
any fees to or expenses of any witness who was not subpoenaed by FHFA.
Sec. 1209.20 Opportunity for informal settlement.
Any respondent may, at any time in the proceeding, unilaterally
submit to FHFA's counsel of record written offers or proposals for
settlement of a proceeding without prejudice to the rights of any of
the parties. No such offer or proposal shall be made to any FHFA
representative other than FHFA counsel of record. Submission of a
written settlement offer does not provide a basis for adjourning,
deferring or otherwise delaying all or any portion of a proceeding
under this part. No settlement offer or proposal, or any subsequent
negotiation or resolution, is admissible as evidence in any proceeding.
Sec. 1209.21 Conduct of examination.
Nothing in this part limits or constrains in any manner any duty,
authority, or right of FHFA to conduct or to continue any examination,
investigation, inspection, or visitation of any regulated entity or
entity-affiliated party.
Sec. 1209.22 Collateral attacks on adjudicatory proceeding.
If an interlocutory appeal or collateral attack is brought in any
court concerning all or any part of an adjudicatory proceeding, the
challenged adjudicatory proceeding shall continue without regard to the
pendency of that court proceeding. No default or other failure to act
as directed in the adjudicatory proceeding within the times prescribed
in subpart C of this part shall be excused based on the pendency before
any court of any interlocutory appeal or collateral attack.
Sec. 1209.23 Commencement of proceeding and contents of notice of
charges.
Proceedings under subpart C of this part are commenced by the
Director by the issuance of a notice of charges, as defined in Sec.
1209.3(p), that must be served upon a respondent. A notice of charges
shall state all of the following:
(a) The legal authority for the proceeding and for FHFA's
jurisdiction over the proceeding;
(b) A statement of the matters of fact or law showing that FHFA is
entitled to relief;
(c) A proposed order or prayer for an order granting the requested
relief;
(d) Information concerning the nature of the proceeding and
pertinent procedural matters, including: the requirement that the
hearing shall be held in the District of Columbia; the presiding
officer will set the date and location for an evidentiary hearing in a
scheduling order to be issued not less than 30 days or more than 60
days after service of the notice of charges; contact information for
FHFA enforcement counsel and the presiding officer, if known;
submission information for filings and appearances, the time within
which to request a hearing, and citation to FHFA Rules of Practice and
Procedure; and
(e) Information concerning proper filing of the answer, including
the time within which to file the answer as required by law or
regulation, a statement that the answer shall be filed with the
presiding officer or with FHFA as specified therein, and the address
for filing the answer (and request for a hearing, if applicable).
Sec. 1209.24 Answer.
(a) Filing deadline. Unless otherwise specified by the Director in
the notice, respondent shall file an answer within 20 days of service
of the notice of charges initiating the enforcement action.
(b) Content of answer. An answer must respond specifically to each
paragraph or allegation of fact contained in the notice of charges and
must admit, deny, or state that the party lacks sufficient information
to admit or deny each allegation of fact. A statement of lack of
information has the effect of a denial. Denials must fairly meet the
substance of each allegation of fact denied; general denials are not
permitted. When a respondent denies part of an allegation, that part
must be denied and the remainder specifically admitted. Any allegation
of fact in the notice that is not denied in the answer is deemed
admitted for purposes of the proceeding. A respondent is not required
to respond to the portion of a notice that constitutes the prayer for
relief or proposed order. The answer must set forth affirmative
defenses, if any, asserted by the respondent.
(c) Default. Failure of a respondent to file an answer required by
this section within the time provided constitutes a waiver of such
respondent's right to appear and contest the allegations in the notice.
If no timely answer is filed, FHFA counsel of record may file a motion
for entry of an order of default. Upon a finding that no good cause has
been shown for the failure to file a timely answer, the presiding
officer shall file with the Director a recommended decision containing
the findings and the relief sought in the notice. Any final order
issued by the Director based upon a respondent's failure to answer is
deemed to be an order issued upon consent.
Sec. 1209.25 Amended pleadings.
(a) Amendments. The notice or answer may be amended or supplemented
at any stage of the proceeding. The respondent must answer an amended
notice within the time remaining for the respondent's answer to the
original notice, or within 10 days after service of the amended notice,
whichever period is longer, unless the Director or presiding officer
orders otherwise for good cause shown.
(b) Amendments to conform to the evidence. When issues not raised
in the notice or answer are tried at the hearing by express or implied
consent of the parties, or as the presiding officer may allow for good
cause shown, such issues will be treated in all respects as if they had
been raised in the notice or answer, and no formal amendments are
required. If evidence is objected to at the hearing on the ground that
it is not within the issues raised by the notice or answer, the
presiding officer may admit the evidence when admission is likely to
assist in adjudicating the merits of the action. The presiding officer
will do so freely when the determination of the merits of the action is
served thereby and the objecting party fails to satisfy the presiding
officer that the admission of such evidence would unfairly prejudice
that party's action or defense upon the merits. The presiding officer
may grant a continuance to enable the objecting party to meet such
evidence.
Sec. 1209.26 Failure to appear.
Failure of a respondent to appear in person at the hearing or by a
duly authorized representative of record constitutes a waiver of
respondent's right to a hearing and is deemed an admission of the facts
as alleged and consent to the relief sought in the notice. Without
further proceedings or notice to the respondent, the presiding officer
shall file with the Director a recommended decision containing the
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Agency's findings and the relief sought in the notice.
Sec. 1209.27 Consolidation and severance of actions.
(a) Consolidation. On the motion of any party, or on the presiding
officer's own motion, the presiding officer may consolidate, for some
or all purposes, any two or more proceedings, if each such proceeding
involves or arises out of the same transaction, occurrence or series of
transactions or occurrences, or involves at least one common respondent
or a material common question of law or fact, unless such consolidation
would cause unreasonable delay or injustice. In the event of
consolidation under this section, appropriate adjustment to the pre-
hearing schedule must be made to avoid unnecessary expense,
inconvenience, or delay.
(b) Severance. The presiding officer may, upon the motion of any
party, sever the proceeding for separate resolution of the matter as to
any respondent only if the presiding officer finds that undue prejudice
or injustice to the moving party would result from not severing the
proceeding and such undue prejudice or injustice would outweigh the
interests of judicial economy and expedition in the complete and final
resolution of the proceeding.
Sec. 1209.28 Motions.
(a) In writing. (1) Except as otherwise provided herein, an
application or request for an order or ruling must be made by written
motion.
(2) All written motions must state with particularity the relief
sought and must be accompanied by a proposed order.
(3) No oral argument may be held on written motions except as
otherwise directed by the presiding officer. Written memoranda, briefs,
affidavits, or other relevant material or documents may be filed in
support of or in opposition to a motion.
(b) Oral motions. A motion may be made orally on the record, unless
the presiding officer directs that such motion be reduced to writing,
in which case the motion will be subject to the requirements of this
section.
(c) Filing of motions. Motions must be filed with the presiding
officer and served on all parties; except that following the filing of
a recommended decision, motions must be filed with the Director.
Motions for pre-trial relief such as motions in limine or objections to
offers of proof or experts shall be filed not less than 10 days prior
to the date of the evidentiary hearing, except as provided with the
consent of the presiding officer for good cause shown.
(d) Responses and replies. (1) Except as otherwise provided herein,
any party may file a written response to a non-dispositive motion
within 10 days after service of any written motion, or within such
other period of time as may be established by the presiding officer or
the Director; and the moving party may file a written reply to a
written response to a non-dispositive motion within five days after the
service of the response, unless some other period is ordered by the
presiding officer or the Director. The presiding officer shall not rule
on any oral or written motion before each party with an interest in the
motion has had an opportunity to respond as provided in this section.
(2) The failure of a party to oppose a written motion or an oral
motion made on the record is deemed as consent by that party to the
entry of an order substantially in the form of the order accompanying
the motion.
(e) Dilatory motions. Frivolous, dilatory, or substantively
repetitive motions are prohibited. The filing of such motions may form
the basis for sanctions.
(f) Dispositive motions. Dispositive motions are governed by
Sec. Sec. 1209.34 and 1209.35 of this part.
Sec. 1209.29 Discovery.
(a) General rule. (1) Limits on discovery. Subject to the
limitations set out in paragraphs (a)(2), (b), (d), and (e) of this
section, a party to a proceeding under this part may obtain document
discovery by serving upon any other party in the proceeding a written
request to produce documents. For purposes of such requests, the term
``documents'' may be defined to include records, drawings, graphs,
charts, photographs, recordings, or data stored in electronic form or
other data compilations from which information can be obtained or
translated, if necessary, by the parties through detection devices into
reasonably usable form (e.g., electronically stored information), as
well as written material of all kinds.
(2) Discovery plan. (i) In the initial scheduling conference held
in accordance with Sec. 1209.36, or otherwise at the earliest
practicable time, the presiding officer shall require the parties to
confer in good faith to develop and submit a joint discovery plan for
the timely, cost-effective management of document discovery (including,
if applicable, electronically stored information). The discovery plan
should provide for the coordination of similar discovery requests by
multiple parties, if any, and specify how costs are to be apportioned
among those parties. The discovery plan shall specify the form of
electronic productions, if any. Documents are to be produced in
accordance with the technical specifications described in the discovery
plan.
(ii) Discovery in the proceeding may commence upon the approval of
the discovery plan by the presiding officer. Thereafter, the presiding
officer may interpret or modify the discovery plan for good cause shown
or in his or her discretion due to changed circumstances.
