Job Interview SceneOn November 1, 2018, the Federal Deposit Insurance Corporation (the “FDIC”) issued modifications to its Statement of Policy (“SOP”) for applications made under Section 19 of the Federal Deposit Insurance Act (“FDIA”).  The modifications are expected to reduce the number of Section 19 applications FDIC-supervised institutions must submit prior to submitting offers of employment.

Background

On January 8, 2018, the FDIC published in the Federal Register notice of proposed modifications and sought public comment.  On July 19, 2018, after consideration of comments received, the FDIC approved modifications to the SOP’s exceptions to filing an application and made additional technical and clarifying changes.

What Is Section 19 of the FDIA?

In general, Section 19 prohibits, without the prior written consent of the FDIC, a person convicted of any criminal offense involving dishonesty, breach of trust, money laundering, or who has entered into a pretrial diversion or similar program (program entry) in connection with a prosecution for such offense, from participating in the affairs of an FDIC-insured institution.

What Modifications Were Made to Section 19 Applications?

  • The de minimis exceptions, under which the FDIC’s consent is automatically granted and an application is not required, have been modified to encompass convictions or program entries for issuance of insufficient funds checks of moderate aggregate value; small dollar, simple theft; and isolated minor offenses committed by young adults.
  • A Section 19 application is not required for covered drug-related offenses if certain de minimis criteria are met.
  • Banks may now offer prospective employees conditional offers of employment pending a background check, provided that the individual does not begin employment until the institution verifies that the individual’s participation is not barred by Section 19.
  • The FDIC has also made certain clarifying modifications to further define the terms “complete expungement,” “jail time” and “pretrial diversion or similar programs.”

To read the FDIC’s updated SOP covering Section 19, click here.

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Photo of Daniel C. McKay, II Daniel C. McKay, II

Daniel C. McKay, II concentrates his practice in the representation of financial institutions and corporations and their officers, directors and shareholders in connection with mergers and acquisitions, securities offerings, corporate finance, corporate governance and regulatory and compliance matters. He has been involved in more than 150 bank or thrift  mergers and acquisitions/securities offerings, with aggregate consideration of these deals totaling over $50 billion.

Photo of James M. Kane James M. Kane

Mr. Kane serves as the Co-Chair of the Financial Institutions group for Vedder Price. His practice is focused on financial institutions and their officers and directors. He serves his clients in a number of different capacities. He serves as the regulatory and corporate counsel for many institutions. Calling upon his experience as a regulator, as a past director of two different community banks, and as a private practitioner for nearly 20 years, Mr. Kane is able to offer practical and experienced legal advice that few attorneys can match. In this capacity, he has counseled clients on general corporate, regulatory and securities matters, on new products and on mergers and acquisitions.

Photo of James W. Morrissey James W. Morrissey

Mr. Morrissey concentrates his practice in the representation of financial institutions and corporations and their officers, directors and shareholders in connection with mergers and acquisitions, securities offerings, corporate finance, corporate governance and regulatory and compliance matters. He has represented clients in numerous bank and thrift mergers and acquisitions and securities transactions. In addition, he has represented clients with respect to various bank regulatory matters, including advising clients with respect to preparing for regulatory exams and responding to enforcement actions.

Photo of Jennifer Durham King Jennifer Durham King

Ms. King concentrates her practice in capital markets and corporate securities transactions, with a specific focus on financial institutions. Ms. King regularly represents issuers and underwriters as lead counsel in a broad range of capital markets transactions, including public and private debt and equity offerings, mergers and acquisitions, and capital planning and formation. In 2017, Ms. King was selected as an Illinois Leading Lawyer in the categories of Corporate Finance Law and Securities & Venture Finance Law.

Ms. King also counsels public companies on their reporting and disclosure obligations under the federal securities laws, as well as on a variety of corporate governance matters, including compliance with the Sarbanes-Oxley Act, Dodd-Frank Act, and stock exchange requirements, creation and implementation of corporate compliance programs, and shareholder and board of directors matters.

Photo of Juan M. Arciniegas Juan M. Arciniegas

Mr. Arciniegas works primarily as a derivatives lawyer and covers markets for over-the-counter (OTC) derivatives, structured finance products and listed futures. He advises on every stage throughout the life cycle of a derivatives transaction, providing assistance to a wide range of market participants engaged in the markets in various capacities. Regulatory matters range from assisting clients on financial reform legislation, registration and membership with the CFTC, NFA, and other financial market utilities, to providing guidance to commercial end-users and sell-side participants on exemptions, cross-border access issues, and matters involving the overlapping jurisdiction of securities and commodities regulation. Transactional matters include the negotiation and implementation of comprehensive documentation for agency-MBS, cleared and OTC derivatives, FX, futures, loan-level hedging arrangements, prime brokerage, repurchase transactions, securities lending, structured finance transactions, and related industry protocols implementing changes in those markets. Mr. Arciniegas has appeared before the CFTC, the Federal Reserve, the SEC, and is a frequent speaker and published author on futures and derivatives topics.

Photo of Lisa M. Simonetti Lisa M. Simonetti

Lisa M. Simonetti is a Shareholder at Vedder Price and a member of the Litigation group. Ms. Simonetti focuses on the defense of complex litigation, including class actions, mass actions and regulatory investigations and enforcement actions. Ms. Simonetti represents a wide array of financial services companies, including credit card issuers, mortgage lenders, e-commerce companies, automotive finance companies, national banks, student lenders and savings and loan associations.

Photo of Mark C. Svalina Mark C. Svalina

Mr. Svalina advises corporate clients, financial institutions and FinTech companies on significant corporate transactions. He focuses his practice on representation of financial institutions and their officers, directors and shareholders in connection with mergers and acquisitions, corporate finance, corporate governance, and regulatory and compliance matters. In addition, he has represented clients with respect to various bank regulatory matters, including advising clients with respect to preparing for regulatory exams, responding to enforcement actions, new products/services and federal and state compliance issues.