Rules of Practice and Procedure

Federal RegisterApr 13, 2022

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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Parts 3, 4, 6, 19, 108, 109, 112, and 165

[Docket ID OCC-2021-0007]

RIN 1557-AE33

FEDERAL RESERVE SYSTEM

12 CFR Parts 238 and 263

[Docket No. R-1766]

RIN 7100-AG26

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 308

RIN 3064-AF10

NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 747

[NCUA 2021-0079]

RIN 3133-AF37

Rules of Practice and Procedure

AGENCY:

Office of the Comptroller of the Currency, Treasury; Board of Governors of the Federal Reserve System; Federal Deposit Insurance Corporation; National Credit Union Administration.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

The Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System (Board), Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA) (collectively, the Agencies) are proposing changes to the Uniform Rules of Practice and Procedure (Uniform Rules) to recognize the use of electronic communications in all aspects of administrative hearings and to otherwise increase the efficiency and fairness of administrative adjudications. The OCC, Board, and FDIC are also proposing to modify their agency-specific rules of administrative practice and procedure (Local Rules). The OCC also proposes to integrate its Uniform Rules and Local Rules so that one set of rules applies to both national banks and Federal savings associations and to amend its rules on organization and functions to address service of process.

DATES:

Comments must be received on or before June 13, 2022.

ADDRESSES:

Comments should be directed to:

OCC:

Commenters are encouraged to submit comments through the Federal eRulemaking Portal. Please use the title “Uniform Rules of Practice and Procedure” to facilitate the organization and distribution of the comments. You may submit comments by any of the following methods:

☐

Federal eRulemaking Portal—Regulations.gov:

Go to

https://regulations.gov/.

Enter “Docket ID OCC-2021-0007” in the Search Box and click “Search.” Public comments can be submitted via the “Comment” box below the displayed document information or by clicking on the document title and then clicking the “Comment” box on the top-left side of the screen. For help with submitting effective comments please click on “Commenter's Checklist.” For assistance with the

Regulations.gov

site, please call (877) 378-5457 (toll free) or (703) 454-9859 Monday-Friday, 9 a.m.-5 p.m. ET or email

regulations@erulemakinghelpdesk.com.

☐

Mail:

Chief Counsel's Office, Attention: Comment Processing, Office of the Comptroller of the Currency, 400 7th Street SW, Suite 3E-218, Washington, DC 20219.

☐

Hand Delivery/Courier:

400 7th Street SW, Suite 3E-218, Washington, DC 20219.

Instructions:

You must include “OCC” as the agency name and “Docket ID OCC-2021-0007” in your comment. In general, the OCC will enter all comments received into the docket and publish the comments on the

Regulations.gov

website without change, including any business or personal information provided such as name and address information, email addresses, or phone numbers. Comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not include any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure.

You may review comments and other related materials that pertain to this action by the following method:

☐

Viewing Comments Electronically—Regulations.gov:

Go to

https://regulations.gov/.

Enter “Docket ID OCC-2021-0007” in the Search Box and click “Search.” Click on the “Documents” tab and then the document's title. After clicking the document's title, click the “Browse Comments” tab. Comments can be viewed and filtered by clicking on the “Sort By” drop-down on the right side of the screen or the “Refine Results” options on the left side of the screen. Supporting materials can be viewed by clicking on the “Documents” tab and filtered by clicking on the “Sort By” drop-down on the right side of the screen or the “Refine Documents Results” options on the left side of the screen.” For assistance with the

Regulations.gov

site, please call (877) 378-5457 (toll free) or (703) 454-9859 Monday-Friday, 9 a.m.-5 p.m. ET or email

regulations@erulemakinghelpdesk.com.

The docket may be viewed after the close of the comment period in the same manner as during the comment period.

Board:

You may submit comments, identified by Docket No. R-1766 and RIN 7100-AG26 by any of the following methods:

•

Agency Website: http://www.federalreserve.gov.

Follow the instructions for submitting comments at

http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.

•

Email: regs.comments@federalreserve.gov.

Include the docket number in the subject line of the message.

•

Fax:

(202) 452-3819.

•

Mail:

Ann E. Misback, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue NW, Washington, DC 20551.

All public comments are available from the Board's website at

http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm

as submitted, unless modified for technical reasons or to remove personally identifiable information at the commenter's request. Accordingly, comments will not be edited to remove any identifying or contact information. Public comments may also be viewed electronically or in paper in Room 146, 1709 New York Avenue NW, Washington, DC 20006, between 9:00 a.m. and 5:00 p.m. on weekdays.

FDIC:

You may submit comments, identified by RIN 3064-AF10 by any of the following methods:

•

FDIC Website: https://www.fdic.gov/resources/regulations/federal-register-publications/.

Follow instructions for submitting comments on the agency website.

•

Email: Comments@fdic.gov.

Include RIN 3064-AF10 on the subject line of the message.

•

Mail:

James P. Sheesley, Assistant Executive Secretary, Attention: Comments, Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, DC 20429.

•

Hand Delivery to FDIC:

Comments may be hand-delivered to the guard station at the rear of the 550 17th Street NW building (located on F Street) on business days between 7 a.m. and 5 p.m.

Please include your name, affiliation, address, email address, and telephone number(s) in your comment. All statements received, including attachments and other supporting materials, are part of the public record and are subject to public disclosure. You should submit only information that you wish to make publicly available.

Please note:

All comments received will be posted generally without change to

https://www.fdic.gov/resources/regulations/federal-register-publications/,

including any personal information provided.

NCUA:

You may submit comments, identified by RIN 3133-AF37 by any of the following methods (please send comments by one method only):

•

Federal eRulemaking Portal: http://www.regulations.gov.

Follow the instructions for submitting comments for docket number NCUA-2021-0079.

•

Fax:

(703) 518-6319. Use the subject line “[Your name] Comments on “Uniform Rules of Practice and Procedure” on the transmission cover sheet.

•

Mail:

Address to Melane Conyers-Ausbrooks, Secretary of the Board, National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428.

•

Hand Delivery/Courier:

Use the same address as for mailed comments.

Public Inspection:

You can view all public comments on the NCUA website at:

http://www.ncua.gov/Legal/Regs/Pages/PropRegs.aspx

as submitted, except for those we cannot post for technical reasons. The NCUA will not edit or remove any identifying or contact information from the public comments. Due to social distancing measures in effect, the usual opportunity to inspect paper copies of comments in the NCUA's law library is not currently available. After social distancing measures are relaxed, visitors may make an appointment to review paper copies by calling (703) 518-6540 or emailing

OGCMail@ncua.gov.

FOR FURTHER INFORMATION CONTACT:

OCC:

MaryAnn Nash, Counsel, and Heidi Thomas, Special Counsel, Chief Counsel's Office, (202) 649-5490. If you are deaf, hard of hearing, or have a speech disability, please dial 7-1-1 to access telecommunications relay services.

Board:

David Williams, Associate General Counsel,

david.williams@frb.gov,

(202) 452-3973, and Héctor G. Bladuell, Senior Counsel, Legal Division,

hector.g.bladuell@frb.gov,

(202) 452-2491.

FDIC:

Heather M. Walters, Counsel, Legal Division,

hewalters@fdic.gov,

(202) 898-6729 and Michael P. Farrell, Counsel, Legal Division,

mfarrell@fdic.gov,

(202) 898-3853. For users of Telecommunications Device for the Deaf (TDD) only, contact (202) 263-4869.

NCUA:

Damon P. Frank, Senior Trial Attorney, and John H. Brolin, Senior Staff Attorney, Office of General Counsel, at (703) 518-6540.

SUPPLEMENTARY INFORMATION:

I. Background

Section 916 of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, Public Law 101-73, 103 Stat. 183 (1989), required the Agencies, together with the Office of Thrift Supervision (OTS), to develop uniform rules and procedures for administrative hearings. In August 1991, the Agencies and OTS each adopted final Uniform Rules as well as Local Rules specific to each agency.

Based on the experience gained in administrative hearings, the Agencies, together with OTS, modified the Uniform Rules and Local Rules in 1996.

The Agencies, together with the OTS, issued a joint notice of proposed rulemaking on June 17, 1991 (56 FR 27790). Each agency issued a final rule on the following dates: OCC on August 9, 1991 (56 FR 38024); Board on August 9, 1991 (56 FR 38052); FDIC on August 9, 1991 (56 FR 37968); and NCUA on August 8, 1991 (56 FR 37767). The OTS, whose rules and procedures were transferred to the OCC in 2011, published its rules on August 12, 1991 (56 FR 38317). The Agencies' rules are codified at 12 CFR part 19, subpart A (OCC); 12 CFR part 263, subpart A (Board); 12 CFR part 308, subpart A (FDIC); and 12 CFR part 747, subpart A (NCUA).

61 FR 20330, May 6, 1996.

The Uniform Rules and Local Rules have remained largely unchanged since the 1996 amendments, while the practice of administrative hearings has changed fundamentally with the introduction of electronic communication and transmission. The current Uniform Rules were promulgated at a time when the Agencies accepted only paper pleadings. However, beginning in 2005, the Office of Financial Institution Adjudication (OFIA) established a dedicated electronic mailbox to accept electronic pleadings and service and, by 2006, paper pleadings were virtually eliminated in administrative hearings. Without rules in place to address electronic pleadings, the Administrative Law Judges (ALJs) opted to dictate procedures pertaining to electronic filing and other items on an ad hoc basis in their scheduling orders.

The Agencies have identified sections of the Uniform Rules that should be modified to recognize electronic pleadings and communications in administrative hearings and other sections that require modification based on the experience of the Agencies in administrative litigation. The Agencies also propose to remove the remaining references to the Office of Thrift Supervision (OTS), which was abolished in 2011.

In addition, the OCC, Board, and FDIC propose to amend certain sections of their Local Rules that they believe should be updated, improved, or clarified. Furthermore, the OCC proposes to consolidate its uniform and local rules by applying part 19 to both national bank- and Federal savings association-related proceedings and investigations and removing its separate enforcement-related rules for Federal savings associations, 12 CFR parts 108, 109, 112, and 165. Finally, the OCC proposes to amend subpart A of 12 CFR part 4, Organization and Functions, to add a new § 4.8 that would address service of process. The Agencies intend that any final rules issued in connection with this rulemaking will only apply to actions filed after the effective date of any final rule.

The FDIC removed references to the OTS and updated its definitions by Final Rule on Jan. 30, 2015 (80 FR 5009). The Board similarly removed references to the OTS from its definitions on September 13, 2011 (76 FR 56603).

The Agencies invite comments on all aspects of this joint proposed rule. Comments on the Local Rules should be sent only to the appropriate agency.

II. Section-by-Section Discussion of Proposed Amendments to the Uniform Rules

General Comments

The text of the proposed amendments to the Uniform Rules appears at the end of the preamble. Agency-specific proposed amendments to the Uniform Rules and Local Rules appear in the instructions below. Where appropriate, the Agencies propose to replace gender references such as “him or her,” “his or her,” and “himself or herself” with gender neutral terminology. Consistent with

Federal Register

drafting guidelines,

the Agencies also propose to replace the word “shall” throughout the rule with the terms “must,” “will,” or other appropriate language. The Agencies are also proposing to use the abbreviation “ALJ” for “administrative law judge,” as this abbreviation is commonly used and understood, and using this abbreviation will reduce the length of the rules. These changes are proposed throughout the Uniform Rules and will not be discussed further in the individual sections below.

National Archives,

Federal Register

Writing Resources for Federal Agencies: Drafting Legal Documents,

https://www.archives.gov/federal-register/write/legal-docs/clear-writing.html.

Section __.1 Scope

Section __.1 lists the types of adjudicatory proceeding to which the Uniform Rules apply. To the extent necessary, the Agencies propose to update the list of civil money penalty proceedings covered by the Uniform Rules described in § __.1(e) to include section 5, section 9, and section 10 of the Home Owners' Loan Act (HOLA).

These sections of the HOLA are applicable to Federal savings associations now supervised by the OCC, State-chartered savings associations now supervised by the FDIC, and savings and loan holding companies supervised by the Board. The Agencies also propose to add references to “the former Office of Thrift Supervision” in § __.1(e)(10), to clarify that the Uniform Rules will apply to civil money proceedings for violations of orders issued, written agreements executed, and conditions imposed in writing by OTS.

The Board made these updates on September 13, 2011 (76 FR 56603).

Section__.3 Definitions

Section __.3 of the Uniform Rules includes definitions applicable to the Uniform Rules and, unless otherwise specified, the Local Rules. The Agencies propose adding a definition of the term “electronic signature” in § __.3. The Agencies are proposing that electronic signatures be used to satisfy the good faith certification requirement in § __.7 and, therefore, are including a definition of the term “electronic signature” in this section. The OCC, Board, and FDIC are proposing to replace the definition of violation in § __.3 with a cross-reference to the identical definition in section 3(v) of the Federal Deposit Insurance Act (FDIA), 12 U.S.C. 1813(v). To the extent necessary, the Agencies also propose to remove the legacy reference to the Office of Thrift Supervision both in the definition of “OFIA” and the definition of “Uniform Rules” in § __.3.

The OCC proposes to add the term “Federal savings association” to its definition of “institution” in order to make the Uniform Rules and the OCC's Local Rules in part 19 of title 12 applicable to Federal savings associations, which have been regulated by the OCC since 2011.

As described elsewhere in this

Supplementary Information,

the OCC is proposing to remove its Uniform Rules and Local Rules applicable to Federal savings associations, parts 108, 109, 112, and 165 of title 12.

The Board proposes to add “nonbank financial companies” and “financial market utilities” designated by the Financial Stability Oversight Council to its definition of “institution” to clarify that the Uniform Rules are applicable to these entities, which are supervised by the Board pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

In addition, the Board proposes to clarify that organizations operating under section 25A of the Federal Reserve Act, Federal and state “branches,” as well as “agencies” as defined in section 1(b) of the International Banking Act, and “any other entity subject to the supervision of the Board,” are included in its definition of “institution.” The Board also proposes to replace the word “savings association” with “depository institution” in 12 CFR 263(f)(6) to conform this language to the language in 12 U.S.C. 1818(b)(3).

Public Law 111-203, 124 Stat. 1376 (2010).

Section __.5 Authority of the Administrative Law Judge (ALJ)

Section __.5 of the Uniform Rules addresses the authority of the ALJ. The Agencies propose to amend § __.5(b)(2) to add the term “other orders” to the list of specific orders an ALJ is authorized to issue, quash, or modify. The Agencies are proposing this change to clarify that the authority of the ALJ to issue orders is not limited to subpoenas, subpoenas

duces tecum,

and protective orders and may include other types of orders that are not enumerated in this section. The Agencies also propose to amend § __.5(b)(11) to change the term “presiding officer” to “ALJ” in order to avoid confusion and clarify that the ALJ has the powers necessary and appropriate to discharge the duties of this role.