(iii) Nothing in paragraph (a)(2) of this section shall be
interpreted or deemed to require the production of documents that are
privileged or not reasonably accessible because of undue burden or
cost, or to require any document production otherwise inconsistent with
the limitations on discovery set forth in this part.
(b) Relevance and scope. (1) A party may obtain document discovery
regarding any matter not privileged that is materially relevant to the
charges or allowable defenses raised in the pending proceeding.
(2) The scope of available discovery shall be limited in accordance
with subpart C of this part. Any request for the production of
documents that seeks to obtain privileged information or documents not
materially relevant under paragraph (b)(1) of this section, or that is
unreasonable, oppressive, excessive in scope, unduly burdensome,
cumulative, or repetitive of any prior discovery requests, shall be
denied or modified.
(3) A request for document discovery is unreasonable, oppressive,
excessive in scope, or unduly burdensome--and shall be denied or
modified--if, among other things, the request:
(i) Fails to specify justifiable limitations on the relevant
subject matter, time period covered, search parameters, or the
geographic location(s) or data repositories to be searched;
(ii) Fails to identify documents with sufficient specificity;
(iii) Seeks material that is duplicative, cumulative, or obtainable
from another source that is more accessible, cost-effective, or less
burdensome;
(iv) Calls for the production of documents to be delivered to the
requesting party or his or her designee and fails to provide a written
agreement by the requestor to pay in advance for the costs of
production in accordance with Sec. 1209.30, or otherwise fails to take
into account costs associated with processing electronically stored
[[Page 53618]]
information or any cost-sharing agreements between the parties;
(v) Fails to afford the responding party adequate time to respond;
or
(vi) Fails to take into account retention policies or security
protocols with respect to Federal information systems.
(c) Forms of discovery. Discovery shall be limited to requests for
production of documents for inspection and copying. No other form of
discovery shall be allowed. Discovery by use of interrogatories is not
permitted. This paragraph shall not be interpreted to require the
creation of a document.
(d) Privileged matter.--(1) Privileged documents are not
discoverable. (i) Privileges include the attorney-client privilege,
work-product privilege, any government's or government agency's
deliberative process privilege, and any other privileges provided by
the Constitution, any applicable act of Congress, or the principles of
common law.
(ii) The parties may enter into a written agreement to permit a
producing party to assert applicable privileges of a document even
after its production and to request the return or destruction of
privileged matter (claw back agreement). The parties shall file the
claw back agreement with the presiding officer. To ensure the
enforceability of the terms of any such claw back agreement, the
presiding officer shall enter an order. Any party may petition the
presiding officer for an order specifying claw back procedures for good
cause shown.
(2) No effect on examination authority. The limitations on
discoverable matter provided for in this part are not intended and
shall not be construed to limit or otherwise affect the examination,
regulatory or supervisory authority of FHFA.
(e) Time limits. All discovery matters, including all responses to
discovery requests, shall be completed at least 20 days prior to the
date scheduled for the commencement of the testimonial phase of the
hearing. No exception to this discovery time limit shall be permitted,
unless the presiding officer finds on the record that good cause exists
for waiving the 20-day requirement of this paragraph.
(f) Production. Documents must be produced as they are kept in the
usual course of business, or labeled and organized to correspond with
the categories in the request, or otherwise produced in a manner
determined by mutual agreement between the requesting party and the
party or non-party to whom the request is directed in accordance with
this part.
Sec. 1209.30 Request for document discovery from parties.
(a) General rule. Each request for the production of documents must
conform to the requirements of this part.
(1) Limitations. Subject to applicable limitations on discovery in
this part, a party may serve (requesting party) a request on another
party (responding party) for the production of any non-privileged,
discoverable documents in the possession, custody, or control of the
responding party. A requesting party shall serve a copy of any such
document request on all other parties. Each request for the production
of documents must, with reasonable particularity, identify or describe
the documents to be produced, either by individual item or by category,
with sufficient specificity to enable the responding party to respond
consistent with the requirements of this part.
(2) Discovery plan. Document discovery under subpart C of this part
shall be consistent with any discovery plan approved by the presiding
officer under Sec. 1209.29.
(b) Production and costs.--(1) General rule. Subject to the
applicable limitations on discovery in this part and the discovery
plan, the requesting party shall specify a reasonable time, place, and
manner for the production of documents and the performance of any
related acts. The responding party shall produce documents to the
requesting party in a manner consistent with the discovery plan.
(2) Costs. All costs associated with document productions--
including, without limitation, photocopying (as specified in paragraph
(b)(4) of this section) or electronic processing (as specified in
paragraph (b)(5) of this section)--shall be born by the requesting
party, or otherwise in accordance with any discovery plan approved by
the presiding officer that may require such costs be apportioned
between parties, or as otherwise ordered by the presiding officer. If
consistent with the discovery plan approved by the presiding officer,
the responding party may require receipt of payment of any such
document production costs in advance before any such production of
responsive documents.
(3) Organization. Unless otherwise provided for in any discovery
plan approved by the presiding officer under Sec. 1209.29 of this
part, or by order of the presiding officer, documents must be produced
as they are kept in the usual course of business or they shall be
labeled and organized to correspond with the categories in the document
request.
(4) Photocopying charges. Photocopying charges are to be set at the
current rate per page imposed by FHFA under the fee schedule pursuant
to Sec. 1202.11(c) of this part for requests for documents filed under
the Freedom of Information Act, 5 U.S.C. 552.
(5) Electronic processing. In the event that any party seeks the
production of electronically stored information (i.e., information
created, stored, communicated, or used in digital format requiring the
use of computer hardware and software), the parties shall confer in
good faith to resolve common discovery issues related to electronically
stored information, such as preservation, search methodology,
collection, and need for such information; the suitability of
alternative means to obtain it; and the format of production.
Consistent with the discovery plan approved by the presiding officer
under Sec. 1209.29, costs associated with the processing of such
electronic information (i.e., imaging; scanning; conversion of
``native'' files to images that are viewable and searchable; indexing;
coding; database or Web-based hosting; searches; branding of
endorsements, such as ``confidential'' or document control numbering;
privilege reviews; and copies of production discs) and delivery of any
such document production, shall be born by the requesting party,
apportioned among the parties, or as otherwise ordered by the presiding
officer. Nothing in this part shall be deemed to require FHFA to
produce privileged documents or any electronic records in violation of
applicable Federal law or security protocols.
(c) Obligation to update responses. A party who has responded to a
discovery request is not required to supplement the response, unless:
(1) The responding party learns that in some material respect the
information disclosed is incomplete or incorrect, and
(2) The additional or corrective information has not otherwise been
made known to the other parties during the discovery process or in
writing.
(d) Motions to strike or limit discovery requests. (1) Any party
served with a document discovery request may object within 30 days of
service of the request by filing a motion to strike or limit the
request in accordance with the provisions of Sec. 1209.28 of this
part. No other party may file an objection. If an objection is made
only to a portion of an item or category in a request, the objection
shall specify that portion. Any objections not made in accordance with
this paragraph and Sec. 1209.28 are waived.
(2) The party who served the request that is the subject of a
motion to strike
[[Page 53619]]
or limit may file a written response in accordance with the provisions
of Sec. 1209.28. A reply by the moving party, if any, shall be
governed by Sec. 1209.28. No other party may file a response.
(e) Privilege. At the time other documents are produced, all
documents withheld on a claim of privilege must be reasonably
identified, together with a statement of the basis for the assertion of
privilege on a privilege log. When similar documents that are protected
by the government's deliberative process, investigative or examination
privilege, the attorney work-product doctrine, or the attorney-client
privilege are voluminous, such documents may be identified on the log
by category instead of by individual document. The presiding officer
has discretion to permit submission of a privilege log subsequent to
the document production(s), which may occur on a rolling basis if
agreed to by the parties in the discovery plan, and to determine
whether an identification by category is sufficient to provide notice
of withheld documents.
(f) Motions to compel production. (1) If a party withholds any
document as privileged or fails to comply fully with a document
discovery request, the requesting party may, within 10 days of the
assertion of privilege or of the time the failure to comply becomes
known to the requesting party, file a motion in accordance with the
provisions of Sec. 1209.28 for the issuance of a subpoena compelling
the production of any such document.
(2) The party who asserted the privilege or failed to comply with
the request may, within five days of service of a motion for the
issuance of a subpoena compelling production, file a written response
to the motion. No other party may file a response.
(g) Ruling on motions.--(1) Appropriate protective orders. After
the time for filing a response to a motion to compel pursuant to this
section has expired, the presiding officer shall rule promptly on any
such motion. The presiding officer may deny, grant in part, or
otherwise modify any request for the production of documents, if he
determines that a discovery request, or any one or more of its terms,
seeks to obtain the production of documents that are privileged or
otherwise not within the scope of permissible discovery under Sec.
1209.29(b), and may issue appropriate protective orders, upon such
conditions as justice may require.
(2) No stay. The pendency of a motion to strike or limit discovery,
or to compel the production of any document, shall not stay or continue
the proceeding, unless otherwise ordered by the presiding officer.
Notwithstanding any other provision in this part, the presiding officer
may not release, or order any party to produce, any document withheld
on the basis of privilege, if the withholding party has stated to the
presiding officer its intention to file with the Director a timely
motion for interlocutory review of the presiding officer's privilege
determination or order to produce the documents, until the Director has
rendered a decision on the motion for interlocutory review.
