53596 Federal Register / Vol. 76, No. 166 / Friday, August 26, 2011 / Rules and Regulations 

1See generally, HERA, Division A, Titles I–III, 

Public Law 110–289, 122 Stat. 2654, sections 1101 

et seq. (July 30, 2008). Specifically, section 1101 of 

HERA amended section 1311(a) of the Safety and 

Soundness Act, Title XIII, Public Law 102–550, 106 

Stat. 3672, 3941–4012, sections 1301 et seq. (1992), 

to establish FHFA as an independent agency of the 

Federal government. See 12 U.S.C. 4511(a). 

2The existing regulations are enforceable by the 

Director, until such time as they are modified, 

terminated, set aside, or superseded by the Director, 

as provided by HERA sections 1302 and 1312, 122 

Stat. 2795, 2798. See also 75 FR 49314, 49315, 

n. 6. 

FEDERAL HOUSING FINANCE BOARD 

12 CFR Part 908 

FEDERAL HOUSING FINANCE 

AGENCY 

12 CFR Part 1209 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

Office of Federal Housing Enterprise 

Oversight 

12 CFR Part 1780 

RIN 2590–AA14 

Rules of Practice and Procedure 

AGENCIES: Federal Housing Finance 

Board; Federal Housing Finance 

Agency; and Office of Federal Housing 

Enterprise Oversight. 

ACTION: Final rule. 

SUMMARY: The Federal Housing Finance 

Agency (FHFA) is adopting a final rule 

to implement the Housing and 

Economic Recovery Act of 2008 (HERA) 

amendments to the Federal Housing 

Enterprises Financial Safety and 

Soundness Act of 1992 (Safety and 

Soundness Act) and the Federal Home 

Loan Bank Act (Bank Act) governing 

civil administrative enforcement actions 

by FHFA, under which FHFA’s 

authority was consolidated to initiate 

enforcement proceedings against the 

Federal National Mortgage Association 

(Fannie Mae) and the Federal Home 

Loan Mortgage Corporation (Freddie 

Mac) (together, the Enterprises), the 

Federal Home Loan Banks (the Banks) 

(collectively, the regulated entities), and 

their entity-affiliated parties. This rule 

removes the existing Rules of Practice 

and Procedure of the Federal Housing 

Finance Board (Finance Board) and the 

Office of Federal Housing Enterprise 

Oversight (OFHEO), and establishes 

new FHFA regulations. 

DATES: This rule is effective September 

26, 2011. 

FOR FURTHER INFORMATION CONTACT: 

Stephen E. Hart, Managing Associate 

General Counsel, Federal Housing 

Finance Agency, 1700 G Street, NW., 

Fourth Floor, Washington, DC 20552, 

telephone (202) 414–8960 (not a toll-free 

number). The telephone number for the 

Telecommunications Device for the Deaf 

is: (800) 877–8339. 

SUPPLEMENTARY INFORMATION: The 

Supplementary Information is organized 

according to this table of contents: 

I. Background 

II. Summary of Comments 

III. Final Rule 

IV. Paperwork Reduction Act 

V. Regulatory Flexibility Act 

I. Background 

A. Regulatory History 

On August 12, 2010, FHFA published 

for comment a proposed rule to 

implement the provisions of HERA 

authorizing FHFA to take civil 

enforcement actions in accordance with 

sections 1371 through 1379D of the 

Safety and Soundness Act under 

specified conditions. 75 FR 49314 

(proposed rule). The proposed rule 

included proposed Rules of Practice and 

Procedure for hearings on the record in 

enforcement actions, rules of practice 

governing individuals who practice 

before FHFA, provisions for periodic 

civil money penalty adjustments, and 

the rules governing suspension or 

removal of an entity-affiliated party 

charged with a felony. The comment 

period closed on October 12, 2010. 

FHFA received two comment letters 

on the proposed rule, one from the 12 

Banks and the other from two trade 

associations, that generally were 

supportive of the proposal, and 

recommended ways in which the 

regulation could be amended to better 

achieve its objectives. A discussion of 

those comments follows. The key 

substantive issues raised by the 

comment letters focused principally on 

procedural refinements, whether the 

procedures for hearings would apply to 

enforcement actions on housing goals, 

and whether the rule was intended to 

cover investigative subpoenas. In this 

final rule, FHFA has incorporated 

certain revisions suggested by these 

commenters, but in other respects 

retains the substance of the proposed 

rule for the reasons stated in the 

comment summary below. 

B. HERA Amendments 

On July 30, 2008, HERA, Public Law 

No. 110–289, 122 Stat. 2654, became 

law and created FHFA as an 

independent agency of the Federal 

government.1 Among other things, 

HERA transferred to FHFA the 

supervisory and oversight 

responsibilities over the Enterprises, 

previously vested in OFHEO, and the 

Banks, which had been regulated by the 

Finance Board. HERA established FHFA 

as the financial safety and soundness 

regulator to oversee the prudential 

operations of the regulated entities and 

to ensure that they operate in a safe and 

sound manner; remain adequately 

capitalized; foster liquid, efficient, 

competitive and resilient national 

housing finance markets; comply with 

the Safety and Soundness Act and their 

respective authorizing statutes, as well 

as all rules, regulations, guidelines, and 

orders issued under law; and carry out 

their missions through activities that are 

authorized by law and are consistent 

with the public interest. See 12 U.S.C. 

4513. The Enterprises and Banks 

continue to operate under regulations 

promulgated by OFHEO and the 

Finance Board, respectively, until such 

time as the existing regulations are 

supplanted by regulations promulgated 

by FHFA.2

C. HERA-Enhanced Enforcement 

Authority 

Because the regulated entities play a 

key role in housing finance and the U.S. 

economy, and FHFA’s mission is to 

provide effective supervision, 

regulation, and housing mission 

oversight of the Enterprises and the 

Banks, HERA amended the Safety and 

Soundness Act to make explicit the 

general regulatory and supervisory 

authority of FHFA and the Director. See 

generally, 12 U.S.C. 4511, 4513, 4517, 

4518, and 4526. The HERA amendments 

to sections 1371 through 1379D of the 

Safety and Soundness Act (12 U.S.C. 

4631 through 4641) authorize the 

Director to initiate administrative 

enforcement proceedings to issue cease 

and desist orders and temporary cease 

and desist orders and to impose civil 

money penalties against regulated 

entities, entity-affiliated parties, and the 

Office of Finance of the Federal Home 

Loan Bank System, in accordance with 

applicable law. 

Additionally, the HERA provisions in 

section 1377(a) of the Safety and 

Soundness Act (12 U.S.C. 4636a(a)), 

give the Director express authority to 

suspend or remove from office, or to 

prohibit any further participation in the 

conduct of the affairs of a regulated 

entity, an entity-affiliated party, or any 

officer, director, or management of the 

Office of Finance, for any violation, 

practice, or breach of such party’s 

fiduciary duty, as set forth therein. 

Thus, in accordance with section 

1377(b) of the Safety and Soundness Act 

(12 U.S.C. 4636a(b)), the Director can 

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Federal Register / Vol. 76, No. 166 / Friday, August 26, 2011 / Rules and Regulations 53597 

3The Director has broad safety and soundness 

enforcement authority under sections 1371 through 

1379D of the Safety and Soundness Act, (subtitle 

C—Enforcement Provisions) (12 U.S.C. 4631 

through 4641), in furtherance of the Director’s 

general safety and soundness regulatory authority. 

Additionally, the Director has authority under 

subtitle B of the Safety and Soundness Act (sections 

1361 through 1369E) to set and enforce capital 

levels or to appoint FHFA as conservator or receiver 

for a regulated entity. More important, as amended 

by HERA, section 1311(c) of the Safety and 

Soundness Act expressly preserves these powers in 

addition to the Director’s general supervisory and 

regulatory authority under subsection (b) of section 

1311 of the Safety and Soundness Act, as amended: 

‘‘[t]he authority of the Director to take actions under 

subtitles B and C shall not in any way limit the 

general supervisory and regulatory authority 

granted to the Director under subsection (b).’’ See 

12 U.S.C. 4511(c). 

4The proposed rule included a discussion of its 

origin in the Uniform Rules. See 75 FR 49314, 

49316–17. 

5Public Law 89–554, 80 Stat. 381 (1966) (codified 

at 5 U.S.C. 551–559; 701–706). Formal 

adjudications (i.e., hearings ‘‘on the record’’) are 

governed by chapters 5 and 7 of the APA (5 U.S.C. 

554, 556, and 557). The APA grants each agency 

‘‘the authority necessary to comply with the 

requirements of [chapter 5] through the issuance of 

rules or otherwise.’’ See 5 U.S.C. 559. 

6No hearing on the record is required prior to the 

issuance of an order under section 1377(h) of the 

Safety and Soundness Act (12 U.S.C. 4636a(h)), for 

the suspension or removal of an entity-affiliated 

party charged with a felony. Once served, the 

subject may timely submit a written request to 

appear before the Director to show the continued 

service would not pose a threat to the interests of 

the regulated entity or threaten to impair public 

confidence in the regulated entity. This provision 

does not authorize or require a formal hearing on 

the record; therefore, the subpart C provisions of the 

proposed rule do not govern such proceedings. 

take immediate action to suspend or 

remove from office, or to prohibit the 

participation in any manner in the 

conduct of the affairs of the regulated 

entity, any party subject to an action 

under section 1377(a) of the Safety and 

Soundness Act. 

Moreover, under section 1377(h) of 

the Safety and Soundness Act (12 U.S.C. 

4636a(h)), with respect to any entityaffiliated party who is charged with a 

Federal or state crime involving 

dishonesty or breach of trust, which is 

punishable by imprisonment for more 

than one year, in any criminal 

information, indictment or complaint, 

the Director is authorized to suspend 

such party from office or prohibit him 

or her from any further involvement in 

the conduct of the affairs of a regulated 

entity if continued service or 

participation by such party could pose 

a threat to, or impair public confidence 

in, the regulated entity. See 12 U.S.C. 

4636a(h)(1)(A). The statute prescribes 

that a copy of the suspension notice 

shall be served on each relevant 

regulated entity, see 12 U.S.C. 

4636a(h)(1)(B)(i), and specifies 

streamlined procedures for such actions. 

Prior to HERA section 1379B of the 

Safety and Soundness Act (12 U.S.C. 

4641) established the subpoena power 

of the Director in administrative 

proceedings. Under the HERA 

amendments, section 1379D of the 

Safety and Soundness Act makes 

explicit agency subpoena powers in 

investigations and examinations, and 

authorizes any designated 

representative of the Director to issue, 

revoke, quash, or modify a subpoena or 

subpoena duces tecum, as follows: 

In the course of or in connection with any 

proceeding, examination, or investigation 

under this chapter, the Director or any 

designated representative thereof, including 

any person designated to conduct any 

hearing under this subchapter shall have the 

authority * * * to revoke, quash, or modify 

subpoenas and subpoenas duces tecum. 

12 U.S.C. 4641. This provision, 

however, should not be read to subject 

investigative subpoenas, subpoenas 

issued in connection with an 

examination, or conservator and 

receiver subpoenas to the procedural 

requirements that would apply in 

administrative enforcement 

proceedings. 

Thus, under these enhanced powers, 

the Director has at his or her disposal a 

broad range of enforcement mechanisms 

to enforce, as needed, applicable law, 

rules, orders, and agreements pertaining 

to the safe and sound operation of the 

Enterprises and Banks.3 In fact, much of 

FHFA’s enforcement authority parallels 

that of the Federal bank and thrift 

regulators who adopted uniform rules of 

practice and procedure for enforcement 

actions pursuant to section 916 of the 

Financial Institutions Reform, Recovery 

and Enforcement Act of 1989 (FIRREA), 

Public Law 101–73, 103 Stat. 183 (1989) 

(Uniform Rules). The Uniform Rules set 

the standard for formal enforcement 

proceedings, and served as the model 

for the enforcement regulations adopted 

by the Finance Board in 2002 (12 CFR 

part 908) and OFHEO in 1999 (as 

amended in 2001) (12 CFR part 1780).4

FHFA has determined mainly to 

adopt these procedures, with some 

changes that reflect the differences in 

the respective regulatory structures. 

Thus, the final rule builds upon the 

Uniform Rules and the rules previously 

adopted by the Finance Board and 

OFHEO. 

Cease and desist enforcement 

proceedings are commenced by serving 

a notice of charges that is to set forth the 

facts constituting the practice or 

violation and fix a time and place for a 

hearing to determine on the record 

whether an order to cease and desist 

from such practice or violation should 

issue. See 12 U.S.C. 4631(c)(1). Such 

hearings are governed by section 1373 of 

the Safety and Soundness Act. See 

generally, 12 U.S.C. 4633. In fact, 

section 1373(a)(1) of the Safety and 

Soundness Act (12 U.S.C. 4633(a)(1)) 

requires that any hearing under sections 

1371 (cease and desist order), 1376(c) 

(civil money penalty assessment), or 

1377 (removal or suspension orders; 

except removal actions under section 

1377(h) of the Safety and Soundness 

Act) be held on the record and 

conducted in accordance with sections 

554, 556, and 557 of the Administrative 

Procedure Act (APA).5 See 12 U.S.C. 

4633(a)(1), (3). 

Therefore, prior to issuing a ceaseand-desist order, imposing civil money 

penalties, or ordering the suspension or 

removal of an entity-affiliated party or 

any officer, director, or management of 

the Office of Finance, FHFA must 

conduct a hearing on the record and 

provide the subject of such an order 

with notice and the opportunity to 

participate in a formal hearing. The final 

rule establishes the procedural 

requirements for any such hearing on 

the record.6

D. The Proposed Rule 

The proposed rule was to govern 

administrative hearings on the following 

matters that FHFA by law must conduct 

on the record under APA formal hearing 

requirements: 

(1) Enforcement proceedings under 

sections 1371 through 1379D of the 

Safety and Soundness Act (12 U.S.C. 

4631 through 4641) (except section 

1377(h) (12 U.S.C. 4636a)); 

(2) Removal, prohibition, and civil 

money penalty proceedings for 

violations of post-employment 

restrictions imposed by applicable law; 

and 

(3) Proceedings under section 102 of 

the Flood Disaster Protection Act of 

1973, as amended (42 U.S.C. 4012a), to 

assess civil money penalties. 

Because the procedural framework for 

formal hearings on the record is 

appropriate for other types of 

enforcement actions, the formal hearing 

procedures were enumerated separately 

in subpart C of the proposed rule. The 

procedural framework established in 

subpart C of the proposed rule may 

accommodate formal enforcement 

actions under sections 1341 and 1345 of 

the Safety and Soundness Act 

pertaining to the achievement of 

housing goals and enforcement actions 

to enforce the regulated entities’ 

reporting requirements under section 

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53598 Federal Register / Vol. 76, No. 166 / Friday, August 26, 2011 / Rules and Regulations 

7See 75 FR 49314, 49317, n. 17, 18. 

8See id. at n. 19. 

9See id. at n. 20. 

10So in original; no paragraphs (d) and (e) were 

enacted. See 12 U.S.C.A. 4513 n 1. 

1314 of the Safety and Soundness Act 

(12 U.S.C. 4514). 

As proposed, the rule would have 

replaced the Rules of Practice and 

Procedure previously adopted by 

OFHEO (12 CFR part 1780) and the 

Finance Board (12 CFR part 908).7 Many 

of the existing procedures were retained 

in the proposed rule without significant 

revisions. The proposed rule set out the 

requirements for the commencement of 

an enforcement proceeding by service of 

a notice of charges; the appointment of 

a presiding officer; hearing procedures 

and permissible activities; the conduct 

of the trial-like testimonial phase of the 

hearing process; the presiding officer’s 

filing with the Director of a 

recommended decision and order, along 

with the hearing record; the decision by 

the Director; and the qualifications and 

disciplinary rules for practice before 

FHFA.8

The proposed process was similar to 

the existing rules in that during the 

course of the hearing, the presiding 

officer would control virtually all 

aspects of the proceeding. In particular, 

the proposed rule would have 

established that the presiding officer 

would determine the hearing schedule; 

preside over all conferences; rule on 

non-dispositive motions, discovery, and 

evidentiary issues; and ensure that the 

proceeding is prompt, fair, and 

impartial, and allows for the creation of 

a written record upon which the 

recommended decision is based.9

The proposed rule retained the 

existing requirement that the Director 

issue a final ruling within 90 days of the 

date on which the Director serves notice 

upon the parties that the hearing record 

is complete and the case has been 

submitted for final decision. The 

proposed rule similarly would have 

reserved to the Director the authority to 

dismiss the proceeding, in whole or in 

part, or to make a final determination of 

the merits of the proceeding. 