Section __.6 Appearance and Practice in Adjudicatory Proceedings

Section __.6 of the Uniform Rules addresses appearance and practice in adjudicatory proceedings. The Agencies propose to amend § __.6(a)(2) to state simply that an individual may appear on their own behalf. In making this change, the Agencies would eliminate the additional language that is duplicative and unnecessary to the meaning of the provision. The Agencies also propose to amend § __.6(a)(3) to include a requirement that a notice of appearance include a written acknowledgment that the individual has reviewed and will comply with the Uniform Rules and Local Rules. The Agencies propose to add this requirement in order to ensure that representatives appearing in the proceeding are informed of the rules that govern the proceedings.

Section __.7 Good Faith Certification

Section __.7 of the Uniform Rules addresses the requirement for good faith certification for every filing or submission of record following the issuance of a notice. The Agencies propose to amend § __.7(a) to require that the counsel of record, including an individual who acts as their own counsel, include a mailing address, an electronic mail address, and a telephone number with every certification. The Agencies also propose to amend this section to permit electronic signatures to satisfy the signature requirements of the certification. These proposed changes to the rules conform the rules to the current practice of electronic filing.

Section __.9 Ex Parte Communications

Section __.9 of the Uniform Rules addresses

ex parte

communications in administrative proceedings. The Agencies propose to amend § __.9(c) to clarify that upon the occurrence of

ex parte

communication, the ALJ or the Agency Head must determine whether any action in the form of sanctions should be taken concerning the

ex parte

communication. The Agencies also propose to amend § __.9(e)(1) to better align it with section 5 of the Administrative Procedure Act, 5 U.S.C. 554(d). Specifically, the Agencies propose to add language stating that the ALJ may not consult with a person or party on a fact in issue without giving all parties notice and an opportunity to participate and may not be responsible to or subject to the supervision or direction of an employee agent engaged in the performance of investigative or prosecuting functions for any of the Agencies. Finally, the Agencies propose to amend § __.9(e)(2) to refer to administrative or judicial proceedings rather than public proceedings. The Agencies are proposing this change to better describe the type of proceedings subject to the rule.

Section __.10 Filing of Papers

Section __.10 of the Uniform Rules addresses the requirements for the filing of papers. The Agencies propose to amend and renumber § __.10(b) to remove an outdated section on rules governing transmission by electronic media and replace it with a section stating that filing may be accomplished by electronic mail or other electronic means designated by the Agency Head or the ALJ. The Agencies further propose to amend § __.10(b) to eliminate references to specific carriers and names of mail delivery services and

instead refer generally to same day courier services and overnight delivery services. The Agencies propose to amend § __.10(c), which addresses the formal requirements as to papers filed, to require papers to include the mailing address, electronic mail address, and telephone number of the counsel or party making the filing. Finally, the Agencies propose to strike § __.10(c)(4), which requires the filing of an original and one copy of each filing. The Agencies believe this requirement is no longer necessary, especially given that the vast majority of papers are filed electronically, consistent with current adjudicatory practice. The Agencies also propose to retain the existing methods of filing by paper, such as personal service, same day courier, overnight delivery, and mail, and have modified the descriptions of those methods to conform to current terminology and standards for delivery.

Section __.11 Service of Papers

Section __.11 of the Uniform Rules addresses the requirements for service of papers. The proposed modifications to § __.11 are intended to provide for electronic filing, where appropriate, and simplify and update the descriptions for other, non-electronic, means of filing. The Agencies propose to amend § __.11(b) to add service by electronic mail or other electronic means as a method for serving papers, consistent with current practice. The Agencies also propose to retain the existing methods of service by paper, such as personal service, same day courier, overnight delivery, and mail, and have replaced references to specific carriers and delivery services with general references to same day courier service and overnight delivery service. The Agencies also propose to amend § __.11(c)(1) to require that all papers required to be served by the Agency Head or the ALJ upon a party that has appeared in the proceeding will be served by electronic mail or other electronic means designated by the Agency Head or the ALJ. For parties that have not appeared in the proceeding in accordance with § __.6, the Agencies have preserved the option for non-electronic methods of service. The Agencies propose to modify the descriptions of some of those methods to conform to current terminology and standards for delivery. Finally, in § __.11(d), the Agencies propose to generally retain the existing methods for the service of subpoenas with appropriate modifications to the descriptions of the methods to conform to current terminology and standards for delivery.

Section __.12 Construction of Time Limits

Section __.12 of the Uniform Rules addresses the construction of time limits. The Agencies propose to amend § __.12(b), which addresses when papers are deemed to be filed or served, to provide that in the case of transmission by electronic mail or other electronic means, filing and service are deemed to be effective upon transmittal by the serving party. The Agencies also propose to retain the existing times for non-electronic methods of filing and service and update the descriptions of these methods to make them consistent with the updated descriptions in §§ __.10 and __.11. The Agencies propose to amend § __.12(c), which addresses the calculation of time for service and filing of responsive papers, to provide that in the case of service by electronic mail or other electronic means, the time limits are calculated by adding one calendar day to the prescribed period. The Agencies further propose to modify the rule to provide for the addition of two calendar days, rather than one, in the case of service by overnight delivery service and retain the rule providing for the addition of three calendar days for service made by mail.

Section __.14 Witness Fees and Expenses

Section __.14 of the Uniform Rules addresses witness fees and expenses in administrative proceedings. The Agencies propose to amend § __.14 to clarify the general rule, in § __.14(a), that all witnesses, including an expert witness who testifies at a deposition or hearing, will 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. The Agencies further propose to add language in § __.14(b) to clarify that the Agencies are not required to pay witness fees and mileage for testimony by a party. The Agencies propose to retain existing language governing the timing of witness payments in a new § __.14(c).

Section __.15 Opportunity for Informal Settlement

Section __.15 of the Uniform Rules addresses the rules and process for informal settlement once a proceeding has been initiated. The Agencies propose to revise the language of this section to more plainly express the existing rule that an offer or proposal for informal settlement may only be made to Enforcement Counsel.

Section __.18 Commencement of Poceeding and Contents of Notice

Section __.18(a) of the Uniform Rules governs the commencement of administrative proceedings. The Agencies propose to amend § __.18(a)(ii) to provide that Enforcement Counsel serves the notice upon the respondent to begin proceedings.

The Agencies also propose to amend this section to provide that Enforcement Counsel may serve the notice upon counsel for the respondent, rather than the respondent, provided that counsel for the respondent has confirmed that counsel represents the respondent in the matter and will accept service of the notice on behalf of the respondent. By requiring counsel to confirm representation of a respondent, the Agencies hope to clarify when it is appropriate to serve notice on an individual who purports to represent the respondent. The Agencies propose to amend § __.18(a)(iii) to make it clear that Enforcement Counsel files the notice with OFIA.

The FDIC has already made this change in its version of the Uniform Rules in connection with amendments that became effective on January 12, 2021.

The NCUA proposes to delete the reference to change-in-control proceedings from part 747 under 12 U.S.C. 1817(j), which does not apply to credit unions or the NCUA. The NCUA proposes the same deletion under § __.33.

Section __.18(b) of the Uniform Rules addresses the contents of the notice in administrative proceedings. The Agencies propose to amend § __.18(b) to provide that notice pleading applies in administrative proceedings, meaning that a notice need only provide a short and plain statement of the claim(s) showing that the Agency is entitled to relief. The Agencies further propose to make a technical change to § __.18(b)(2) to change the description from “a statement of the matters of fact or law showing the [Agency] is entitled to relief” to simply “matters of fact or law showing that the [Agency] is entitled to relief.” The Agencies believe the reference to “a statement” in this section has no substantive meaning and, thus, propose to remove it.

Section __.19 Answer

Section __.19 of the Uniform Rules sets out the requirements for an answer in an administrative proceeding. The Agencies propose to amend § __.19(c)(2) to provide that if a respondent fails to request a hearing as required by law within the applicable time frame, the notice of assessment constitutes a final and unappealable order, in accordance with 12 U.S.C. 1818(i)(2)(E)(ii) and 12 U.S.C.

1786(k)(2)(E)(ii), without further action by the ALJ. In the past, there has been confusion about whether any additional action on the part of the ALJ is required in this situation, and the proposed language clarifies that no further action is necessary.

Section __.24 Scope of Document Discovery

Section __.24 of the Uniform Rules addresses the scope of discovery in an administrative proceeding and § __.24(a) addresses limitations on discovery. The Agencies propose to update the definition of the term “documents” in § __.24(a)(1) to include not only writings, drawings, graphs, charts, photographs, and recordings, but electronically stored information and data or data compilations stored in any medium from which information can be obtained. This expanded definition of the term “document” is necessary to account for the range of digital information now available. The Agencies further propose to amend § __.24(a)(3) to clarify that discovery by the use of either interrogatories or requests for admission is not permitted. The Agencies propose to move the paragraph on relevance currently in § __.24(b) to a new paragraph § __.24(a)(4) because that provision functions as a limitation on discovery. The Agencies propose to amend § __.24(c) to clarify the list of privileges applicable to otherwise discoverable documents. In addition to the attorney-client privilege and the work-product doctrine, the proposed language would also specifically identify the bank examination privilege and the law enforcement privilege and exclude those privileged documents from discovery. Finally, the Agencies propose to add language to § __.24(d) to provide that document discovery, including all responses to discovery requests, must be completed by the date set by the ALJ and no later than 30 days prior to the date scheduled for the commencement of the hearing. This proposed language recognizes the role of the ALJ in establishing a schedule for discovery while also providing for discovery to be completed earlier in the hearing process.

Section __.25 Request for Document Discovery by Parties

Section __.25 of the Uniform Rules addresses requests for document discovery from parties in administrative proceedings. The Agencies propose to reorganize the section to improve clarity and make additional changes. The Agencies propose to replace the heading “General rule” with “Document requests” in § __.25(a) to better identify the subject matter of the section. The Agencies propose to amend § __.25(a) to add a paragraph (1) stating that a party may serve on another party a request to not only produce discoverable documents but to permit the requesting party or its representative to inspect or copy discoverable documents that are in the possession, custody, or control of the party upon whom the request is served. It has been the practice of parties in administrative proceedings to permit the inspection and copying of discoverable documents, and the proposed language formalizes that practice under the rules. The Agencies propose to include language to provide that a party responding to a request for inspection may produce copies of documents or electronically stored information instead of permitting inspection. In many cases, providing documents or electronically stored information directly is more efficient than permitting inspection, and the proposed amendment preserves the right of a responding party to make that choice. The Agencies further propose to add a new paragraph (2) to simplify the language that previously appeared in § __.25(b) regarding the identification of documents to be produced. The proposal would require that the request describe with reasonable particularity each item or category of items to be inspected and specify a reasonable time, place, and manner for the inspection or production.

The Agencies propose to amend the rules governing production or copying, as set out in a new § __.25(b)(1), to require that, unless a particular form is specified by the ALJ or agreed upon by the parties, the producing party must produce copies of documents as they are kept in the usual course of business or organized to correspond to the categories of the request, and produce electronically stored information in a form in which it is ordinarily maintained or in a reasonably usable form. The Agencies recognize that the ways in which electronically stored information may be stored and transmitted may change over time and are adopting the reasonably usable standard for electronically stored information to provide flexibility.

The Agencies propose to simplify the rules associated with the costs of document production in a new § __.25(b)(2), which would require the producing party to pay its own costs to respond to a discovery request unless otherwise agreed by the parties. This proposed language would eliminate the earlier requirement that a requesting party prepay the producing party for certain costs while also allowing the parties to agree to share costs, as appropriate in a particular case.

The Agencies propose to modify the time limits for motions to limit discovery in § __.25(d). In § __.25(d)(1), the Agencies propose to extend the time limit for a party to object to a discovery request from within ten to within 20 days of being served with such a request. In § __.25(d)(2), the Agencies propose to extend the time limit for a party to file a written response from within five to within ten days of service of the motion. Additional time allows the parties to digest such requests and engage with each other to narrow the scope of the request before having to file a motion with the ALJ. The Agencies believe that parties making motions to limit discovery and responding to motions to limit discovery will benefit from additional time to review and respond to such requests.

Finally, the Agencies propose to amend § __.25(e) to specify the available privileges that may be asserted in connection with a request for production. The section includes attorney-client privilege, attorney work-product doctrine, bank examination privilege, law enforcement privilege, any government deliberative process privilege, other privileges of the Constitution, any applicable act of Congress, and other principles of common law as grounds for withholding documents.

Section __.26 Document Subpoenas to Non-Parties

Section __.26 of the Uniform Rules addresses document subpoenas to third parties in administrative proceedings. The Agencies propose to amend § __.26(b)(1) to provide that a person to whom a document subpoena is directed may file a motion to quash or modify such subpoena with the ALJ. This amendment clarifies to whom the motion to quash should be directed.

Section __.27 Deposition of Witness Unavailable for Hearing

Section __.27 of the Uniform Rules addresses the deposition of witnesses unavailable for an administrative hearing. The Agencies propose to amend § __.27(a)(2) to require that the application for a subpoena state the manner in which the deposition is to be taken, in addition to the time and place, and provide explicitly that a deposition may be taken by remote means. These changes modernize the rules and conform the rules to existing practice. The Agencies propose to simplify

§ __.27(a)(4) by eliminating unnecessary language related to where subpoenas may be served. In order to further provide for remote depositions, the Agencies propose to amend § __. 27(c)(1) to provide that a court reporter or other person authorized to administer an oath may administer the oath remotely without being in the physical presence of the deponent, by stipulation of the parties or order by the ALJ. The Agencies further propose to amend § __.27(d) to clarify that if a subpoenaed person fails to comply with any subpoena issued pursuant to this section the aggrieved party may apply to the appropriate United States district court for an order requiring compliance with the portions of the subpoena with which the subpoenaed party has not complied. Finally, the Agencies are making a correction to an inaccurate cross-reference in the rule. The cross reference to paragraph (c)(3) has been changed to correctly reference paragraph (c)(2).

Section __.29 Summary Disposition

Section __.29 of the Uniform Rules addresses summary disposition. The Agencies propose to modify § __.29(c) to provide that a request for a hearing on a motion must be made in writing. This change will formalize the process of requesting a hearing and increase the clarity of the process.

Section __.31 Scheduling and Prehearing Conferences

Section __.31 of the Uniform Rules addresses scheduling and prehearing conferences. The Agencies propose to amend § __.31(a) to clarify that the prehearing conference must be set within 30 days of service of the notice or an order commencing a proceeding and eliminate the option in the current rule for the parties to agree on another time. The Agencies also propose to add language to clarify that it is a schedule for discovery, and not actual discovery, that the parties may determine at the scheduling conference. Finally, the Agencies propose to eliminate references to “telephone” conferences in order to make the provision more technologically neutral.