(3) Interlocutory review by the Director. Interlocutory review of a
privilege determination or document discovery subpoena of the presiding
officer shall be in accordance with Sec. 1209.33. To the extent
necessary to rule promptly on such matters, the Director may request
that the presiding officer provide additional information from the
record. As provided by Sec. 1209.33 of this part, a pending
interlocutory review of a privilege determination or document discovery
subpoena shall not stay the proceedings, unless otherwise ordered by
the presiding officer or the Director.
(h) Enforcement of document discovery subpoenas.--(1) Authority. If
the presiding officer or Director issues a subpoena compelling
production of documents by a party in a proceeding under this part, in
the event of noncompliance with the subpoena and to the extent
authorized by section 1379D(c)(1) of the Safety and Soundness Act (12
U.S.C. 4641(c)(1)), the Director or the subpoenaing party may apply to
the appropriate United States district court for an order requiring
compliance with the subpoena.
(2) United States district court jurisdiction. As provided by
section 1379D(c)(2) of the Safety and Soundness Act (12 U.S.C.
4641(c)(2)), the appropriate United States district court has the
jurisdiction and power to order and to require compliance with any
discovery subpoena issued under this part.
(3) No stay; sanctions. The judicial enforcement of a discovery
subpoena shall not operate as a stay of the proceedings, unless the
presiding officer or the Director orders a stay of such duration as the
presiding officer or Director may find reasonable and in the best
interest of the parties or as justice may require. A party's right to
seek judicial enforcement of a subpoena shall not in any manner limit
the sanctions that may be imposed by the presiding officer or Director
against a party who fails to produce or induces another to fail to
produce subpoenaed documents.
Sec. 1209.31 Document discovery subpoenas to non-parties.
(a) General rules.--(1) Application for subpoena. As provided under
this part, any party may apply to the presiding officer for the
issuance of a document discovery subpoena addressed to any person who
is not a party to the proceeding. The application must contain the
proposed document subpoena, and a brief statement of facts
demonstrating that the documents are materially relevant to the charges
and issues presented in the proceeding and the reasonableness of the
scope of the document request. The subpoenaing party shall specify a
reasonable time, place, and manner for production in response to the
subpoena, and state its unequivocal intention to pay for the production
of the documents as provided in this part.
(2) Service of subpoena. A party shall apply for a document
subpoena under this section only within the time period during which
such party could serve a discovery request under Sec. 1209.30 of this
part. The party obtaining the document subpoena is responsible for
serving it on the subpoenaed person and for serving copies on all other
parties. Document subpoenas may be served in the District of Columbia,
or any State, Territory, possession, or other place subject to the
jurisdiction of the United States, or as otherwise provided by law.
(3) Presiding officer's discretion. The presiding officer shall
issue promptly any document subpoena applied for under this section
subject to the application conditions set forth in this section and his
or her discretion. If the presiding officer determines that the
application does not set forth a valid basis for the issuance of the
requested document subpoena, or that any of its terms are unreasonable,
oppressive, excessive in scope, unduly burdensome, or otherwise
objectionable under Sec. 1209.29(b), he may refuse to issue the
requested document subpoena or may issue it in a modified form upon
such additional conditions as may be determined by the presiding
officer.
(b) Motion to quash or modify.--(1) Limited appearance. Any non-
party to a pending proceeding to whom a document subpoena is directed
may enter a limited appearance, through a representative or on his or
her own behalf, before the presiding officer to file with the presiding
officer a motion to quash or modify such subpoena, accompanied by a
statement of the basis for quashing or modifying the subpoena.
(2) Objections. Any motion to quash or modify a document subpoena
must be filed on the same basis, including the assertion of any
privileges, upon which
[[Page 53620]]
a party could object to a discovery document request under Sec.
1209.30 and during the same time limits during which such an objection
could be filed.
(3) Responses and replies. The party who obtained the subpoena may
respond to such motion within 10 days of service of the motion; the
response shall be served on the non-party in accordance with this part.
Absent express leave of the presiding officer, no other party may
respond to the non-party's motion. The non-party may file a reply
within five days of service of a response.
(4) No stay. A non-party's right to seek to quash or modify a
document subpoena shall not stay the proceeding, or limit in any manner
the sanctions that may be imposed by the presiding officer against a
party who induces another to fail to produce any such subpoenaed
documents. No party may rely upon the pendency of a non-party's motion
to quash or modify a document subpoena to excuse performance of any
action required of that party under this part.
(c) Enforcing document subpoenas to non-parties.--(1) Application
for enforcement of subpoena. If a non-party fails to comply with any
subpoena issued pursuant to this section or with any order of the
presiding officer that directs compliance with all or any portion of a
document subpoena issued pursuant to this section, the subpoenaing
party or any other aggrieved party to the proceeding may, to the extent
authorized by section 1379D(c) of the Safety and Soundness Act (12
U.S.C. 4641(c)), apply to an appropriate United States district court
for an order requiring compliance with the subpoena.
(2) No stay. A party's right to seek district court enforcement of
a non-party document production subpoena under this section shall not
automatically stay an enforcement proceeding under of the Safety and
Soundness Act.
(3) Sanctions. A party's right to seek district court enforcement
of a non-party document subpoena shall in no way limit the sanctions
that may be imposed by the presiding officer on a party who induces
another to fail to comply with any subpoena issued under this section.
Sec. 1209.32 Deposition of witness unavailable for hearing.
(a) General rules. (1) If a witness will not be available for the
hearing, a party desiring to preserve that witness's testimony for the
record may apply to the presiding officer in accordance with the
procedures set forth in paragraph (a)(2) of this section for the
issuance of a subpoena or subpoena duces tecum requiring attendance of
the witness at a deposition for the purpose of preserving that
witness's testimony. The presiding officer may issue a deposition
subpoena under this section upon a showing that:
(i) The witness will be unable to attend or may be prevented from
attending the testimonial phase of the hearing because of age,
sickness, or infirmity, or will be otherwise unavailable;
(ii) The subpoenaing party did not cause or contribute to the
unavailability of the witness for the hearing;
(iii) The witness has personal knowledge and the testimony is
reasonably expected to be materially relevant to claims, defenses, or
matters determined to be at issue in the proceeding; and
(iv) Taking the deposition will not result in any undue burden to
any other party and will not cause undue delay of the proceeding.
(2) The application must contain a proposed deposition subpoena and
a brief statement of the reasons for the issuance of the subpoena. The
subpoena must name the witness whose deposition is to be taken and
specify the time and place for taking the deposition. A deposition
subpoena may require the witness to be deposed anywhere within the
United States, or its Territories and possessions, in which that
witness resides or has a regular place of employment or such other
convenient place as the presiding officer shall fix.
(3) Subpoenas must be issued promptly upon request, unless the
presiding officer determines that the request fails to set forth a
valid basis under this section for its issuance. Before making a
determination that there is no valid basis for issuing the subpoena,
the presiding officer shall require a written response from the party
requesting the subpoena or require attendance at a conference to
determine whether there is a valid basis upon which to issue the
requested subpoena.
(4) The party obtaining a deposition subpoena is responsible for
serving it on the witness and for serving copies on all parties. Unless
the presiding officer orders otherwise, no deposition under this
section shall be taken on fewer than 10 days' notice to the witness and
all parties. Deposition subpoenas may be served anywhere within the
United States or its Territories and possessions, or on any person
doing business anywhere within the United States or its Territories and
possessions, or as otherwise permitted by law.
(b) Objections to deposition subpoenas. (1) The witness and any
party who has not had an opportunity to oppose a deposition subpoena
issued under this section may file a motion with the presiding officer
under Sec. 1209.28 of this part to quash or modify the subpoena prior
to the time for compliance specified in the subpoena, but not more than
10 days after service of the subpoena.
(2) A statement of the basis for the motion to quash or modify a
subpoena issued under this section must accompany the motion. The
motion must be served on all parties.
(c) Procedure upon deposition. (1) Each witness testifying pursuant
to a deposition subpoena must be duly sworn and each party shall have
the right to examine the witness. Objections to questions or documents
must be in short form, stating the grounds for the objection. Failure
to object to questions or documents is not deemed a waiver except where
the ground for objection might have been avoided if the objection had
been presented timely. All questions, answers, and objections must be
recorded and transcribed. Videotaped depositions must be transcribed
for the record; copies and transcriptions must be supplied to each
party.
(2) Any party may move before the presiding officer for an order
compelling the witness to answer any questions the witness has refused
to answer or submit any evidence that, during the deposition, the
witness has refused to submit.
(3) The deposition transcript must be subscribed by the witness,
unless the parties and the witness, by stipulation, have waived the
signing, or the witness is ill, cannot be found, or has refused to
sign. If the deposition is not subscribed by the witness, the court
reporter taking the deposition shall certify that the transcript is a
true and complete transcript of the deposition.
(d) Enforcing subpoenas. If a subpoenaed person fails to comply
with any subpoena issued pursuant to this section or with any order of
the presiding officer made upon motion under paragraph (c)(2) of this
section, the subpoenaing party or other aggrieved party may, to the
extent authorized by section 1379D(c) of the Safety and Soundness Act
(12 U.S.C. 4641(c)), apply to an appropriate United States district
court for an order requiring compliance with the portions of the
subpoena that the presiding officer has ordered enforced. A party's
right to seek court enforcement of a deposition subpoena in no way
limits the sanctions that may be imposed by the presiding officer on a
party who fails to comply with or induces a failure to comply with a
subpoena issued under this section.