Informed by OFHEO’s prior 

experience in conducting enforcement 

proceedings under its existing Rules of 

Practice and Procedure, FHFA 

identified certain issues for clarification 

in its revised rule. Accordingly, the 

proposed rule would have included a 

definition of ‘‘notice of charges’’ to 

establish the notice of charges as the 

charging document that is served by 

FHFA on a regulated entity or party as 

provided in sections 1371 through 1377 

of the Safety and Soundness Act (12 

U.S.C. 4631 through 4636a) to initiate 

enforcement proceedings. Additionally, 

to avert any future confusion, the 

proposed rule would have stated in a 

new definition in § 1209.3 that a ‘‘notice 

of charges’’ is to be distinguished from 

an ‘‘effective notice’’ within the 

meaning of 12 U.S.C. 4635(a), to more 

clearly articulate that this provision 

does not confer upon a Federal district 

court subject matter jurisdiction over 

FHFA’s administrative enforcement 

proceeding. That is, although a Federal 

district court has authority to enforce an 

effective notice or order that has been 

issued by FHFA, such a notice is not the 

same as a notice of charges and the 

court does not obtain subject matter 

jurisdiction over an ongoing 

administrative enforcement proceeding 

through this provision. 

The proposed rule sought to make the 

presiding officer’s authority more 

explicit in several respects. A principal 

revision in § 1209.11(b)(1) made explicit 

the authority of the presiding officer to 

hold an initial scheduling conference to 

control the proceedings and set the date 

for the testimonial phase of the hearing 

in a scheduling order issued in 

conjunction with the initial scheduling 

conference set under § 1209.36 of the 

proposed rule. As a corollary to the 

authority of the presiding officer to set 

the date of the evidentiary hearing in a 

scheduling order, § 1209.23 of the 

proposed rule would clarify that the 

notice of charges is to specify that the 

testimonial hearing date will be 

determined when the presiding officer 

holds the initial scheduling conference 

and issues a scheduling order within 30 

to 60 days of service of the notice of 

charges. 

Additionally, the proposed rule 

sought to arm the presiding officer with 

sufficient autonomy to control the pace 

and focus of discovery to prohibit 

unnecessary or burdensome discovery. 

First, § 1209.11(b)(5) of the proposed 

rule confirmed that the presiding officer 

has full authority to issue and enforce 

discovery orders. Second, 

§ 1209.11(b)(8) of the proposed rule was 

to effectively codify the broad powers of 

the presiding officer to regulate the 

scope, timing, and completion of 

discovery of any non-privileged matter 

that is materially relevant to the charges 

or allowable defenses in the proceeding. 

Third, the proposed rule made 

explicit the requirement that matters or 

documents subject to discovery must be 

‘‘materially relevant’’ to the charges or 

allowable defenses in the proceeding. 

This measure of allowable discovery 

was stated to support the presiding 

officer’s discretion and enhance his 

ability to deny discovery requests that 

seek information having no logical 

connection to a consequential fact that 

would tend to prove or to disprove a 

matter in issue. The proposed rule thus 

would have included a parallel 

authority in § 1209.11(b)(11) to 

underscore that the presiding officer has 

ample authority to admit, exclude, or 

limit evidence according to its material 

relevance to the legally cognizable 

claims and defenses presented by a 

notice of charges. 

E. Differences 

When promulgating any regulation 

that may have future affect relating to 

the Banks, the Director is required by 

section 1201 of HERA to consider the 

differences between the Banks and the 

Enterprises with respect to the Banks’ 

cooperative ownership structure; 

mission of providing liquidity to 

members; affordable housing and 

community development mission; 

capital structure; and joint and several 

liability. See section 1201 Public Law 

110–289, 122 Stat. 2782–83 (amending 

12 U.S.C. 4513(f)[sic]).10 As noted in the 

preamble to the proposed rule, the 

Director considered the differences 

between the Banks and the Enterprises, 

as they relate to the above factors, and 

determined that the rule is appropriate. 

See 75 FR 49314, 49315. FHFA also 

requested comments from the public 

about whether differences related to 

these factors should have resulted in 

any revisions to the proposed rule. No 

comments specific to that request were 

received. In sum, the five differences 

identified in section 1201 of HERA do 

not require a different enforcement 

regulation for the Banks than for the 

Enterprises. Therefore, the comparative 

analysis under section 1201 of HERA 

undertaken for the proposed rule 

required no changes. 

On the effective date, this final rule 

will, among other things, repeal and 

replace the current Finance Board Rules 

of Practice and Procedure regulation 

governing formal enforcement 

proceedings (12 CFR part 908), revised 

to implement the HERA-amended 

enforcement scheme. 

II. Summary of Comments 

FHFA received two comment letters 

on the proposed rule. In their respective 

letters the Banks and the trade 

associations commented on more than 

two dozen provisions and noted a 

number of broader issues presented in 

the proposed rule. Those broader issues 

centered on: whether the evidentiary 

standard stated in the rule is 

comparable to that of the Uniform 

Rules; whether the rule may apply to 

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enforcement of housing goals; whether 

some of the procedures may provide 

FHFA with a tactical advantage over the 

responding party; whether the rule is 

intended to apply to investigative 

subpoenas; whether the provisions on 

district court jurisdiction should be 

clarified; whether the rule should be 

revisited to impose the standards of 

conduct for parties appearing before the 

Director on agency employees, and 

whether the rule should impose on 

agency staff and the presiding officer a 

confidentiality requirement under the 

Trade Secrets Act. These issues are 

addressed in turn below. 

Evidentiary Standard 

One commenter queried whether the 

evidentiary standard expressed in the 

proposed rule strays from the model 

Uniform Rules. FHFA has considered 

the comment and concluded that the 

rule does not depart from the 

evidentiary standard for discovery in 

enforcement hearings embodied in the 

Uniform Rules. Indeed, it is fully 

consistent with the Federal Deposit 

Insurance Corporation’s rule that allows 

discovery of ‘‘any matter, not privileged, 

that has material relevance to the merits 

of the pending action.’’ 12 CFR 

308.24(b). This rule adopts a similar 

standard that the evidence must be 

materially relevant to the charges or 

allowable defenses presented in the 

action. The ‘‘materially relevant’’ 

standard ensures that the information to 

be introduced for the record will have 

a logical connection to a consequential 

fact that tends to prove or disprove a 

matter in issue. 

The discovery requirement was made 

more explicit also to underscore that in 

an administrative enforcement hearing 

the presiding officer must have 

authority to frame the issues, control the 

pace of the proceedings, and to admit, 

exclude or limit evidence according to 

its materiality, relevance, and analytical 

usefulness in the context of the claims 

and available defenses. This standard 

for discovery matters is fully consistent 

with the APA requirement for formal 

administrative hearings that an agency 

‘‘as a matter of policy shall provide for 

the exclusion of irrelevant, immaterial, 

or unduly repetitive evidence.’’ See 5 

U.S.C. 556(d). Moreover, it fosters 

conclusions based on a hearing record 

that comprises ‘‘reliable, probative, and 

substantial evidence.’’ See id. It is, 

therefore, essential for evidentiary 

probity to make express this clear 

standard in order to promote the fair 

resolution of issues in an equitable and 

timely fashion, and for the conservation 

of the resources of the presiding officer. 

This issue also is discussed below in 

response to a comment on § 1209.11(b) 

of the proposed rule. 

Enforcement of Enterprise Housing 

Goals 

The grounds and remedies for cease 

and desist enforcement proceedings 

relative to Enterprise housing goals 

(exclusive of the requirements 

pertaining to underserved markets) in 

12 U.S.C. 4581 differ from those for 

cease and desist enforcement 

proceedings under 12 U.S.C. 4631, but 

the hearing process called for in 12 

U.S.C. 4582 for enforcement of housing 

goals is essentially identical to the 

hearing procedure requirements set out 

in 12 U.S.C. 4633. Therefore, the 

proposed rule allowed that in the future 

the hearing procedures in subpart C of 

the proposed rule might be utilized for 

housing goals enforcement hearings. 

One commenter opined that 

application of the hearing procedures in 

subpart C of the proposed rule to 

Enterprise housing goals enforcement 

proceedings ‘‘appears sensible,’’ but 

recommended that FHFA should be 

clear about which subpoena authority 

would be used in such actions because 

the subpoena authority in 12 U.S.C. 

4588 differs in certain respects. For 

example, the treatment of witness fees 

in 12 U.S.C. 4588 has provisions not 

found in the subpoena authority in 12 

U.S.C. 4641. Moreover, following the 

HERA amendments, 12 U.S.C. 4641 

applies to administrative enforcement 

actions, examinations, and 

investigations. Compare 12 U.S.C. 4588 

with 12 U.S.C. 4641. Without presaging 

every possible scenario, 12 U.S.C. 4588, 

the subpoena authority for housing 

goals administrative enforcement 

proceedings under 12 U.S.C. 4581, 

appears to be controlling in such 

actions. Without more information, 

specific guidance on such issues in 

advance of potential future rulemakings 

would be premature. 

Tactical Advantages 

One commenter questioned whether 

certain provisions of the proposed rule 

provided for symmetrical treatment of 

parties or their counsel in an 

enforcement action, in particular with 

respect to the filing of documents under 

seal (§ 1209.12(c)), requesting a closed 

hearing (§ 1209.12(d)), and authority to 

sanction counsel for ex parte contact of 

decisional employees (§§ 1209.14 and 

1209.70). These sections are not unfairly 

weighted in favor of FHFA counsel of 

record. First, whether a proceeding 

should be open to the public or a 

document should be filed under seal is 

vested exclusively in the agency by the 

statutory authority reserved to the 

Director to determine if disclosure 

would be contrary to the public interest. 

Therefore, to file a document under seal, 

FHFA counsel of record must make a 

written determination that disclosure of 

the document would be contrary to the 

public interest; at the same time the 

presiding officer is authorized to issue 

orders or close hearings in whole or in 

part to ensure the confidentiality of the 

material is preserved. Thus, the 

proposed rule would have entrusted to 

the presiding officer the responsibility 

to maintain the confidentiality of 

information. These standards are 

consistent with due process and the 

Uniform Rules. Furthermore, all parties’ 

rights to protect confidential 

information are preserved because any 

party to a proceeding may request 

confidential treatment of information, 

such as personal financial information, 

in the form of a protective order. 

Second, the standards set forth in 

Subpart D governing representational 

conduct before the agency are to 

promote the expeditious, fair resolution 

of adjudications or matters defined as 

‘‘practice before FHFA,’’ including 

enforcement proceedings. FHFA 

counsel of record appearing before the 

presiding officer in an enforcement 

proceeding would of course be subject 

to these requirements. In addition, 

FHFA employees are held to standards 

of conduct and ethical requirements that 

are set forth and redressed under Title 

5 of the United States Code. The 

procedures in subpart C of the proposed 

rule would not govern such matters. 

Notwithstanding the express authority 

of the presiding officer to take remedial 

action or sanction a party or 

representative for prohibited acts in a 

proceeding, the overall authority of the 

presiding officer and Director to take 

action or impose restrictions or 

sanctions authorized under applicable 

statute or regulations is preserved by 

§ 1209.74(c)(4). 

Investigative Subpoenas 

One commenter asked for clarification 

on whether the proposed rule is 

intended to govern investigatory 

subpoenas. The commenter attributed 

the confusion, in part, to the fact that 12 

U.S.C. 4641 contains authority for the 

issuance of subpoenas in examinations 

and investigations, in addition to 

adjudications. To be clear, 12 U.S.C. 

4641 is included in the citation as 

support for the rule because it contains 

the authority for adjudicative 

subpoenas; there was no intention to 

suggest the proposed rule for 

enforcement proceedings would apply 

to investigations or examinations. The 

commenter posited that the proposed 

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53600 Federal Register / Vol. 76, No. 166 / Friday, August 26, 2011 / Rules and Regulations 

11 12 U.S.C. 4635(b) provides in pertinent part: 

‘‘Except as otherwise provided in this subchapter 

and sections 4619 and 4623 of this title, no court 

shall have jurisdiction to affect, by injunction or 

otherwise, the issuance or enforcement of any 

notice or order under section 4631, 4632, 4513b, 

4636 or 4637 of this title, or subchapter II of this 

chapter, or to review, modify, suspend, terminate, 

or set aside any such notice or order.’’ Public Law 

102–550, Title XIII, § 1375, Oct. 28, 1992, 106 Stat. 

3990; Public Law 110–289, Div. A, Title I, § 1154, 

122 Stat. 2775, July 30, 2008. 

rule would not apply to examinations or 

investigations because: (1) FHFA has 

authority to issue (only) two types of 

subpoenas, investigative and 

adjudicatory; and (2) routine 

examinations generally would not 

involve the issuance of subpoenas, and 

if the subpoena authority is exercised 

‘‘it is commonly called a formal 

investigation.’’ FHFA has considered 

these comments, and notes that express 

examination subpoena power is 

established by the HERA amendments 

in 12 U.S.C. 4641. In addition, FHFA 

agrees with the conclusion that the 

proposed rule does not establish a 

process for formal investigations, and 

thus further clarification would be 

unnecessary. Finally, by law, FHFA as 

conservator or receiver may issue 

subpoenas pursuant to 12 U.S.C. 

4617(b)(2)(I). Therefore, FHFA has 

determined that no changes to the 

proposed rule are required. 

Judicial Enforcement of Administrative 

Subpoenas 

One commenter recommended 

removal of the last sentence in the 

provision that governs discovery of 

parties, § 1209.30(h)(2), which states 

that the jurisdiction of district courts to 

enforce administrative subpoenas is as 

provided by 12 U.S.C. 4641(c)(2). 

Specifically, the proposed rule would 

have added a new sentence citing the 

limitations on district court jurisdiction 

that are found in 12 U.S.C. 4635(b), to 

underscore that a district court when 

called upon to enforce an administrative 

subpoena does not obtain subject matter 

jurisdiction over the administrative 

enforcement action.11 In sum, the 

statute makes express that the district 

court’s jurisdiction is limited to 

determining whether the subpoena is 

legally enforceable and to order 

compliance. But because no corollary 

sentence was added to the section on 

discovery of nonparties in § 1209.31, 

FHFA has deleted the last sentence in 

§ 1209.30(h)(2) from the final rule to 

avoid any potential for confusion. 

Sanctions 

One commenter objected that the 

proposed rule would permit dissimilar 

treatment of agency counsel for 

prohibited conduct and requested that 

agency counsel should be expressly 

barred from engaging in ex parte 

communications and from conferring 

with decisional staff on settlement 

offers. Additionally, the commenter 

recommended that the presiding officer 

should have express authority under the 

subpart D provisions to sanction agency 

counsel for prohibited conduct. Ex parte 

communications are prohibited in 

§ 1209.14 of the proposed rule. The 

commenter objected that the proposed 

rule fails to act as a deterrent to both 

parties, because it does not expressly 

subject agency counsel to the sanctions 

applicable to prohibited 

communications. 

Contrary to the commenter’s 

assertion, the rule anticipates that 

agency counsel would refrain from 

improper conduct and ex parte 

communications with the presiding 

officer. Any party or representative 

appearing in an administrative 

enforcement hearing, including FHFA 

counsel of record, is subject to the bar 

on ex parte communications and the 

corresponding authority of the presiding 

officer. Nevertheless, the rule does 

allow for the agency head to be briefed 

on matters that may relate to settlement 

issues and complex supervisory or 

regulatory matters by those employees 

who best know the subject matter, even 

if the subject matter bears on the 

proceeding. FHFA does not agree that, 

in such situations FHFA counsel of 

record should be so prohibited and 

subject to disciplinary action. Where the 

Director must rely on the expertise of 

agency staff, the Director should not be 

denied advice of counsel. For these 

reasons, FHFA declines to revise the 

final rule. 

Trade Secrets Act Reminder 

One commenter remarked that more 

protections for confidential information 

should be afforded where discovery 

requests often may seek the production 

of confidential financial or other 

proprietary materials from parties and 

nonparties. The commenter notes that 

the Trade Secrets Act prohibits Federal 

employees from divulging trade secrets 

obtained in the course of their Federal 

employment, and notwithstanding the 

precautions taken by FHFA employees, 

the rule should contain a reminder of 

these prohibitions. Neither the Uniform 

Rules nor the current respective agency 

Rules of Practice and Procedure include 

a reference to the Trade Secrets Act. 

Several factors dictate against adding a 

specific reference to the Trade Secrets 

Act in the final rule. 

First, the Trade Secrets Act prohibits 

officers and employees of Federal 

agencies from publishing or disclosing 

trade secrets and other confidential 

business information ‘‘to any extent not 

authorized by law.’’ This prohibition on 

the public disclosure of trade secrets 

material unquestionably applies to 

FHFA employees. Following a 1992 

amendment, the Trade Secrets Act also 

applied to ‘‘any person acting on behalf 

the Office of Federal Housing Enterprise 

Oversight.’’ (See Public Law 102–550, 

Title. XIII, § 1353, 106 Stat. at 3970). 