Section __.32 Prehearing Submission

Section __.32 of the Uniform Rules addresses prehearing submissions. The Agencies propose to amend § __.32(a) to extend the time for a party to file prehearing submissions with the ALJ from 14 days to 20 days before the start of the hearing. The Agencies propose this change to give the parties more flexibility in completing their filings. The Agencies propose to further amend § __.32 to update the required prehearing submissions. The Agencies propose to amend § __.32(a)(1) to require the submission of a prehearing statement that states the party's position with respect to the legal issues presented, the statutory and case law upon which the party relies, and the facts the party expects to prove at the hearing. The Agencies propose to amend § __.32(a)(2) to require that the final list of witnesses include the name, mailing address, and electronic mail address for each witness and to clarify that the list of witnesses need not identify the exhibits to be relied upon by each witness at the hearing and that the list of exhibits should be a list of exhibits expected to be introduced at the hearing.

Section __.35 Conduct of Hearings

Section __.35 of the Uniform Rules addresses the conduct of administrative hearings. The Agencies propose to add a new § __.35(c) to provide rules governing electronic presentations in a hearing. The new language provides that the ALJ may direct the use of, or any party may use, an electronic presentation during the hearing. If an ALJ requires an electronic presentation, each party will be responsible for their own presentation or related costs unless the parties agree to another manner in which to allocate responsibilities and costs. This new language is necessary to account for electronic presentations that are not addressed in the existing rules but are used routinely in hearings.

Section __.36 Evidence

Section __.36 of the Uniform Rules sets forth the rules governing evidence in an adjudicatory proceeding. The Agencies propose to amend § __.36(b)(2) to refer to “direct questioning” rather than “direct interrogation” of witnesses in order to clarify, in plain language, the meaning of this section.

III. Section-by-Section Summary and Discussion of Proposed Amendments to the Local Rules of Each Agency

A. Proposed Amendments to the OCC Local Rules

Part 19, subparts B through P, address local rules of practice and procedure specific to OCC investigations, hearings before the OCC, and other OCC-related proceedings involving national banks. The corresponding rules for Federal savings association-related proceedings and investigations, transferred from the former OTS to the OCC by the Dodd-Frank Act, are set forth at 12 CFR parts 108, 109, 112, and 165. Many of the national bank and Federal savings association-related provisions are similar, but in some cases no corresponding rule exists or one set of rules provides more specificity than the other. The proposed rule would consolidate these rules by applying part 19 to both national bank- and Federal savings association-related proceedings and investigations and remove parts 108, 109, 112, and 165. The proposed rule also would amend the local rules to add certain provisions of the Federal savings association rules that are not currently included in part 19 but that the OCC believes should apply to both Federal savings associations and national banks. In addition, the OCC proposes to reorganize certain rules in part 19, including subparts D, E, F, and G relating to actions under the Federal securities laws; add new provisions addressing the Equal Access to Justice Act (EAJA); and add a new subpart O addressing the forfeiture of a national bank, Federal savings association, or Federal branch and agency charter or franchise for certain money laundering or cash transaction offenses. As set forth in proposed subpart R, the revised consolidated rules would apply to adjudicatory actions filed on or after the effective date of the final rule resulting from this proposal.

The proposed amendments to the OCC's local rules are discussed below.

Subpart B—Procedural Rules for OCC Adjudications

19.100—Filing Documents

Sections 19.100 and 109.104(g) require that all filings with or referred to the Comptroller or ALJ in any proceeding under parts 19 or 109, respectively, be filed with the OCC Hearing Clerk. The two provisions are substantively the same except that § 19.100 provides a more detailed description of the types of filings to which the rule applies. As a result of the proposed application of part 19 to Federal savings associations and removal of part 109, § 19.100 also would apply to filings in Federal savings association-related proceedings. Furthermore, the proposed rule would amend § 19.100 to remove the OCC filing street address and to require the filing to be made in a manner prescribed by § 19.10(b) and (c). Section 19.10(b) and (c) prescribe the permissible filing methods and list form and content requirements for filing papers with the OCC. As amended by this proposal, filings would be permitted by electronic mail or other electronic means designated by the Comptroller or the

ALJ. Lastly, the proposal would amend the current provision to clarify that the materials filed include any attachments or exhibits to the listed documents.

19.101 Delegation to OFIA

Both §§ 19.101 and 109.101 provide that an ALJ at the Office of Financial Institution Adjudication (OFIA) will conduct actions brought under the respective subpart A rules. As a result of the proposed application of part 19 to Federal savings associations, § 19.101 would apply to adjudicatory actions brought against either national banks or Federal savings associations. The proposal would make one stylistic revision to § 19.101 to remove the passive sentence structure.

19.102 Civil Money Penalties

The proposed rule would add a new § 19.102 that would incorporate parts of § 109.103(b), which provides rules for the payment of civil money penalties. The national bank rules do not address this topic with specificity, and the OCC has determined that these provisions, which clarify when parties must pay civil money payments, should be applicable to both national banks and Federal savings associations. As a result of this amendment, respondents would be required to pay civil money penalties assessed pursuant to subpart A of part 19 within 60 days after the issuance of the notice of assessment, unless the OCC requires a different time for payment. If a respondent has made a timely request for a hearing to challenge the assessment of the penalty, the respondent would not be required to pay the penalty until the OCC has issued a final order of assessment. In such instances, the respondent would be required to pay the penalty within 60 days of service of the final order unless the OCC requires a different time for payment.

Subpart C—Removals, Suspensions, and Prohibitions When a Crime Is Charged or a Conviction Is Obtained

Subpart C of part 19 includes the rules applicable in hearings brought against any institution-affiliated party

who the OCC has suspended or removed from office or prohibited from further participation in the affairs a depository institution pursuant to section 8(g) of the FDIA (12 U.S.C. 1818(g)). Part 108 applies similar rules to officers, directors, or other persons participating in the conduct of the affairs of a Federal savings association, Federal savings association subsidiary, or affiliate service corporation, although part 108 differs slightly on certain procedural issues. As described below, the proposed rule would amend subpart C to incorporate certain provisions of part 108 that would be helpful to the OCC in these adjudicatory actions, specifically apply amended subpart C to both national banks and Federal savings associations, and remove part 108. Although part 108 does not use the term “institution-affiliated party,” the OCC believes that the scope of part 108 is similar in substance to this term as defined in § 19.3 by reference to the FDIA.

“Institution-affiliated party,” as defined in § 19.3 by reference to section 3(u) of the FDIA (12 U.S.C. 1813(u)), means: (1) Any director, officer, employee, or controlling stockholder (other than a bank holding company or savings and loan holding company) of, or agent for, an insured depository institution; (2) any other person who has filed or is required to file a change-in-control notice with the appropriate Federal banking agency under 12 U.S.C. 1817(j); (3) any shareholder (other than a bank holding company or savings and loan holding company), consultant, joint venture partner, and any other person as determined by the appropriate Federal banking agency who participates in the conduct of the affairs of an insured depository institution; and (4) any independent contractor (including any attorney, appraiser, or accountant) who knowingly or recklessly participates in any violation of any law or regulation, any breach of fiduciary duty, or any unsafe or unsound practice which caused or is likely to cause more than a minimal financial loss to, or a significant adverse effect on, the insured depository institution.

19.110 Scope

The proposed rule would amend § 19.110 to include a definitions section for subpart C similar to the one for Federal savings associations in § 108.2 to enhance the understanding and application of the rule and simplify the rule text. New § 19.110(b) would define “petitioner” to mean an individual who has filed a petition for informal hearing under subpart C; “depository institution” to mean any national bank, Federal savings association, or Federal branch of a foreign bank; and “OCC Supervisory Office” to mean the Senior Deputy Comptroller or Deputy Comptroller of the OCC department or office responsible for supervision of the depository institution, or, in the case of an individual no longer affiliated with a particular depository institution, the Deputy Comptroller for Special Supervision. Furthermore, the proposal would label the existing paragraph in § 19.110 as paragraph (a), Scope, and retitle the section heading to account for the addition of definitions.

19.111 Suspension, Removal, or Prohibition

The proposed rule would reorganize § 19.111 into paragraphs; retitle the section heading, as well as the subpart, to clarify that it applies to institution-affiliated parties and remove passive sentence structure. In newly designated § 19.111(a), the proposal would correct an omission in current § 19.111, which provides that the Comptroller may serve a notice of suspension or order of removal or prohibition pursuant to 12 U.S.C. 1818(g) on an institution-affiliated party and must serve a copy of this notice or order on the appropriate depository institution. Because 12 U.S.C. 1818(g) also provides for a notice of prohibition, the proposed rule would add a reference to this notice of prohibition to this paragraph. In addition, § 108.4 provides for method of service by the Comptroller. Like § 108.4, newly designated § 19.111(a) would specify the manner of service by the Comptroller, providing that the Comptroller serve the notice or order in the manner set forth in § 19.11(c), Service of papers. The OCC also proposes to move the information regarding a request for a hearing by the institution-affiliated party to a separate paragraph § 19.111(b); add the ability to send the hearing request by same day courier service or overnight delivery service, in addition to by certified mail or by personal service with a signed receipt as provided under the current rule; and add the caveat that this submission rule applies unless instructed otherwise by the Comptroller. This proposed revision also utilizes the newly defined term “OCC Supervisory Office.”

In addition, the proposed rule would include in § 19.111(b)(2) a provision similar to § 108.5(b) that requires an institution-affiliated party in a request for a hearing to admit or deny each allegation, or state that they lack sufficient information to admit or deny each allegation, which would be treated as a denial. Proposed § 19.111(b)(2) also provides that denials must fairly meet the substance of each allegation denied and that general denials are not permitted; when the institution-affiliated party denies part of an allegation, that part must be denied and the remainder specifically admitted; and any allegation in the notice or order which is not denied is deemed admitted for purposes of the proceeding. Furthermore, similar to § 108.5(c), proposed § 19.111(b)(2) provides that the request must state with particularity how the institution-affiliated party intends to show that its continued service to or participation in the affairs of the institution would not pose a threat to the interests of the institution's depositors or impair public confidence in any institution. The OCC believes that adopting these provisions from the

Federal savings association rule should help narrow the issues to be contested and make this rule more consistent with the adjudicatory rule in § 19.19.

Furthermore, the proposed rule would add the default provision included in § 108.8 to § 19.111, as new paragraph (c). Under this new paragraph, if the institution-affiliated party fails to timely file a petition for a hearing pursuant to § 19.111(b); fails to appear at a hearing either in person or by attorney, or fails to submit a written argument where oral argument has been waived pursuant to § 19.112(c), the notice of suspension or prohibition would remain in effect until the information, indictment, or complaint is finally disposed of and the order of removal or prohibition would remain in effect until terminated by the OCC. The OCC believes the application of this provision to national banks should clarify that there are consequences if a petitioner fails to appear or fails to answer.

19.112 Informal Hearing

The proposal would make a number of changes to § 19.112, which provides the procedures for informal suspension or removal hearings before the OCC involving an institution-affiliated party. In § 19.112(a), the proposal would update the name of the OCC's Enforcement and Compliance Division to OCC Enforcement. The proposal also would remove the requirement in this paragraph that the OCC Supervisory Office notify the appropriate OCC District Counsel of the hearing, as this is an unnecessary step.

In § 19.112(c)(2), the proposal would add language to clarify that, when responding to a petitioner's submissions, the OCC would serve other parties in the manner set forth in § 19.11(c).

In § 19.112(d), the proposal would amend paragraph (d)(2), which provides that the informal hearing is not governed by formal rules of evidence, to clarify that these inapplicable formal rules of evidence include the Federal Rules of Evidence, as provided in § 19.36. The proposal also would clarify paragraph (d)(3)(i) by breaking up the first sentence into two sentences. In paragraph (d)(3)(ii), the proposal would provide that the presiding officer may require, instead of permit as in the current paragraph, a shorter time period in which the parties may request oral testimony or witnesses at a hearing, which is the more accurate action for a presiding officer. As in § 19.27(c), the proposal also would amend § 19.112(d)(3)(ii) to provide that, by stipulation of the parties or by order of the presiding officer, a court reporter or other authorized person may administer the required oath to a witness remotely without being in the physical presence of the witness. This amendment would update the current oath requirement for witnesses to account for remote proceedings and conform this provision to § 19.112(d)(4), which permits electronic presentations at the hearing. In paragraph (d)(3)(iii), the proposal would make technical changes to the different actions a presiding officer may take related to a suspension or prohibition based on an indictment, information, or complaint and a removal or prohibition with respect to a conviction or pre-trial diversion program to better reflect 12 U.S.C. 1818(g). Throughout paragraph (d) the proposal would make technical corrections by replacing “appointed OCC attorney” with “OCC.”

The proposed rule also would add a new paragraph (d)(4) to § 19.112 to provide rules governing electronic presentations in the course of a hearing. As in proposed § 19.35(c), this provision would provide that, based on the circumstances of each hearing, the presiding officer may direct the use of, or any party may elect to use, an electronic presentation during the hearing. If the presiding officer requires an electronic presentation, each party would be responsible for its own presentation or related costs unless the parties agree to allocate presentation responsibilities and costs differently. This new language is necessary to account for the routine use of electronic presentations in hearings that existing rules do not address.

Throughout § 19.112, the proposal would utilize the newly defined term “OCC Supervisory Office” and remove passive sentence structure.

19.113 Recommended and Final Decisions

The proposed rule would make a number of changes to § 19.113, which provides the procedures for decisions by the presiding officer and the OCC. The proposal would update § 19.113(c) to permit the Comptroller to notify the petitioner of a decision by electronic mail or other electronic means, if the petitioner consents, instead of by registered mail. The proposal also would make technical changes to paragraph (c) by replacing “when” with “if” in describing whether the petitioner has waived an oral hearing, replacing the “must” with “will” in describing the Comptroller's notification of the decision, and replacing the “and” with “or” in describing the actions that the Comptroller may affirm, terminate, or modify in its final decision. In § 19.113(d), the proposal would clarify that there could be more than one charge against an institution-affiliated party. In § 19.113(f), the proposal would remove the passive sentence structure. Lastly, the proposal would add headings to each paragraph.

