Senate Bill S5465

                            
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  5465

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                              May 24, 2011
                               ___________

Introduced  by  Sen. GRIFFO -- (at request of the Banking Department) --
  read twice and ordered printed, and when printed to  be  committed  to
  the Committee on Banks

AN ACT to amend the banking law, in relation to the penalties imposed on
  individuals  for  violating  or  causing  a violation of laws or regu-
  lations by banking entities; and to repeal  section  41  of  such  law
  relating thereto

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. Section 41 of the banking law is REPEALED and a new section
41 is added to read as follows:
  S 41. REMOVAL, PROHIBITION AND CIVIL MONETARY  PENALTIES  FOR  CERTAIN
VIOLATIONS.    1.  GROUNDS  FOR ENFORCEMENT ACTION. FOR PURPOSES OF THIS
SECTION, GROUNDS FOR COMMENCEMENT OF AN ENFORCEMENT ACTION  SHALL  EXIST
WHERE  THE SUPERINTENDENT HAS REASON TO BELIEVE THAT ANY DIRECTOR, TRUS-
TEE, OFFICER, MEMBER OR PARTNER, OR, IN THE CASE OF  A  FOREIGN  BANKING
CORPORATION,  THE PERSON IN CHARGE, OR AN OFFICER, OF A BRANCH OR AGENCY
(FOR PURPOSES OF THIS SECTION, EACH  A  "COVERED  INDIVIDUAL"),  OF  ANY
BANKING  ORGANIZATION, ANY BANK HOLDING COMPANY (AS SUCH TERM IS DEFINED
IN ARTICLE THREE-A OF THIS CHAPTER), OR ANY FOREIGN BANKING  CORPORATION
(FOR PURPOSES OF THIS SECTION, EACH A "COVERED ENTITY");
  (A)  HAS  VIOLATED  OR  CAUSED  OR  PERMITTED  SUCH  COVERED ENTITY TO
VIOLATE:
  (I) ANY LAW OR ANY REGULATION DULY ENACTED UNDER THIS CHAPTER RELATING
TO SUCH COVERED ENTITY,
  (II) ANY ORDER ISSUED BY THE SUPERINTENDENT TO SUCH COVERED ENTITY  TO
CEASE  CONDUCTING  BUSINESS  IN  AN  UNAUTHORIZED  OR UNSAFE AND UNSOUND
MANNER, OR
  (III) ANY WRITTEN AGREEMENT BETWEEN SUCH COVERED ENTITY AND THE SUPER-
INTENDENT; OR

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD09734-03-1

              