Thereafter, section 1161(d) of HERA 

substituted FHFA for OFHEO in this 

provision. Thus, FHFA’s employees, 

contractors and agents are subject to 

criminal penalties for the unauthorized 

public disclosure of trade secrets 

material. 

Second, existing regulations govern 

the disclosure of confidential or 

proprietary information, even where the 

Trade Secrets Act would not bar 

disclosure. See 12 CFR part 1703. In 

short, the regulations currently in effect 

prohibit agency employees from 

disclosing or permitting the disclosure 

of unpublished FHFA information 

absent authorization of the Director. 

Any person or entity that releases, 

discloses, or uses any unpublished 

information, except as expressly 

authorized, may be subject to the 

penalties provided in 18 U.S.C. 641 and 

other applicable laws. A current FHFA 

employee also may be subject to 

administrative or disciplinary 

proceedings under existing OFHEO and 

Finance Board regulations that remain 

in effect until FHFA issues a 

comprehensive regulation. 

Third, apart from the Trade Secrets 

Act and FHFA’s information disclosure 

regulation(s), there are provisions in the 

Rules of Practice and Procedure 

sufficient to ensure that sensitive, 

confidential materials will not be 

inadvertently disclosed in the course of 

an enforcement hearing. The rule as 

proposed includes these safeguards for 

the protection of confidential financial 

and trade secrets information. For 

example, a party (or non-party) who 

provides discovery materials that are 

considered confidential may apply for a 

protective order to preserve the 

confidentiality of the information. In 

addition, FHFA counsel of record may 

file or require the filing of a document 

under seal if he or she provides a 

written determination that disclosure of 

the document or portion of the 

document would be contrary to the 

public interest in accordance with 

§ 1209.12(c) of the proposed rule. 

Moreover, a respondent may move for a 

closed hearing under § 1209.12(b); the 

presiding officer then forwards a 

recommended decision to the Director 

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Federal Register / Vol. 76, No. 166 / Friday, August 26, 2011 / Rules and Regulations 53601 

12Section 1371(a)(2) of the Safety and Soundness 

Act (12 U.S.C. 4631(a)(2)) states in pertinent part 

that the Director may not proceed under that 

section to ‘‘enforce compliance with any housing 

goal established under [sections 1331 through 1348 

of the Safety and Soundness Act], with section 1336 

or 1337 of this title, with subsection (m) or (n) of 

section 309 [of Fannie Mae’s authorizing statute] 

(12 U.S.C. 1723a(m), (n)), with subsection (e) or (f) 

of section 307 [of Freddie Mac’s authorizing statute] 

(12 U.S.C. 1456(e), (f)), or with paragraph (5) of 

section 10(j) of the Federal Home Loan Bank Act (12 

U.S.C. 1430(j)).’’ 

for his determination. And, the 

proceeding itself may be closed to 

entertain the introduction of sealed 

materials under § 1209.12(c). FHFA 

finds that there are sufficient safeguards 

in the rule for the protection of 

materials characterized as trade secrets. 

Finally, the Safety and Soundness Act 

authorizes the Director to make 

disclosures that are, in his or her 

exclusive discretion, in the best interest 

of the public. For example, the Director 

has the authority to determine that 

information sharing with other Federal 

agencies is appropriate where it is 

necessary for the performance of official 

duties, and to determine when it is in 

the public interest to make information 

public. Therefore, FHFA concludes that 

it is not necessary to add a specific 

reference to the Trade Secrets Act in the 

final rule. 

Specific Provisions 

The commenters also raised points 

relating to specific provisions of the 

proposed rule. To the extent that FHFA 

either adopts revisions in the final rule 

in response to those comments or 

declines to adopt comments on the 

proposed rule, those matters are 

addressed below as part of the 

discussion of those sections in the final 

rule. Sections of the proposed rule that 

raised no issues or received no 

comments are to be adopted in the final 

rule as proposed. 

III. Final Rule 

A. General 

The proposed rule would have 

adopted many provisions of the Finance 

Board’s and OFHEO’s enforcement 

rules, which are nearly identical 

procedurally, without substantive 

changes, to be codified in a new part 

1209 that would supersede the existing 

OFHEO and Finance Board Rules of 

Practice and Procedure. In the final rule, 

FHFA is adopting most of those 

provisions of the proposed rule without 

any further substantive changes. Thus, 

most of the provisions of the final rule 

that are located in Subpart A (Scope and 

Authority), Subpart B (Enforcement 

Proceedings under sections 1371 

through 1379D of the Safety and 

Soundness Act), Subpart C (Rules of 

Practice and Procedure), Subpart D 

(Parties and Representational Practice 

before the Federal Housing Finance 

Agency; Standards of Conduct), Subpart 

E (Civil Money Penalty Inflation 

Adjustments), and Subpart F 

(Suspension or Removal of EntityAffiliated Party Charged with Felony), 

are unchanged from the proposed rule. 

Described separately below are all 

instances where FHFA adopts or 

declines to adopt revisions in response 

to comments on specific sections in the 

proposed rule. 

B. Subpart A—Scope and Authority 

Section 1209.3—Definitions 

The proposed rule would have carried 

over into § 1209.3, without substantive 

edits, nearly all of the existing 

definitions from the OFHEO and 

Finance Board regulations that are 

applicable to regulations in this part, 

but would have revised certain 

definitions and added a number of new 

definitions to implement the statutory 

amendments or provide greater clarity. 

Except as described below, the final rule 

adopts the definitions from the 

proposed rule without further change. 

The proposed rule included a new 

definition of ‘‘associated with the 

regulated entity,’’ to address the HERA 

amendments in section 1379 of the 

Safety and Soundness Act that 

established a six-year ‘‘look-back’’ 

period and expanded the scope of the 

parties subject to FHFA enforcement 

jurisdiction. (See 12 U.S.C. 4637). In 

particular, the law provides that the 

Director may issue a notice and proceed 

‘‘against any such entity-affiliated party, 

if such notice is served before the end 

of the six-year period beginning on the 

date such entity-affiliated party ceases 

to be associated with the regulated 

entity.’’ See id. The proposed rule 

would have included a definition of 

‘‘associated with the regulated entity’’ to 

provide descriptive guidance as to the 

type of activities meant by the phrase 

‘‘associated with.’’ One commenter 

opined that ‘‘associated with the 

regulated entity’’ appears to be broader 

than ‘‘entity-affiliated party,’’ and does 

not appear elsewhere in the proposed 

rule. That commenter suggested that the 

six-year period should begin ‘‘on the 

date such entity-affiliated party would 

no longer be deemed to be an entityaffiliated party.’’ 

FHFA disagrees with this suggestion. 

First, section 1379 of the Safety and 

Soundness Act statute was amended 

precisely for that reason—to hold a 

wider class of persons accountable for 

their actions under the Safety and 

Soundness Act. Under HERA, the 

revised provision reads: ‘‘The 

resignation, termination of employment 

or participation, or separation of an 

entity-affiliated party,’’ whereas prior to 

HERA it read: ‘‘Director or executive 

officer of an enterprise.’’ Second, the 

suggested language falls short of setting 

a hard deadline. Because it is too 

subjective, it may actually extend the 

reach of the look-back further than 

Congress intended. Third, by conflating 

‘‘entity-affiliated party’’ with 

‘‘associated with,’’ the provision would 

read: When an entity-affiliated party 

ceases to be an entity-affiliated party. 

Such a reading would strip the phrase 

of any logical meaning and dilute the 

prerequisite. Therefore, the final rule 

adopts the definition as proposed. 

C. Subpart B–Enforcement Proceedings 

Under Sections 1371 Through 1379D of 

the Safety and Soundness Act 

Section 1209.4—Scope and Authority 

This section states the authority for 

administrative enforcement proceedings 

in accordance with sections 1371 

through 1379D of the Safety and 

Soundness Act (12 U.S.C. 4631 through 

4641), which under section 1373 of the 

Safety and Soundness Act (12 U.S.C. 

4633) must be held on the record, as 

follows: (1) Cease and desist and 

temporary cease and desist proceedings 

under sections 1371 through 1372 of the 

Safety and Soundness Act (12 U.S.C. 

4631 through 4633); (2) civil money 

penalty assessment proceedings under 

section 1376 of the Safety and 

Soundness Act (12 U.S.C. 4636); and (3) 

the removal and prohibition 

proceedings under section 1377 of the 

Safety and Soundness Act (12 U.S.C. 

4636a) (except proceedings under 

section 1377(h) of the Safety and 

Soundness Act for the suspension or 

removal of an entity-affiliated party 

charged with a felony (12 U.S.C. 

4636a(h)). 

Additionally, it reiterates that, 

pursuant to sections 1336(c) and 

1371(a)(2) of the Safety and Soundness 

Act (12 U.S.C. 4566(c) and 12 U.S.C. 

4631(a)(2)), actions to enforce housing 

goals must proceed under sections 1341 

and 1345 of the Safety and Soundness 

Act. See 12 U.S.C. 4581, 4585.12 It is 

necessary to make this distinction clear 

because the grounds for initiating cease 

and desist proceedings relative to 

housing goals under 12 U.S.C. 4581 

differ from the cease and desist powers 

under 12 U.S.C. 4631. Similarly, the 

civil money penalties for housing goals 

violations differ from the civil money 

penalty provisions in 12 U.S.C. 4636. 

See 12 U.S.C. 4585. The process for 

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53602 Federal Register / Vol. 76, No. 166 / Friday, August 26, 2011 / Rules and Regulations 

conducting housing goals enforcement 

actions, however, is indistinguishable— 

a notice of charges is served and a 

hearing is conducted on the record. See 

12 U.S.C. 4582(a)(1)). For that reason, 

the formal hearing procedures set out in 

subpart C of part 1209 as proposed are 

well-suited to govern housing goals 

enforcement proceedings. One 

commenter offered that combining the 

hearing procedures appeared sensible. 

FHFA has concluded that promoting use 

of the subpart C procedures for housing 

goals enforcement proceedings supports 

both an economies of scale approach to 

regulation, and provides certainty with 

respect to the process. Therefore, the 

provision is to be adopted in final as 

proposed. 

Section 1209.5—Cease and Desist 

Proceedings 

Section 1209.5 of the proposed rule 

closely followed the requirements of 

section 1371 of the Safety and 

Soundness Act (12 U.S.C. 4631). That 

statutory provision, as amended by 

section 1151 of HERA, sets out the 

authority and establishes several 

requirements for cease and desist 

enforcement proceedings. In the final 

rule, FHFA has retained the language of 

the proposed rule regarding the general 

requirements, but has also made certain 

revisions in response to the comments. 

In particular, § 1209.5(a)(1)(i) in the 

final rule has been edited to state more 

specifically the requisite conditions of 

section 1371(a)(1) of the Safety and 

Soundness Act (12 U.S.C. 4631(a)(1)). 

Additionally, § 1209.5(a)(i) has been 

edited lightly to underscore that the 

cease and desist/civil money penalty 

provisions set out in sections 1371 and 

1376 of the Safety and Soundness Act 

(12 U.S.C. 4631, 4636) are not to be 

applied to the enforcement of housing 

goals. Also in response to a comment, 

§ 1209.5(a)(2) in the final rule has been 

revised to state more expressly the 

discretion and authority of the Director 

to deem a regulated entity to be 

engaging in an unsafe or unsound 

practice on the basis of a less than 

satisfactory rating in its most recent 

report of examination with respect to 

asset quality, management, earnings, or 

liquidity, where the Director finds that 

the deficiency has not been corrected. 

Section 1209.5 of the proposed rule 

summarizes the statutory cease and 

desist authority under section 1371 of 

the Safety and Soundness Act (12 U.S.C. 

4631), which provides in section 1371(f) 

of the Safety and Soundness Act (12 

U.S.C. 4631(f)) that a cease and desist 

order shall remain effective and 

enforceable as provided in the order, 

except to the extent that the order is 

stayed, modified, terminated, or set 

aside by the Director or otherwise as 

provided under the Safety and 

Soundness Act. One commenter 

recommended revising § 1209.5 of the 

proposed rule to include a reference to 

the availability of judicial review to 

make it consistent with §§ 1209.6(d) and 

1209.7(d) in the proposed rule. This 

suggestion, which is misplaced in one 

respect, has merit for another reason: To 

reinforce that section 1374 of the Safety 

and Soundness Act (12 U.S.C. 4634) 

governs judicial review of a final cease 

and desist order. Section 1209.5 of the 

final rule is being revised to add a new 

paragraph (d)(2), to state that judicial 

review is governed by section 1374 of 

the Safety and Soundness Act (12 U.S.C. 

4634), as provided for in section 1371(f) 

of the Safety and Soundness Act (12 

U.S.C. 4631(f)). 

FHFA notes that this revision to 

§ 1209.5(d) of the final rule is not made 

for the purpose of consistency with 

§ 1209.6(d) of the rule, as the 

commenter posited. In fact, § 1209.6(d) 

refers to an entirely different judicial 

authority: The authority of a district 

court to issue an injunction to set aside, 

limit, or suspend the enforcement of a 

temporary cease and desist order 

pending the completion of 

administrative proceedings on a notice 

of charges under section 1372(d) of the 

Safety and Soundness Act (12 U.S.C. 

4632(d)). Section 1376(c)(3) of the 

Safety and Soundness Act (12 U.S.C. 

4636(c)(3)) makes clear that a district 

court does not have jurisdiction to 

review a final order imposing a civil 

money penalty: The order of the 

Director imposing a penalty under this 

section shall not be subject to review, 

except as provided in section 1374 of 

the Safety and Soundness Act (12 U.S.C. 

4634), which vests exclusive 

jurisdiction in the United States Court 

of Appeals for the District of Columbia 

to review any final order issued under 

sections 1313B, 1371, 1376, or 1377 of 

the Safety and Soundness Act (12 U.S.C. 

4513b, 4631, 4636, 4636a). In fact, 

section 1376(d) of the Safety and 

Soundness Act expressly bars a district 

court from putting at issue the validity 

and appropriateness of a civil money 

penalty order in an action under this 

subsection to enforce a civil money 

penalty by obtaining a monetary 

judgment in district court. See 12 U.S.C. 

4636(d). 

For additional clarity, minor edits 

also have been made to §§ 1209.55(c), 

1209.56, and 1209.57 in the final rule to 

underscore the authority of the Director 

to modify, terminate, or set aside an 

order as provided by section 1373(b)(2) 

of the Safety and Soundness Act (12 

U.S.C. 4633(b)(2)), to require a party to 

exhaust administrative remedies as a 

precondition to judicial review of any 

final decision and order, and to state 

that judicial review of a final order is 

available in accordance with section 

1374 of the Safety and Soundness Act 

(12 U.S.C. 4634). 

Section 1209.6—Temporary Cease and 

Desist Orders 

Section 1209.6 of the proposed rule 

implements section 1372(a) of the Safety 

and Soundness Act (12 U.S.C. 4632(a)) 

governing the issuance of a temporary 

cease and desist order. Section 1372(a) 

provides that, in connection with a 

notice of charges served under section 

1371(a) or (b) of the Safety and 

Soundness Act, if the Director 

determines that the actions specified in 

the notice of charges served upon a 

regulated entity or any entity-affiliated 

party, or the continuation thereof, are 

likely to cause insolvency or significant 

dissipation of assets or earnings of that 

entity, or to weaken the condition of 

that entity prior to the completion of the 

proceedings conducted pursuant to 

sections 1371 and 1373 of the Safety 

and Soundness Act (12 U.S.C. 4631, 

4633), the Director may issue a 

temporary order requiring the regulated 

entity or entity-affiliated party to cease 

and desist from any such violation or 

practice, and take affirmative action to 

prevent or remedy such insolvency, 

dissipation, condition, or prejudice 

pending completion of the cease and 

desist proceedings. 

One commenter suggested that 

§§ 1209.6 and 1209.7 of the proposed 

rule should ‘‘specify that the notice of 

charges in a civil money penalty 

proceeding must conform with 

§ 1209.23,’’ and incorporate parallels to 

§§ 1209.5(a)(1) and 1209.8(a)(1). FHFA 

agrees that a notice in a civil money 

penalty action must provide the same 

type of information as required of a 

notice of charges. Accordingly, § 1209.7 

will be revised in the final rule to 

specify that the notice in a civil money 

penalty action must provide the same 

information as required of a notice of 

charges and conform to the 

requirements of § 1209.23. No changes 

to § 1209.6 are contemplated because 

the operative notice of charges in a 

temporary cease and desist proceeding 

would be subject to § 1209.5, which, as 

stated, requires conformity with the 

requirements of § 1209.23. 