Subparts D Through G—Actions Under the Federal Securities Laws

Subparts D, E, F, and G of part 19 set forth the procedures applicable to actions taken by the OCC with respect to banks pursuant to various provisions of the Federal securities laws, including the Securities Exchange Act of 1934 (Exchange Act). Specifically, subpart D addresses exemption hearings under section 12(h) of the Exchange Act, subpart E addresses disciplinary proceedings, subpart F addresses civil money penalties, and subpart G addresses cease and desist authority. Although these Federal securities laws also apply to Federal savings associations, there are no comparable provisions in OCC regulations for Federal savings associations. Instead, the former OTS relied on the authority granted under the Exchange Act for these actions rather than incorporating the authority into its rules and specified in § 109.100(c) that the Uniform Rules of Practice and Procedure in part 109, subpart A applied to proceedings under the Exchange Act. The OCC proposes to amend the rules in subparts D, E, F, and G to apply to Federal savings associations and to make other changes, described below. To streamline the rules, the OCC also proposes to combine subparts D, E, F, and G into one subpart D entitled “Actions under the Federal Securities Laws,” reserve subparts E, F and G; and remove § 109.100(c).

19.120 Exemption Hearings Under Section 12(h) of the Securities Exchange Act of 1934

The proposed rule would move the provisions in subpart D of part 19 to a new § 19.120. Current subpart D governs informal hearings by the Comptroller to determine whether, pursuant to authority in sections 12(h) and (i) of the Exchange Act (15 U.S.C. 78

(h) and (i)), to exempt an issuer or a class of issuers from the provisions of sections 12(g), 13, or 14 of the Exchange Act (15 U.S.C. 78

(g), 78m or 78n) or whether to exempt any officer, director, or beneficial owner of securities of an issuer from section 16 of the Exchange Act (15 U.S.C. 78p). This subpart currently covers issuers that are banks whose securities are registered pursuant to section 12(g) of the Exchange Act (15 U.S.C. 78

(g)). In addition to proposing to apply this provision to issuers that

are Federal savings associations, the OCC proposes the following changes.

Specifically, the proposal would clarify in proposed § 19.120(a) that this section would apply to national bank and Federal savings association issued securities that may be subject to registration in addition to those securities already registered. This change would permit a national bank or Federal savings association to obtain an exemption from the OCC in advance of registering.

The OCC also proposes that when an applicant provides a copy of its newspaper notice of an exemption hearing to its shareholders pursuant to § 19.120(c) it must do so in the same manner as is customary for shareholder communications, which could be through electronic means. This change should make it easier and less burdensome to comply with this notice requirement.

In addition, as in proposed §§ 19.35(c) and 19.112(d)(4), the proposed rule would add a provision, § 19.120(d)(8), governing electronic presentations in the course of an Exchange Act-related hearing. This provision would provide that, based on the circumstances of each hearing, the presiding officer may direct the use of, or any party may elect to use, an electronic presentation during the hearing. If the presiding officer requires an electronic presentation during the hearing, each party would be responsible for its own presentation and related costs unless the parties agree to another manner by which to allocate presentation responsibilities and costs. As indicated above, this new language is necessary to account for the routine use of electronic presentations in hearings that the existing rule does not currently address. The proposed rule would make a conforming change in § 19.120(d)(6) that would allow, by stipulation of the parties or by order of the presiding officer, a court reporter or other authorized person to administer the required oath to a witness remotely without being in the physical presence of the witness. Furthermore, the proposed rule would clarify in proposed § 19.120(d)(9) that a transcript of the hearing may be provided by electronic means.

Lastly, the OCC proposes technical changes to § 19.120. The proposed rule would make minor, non-substantive changes in provisions redesignated as paragraphs (b) and (c), remove passive sentence structure in text redesignated as paragraph (d)(9), allow for more than one applicant in provisions redesignated as paragraphs (d)(4) and (5) and (e), and change references in this section to the “Securities and Corporate Practices Division” to “Bank Advisory” to reflect the reorganization of the OCC's Law Department.

19.121 Disciplinary Proceedings Involving the Federal Securities Laws

The proposed rule would move the provisions in subpart E of part 19 to a new § 19.121. Current subpart E governs proceedings by the Comptroller to determine whether to take disciplinary actions against banks that are transfer agents, municipal securities dealers, government securities brokers, government securities dealers, or persons associated with or seeking to become associated with these institutions.

The proposal would apply this section to Federal savings associations by defining “bank” to mean a national bank or Federal savings association, and, when referring to a government securities broker or government securities dealer, a Federal branch or agency of a foreign bank. In addition, the proposed rule would define “transfer agent,” “municipal securities dealer,” “government securities broker,” “government securities dealer,” and person associated with a person engaged in these activities or with a bank engaged in these activities by cross-referencing to definitions in the Exchange Act. The proposal also makes conforming changes to these defined terms throughout the section. The OCC also is proposing technical changes to terms used in this section to correlate them more closely with terms used in the Exchange Act, including the addition to the scope of § 19.121 of any person seeking to become associated with a government securities broker or government securities dealer. Furthermore, the OCC proposes to remove the reference to the Comptroller's delegate in redesignated paragraph (a)(2). The definition of “Comptroller” in § 19.3, which applies to § 19.121, includes a person delegated to perform the functions of the Comptroller of the Currency. Therefore, this reference is unnecessary. Lastly, the OCC proposes a clarifying change to replace the term “party” with the more accurate term “respondent” in redesignated paragraphs (b)(1) and (c)(2).

Pursuant to sections 3(a)(34)(G)(i) and 15C(c)(2)(A) of the Exchange Act (15 U.S.C. 78c(a)(34)(G)(i) and 78o-5(c)(2)(A), the OCC also may take disciplinary actions against Federal branches and agencies of foreign banks that are government securities brokers or government securities dealers or persons associated with or seeking to become associated with these entities.

19.122 Civil Money Penalty Authority Under Federal Securities Laws

The proposed rule would move the provisions in subpart F of part 19 to a new § 19.122. Current subpart F governs proceedings by the Comptroller to determine whether to impose a civil money penalty against banks that are transfer agents, municipal securities dealers, government securities brokers, government securities dealers, or persons associated with or seeking to become associated with these institutions.

As with proposed § 19.121, the proposed rule would apply this provision to Federal savings associations by defining “bank” to mean a national bank or Federal savings association and, when referring to a government securities broker or government securities dealer, a Federal branch or agency of a foreign bank. The OCC also proposes to define “transfer agent,” “municipal securities dealer,” “government securities broker,” “government securities dealer,” and person engaged in these activities or person associated with a bank engaged in these activities by cross-referencing to definitions in the Exchange Act. Lastly, as with proposed § 19.121, the OCC has made other technical changes to terms used in this section to correlate them more closely with terms used in the Exchange Act, including the addition of persons seeking to become associated with a government securities broker or government securities dealer to the scope of this section.

Id.

19.123 Cease and Desist Authority Under Federal Securities Laws

The proposed rule would move the provisions in subpart G of part 19 to a new § 19.123. Current subpart G governs proceedings by the Comptroller to determine whether to initiate cease-and-desist proceedings against a national bank for violations of sections 12, 13, 14(a), 14(c), 14(d), 14(f), and 16 of the Exchange Act (15 U.S.C. 78

78m, 78n(a), 78n(c), 78n(d), 78n(f), and 78p) or implementing regulations. The proposed rule would apply this provision to both national banks and Federal savings associations. It also would update this provision by adding violations enacted by, or rules or regulations enacted thereunder, the Sarbanes-Oxley Act in 2002, as amended,

specifically sections 301

(audit committees), 302 (corporate responsibility for financial reports), 303 (improper influence on conduct of audits), 304 (forfeiture of certain

bonuses and profits), 306 (insider trades during pension fund blackout periods), 401(b) (accuracy of financial reports), 404 (management assessment of internal controls), 406 (code of ethics for senior financial officers), and 407 (disclosure of audit committee financial expert)

(15 U.S.C. 78j-1(m), 7241, 7242, 7243, 7244, 7261, 7262, 7264, and 7265).

Public Law 107-204, 116 Stat. 745 (2002).

Adding section 10A(m) to the Exchange Act.

15 U.S.C. 78j-1(m), 7241, 7242, 7243, 7244, 7261, 7262, 7264, and 7265.

Subpart H—Change in Bank Control

The Change in Bank Control Act (CBCA), which added section 7(j) to the FDIA (12 U.S.C. 1817(j)) and which the OCC has implemented at 12 CFR 5.50, provides that no person may acquire control of an insured depository institution unless the appropriate Federal bank regulatory agency has been given prior written notice of the proposed acquisition. If, after investigating and soliciting comment on the proposed acquisition, the agency disapproves the acquisition, the agency must mail a written notification to the filer within three days of the decision. The filer may then request an agency hearing on the proposed acquisition within 10 days of receipt of the disapproval notice. The Uniform Rules in part 19, subpart A, and part 109, subpart A, apply to hearings for filers whose proposed acquisition of a national bank or Federal savings association, respectively, under the CBCA has been disapproved by the OCC. Subpart H of part 19 provides additional hearing procedures for insured national banks. Section 5.50, which applies to both national banks and Federal savings associations, directs filers who wish to pursue a hearing for a disapproval decision to part 19, subpart H. However, subpart H refers only to national banks.

Because 12 CFR 5.50 applies to both national banks and Federal savings associations, the proposed rule would amend subpart H by adding language that would make it specifically applicable to Federal savings associations in addition to national banks. Furthermore, because 12 CFR 5.50 applies to both

insured and uninsured

institutions and refers all filers who have been disapproved under § 5.50 to the part 19 procedures, the proposed rule would amend subpart H to make it also applicable to uninsured institutions. In addition, the proposed rule would streamline subpart H by removing a description of the CBCA disapproval process and instead cross-referencing to 12 CFR 5.50 in the scope of § 19.160 and removing current paragraph (a) in § 19.161, which contains provisions relating to disapproval notification that are duplicative of 12 CFR 5.50(f). The proposal also would add section headings to § 19.160 and revise the section heading in § 19.161.

Subpart I—Discovery Depositions and Subpoenas

Subpart I of part 19 and § 109.102 address the rules applicable to discovery depositions and subpoenas relating to national banks and Federal savings associations, respectively. These provisions are substantively similar but have slightly different wording. The proposed rule would apply part 19, subpart I to Federal savings associations and remove § 109.102. The OCC also proposes further changes to subpart I. In § 19.170(a) and (d), the proposal revises the phrase “direct knowledge of matters that are non-privileged, relevant, and material to the proceeding” to “direct knowledge of matters that are non-privileged and of material relevance to the proceeding.” This change would clarify that persons being deposed have information of material relevance to the proceeding and would be consistent with the requirements for document discovery in current and proposed § 19.24(b). Furthermore, the proposal would amend paragraph (a) to specify that a party also may take a deposition of a hybrid fact-expert witness in addition to an expert and a person, including another party, who has direct knowledge of matters that meet the standards of the paragraph, labeled as a “fact witness” by this amendment. This amendment would define a hybrid fact-expert witness as a fact witness who also will provide relevant expert opinion testimony based on the witness's training and experience.

The proposal also adds a new paragraph (a)(1) to § 19.170 to require a party to produce an expert report for any testifying expert or hybrid fact-expert witness before the witness's deposition and that, unless otherwise provided by the ALJ, the party must produce such report at least 20 days prior to the deposition. This new provision would ensure that a deposing party has the benefit of the expert report prior to the deposition of an expert or hybrid fact-expert witness and that the deposing party has sufficient time to review the report prior to the deposition. Furthermore, new paragraph (a)(2) of § 19.170 would provide that respondents, collectively, are limited to a combined total of five depositions from all fact witnesses and hybrid fact-expert witnesses. This paragraph also would provide that Enforcement Counsel has the same deposition limit. This limit in the number of depositions would add efficiencies to the discovery process and prevent deposition requests from delaying the completion of the proceeding. Lastly, proposed § 19.170(a)(2) provides that a party is entitled to take a deposition of each expert witness designated by an opposing party. This provision would codify the right of a party to depose the opposing party's designated expert witness.

The proposal would amend § 19.170(b) to require that a deposition notice provide the manner for taking the deposition in addition to the time and place. In addition, the proposal would add language to § 19.170(b) to indicate that a deposition notice may require the witness to be deposed at any place within a State, territory, or possession of the United States or the District of Columbia in which that witness resides or has a regular place of employment or such other convenient place as agreed by the noticing party and the witness. Paragraph (b) also would permit the parties to stipulate, or the ALJ to order, that a deposition be taken by telephone or other remote means. The OCC believes these changes would make it easier and perhaps less costly for parties to obtain, and witnesses to provide, depositions, thereby improving the fact-finding process.

In § 19.170(c), the proposal would provide that a party may take depositions no later than 20 days before the scheduled hearing date, instead of 10 days as in the current rule, except with permission of the ALJ for good cause shown. Increasing this time before a hearing will allow all parties more time to prepare for the hearing.

As elsewhere in this proposal, the OCC proposes to amend § 19.170(d), Conduct of a deposition, to provide that, by stipulation of the parties or by order of the ALJ, a court reporter or other authorized person may administer the required oath to a deponent remotely without being in the physical presence of the deponent. This amendment would update the current oath requirement for witnesses to account for remote proceedings and conform this provision to § 19.170(b)(ii), which allows depositions to be taken by telephone or other remote means.

The proposal would update § 19.170(e)(1)(i) to allow for the witness's testimony to be recorded by electronic means such as by a video recording device. The current rule only allows for recording by a stenotype machine and electronic sound recording device. The proposed change would update the rule to reflect new

technology and add flexibility to the testimony process.

Lastly, the proposal would make a non-substantive change to the heading in paragraph (a) and change the heading of paragraph (g) from “Fees” to “Expenses” to more accurately describe the subject of the paragraph.

With respect to § 19.171, the proposal would amend paragraph (a) to correct a cross-reference and conform the reference to a place located in the United States to that used elsewhere in part 19. The proposal also would amend paragraph (b)(2), which requires the party serving a subpoena to file proof of service with the ALJ, to provide that this proof of service is not required if so ordered by the ALJ. The OCC is proposing this change because, in some OCC proceedings, the ALJ indicated they did not wish to receive this proof of service. Finally, the proposal would amend paragraph (c) to provide that any party, in addition to a person named in a subpoena, may file a motion to quash or modify the subpoena. This amendment would ensure that a party has the right to seek to quash or modify a third-party deposition subpoena.

Subpart J—Formal Investigations

Subpart J of part 19 and part 112 address formal investigations against national banks and Federal savings associations, respectively. The proposed rule would amend subpart J to make it applicable to both national banks and Federal savings associations and remove part 112. Unlike the Federal savings association rule at § 112.7(b), subpart J does not include a provision specifically providing for motions to quash subpoenas. The OCC has determined that it is neither necessary nor appropriate to include this provision because the recipient may challenge investigative subpoenas in Federal court. However, the proposal would add a new paragraph (c) to § 19.184 of subpart J that is similar to the Federal savings association rule at § 112.7(c). This new paragraph would permit subpoenas that require the attendance and testimony of witnesses or the production of documents, including electronically stored information, to be served on any person or entity within any State, territory, or possession of the United States or the District of Columbia or as otherwise provided by law. This proposed provision also would subject foreign nationals to subpoenas if service is made upon a duly authorized agent located in the United States or in accordance with international requirements for service of subpoenas. The existing rule for national banks is not clear on service of foreign nationals, and the adoption of specific language from the Federal savings association rule should eliminate the disputes that previously have arisen on this issue. Furthermore, the addition of language regarding international subpoena requirements would codify existing OCC practice.

