**PART 366\--Minimum Standards of Integrity and Fitness for an FDIC
Contractor**

**TABLE OF CONTENTS**

**[Sec.]{.underline} [Subject]{.underline} [Page]{.underline}**

366.0
Definitions.....................................................................................1

366.1 What is the purpose of this
part?............................................................2

366.2 What is the scope of this
part?...............................................................2

366.3 Who cannot perform contractual services for the
FDIC?................................2

366.4 When is there a pattern or practice of
defalcation?.......................................3

366.5 What causes a substantial loss to a federal deposit insurance
fund?...................3

366.6 How is my ownership or control
determined?............................................4

366.7 Will the FDIC waive the prohibitions under §
366.3?...................................5

366.8 Who can grant a waiver of a prohibition or conflict of
interest?.......................5

366.9 What other requirements could prevent me from performing
contractual

services for the
FDIC?....................................................\................\.....5

366.10 When would I have a conflict of
interest?................................................5

366.11 Will the FDIC waive a conflict of
interest?...............................................6

366.12 What are the FDIC's minimum standards of ethical
responsibility?................\...6

366.13 What is my obligation regarding confidential
information?.........................\....7

366.14 What information must I provide the
FDIC?..............................................7

366.15 What advice or determinations will the FDIC provide me on the

applicability of this
part?..................................................................\...8

366.16 When may I seek a reconsideration or review of an FDIC
determination?...........8

366.17 What are the possible consequences for violating this
part?.........................\....9

**Authority:** 12 U.S.C. 1819(Tenth), 1822(f)(3) and (4); Sec. 19 of
Pub. L. 103-204, 107 Stat. 2369.

**§ 366.0 Definitions.**

As used in this part:

(a) The word *person* refers to an individual, corporation, partnership,
    or other entity with a legally independent existence.

(b) The terms *we, our,* and *us* refer to the Federal Deposit Insurance
    Corporation (FDIC), except when acting as conservator or operator of
    a bridge bank.

(c) The terms *I, me, my, mine, you[,]{.underline}* and *yourself* refer
    to a person who submits an offer to perform or performs, directly or
    indirectly, contractual services or functions on our behalf.

(d) The phrase *insured depository institution* refers to any bank or
    savings association whose deposits are insured by the FDIC.

**§ 366.1 What is the purpose of this part?**

This part establishes the minimum standards of integrity and fitness
that contractors, subcontractors, and employees of contractors and
subcontractors must meet if they perform any service or function on our
behalf. This part includes regulations governing conflicts of interest,
ethical responsibility, and use of confidential information in
accordance with 12 U.S.C. 1822(f)(3) and the prohibitions and the
submission of information in accordance with 12 U.S.C. 1822(f)(4).

**§ 366.2 What is the scope of this part?**

(a) This part applies to a person who submits an offer to perform or
    performs, directly or indirectly, a contractual service or function
    on our behalf.

(b) This part does not apply to:

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(1) An FDIC employee for the purposes of title 18, United States Code;
    or

(2) The FDIC when we operate an insured depository institution such as a
    bridge bank or conservatorship.

**§ 366.3 Who cannot perform contractual services for the FDIC?**

We will not enter into a contract with you to perform a service or
function on our behalf, if you or any person that owns or controls you,
or any entity you own or control:

(a) Has a felony conviction;

(b) Was removed from or is prohibited from participating in the affairs
    of an insured depository institution as a result of a federal
    banking agency final enforcement action;

(c) Has a pattern or practice of defalcation; or

(d) Is responsible for a substantial loss to a federal deposit insurance
    fund.

**§ 366.4 When is there a pattern or practice of defalcation?**

(a) You have a pattern or practice of defalcation under § 366.3(c) when
    you, any person that owns or controls you, or any entity you own or
    control has a legal responsibility for the payment on at least two
    obligations that are:

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(1) To one or more insured depository institutions;

(2) More than 90 days delinquent in the payment of principal, interest,
    or a combination thereof; and

(3) More than \$50,000 each.

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(b) The following are examples of when you have or do not have a pattern
    or practice of defalcation. These examples are not inclusive.

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(1) You have five loans at insured depository institutions. Three of
    them are 90 days past due. Two of the three loans have outstanding
    balances of more than \$50,000 each. You have a pattern or practice
    of defalcation.