Section 1209.7—Civil Money Penalties 

Section 1209.7 of the proposed rule 

implemented the provisions of section 

1376 of the Safety and Soundness Act 

that govern civil money penalty 

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Federal Register / Vol. 76, No. 166 / Friday, August 26, 2011 / Rules and Regulations 53603 

13The reference should be to section 1377(c) of 

the Safety and Soundness Act (12 U.S.C. 4636a(c)), 

which concerns final orders. 

enforcement proceedings under the 

Safety and Soundness Act. See 12 

U.S.C. 4636(a). For the commencement 

of such proceedings section 1376(c) of 

the Safety and Soundness Act requires 

the Director to establish standards and 

procedures that, among other things, 

provide for the Director to notify the 

regulated entity or entity-affiliated party 

in writing of the Director’s 

determination to impose a penalty. A 

hearing on the record under section 

1373 of the Safety and Soundness Act 

is required. One commenter suggested 

that the proposed rule should be revised 

to specify that the notice should comply 

with the requirements of § 1209.23 of 

the proposed rule that dictates the 

content of a notice of charges in order 

to bring the civil money penalty notice 

in parallel with a notice of charges 

issued under the cease and desist or a 

notice issued under the removal and 

prohibition provisions. 

The suggestion has merit. Like a 

notice of charges issued under section 

1371(c)(1) of the Safety and Soundness 

Act (12 U.S.C. 4631(c)(1)), or a notice of 

intention to remove or suspend a party 

under section 1377(c)(1) of the Safety 

and Soundness Act (12 U.S.C. 4636a(a)), 

a notice of intent to impose a civil 

money penalty under section 1376 of 

the Safety and Soundness Act (12 U.S.C. 

4636) should contain a statement of 

facts constituting grounds for such an 

action, and fix a time and place for the 

hearing. Under applicable law, each of 

these pleadings must give sufficient 

notice of the facts and authority 

underlying the respective proceeding, 

and § 1209.23 was drafted with that 

premise in mind. Therefore, FHFA has 

determined to edit § 1209.7(a)(1) in the 

final rule to require that such notices 

shall conform to § 1209.23. 

One commenter noted that 

§ 1209.7(a)(2) of the proposed rule omits 

a reference to the daily penalty cap. The 

proposed rule cited to but did not recite 

the statutory authority for Tier I 

violations that includes that reference. 

FHFA agrees that for the sake of clarity 

§ 1209.7(a)(2) in the final rule should be 

revised to include that reference. 

Section 1209.8—Removal and 

Suspension Proceedings 

The statutory authority and 

requirements for removal and 

suspension enforcement proceedings are 

set forth in section 1377 of the Safety 

and Soundness Act (12 U.S.C. 4636a). 

The removal or suspension of an entityaffiliated party, or the officers, directors, 

or management of the Office of Finance, 

a joint office of the Banks— where the 

requisite conditions are met—is 

initiated by service of a notice, and a 

hearing on the record is held to 

determine whether the grounds are 

satisfied, as provided by section 

1373(a)(1) of the Safety and Soundness 

Act (12 U.S.C. 4633(a)(1)). In particular, 

section 1377(a)(1) of the Safety and 

Soundness Act authorized the Director 

to serve upon a party described in 

paragraph (a)(2) of the section, or any 

officer, director, or management of the 

Office of Finance, written notice of the 

intention of the Director to suspend or 

remove such party from office, or 

prohibit any further participation by 

such party, in any manner, in the 

conduct of the affairs of a regulated 

entity. See 12 U.S.C. 4636a(a)(1). 

Section 1209.8(a)(1) of the proposed 

rule was drafted to implement 12 U.S.C. 

4636a(a)(1). One commenter noted that 

§§ 1209.8(a)(1) and (c)(1) may present 

confusing redundancies by repeating the 

requirement for notices to conform to 

§ 1209.23. To avoid any potential 

confusion FHFA has determined to 

remove the reference to § 1209.23 from 

§ 1209.8(a)(1) in the final rule. Section 

1209.8(c)(1) will be adopted in the final 

rule as proposed. 

Section 1209.8(b) of the proposed rule 

was drafted to implement section 

1377(b) of the Safety and Soundness Act 

(12 U.S.C. 4636a(b)). Section 

1377(b)(2)(B) of the Safety and 

Soundness Act (12 U.S.C. 

4636a(b)(2)(B)) provides that unless 

stayed by a court under paragraph (g) of 

section 1377 of the Safety and 

Soundness Act (12 U.S.C. 4636a(g)), any 

suspension order issued under 

paragraph (b) shall remain in effect and 

enforceable until the Director dismisses 

the charges set out in the notice served 

under paragraph (a)(1) of this section or 

the effective date of the order issued 

under paragraph (b) [sic].13 This is a 

drafting error in the statute; the 

reference should be to paragraph (c) of 

section 1377. See 12 U.S.C. 

4636a(b)(2)(B)(ii)). 

Noting this technical error, one 

commenter posited that § 1209.8 of the 

proposed rule, which refers to the 

applicable provision, ‘‘leaves unclear 

the distinction between an immediate 

suspension/prohibition order issued 

pursuant to § 1209.8(b) and a final 

suspension/prohibition order issued 

pursuant to § 1209.8(c).’’ To give the 

statute logical meaning the commenter 

would make an explicit reference to 

paragraph (c) in § 1209.8(b)(2) of the 

final rule to specify ‘‘that the effective 

period of a suspension order issued 

under § 1209.8(b) commences upon 

service and unless a court issues a stay, 

remains effective until the Director 

either dismisses the charges, or 

pursuant to § 1209.8(c), the Director 

issues a final order.’’ FHFA agrees that 

the intent of the law is that an order 

issued under section 1377(b) of the 

Safety and Soundness Act (12 U.S.C. 

4636a(b)) is effective immediately upon 

service and, absent a court-ordered stay, 

remains in effect and enforceable until 

the Director dismisses the charges or the 

effective date of an order issued under 

section 1377(c) of the Safety and 

Soundness Act. See 12 U.S.C. 

4636a(b)(2). Accordingly, to more 

specifically convey the intent of the law, 

§ 1209.8(b)(2) (effective period) in the 

final rule has been revised to that effect. 

Section 1209.8(d)(3) of the proposed 

rule was written to implement the 

provisions of section 1377(e) of the 

Safety and Soundness Act (12 U.S.C. 

4636a(e)) that impose industry-wide 

restrictions on anyone who has been 

removed or suspended from office (or 

barred from participating in the affairs 

of a regulated entity or the Office of 

Finance), absent the written consent of 

the Director in accordance with section 

1377(e)(2) of the Safety and Soundness 

Act (12 U.S.C. 4636a(e)(2)). Such 

consent is committed to the discretion 

of the Director by law. The provision is 

silent on any process or procedures for 

obtaining that written consent, other 

than to require that the consent be 

publicly disclosed. 

One commenter suggested that 

§ 1209.8(d)(3)(ii) of the proposed rule 

was inadvertent in stating that the 

Director’s refusal to consent shall not be 

a final agency action, because that 

effectively would bar access to judicial 

review. In truth, the draft rule provision 

is not a mistake, and FHFA disagrees 

with the premise of the commenter’s 

suggestion because there is no provision 

for judicial review. Section 1377(e) of 

the Safety and Soundness Act (12 U.S.C. 

4636a(e)) does not provide for judicial 

review of the Director’s decision 

whether to permit a person subject to a 

removal or suspension order to 

continue, resume, or undertake 

participation in the affairs of a regulated 

entity or the Office of Finance. In fact, 

section 1377 of the Safety and 

Soundness Act provides only two 

judicial remedies. First, for orders 

issued under section 1377(b) of the 

Safety and Soundness Act, the subject 

may pursue a stay of the order through 

an action in district court under section 

1377(g) of the Safety and Soundness Act 

(12 U.S.C. 4636a(b), (g)). Second, a final 

suspension/removal/prohibition order 

issued under section 1377(c) of the 

Safety and Soundness Act (12 U.S.C. 

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53604 Federal Register / Vol. 76, No. 166 / Friday, August 26, 2011 / Rules and Regulations 

14See generally, Singer, N., Statutes and Statutory 

Construction (Sixth Ed.), § 67:9. 

4636a(c)) is subject to judicial review in 

the court of appeals in accordance with 

section 1374 of the Safety and 

Soundness Act (12 U.S.C. 4634). Third, 

the public purpose of the industry-wide 

prohibition set out in section 1377(e)(1) 

of the Safety and Soundness Act (12 

U.S.C. 4636a(e)(1)), taken together with 

the prohibitions on certain specified 

activities in section 1377(d) of the 

Safety and Soundness Act (12 U.S.C. 

4636a(d)), must be given weight. Fourth, 

the decision whether to permit an 

entity-affiliated party to participate in 

the affairs of a regulated entity or the 

Office of Finance is committed to the 

discretion of the Director by law. Fifth, 

under the general precepts of statutory 

construction, where a provision (such as 

the right of judicial review) is included 

in one portion of an act, but excluded 

in other sections, implying a legislative 

intent to include the missing provision 

where it is omitted is unsupported.14

Moreover, in the context of a final 

order under section 1377(c) of the Safety 

and Soundness Act (12 U.S.C. 4636a(c)), 

where a court of appeals has already 

ruled on the appropriateness of a final 

order, the subject should not then be 

permitted to seek district court review 

of the Director’s refusal to consent to the 

subject’s proposed participation in a 

regulated entity or the Office of Finance. 

The statute includes no such provision 

of jurisdiction, and to read in such a 

right potentially would allow a subject 

to circumvent a final order. As stated, 

district court jurisdiction is limited by 

section 1377(g) of the Safety and 

Soundness Act (12 U.S.C. 4636a(g)) to 

ordering a stay of a suspension or 

prohibition order pending the 

completion of an administrative hearing 

under section 1377(c) of the Safety and 

Soundness Act (12 U.S.C. 4636a(c)). 

Finally, to upend the finality of a final 

order issued under section 1377(c) of 

the Safety and Soundness Act (12 U.S.C. 

4636a(c)), that was affirmed by the 

appellate court, would run contrary to 

the statutory intent to let the Director 

exercise his advanced knowledge of the 

Enterprises, the Banks, and the Office of 

Finance to determine what is in the best 

interests of these entities. Therefore, 

having considered the issues, FHFA 

declines to remove the word ‘‘not’’ from 

§ 1209.8(d)(3)(ii) in the final rule as was 

suggested by the commenter. 

D. Subpart C—Rules of Practice and 

Procedure for Hearings on the Record 

Section 1209.11—Authority of the 

Presiding Officer 

This section states that hearings are to 

be held in accordance with the APA, 

and provides that the presiding officer 

is to have complete charge of the 

proceedings, to act in a fair and 

impartial manner, and to ensure that a 

full and complete record of the 

proceeding is made. The powers of the 

presiding officer to control proceedings 

are specified. Several commenters noted 

that § 1209.11(b)(11) of the proposed 

rule provides that the presiding officer 

may receive ‘‘materially relevant’’ 

evidence, and characterized this as a 

stricter evidentiary standard than is 

provided for in the Uniform Rules. One 

commenter suggested that this could 

create uncertainty and disparity in the 

administrative process, ultimately 

resulting in unnecessary judicial review 

of the standard. 

In fact, to ensure that the record is 

complete and accurate, the presiding 

officer has broad authority under the 

proposed rule to take all lawful actions 

necessary to regulate the scope, timing, 

and completion of discovery of any nonprivileged matter that is materially 

relevant to the charges or allowable 

defenses; rule upon the admissibility of 

evidence, and exclude or limit evidence; 

regulate the course of the testimonial 

phase of the hearing; examine 

witnesses; and, upon motion of a party, 

take judicial notice of a fact. (See 

§ 1209.11(b)). 

FHFA has considered the comment 

and concludes that it misconstrues the 

standard embodied in the Uniform 

Rules. Section 1209.11(b) of the 

proposed rule reflects the analogous 

provisions in the Uniform Rules; and, 

while it may be an extension of the 

standard, it does not create a disparity. 

For example, the Uniform Rules of the 

Federal Deposit Insurance Corporation 

(12 CFR part 308, Subpart A) (FDIC rule) 

provide that the powers of the 

administrative law judge include the 

power ‘‘to receive relevant evidence 

* * *’’ (12 CFR 308.5(b)(3)). And 

relevance is more specifically defined in 

the discovery rule governing relevance 

that limits discovery to ‘‘any matter not 

privileged that has material relevance to 

the merits of the pending action.’’ 

(12 CFR 308.25(a), (b)). The proposed 

rule would adopt the same standard. It 

is necessary and appropriate to expect 

that evidence have a logical connection 

to a consequential fact that tends to 

prove or disprove a matter in issue 

relative to the charges or allowable 

defenses in the pending action. This is 

to enable the presiding officer to ensure 

that the case is not sidetracked by 

unnecessary discovery, that discovery is 

focused on the salient issues, and that 

an accurate, thorough administrative 

record is timely created. Accordingly, 

FHFA declines to revise this provision 

in the final rule. 

Section 1209.12—Public Hearings; 

Closed Hearings 

Generally, appearance hearings are to 

be open to the public. But this section 

also reflects the authority of the 

Director, under section 1379B(b) of the 

Safety and Soundness Act (12 U.S.C. 

4639(b)), to determine that holding an 

open hearing would be contrary to the 

public interest, and provides 

appropriate mechanisms for making and 

implementing such determinations. 

Section 1209.12(c) of the proposed rule 

reserves to FHFA counsel of record the 

authority to file documents under seal, 

or to require that a document be filed 

under seal, upon a written 

determination that the disclosure of the 

document would be contrary to the 

public interest. Furthermore, the 

presiding officer must preserve the 

confidentiality of the document and, if 

needed, issue a protective order that is 

acceptable to FHFA counsel of record. If 

a hearing is to be closed for the purpose 

of introducing testimony or documents 

filed under seal, certain procedures for 

handling confidential information are to 

be followed. 

One commenter objected to this 

process arguing that the rule should 

provide authority to respondent’s 

counsel to file documents under seal 

voluntarily to preserve a private (or 

public) need to protect filings from 

public disclosure. FHFA has considered 

the comment and determined that a 

respondent’s right to protect 

confidential information is procedurally 

ensured because any party to a 

proceeding may request confidential 

treatment of information, such as 

personal financial information, in the 

form of a protective order. Therefore, 

FHFA has determined not to change the 

provision in the final rule. 

One commenter mistakenly cited 

§ 1209.12(d) in objecting to the 

requirement in § 1209.12(c) of the 

proposed rule that a protective order 

issued by the presiding officer to protect 

the confidentiality of sensitive 

information should be acceptable to 

FHFA counsel of record. FHFA sees no 

inconsistency in this requirement. The 

Agency has a vital interest in ensuring 

the confidentiality of sensitive 

commercial and financial information of 

the regulated entities. Respondent’s 

counsel would find similar protections 

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Federal Register / Vol. 76, No. 166 / Friday, August 26, 2011 / Rules and Regulations 53605 

available where a private hearing is 

authorized. Section 1209.12(b) of the 

proposed rule permits any party to 

request a private hearing; the 

determination is committed to the 

discretion of the Director, which is 

consistent with 12 U.S.C. 4639(b), (d). 

Having considered the issues, FHFA 

declines to revise § 1209.12(c) in the 

final rule. 

Section 1209.14—Ex Parte 

Communications 

This section defines and prohibits ex 

parte communications, and provides for 

procedures for dealing with such 

communications, including sanctions. 

This section also provides for the 

separation of functions of Agency 

personnel. Any employee or agent of 

FHFA who participated in the 

examination, investigative, or 

prosecutorial functions on the case may 

not participate in or advise in the 

recommended decision or the Director’s 

decision on the final determination. One 

commenter objected that analysis of 

settlement offers and regulatory or 

supervisory matters are exempt from 

this prohibition. This reasonable carve 

out anticipates situations where FHFA 

counsel of record may be the staff 

possessed of the detailed knowledge of 

an issue that could be relied upon to 

provide context, content, and legal 

advice to the Director on a supervisory 

or regulatory matter, or the basis for 

appropriately resolving an enforcement 

action. 

Section 1209.29—Discovery 

Section 1209.29 of the rule provides 

that the presiding officer is charged with 

restricting discovery to any matter not 

privileged that is materially relevant to 

the charges or allowable defenses in a 

pending proceeding. One commenter 

objected to the standard and stated that 

it differs from the evidentiary standard 

in the Uniform Rules. The identical 

concern was raised with respect to 

§ 1209.11(b) of the proposed rule. For 

the reasons stated in response to the 

comment on § 1209.11(b), FHFA has 

determined not to revise these 

provisions in the final rule. This 

evidentiary standard is in addition to 

other measures that are designed to 

assist the presiding officer in controlling 

the proceeding, such as a new meet and 

confer requirement in § 1209.29(a)(2) of 

the proposed rule that requires the 

parties to meet and confer in good faith 

and to submit a discovery plan to the 

presiding officer for his or her approval. 

Discovery is limited to document 

requests; no other form of discovery is 

permitted. That is, with the exception of 

depositions to preserve testimony of a 

witness unavailable for a hearing 

(§ 1209.32 of the proposed rule), 

depositions are prohibited. And, 

§ 1209.29(c) of the proposed rule 

reiterates that privileged documents are 

not discoverable. Applicable privileges 

include: Attorney client, work product, 

and privileges available to government 

agencies (e.g., deliberative process; 

examination; investigative; or any other 

privileges available under the U.S. 

