Federal Register / Vol. 75, No. 248 / Tuesday, December 28, 2010 / Rules and Regulations 81377 

1This temporary exemption originally was 

initially scheduled to expire on September 5, 2007. 

OTS has extended the expiration date several times, 

most recently to September 30, 2010 (74 FR 14457). 

2 72 FR at 25953. 

3 72 FR at 25953–54. 4 72 FR at 25954. 

DEPARTMENT OF THE TREASURY 

Office of Thrift Supervision 

12 CFR Part 585 

[Docket No. OTS–2010–0036] 

RIN 1550–AC14 

Prohibited Service at Savings and 

Loan Holding Companies; 

Reinstitution of Expiration Date of 

Temporary Exemption 

AGENCY: Office of Thrift Supervision 

(OTS), Treasury. 

ACTION: Final rule. 

SUMMARY: OTS is revising its rules 

implementing section 19(e) of the 

Federal Deposit Insurance Act (FDIA), 

which prohibits any person who has 

been convicted of any criminal offense 

involving dishonesty, breach of trust, or 

money laundering (or who has agreed to 

enter into a pretrial diversion or similar 

program in connection with a 

prosecution for such an offense) from 

holding certain positions with respect to 

a savings and loan holding company 

(SLHC). Specifically, OTS is 

reinstituting and extending the 

expiration date of a temporary 

exemption granted to persons who held 

positions with respect to a SLHC as of 

the date of the enactment of section 

19(e). The reinstituted and revised 

expiration date for the temporary 

exemption is December 31, 2012. 

DATES: Effective Date: The final rule is 

effective on December 28, 2010. 

FOR FURTHER INFORMATION CONTACT: 

Donna Deale, Director, Holding 

Companies and International Activities, 

Examinations, Supervision and 

Consumer Protection, (202) 906–7488, 

Marvin Shaw, Senior Attorney, 

Regulations and Legislation Division, 

(202) 906–6639, Office of Thrift 

Supervision, 1700 G Street, NW., 

Washington, DC 20552. 

SUPPLEMENTARY INFORMATION: On May 8, 

2007, OTS published an interim final 

rule adding 12 CFR part 585. This new 

part implemented section 19(e) of the 

FDIA, which prohibits any person who 

has been convicted of any criminal 

offense involving dishonesty, breach of 

trust, or money laundering (or who has 

agreed to enter into a pretrial diversion 

or similar program in connection with a 

prosecution for such an offense) from 

holding certain positions with a SLHC. 

Section 19(e) also authorizes the 

Director of OTS to provide exemptions 

from the prohibitions, by regulation or 

order, if the exemption is consistent 

with the purposes of the statute. 

The interim final rule described the 

actions that are prohibited under the 

statute and prescribed procedures for 

applying for an OTS order granting a 

case-by-case exemption from the 

prohibition. The rule also provided 

regulatory exemptions to the 

prohibitions, including a temporary 

exemption for persons who held 

positions with respect to a SLHC on 

October 13, 2006, the date of enactment 

of section 19(e). This temporary 

exemption expired on September 30, 

2010, unless a case-by-case exemption 

was filed prior to that expiration date.1

OTS has decided to reinstitute the 

temporary regulatory exemption, with a 

new expiration date of December 31, 

2012. OTS notes that the reinstituted 

regulatory exemption applies from 

October 13, 2006 until December 31, 

2012 and includes the period after 

October 1, 2010 until today. Given that 

this reinstitution of the temporary 

exemption will reduce needless 

disruptions of SLHC operations, OTS 

has concluded that reinstituting the 

exemption is consistent with the 

purposes of section 19(e) of the FDIA. 

Regulatory Findings 

Notice and Comment and Effective Date 

For the reasons set out in the interim 

final rule,2 OTS has concluded that: 

notice and comment on this extension 

are unnecessary and contrary to the 

public interest under section 552(b)(B) 

of the Administrative Procedure Act 

(APA); there is good cause for making 

the extension effective immediately 

under section 553(d) of the APA; and 

the delayed effective date requirements 

of section 302 of the Riegle Community 

Development and Regulatory 

Improvement Act of 1994 (CDRIA) do 

not apply. 

Regulatory Flexibility Act 

For the reasons stated in the interim 

final rule,3 OTS has concluded that this 

rule does not require an initial 

regulatory flexibility analysis under the 

Regulatory Flexibility Act (RFA) (5 

U.S.C. 601 et seq.), and that this rule 

should not have a significant impact on 

a substantial number of small entities, 

as defined in the RFA. 