S. 5465                             2

  (B) HAS CONTINUED TO ENGAGE OR  PARTICIPATE  IN  ANY  UNAUTHORIZED  OR
UNSAFE  PRACTICE IN CONDUCTING THE BUSINESS OF SUCH COVERED ENTITY AFTER
HAVING BEEN ORDERED OR WARNED BY THE SUPERINTENDENT TO DISCONTINUE  SUCH
PRACTICE.
  2.  NOTICE  OF  HEARING.  WHERE  THE SUPERINTENDENT BELIEVES THERE ARE
GROUNDS FOR AN ENFORCEMENT ACTION AGAINST A COVERED INDIVIDUAL,  AS  SET
FORTH IN SUBDIVISION ONE OF THIS SECTION, THE SUPERINTENDENT MAY, IN HIS
OR  HER  DISCRETION,  CAUSE  TO  BE SERVED UPON SUCH COVERED INDIVIDUAL,
EITHER PERSONALLY OR, UPON A FINDING  THAT  SUCH  INDIVIDUAL  CANNOT  BE
SERVED  PERSONALLY  WITHIN  THE  STATE, BY REGISTERED MAIL AT HIS OR HER
ADDRESS LAST KNOWN TO THE SUPERINTENDENT, A  STATEMENT  OF  THE  CHARGES
AGAINST  SUCH  COVERED INDIVIDUAL AND NOTICE OF AN OPPORTUNITY TO APPEAR
BEFORE THE SUPERINTENDENT TO SHOW CAUSE WHY HE  OR  SHE  SHOULD  NOT  BE
SUBJECT  TO  ONE  OR  MORE  OF THE FOLLOWING PENALTIES (INDIVIDUALLY AND
JOINTLY REFERRED TO IN THIS SECTION AS AN "AVAILABLE PENALTY"):
  (A) REMOVAL FROM OFFICE, EMPLOYMENT OR THE PERFORMANCE OF ANY  FURTHER
CONTRACTUAL SERVICES WITH THE COVERED ENTITY;
  (B)  PROHIBITION  FROM PARTICIPATION, IN ANY MANNER, IN THE CONDUCT OF
THE AFFAIRS OF ANY COVERED ENTITY; OR
  (C) FORFEITURE AND PAYMENT FOR EACH DAY SUCH VIOLATION  OR  VIOLATIONS
HAVE CONTINUED OF A CIVIL MONETARY PENALTY DETERMINED IN ACCORDANCE WITH
SUBDIVISION SIX OF THIS SECTION.
  3.  HEARING. SUCH NOTICE OF OPPORTUNITY FOR A HEARING SHALL FIX A TIME
AND PLACE AT WHICH THE HEARING MAY BE HELD. ANY SUCH  HEARING  SHALL  BE
NOTICED,  CONDUCTED AND ADMINISTERED BEFORE AN INDEPENDENT HEARING OFFI-
CER IN COMPLIANCE WITH THE STATE ADMINISTRATIVE PROCEDURE  ACT  AND  THE
RULES AND PROCEDURES OF THE DEPARTMENT. IF SUCH COVERED INDIVIDUAL SHALL
WAIVE  A  HEARING OR SHALL FAIL TO APPEAR IN PERSON OR BY A DULY AUTHOR-
IZED REPRESENTATIVE WITHOUT GOOD CAUSE SHOWN, SUCH INDIVIDUAL  SHALL  BE
DEEMED  TO  HAVE  CONSENTED  TO THE ISSUANCE OF AN ORDER IMPOSING ONE OR
MORE OF THE AVAILABLE PENALTIES.
  4. SUSPENSION PENDING DETERMINATION OF CHARGES. UPON OR  AT  ANY  TIME
AFTER  SERVICE  OF  WRITTEN  NOTICE  PURSUANT TO SUBDIVISION TWO OF THIS
SECTION TO ANY COVERED INDIVIDUAL, THE SUPERINTENDENT MAY  SUSPEND  SUCH
INDIVIDUAL FROM OFFICE OR PROHIBIT SUCH INDIVIDUAL FROM PARTICIPATING IN
ANY  MANNER  IN  THE  CONDUCT  OF THE AFFAIRS OF ANY COVERED ENTITY. ANY
SUSPENSION ORDER SO ISSUED SHALL  BECOME  EFFECTIVE  UPON  SERVICE  AND,
UNLESS  AMENDED  OR  RESCINDED  BY  THE  SUPERINTENDENT, SHALL REMAIN IN
EFFECT AND ENFORCEABLE UNTIL LIFTED BY THE SUPERINTENDENT OR REPLACED BY
AN ORDER ISSUED PURSUANT TO SUBDIVISION FIVE OF THIS SECTION.
  5. DETERMINATION BY SUPERINTENDENT. FOLLOWING RECEIPT OF  FINDINGS  OF
FACT  AND  CONCLUSIONS  OF  LAW  FROM  THE  INDEPENDENT  HEARING OFFICER
CONDUCTING A HEARING HELD IN ACCORDANCE WITH SUBDIVISION THREE  OF  THIS
SECTION,  OR  A  WAIVER  OF, OR FAILURE WITHOUT GOOD CAUSE TO APPEAR AT,
SUCH HEARING, THE SUPERINTENDENT SHALL DETERMINE WHETHER TO DISMISS  ONE
OR  MORE OF THE CHARGES OR TO ISSUE AN ORDER IMPOSING ONE OR MORE OF THE
AVAILABLE PENALTIES.
  6. CIVIL MONETARY PENALTY. THE SUPERINTENDENT MAY, PURSUANT TO  SUBDI-
VISION  FIVE  OF  THIS SECTION, REQUIRE ANY COVERED INDIVIDUAL TO PAY TO
THE PEOPLE OF THIS STATE A PENALTY DETERMINED AS FOLLOWS:
  (A) FIRST TIER.  IF  THE  COVERED  INDIVIDUAL  COMMITS  ANY  VIOLATION
DESCRIBED  IN  PARAGRAPH (A) OF SUBDIVISION ONE OF THIS SECTION, A CIVIL
PENALTY OF NOT MORE THAN $5,000 FOR EACH DAY DURING WHICH SUCH VIOLATION
CONTINUES.
  (B) SECOND TIER. IF  THE  COVERED  INDIVIDUAL  COMMITS  ANY  VIOLATION
DESCRIBED  IN PARAGRAPH (A) OF SUBDIVISION ONE OF THIS SECTION, AND SUCH

