Effective May 8, the Office of Thrift Supervision (OTS) adopted an interim final rule implementing certain prohibitions applicable to a person convicted of any criminal offense involving dishonesty, a breach of trust or money laundering or that enters into certain agreements to enter into a pretrial diversion in connection with such prosecution (Covered Convictions). Section 19(e)(1) of the Federal Deposit Insurance Act (FDIA) provides that such person is prohibited from owning, controlling or participating in, either directly or indirectly, any savings and loan holding company (SLHC) (Prohibited Actions). A person who knowingly violates the statute shall be fined not more than $1 million for each day the prohibition is violated or imprisoned for not more than five years or both.
The interim final rule provides guidance with respect to Prohibited Actions by essentially adopting many of the definitions already applicable to insured depository institutions under Section 19(a) of the FDIA. Regarding Covered Convictions, OTS has provided guidance on the scope of what constitutes a “conviction” and an “agreement to enter into a pretrial diversion or similar program.” OTS also provides guidance as to the meaning of “dishonesty” and the basis for determining whether a criminal offense involves dishonesty or a breach of trust. The interim rule excludes certain types of adjudications and criminal offenses and provides a set of criteria by which an offense will be deemed de minimis and therefore excluded. Pursuant to its powers under Section 19(e)(2), OTS also provides two regulatory exemptions from the prohibitions described above.
First, OTS is exempting SLHC employees whose responsibilities and activities are limited solely to agriculture, forestry, manufacturing, retail merchandising, or public utilities operations. OTS believes it is unlikely that employees with such responsibilities (at the holding company level) would constitute a threat to a institution’s safety and soundness. Second, OTS is providing a transitional, temporary exemption for any prohibited person with respect to a SLHC on October 13, 2006 (date of enactment of Section 19(e)). Such exemption expires 120 days from the effective date of this interim rule, unless an application has been filed seeking a case-by-case exemption. The OTS interim rule provides guidance in applying for a case-by-case exemption. Comments must be received by July 9.