Paperwork Reduction Act 

OTS has determined that this rule 

does not involve a change to collections 

of information previously approved 

under the Paperwork Reduction Act (44 

U.S.C. 3501 et seq.) 

Unfunded Mandates Act of 1995 

For the reasons stated in the interim 

final rule,4 OTS has determined that 

this rule will not result in expenditures 

by state, local, and tribal governments, 

in the aggregate, or by the private sector, 

of more than $100 million in any one 

year. 

Executive Order 12866 

OTS has determined that this rule is 

not a significant regulatory action under 

Executive Order 12866. 

Plain Language 

Section 722 of the Gramm-LeachBliley Act (12 U.S.C. 4809) requires the 

Agencies to use ‘‘plain language’’ in all 

final rules published after January 1, 

2000. OTS believes that the final rule is 

presented in a clear and straightforward 

manner. 

List of Subjects in 12 CFR Part 585 

Administrative practice and 

procedure, Holding companies, 

Reporting and recordkeeping 

requirements, Savings associations. 

Authority and Issuance 

■ For the reasons in the preamble, OTS 

is amending part 585 of chapter V of 

title 12 of the Code of Federal 

Regulations as set forth below: 

PART 585—PROHIBITED SERVICE AT 

SAVINGS AND LOAN HOLDING 

COMPANIES 

■ 1. The authority citation for 12 CFR 

part 585 continues to read as follows: 

Authority: 12 U.S.C. 1462, 1462a, 1463, 

1464, 1467a, and 1829(e). 

■ 2. Amend § 585.100(b)(2) introductory 

text to read as follows: 

§ 585.100 Who is exempt from the 

prohibition under this part? 

* * * * * 

(b) Temporary exemption. * * * 

(2) This exemption expires on 

December 31, 2012, unless the savings 

and loan holding company or the person 

files an application seeking a case-bycase exemption for the person under 

§ 585.110 by that date. If the savings and 

loan holding company or the person 

files such an application, the temporary 

exemption expires on: 

* * * * * 

Dated: December 21, 2010. 


srobinson on DSKHWCL6B1PROD with RULES
81378 Federal Register / Vol. 75, No. 248 / Tuesday, December 28, 2010 / Rules and Regulations 

By the Office of Thrift Supervision. 

John E. Bowman, 

Acting Director. 

[FR Doc. 2010–32637 Filed 12–27–10; 8:45 am] 

BILLING CODE P 

NATIONAL CREDIT UNION 

ADMINISTRATION 

12 CFR Parts 701, 708a, and 708b 

RIN 3133–AD40 

Fiduciary Duties at Federal Credit 

Unions; Mergers and Conversions of 

Insured Credit Unions 

AGENCY: National Credit Union 

Administration (NCUA). 

ACTION: Final rule. 

SUMMARY: NCUA is issuing final 

amendments to its regulations covering 

several related subjects. The final rule 

documents and clarifies the fiduciary 

duties and responsibilities of Federal 

credit union (FCU) directors. The final 

rule amends NCUA’s indemnification 

regulation limiting indemnification of 

FCU officials and employees for liability 

arising from improper decisions that 

affect the fundamental rights of credit 

union members, and makes conforming 

changes to the standard FCU and 

corporate credit union bylaws. In 

addition, the final rule adds new 

provisions establishing the procedures 

for insured credit unions merging into 

banks. The final rule also amends some 

of NCUA’s existing regulatory 

procedures applicable to insured credit 

union mergers with other credit unions, 

conversions to mutual savings banks 

(MSBs), and termination of share 

insurance. 

DATES: This rule is effective January 27, 

2011. 

FOR FURTHER INFORMATION CONTACT: Paul 

Peterson, Associate General Counsel; 

Elizabeth Wirick, Staff Attorney; or 

Jacqueline Lussier, Staff Attorney; 

Office of General Counsel, at the 

National Credit Union Administration, 

1775 Duke Street, Alexandria, Virginia 

22314–3428 or telephone (703) 518– 

6540. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On March 18, 2010, the NCUA Board 

issued a Notice of Proposed Rulemaking 

(NPR or Proposal) to amend parts 701, 

708a, and 708b of NCUA’s rules. 75 FR 

15574 (March 29, 2010). 