The OCC also proposes further changes to subpart J. First, the OCC is proposing to amend § 19.181, Confidentiality of formal investigations. Currently, this provision provides that information or documents obtained in the course of a formal investigation are confidential and may be disclosed only in accordance with the provisions of 12 CFR part 4. The OCC proposes to describe in more detail the information or documents that are confidential to better ensure the confidentiality of formal investigations. Specifically, proposed § 19.181 would state that the entire record of any formal investigative proceeding, including the resolution or order of the Comptroller authorizing or terminating the proceeding; all subpoenas issued by the OCC during the investigation; and all information, documents, and transcripts obtained by the OCC in the course of a formal investigation, are confidential and may be disclosed only in accordance with the provisions of part 4. The proposal also would add that this information may be disclosed pursuant to the OCC discovery obligations under subpart A of part 19.

Second, the OCC proposes to amend § 19.182, Order to conduct a formal investigation, to clarify the list of actions persons authorized to conduct an investigation may take. Currently, this section provides that these persons may, among other things, issue subpoenas

duces tecum,

administer oaths, and receive affirmations as to any matter under investigation by the Comptroller. The proposal would add that these authorized persons also may take or cause to be taken testimony under oath, issue subpoenas other than subpoenas

duces tecum,

and modify subpoenas. This amendment would make this section more consistent with the powers enumerated in the relevant underlying statutes, including 12 U.S.C. 1818(n) and 1820(c). The proposal also would make a technical correction to indicate that authorized persons may administer affirmations rather than receive affirmations. Section 19.182 also currently provides that, upon application and for good cause, the Comptroller may limit, modify, or withdraw the order at any stage of the proceedings. The proposal would clarify that the Comptroller may also terminate the order. Finally, the proposal would amend § 19.182 to specifically indicate that the persons conducting the investigation are empowered by the Comptroller to do so.

Third, the proposed rule would amend § 19.183, Rights of witnesses. Current paragraph (a) provides that any person who is compelled or requested to furnish testimony, documentary evidence, or other information with respect to any matter under formal investigation must, on request, be shown the order initiating the investigation. The proposal would amend this provision to provide that such persons may not retain copies of the order without first receiving written approval of the OCC. This amendment would ensure the confidentiality of the order.

Current paragraph (b) of § 19.183 provides that a person testifying in a formal investigation may be accompanied, represented, and advised by counsel, and indicates that this right to counsel means that the attorney may be present at all times while the person is testifying and that the attorney may, among other things, question the person briefly at the conclusion of the testimony to clarify answers and make summary notes during the testimony solely for use of the person testifying. The proposal would amend this description of permissible attorney activities to provide that the attorney's questioning of the person may be on the record. This change would ensure a more complete formal record of the proceeding. In addition, the proposal would provide that the notes taken by the attorney during testimony may be used solely in representing the person. This change would allow the attorney to use these notes and not restrict use of the notes to the person testifying thereby enabling the attorney to better represent their client.

Current paragraph (c) of § 19.183 provides that any person who has given or will give testimony and counsel representing the person may be excluded from the proceedings during the taking of testimony of any other witness. The proposal would amend this provision to specify that such person and counsel may be excluded during the testimony of any other person at the discretion of the OCC or the OCC's designated representative. Furthermore, the proposal would provide that neither attorney(s) for the institution(s) affiliated with the testifying person nor attorneys for any other interested persons have any right to be present during the testimony of any person not personally represented by such attorney. These changes would ensure the confidentiality and integrity

of the proceeding by mitigating conflicts of interest and clarify that it is the OCC or OCC's designated representative who makes the decision on exclusion.

Current paragraph (d) of § 19.183 provides that any person who is compelled to give testimony is entitled to inspect any transcript that has been made of the testimony but may not obtain a copy if the Comptroller's representatives conducting the proceedings have cause to believe that the contents should not be disclosed pending completion of the investigation. The proposal would remove the burden of proving “cause” included in this provision, as the OCC finds this unnecessary. The proposal also would eliminate the language that limits the release of the transcript pending completion of the investigation because the reasons for not disclosing the transcript may persist beyond the conclusion of any pending investigation.

Paragraph (e) of § 19.183 provides that any designated representative conducting an investigative proceeding must report to the Comptroller any instances where a person has been guilty of dilatory, obstructionist, or insubordinate conduct during the course of the proceeding or any other instance involving a violation of this part. As this paragraph does not pertain to rights of witnesses, and to make clear that this provision applies to all formal investigations covered by subpart J, the OCC proposes to redesignate this paragraph as a new § 19.185. In redesignated § 19.185, the OCC proposes replacing the phrase “has been guilty of” with “has engaged in.” The phrase “has been guilty of” is unclear in the context of this rule. Furthermore, the OCC does not believe it is appropriate for a person to be found guilty of this behavior before the designated representative reports this person to the OCC. With this change, the OCC may investigate or take other action with respect to this individual to ensure the fairness and accuracy of the proceeding in a more timely manner. This change also conforms the scope of this provision with the scope of a similar provision, § 19.197, which involves the reporting of certain conduct of an individual practicing before the OCC.

Fourth, the proposal would amend § 19.184, Service of subpoena and payment of witness expenses, by removing the specific language in paragraph (b) regarding the payment of witnesses and instead cross-reference to the more detailed rule for witness payments contained in revised § 19.14, discussed previously.

Lastly, the OCC proposes technical changes to subpart J. The proposal would replace references to “the Comptroller” with “the OCC” in § 19.183(b) and (d) and in redesignated § 19.185 and replace the term “representatives” with “designated representatives” in § 19.183(d)” to align the provisions more closely with the statute. The proposal also would remove the references to the “Comptroller's delegate” in §§ 19.180 and 19.182 as the definition of “Comptroller” in § 19.3, which applies to subpart J, includes a person delegated to perform the functions of the Comptroller of the Currency. In addition, the proposal would add reference to Federal branches and agencies in § 19.180 to more completely describe those entities that are subject to the OCC's examination authority. Finally, the proposal would add section headings to § 19.183.

Subpart K—Parties and Representational Practice Before the OCC; Standards of Conduct

Subpart K of part 19 contains rules relating to parties and representational practice before the OCC. The OCC is proposing mostly technical changes to this subpart.

First, in § 19.190, Scope, the proposal would make a confirming change to a cross-reference to reflect this rulemaking's proposed amendments to subpart D.

Second, the proposal would amend the definition of “practice before the OCC” in paragraph (a) of § 19.191, Definitions. Currently, the OCC defines the term to include any matters connected with presentations to the OCC or any of its officers or employees relating to a client's rights, privileges, or liabilities under laws or regulations administered by the OCC. The proposed rule would clarify this statement so that it applies to both written and oral presentations. Section 19.191(a) also provides that the term “practice before the OCC” does not include work prepared for a bank solely at its request for use in the ordinary course of its business. The proposal would amend this statement so that it also includes work prepared for a Federal savings association and a Federal branch or agency of a foreign bank, and change “bank” to “national bank.” These changes are part of the OCC's application of part 19 to Federal savings associations and the OCC's specific inclusion of Federal branches and agencies in part 19 to clarify the application of part 19 to all entities supervised by the OCC.

Third, the proposal would amend § 19.194, Eligibility of attorneys and accountants to practice, by removing the phrase “who is qualified to practice as an attorney” in paragraph (a) and the phrase “who is qualified to practice as a certified public accountant or public accountant” in paragraph (b). Section 19.191 defines the terms “attorney” and “accountant” and these definitions reference qualification requirements. Therefore, these phrases are superfluous.

Fourth, the proposal would amend § 19.196, Disreputable conduct, which provides a nonexclusive list of disreputable conduct for which an individual may be censured, debarred, or suspended from practice before the OCC. Paragraph (d) of this section includes on this list disbarment or suspension from practice as an attorney or as a certified public accountant or public accountant by any duly constituted authority of any State, possession, or commonwealth of the United States or the District of Columbia for the conviction of a felony or misdemeanor involving moral turpitude in matters relating to the supervisory responsibilities of the OCC, where the conviction has not been reversed on appeal. The proposed rule would delete the phrase “in matters relating to the supervisory responsibilities of the OCC” so as not to limit the felony or misdemeanor conviction to only OCC-related matters. The OCC believes that an individual engaged in any of the conduct listed in this section, whether or not related to OCC supervisory matters, should not practice before the OCC.

Fifth, the proposal would replace the reference to the OTS in § 19.196(g) with “the former OTS,” as the OTS no longer exists.

Sixth, the proposal would amend § 19.197, which provides the standards and rules for initiating disciplinary proceedings. Paragraph (a) of this section provides that an individual, including any employee of the OCC, who has reason to believe that an individual practicing before the OCC in a representative capacity has engaged in any conduct that would serve as a basis for censure, suspension, or debarment under § 19.192 (such as contemptuous conduct, materially injuring or prejudicing another party, violating a law or order, or unduly delaying proceedings) may report this conduct to the OCC or a person delegated to receive this information by the Comptroller. The OCC is proposing to broaden the application of this paragraph to conduct under all of subpart K, which includes incompetence (§ 19.195) and

disreputable conduct (§ 19.196), instead of conduct only under § 19.192. The OCC believes that an individual found to be incompetent or to have engaged in disreputable conduct also should be subject to a disciplinary proceeding under this section.

Seventh, the proposal would amend § 19.198, Conferences, to add the terms “censure” in paragraph (a) and “debarment” in paragraph (b) to correct missing references. The proposal also would change the heading on § 19.198(b) from “Resignation or voluntary suspension” to “Voluntary suspension or debarment” so that it more accurately reflects the subject of the paragraph.

Eighth, the proposal would amend paragraph (a) of § 19.200, which provides that if the final order against the respondent is for debarment, the individual may not practice before the OCC unless otherwise permitted to do so by the Comptroller, by clarifying that the Comptroller's permission to permit such practice is pursuant to § 19.201. Section 19.201 provides that the Comptroller may entertain a petition for reinstatement after the expiration of the time period designated in the order of debarment and that the Comptroller may grant reinstatement only if satisfied that the petitioner is likely to act in accordance with part 19 and if granting reinstatement would not be contrary to the public interest. Section 19.201 further provides that any request for reinstatement is limited to written submissions unless the Comptroller, in their discretion, affords the petitioner a hearing. The amendment merely confirms that a debarred respondent only may be reinstated pursuant to the process set forth in § 19.201. It makes no substantive change. The proposal also would revise the heading of § 19.200 to reflect the order of topics covered by the section.

Ninth, the proposal would remove the references to the “Comptroller's delegate” in §§ 19.197(b) and (c), 19.199, and 19.200(d) as the definition of “Comptroller” in § 19.3, which applies to subpart K, includes a person delegated to perform the functions of the Comptroller of the Currency.

Finally, the proposal would make several minor, nonsubstantive wording changes throughout subpart K.

Subpart L—Equal Access to Justice Act

In general, EAJA,

codified at 5 U.S.C. 504, authorizes the payment of attorney's fees and other expenses to eligible parties who prevail over the United States in certain adversary adjudications, absent a showing by the government that its position was substantially justified or that special circumstances make an EAJA award unjust. EAJA requires each agency to issue rules that establish uniform procedures for the submission and consideration of applications for an EAJA award.

The OCC currently meets this requirement in subpart L of part 19, which provides that EAJA implementing regulation promulgated by the U.S. Department of the Treasury (Treasury), set forth at 31 CFR part 6, are applicable to formal adjudicatory proceedings under part 19. The OCC is proposing to delete the cross-reference to the Treasury regulation and amend subpart L to set forth EAJA regulations specifically applicable to certain OCC adversary adjudications conducted under part 19.

Public Law 96-481, title II, sec. 203(a)(1), (c) (1980), revived and amended Public Law 99-80, sec. 1, 6 (1985).

5 U.S.C. 504(c)(1). EAJA also requires that each agency issue its EAJA rule after consultation with the Chairman of ACUS. 5 U.S.C. 504(c)(1). Pursuant to instructions provided by ACUS in the preamble to the Model Rule, the OCC will notify the Office of the Chairman of ACUS of the proposed rule and will consider any comments provided by ACUS when drafting a final rule.

See

84 FR 38934.

The OCC has based proposed subpart L on the revised model rule implementing EAJA published in 2019 by the Administrative Conference of the United States (ACUS) (Model Rule).

As discussed below, the OCC has customized the proposed rule in certain places to reflect the OCC's procedures in adversary adjudications, reorganized a few provisions included in the Model Rule, made other changes based on the Treasury EAJA rule as well as the EAJA rules of the Board and FDIC

and made non-substantive grammatical or stylistic changes. Although the Treasury, Board, and FDIC EAJA rules are based on earlier versions of the ACUS model rule, the OCC believes that these provisions remain useful and clarify the application of EAJA to OCC adversary proceedings.

84 FR 38934 (Aug. 18, 2019). ACUS originally issued an EAJA model rule in 1981 (46 FR 32900 (June 25, 1981)) and previously revised its model rule in 1986 (51 FR 16659 (May 6, 1986) (previously codified at 1 CFR 315)). ACUS issued its model rule to assist agencies when adopting their EAJA rules and encourages agencies to set out and implement this model rule as part of their own EAJA rules.

Id.

The Treasury EAJA rule is based on the 1981 EAJA model rule.

12 CFR 263, subpart G (Board) and 12 CFR 308, subpart P (FDIC). Both the Board and FDIC EAJA rules are based on the earlier versions of the ACUS model rule.

Authority and scope; waiver.

Proposed § 19.205 describes the general purpose and scope of EAJA. Specifically, an eligible party may receive an award of attorney fees and other expenses when it prevails over an agency in certain administrative proceedings (adversary adjudications) unless the agency's position was substantially justified or special circumstances make an award unjust. Furthermore, as provided in the Treasury regulations, and as determined by EAJA caselaw, this proposed provision provides that no presumption under this subpart arises that the agency's position was not substantially justified because the agency did not prevail.

See

31 CFR 6.5.

See also

5 U.S.C. 504(a)(2).

31 CFR 6.8(d).

Although not included in EAJA or the Model Rule, proposed § 19.207(c) provides that, upon receipt of an EAJA application, the OCC will to the extent feasible refer the matter to the official who heard the underlying adversary adjudication. The OCC is proposing this provision because it believes that the official presiding over the adversary proceeding subject to the EAJA application is in the best position to review the EAJA application, and that this referral directive should be included in the proposed rule for clarity.