S. 5465                             3

VIOLATION (I) IS PART OF A PATTERN OF  MISCONDUCT,  (II)  CAUSES  OR  IS
LIKELY  TO  CAUSE MORE THAN A MINIMAL LOSS TO HIS OR HER COVERED ENTITY;
OR (III) RESULTS, DIRECTLY OR INDIRECTLY, IN  PECUNIARY  GAIN  OR  OTHER
BENEFIT  TO  SUCH  COVERED  INDIVIDUAL, A CIVIL PENALTY OF NOT MORE THAN
$25,000 FOR EACH DAY DURING WHICH SUCH VIOLATION CONTINUES.
  (C) THIRD TIER. IF THE  COVERED  INDIVIDUAL  KNOWINGLY  OR  RECKLESSLY
COMMITS  ANY  VIOLATION DESCRIBED IN PARAGRAPH (A) OF SUBDIVISION ONE OF
THIS SECTION, AND SUCH VIOLATION CAUSES OR IS LIKELY TO CAUSE A  SIGNIF-
ICANT  LOSS  TO  HIS OR HER COVERED ENTITY OR RESULTS, DIRECTLY OR INDI-
RECTLY, IN A SUBSTANTIAL PECUNIARY GAIN OR OTHER BENEFIT TO SUCH COVERED
INDIVIDUAL, A CIVIL PENALTY IN AN AMOUNT NOT TO  EXCEED  $1,000,000  FOR
EACH DAY DURING WHICH SUCH VIOLATION, PRACTICE, OR BREACH CONTINUES.
  7.  EFFECT  OF  ORDER  FOR REMOVAL, PROHIBITION OR MONETARY PENALTIES.
SERVICE OF A COPY OF AN ORDER OF REMOVAL OR PROHIBITION OR ORDER  IMPOS-
ING  MONETARY  PENALTIES  UPON A COVERED INDIVIDUAL SHALL BE MADE EITHER
PERSONALLY OR BY REGISTERED MAIL AT THE  ADDRESS  OF  SUCH  PERSON  LAST
KNOWN  TO THE SUPERINTENDENT, AND, IN THE CASE OF AN ORDER OF REMOVAL OR
PROHIBITION, UPON THE COVERED ENTITY OF WHICH HE OR SHE IS  A  DIRECTOR,
TRUSTEE,  OFFICER,  MEMBER  OR  PARTNER  OR,  IN THE CASE OF A PERSON IN
CHARGE OR AN OFFICER OF A BRANCH OR AGENCY OF A FOREIGN  BANKING  CORPO-
RATION, UPON SUCH FOREIGN BANKING CORPORATION. UPON SUCH SERVICE, IN THE
CASE  OF  AN  ORDER  OF  REMOVAL OR PROHIBITION, SUCH COVERED INDIVIDUAL
SHALL CEASE TO BE A DIRECTOR, TRUSTEE, OFFICER, MEMBER OR PARTNER OF THE
RELEVANT BANKING ENTITY OR THE PERSON IN CHARGE OF,  OR  OFFICER  OF,  A
BRANCH  OR  AGENCY OF A FOREIGN BANKING CORPORATION, AND, IN THE CASE OF
AN ORDER IMPOSING MONETARY PENALTIES, SUCH INDIVIDUAL SHALL CAUSE TO  BE
PAID  ANY  AMOUNTS  OWED TO THE DEPARTMENT UNDER SUCH ORDER WITHIN SIXTY
DAYS OF THE DATE OF SUCH SERVICE.   ANY COVERED  INDIVIDUAL  SO  REMOVED
FROM  OFFICE, EMPLOYMENT, OR SUCH CONTRACTUAL ARRANGEMENT WITH A COVERED
ENTITY WHO THEREAFTER WITHOUT PERMISSION OF THE  SUPERINTENDENT  PARTIC-
IPATES IN ANY MANNER IN THE MANAGEMENT OF, EMPLOYMENT IN OR ANY CONTRAC-
TUAL ARRANGEMENT WITH SUCH ENTITY SHALL BE GUILTY OF A MISDEMEANOR.
  8.  MANNER  OF  REVIEW.  THE SUPERINTENDENT SHALL FILE ONE COPY OF ANY
ORDER ISSUED UNDER THIS SECTION IN THE OFFICE OF  THE  DEPARTMENT.  SUCH
ORDER MAY BE REVIEWED IN THE MANNER PROVIDED BY ARTICLE SEVENTY-EIGHT OF
THE  CIVIL  PRACTICE  LAW  AND RULES. SUCH SPECIAL PROCEEDING FOR REVIEW
MUST BE COMMENCED WITHIN THIRTY DAYS FROM THE DATE OF SUCH ORDER.
  S 2. This act shall take effect immediately.