[[Page 53621]]
Sec. 1209.33 Interlocutory review.
(a) General rule. The Director may review a ruling of the presiding
officer prior to the certification of the record to the Director only
in accordance with the procedures set forth in this section.
(b) Scope of review. The Director may exercise interlocutory review
of a ruling of the presiding officer if the Director finds that:
(1) The ruling involves a controlling question of law or policy as
to which substantial grounds exist for a difference of opinion;
(2) Immediate review of the ruling may materially advance the
ultimate termination of the proceeding;
(3) Subsequent modification of the ruling at the conclusion of the
proceeding would be an inadequate remedy; or
(4) Subsequent modification of the ruling would cause unusual delay
or expense.
(c) Procedure. Any motion for interlocutory review shall be filed
by a party with the presiding officer within 10 days of his or her
ruling. Upon the expiration of the time for filing all responses, the
presiding officer shall refer the matter to the Director for final
disposition. In referring the matter to the Director, the presiding
officer may indicate agreement or disagreement with the asserted
grounds for interlocutory review of the ruling in question.
(d) Suspension of proceeding. Neither a request for interlocutory
review nor any disposition of such a request by the Director under this
section suspends or stays the proceeding unless otherwise ordered by
the presiding officer or the Director.
Sec. 1209.34 Summary disposition.
(a) In general. The presiding officer shall recommend that the
Director issue a final order granting a motion for summary disposition
if the undisputed pleaded facts, admissions, affidavits, stipulations,
documentary evidence, matters as to which official notice may be taken,
and any other evidentiary materials properly submitted in connection
with a motion for summary disposition show that:
(1) There is no genuine issue as to any material fact; and
(2) The movant is entitled to a decision in its favor as a matter
of law.
(b) Filing of motions and responses. (1) Any party who believes
there is no genuine issue of material fact to be determined and that
such party is entitled to a decision as a matter of law may move at any
time for summary disposition in its favor of all or any part of the
proceeding. Any party, within 30 days after service of such motion or
within such time period as allowed by the presiding officer, may file a
response to such motion.
(2) A motion for summary disposition must be accompanied by a
statement of material facts as to which the movant contends there is no
genuine issue. Such motion must be supported by documentary evidence,
which may take the form of admissions in pleadings, stipulations,
depositions, investigatory depositions, transcripts, affidavits, and
any other evidentiary materials that the movant contends support its
position. The motion must also be accompanied by a brief containing the
points and authorities in support of the contention of the movant. Any
party opposing a motion for summary disposition must file a statement
setting forth those material facts as to which the party contends a
genuine dispute exists. Such opposition must be supported by evidence
of the same type as that submitted with the motion for summary
disposition and a brief containing the points and authorities in
support of the contention that summary disposition would be
inappropriate.
(c) Hearing on motion. At the request of any party or on his or her
own motion, the presiding officer may hear oral argument on the motion
for summary disposition.
(d) Decision on motion. Following receipt of a motion for summary
disposition and all responses thereto, the presiding officer shall
determine whether the movant is entitled to summary disposition. If the
presiding officer determines that summary disposition is warranted, the
presiding officer shall submit a recommended decision to that effect to
the Director, under Sec. 1209.53. If the presiding officer finds that
the moving party is not entitled to summary disposition, the presiding
officer shall make a ruling denying the motion.
Sec. 1209.35 Partial summary disposition.
If the presiding officer determines that a party is entitled to
summary disposition as to certain claims only, he shall defer
submitting a recommended decision to the Director as to those claims. A
hearing on the remaining issues must be ordered. Those claims for which
the presiding officer has determined that summary disposition is
warranted will be addressed in the recommended decision filed at the
conclusion of the hearing.
Sec. 1209.36 Scheduling and pre-hearing conferences.
(a) Scheduling conference. After service of a notice of charges
commencing a proceeding under this part, the presiding officer shall
order the representative(s) of record for each party, and any party not
so represented who is appearing pro se, to meet in person or to confer
by telephone at a specified time within 30 days of service of such
notice for the purpose of setting the time and place of the testimonial
hearing on the record to be held within the District of Columbia and
scheduling the course and conduct of the proceeding (the ``scheduling
conference''). The identification of potential witnesses, the time for
and manner of discovery, and the exchange of any pre-hearing materials
including witness lists, statements of issues, stipulations, exhibits,
and any other materials also may be determined at the scheduling
conference.
(b) Pre-hearing conferences. The presiding officer may, in addition
to the scheduling conference, on his or her own motion or at the
request of any party, direct representatives for the parties to meet
with (in person or by telephone) at a pre-hearing conference to address
any or all of the following:
(1) Simplification and clarification of the issues;
(2) Stipulations, admissions of fact and the contents, authenticity
and admissibility into evidence of documents;
(3) Matters of which official notice may be taken;
(4) Limitation of the number of witnesses;
(5) Summary disposition of any or all issues;
(6) Resolution of discovery issues or disputes;
(7) Amendments to pleadings; and
(8) Such other matters as may aid in the orderly disposition of the
proceeding.
(c) Transcript. The presiding officer, in his or her discretion,
may require that a scheduling or pre-hearing conference be recorded by
a court reporter. Any transcript of the conference and any materials
filed, including orders, become part of the record of the proceeding. A
party may obtain a copy of a transcript at such party's expense.
(d) Scheduling or pre-hearing orders. Within a reasonable time
following the conclusion of the scheduling conference or any pre-
hearing conference, the presiding officer shall serve on each party an
order setting forth any agreements reached and any procedural
determinations made.
Sec. 1209.37 Pre-hearing submissions.
(a) General. Within the time set by the presiding officer, but in
no case later than 10 days before the start of the
[[Page 53622]]
hearing, each party shall serve on every other party the serving
party's:
(1) Pre-hearing statement;
(2) Final list of witnesses to be called to testify at the hearing,
including name and address of each witness, and a short summary of the
expected testimony of each witness;
(3) List of the exhibits to be introduced at the hearing along with
a copy of each exhibit; and
(4) Stipulations of fact, if any.
(b) Effect of failure to comply. No witness may testify and no
exhibit may be introduced at the hearing that is not listed in the pre-
hearing submissions pursuant to paragraph (a) of this section, except
for good cause shown.
Sec. 1209.38 Hearing subpoenas.
(a) Issuance. (1) Upon application of a party to the presiding
officer showing relevance and reasonableness of scope of the testimony
or other evidence sought, the presiding officer may issue a subpoena or
a subpoena duces tecum requiring the attendance of a witness at the
hearing or the production of documentary or physical evidence at such
hearing. The application for a hearing subpoena must also contain a
proposed subpoena specifying the attendance of a witness or the
production of evidence from any place within the United States or its
territories and possessions, or as otherwise provided by law, at the
designated place where the hearing is being conducted. The party making
the application shall serve a copy of the application and the proposed
subpoena on every other party.
(2) A party may apply for a hearing subpoena at any time before the
commencement of or during a hearing. During a hearing, a party may make
an application for a subpoena orally on the record before the presiding
officer.
(3) The presiding officer shall promptly issue any hearing subpoena
applied for under this section; except that, if the presiding officer
determines that the application does not set forth a valid basis for
the issuance of the subpoena, or that any of its terms are
unreasonable, oppressive, excessive in scope, or unduly burdensome, he
may refuse to issue the subpoena or may issue the subpoena in a
modified form upon any conditions consistent with subpart C of this
part. Upon issuance by the presiding officer, the party making the
application shall serve the subpoena on the person named in the
subpoena and on each party.
(b) Motion to quash or modify. (1) Any person to whom a hearing
subpoena is directed or any party may file a motion to quash or modify
such subpoena, accompanied by a statement of the basis for quashing or
modifying the subpoena. The movant must serve the motion on each party
and on the person named in the subpoena. Any party may respond to the
motion within 10 days of service of the motion.
(2) Any motion to quash or modify a hearing subpoena must be filed
prior to the time specified in the subpoena for compliance, but no more
than 10 days after the date of service of the subpoena upon the movant.
(c) Enforcing subpoenas. If a subpoenaed person fails to comply
with any subpoena issued pursuant to this section or any order of the
presiding officer that directs compliance with all or any portion of a
hearing subpoena, the subpoenaing party or any other aggrieved party
may seek enforcement of the subpoena pursuant to Sec. 1209.31. A
party's right to seek court enforcement of a hearing subpoena shall in
no way limit the sanctions that may be imposed by the presiding officer
on a party who induces a failure to comply with subpoenas issued under
this section.
Sec. Sec. 1209.39 through 1209.49 [Reserved].
Sec. 1209.50 Conduct of hearings.
(a) General rules.--(1) Conduct. Hearings shall be conducted in
accordance with chapter 5 of Title 5 and other applicable law and so as
to provide a fair and expeditious presentation of the relevant disputed
issues. Except as limited by this subpart, each party has the right to
present its case or defense by oral and documentary evidence and to
conduct such cross examination as may be required for full disclosure
of the facts.