Constitution, Federal law, or the 

principles of Federal common law). To 

preserve such privileges in productions, 

a new provision, § 1209.29(d)(1)(ii) of 

the proposed rule, would have provided 

that the parties may enter into so-called 

‘‘claw back’’ agreements, and that the 

presiding officer shall enter an order to 

ensure the enforceability of such 

agreements. One commenter suggested 

the provision be revised to permit the 

presiding officer to order claw back 

procedures where parties did not reach 

such an agreement prior to production. 

As proposed, however, the section 

allows any party to petition the 

presiding officer to issue claw back 

procedures, which should address the 

commenter’s concern. FHFA has 

considered the issue and determined 

not to revise this section in the final 

rule. 

Section 1209.30—Request for Document 

Discovery From Parties 

This section in the proposed rule 

would have established the 

requirements for document discovery 

from parties, and stated that such 

discovery must be consistent with the 

discovery plan approved by the 

presiding officer under § 1209.29. 

Among other things, the proposed rule 

set deadlines for objections to discovery 

requests or assertion of privilege claims, 

and addressed the complexities and 

costs associated with the discovery of 

electronically-stored information (ediscovery) to encourage transparency 

and cooperation of the parties to avoid 

the costly issues commonly encountered 

in e-discovery. 

Under § 1209.30(h) of the proposed 

rule, pertaining to the enforcement of a 

document discovery subpoena, the 

Director or a party who obtained the 

subpoena may seek enforcement to the 

extent authorized under section 

1379D(c)(1) of the Safety and Soundness 

Act (12 U.S.C. 4641(c)(1)) by seeking an 

order from the appropriate United States 

district court. Section 1209.30(h)(2) of 

the proposed rule would have dedicated 

a sentence to state the limitations on a 

district court’s jurisdiction under 

section 1375(b) of the Safety and 

Soundness Act (12 U.S.C. 4635(b)). A 

district court that is reviewing a 

subpoena does not obtain jurisdiction 

over the enforcement action itself, 

because section 1375(b) of the Safety 

and Soundness Act (12 U.S.C. 4635(b)) 

provides that a court may not affect by 

injunction or otherwise the issuance or 

enforcement of any effective and 

outstanding notice or order issued by 

the Director under sections 4513b, 4631, 

4632, 4636, and 4637 of Title 12 of the 

United States Code. The same provision 

also bars a district court from enjoining 

or otherwise affecting the issuance or 

enforcement of an order issued under 

subchapter II of the Safety and 

Soundness Act (pertaining to required 

capital levels, special enforcement 

powers, and reviews of assets and 

liabilities), or otherwise to review, 

modify, suspend, terminate, or set aside 

any such effective and outstanding 

notice or order. That is, the jurisdiction 

of a district court charged with 

enforcing a subpoena (or declining to do 

so) would run only to the 

appropriateness of the subpoena. 

Several commenters objected that that 

sentence in the proposed rule was 

misleading or overbroad in referring to 

‘‘subtitle C of the Safety and Soundness 

Act,’’ and that the provision otherwise 

appeared to govern discovery of nonparties as well. To resolve any 

confusion, the commenter 

recommended that FHFA remove that 

sentence from § 1209.30(h)(2). In 

considering the comments, FHFA notes 

that the jurisdictional bar in section 

1375(b) of the Safety and Soundness Act 

(12 U.S.C. 4635(b)) is set out as a matter 

of law. To avoid redundancy and 

foreclose any confusion, FHFA has 

removed the sentence from the final 

rule. 

Section 1209.31—Document Discovery 

Subpoenas to Non-Parties 

Section 1209.31 of the proposed rule 

governs document discovery subpoenas 

to non-parties. The proposed rule would 

adopt the existing rule with minor 

changes to headings and the addition of 

text requiring that the subpoenaing 

party seek only documents that are 

materially relevant to the charges and 

issues presented in the action, state its 

unequivocal intention to pay for 

document discovery of a non-party, and 

serve all other parties with the 

subpoena. The edits also make clear the 

discretion of the presiding officer to 

refuse to issue a subpoena to a nonparty where the party’s application for 

the subpoena does not set forth a valid 

basis of its issuance, or where the 

request is otherwise objectionable under 

§ 1209.29(b). 

One commenter suggested the 

evidentiary standard be revised to one 

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53606 Federal Register / Vol. 76, No. 166 / Friday, August 26, 2011 / Rules and Regulations 

of ‘‘general relevance.’’ Here, again, the 

proposed rule specifies a materially 

relevant standard to keep the Rules of 

Practice and Procedure aligned with the 

material and relevant standard adopted 

by the Federal banking agencies in the 

Uniform Rules, and to mirror the 

generally accepted standards of 

materiality and relevance embodied in 

Federal law. This standard best takes 

into account the importance of a 

transparent discovery process in 

expeditiously resolving the issues 

presented by the claims and defenses in 

a case. FHFA rejects the suggestion that 

this standard differs from the Uniform 

Rules, and is issuing this provision in 

the final rule as proposed. 

Section 1209.31(b) of the proposed 

rule governs motions to quash or modify 

a document subpoena, and adds a 

provision to allow a non-party to enter 

a limited appearance in the proceeding 

to challenge the subpoena directed to it. 

The non-party may raise the same types 

of objections that may be raised by a 

party under § 1209.30, and within the 

same time deadlines. The revised 

provision permits the party seeking the 

subpoena to respond to the non-party’s 

objections within 10 days of service of 

a motion to quash or modify. Absent 

express leave of the presiding officer, no 

other party may respond to the nonparty’s motion. Additionally, the 

pending motion shall not operate as a 

stay on the proceeding or in any way 

limit the presiding officer’s authority to 

impose sanctions on a party who 

induces another to fail to comply with 

a subpoena. No party may rely on the 

pendency of a motion to quash or 

modify to excuse performance of any 

action required of that party under this 

part. 

One commenter argued that any party 

should be permitted to object to any 

subpoena to a non-party for the purpose 

of asserting that party’s rights with 

respect to the subpoenaed materials, 

such as the confidentiality of 

commercial information. FHFA has 

considered the comment in the context 

of the overall discovery process and the 

discretion of the presiding officer to 

control the proceedings. Additionally, it 

should be noted that any party may seek 

a protective order. FHFA is of the view 

that the mechanisms in place 

sufficiently protect the rights of parties 

who may be concerned about the 

possible disclosure of sensitive or 

personal information. Therefore, FHFA 

has determined not to revise the 

provision in the final rule. 

Finally, enforcement of document 

subpoenas to non-parties also is 

authorized pursuant to section 1379D(c) 

of the Safety and Soundness Act (12 

U.S.C. 4641(c)). Section 1209.31(c)(2) of 

the proposed rule provides that there is 

no automatic stay in the event that a 

subpoena enforcement action is 

initiated. In an apparent misreading of 

the proposed rule, one commenter 

argued that the presiding officer should 

have discretion to order a stay. As in 

§ 1209.30(h)(3) of the proposed rule, the 

provision would allow for a 

discretionary stay of the proceedings by 

the presiding officer or the Director for 

a reasonable period in the interests of 

the parties or justice. The presiding 

presumably will ensure that the stay 

does not interfere with the pace and 

independence of the enforcement 

proceeding. This is to ensure the agency 

process can go forward without delay 

due to discovery disputes so that the 

proceedings are not derailed and no 

hardships are imposed on the parties 

who seek a speedy adjudication. 

Therefore, FHFA has determined to 

promulgate the provision in the final 

rule as proposed. 

E. Subpart D—Parties and 

Representational Practice Before the 

Federal Housing Finance Agency; 

Standards of Conduct 

Section 1209.70—Scope 

Subpart D of this part contains rules 

governing practice by parties or their 

representatives before FHFA in an 

adjudicatory proceeding and standards 

of conduct under this part and in any 

appearance before the Director or any 

agency representative. This subpart 

outlines the sanctions that may be 

prescribed by a presiding officer or the 

Director against parties or their 

representatives who fail to conform to 

the requirements and conduct 

guidelines; such representation 

includes, but is not limited to, the 

practice of attorneys and accountants. 

This provision also states that 

employees of FHFA are not subject to 

disciplinary proceedings under this 

subpart, which is a carry-over from the 

existing enforcement regulations. One 

commenter mistakenly assumed from 

this provision that the presiding officer 

could not sanction agency counsel for 

violating the rules of practice, but 

should have discretion to do so. In fact, 

the presiding officer has exactly that 

discretionary authority. This provision 

underscores that employee disciplinary 

matters proceed under the applicable 

rules in Title 5 of the United States 

Code. Disciplinary matters are to be 

distinguished from conduct that violates 

the rules of practice for matters before 

the Director or the presiding officer. If 

FHFA counsel of record is found to have 

engaged in prohibited contumacious 

conduct in the course of an enforcement 

proceeding, FHFA is of the view that 

this subpart provides sufficient 

discretion and guidance for the 

presiding officer to deal with it, and is 

adopting the provision in the final rule 

as proposed. Moreover, this subpart 

should not be read to preclude the 

Director from taking any other action or 

imposing any restriction or sanction 

authorized by applicable law, rule, 

order or regulation. 

F. Subpart F—Suspension or Removal of 

Entity-Affiliated Party Charged With 

Felony 

Section 1209.102—Hearing on Removal 

or Suspension 

Section 1209.102 of the proposed rule 

sets forth the requirements for an 

informal hearing on a removal or 

suspension under section 1377(h) of the 

Safety and Soundness Act (12 U.S.C. 

4636a(h)), and the timing and 

procedural matters of such hearings. 

Because the Safety and Soundness Act 

does not require a formal APA-type full 

evidentiary hearing on the record, the 

process is less formal. Nevertheless, the 

procedure provides the requisite due 

process requirements of notice and 

opportunity to respond. This provision 

in the proposed rule specified the 

requirements as to form, timing, 

conduct, submissions, and the record of 

the hearing. 

The proposed rule allowed that an 

entity-affiliated party could have elected 

in writing to waive his or her right to 

appear in person or through counsel to 

make a statement, and to have the 

matter determined solely on the basis of 

a written submission, thus obviating an 

appearance hearing. Additionally, as 

proposed, the rule provided that the 

Director or his designee would have the 

discretion to determine to deny, permit, 

or limit oral testimony in a hearing. The 

sole purpose of the informal hearing is 

to determine whether the suspension or 

prohibition will be continued, modified, 

or terminated, or whether an order 

removing such party or prohibiting the 

party from participation in the affairs of 

the regulated entity will be rescinded or 

modified. 

One commenter argued that: (1) The 

presiding officer should not have the 

power to determine whether to admit or 

exclude witness testimony, and (2) the 

rule should require the creation of a 

hearing transcript. FHFA disagrees with 

these comments for the reason that the 

Director has the authority to make such 

a determination, and written 

submissions may constitute the full 

record in the absence of an appearance. 

In any case, the recommended decision 

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Federal Register / Vol. 76, No. 166 / Friday, August 26, 2011 / Rules and Regulations 53607 

1As used in this part, the ‘‘Safety and Soundness 

Act’’ means the Federal Housing Enterprise 

Financial Safety and Soundness Act of 1992, as 

amended. See § 1209.3. The Safety and Soundness 

Act was amended by the Housing and Economic 

Recovery Act of 2008, Public Law No. 110–289, 

sections 1101 et seq., 122 Stat. 2654 (July 30, 2008) 

(HERA). Specifically, sections 1151 through 1158 of 

HERA amended sections 1371 through 1379D of the 

Safety and Soundness Act, (codified at 12 U.S.C. 

Continued 

would reflect all materials or testimony 

and be transmitted to the Director, who 

makes the final determination. These 

steps are sufficient in the context of this 

process to adequately protect the 

parties. Therefore, to provide for the 

efficient operation of the rule, FHFA is 

not adopting the modifications 

suggested by the commenter. 

IV. Paperwork Reduction Act 

The Paperwork Reduction Act 

(44 U.S.C. 3501 et seq.) requires that 

regulations involving the collection of 

information receive clearance from 

OMB. This rule contains no such 

collection of information requiring OMB 

approval under the Paperwork 

Reduction Act. Consequently, no 

information has been submitted to OMB 

for review. 

V. Regulatory Impact 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) requires that a 

regulation that has a significant 

economic impact on a substantial 

number of small entities, small 

businesses, or small organizations must 

include an initial regulatory flexibility 

analysis describing the regulation’s 

impact on small entities. Such an 

analysis need not be undertaken if the 

agency has certified that the regulation 

will not have a significant economic 

impact on a substantial number of small 

entities. 5 U.S.C. 605(b). FHFA has 

considered the impact of the proposed 

regulation under the Regulatory 

Flexibility Act. FHFA certifies that the 

final regulation is not likely to have a 

significant economic impact on a 

substantial number of small business 

entities because the regulation applies 

to the Enterprises and Banks, which are 

not small entities for purposes of the 

Regulatory Flexibility Act. 5 U.S.C. 

605(b). 

List of Subjects 

12 CFR Part 908 

Administrative practice and 

procedure, Federal home loan banks, 

Penalties. 

12 CFR Part 1209 

Administrative practice and 

procedure, Federal home loan banks. 

12 CFR Part 1780 

Administrative practice and 

procedure, Penalties. 

Accordingly, for the reasons set forth 

in the preamble, under the authority of 

12 U.S.C. 4513b and 4526, the Federal 

Housing Finance Agency amends 

chapters IX, XII, and XVII of Title 12, 

Code of Federal Regulations, as follows: 

CHAPTER IX—FEDERAL HOUSING 

FINANCE BOARD 

Subchapter B—Federal Housing Finance 

Board Organization and Operations 

PART 908—[REMOVED] 

■ 1. Remove part 908. 

CHAPTER XII—FEDERAL HOUSING 

FINANCE AGENCY 

Subchapter A–Organization and Operations 

■ 2. Add part 1209 to subchapter A to 

read as follows: 

PART 1209—RULES OF PRACTICE 

AND PROCEDURE 

Subpart A—Scope and Authority 

Sec. 

1209.1 Scope. 

1209.2 Rules of construction. 

1209.3 Definitions. 

Subpart B—Enforcement Proceedings 

Under Sections 1371 Through 1379D of the 

Safety and Soundness Act 

1209.4 Scope and authority. 

1209.5 Cease and desist proceedings. 

1209.6 Temporary cease and desist orders. 

1209.7 Civil money penalties. 

1209.8 Removal and prohibition 

proceedings. 

1209.9 Supervisory actions not affected. 

Subpart C—Rules of Practice and 

Procedure 

1209.10 Authority of the Director. 

1209.11 Authority of the Presiding Officer. 

1209.12 Public hearings; closed hearings. 

1209.13 Good faith certification. 

1209.14 Ex parte communications. 

1209.15 Filing of papers. 

1209.16 Service of papers. 

1209.17 Time computations. 

1209.18 Change of time limits. 

1209.19 Witness fees and expenses. 

1209.20 Opportunity for informal 

settlement. 

1209.21 Conduct of examination. 

1209.22 Collateral attacks on adjudicatory 

proceeding. 

1209.23 Commencement of proceeding and 

contents of notice of charges. 

1209.24 Answer. 

1209.25 Amended pleadings. 

1209.26 Failure to appear. 

1209.27 Consolidation and severance of 

actions. 

1209.28 Motions. 

1209.29 Discovery. 

1209.30 Request for document discovery 

from parties. 

1209.31 Document discovery subpoenas to 

non-parties. 

1209.32 Deposition of witness unavailable 

for hearing. 

1209.33 Interlocutory review. 

1209.34 Summary disposition. 

1209.35 Partial summary disposition. 

1209.36 Scheduling and pre-hearing 

conferences. 

1209.37 Pre-hearing submissions. 

1209.38 Hearing subpoenas. 

1209.39–1209.49 [Reserved]. 

1209.50 Conduct of hearings. 

1209.51 Evidence. 

1209.52 Post-hearing filings. 

1209.53 Recommended decision and filing 

of record. 

1209.54 Exceptions to recommended 

decision. 

1209.55 Review by Director. 

1209.56 Exhaustion of administrative 

remedies. 

1209.57 Judicial review; no automatic stay. 

1209.58–1209.69 [Reserved]. 

Subpart D—Parties and Representational 

Practice Before the Federal Housing 

Finance Agency; Standards of Conduct 

1209.70 Scope. 

1209.71 Definitions. 

1209.72 Appearance and practice in 

adjudicatory proceedings. 

1209.73 Conflicts of interest. 

1209.74 Sanctions. 

1209.75 Censure, suspension, disbarment, 

and reinstatement. 

1209.76–1209.79 [Reserved]. 

Subpart E—Civil Money Penalty Inflation 

Adjustments 

1209.80 Inflation adjustments. 

1209.81 Applicability. 

1209.82–1209.99 [Reserved]. 