Net worth exhibit.

Proposed § 19.208 requires specific net worth documentation to accompany certain EAJA applications. This documentation is necessary to determine whether the applicant meets the definition of “party” under proposed § 19.206(c) and therefore be eligible for an EAJA award. Paragraph (a) would require an applicant, other than an applicant that is a non-profit or a cooperative association, to provide with its EAJA application a detailed exhibit of the applicant's, and where applicable, any of its affiliates' net worth at the time the adversary adjudication was initiated. Unless otherwise required, this paragraph would permit this exhibit to be in any form convenient to the applicant that provides full disclosure of the applicant's and affiliates' assets and liabilities sufficient to determine whether the applicant qualifies under

the standards of this subpart. Furthermore, this paragraph would permit a presiding officer to require an applicant to file additional information to determine its eligibility for an award. These net worth exhibit requirements are taken from § 3.02 of the Model Rule, except that the proposal would require the net worth information from affiliates, where appropriate. Because of the structure and interrelatedness of many financial institutions, the OCC believes that affiliate net worth will often prove relevant when determining eligibility for an EAJA award. The OCC notes that the EAJA rules issued by Treasury, the Board, and the FDIC require net worth information from affiliates to determine eligibility under EAJA.

See

31 CFR 6.4(f) (Treasury); 12 CFR part 263.105 (Board); and 12 CFR part 308.177 (FDIC).

Proposed § 19.208 also includes further provisions included in the Board's and the FDIC's EAJA regulation but not included in the Model Rule.

These provisions provide more detailed information as to what the OCC will accept in satisfaction of the net worth exhibit requirement or pertain specifically to national banks and Federal savings associations. Specifically, paragraph (a)(1) would permit the use of unaudited financial statements for individual applicants as well as certain financial statements or reports submitted to a Federal or State agency for determining individual net worth, unless the presiding officer or the OCC otherwise requires. For applicants or affiliates that are not banks or savings associations, paragraph (a)(2) provides that net worth will be considered to be the excess of total assets over total liabilities as of the date the underlying proceeding was initiated. For banks and savings associations, paragraph (a)(3) would require the submission of a Consolidated Report of Condition and Income (Call Report) and would provide that net worth would be the total equity capital as reported in the Call Report filed for the last reporting date before the initiation of the proceeding.

Id.

Similar to § 3.02 of the model rule, paragraph (b) would provide that the net worth exhibit will be included in the public record of the proceeding unless an applicant believes that there are legal grounds for withholding it from disclosure and requests that the documents be filed under seal or otherwise treated as confidential.

Documentation of fees and expenses.

As provided in the § 3.03 of the Model Rule, proposed § 19.209 would require applications to be accompanied by adequate documentation of the fees and other expenses incurred after initiation of the adversary adjudication. This information is necessary to determine any EAJA award. Specifically, this section would require a separate itemized statement for each professional firm or individual whose services are covered by the application showing the hours spent in connection with the proceeding by each individual, a description of the specific services provided, the rate at which each fee has been computed, any expenses for which reimbursement is sought, the total amount claimed, and the total amount paid or payable by the applicant or by any other person or entity for the services provided. This section also would authorize a presiding officer to require an applicant to provide vouchers, receipts, or other substantiation for any fees or expenses claimed.

Unlike the Model Rule, this provision also provides that an application seeking an increase in fees to account for inflation pursuant to proposed § 19.215(d)(1)(i), discussed below, also must include adequate documentation of the change in the consumer price index for the attorney or agent's locality.

Filing and service of documents.

As in § 4.01 of the Model Rule, proposed § 19.210 requires that applications for an award, or any accompanying documentation related to an application, be filed and served on all parties to the proceeding in accordance with § 19.11, Service of papers, except for confidential information pursuant to proposed § 19.208(b).

Answer to application.

As provided in § 4.02 of the Model Rule, proposed § 19.211 provides that Enforcement Counsel may file an answer to an EAJA application within 30 days after service of the application except in cases involving settlement negotiations under proposed § 19.213. This section would provide that failure to file an answer within 30 days may be treated as consent to the award requested unless Enforcement Counsel requests an extension of time for filing or files a statement of intent to negotiate a settlement under proposed § 19.213. This section would require the answer to explain in detail any objections to the award requested and identify the facts supporting Enforcement Counsel's position. For any facts not already in the record of the proceeding, Enforcement Counsel would be required to provide supporting affidavits or a request for further proceedings under proposed § 19.214 with the answer. Unlike the Model Rule, proposed § 19.211 does not include information related to settlement negotiations and instead cross-references to § 19.213, which discusses settlement of an EAJA award. The OCC believes that, for ease of use, all settlement provisions should be included in the same section of the regulation.

Reply.

As in § 4.03 of the Model Rule, proposed § 19.212 would permit an applicant to reply within 15 days after service of an answer. For facts not already in the record, the applicant would be required to provide supporting affidavits or a request for further proceedings pursuant to § 19.214 with the answer.

Settlement.

As in § 4.04 of the Model Rule, proposed § 19.213 would provide that the applicant and Enforcement Counsel may agree to a proposed settlement before final action on the application, either in connection with a settlement of the underlying proceeding or after conclusion of an underlying proceeding, in accordance with the OCC's standard settlement procedure pursuant to § 19.15, Opportunity for informal settlement. In a case where a prevailing party and Enforcement Counsel agree on a proposed settlement of an award before an EAJA application has been filed, this section would require the application to be filed with the proposed settlement. Proposed § 19.213 also would clarify that, if a proposed settlement of an underlying proceeding provides for each side to pay its own expenses and the settlement is accepted, no application under this subpart may be filed. However, this section differs from § 4.04 of the Model Rule by including a provision the Model Rule includes in its section relating to an answer to an application, § 4.02. Specifically, proposed § 19.213 would specify that, if after an application is submitted, Enforcement Counsel and the applicant believe that they can reach a settlement, they may file a joint statement of their intent to negotiate a settlement. Filing this statement would extend the time for filing an answer under proposed § 19.211 for an additional 30 days. Further extensions could be granted by the presiding officer at the joint request of the applicant and Enforcement Counsel. As indicated above, the OCC believes that this provision is better placed in § 19.213 so that all settlement information is included in the same section of the regulation.

Further Proceedings.

Ordinarily, the determination of an EAJA award would be made on the basis of the written record. However, proposed § 19.214(a) would permit an applicant or Enforcement Counsel to request the

filing of additional written submissions, an informal conference, oral argument, discovery, or an evidentiary hearing with respect to issues other than whether the OCC's position was substantially justified, such as issues involving the applicant's eligibility or substantiation of fees or expenses. The presiding officer may permit these further proceedings if necessary for a full and fair decision on the application. The presiding officer also may order these additional proceedings on its own initiative. In addition, paragraph (a) would require that further proceedings be held as promptly as possible so as not to delay resolution of the EAJA application. The proposed rule lists applicant eligibility or substantiation of fees and expenses as examples of permissible issues for further proceedings. Paragraph (a) is based on § 4.05 of the Model Rule. However, proposed § 19.214 does not contain the Model Rule's statement regarding the basis for a decision on whether the OCC's position was substantially justified. The OCC believes it is more appropriate to include this statement in § 19.215, Decisions. In addition, to list all possible further proceedings available more completely, the proposed rule also permits the applicant or Enforcement Counsel to request an informal conference, which is not listed in the Model Rule.

As in § 4.05 of the Model Rule, paragraph (b) of proposed § 19.214 would require that any request for further proceedings specifically identify the information sought or any disputed issues and explain why additional proceedings are necessary to resolve the issues.

Decision.

The OCC's proposed section on EAJA decisions, § 19.215, is based on 5 U.S.C. 504(a)(3) and in part on § 4.06 of the Model Rule. Proposed paragraph (a) of § 19.215 provides that a presiding officer must base its decision on whether the position of the OCC was substantially justified on the administrative record as a whole of the adversary adjudication for which fees and other expenses are sought. The Model Rule includes this provision in its section on further proceedings, § 19.214. However, the OCC believes this requirement better belongs in the section of the rule outlining EAJA decisions because it provides parameters for the presiding officer's decision.

As in § 4.06 of the Model Rule, proposed paragraph (b) of § 19.215 would mandate the timing of the presiding officer's decisions. It would require the presiding officer to issue a recommended decision in writing on an EAJA application within 90 days after the time for filing a reply or within 90 days of the completion of further proceedings held pursuant to proposed § 19.214.

The Model Rule provides that an agency may determine the specific time period for this section.

Also, as in § 4.06 of the Model Rule, proposed paragraph (c) of § 19.215 provides that a decision must include written findings and conclusions on an applicant's eligibility and status as a prevailing party. The decision must also include, if applicable, an explanation of the reasons for any difference between the amount requested and the amount awarded, findings on whether the OCC's position was substantially justified, whether the applicant unduly and unreasonably protracted the proceedings, or whether special circumstances would make an award unjust. Paragraph (c) differs from § 4.06 of the Model Rule in that it includes language taken from § 4.05 of the Model Rule. Specifically, paragraph (c) provides that the presiding officer must determine whether or not the position of the OCC was substantially justified on the basis of the administrative record as a whole of the adversary adjudication for which fees and other expenses are sought.

Proposed paragraph (d) of § 19.215 would provide the requirements for EAJA decisions. Paragraphs (d)(1), (2) and (3) of proposed § 19.215 are not included in the Model Rule but are based on the EAJA statute, provisions included in the FDIC and Board EAJA rules,

and provisions included in the prior ACUS model rule that ACUS determined were largely substantive matters beyond the Conference's statutory charge.

The OCC believes that these provisions provide important details on the basis for EAJA award amounts that should apply to all EAJA applications and be included in its EAJA regulation.

12 CFR 263.106, 308.175.

See

84 FR 38934.

Specifically, proposed § 19.215(d)(1) provides that EAJA awards may include the reasonable expenses of expert witnesses; the reasonable cost of any study, analysis, report, test, or project; and reasonable attorney or agent fees incurred after initiation of the adversary adjudication subject to the EAJA application. This paragraph also provides that the presiding officer will base awards on prevailing market rates for the kind and quality of the services furnished, even if the services were provided without charge or at reduced rate to the applicant. However, no award for the fee of an attorney or agent under this subpart may exceed the hourly rate specified in EAJA (5 U.S.C. 504(b)(1)(A)) except, as permitted by EAJA, to account for inflation as requested by the applicant and documented in the EAJA application or if a special factor, such as the limited availability of qualified attorneys or agents for the proceedings involved, justifies a higher fee.

Pursuant to EAJA, this paragraph also would prohibit an award for expert witness fees that exceed the highest rate paid for expert witnesses by the OCC.

5 U.S.C. 504(b)(1)(A).

Id.

Proposed § 19.215(d)(2) would provide factors the presiding officer should consider in determining the reasonableness of the attorney, agent, or expert witness fees. These factors are: (1) If in private practice, the attorney's, agent's, or witness's customary fee for similar services; (2) if an employee of the applicant, the fully allocated cost of the attorney's, agent's, or witness's services; (3) the prevailing rate for similar services in the community in which the attorney, agent, or witness ordinarily perform services; (4) the time actually spent in the representation of the applicant; (5) the time reasonably spent in light of the difficulty or complexity of the issues in the proceeding; and (6) any other factors as may bear on the value of the services provided.

Proposed § 19.215(d)(3) would provide parameters for the award of costs for any study, analysis, report, test, project, or similar matter. Specifically, the presiding officer may award the reasonable cost of these services prepared on behalf of the applicant to the extent that the charge for the service does not exceed the prevailing rate for similar services and the presiding officer finds that the service was necessary for preparation of the applicant's case.

As in § 4.06 of the Model Rule, proposed paragraph (d)(4) would permit a presiding officer to reduce the amount to be awarded or deny an award to the extent that the party during the proceedings engaged in conduct that unduly and unreasonably protracted final resolution of the matter in controversy. Unlike § 4.06 of the Model Rule, paragraph (d)(4) also would permit the presiding officer to reduce or deny the award if special circumstances would make the award sought unjust. This provision is included in 5 U.S.C. 504(a)(1) and in the Treasury rule

and is noted in the authority and scope section of this rule, proposed

§ 19.205(a). The OCC believes it would be helpful to include it in § 19.215 as this section is specifically related to the decision making of the presiding officer.

See

31 CFR 6.14.

Finally, proposed paragraph (e) of § 19.215 would provide that the Comptroller will issue a final decision on the EAJA application or remand the application to the presiding officer for further proceedings in accordance with § 19.40, Review by the Comptroller. This provision is not included in the Model Rule. However, the OCC believes for clarity and completeness that its proposed EAJA rule should specify the final agency action on the EAJA application, as delineated in part 19.

Agency review.

As in § 4.07 of the Model Rule, proposed § 19.216 allows an applicant or Enforcement Counsel to seek review of the presiding officer's decision on the EAJA application, in accordance with § 19.39, Exceptions to recommended decision. However, proposed § 19.216 does not include the provision in the Model Rule that permits the agency to review the decision on its own initiative. The OCC does not believe that this provision is necessary because the proposed rule includes a separate provision in § 19.215(d) that is not included in the Model rule that provides for a final decision on the EAJA application by the Comptroller or the Comptroller's remand of the application to the presiding officer for further proceedings.

Judicial review.

As provided by 5 U.S.C. 504(c)(2) and in § 4.08 of the Model Rule, proposed § 19.217 provides for judicial review of final OCC decisions on awards in accordance with 5 U.S.C. 504(c)(2).

Stay of decision concerning award.

As in § 4.09 of the Model Rule, proposed § 19.218 provides for an automatic stay of an EAJA proceeding until the OCC's final disposition of the decision on which the application is based and either the time period for judicial review has expired, or if judicial review is sought, final disposition is made by a court and no further judicial review is available.

Payment of award.

As in § 4.10 of the Model Rule, proposed § 19.219 provides that an applicant seeking payment of an award must submit to the OCC's Litigation Group a copy of the final decision granting the award accompanied by a certification that the applicant will not seek review of the decision in the United States courts. This proposed section also would provide that the OCC pay any amount owed to an applicant within 90 days.