(2) Order of hearing. FHFA counsel of record shall present its
case-in-chief first, unless otherwise ordered by the presiding officer
or unless otherwise expressly specified by law or regulation. FHFA
counsel of record shall be the first party to present an opening
statement and a closing statement and may make a rebuttal statement
after the respondent's closing statement. If there are multiple
respondents, respondents may agree among themselves as to the order of
presentation of their cases, but if they do not agree, the presiding
officer shall fix the order.
(3) Examination of witnesses. Only one representative for each
party may conduct an examination of a witness, except that in the case
of extensive direct examination, the presiding officer may permit more
than one representative for the party presenting the witness to conduct
the examination. A party may have one representative conduct the direct
examination and another representative conduct re-direct examination of
a witness, or may have one representative conduct the cross examination
of a witness and another representative conduct the re-cross
examination of a witness.
(4) Stipulations. Unless the presiding officer directs otherwise,
all documents that the parties have stipulated as admissible shall be
admitted into evidence upon commencement of the hearing.
(b) Transcript. The hearing shall be recorded and transcribed. The
transcript shall be made available to any party upon payment of the
cost thereof. The presiding officer shall have authority to order the
record corrected, either upon motion to correct, upon stipulation of
the parties, or following notice to the parties upon the presiding
officer's own motion.
Sec. 1209.51 Evidence.
(a) Admissibility. (1) Except as is otherwise set forth in this
section, relevant, material, and reliable evidence that is not unduly
repetitive is admissible to the fullest extent authorized by the
Administrative Procedure Act (5 U.S.C. 552 et seq.) and other
applicable law.
(2) Evidence that would be admissible under the Federal Rules of
Evidence is admissible in a proceeding conducted pursuant to subpart C
of this part.
(3) Evidence that would be inadmissible under the Federal Rules of
Evidence may not be deemed or ruled to be inadmissible in a proceeding
conducted pursuant to subpart C of this part if such evidence is
relevant, material, probative and reliable, and not unduly repetitive.
(b) Official notice. (1) Official notice may be taken of any
material fact that may be judicially noticed by a United States
district court and of any materially relevant information in the
official public records of any Federal or State government agency.
(2) All matters officially noticed by the presiding officer or the
Director shall appear on the record.
(3) If official notice is requested of any material fact, the
parties, upon timely request, shall be afforded an opportunity to
object.
(c) Documents. (1) A duplicate copy of a document is admissible to
the same extent as the original, unless a genuine issue is raised as to
whether the copy is in some material respect not a true and legible
copy of the original.
(2) Subject to the requirements of paragraph (a)(1) of this
section, any document, including a report of examination, oversight
activity,
[[Page 53623]]
inspection, or visitation prepared by FHFA or by another Federal or
State financial institution's regulatory agency, is admissible either
with or without a sponsoring witness.
(3) Witnesses may use existing or newly created charts, exhibits,
calendars, calculations, outlines, or other graphic material to
summarize, illustrate, or simplify the presentation of testimony. Such
materials may, subject to the presiding officer's discretion, be used
with or without being admitted into evidence.
(d) Objections. (1) Objections to the admissibility of evidence
must be timely made and rulings on all objections must appear in the
record.
(2) When an objection to a question or line of questioning is
sustained, the examining representative of record may make a specific
proffer on the record of what he or she expected to prove by the
expected testimony of the witness. The proffer may be by representation
of the representative or by direct interrogation of the witness.
(3) The presiding officer shall retain rejected exhibits,
adequately marked for identification, for the record and transmit such
exhibits to the Director.
(4) Failure to object to admission of evidence or to any ruling
constitutes a waiver of the objection.
(e) Stipulations. The parties may stipulate as to any relevant
matters of fact or the authentication of any document to be admitted
into evidence. Such stipulations must be received in evidence at a
hearing, are binding on the parties with respect to the matters
stipulated, and shall be made part of the record.
(f) Depositions of unavailable witnesses. (1) If a witness is
unavailable to testify at a hearing and that witness has testified in a
deposition in accordance with Sec. 1209.32, a party may offer as
evidence all or any part of the transcript of the deposition, including
deposition exhibits, if any.
(2) Such deposition transcript is admissible to the same extent
that testimony would have been admissible had that person testified at
the hearing, provided that if a witness refused to answer proper
questions during the deposition the presiding officer may, on that
basis, limit the admissibility of the deposition in any manner that
justice requires.
(3) Only those portions of a deposition or related exhibits
received in evidence at the hearing in accordance with this section
shall constitute a part of the record.
Sec. 1209.52 Post-hearing filings.
(a) Proposed findings and conclusions and supporting briefs. (1)
Using the same method of service for each party, the presiding officer
shall serve notice upon each party that the certified transcript,
together with all hearing exhibits and exhibits introduced but not
admitted into evidence at the hearing, has been filed with the
presiding officer. Any party may file with the presiding officer
proposed findings of fact, proposed conclusions of law, and a proposed
order within 30 days after the parties have received notice that the
transcript has been filed with the presiding officer, unless otherwise
ordered by the presiding officer.
(2) Proposed findings and conclusions must be supported by citation
to any relevant authorities and by page and line references to any
relevant portions of the record. A post-hearing brief may be filed in
support of proposed findings and conclusions, either as part of the
same document or in a separate document.
(3) A party is deemed to have waived any issue not raised in
proposed findings or conclusions timely filed by that party.
(b) Reply briefs. Reply briefs may be filed within 15 days after
the date on which the parties' proposed findings and conclusions and
proposed order are due. Reply briefs shall be limited strictly to
responding to new matters, issues, or arguments raised by another party
in papers filed in the proceeding. A party who has not filed proposed
findings of fact and conclusions of law or a post-hearing brief may not
file a reply brief.
(c) Simultaneous filing required. The presiding officer shall not
order the filing by any party of any brief or reply brief supporting
proposed findings and conclusions in advance of the other party's
filing of its brief.
Sec. 1209.53 Recommended decision and filing of record.
(a) Filing of recommended decision and record. Within 45 days after
expiration of the time allowed for filing reply briefs under Sec.
1209.52(b), the presiding officer shall file with and certify to the
Director, for decision, the record of the proceeding. The record must
include the presiding officer's recommended decision, recommended
findings of fact and conclusions of law, and proposed order; all pre-
hearing and hearing transcripts, exhibits and rulings; and the motions,
briefs, memoranda, and other supporting papers filed in connection with
the hearing. The presiding officer shall serve upon each party the
recommended decision, recommended findings and conclusions, and
proposed order.
(b) Filing of index. At the same time the presiding officer files
with and certifies to the Director, for final determination, the record
of the proceeding, the presiding officer shall furnish to the Director
a certified index of the entire record of the proceeding. The certified
index shall include, at a minimum, an entry for each paper, document or
motion filed with the presiding officer in the proceeding, the date of
the filing, and the identity of the filer. The certified index shall
also include an exhibit index containing, at a minimum, an entry
consisting of exhibit number and title or description for: each exhibit
introduced and admitted into evidence at the hearing; each exhibit
introduced but not admitted into evidence at the hearing; each exhibit
introduced and admitted into evidence after the completion of the
hearing; and each exhibit introduced but not admitted into evidence
after the completion of the hearing.
Sec. 1209.54 Exceptions to recommended decision.
(a) Filing exceptions. Within 30 days after service of the
recommended decision, recommended findings and conclusions, and
proposed order under Sec. 1209.53, a party may file with the Director
written exceptions to the presiding officer's recommended decision,
recommended findings and conclusions, and proposed order; to the
admission or exclusion of evidence; or to the failure of the presiding
officer to make a ruling proposed by a party. A supporting brief may be
filed at the time the exceptions are filed, either as part of the same
document or in a separate document.
(b) Effect of failure to file or raise exceptions. (1) Failure of a
party to file exceptions to those matters specified in paragraph (a) of
this section within the time prescribed is deemed a waiver of objection
thereto.
(2) No exception need be considered by the Director if the party
taking exception had an opportunity to raise the same objection, issue,
or argument before the presiding officer and failed to do so.
(c) Contents. (1) All exceptions and briefs in support of such
exceptions must be confined to the particular matters in or omissions
from the presiding officer's recommendations to which that party takes
exception.
(2) All exceptions and briefs in support of exceptions must set
forth page or paragraph references to the specific parts of the
presiding officer's recommendations to which exception is
[[Page 53624]]
taken, the page or paragraph references to those portions of the record
relied upon to support each exception, and the legal authority relied
upon to support each exception. Exceptions and briefs in support shall
not exceed a total of 30 pages, except by leave of the Director on
motion.
(3) One reply brief may be submitted by each party opposing the
exceptions within 10 days of service of exceptions and briefs in
support of exceptions. Reply briefs shall not exceed 15 pages, except
by leave of the Director on motion.
Sec. 1209.55 Review by Director.
(a) Notice of submission to the Director. When the Director
determines that the record in the proceeding is complete, the Director
shall serve notice upon the parties that the case has been submitted to
the Director for final decision.
(b) Oral argument before the Director. Upon the initiative of the
Director or on the written request of any party filed with the Director
within the time for filing exceptions, the Director may order and hear
oral argument on the recommended findings, conclusions, decision and
order of the presiding officer. A written request by a party must show
good cause for oral argument and state reasons why arguments cannot be
presented adequately in writing. A denial of a request for oral
argument may be set forth in the Director's final decision. Oral
argument before the Director must be transcribed.