(2) You have five loans at insured depository institutions. Two of them
    are 90 days past due. One of the two is with ABC Bank for \$170,000.
    The other one is with XYZ bank for \$60,000. You have a pattern or
    practice of defalcation*.*

(3) You have five loans at insured depository institutions. Three of
    them are 90 days past due. One of the three has an outstanding
    balance of more than \$50,000. The other two have outstanding
    balances of less than \$50,000. You do not have a pattern or
    practice of defalcation.

(4) You have five loans at insured depository institutions. Three of
    them have outstanding balances of more than \$50,000. Two of those
    three were 90 days past due but are now current. You do not have a
    pattern or practice of defalcation.

**§ 366.5 What causes a substantial loss to a federal deposit insurance
fund?**

You cause a substantial loss to a federal deposit insurance fund under §
366.3(d) when you, or any person that owns or controls you, or any
entity you own or control has:

(a) An obligation to us that is delinquent for 90 days or more and on
    which there is an outstanding balance of principal, interest, or a
    combination thereof of more than \$50,000;

(b) An unpaid final judgment in our favor that is in excess of \$50,000,
    regardless of whether it becomes discharged in whole or in part in a
    bankruptcy proceeding;

(c) A deficiency balance following foreclosure of collateral on an
    obligation owed to us that is in excess of \$50,000, regardless of
    whether it becomes discharged in whole or in part in a bankruptcy
    proceeding; or

(d) A loss to us that is in excess of \$50,000 that we report on IRS
    Form 1099-C, Information Reporting for Discharge of Indebtedness.

**§ 366.6 How is my ownership or control determined?**

(a) Your ownership or control is determined on a case-by-case basis.
    Your ownership or control depends on the specific facts of your
    situation and the particular industry and legal entity involved. You
    must provide documentation to us to use in determining your
    ownership or control.

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(b) The interest of a spouse or other family member in the same
    organization is imputed to you in determining your ownership or
    control.

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(c) The following are examples of when your ownership or control may or
    may not exist. These examples are not inclusive.

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(1) You have control if you are the president or chief executive officer
    of an organization.

(2) You have ownership or control if you are a partner in a small law
    firm. You might not have ownership or control if you are a partner
    in a large national law firm.

(3) You have control if you are a general partner of a limited
    partnership. You have ownership or control if you have a limited
    partnership interest of 25 percent or more.

(4) You have ownership or control if you have the:

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(i) Power to vote, directly or indirectly, 25% or more interest of any
    class of voting stock of a company;

(ii) Ability to direct in any manner the election of a majority of a
     company\'s directors or trustees; or

(iii) Ability to exercise a controlling influence over the company\'s
      management and policies.

§ 366.7 Will the FDIC waive the prohibitions under § 366.3?

We may waive the prohibitions for entities other than individuals for
good cause shown at our discretion when our need to contract for your
services outweighs all relevant factors. The statute does not allow us
to waive the prohibitions for individuals.

§ 366.8 Who can grant a waiver of a prohibition or conflict of interest?

The FDIC\'s Board of Directors delegates to the Chairman, or his
designee, authority to issue waivers and implement procedures for part
366.

§ 366.9 What other requirements could prevent me from performing
contractual services for the FDIC?

You must avoid a conflict of interest, be ethically responsible, and
maintain confidential information as described in §§ 366.10 through
366.13. You must also provide us with the information we require in §
366.14. Failure to meet these requirements may prevent you from
contracting with us.

§ 366.10 When would I have a conflict of interest?

(a) You have a conflict of interest when you, any person that owns or
    controls you, or any entity you own or control:

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(1) Has a personal, business, or financial interest or relationship that
    relates to the services you perform under the contract;

(2) Is a party to litigation against us, or represents a party that is;

(3) Submits an offer to acquire an asset from us for which services were
    performed during the past three years, unless the contract allows
    for the acquisition; or

(4) Engages in an activity that would cause us to question the integrity
    of the service you provided, are providing or offer to provide us,
    or impairs your independence.

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(b) The following are examples of a conflict of interest. These examples
    are not inclusive.

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(1) You submit an offer to perform property management services for us
    and you own or manage a competing property.

(2) You audit a business under a contract with us and you or a partner
    in your firm has an ownership interest in that business.

(3) You perform loan services on a pool of loans we are selling, and you
    submit a bid to purchase one or more of the loans in the pool.

(4) You audit your own work or provide nonaudit services that are
    significant or material to the subject matter of the audit.

§ 366.11 Will the FDIC waive a conflict of interest?

(a) We may waive a conflict of interest for good cause shown at our
    discretion when our need to contract for your services outweighs all
    relevant factors.

(b) The following are examples of when we may grant you a waiver for a
    conflict of interest. These examples are not inclusive.