Subpart M—Procedures for Reclassifying an Insured Depository Institution Based on Criteria Other Than Capital

Subpart M of part 19 and 12 CFR 165.8 set out procedures for reclassifying a national bank or Federal savings association, respectively, to a lower capital category based on criteria other than capital, pursuant to section 38 of the FDIA (12 U.S.C. 1831o) and the prompt corrective action rule, 12 CFR part 6. These procedures are substantively the same, and the proposed rule would amend subpart M to include Federal savings associations in addition to national banks and remove § 165.8. As this subpart currently also applies to insured Federal branches of foreign banks, the proposed rule would specifically include insured Federal branches in the scope section. Specifically, the proposal would replace the term “bank” each time it appears in subpart M with the term “insured depository institution,” and define this term to mean an insured national bank, an insured Federal savings association, an insured Federal savings bank, and an insured Federal branch of a foreign bank. The proposal also would replace the incorrect reference to subpart M with a reference to part 6 in § 19.220. In addition, the proposal would make a conforming change to § 19.221(b)(3) to replace the phrase “a written appeal of the proposed classification” with “a written response to the proposed reclassification,” which is the terminology used elsewhere in this section. Furthermore, as in proposed §§ 19.35, 19.112, and 19.120, the OCC proposes to add a new paragraph (3) to § 19.221(g) to provide rules governing electronic presentations in the course of a hearing. Specifically, this provision would provide that, based on the circumstances of each hearing, the presiding officer may direct the use of, or any party may elect to use, an electronic presentation during the hearing. If required by the presiding officer, each party would be responsible for its own presentation and related costs unless the parties agree otherwise. As indicated previously, this new language is necessary to account for the routine use of electronic presentations that current part 19 does not address. The OCC also proposes a conforming change in paragraph (g)(2) that would allow, by stipulation of the parties or by order of the presiding officer, a court reporter or other authorized person to administer the required oath to a witness remotely without being in the physical presence of the witness. Additionally, the proposal would revise the heading to subpart M to include insured depository institutions and to describe the subject of the subpart more accurately. Lastly, the proposal would make technical changes to 12 CFR 6.3, 6.4, and 6.5 to remove the separate references to § 165.8 with respect to savings associations.

Subpart N—Order To Dismiss a Director or Senior Executive Officer

Subpart N of part 19 and 12 CFR 165.9 set out procedures associated with an order to dismiss a director or senior executive officer of a national bank or Federal savings association, respectively, pursuant to an order issued under section 38 of the FDIA (12 U.S.C. 1831o) and, with respect to national banks, the prompt corrective action rule, 12 CFR part 6. Subpart N and § 165.9 are substantively the same, and the proposed rule would apply subpart N to Federal savings associations in addition to national banks and remove § 165.9. The proposal also would replace the term “bank” each time it appears in § 19.230 with the term “insured depository institution” and define the term based on section 3 of the FDIA (12 U.S.C. 1813(c)(2)) to mean an insured national bank, an insured Federal savings association, an insured Federal savings bank, or an insured Federal branch of a foreign bank.

The OCC also is proposing to amend paragraph (b) of § 19.231 This paragraph provides that a director or senior executive officer who has been served with a directive for dismissal has 10 calendar days to file a written request for reinstatement, unless the OCC allows further time as requested of the Respondent. The proposal would provide that failure by the Respondent to file this request within the specified time period will constitute a waiver of the opportunity to respond and consent to the dismissal. The OCC is proposing to add this statement to the rule to clarify the result of a failure to request reinstatement. The OCC also is proposing a stylistic revision to § 19.231(b) to remove passive sentence structure.

In addition, the proposal would amend § 19.231(c), which requires that the OCC issue an order directing an informal hearing to commence no later than 30 days after receipt of the request for a hearing unless the respondent requests a later date. The proposed amendment would provide that a later hearing date may occur only if permitted by the OCC, and, therefore, the request for an extension would not be automatically approved. This change would allow the OCC some discretion as

to how far into the future a hearing may take place.

The OCC also proposes to amend § 19.231(d) to provide rules governing electronic presentations in the course of a hearing. Specifically, this provision would provide that, based on the circumstances of each hearing, the presiding officer may direct the use of, or any party may elect to use, an electronic presentation during the hearing. If required by the presiding officer, each party would be responsible for its own presentation and related costs unless the parties agree otherwise. This new language is necessary to account for the routine use of electronic presentations that current part 19 does not address. The OCC also proposes a conforming change in § 19.231(d)(5) that would allow, by stipulation of the parties or by order of the presiding officer, a court reporter or other authorized person to administer the required oath to a witness remotely without being in the physical presence of the witness. The proposed rule also would make a clarifying change in paragraph (d)(1), Hearing procedures. Among other things, this paragraph provides that a Respondent has the right to introduce relevant written materials and to present oral argument. The proposal would clarify that these written materials and oral arguments would be made at the hearing. This clarification ensures that the Respondent is aware that this right is provided during the hearing and not outside of the hearing context. The proposed rule also would move the sentence regarding oral testimony and witnesses in paragraph (d)(1) to paragraph (d)(5) to better organize paragraph (d) and add paragraph headings.

Furthermore, the proposal would revise the heading of subpart N to describe the subject of the subpart more accurately.

Lastly, the proposal would make technical changes to 12 CFR 6.6 to remove the separate reference to § 165.9 with respect to Federal savings associations.

Because §§ 165.8 and 165.9 are the only sections in current part 165, the proposal would remove part 165 in its entirety.

Subpart O—Civil Money Penalty Inflation Adjustments

Subpart O of part 19 and § 109.103 provide the statutorily required formula to calculate inflation adjustments for civil money penalties assessed against national banks and savings associations, respectively. These sections also indicate that the OCC will publish, on or before January 15 of each calendar year, an annual notice in the

Federal Register

of the maximum penalties the OCC may assess. The OCC is proposing to retain subpart O and remove § 109.103. No amendments are necessary to apply subpart O to Federal savings associations. The proposal would amend the section heading to be more descriptive and make a stylistic revision in paragraph (a) to remove passive sentence structure.

Subpart Q—Forfeiture of Franchise for Money Laundering or Cash Transaction Reporting Offenses

Twelve U.S.C. 93(d)(1) requires the Comptroller, after receiving notification from the U.S. Attorney General of a conviction of a criminal offense under section 1956 or 1957 of title 18 (18 U.S.C. 1956, 1957) or under section 5322 or 5324 of title 31 (31 U.S.C. 5322, 5324), to issue to the convicted national bank or Federal branch or agency of foreign bank a notice of the Comptroller's intent to terminate all rights, privileges and franchises of the bank or Federal branch or agency and to schedule a pretermination hearing. The offenses include financial crimes, including money laundering (18 U.S.C. 1956), engaging in monetary transactions in criminally derived property (18 U.S.C. 1957), and structuring transactions to evade reporting requirements (31 U.S.C. 5324). Twelve U.S.C. 1464(w) imposes the same requirement with respect to convicted Federal savings associations.

Part 19 currently does not include specific procedures for a charter pretermination hearing. The OCC proposes adding a new subpart Q that sets forth APA compliant procedures for pretermination hearings, which will be conducted before a presiding officer appointed by the Comptroller. The proposed procedures are largely analogous to the deposit insurance termination hearing procedures instituted by the FDIC and NCUA for insured State depository institutions and Federally insured credit unions, respectively, that are convicted of the same offenses.

Specifically, proposed § 19.250 makes subpart A applicable, except as provided in new subpart Q, to proceedings by the Comptroller to determine whether, pursuant to 12 U.S.C. 93(d) or 12 U.S.C. 1464(w), as applicable, to terminate all rights, privileges, and franchises of a national bank, Federal savings association, or Federal branch or agency convicted of a criminal offense under 18 U.S.C. 1956 or 1957 or 31 U.S.C. 5322 or 5324.

Proposed § 19.251(a) provides that, after receiving written notification from the U.S. Attorney General of a conviction of a criminal offense under sections 18 U.S.C. 1956 or 1957 or 31 U.S.C. 5322 or 5324, the Comptroller will issue a written notice of intent to terminate all rights, privileges and franchises to the convicted national bank, Federal savings association, or Federal branch or agency and schedule a pretermination hearing. Proposed § 19.251(b) details the requisite contents of the notice and proposed § 19.251(c) provides that failure to answer the notice would be deemed consent to the termination and that the Comptroller may order the termination. The proposed notice of intent to terminate is similar to the notice in § 19.18 except that the subpart Q notice of intent would list the basis of termination pursuant to factors listed in proposed § 19.253 instead of the statement of matters of fact or law; the time within which to file an answer in response to the notice of intent will be established by the presiding officer instead of by law or regulation; and the answer must be filed with the OCC instead of with OFIA. Proposed § 19.251(d) provides that the OCC will serve the notice upon the national bank, Federal savings association, or Federal branch or agency in the manner set forth in § 19.11(c).

Proposed § 19.252 provides that the Comptroller will designate a presiding officer to conduct the pretermination hearing. The presiding officer would have the same powers set forth in § 19.5, including the discretion necessary to conduct the pretermination hearing in a manner that avoids unnecessary delay. Proposed § 19.252 also provides that the presiding officer may limit the use of discovery and limit opportunities to file written memoranda, briefs, affidavits, or other materials or documents to avoid relitigating facts already stipulated to by the parties, conceded to by the institution, or otherwise already firmly established by the underlying criminal conviction.

Proposed § 19.253 provides the factors the Comptroller will take into account when determining whether or not to terminate a franchise as set forth in 12 U.S.C. 93(d)(1)(C)(2) and 1464(w)(1)(C)(2). The factors are the extent to which directors or senior executive officials knew of or were involved in the criminal offense; the extent to which the offense occurred despite the existence of policies and procedures within the institution designed to prevent the occurrence of the offense; the extent to which the institution fully cooperated with law enforcement authorities regarding the

investigation of the offense; the extent to which the institution has implemented additional internal controls since the commission of the offense to prevent a reoccurrence; and the extent to which the interest of the local community in having adequate deposit and credit services available would be threatened by the forfeiture of the franchise.

Lastly, proposed § 19.254 delineates the right of judicial review under 12 U.S.C. 1818(h) of a termination order as required by 12 U.S.C. 93(d)(1)(C) and 1464(w)(1)(C).

Subpart R—Effective Date

The OCC is proposing a new subpart R to part 19 to address questions about the effective date of the amendments to part 19 and their application to proceedings and investigations in progress. Specifically, subpart R provides that the rules of practice and procedure set forth in subparts A through E and H, I, J, L, M, N, P, and Q (as revised or added by this rulemaking) would apply to adjudicatory proceedings initiated on or after the effective date of a final rule. Rules applicable to national banks, Federal savings associations, or Federal branches and agencies in effect prior to this effective date would continue to govern actions initiated and in process prior to this effective date. This timing would ensure that parties to adjudicatory proceedings involving national banks, Federal savings associations, or Federal branches and agencies would have adequate notice of the rules governing those proceedings.

Technical Changes

The proposed rule would make technical changes throughout parts B through P by (1) replacing the word “shall” with “must,” “will,” or other appropriate language, which is the more current rule writing convention for imposing an obligation and is the recommended drafting style of the

Federal Register

; (2) conforming citation styles and providing more detailed references to the cited statutes; (3) conforming abbreviations, including replacing the use of the term “administrative law judge” with “ALJ; (4) replacing gender references such as “him,” “his” or “her” with gender neutral terminology; and (5) and making other non-substantive grammatical, clarifying, organizational, and stylistic changes. The proposal also makes a technical change to 12 CFR 3.405 to correct the reference to part 19 and remove the reference to part 109 with respect to savings associations because this rulemaking proposes to remove part 109 and apply part 19 to Federal savings associations.

B. Proposed Amendments to the Board's Local Rules

Part 263, subparts B through J, contain rules specific to Board proceedings. The Board proposes several amendments to subpart B that supplement the Uniform Rules, the creation of a new subpart K establishing rules governing all Board formal investigations, and the elimination of subpart L of Regulation LL (12 CFR part 238), which would be replaced by the new subpart K. The proposed amendments are described below. The Board invites comments on all aspects of this proposal.

Subpart B—Board Local Rules Supplementing the Uniform Rules

Technical Changes

The proposal makes three general non-substantive changes to the language of the Board's Local Rules (12 CFR 265.50-263.56). First, consistent with

Federal Register

drafting guidelines, the proposal replaces the word “shall” throughout the Local Rules with the terms “must,” “will,” or other appropriate language. Second, the proposal replaces gender specific references with gender neutral language. And third, the proposal replaces the term “administrative law judge” with the abbreviation “ALJ” as this shortened form is commonly used and understood. These changes are proposed throughout the Local Rules and will not be discussed in the individual sections below.

Section 263.52 Address for Filing

The proposal adds a second sentence providing an electronic mail address (

OSEC-Litigation@frb.gov

) for papers to be filed electronically with the Secretary of the Board. The Board recognizes that electronic filings have become more frequent and deems it appropriate to identify the electronic mail address that must be used to file papers electronically with the Board.

Section 263.53 Discovery Depositions

The proposal makes four changes to this section to provide for the increasing frequency of depositions by remote means. First, the proposal changes § 263.53(b) to require parties to state in the application the manner (

e.g.,

remote means, in person) in which the deposition is to be taken, in addition to the place and time. Second, the proposal changes § 263.53(c) to include the proposed manner of the deposition as a factor to be considered by the ALJ in determining whether a deposition is unnecessary, unreasonable, oppressive, excessive in scope or unduly burdensome. Third, the proposal adds that a deposition subpoena may require the witness to be deposed where the witness resides or has a regular place of employment, by remote means, or such other convenient place or manner as the ALJ fixes. This language is consistent with § 263.27(a)(2) and provides explicitly for depositions by remote means. And fourth, the proposal adds a sentence in § 263.53(f) indicating that, by stipulation of the parties or order by the ALJ, a deponent may be sworn remotely and is not required to be in the physical presence of the person administering the oath. The Board believes these changes would facilitate discovery by making depositions more flexible and less burdensome.

Section 263.55 Board as Presiding Officer

Section 263.55 authorizes the Board to designate itself, one or more of its members, or an authorized officer, to act as presiding officer in a formal hearing. The proposal adds a sentence clarifying that when such designations occur, the authority of the Board or its designee will include all the authority provided to an ALJ under the rules governing formal hearings. This ensures that the authority of the Board or its designee will include all powers vested in the ALJ by the language of the rules.

Section 263.57 Sanctions Related to Conduct in Adjudicatory Proceedings

Several sections of the Uniform Rules authorize the ALJ to impose sanctions for particular types of misconduct.

However, the Uniform Rules do not specify the rules and procedures governing the sanctions available where a party generally engages in contemptuous conduct. Sanctions provisions are instead found in the local rules of other banking regulators.

To date, the Board has not adopted a similar sanctions provision. The proposal fills this void by adding a new section establishing the rules governing the imposition of sanctions against parties or persons participating in administrative adjudicatory proceedings. The proposed new section: (a) Explicitly authorizes the ALJ to impose sanctions against parties or persons; (b) describes the sanctions the ALJ may impose; (c) describes

procedures for imposing sanctions: And (d) establishes that the ALJ or the Board may impose other sanctions authorized by applicable statute or regulation.