Subpart F—Suspension or Removal of an 

Entity-Affiliated Party Charged With Felony 

1209.100 Scope. 

1209.101 Suspension, removal, or 

prohibition. 

1209.102 Hearing on removal or 

suspension. 

1209.103 Recommended and final 

decisions. 

Authority: 5 U.S.C. 554, 556, 557, and 701 

et seq.; 12 U.S.C. 4501, 4503, 4511, 4513, 

4513b, 4517, 4526, 4531, 4535, 4536, 4581, 

4585, 4631–4641; and 28 U.S.C. 2461 note. 

Subpart A—Scope and Authority 

§ 1209.1 Scope. 

(a) Authority. This part sets forth the 

Rules of Practice and Procedure for 

hearings on the record in administrative 

enforcement proceedings in accordance 

with the Federal Housing Enterprises 

Financial Safety and Soundness Act of 

1992, Title XIII of the Housing and 

Community Development Act of 1992, 

Public Law 102–550, sections 1301 et 

seq., codified at 12 U.S.C. 4501 et seq., 

as amended (the ‘‘Safety and Soundness 

Act’’), as stated in § 1209.4 of this part.1

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4631 through 4641) (hereafter, ‘‘Enforcement 

Proceedings’’). 

2Public Law 101–410, 104 Stat. 890, as amended 

by the Debt Collection Improvement Act of 1996, 

Public Law 104–134, Title III, sec. 31001(s)(1), Apr. 

26, 1996, 110 Stat. 1321–373; Public Law 105–362, 

Title XIII, sec. 1301(a), Nov. 10, 1998, 112 Stat. 

3293 (28 U.S.C. 2461 note). 

(b) Enforcement Proceedings. Subpart 

B of this part (Enforcement Proceedings 

Under sections 1371 through 1379D of 

the Safety and Soundness Act) sets forth 

the statutory authority for enforcement 

proceedings under sections 1371 

through 1379D of the Safety and 

Soundness Act (12 U.S.C. 4631 through 

4641) (Enforcement Proceedings). 

(c) Rules of Practice and Procedure. 

Subpart C of this part (Rules of Practice 

and Procedure) prescribes the general 

rules of practice and procedure 

applicable to adjudicatory proceedings 

that the Director is required by statute 

to conduct on the record after 

opportunity for a hearing under the 

Administrative Procedure Act, 5 U.S.C. 

554, 556, and 557, under the following 

statutory provisions: 

(1) Enforcement proceedings under 

sections 1371 through 1379D of the 

Safety and Soundness Act, as amended 

(12 U.S.C. 4631 through 4641); 

(2) Removal, prohibition, and civil 

money penalty proceedings for 

violations of post-employment 

restrictions imposed by applicable law; 

and 

(3) Proceedings under section 102 of 

the Flood Disaster Protection Act of 

1973, as amended (42 U.S.C. 4012a) to 

assess civil money penalties. 

(d) Representation and conduct. 

Subpart D of this part (Parties and 

Representational Practice before the 

Federal Housing Finance Agency; 

Standards of Conduct) sets out the rules 

of representation and conduct that shall 

govern any appearance by any person, 

party, or representative of any person or 

party, before a presiding officer, the 

Director of FHFA, or a designated 

representative of the Director or FHFA 

staff, in any proceeding or matter 

pending before the Director. 

(e) Civil money penalty inflation 

adjustments. Subpart E of this part 

(Civil Money Penalty Inflation 

Adjustments) sets out the requirements 

for the periodic adjustment of maximum 

civil money penalty amounts under the 

Federal Civil Penalties Inflation 

Adjustment Act of 1990, as amended 

(Inflation Adjustment Act) on a 

recurring four-year cycle.2

(f) Informal proceedings. Subpart F of 

this part (Suspension or Removal of an 

Entity-Affiliated Party Charged with 

Felony) sets out the scope and 

procedures for the suspension or 

removal of an entity-affiliated party 

charged with a felony under section 

1377(h) of the Safety and Soundness Act 

(12 U.S.C. 4636a(h)), which provides for 

an informal hearing before the Director. 

§ 1209.2 Rules of construction. 

For purposes of this part: 

(a) Any term in the singular includes 

the plural and the plural includes the 

singular, if such use would be 

appropriate; 

(b) Any use of a masculine, feminine, 

or neuter gender encompasses all three, 

if such use would be appropriate; and 

(c) Unless the context requires 

otherwise, a party’s representative of 

record, if any, on behalf of that party, 

may take any action required to be taken 

by the party. 

§ 1209.3 Definitions. 

For purposes of this part, unless 

explicitly stated to the contrary: 

Adjudicatory proceeding means a 

proceeding conducted pursuant to these 

rules, on the record, and leading to the 

formulation of a final order other than 

a regulation. 

Agency has the meaning defined in 

section 1303(2) of the Safety and 

Soundness Act (12 U.S.C. 4502(2)). 

Associated with the regulated entity 

means, for purposes of section 1379 of 

the Safety and Soundness Act (12 U.S.C. 

4637), any direct or indirect 

involvement or participation in the 

conduct of operations or business affairs 

of a regulated entity, including engaging 

in activities related to the operations or 

management of, providing advice or 

services to, consulting or contracting 

with, serving as agent for, or in any 

other way affecting the operations or 

business affairs of a regulated entity— 

with or without regard to—any direct or 

indirect payment, promise to make 

payment, or receipt of any 

compensation or thing of value, such as 

money, notes, stock, stock options, or 

other securities, or other benefit or 

remuneration of any kind, by or on 

behalf of the regulated entity, except 

any payment made pursuant to a 

retirement plan or deferred 

compensation plan, which is 

determined by the Director to be 

permissible under section 1318(e) of the 

Safety and Soundness Act (12 U.S.C. 

4518(e)), or by reason of the death or 

disability of the party, in the form and 

manner commonly paid or provided to 

retirees of the regulated entity, unless 

such payment, compensation, or such 

benefit is promised or provided to or for 

the benefit of said party for the 

provision of services or other benefit to 

the regulated entity. 

Authorizing statutes has the meaning 

defined in section 1303(3) of the Safety 

and Soundness Act (12 U.S.C. 4502(3)). 

Bank Act means the Federal Home 

Loan Bank Act, as amended (12 U.S.C. 

1421 et seq.). 

Board or Board of Directors means the 

board of directors of any Enterprise or 

Federal Home Loan Bank (Bank), as 

provided for in the respective 

authorizing statutes. 

Decisional employee means any 

member of the Director’s or the 

presiding officer’s staff who has not 

engaged in an investigative or 

prosecutorial role in a proceeding and 

who may assist the Director or the 

presiding officer, respectively, in 

preparing orders, recommended 

decisions, decisions, and other 

documents under subpart C of this part. 

Director has the meaning defined in 

section 1303(9) of the Safety and 

Soundness Act (12 U.S.C. 4502(9)); 

except, as the context requires in this 

part, ‘‘director’’ may refer to a member 

of the Board of Directors or any Board 

committee of an Enterprise, a Federal 

Home Loan Bank, or the Office of 

Finance. 

Enterprise has the meaning defined in 

section 1303(10) of the Safety and 

Soundness Act (12 U.S.C. 4502(10)). 

Entity-affiliated party has the meaning 

defined in section 1303(11) of the Safety 

and Soundness Act (12 U.S.C. 4502(11)), 

and may include an executive officer, 

any director, or management of the 

Office of Finance, as applicable under 

relevant provisions of the Safety and 

Soundness Act or FHFA regulations. 

Executive officer has the meaning 

defined in section 1303(12) of the Safety 

and Soundness Act (12 U.S.C. 4502(12)), 

and may include an executive officer of 

the Office of Finance, as applicable 

under relevant provisions of the Safety 

and Soundness Act or FHFA 

regulations. 

FHFA means the Federal Housing 

Finance Agency as defined in section 

1303(2) of the Safety and Soundness Act 

(12 U.S.C. 4502(2)). 

Notice of charges means the charging 

document served by FHFA to 

commence an enforcement proceeding 

under this part for the issuance of a 

cease and desist order; removal, 

suspension, or prohibition order; or an 

order to assess a civil money penalty, 

under 12 U.S.C. 4631 through 4641 and 

§ 1209.23. A ‘‘notice of charges,’’ as 

used or referred to as such in this part, 

is not an ‘‘effective notice’’ under 

section 1375(a) of the Safety and 

Soundness Act (12 U.S.C. 4635(a)). 

Office of Finance has the meaning 

defined in section 1303(19) of the Safety 

and Soundness Act (12 U.S.C. 4502(19)). 

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Party means any person named as a 

respondent in any notice of charges, or 

FHFA, as the context requires in this 

part. 

Person means an individual, sole 

proprietor, partnership, corporation, 

unincorporated association, trust, joint 

venture, pool, syndicate, organization, 

regulated entity, entity-affiliated party, 

or other entity. 

Presiding officer means an 

administrative law judge or any other 

person appointed by or at the request of 

the Director under applicable law to 

conduct an adjudicatory proceeding 

under this part. 

Regulated entity has the meaning 

defined in section 1303(20) of the Safety 

and Soundness Act (12 U.S.C. 4502(20)). 

Representative of record means an 

individual who is authorized to 

represent a person or is representing 

himself and who has filed a notice of 

appearance and otherwise has complied 

with the requirements under § 1209.72. 

FHFA’s representative of record may be 

referred to as FHFA counsel of record, 

agency counsel or enforcement counsel. 

Respondent means any party that is 

the subject of a notice of charges under 

this part. 

Safety and Soundness Act means 

Title XIII of the Housing and 

Community Development Act of 1992, 

Public Law 102–550, known as the 

Federal Housing Enterprises Financial 

Safety and Soundness Act of 1992, as 

amended (12 U.S.C. 4501 et seq.) 

Violation has the meaning defined in 

section 1303(25) of the Safety and 

Soundness Act (12 U.S.C. 4502(25)). 

Subpart B—Enforcement Proceedings 

Under Sections 1371 Through 1379D of 

the Safety and Soundness Act 

§ 1209.4 Scope and authority. 

The rules of practice and procedure 

set forth in Subpart C (Rules of Practice 

and Procedure) of this part shall be 

applicable to any hearing on the record 

conducted by FHFA in accordance with 

sections 1371 through 1379D of the 

Safety and Soundness Act (12 U.S.C. 

4631 through 4641), as follows: 

(a) Cease-and-desist proceedings 

under sections 1371 and 1373 of the 

Safety and Soundness Act, (12 U.S.C. 

4631, 4633); 

(b) Civil money penalty assessment 

proceedings under sections 1373 and 

1376 of the Safety and Soundness Act, 

(12 U.S.C. 4633, 4636); and 

(c) Removal and prohibition 

proceedings under sections 1373 and 

1377 of the Safety and Soundness Act, 

(12 U.S.C. 4633, 4636a), except removal 

proceedings under section 1377(h) of 

the Safety and Soundness Act, (12 

U.S.C. 4636a(h)). 

§ 1209.5 Cease and desist proceedings. 

(a) Cease and desist proceedings.—(1) 

Authority.—(i) In general. As prescribed 

by section 1371(a) of the Safety and 

Soundness Act (12 U.S.C. 4631(a)), if in 

the opinion of the Director, a regulated 

entity or any entity-affiliated party is 

engaging or has engaged, or the Director 

has reasonable cause to believe that the 

regulated entity or any entity-affiliated 

party is about to engage, in an unsafe or 

unsound practice in conducting the 

business of the regulated entity or the 

Office of Finance, or is violating or has 

violated, or the Director has reasonable 

cause to believe is about to violate, a 

law, rule, regulation, or order, or any 

condition imposed in writing by the 

Director in connection with the granting 

of any application or other request by 

the regulated entity or the Office of 

Finance or any written agreement 

entered into with the Director, the 

Director may issue and serve upon the 

regulated entity or entity-affiliated party 

a notice of charges (as described in 

§ 1209.23) to institute cease and desist 

proceedings, except with regard to the 

enforcement of any housing goal that 

must be addressed under sections 1341 

and 1345 of the Safety and Soundness 

Act (12 U.S.C. 4581, 4585). 

(ii) Hearing on the record. In 

accordance with section 1373 of the 

Safety and Soundness Act (12 U.S.C. 

4633), a hearing on the record shall be 

held in the District of Columbia. 

Subpart C of this part shall govern the 

hearing procedures. 

(iii) Consent to order. Unless the party 

served with a notice of charges shall 

appear at the hearing personally or 

through an authorized representative of 

record, the party shall be deemed to 

have consented to the issuance of the 

cease and desist order. 

(2) Unsatisfactory rating. In 

accordance with section 1371(b) of the 

Safety and Soundness Act (12 U.S.C. 

4631(b)), if a regulated entity receives, 

in its most recent report of examination, 

a less-than-satisfactory rating for asset 

quality, management, earnings, or 

liquidity, the Director may deem the 

regulated entity to be engaging in an 

unsafe or unsound practice within the 

meaning of section 1371(a) of the Safety 

and Soundness Act (12 U.S.C. 4631(a)), 

if any such deficiency has not been 

corrected. 

(3) Order. As provided by section 

1371(c)(2) of the Safety and Soundness 

Act (12 U.S.C. 4631(c)(2)), if the Director 

finds on the record made at a hearing in 

accordance with section 1373 of the 

Safety and Soundness Act (12 U.S.C. 

4633) that any practice or violation 

specified in the notice of charges has 

been established (or the regulated entity 

or entity-affiliated party consents 

pursuant to section 1373(a)(4) of the 

Safety and Soundness Act (12 U.S.C. 

4633(a)(4)), the Director may issue and 

serve upon the regulated entity, 

executive officer, director, or entityaffiliated party, an order (as set forth in 

§ 1209.55) requiring such party to cease 

and desist from any such practice or 

violation and to take affirmative action 

to correct or remedy the conditions 

resulting from any such practice or 

violation. 

(b) Affirmative action to correct 

conditions resulting from violations or 

activities. The authority to issue a cease 

and desist order or a temporary cease 

and desist order requiring a regulated 

entity, executive officer, director, or 

entity-affiliated party to take affirmative 

action to correct or remedy any 

condition resulting from any practice or 

violation with respect to which such 

cease and desist order or temporary 

cease and desist order is set forth in 

section 1371(a), (c)(2), and (d) of the 

Safety and Soundness Act (12 U.S.C. 

4631(a), (c)(2), and (d)), and includes 

the authority to: 

(1) Require the regulated entity or 

entity-affiliated party to make 

restitution, or to provide 

reimbursement, indemnification, or 

guarantee against loss, if— 

(i) Such entity or party or finance 

facility was unjustly enriched in 

connection with such practice or 

violation, or 

(ii) The violation or practice involved 

a reckless disregard for the law or any 

applicable regulations, or prior order of 

the Director; 

(2) Require the regulated entity to 

seek restitution, or to obtain 

reimbursement, indemnification, or 

guarantee against loss; as 

(3) Restrict asset or liability growth of 

the regulated entity; 

(4) Require the regulated entity to 

obtain new capital; 

(5) Require the regulated entity to 

dispose of any loan or asset involved; 

(6) Require the regulated entity to 

rescind agreements or contracts; 

(7) Require the regulated entity to 

employ qualified officers or employees 

(who may be subject to approval by the 

Director at the direction of the Director); 

and 

(8) Require the regulated entity to take 

such other action, as the Director 

determines appropriate, including 

limiting activities. 

(c) Authority to limit activities. As 

provided by section 1371(e) of the 

Safety and Soundness Act (12 U.S.C. 

4631(e)), the authority of the Director to 

issue a cease and desist order under 

section 1371 of the Safety and 

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Soundness Act (12 U.S.C. 4631) or a 

temporary cease and desist order under 

section 1372 of the Safety and 

Soundness Act (12 U.S.C. 4632), 

includes the authority to place 

limitations on the activities or functions 

of the regulated entity or entityaffiliated party or any executive officer 

or director of the regulated entity or 

entity-affiliated party. 

(d) Effective date of order; judicial 

review.—(1) Effective date. The effective 

date of an order is as set forth in section 

1371(f) of the Safety and Soundness Act 

(12 U.S.C. 4631(f)). 

(2) Judicial review. Judicial review is 

governed by section 1374 of the Safety 

and Soundness Act (12 U.S.C. 4634). 

§ 1209.6 Temporary cease and desist 

orders. 

(a) Temporary cease and desist 

orders.—(1) Grounds for issuance. The 

grounds for issuance of a temporary 

cease and desist order are set forth in 

section 1372(a) of the Safety and 

Soundness Act (12 U.S.C. 4632(a)). In 

accordance with section 1372(a) of the 

Safety and Soundness Act (12 U.S.C. 