The Proposal would have: 

• Added a new § 701.4 clarifying the 

authorities and duties of FCU directors 

in managing the affairs of their credit 

unions and revising § 701.33 limiting 

indemnification of FCU officials and 

employees for liability arising from 

improper decisions that affect the 

fundamental rights of credit union 

members. 

• Revised the existing provisions of 

Part 708a on insured credit union to 

MSB conversions. 

• Added a new subpart C to Part 708a 

setting forth procedural and substantive 

requirements for converting an insured 

credit union to a bank by merger. 

• Revised the existing provisions of 

Part 708b on insured credit union 

mergers with other credit unions and 

the termination of Federal share 

insurance. 

The public comment period for the 

NPR closed on May 28, 2010. NCUA 

received comments from 40 commenters 

including ten Federal and State credit 

unions, 16 credit union trade 

organizations (which included 13 State 

credit union leagues), one State credit 

union regulators’ association, six law 

firms, two credit union consultants, an 

individual credit union member, an 

election teller, a private deposit insurer, 

an association representing the interests 

of converting credit union members, 

and one bank trade association. The 

most significant comments on each part 

of the Proposal are discussed in the 

following section-by-section analysis of 

the revisions in this final rule. 

II. Section-by-Section Analysis 

A. Duties of Federal Credit Union 

Boards of Directors (§ 701.4) 

The Proposal included a new § 701.4, 

titled ‘‘General authorities and duties of 

Federal credit union boards of 

directors.’’ 

Sec. 701.4(a) Management of a Federal 

Credit Union 

Proposed paragraph (a) provided that 

the management of each Federal credit 

union is vested in its board of directors, 

and that while a Federal credit union 

board of directors may delegate the 

execution of operational functions to 

Federal credit union personnel, the 

ultimate responsibility of each Federal 

credit union’s board of directors for that 

Federal credit union’s management is 

non-delegable. The language of the 

proposal mirrors the duties of the 

Federal Home Loan Bank directors, as 

expressed in a rule promulgated by the 

Federal Housing Finance Agency 

(FHFA). 12 CFR 917.2(b)(1). 

Some commenters stated that NCUA 

should clarify that while an FCU’s board 

of directors has the ultimate 

responsibility for the management of the 

credit union, this responsibility does 

not include day-to-day management. 

One commenter said that NCUA should 

withdraw the language in the second 

sentence of proposed paragraph (a) 

making the board’s ultimate 

responsibility for the credit union’s 

management non-delegable. This 

commenter stated the FCU Act vests the 

management of each FCU in the board 

of directors, but it does not prohibit the 

board from delegating the management 

of the credit union. The commenter 

further stated that since an FCU’s board 

is composed primarily of unpaid 

volunteers the board of directors should 

be allowed to delegate the management 

to compensated executives. The 

commenter recommended NCUA 

substitute language that the board of 

directors provides the general direction 

for the credit union, which would better 

reflect the policy-making role of the 

board. 

The NCUA Board agrees that 

paragraph (a) should more closely track 

the language of section 113 of the FCU 

Act, which employs the language 

‘‘general direction and control.’’ 

Accordingly, the final rule substitutes 

‘‘general direction and control’’ for 

‘‘management.’’ This amendment clarify 

that the directors do not actually 

manage the credit union. The board of 

directors, however, may not and cannot 

delegate its ultimate statutory 

responsibility for the proper 

management of the credit union. 

Sec. 701.4(b) Duties of Federal Credit 

Union Directors 

Proposed paragraph (b) set forth the 

fiduciary duties of FCU directors. It 

charged each director to: 

• Carry out his or her duties as a 

director in good faith, in a manner 

reasonably believed to be in the best 

interests of the membership of the FCU, 

and with such care, including 

reasonable inquiry, as an ordinarily 

prudent person in a like position would 

use under similar circumstances 

(paragraph (b)(1)); 

• Administer the affairs of the FCU 

fairly and impartially and without 

discrimination in favor of or against any 

particular member (paragraph (b)(2)); 

• Understand the FCU’s balance sheet 

and income statement and ask, as 

appropriate, substantive questions of 

management and the internal and 

external auditors (paragraph (b)(3)); and 

• Direct the operations of the FCU in 

conformity with the requirements set 

forth in the Federal Credit Union Act, 

the NCUA’s regulations, other 

applicable law, and sound business 

practices (paragraph (b)(4)). 


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