See, e.g.,

12 CFR 263.6(b) (authorizing the exclusion or suspension of counsel for misconduct); 12 CFR 263.9 (authorizing various sanctions against a party or counsel for

ex parte

communications); 12 CFR 263.23(e) (authorizing sanctions for dilatory conduct).

See

12 CFR 308.108 (FDIC); 12 CFR 19.192 (OCC).

First, subsection (a) establishes that the ALJ may impose sanctions against any party or person who violates a statute, regulation, or order. In addition, sanctions may only be imposed where such violation constitutes contemptuous conduct, materially injures another party, amounts to a clear and unexcused violation, or unduly delays the proceedings.

Second, subsection (b) describes the sanctions the ALJ may impose against parties or persons. Appropriate sanctions include: (1) Issuing an order making findings against a party; (2) rejecting or striking testimony or other evidence offered by a party; (3) precluding the party from contesting specific issues or findings, offering or challenging certain evidence, or making late filings or conditioning such late filings; (4) assessing reasonable expenses incurred by the other party as a result of the misconduct; and (5) excluding the party or person from the adjudicatory proceeding. This list is non-exhaustive. As expressed in subsection (d), the ALJ or the Board may impose other sanctions authorized by an applicable statute or regulation.

Third, subsection (c) describes procedures for imposing and reviewing sanctions. First, sanctions could be imposed upon the motion of any party or upon the ALJ's own motion, although the ALJ would be required to submit to the Board any sanction that includes a final order on the merits. Second, no sanction beyond refusal to accept late filings may imposed without affording the party or person to be sanctioned the opportunity to be heard. And third, an order imposing sanctions would be subject to interlocutory review like any other order. Finally, subsection (d) clarifies that an ALJ or the Board may also impose any other restriction or sanction authorized by another applicable statute or regulation.

The Board believes that this new proposed section promotes fairness and transparency in adjudicatory proceedings by providing clear standards governing the authority of the ALJ to manage the conduct of the proceedings when presented with contemptuous conduct.

In addition, because this proposed section is modeled on the sanctions provisions already adopted by other banking regulators, it promotes uniformity in the rules of banking regulators.

The Board believes that the power to impose sanctions is inherent in the ALJ's power to “regulate the course of a proceeding,” 5 U.S.C. 556(c)(5), and to “do all things necessary and appropriate to discharge the duties of a presiding officer.” 12 CFR 263.5(b)(11).

Subpart K—Formal Investigative Proceedings

Under section 8(n) of the Federal Deposit Insurance Act and other statutory provisions, the Board has authority to conduct formal investigations, including authority to administer oaths, take depositions, and issue subpoenas in connection with the Board's examination and enforcement authority.

In 2011, the Board adopted regulations previously issued by the OTS which govern formal investigations of savings and loan holding companies and their subsidiaries under Home Owners' Loan Act.

These regulations, which are found in subpart L of Regulation LL (12 CFR part 238), do not govern formal investigations of other banking institutions or individuals under the Board's jurisdiction. While the Board has long-standing practices concerning the conduct of formal administrative investigations involving other banking organizations or individuals within its jurisdiction, these practices have heretofore not been incorporated in regulations governing such formal investigations.

12 U.S.C. 1818(n).

In 2011, pursuant to section 312 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) (12 U.S.C. 5412), the responsibility for the supervision and regulation of savings and loan holding companies and their non-savings association subsidiaries transferred from the former-OTS to the Board. Shortly thereafter, the Board adopted an interim final rule that provided for the corresponding transfer of certain OTS regulations necessary for the Board to administer the statutes relating to supervision of savings and loan holding companies, including provisions governing formal investigative proceedings set forth at subpart L of Regulation LL (12 CFR 238.111-117) (

see

76 FR 56508 (September 13, 2011)).

The Board now proposes to codify and clarify its long-standing practices concerning the conduct of formal administrative investigations and promulgate rules governing all formal investigations of organizations and individuals within the Board's jurisdiction. The proposal deletes subpart L of Regulation LL and replaces it with a new section (subpart K to 12 CFR part 263). This new section establishes a single set of rules governing formal investigations for all Board-regulated organizations, including but not limited to state member banks, foreign banks, bank holding companies and their subsidiaries, savings and loan holding companies and their subsidiaries, Edge Act and agreement corporations, nonbank financial companies that the Financial Stability Oversight Council has determined should be supervised by the Board pursuant to section 113 of the Dodd-Frank Act (nonbank financial companies) or any subsidiaries of such companies,

and any other entity or individual that the Board has authority to investigate or bring an enforcement action against. Proposed subpart K would govern only the conduct of formal investigations; administrative adjudicatory proceedings would continue to be governed by the Board's Uniform Rules and Local Rules (subparts A and B of 12 CFR 263).

12 U.S.C. 5323; 12 U.S.C. 5362.

Proposed subpart K is modeled on the investigative procedures of other Federal financial industry enforcement agencies, including the FDIC and OCC. Like the existing rules of these agencies, proposed subpart K would, among other things, define a formal investigative proceeding by the Board and its scope; delineate some of the powers of the Board's designated representatives conducting formal investigative proceedings; require the confidentiality of formal investigative proceedings; provide for certain rights of witnesses in formal investigative proceedings; and establish investigative subpoena procedures.

The proposed rules authorize the Board or the General Counsel or the General Counsel's designee (in accordance with 12 CFR 265.6) to commence a formal investigation by issuing an order of investigation which designates both the purpose of the investigation and the “designated representatives” of the Board. These designated representatives would be authorized to administer oaths, to take and preserve testimony under oath, and to issue subpoenas

ad testificandum

and subpoenas

duces tecum

and to apply to the appropriate court to enforce such subpoenas.

The proposed rules also set forth the rights of persons from whom the Board seeks to compel information in a formal investigation. Specifically, the proposed rules describe a person's right to counsel during investigative testimony, an attorney's ability to advise and question a witness during investigative testimony, and the ability of a witness to obtain a copy of any testimony the witness provided. The proposed rules would also require the confidentiality of formal investigative proceedings and generally require sequestration of witnesses.

Proposed subpart K generally incorporates the substantive provisions currently contained in subpart L of Regulation LL with two major exceptions. First, the proposed subpart

K does not include provisions (currently found in 12 CFR part 238.117(b)) providing for the filing and resolution of applications seeking to quash or modify subpoenas within 10 days of their service. Since the Board already vests with the General Counsel or his or her designee the authority to quash, modify, or revoke subpoenas that have been issued,

any person or entity to whom a subpoena is directed may seek a modification or revocation of a subpoena by application to the General Counsel. A separate procedure is not necessary.

See

12 CFR part 265.6.

Second, the proposed subpart K provides that the officer supervising a formal investigative proceeding may, in certain circumstances, deny a written request for a copy of a transcript. Both subpart L of Regulation LL and the proposed rules (see 12 CFR part 238.114 and proposed rule 263.456(b)) provide that a witness may inspect a copy of the transcript without retaining a copy. Similarly, both subpart L of Regulation LL and the proposed rules (see 12 CFR part 238.114 and proposed rule 263.456(c)) provide that any request for a copy of a transcript may be denied. Although subpart L of Regulation LL vests the Board with the authority to deny a witness's request to inspect a copy of a transcript (see 12 CFR part 238.114), proposed subpart K vests the officer supervising a formal investigative proceeding with the authority to deny such request if provision of the transcript may infringe the privacy of third persons involved in the investigation, or impede or interfere with the conduct of any Board investigation.

The proposed subpart K also reorganizes or re-orders provisions currently found in subpart L of Regulation LL. For example, subpart L of Regulation LL had a separate provision regarding transcripts of investigative testimony (12 CFR part 238.114) that provides, among other things, that a witness may inspect the transcript of the witness's testimony. Proposed subpart K instead places the provision to permit inspection of a transcript of a witness's testimony in the proposed rule concerning the rights of witnesses (see proposed subpart K rule 263.456). Other provisions of proposed subpart K conform provisions of subpart L of Regulation LL to current practices followed in Board investigations. For example, proposed subpart K rule 263.457, governing service of subpoenas in formal investigations, conforms to the current rules governing service of subpoenas in adjudicatory proceedings, 12 CFR part 263.11(d). These technical modifications are not intended to affect the substantive rights of parties.

In summary, proposed subpart K clarifies and centralizes the Board's existing investigative practices by codifying those procedures uniformly across all Board formal investigations.

C. Proposed Amendments to the FDIC's Local Rules

When the Uniform Rules were adopted in 1991, each Agency also adopted Local Rules to address procedures to supplement the Uniform Rules or otherwise facilitate the processing of administrative enforcement actions within an Agency. The Local Rules at issue here are set forth at 12 CFR part 308, subpart B: General Rules of Procedure, and supplement the Uniform Rules and procedures set forth in 12 CFR part 308, subpart A.

The FDIC requests comment on proposed amendments to the FDIC's Local Rules at subpart B. These revisions are intended to enhance the Uniform Rules and to further modernize and streamline the discovery process in administrative enforcement actions brought by the FDIC. The FDIC proposes changes that reflect the current processes and procedures routinely ordered by the administrative law judges (ALJs) that mirror procedures followed in the Federal court system. The FDIC also proposes to add new provisions regarding modern discovery practices, depositions, and disclosure of expert witness testimony to promote cooperation, fairness, and transparency.

Since the Local Rules were last updated, the development and utilization of electronically stored information has drastically increased the amount of potentially discoverable materials. In 2015, the Federal Rules of Civil Procedure (FRCP) were amended, in part, to address concerns regarding the volume of available materials and the effort and expense in processing those materials for discovery purposes. Although neither the FRCP, nor the Federal Rules of Evidence, apply to administrative proceedings at the FDIC, they do provide guidance and direction. Additionally, the FRCP are thoroughly vetted and considered to be best practices and procedures by the legal community. The FDIC is not adopting the FRCP; however, there are certain best practices and procedures that the FDIC believes would be advantageous to all parties to the administrative proceedings. Over the past few years, the ALJs have implemented, on a case-by-case basis, certain case management orders related to discovery procedures and requirements that mirror certain provisions of the FRCP. The FDIC wishes to formalize these procedures in the Local Rules to provide notice and clarity of the discovery rules applicable to administrative proceedings.

Similar to the changes in the Uniform Rules, the FDIC also proposes to update the language throughout its Local Rules to reflect the modernized language used in rulemaking. Where appropriate, the FDIC proposes to replace the term “shall” with “must” or “will” to reflect the current convention for a legal requirement and changes made to the FRCP in 2000. Additionally, the FDIC proposes to provide shortened references to “administrative law judge” (ALJ) and “electronically stored information” (ESI) because the shortened terms are well understood and the repetition of the shortened terms reduces the length of the regulations. These changes are proposed throughout the Local Rules and will not be discussed further in the individual sections below.

Section 308.102 Authority of Board of Directors and Administrative Officer

Section 308.102 contains minor changes to reflect the current internal organization of the FDIC.

Section 308.103 Assignment to Administrative Law Judge (ALJ)

Section 308.103 is being renamed to better reflect additional changes to how matters are currently assigned to an ALJ.

Section 308.104 Filings With the Board of Directors

Section 308.104 provides an electronic mail address for the FDIC's Administrative Officer, who is the official custodian of the record for administrative proceedings, and with whom all parties must file an electronic copy of all pleadings.

Section 308.107 Supplemental Discovery Rules

Section 308.107 is being renamed to reflect the updates to the FDIC's discovery processes to include modern discovery practices and procedural orders issued by the ALJs and to allow for limited depositions.

Section 308.107(a) Scope of Discovery

Section 308.107(a) is a new section that describes the permitted scope of discovery. The FDIC proposes to adopt the concept of “proportionality” in discovery production and set forth limits on ESI, both of which were added to the FRCP in 2015. Because the FDIC maintains the data collected from failed insured depository institutions in its

role as Receiver, it has custody and control of voluminous amounts of failed bank data. Generally, the vast majority of this information would not be materially relevant to an administrative enforcement proceeding. Instituting a requirement that discovery be proportional will decrease unnecessary expenditures and promote a more efficient process for all parties to the administrative proceedings.

Section 308.107(b) Joint Discovery Plan

Section 308.107(b) sets forth the FDIC's proposal to add a Joint Discovery Plan to the discovery process. Currently, the ALJs routinely require both parties agree to an ESI Plan that governs the production of ESI. The FDIC proposes to combine the current practice with certain provisions similar to the FRCP Rule 26(f)(3). This new section would require the parties to meet and confer at the beginning of the discovery process to facilitate communication and cooperation on discovery matters. The purpose is to develop a Joint Discovery Plan that meets the parties' needs, decreases discovery disputes, encourages collegiality, and conserves resources. If necessary, this section provides a mechanism for resolution of discovery disputes.

Section 308.107(c) Document and Electronically Stored Information (ESI) Discovery

Section 308.107(c) was created to integrate the proposed provisions of the Local Rules with the Uniform Rules. Additionally, the provisions related to the production of documents now include modern concepts from the FRCP related to the production of ESI.

Section 308.107(d) Expert Witness Disclosures

Section 308.107(d) is a new section mirroring the 1993 updates to the FRCP 26(a)(2) that describe the proposed disclosures for expert witness testimony. The vast majority of modern administrative enforcement proceedings involve expert testimony; however, there are currently no rules governing how expert testimony is fairly and properly disclosed to the opposing party. As a result, the ALJs began issuing orders, on a case-by-case basis, requiring disclosure of expert testimony similar to the requirements set forth in FRCP 26(a)(2). The FDIC proposes to incorporate these expert witness disclosure requirements into the written rules to improve transparency and promote fairness. Similar to the 1993 and 2010 revisions to the FRCP 26(a)(2), § 308.107(d) provides two categories of expert witnesses with two different levels of required disclosures. Section 308.107(d)(2)(i) is intended for professional experts who generally do not work for a party but are specifically engaged for the purpose of providing expert testimony. Section 308.107(d)(2)(ii) is intended to cover those individuals whose expertise comes from the person's regular course of business such as, a commissioned bank examiner or bank personnel, who will be offered as an expert witness at the hearing. Consistent with the FRCP 26(a)(2), these rules are intended as disclosure requirements. Similar to the Federal rules of evidence and case law, these documents are prior written disclosures of future opinion testimony to be offered at the hearing to assist the ALJ. Neither category of written disclosures is intended to serve as substitutes for expert witness testimony at the hearing. Moreover, occasionally the ALJ orders mandated more disclosure from expert witnesses than the FRCP 26(a)(2) required. The FDIC believes that the FRCP 26(a)(2) created a two-tier system for disc

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