4632(a)), the Director may: 

(i) Issue a temporary order requiring 

that regulated entity or entity-affiliated 

party to cease and desist from any 

violation or practice specified in the 

notice of charges; and 

(ii) Require that regulated entity or 

entity-affiliated party to take affirmative 

action to prevent or remedy any 

insolvency, dissipation, condition, or 

prejudice, pending completion of the 

proceedings. 

(2) Additional requirements. As 

provided by section 1372(a)(2) of the 

Safety and Soundness Act (12 U.S.C. 

4632(a)(2)), an order issued under 

section 1372(a)(1) of the Safety and 

Soundness Act (12 U.S.C. 4632(a)(1)) 

may include any requirement 

authorized under section 1371(d) of the 

Safety and Soundness Act (12 U.S.C. 

4631(d)). 

(b) Effective date of temporary order. 

The effective date of a temporary order 

is as provided by section 1372(b) of the 

Safety and Soundness Act (12 U.S.C. 

4632(b)). And, unless set aside, limited, 

or suspended by a court in proceedings 

pursuant to the judicial review 

provisions of section 1372(d) of the 

Safety and Soundness Act (12 U.S.C. 

4632(d)), shall remain in effect and 

enforceable pending the completion of 

the proceedings pursuant to such notice 

of charges, and shall remain effective 

until the Director dismisses the charges 

specified in the notice or until 

superseded by a cease-and-desist order 

issued pursuant to section 1371 of the 

Safety and Soundness Act (12 U.S.C. 

4631). 

(c) Incomplete or inaccurate 

records.—(1) Temporary order. As 

provided by section 1372(c) of the 

Safety and Soundness Act (12 U.S.C. 

4632(c)), if a notice of charges served 

under section 1371(a) or (b) of the Safety 

and Soundness Act (12 U.S.C. 4631(a), 

(b)), specifies on the basis of particular 

facts and circumstances that the books 

and records of the regulated entity 

served are so incomplete or inaccurate 

that the Director is unable, through the 

normal supervisory process, to 

determine the financial condition of the 

regulated entity or the details or the 

purpose of any transaction or 

transactions that may have a material 

effect on the financial condition of that 

regulated entity, the Director may issue 

a temporary order requiring: 

(i) The cessation of any activity or 

practice that gave rise, whether in whole 

or in part, to the incomplete or 

inaccurate state of the books or records; 

or 

(ii) Affirmative action to restore the 

books or records to a complete and 

accurate state. 

(2) Effective period. Any temporary 

order issued under section 1372(c)(1) of 

the Safety and Soundness Act (12 U.S.C. 

4632(c)(1)) shall become effective upon 

service, and remain in effect and 

enforceable unless set aside, limited, or 

suspended in accordance with section 

1372(d) of the Safety and Soundness Act 

(12 U.S.C. 4632(d)), as provided by 

section 1372(c)(2) of the Safety and 

Soundness Act (12 U.S.C. 4632(c)(2)). 

(d) Judicial review. Section 1372(d) of 

the Safety and Soundness Act (12 U.S.C. 

4632(d)), authorizes a regulated entity, 

executive officer, director, or entityaffiliated party that has been served 

with a temporary order pursuant to 

section 1372(a) or (b) of the Safety and 

Soundness Act (12 U.S.C. 4632(a), (b)) 

to apply to the United States District 

Court for the District of Columbia 

within 10 days after service of the 

temporary order for an injunction 

setting aside, limiting, or suspending 

the enforcement, operation, or 

effectiveness of the temporary order, 

pending the completion of the 

administrative enforcement proceeding. 

The district court has jurisdiction to 

issue such injunction. 

(e) Enforcement of temporary order. 

As provided by section 1372(e) of the 

Safety and Soundness Act (12 U.S.C. 

4632(e)), in the case of any violation, 

threatened violation, or failure to obey 

a temporary order issued pursuant to 

this section, the Director may bring an 

action in the United States District 

Court for the District of Columbia for an 

injunction to enforce a temporary order, 

and the district court is to issue such 

injunction upon a finding made in 

accordance with section 1372(e) of the 

Safety and Soundness Act (12 U.S.C. 

4632(e)). 

§ 1209.7 Civil money penalties. 

(a) Civil money penalty 

proceedings.—(1) In general. Section 

1376 of the Safety and Soundness Act 

(12 U.S.C. 4636) governs the imposition 

of civil money penalties. Upon written 

notice, which shall conform to the 

requirements of § 1209.23 of this part, 

and a hearing on the record to be 

conducted in accordance with subpart C 

of this part, the Director may impose a 

civil money penalty on any regulated 

entity or any entity-affiliated party as 

provided by section 1376 of the Safety 

and Soundness Act for any violation, 

practice, or breach addressed under 

sections 1371, 1372, or 1376 of the 

Safety and Soundness Act (12 U.S.C. 

4631, 4632, 4636), except with regard to 

the enforcement of housing goals that 

are addressed separately under sections 

1341 and 1345 of the Safety and 

Soundness Act (12 U.S.C. 4581, 4585). 

(2) Amount of penalty.—(i) First Tier. 

Section 1376(b)(1) of the Safety and 

Soundness Act (12 U.S.C. 4636(b)(1)) 

prescribes the civil penalty for 

violations as stated therein, in the 

amount of $10,000 for each day during 

which a violation continues. 

(ii) Second Tier. Section 1376(b)(2) of 

the Safety and Soundness Act (12 U.S.C. 

4636(b)(2)) provides that 

notwithstanding paragraph (b)(1) 

thereof, a regulated entity or entityaffiliated party shall forfeit and pay a 

civil penalty of not more than $50,000 

for each day during which a violation, 

practice, or breach continues, if the 

regulated entity or entity-affiliated party 

commits any violation described in 

(b)(1) thereof, recklessly engages in an 

unsafe or unsound practice, or breaches 

any fiduciary duty, and the violation, 

practice, or breach is part of a pattern 

of misconduct; causes or is likely to 

cause more than a minimal loss to the 

regulated entity; or results in pecuniary 

gain or other benefit to such party. 

(iii) Third Tier. Section 1376(b)(3) of 

the Safety and Soundness Act (12 U.S.C. 

4636(b)(3)) provides that, 

notwithstanding paragraphs (b)(1) and 

(b)(2) thereof, any regulated entity or 

entity-affiliated party shall forfeit and 

pay a civil penalty, in accordance with 

section 1376(b)(4) of the Safety and 

Soundness Act (12 U.S.C. 4636(b)(4)), 

for each day during which such 

violation, practice, or breach continues, 

if such regulated entity or entityaffiliated party: 

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(A) Knowingly— 

(1) Commits any violation described 

in any subparagraph of section 

1376(b)(1) of the Safety and Soundness 

Act; 

(2) Engages in any unsafe or unsound 

practice in conducting the affairs of the 

regulated entity; or 

(3) Breaches any fiduciary duty; and 

(B) Knowingly or recklessly causes a 

substantial loss to the regulated entity or 

a substantial pecuniary gain or other 

benefit to such party by reason of such 

violation, practice, or breach. 

(b) Maximum amounts.—(1) 

Maximum daily penalty. Section 

1376(b)(4) of the Safety and Soundness 

Act (12 U.S.C. 4636(b)(4)), prescribes 

the maximum daily amount of a civil 

penalty that may be assessed for any 

violation, practice, or breach pursuant 

to section 1376(b)(3) of the Safety and 

Soundness Act (12 U.S.C. 4636(b)(3)), in 

the case of any entity-affiliated party 

(not to exceed $2,000,000.00), and in the 

case of any regulated entity 

($2,000,000.00). 

(2) Inflation Adjustment Act. The 

maximum civil penalty amounts are 

subject to periodic adjustment under the 

Federal Civil Penalties Inflation 

Adjustment Act of 1990, as amended (28 

U.S.C. 2461 note), as provided in 

subpart E of this part. 

(c) Factors in determining amount of 

penalty. In accordance with section 

1376(c)(2) of the Safety and Soundness 

Act (12 U.S.C. 4636(c)(2)), in assessing 

civil money penalties on a regulated 

entity or an entity-affiliated party in 

amounts as provided in section 1376(b) 

of the Safety and Soundness Act (12 

U.S.C. 4636(b)), the Director shall give 

consideration to such factors as: 

(1) The gravity of the violation, 

practice, or breach; 

(2) Any history of prior violations or 

supervisory actions, or any attempts at 

concealment; 

(3) The effect of the penalty on the 

safety and soundness of the regulated 

entity or the Office of Finance; 

(4) Any loss or risk of loss to the 

regulated entity or to the Office of 

Finance; 

(5) Any benefits received or derived, 

whether directly or indirectly, by the 

respondent(s); 

(6) Any injury to the public; 

(7) Any deterrent effect on future 

violations, practices, or breaches; 

(8) The financial capacity of the 

respondent(s), or any unusual 

circumstance(s) of hardship upon an 

executive officer, director, or other 

individual; 

(9) The promptness, cost, and 

effectiveness of any effort to remedy or 

ameliorate the consequences of the 

violation, practice, or breach; 

(10) The candor and cooperation, if 

any, of the respondent(s); and 

(11) Any other factors the Director 

may determine by regulation to be 

appropriate. 

(d) Review of imposition of penalty. 

Section 1376(c)(3) of the Safety and 

Soundness Act (12 U.S.C. 4636(c)(3)) 

governs judicial review of a penalty 

order under section 1374 of the Safety 

and Soundness Act (12 U.S.C. 4634). 

§ 1209.8 Removal and prohibition 

proceedings. 

(a) Removal and prohibition 

proceedings.—(1) Authority to issue 

order. As provided by section 1377(a)(1) 

of the Safety and Soundness Act (12 

U.S.C. 4636a(a)(1)), the Director may 

serve upon a party described in 

paragraph (a)(2) of this section, or any 

officer, director, or management of the 

Office of Finance, a notice of the 

intention of the Director to suspend or 

remove such party from office, or to 

prohibit any further participation by 

such party in any manner in the 

conduct of the affairs of the regulated 

entity or the Office of Finance. 

(2) Applicability. As provided by 

section 1377(a)(2) of the Safety and 

Soundness Act (12 U.S.C. 4636a(a)(2)), a 

party described in this paragraph is an 

entity-affiliated party or any officer, 

director, or management of the Office of 

Finance, if the Director determines that: 

(i) That party, officer, or director has, 

directly or indirectly— 

(A) Violated— 

(1) Any law or regulation; 

(2) Any cease and desist order that 

has become final; 

(3) Any condition imposed in writing 

by the Director in connection with an 

application, notice, or other request by 

a regulated entity; or 

(4) Any written agreement between 

such regulated entity and the Director; 

(B) Engaged or participated in any 

unsafe or unsound practice in 

connection with any regulated entity or 

business institution; or 

(C) Committed or engaged in any act, 

omission, or practice which constitutes 

a breach of such party’s fiduciary duty; 

(ii) By reason of such violation, 

practice, or breach— 

(A) Such regulated entity or business 

institution has suffered or likely will 

suffer financial loss or other damage; or 

(B) Such party directly or indirectly 

received financial gain or other benefit; 

and 

(iii) The violation, practice, or breach 

described in subparagraph (i) of this 

section— 

(A) Involves personal dishonesty on 

the part of such party; or 

(B) Demonstrates willful or 

continuing disregard by such party for 

the safety or soundness of such 

regulated entity or business institution. 

(3) Applicability to business entities. 

Under section 1377(f) of the Safety and 

Soundness Act (12 U.S.C. 4636a(f)), this 

remedy applies only to a person who is 

an individual, unless the Director 

specifically finds that it should apply to 

a corporation, firm, or other business 

entity. 

(b) Suspension order.—(1) Suspension 

or prohibition authorized. If the Director 

serves written notice under section 

1377(a) of the Safety and Soundness Act 

(12 U.S.C. 4636a(a)) upon a party 

subject to that section, the Director may, 

by order, suspend or remove such party 

from office, or prohibit such party from 

further participation in any manner in 

the conduct of the affairs of the 

regulated entity or the Office of Finance, 

if the Director: 

(i) Determines that such action is 

necessary for the protection of the 

regulated entity or the Office of Finance; 

and 

(ii) Serves such party with written 

notice of the order. 

(2) Effective period. The effective 

period of any order under section 

1377(b)(1) of the Safety and Soundness 

Act (12 U.S.C. 4636a(b)(1)) is specified 

in section 1377(b)(2) of the Safety and 

Soundness Act (12 U.S.C. 4636a(b)(2)). 

An order of suspension shall become 

effective upon service and, absent a 

court-ordered stay, remains effective 

and enforceable until the date the 

Director dismisses the charges or the 

effective date of an order issued by the 

Director under section 1377(c)(4) of the 

Safety and Soundness Act (12 U.S.C. 

4636a(c)(4),(5)). 

(3) Copy of order to be served on 

regulated entity. In accordance with 

section 1377(b)(3) of the Safety and 

Soundness Act (12 U.S.C. 4636a(b)(3)), 

the Director will serve a copy of any 

order to suspend, remove, or prohibit 

participation in the conduct of the 

affairs on the Office of Finance or any 

regulated entity with which such party 

is affiliated at the time such order is 

issued. 

(c) Notice; hearing and order.—(1) 

Written notice. A notice of the intention 

of the Director to issue an order under 

sections 1377(a) and (c) of the Safety 

and Soundness Act, (12 U.S.C. 4636a(a), 

(c)), shall conform with § 1209.23, and 

may include any such additional 

information as the Director may require. 

(2) Hearing. A hearing on the record 

shall be held in the District of Columbia 

in accordance with sections 1373(a)(1) 

and 1377(c)(2) of the Safety and 

Soundness Act. See 12 U.S.C. 

4633(a)(1), 4636a(c)(2). 

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(3) Consent. As provided by section 

1377(c)(3) of the Safety and Soundness 

Act (12 U.S.C. 4636a(c)(3)), unless the 

party that is the subject of a notice 

delivered under paragraph (a) of this 

section appears in person or by a duly 

authorized representative of record, in 

the adjudicatory proceeding, such party 

shall be deemed to have consented to 

the issuance of an order under this 

section. 

(4) Issuance of order of suspension or 

removal. As provided by section 

1377(c)(4) of the Safety and Soundness 

Act (12 U.S.C. 4636a(c)(4)), the Director 

may issue an order under this part, as 

the Director may deem appropriate, if: 

(i) A party is deemed to have 

consented to the issuance of an order 

under paragraph (d); or 

(ii) Upon the record made at the 

hearing, the Director finds that any of 

the grounds specified in the notice have 

been established. 

(5) Effectiveness of order. As provided 

by section 1377(c)(5) of the Safety and 

Soundness Act (12 U.S.C. 4636a(c)(5)), 

any order issued and served upon a 

party in accordance with this section 

shall become effective at the expiration 

of 30 days after the date of service upon 

such party and any regulated entity or 

entity-affiliated party. An order issued 

upon consent under paragraph (c)(3) of 

this section, however, shall become 

effective at the time specified therein. 

Any such order shall remain effective 

and enforceable except to such extent as 

it is stayed, modified, terminated, or set 

aside by action of the Director or a 

reviewing court. 

(d) Prohibition of certain activities 

and industry-wide prohibition.—(1) 

Prohibition of certain activities. As 

provided by section 1377(d) of the 

Safety and Soundness Act (12 U.S.C. 

4636a(d)), any person subject to an 

order issued under subpart B of this part 

shall not— 

(i) Participate in any manner in the 

conduct of the affairs of any regulated 

entity or the Office of Finance; 

(ii) Solicit, procure, transfer, attempt 

to transfer, vote, or attempt to vote any 

proxy, consent, or authorization with 

respect to any voting rights in any 

regulated entity; 

(iii) Violate any voting agreement 

previously approved by the Director; or 

(iv) Vote for a director, or serve or act 

as an entity-affiliated party of a 

regulated entity or as an officer or 

director of the Office of Finance. 

(2) Industry-wide prohibition. As 

provided by section 1377(e)(1) of the 

Safety and Soundness Act (12 U.S.C. 

4636a(e)(1)), except as provided in 

section 1377(e)(2) of the Safety and 

Soundness Act (12 U.S.C. 4636a(e)(2)), 

any person who, pursuant to an order 

issued under section 1377 of the Safety 

and Soundness Act (12 U.S.C. 4636a), 

has been removed or suspended from 

office in a regulated entity or the Office 

of Finance, or prohibited from 

participating in the conduct of the 

affairs of a regulated entity or the Office 

of Finance, may not, while such order 

is in effect, continue or commence to 

hold any office in, or participate in any 

manner in the conduct of the affairs of, 

any regulated entity or the Office of 

Finance. 

(3) Relief from industry-wide 

prohibition at the discretion of the 

Director.—(i) Relief from order. As 

provided by section 1377(e)(2) of the 

Safety and Soundness Act (12 U.S.C. 