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(1) We may grant a waiver to an outside counsel who has a
    representational conflict. We will weigh all relevant facts and
    circumstances in making our determination.

(2) We may grant a waiver to allow a contractor to acquire an asset from
    us who is providing or has provided services on that asset. We will
    consider whether granting the waiver will adversely affect the
    fairness of the sale, the type of services provided, and other facts
    and circumstances relevant to the sale in making our determination.

**§ 366.12 What are the FDIC's minimum standards of ethical
responsibility?**

### You and any person who performs services for us must not provide preferential treatment to any person in your dealings with the public on our behalf.

(b) You must ensure that any person you employ to perform services for
    us is informed about their responsibilities under this part.

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(c) You must disclose to us waste, fraud, abuse or corruption.

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(d) You and any person who performs contract services to us must not:

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(1) Accept or solicit for yourself or others any favor, gift, or other
    item of monetary value from any person who you reasonably believe is
    seeking an official action from you on our behalf, or has an
    interest that the performance or nonperformance of your duties to us
    may substantially affect;

(2) Use or allow the use of our property, except as specified in the
    contract;

(3) Make an unauthorized promise or commitment on our behalf; or

(4) Provide impermissible gifts or entertainment to an FDIC employee.

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(e) The following are examples of when you are engaging in unethical
    behavior. These examples are not inclusive.

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(1) Using government resources, including our Internet connection, to
    conduct any business that is unrelated to the performance of your
    contract with us.

(2) Submitting false invoices or claims, or making misleading or false
    statements.

(3) Committing us to forgive or restructure a debt or portion of a debt,
    unless we provide you with written authority to do so.

**§ 366.13 What is my obligation regarding confidential information?**

(a) Neither you nor any person who performs services on your behalf may
    use or disclose information obtained from us or a third party in
    connection with an FDIC contract, unless:

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(1) The contract allows or we authorize the use or disclosure;

(2) The information is generally available to the general public; or

(3) We make the information available to the general public.

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(b) The following are examples of when your use of confidential
    information is inappropriate. These examples are not inclusive.

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(1) Disclosing information about an asset, such as internal asset
    valuations, appraisals or environmental reports, except as part of
    authorized due diligence materials, to a prospective asset
    purchaser.

(2) Disclosing a borrower\'s or guarantor\'s personal or financial
    information, such as a financial statement to an unauthorized party.

**§ 366.14 What information must I provide the FDIC?**

> You must:

(a) Certify in writing that you can perform services for us under §
    366.3 and have no conflict of interest under § 366.10(a).

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(b) Submit a list and description of any instance during the preceding
    five years in which you, any person that owns or controls you, or
    any entity you own or control, defaulted on a material obligation to
    an insured depository institution. A default on a material
    obligation occurs when a loan or advance with an outstanding balance
    of more than \$50,000 is or was delinquent for 90 days or more.

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(c) Notify us within 10 business days after you become aware that you,
    or any person you employ to perform services for us, are not in
    compliance with this part. Your notice must include a detailed
    description of the facts of the situation and how you intend to
    resolve the matter.

(d) Agree in writing that you will employ only persons who meet the
    requirements of this part to perform services on our behalf.

(e) Comply with any request from us for information.

(f) Retain any information you rely upon regarding the provisions of
    this part for a period of three years following termination or
    expiration and final payment of the related contract for services.

§ 366.15 What advice or determinations will the FDIC provide me on the
applicability of this part?

(a) We are available to you for consultation on those determinations you
    are responsible for making under this part, including those with
    respect to any person you employ or engage to perform services for
    us.

(b) We will determine if this part prohibits you from performing
    services for us prior to contract award, after contract award, and
    during the performance of a contract.

(c) We may determine what corrective action you must take.

(d) We may grant you a waiver for good cause shown where provided for
    under this part.

§ 366.16 When may I seek a reconsideration or review of an FDIC
determination?

(a) You may seek reconsideration or review of our initial determination
    by sending a written request to the individual who issued you the
    initial decision.

(b) You must provide new information or explain a change in
    circumstances for our reconsideration of an initial decision. The
    individual who issued you the initial decision may either make a new
    determination or refer your request to a higher authority for
    review.

(c) You must provide an explanation of how you perceive that we
    misapplied this part that sets forth the legal or factual errors for
    our review of an initial decision.

§ 366.17 What are the possible consequences for violating this part?

Depending on the circumstances, violations of this part may result in
rescission or termination of a contract, as well as administrative,
civil, or criminal sanctions.