(c) Director's final decision and order. (1) Decisional employees
may advise and assist the Director in the consideration and disposition
of the case. The final decision of the Director will be based upon
review of the entire record of the proceeding, except that the Director
may limit the issues to be reviewed to those findings and conclusions
to which opposing arguments or exceptions have been filed by the
parties.
(2) The Director shall render a final decision and issue an
appropriate order within 90 days after notification to the parties that
the case has been submitted for final decision, unless the Director
orders that the action or any aspect thereof be remanded to the
presiding officer for further proceedings. Copies of the final decision
including findings of fact and an appropriate order of the Director
shall be served upon each party to the proceeding and as otherwise
required by statute.
(3) The Director may modify, terminate, or set aside an order in
accordance with section 1373(b)(2) of the Safety and Soundness Act (12
U.S.C. 4633(b)(2)).
Sec. 1209.56 Exhaustion of administrative remedies.
To exhaust administrative remedies as to any issue on which a party
disagrees with the presiding officer's recommendations, a party must
file exceptions with the Director under Sec. 1209.54 of this part. A
party must exhaust administrative remedies as a precondition to seeking
judicial review of any final decision and order issued under this part.
Sec. 1209.57 Judicial review; no automatic stay.
(a) Judicial review. Judicial review of any final order of the
Director shall be exclusively as provided by section 1374 of the Safety
and Soundness Act (12 U.S.C. 4634).
(b) No automatic stay. Commencement of proceedings for judicial
review of a final decision and order of the Director may not, unless
specifically ordered by the Director or a reviewing court, operate as a
stay of any order issued by the Director. The Director may, in his or
her discretion and on such terms as he finds just, stay the
effectiveness of all or any part of an order of the Director pending a
final decision on a petition for review of that order.
Sec. Sec. 1209.58 through 1209.69 [Reserved].
Subpart D--Parties and Representational Practice Before the Federal
Housing Finance Agency; Standards of Conduct
Sec. 1209.70 Scope.
Subpart D of this part contains rules governing practice by parties
or their representatives before FHFA. This subpart addresses the
imposition of sanctions by the presiding officer or the Director
against parties or their representatives in an adjudicatory proceeding
under this part. This subpart also covers other disciplinary
sanctions--censure, suspension, or disbarment--against individuals who
appear before FHFA in a representational capacity either in an
adjudicatory proceeding under this part or in any other matters
connected with presentations to FHFA relating to a client's or other
principal's rights, privileges, or liabilities. This representation
includes, but is not limited to, the practice of attorneys and
accountants. Employees of FHFA are not subject to disciplinary
proceedings under this subpart.
Sec. 1209.71 Definitions.
Practice before FHFA for the purposes of subpart D of this part,
includes, but is not limited to, transacting any business with FHFA as
counsel of record, representative, or agent for any other person,
unless the Director orders otherwise. Practice before FHFA also
includes the preparation of any statement, opinion, or other paper by a
counsel, representative or agent that is filed with FHFA in any
certification, notification, application, report, or other document,
with the consent of such counsel, representative, or agent. Practice
before FHFA does not include work prepared for a regulated entity or
entity-affiliated party solely at the request of such party for use in
the ordinary course of its business.
Sec. 1209.72 Appearance and practice in adjudicatory proceedings.
(a) Appearance before FHFA or a presiding officer.--(1) By
attorneys. A party may be represented by an attorney who is a member in
good standing of the bar of the highest court of any State,
commonwealth, possession or territory of the United States, or the
District of Columbia, and who is not currently suspended or disbarred
from practice before FHFA.
(2) By non-attorneys. An individual may appear on his or her own
behalf, pro se. A member of a partnership may represent the partnership
and a duly authorized officer, director, employee, or other agent of
any corporation or other entity not specifically listed herein may
represent such corporation or other entity; provided that such officer,
director, employee, or other agent is not currently suspended or
disbarred from practice before FHFA. A duly authorized officer or
employee of any Government unit, agency, or authority may represent
that unit, agency, or authority.
(b) Notice of appearance. Any person appearing in a representative
capacity on behalf of a party, including FHFA, shall execute and file a
notice of appearance with the presiding officer at or before the time
such person submits papers or otherwise appears on behalf of a party in
the adjudicatory proceeding. Such notice of appearance shall include a
written declaration that the individual is currently qualified as
provided in paragraph (a)(1) or (a)(2) of this section and is
authorized to represent the particular party. By filing a notice of
appearance on behalf of a party in an adjudicatory proceeding, the
representative thereby agrees and represents that he is authorized to
accept service on behalf of the represented party and that, in the
event
[[Page 53625]]
of withdrawal from representation, he or she will, if required by the
presiding officer, continue to accept service until a new
representative has filed a notice of appearance or until the
represented party indicates that he or she will proceed on a pro se
basis. Unless the representative filing the notice is an attorney, the
notice of appearance shall also be executed by the person represented
or, if the person is not an individual, by the chief executive officer,
or duly authorized officer of that person.
Sec. 1209.73 Conflicts of interest.
(a) Conflict of interest in representation. No representative shall
represent another person in an adjudicatory proceeding if it reasonably
appears that such representation may be limited materially by that
representative's responsibilities to a third person or by that
representative's own interests. The presiding officer may take
corrective measures at any stage of a proceeding to cure a conflict of
interest in representation, including the issuance of an order limiting
the scope of representation or disqualifying an individual from
appearing in a representative capacity for the duration of the
proceeding.
(b) Certification and waiver. If any person appearing as counsel or
other representative represents two or more parties to an adjudicatory
proceeding, or also represents a non-party on a matter relevant to an
issue in the proceeding, that representative must certify in writing at
the time of filing the notice of appearance required by Sec. 1209.72
of this part as follows:
(1) That the representative has personally and fully discussed the
possibility of conflicts of interest with each affected party and non-
party; and
(2) That each affected party and non-party waives any right it
might otherwise have had to assert any known conflicts of interest or
to assert any non-material conflicts of interest during the course of
the proceeding.
Sec. 1209.74 Sanctions.
(a) General rule. Appropriate sanctions may be imposed during the
course of any proceeding when any party or representative of record has
acted or failed to act in a manner required by applicable statute,
regulation, or order, and that act or failure to act:
(1) Constitutes contemptuous conduct, which includes dilatory,
obstructionist, egregious, contumacious, unethical, or other improper
conduct at any phase of any proceeding, hearing, or appearance before a
presiding officer or the Director;
(2) Has caused some other party material and substantive injury,
including, but not limited to, incurring expenses including attorney's
fees or experiencing prejudicial delay;
(3) Is a clear and unexcused violation of an applicable statute,
regulation, or order; or
(4) Has delayed the proceeding unduly.
(b) Sanctions. Sanctions that may be imposed include, but are not
limited to, any one or more of the following:
(1) Issuing an order against a party;
(2) Rejecting or striking any testimony or documentary evidence
offered, or other papers filed, by the party;
(3) Precluding the party from contesting specific issues or
findings;
(4) Precluding the party from offering certain evidence or from
challenging or contesting certain evidence offered by another party;
(5) Precluding the party from making a late filing or conditioning
a late filing on any terms that may be just; or
(6) Assessing reasonable expenses, including attorney's fees,
incurred by any other party as a result of the improper action or
failure to act.
(c) Procedure for imposition of sanctions. (1) The presiding
officer, on the motion of any party, or on his or her own motion, and
after such notice and responses as may be directed by the presiding
officer, may impose any sanction authorized by this section. The
presiding officer shall submit to the Director for final ruling any
sanction that would result in a final order that terminates the case on
the merits or is otherwise dispositive of the case.
(2) Except as provided in paragraph (d) of this section, no
sanction authorized by this section, other than refusing to accept late
papers, shall be imposed without prior notice to all parties and an
opportunity for any representative or party against whom sanctions may
be imposed to be heard. The presiding officer shall determine and
direct the appropriate notice and form for such opportunity to be
heard. The opportunity to be heard may be limited to an opportunity to
respond verbally immediately after the act or inaction in question is
noted by the presiding officer.
(3) For purposes of interlocutory review, motions for the
imposition of sanctions by any party and the imposition of sanctions
shall be treated the same as motions for any other ruling by the
presiding officer.
(4) Nothing in this section shall be read to preclude the presiding
officer or the Director from taking any other action or imposing any
other restriction or sanction authorized by any applicable statute or
regulation.
(d) Sanctions for contemptuous conduct. If, during the course of
any proceeding, a presiding officer finds any representative or any
individual representing themself to have engaged in contemptuous
conduct, the presiding officer may summarily suspend that individual
from participating in that or any related proceeding or impose any
other appropriate sanction.
Sec. 1209.75 Censure, suspension, disbarment, and reinstatement.
(a) Discretionary censure, suspension, and disbarment. (1) The
Director may censure any individual who practices or attempts to
practice before FHFA or suspend or revoke the privilege to appear or
practice before FHFA of such individual if, after notice of and
opportunity for hearing in the matter, that individual is found by the
Director--
(i) Not to possess the requisite qualifications or competence to
represent others;
(ii) To be seriously lacking in character or integrity or to have
engaged in material unethical or improper professional conduct;
(iii) To have caused unfair and material injury or prejudice to
another party, such as prejudicial delay or unnecessary expenses
including attorney's fees;
(iv) To have engaged in, or aided and abetted, a material and
knowing violation of the Safety and Soundness Act, the Federal Home
Loan Mortgage Corporation Act, the Federal National Mortgage
Association Charter Act, or the rules or regulations issued under those
statutes, or any other applicable law or regulation;
(v) To have engaged in contemptuous conduct before FHFA;
(vi) With intent to defraud in any manner, to have willfully and
knowingly deceived, misled, or threatened any client or prospective
client; or
(vii) Within the last 10 years, to have been convicted of an
offense involving moral turpitude, dishonesty, or breach of trust, if
the conviction has not been reversed on appeal. A conviction within the
meaning of this paragraph shall be deemed to have occurred when the
convicting court enters its judgment or order, regardless of whether an
appeal is pending or could be taken and includes a judgment or an order
on a plea of nolo contendere or on consent, regardless of whether a
violation is admitted in the consent.
[[Page 53626]]
(2) Suspension or revocation on the grounds set forth in paragraphs
(a)(1)(ii) through (vii) of this section shall only be ordered upon a
further finding that the individual's conduct or character was
sufficiently egregious as to justify suspension or revocation.
Suspension or disbarment under this paragraph shall continue until the
applicant has been reinstated by the Director for good cause shown or
until, in the case of a suspension, the suspension period has expired.
(3) If the final order against the respondent is for censure, the
individual may be permitted to practice before FHFA, but such
individual's future representations may be subject to conditions
designed to promote high standards of conduct. If a written letter of
censure is issued, a copy will be maintained in FHFA's files.
(b) Mandatory suspension and disbarment. (1) Any counsel who has
been and remains suspended or disbarred by a court of the United States
or of any State, commonwealth, possession or territory of the United
States, or the District of Columbia; any accountant or other licensed
expert whose license to practice has been revoked in any State,
commonwealth, possession or territory of the United States, or the
District of Columbia; any person who has been and remains suspended or
barred from practice by or before the Department of Housing and Urban
Development, the Office of the Comptroller of the Currency, the Board
of Governors of the Federal Reserve System, the Office of Thrift
Supervision, the Federal Deposit Insurance Corporation, the National
Credit Union Administration, the Federal Housing Finance Board, the
Farm Credit Administration, the Securities and Exchange Commission, or
the Commodity Futures Trading Commission is also suspended
automatically from appearing or practicing before FHFA. A disbarment or
suspension within the meaning of this paragraph shall be deemed to have
occurred when the disbarring or suspending agency or tribunal enters
its judgment or order, regardless of whether an appeal is pending or
could be taken and regardless of whether a violation is admitted in the
consent.
(2) A suspension or disbarment from practice before FHFA under
paragraph (b)(1) of this section shall continue until the person
suspended or disbarred is reinstated under paragraph (d)(2) of this
section.
(c) Notices to be filed. (1) Any individual appearing or practicing
before FHFA who is the subject of an order, judgment, decree, or
finding of the types set forth in paragraph (b)(1) of this section
shall file promptly with the Director a copy thereof, together with any
related opinion or statement of the agency or tribunal involved.
(2) Any individual appearing or practicing before FHFA who is or
within the last 10 years has been convicted of a felony or of a
misdemeanor that resulted in a sentence of prison term or in a fine or
restitution order totaling more than $5,000 promptly shall file a
notice with the Director. The notice shall include a copy of the order
imposing the sentence or fine, together with any related opinion or
statement of the court involved.
(d) Reinstatement. (1) Unless otherwise ordered by the Director, an
application for reinstatement for good cause may be made in writing by
a person suspended or disbarred under paragraph (a)(1) of this section
at any time more than three years after the effective date of the
suspension or disbarment and, thereafter, at any time more than one
year after the person's most recent application for reinstatement. An
applicant for reinstatement hereunder may, in the Director's sole
discretion, be afforded a hearing.
(2) An application for reinstatement for good cause by any person
suspended or disbarred under paragraph (b)(1) of this section may be
filed at any time, but not less than one year after the applicant's
most recent application. An applicant for reinstatement for good cause
hereunder may, in the Director's sole discretion, be afforded a
hearing.
If, however, all the grounds for suspension or disbarment under
paragraph (b)(1) of this section have been removed by a reversal of the
order of suspension or disbarment or by termination of the underlying
suspension or disbarment, any person suspended or disbarred under
paragraph (b)(1) of this section may apply immediately for
reinstatement and shall be reinstated by FHFA upon written application
notifying FHFA that the grounds have been removed.
(e) Conferences.--(1) General rule. The FHFA counsel of record may
confer with a proposed respondent concerning allegations of misconduct
or other grounds for censure, disbarment, or suspension, regardless of
whether a proceeding for censure, disbarment or suspension has been
commenced. If a conference results in a stipulation in connection with
a proceeding in which the individual is the respondent, the stipulation
may be entered in the record at the request of either party to the
proceeding.
(2) Resignation or voluntary suspension. In order to avoid the
institution of or a decision in a disbarment or suspension proceeding,
a person who practices before FHFA may consent to censure, suspension,
or disbarment from practice. At the discretion of the Director, the
individual may be censured, suspended, or disbarred in accordance with
the consent offered.
(f) Hearings under this section. Hearings conducted under this
section shall be conducted in substantially the same manner as other
hearings under this part, except that in proceedings to terminate an
existing FHFA suspension or disbarment order, the person seeking the
termination of the order shall bear the burden of going forward with an
application and with proof and that the Director may, in the Director's
sole discretion, direct that any proceeding to terminate an existing
suspension or disbarment by FHFA be limited to written submissions. All
hearings held under this section shall be closed to the public unless
the Director, on the Director's own motion or upon the request of a
party, otherwise directs.
Sec. Sec. 1209.76 through 1209.79 [Reserved].
Subpart E--Civil Money Penalty Inflation Adjustments
Sec. 1209.80 Inflation adjustments.
The maximum amount of each civil money penalty within FHFA's
jurisdiction, as set by the Safety and Soundness Act and thereafter
adjusted in accordance with the Inflation Adjustment Act, on a
recurring four-year cycle, is as follows:
------------------------------------------------------------------------
Adjusted
U.S. Code citation Description maximum penalty
amount
------------------------------------------------------------------------
12 U.S.C. 4636(b)(1).......... First Tier............ $10,000
12 U.S.C. 4636(b)(2).......... Second Tier........... 50,000
12 U.S.C. 4636(b)(4).......... Third Tier (Entity- 2,000,000
Affiliated party).
[[Page 53627]]
12 U.S.C. 4636(b)(4).......... Third Tier (Regulated 2,000,000
entity).
------------------------------------------------------------------------
Sec. 1209.81 Applicability.
The inflation adjustments set out in Sec. 1209.80 shall apply to
civil money penalties assessed in accordance with the provisions of the
Safety and Soundness Act, 12 U.S.C. 4636, and subparts B and C of this
part, for violations occurring after the effective date of July 30,
2008.
Sec. Sec. 1209.82 through 1209.99 [Reserved].
Subpart F--Suspension or Removal of an Entity-Affiliated Party
Charged With Felony
Sec. 1209.100 Scope.
Subpart F of this part applies to informal hearings afforded to any
entity-affiliated party who has been suspended, removed, or prohibited
from further participation in the business affairs of a regulated
entity by a notice or order issued by the Director under section
1377(h) of the Safety and Soundness Act (12 U.S.C. 4636a(h)).
Sec. 1209.101 Suspension, removal, or prohibition.
(a) Notice of suspension or prohibition. (1) As provided by section
1377(h)(1) of the Safety and Soundness Act (12 U.S.C. 4636a(h)(1)), if
an entity-affiliated party is charged in any information, indictment,
or complaint, with the commission of or participation in a crime that
involves dishonesty or breach of trust that is punishable by
imprisonment for more than one year under State or Federal law, the
Director may, if continued service or participation by such party may
pose a threat to the regulated entity or impair public confidence in
the regulated entity, by written notice served upon such party, suspend
such party from office or prohibit such party from further
participation in any manner in the conduct of the affairs of any
regulated entity.
(2) In accordance with section 1377(h)(1) of the Safety and
Soundness Act (12 U.S.C. 4636a(h)(1)), the notice of suspension or
prohibition is effective upon service. A copy of such notice will be
served on the relevant regulated entity. The notice will state the
basis for the suspension and the right of the party to request an
informal hearing as provided in Sec. 1209.102. The suspension or
prohibition is to remain in effect until the information, indictment,
or complaint is finally disposed of, or until terminated by the
Director, or otherwise as provided in paragraph (c) of this section.
(b) Order of removal or prohibition. As provided by section
1377(h)(2) of the Safety and Soundness Act (12 U.S.C. 4636a(h)(2)), at
such time as a judgment of conviction is entered (or pretrial diversion
or other plea bargain is agreed to) in connection with a crime as
referred to above in paragraph (a) (the ``conviction''), and the
conviction is no longer subject to appellate review, the Director may,
if continued service or participation by such party may pose a threat
to the regulated entity or impair public confidence in the regulated
entity, issue an order removing such party from office or prohibiting
such party from further participation in any manner in the conduct of
the affairs of the regulated entity without the prior written consent
of the Director. A copy of such order will be served on the relevant
regulated entity, at which time the entity-affiliated party shall
immediately cease to be a director or officer of the regulated entity.
The notice will state the basis for the removal or prohibition and the
right of the party to request a hearing as provided in Sec. 1209.102.
(c) Effective period. Unless terminated by the Director, a notice
of suspension or order of removal issued under section 1377(h)(1) or
(2) of the Safety and Soundness Act (12 U.S.C. 4636a(h)(1), (2)) shall
remain effective and outstanding until the completion of any informal
hearing or appeal provided under section 1377(h)(4) of the Safety and
Soundness Act (12 U.S.C. 4636a(h)(4)). The pendency of an informal
hearing, if any, does not stay any notice of suspension or prohibition
or order of removal or prohibition under subpart F of this part.
(d) Effect of acquittal. As provided by section 1377(h)(2)(B)(ii)
of the Safety and Soundness Act (12 U.S.C. 4636a(h)(2)(B)(ii)), a
finding of not guilty or other disposition of the charge does not
preclude the Director from instituting removal, suspension, or
prohibition proceedings under section 1377(a) or (b) of the Safety and
Soundness Act (12 U.S.C. 4636a(a), (b)).
(e) Preservation of authority. Action by the Director under section
1377(h) of the Safety and Soundness Act (12 U.S.C. 4636a(h)), shall not
be deemed as a predicate or a bar to any other regulatory, supervisory,
or enforcement action under the Safety and Soundness Act.
Sec. 1209.102 Hearing on removal or suspension.
(a) Hearing requests.--(1) Deadline. An entity-affiliated party
served with a notice of suspension or prohibition or an order of
removal or prohibition, within 30 days of service of such notice or
order, may submit to the Director a written request to appear before
the Director to show that his or her continued service or participation
in the affairs of the regulated entity will not pose a threat to the
interests of, or threaten to impair public confidence in, the
Enterprises or the Banks. The request must be addressed to the Director
and sent to the Federal Housing Finance Agency at 1700 G Street, NW.,
Washington, DC 20552, by:
(i) Overnight U.S. Postal Service delivery or delivery by a
reliable commercial delivery service for same day or overnight delivery
to the address stated above; or
(ii) First class, registered, or certified mail via the U.S. Postal
Service.
(2) Waiver of appearance. An entity-affiliated party may elect in
writing to waive his or her right to appear to make a statement in
person or through counsel and have the matter determined solely on the
basis of his or her written submission.
(b) Form and timing of hearing.--(1) Informal hearing. Hearings
under subpart F of this part are not subject to the formal adjudication
provisions of the Administrative Procedure Act (5 U.S.C. 554 through
557), and are not conducted under subpart C of this part.
(2) Setting of the hearing. Upon receipt of a timely request for a
hearing, the Director will give written notice and set a date within 30
days for the entity-affiliated party to appear, personally, or through
counsel, before the Director or his or her designee(s) to submit
written materials (or, at the discretion of the Director, oral
testimony and oral argument) to make the necessary showing under
paragraph (a) of this section. The entity-affiliated party may submit a
written request for additional time for the hearing to commence,
without undue delay, and the Director may extend the hearing date for a
specified time.
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(3) Oral testimony. The Director or his or her designee, in his or
her discretion, may deny, permit, or limit oral testimony in the
hearing.
(c) Conduct of the hearing.--(1) Hearing officer. A hearing under
this section may be presided over by the Director or one or more
designated FHFA employees, except that an officer designated by the
Director (hearing officer) to conduct the hearing may not have been
involved in an underlying criminal proceeding, a factually related
proceeding, or an enforcement proceeding in a prosecutorial or
investigative role. This provision does not preclude the Director
otherwise from seeking information on the matters at issue from
appropriate FHFA staff on an as needed basis consistent with Sec.
1209.101(d)(2).
(2) Submissions. All submissions of the requestor and FHFA's
counsel of record must be received by the Director or his or her
designee no later than 10 days prior to the date set for the hearing.
FHFA may respond in writing to the requestor's submission and serve the
requestor (and any other interested party such as the regulated entity)
not later than the date fixed by the hearing officer for submissions or
other time period as the hearing officer may require.
(3) Procedures.--(i) Fact finding authority of the hearing officer.
The hearing officer shall determine all procedural matters under
subpart F of this part, permit or limit the appearance of witnesses in
accordance with paragraph (b)(3) of this section, and impose time
limits as he or she deems reasonable. All oral statements, witness
testimony, if permitted, and documents submitted that are found by the
hearing officer to be materially relevant to the proceeding and not
unduly repetitious may be considered. The hearing officer may question
any person appearing in the proceeding, and may make any ruling
reasonably necessary to ensure the full and fair presentation of
evidence and to facilitate the efficient and effective operation of the
proceeding.
(ii) Statements to an officer. Any oral or written statement made
to the Director, a hearing officer, or any FHFA employee under subpart
F of this part is deemed to be a statement made to a Federal officer or
agency within the meaning of 18 U.S.C. 1006.
(iii) Oral testimony. If either the requestor or FHFA counsel of
record desires to present oral testimony to supplement the party's
written submission he or she must make a request in writing to the
hearing officer not later than 10 days prior to the hearing, as
provided in paragraph (c)(2) of this section, or within a shorter time
period as permitted by the hearing officer for good cause shown. The
request should include the name of the individual(s), a statement
generally descriptive of the expected testimony, and the reasons why
such oral testimony is warranted. The hearing officer generally will
not admit witnesses, absent a strong showing of specific and compelling
need. Witnesses, if admitted, shall be sworn.
(iv) Written materials. Each party must file a copy of any
affidavit, memorandum, or other written material to be presented at the
hearing with the hearing officer and serve copies on any other
interested party (such as the affected regulated entity) not later than
10 days prior to commencement of the informal hearing, as provided in
paragraph (c)(2), or within a shorter time period as permitted by the
hearing officer for good cause shown.
(v) Relief. The purpose of the hearing is to determine whether the
suspension or prohibition from participation in any manner in the
conduct of the affairs of the regulated entity will be continued,
terminated, or otherwise modified, or whether the order removing such
party from office or prohibiting the party from further participation
in any manner in the conduct of the affairs of the regulated entity
will be rescinded or otherwise modified.
(vi) Ultimate question. In deciding on any request for relief from
a notice of suspension or prohibition, the hearing officer shall not
consider the ultimate question of guilt or innocence with respect to
the outstanding criminal charge(s). In deciding on a request for relief
from a removal order, the hearing officer shall not consider challenges
to or efforts to impeach the validity of the conviction. In either
case, the hearing officer may consider facts that show the nature of
the events on which the conviction or charges were based.
(4) Record. If warranted under the circumstances of the matter, the
hearing officer may require that a transcript of the proceedings be
prepared at the expense of the requesting party. The hearing officer
may order the record be kept open for a reasonable time following the
hearing, not to exceed five business days, to permit the filing of
additional pertinent submissions for the record. Thereafter, no further
submissions are to be admitted to the record, absent good cause shown.
Sec. 1209.103 Recommended and final decisions.
(a) Recommended decision.--(1) Written recommended decision of the
hearing officer. Not later than 20 days following the close of the
hearing (or if the requestor waived a hearing, from the deadline for
submission of the written materials), the hearing officer will serve a
copy of the recommended decision on the parties to the proceeding. The
recommended decision must include a summary of the findings, the
parties' respective arguments, and support for the determination.
(2) Five-day comment period. Not later than five business days
after receipt of the recommended decision, the parties shall submit
written comments in response to the recommended decision, if any, to
the hearing officer. The hearing officer shall not grant any extension
of the stated time for responses to a recommended decision.
(3) Recommended decision to be transmitted to the Director. The
hearing officer shall promptly forward the recommended decision, and
written comments, if any, and the record to the Director for final
determination.
(b) Decision of the Director. Within 60 days of the date of the
hearing, or if the requestor waived a hearing the date fixed for the
hearing, the Director will notify the entity-affiliated party in
writing by registered mail of the disposition of his or her request for
relief from the notice of suspension or prohibition or the order of
removal or prohibition. The decision will state whether the suspension
or prohibition will be continued, terminated, or otherwise modified, or
whether the order removing such party from any participation in the
affairs of the regulated entity will be rescinded or otherwise
modified. The decision will contain a brief statement of the basis for
an adverse determination. The Director's decision is a final and non-
appealable order.
(c) Effect of notice or order. A removal or prohibition by order
shall remain in effect until terminated by the Director. A suspension
or prohibition by notice remains in effect until the criminal charge is
disposed of or until terminated by the Director.
(d) Reconsideration. A suspended or removed entity-affiliated party
subsequently may petition the Director to reconsider the final decision
any time after the expiration of a 12-month period from the date of the
decision, but no such request may be made within 12 months of a
previous petition for reconsideration. An entity-affiliated party must
submit a petition for reconsideration in writing; the petition shall
state the specific grounds for relief from the notice of suspension or
order or removal and be supported by a
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memorandum and any other documentation materially relevant to the
request for reconsideration. No hearing will be held on a petition for
reconsideration, and the Director will inform the requestor of the
disposition of the reconsideration request in a timely manner. A
decision on a request for reconsideration shall not constitute an
appealable order.
CHAPTER XVII--OFFICE OF FEDERAL HOUSING ENTERPRISE OVERSIGHT,
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Subchapter D--Rules of Practice and Procedure
PART 1780--[REMOVED]
0
3. Remove part 1780.
Dated: August 16, 2011.
Edward J. DeMarco,
Acting Director, Federal Housing Finance Agency.
[FR Doc. 2011-21378 Filed 8-25-11; 8:45 am]
BILLING CODE 8070-01-P