4636a(e)(2)), if, on or after the date on 

which an order has been issued under 

section 1377 of the Safety and 

Soundness Act (12 U.S.C. 4636a) that 

removes or suspends from office any 

party, or prohibits such party from 

participating in the conduct of the 

affairs of a regulated entity or the Office 

of Finance, such party receives the 

written consent of the Director, the 

order shall cease to apply to such party 

with respect to the regulated entity or 

the Office of Finance to the extent 

described in the written consent. Such 

written consent shall be on such terms 

and conditions as the Director therein 

may specify in his discretion. Any such 

consent shall be publicly disclosed. 

(ii) No private right of action; no final 

agency action. Nothing in this 

paragraph shall be construed to require 

the Director to entertain or to provide 

such written consent, or to confer any 

rights to such consideration or consent 

upon any party, regulated entity, entityaffiliated party, or the Office of Finance. 

Additionally, whether the Director 

consents to relief from an outstanding 

order under this part is committed 

wholly to the discretion of the Director, 

and such determination shall not be a 

final agency action for purposes of 

seeking judicial review. 

(4) Violation of industry-wide 

prohibition. As provided by section 

1377(e)(3) of the Safety and Soundness 

Act (12 U.S.C. 4636a(e)(3)), any 

violation of section 1377(e)(1) of the 

Safety and Soundness Act (12 U.S.C. 

4636a(e)(1)) by any person who is 

subject to an order issued under section 

1377(h) of the Safety and Soundness Act 

(12 U.S.C. 4636a(h)) (suspension or 

removal of entity-affiliated party 

charged with felony) shall be treated as 

a violation of the order. 

(e) Stay of suspension or prohibition 

of entity-affiliated party. As provided by 

section 1377(g) of the Safety and 

Soundness Act (12 U.S.C. 4636a(g)), not 

later than 10 days after the date on 

which any entity-affiliated party has 

been suspended from office or 

prohibited from participation in the 

conduct of the affairs of a regulated 

entity, such party may apply to the 

United States District Court for the 

District of Columbia, or the United 

States district court for the judicial 

district in which the headquarters of the 

regulated entity is located, for a stay of 

such suspension or prohibition pending 

the completion of the administrative 

enforcement proceeding pursuant to 

section 1377(c) of the Safety and 

Soundness Act (12 U.S.C. 4636a(c)). The 

court shall have jurisdiction to stay such 

suspension or prohibition, but such 

jurisdiction does not extend to the 

administrative enforcement proceeding. 

§ 1209.9 Supervisory actions not affected. 

As provided by section 1311(c) of the 

Safety and Soundness Act (12 U.S.C. 

4511(c)), the authority of the Director to 

take action under subtitle A of the 

Safety and Soundness Act (12 U.S.C. 

4611 et seq.) (e.g., the appointment of a 

conservator or receiver for a regulated 

entity; entering into a written agreement 

or pursuing an informal agreement with 

a regulated entity as the Director deems 

appropriate; and undertaking other such 

actions as may be applicable to 

undercapitalized, significantly 

undercapitalized or critically 

undercapitalized regulated entities), or 

to initiate enforcement proceedings 

under subtitle C of the Safety and 

Soundness Act (12 U.S.C. 4631 et seq.), 

shall not in any way limit the general 

supervisory or regulatory authority 

granted the Director under section 

1311(b) of the Safety and Soundness Act 

(12 U.S.C. 4511(b)). The selection and 

form of regulatory or supervisory action 

under the Safety and Soundness Act is 

committed to the discretion of the 

Director, and the selection of one form 

of action or a combination of actions 

does not foreclose the Director from 

pursuing any other supervisory action 

authorized by law. 

Subpart C—Rules of Practice and 

Procedure 

§ 1209.10 Authority of the Director. 

The Director may, at any time during 

the pendency of a proceeding, perform, 

direct the performance of, or waive 

performance of any act that could be 

done or ordered by the presiding officer. 

§ 1209.11 Authority of the Presiding 

Officer. 

(a) General rule. All proceedings 

governed by subpart C of this part shall 

be conducted consistent with the 

provisions of chapter 5 of Title 5 of the 

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United States Code. The presiding 

officer shall have complete charge of the 

adjudicative proceeding, conduct a fair 

and impartial hearing, avoid 

unnecessary delay, and assure that a 

complete record of the proceeding is 

made. 

(b) Powers. The presiding officer shall 

have all powers necessary to conduct 

the proceeding in accordance with 

paragraph (a) of this section and 5 

U.S.C. 556(c). The presiding officer is 

authorized to: 

(1) Control the proceedings. (i) Upon 

reasonable notice to the parties, not 

earlier than 30 days or later than 60 

days after service of a notice of charges 

under the Safety and Soundness Act, set 

a date, time, and place for an 

evidentiary hearing on the record, 

within the District of Columbia, as 

provided in section 1373 of the Safety 

and Soundness Act (12 U.S.C. 4633), in 

a scheduling order that may be issued 

in conjunction with the initial 

scheduling conference set under 

§ 1209.36, or otherwise as the presiding 

officer finds in the best interest of 

justice, in accordance with this part; 

and 

(ii) Upon reasonable notice to the 

parties, reset or change the date, time, 

or place (within the District of 

Columbia) of an evidentiary hearing; 

(2) Continue or recess the hearing in 

whole or in part for a reasonable period 

of time; 

(3) Hold conferences to address legal 

or factual issues, or evidentiary matters 

materially relevant to the charges or 

allowable defenses; to regulate the 

timing and scope of discovery and rule 

on discovery plans; or otherwise to 

consider matters that may facilitate an 

effective, fair, and expeditious 

disposition of the proceeding; 

(4) Administer oaths and affirmations; 

(5) Issue and enforce subpoenas, 

subpoenas duces tecum, discovery and 

protective orders, as authorized by this 

part, and to revoke, quash, or modify 

such subpoenas issued by the presiding 

officer; 

(6) Take and preserve testimony 

under oath; 

(7) Rule on motions and other 

procedural matters appropriate in an 

adjudicatory proceeding, except that 

only the Director shall have the power 

to grant summary disposition or any 

motion to dismiss the proceeding or to 

make a final determination of the merits 

of the proceeding; 

(8) Take all actions authorized under 

this part to regulate the scope, timing, 

and completion of discovery of any nonprivileged documents that are materially 

relevant to the charges or allowable 

defenses; 

(9) Regulate the course of the hearing 

and the conduct of representatives and 

parties; 

(10) Examine witnesses; 

(11) Receive materially relevant 

evidence, and rule upon the 

admissibility of evidence or exclude, 

limit, or otherwise rule on offers of 

proof; 

(12) Upon motion of a party, take 

official notice of facts; 

(13) Recuse himself upon his own 

motion or upon motion made by a party; 

(14) Prepare and present to the 

Director a recommended decision as 

provided in this part; 

(15) Establish time, place, and manner 

limitations on the attendance of the 

public and the media for any public 

hearing; and 

(16) Do all other things necessary or 

appropriate to discharge the duties of a 

presiding officer. 

§ 1209.12 Public hearings; closed 

hearings. 

(a) General rule. As provided in 

section 1379B(b) of the Safety and 

Soundness Act (12 U.S.C. 4639(b)), all 

hearings shall be open to the public, 

except that the Director, in his 

discretion, may determine that holding 

an open hearing would be contrary to 

the public interest. The Director may 

make such determination sua sponte at 

any time by written notice to all parties, 

or as provided in paragraphs (b) and (c) 

of this section. 

(b) Motion for closed hearing. Within 

20 days of service of the notice of 

charges, any party may file with the 

presiding officer a motion for a private 

hearing and any party may file a 

pleading in reply to the motion. The 

presiding officer shall forward the 

motion and any reply, together with a 

recommended decision on the motion, 

to the Director, who shall make a final 

determination. Such motions and 

replies are governed by § 1209.28 of this 

part. A determination under this section 

is committed to the discretion of the 

Director and is not a reviewable final 

agency action. 

(c) Filing documents under seal. 

FHFA counsel of record, in his 

discretion, may file or require the filing 

of any document or part of a document 

under seal, if such counsel makes a 

written determination that disclosure of 

the document would be contrary to the 

public interest. The presiding officer 

shall issue an order to govern 

confidential information, and take all 

appropriate steps to preserve the 

confidentiality of such documents in 

whole or in part, including closing any 

portion of a hearing to the public or 

issuing a protective order under such 

terms as may be acceptable to FHFA 

counsel of record. 

(d) Procedures for closed hearing. An 

evidentiary hearing, or any part thereof, 

that is closed for the purpose of offering 

into evidence testimony or documents 

filed under seal as provided in 

paragraph (c) of this section shall be 

conducted under procedures that may 

include: prior notification to the 

submitter of confidential information; 

provisions for sealing portions of the 

record, briefs, and decisions; in camera 

arguments, offers of proof, and 

testimony; and limitations on 

representatives of record or other 

participants, as the presiding officer 

may designate. Additionally, at such 

proceedings the presiding officer may 

make an opening statement as to the 

confidentiality and limitations and 

deliver an oath to the parties, 

representatives of record, or other 

approved participants as to the 

confidentiality of the proceedings. 

§ 1209.13 Good faith certification. 

(a) General requirement. Every filing 

or submission of record following the 

issuance of a notice of charges by the 

Director shall be signed by at least one 

representative of record in his 

individual name and shall state that 

representative’s business contact 

information, which shall include his 

address, electronic mail address, and 

telephone number; and the names, 

addresses and telephone numbers of all 

other representatives of record for the 

person making the filing or submission. 

(b) Effect of signature. (1) By signing 

a document, a representative of record 

or party appearing pro se certifies that: 

(i) The representative of record or 

party has read the filing or submission 

of record; 

(ii) To the best of his knowledge, 

information and belief formed after 

reasonable inquiry, the filing or 

submission of record is well-grounded 

in fact and is warranted by existing law 

or a good faith, non-frivolous argument 

for the extension, modification, or 

reversal of existing law, regulation, or 

FHFA order or policy; and 

(iii) The filing or submission of record 

is not made for any improper purpose, 

such as to harass or to cause 

unnecessary delay or needless increase 

in the cost of litigation. 

(2) If a filing or submission of record 

is not signed, the presiding officer shall 

strike the filing or submission of record, 

unless it is signed promptly after the 

omission is called to the attention of the 

pleader or movant. 

(c) Effect of making oral motion or 

argument. The act of making any oral 

motion or oral argument by any 

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representative or party shall constitute a 

certification that to the best of his 

knowledge, information, and belief, 

formed after reasonable inquiry, his 

statements are well-grounded in fact 

and are warranted by existing law or a 

good faith, non-frivolous argument for 

the extension, modification, or reversal 

of existing law, regulation, or FHFA 

order or policy, and are not made for 

any improper purpose, such as to harass 

or to cause unnecessary delay or to 

needlessly increase litigation-related 

costs. 

§ 1209.14 Ex parte communications. 

(a) Definition.—(1) Ex parte 

communication means any material oral 

or written communication relevant to an 

adjudication of the merits of any 

proceeding under this subpart that was 

neither on the record nor on reasonable 

prior notice to all parties that takes 

place between: 

(i) An interested person outside FHFA 

(including the person’s representative of 

record); and 

(ii) The presiding officer handling that 

proceeding, the Director, a decisional 

employee assigned to that proceeding, 

or any other person who is or may be 

reasonably expected to be involved in 

the decisional process. 

(2) A communication that is 

procedural in that it does not concern 

the merits of an adjudicatory 

proceeding, such as a request for status 

of the proceeding, does not constitute an 

ex parte communication. 

(b) Prohibition of ex parte 

communications. From the time a notice 

of charges commencing a proceeding 

under this part is issued by the Director 

until the date that the Director issues his 

final decision pursuant to § 1209.55 of 

this part, no person referred to in 

paragraph (a)(1)(i) of this section shall 

knowingly make or cause to be made an 

ex parte communication with the 

Director or the presiding officer. The 

Director, presiding officer, or a 

decisional employee shall not 

knowingly make or cause to be made an 

ex parte communication. 

(c) Procedure upon occurrence of ex 

parte communication. If an ex parte 

communication is received by any 

person identified in paragraph (a) of this 

section, that person shall cause all such 

written communications (or, if the 

communication is oral, a memorandum 

stating the substance of the 

communication) to be placed on the 

record of the proceeding and served on 

all parties. All parties to the proceeding 

shall have an opportunity within 10 

days of receipt of service of the ex parte 

communication to file responses 

thereto, and to recommend sanctions 

that they believe to be appropriate 

under the circumstances, in accordance 

with paragraph (d) of this section. 

(d) Sanctions. Any party or 

representative for a party who makes an 

ex parte communication, or who 

encourages or solicits another to make 

an ex parte communication, may be 

subject to any appropriate sanction or 

sanctions imposed by the Director or the 

presiding officer, including, but not 

limited to, exclusion from the 

proceedings, an adverse ruling on the 

issue that is the subject of the prohibited 

communication, or other appropriate 

and commensurate action(s). 

(e) Consultations by presiding officer. 

Except to the extent required for the 

disposition of ex parte matters as 

authorized by law, the presiding officer 

may not consult a person or party on 

any matter relevant to the merits of the 

adjudication, unless upon notice to and 

opportunity for all parties to participate. 

(f) Separation of functions. An 

employee or agent engaged in the 

performance of any investigative or 

prosecuting function for FHFA in a case 

may not, in that or in a factually related 

case, participate or advise in the 

recommended decision, the Director’s 

review under § 1209.55 of the 

recommended decision, or the Director’s 

final determination on the merits based 

upon his review of the recommended 

decision, except as a witness or counsel 

in the adjudicatory proceedings. This 

section shall not prohibit FHFA counsel 

of record from providing necessary and 

appropriate legal advice to the Director 

on supervisory (including information 

or legal advice as to settlement issues) 

or regulatory matters. 

§ 1209.15 Filing of papers. 

(a) Filing. All pleadings, motions, 

memoranda, and any other submissions 

or papers required to be filed in the 

proceeding shall be addressed to the 

presiding officer and filed with FHFA, 

1700 G Street, NW., Fourth Floor, 

Washington, DC 20552, in accordance 

with paragraphs (b) and (c) of this 

section. 

(b) Manner of filing. Unless otherwise 

specified by the Director or the 

presiding officer, filing shall be 

accomplished by: 

(1) Overnight delivery. Overnight U.S. 

Postal Service delivery or delivery by a 

reliable commercial delivery service for 

same day or overnight delivery to the 

address stated above; or 

(2) U.S. Mail. First class, registered, or 

certified mail via the U.S. Postal 

Service; and 

(3) Electronic media. Transmission by 

electronic media shall be required by 

and upon any conditions specified by 

the Director or the presiding officer. 

FHFA shall provide a designated site for 

the electronic filing of all papers in a 

proceeding in accordance with any 

conditions specified by the presiding 

officer. All papers filed by electronic 

media shall be filed concurrently in a 

manner set out above and in accordance 

with paragraph (c) of this section. 

(c) Formal requirements as to papers 

filed.—(1) Form. To be filed, all papers 

must set forth the name, address, 

telephone number, and electronic mail 

address of the representative or party 

seeking to make the filing. Additionally, 

all such papers must be accompanied by 

a certification setting forth when and 

how service has been made on all other 

parties. All papers filed must be doublespaced on 81⁄2 x 11-inch paper and must 

be clear, legible, and formatted as 

required by paragraph (c)(5) of this 

section. 

(2) Signature. All papers filed must be 

dated and signed as provided in 

§ 1209.13. 

(3) Caption. All papers filed must 

include at the head thereof, or on a title 

page, the FHFA caption, title and docket 

number of the proceeding, the name of 

the filing party, and the subject of the 

particular paper. 

(4) Number of copies. Unless 

otherwise specified by the Director or 

the presiding officer, an original and 

one copy of all pleadings, motions and 

memoranda, or other such papers shall 

be filed, except that only one copy of 

transcripts of testimony and exhibits 

shall be filed. 

(5) Content format. All papers filed 

shall be formatted in such program(s) 

(e.g., MS WORD©, MS Excel©, or 

WordPerfect©) as the presiding officer 

or Director shall specify. 

§ 1209.16 Service of papers. 

(a) Except as otherwise provided, a 

party filing papers or serving a 

subpoena shall serve a copy upon the 

representative of record for each party to 

the proceeding so represented, and 

upon any party who is not so 

represented, in accordance with the 

requirements of this section. 

(b) Except as provided in paragraphs 

(c)(2) and (d) of this section, a serving 

party shall use one or more of the 

following methods of service: 

(1) Personal service; 

(2) Overnight U.S. Postal Service 

delivery or delivery by a reliable 

commercial delivery service for same 

day or overnight delivery to the parties’ 

respective street addresses; or 

(3) First class, registered, or certified 

mail via the U.S. Postal Service; and 

(4) For transmission by electronic 

media, each party shall promptly 

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provide the presiding officer and all 

parties, in writing, an active electronic 

mail address where service will be 

accepted on behalf of such party. Any 

document transmitted via electronic 

mail for service on a party shall comply 

in all respects with the requirements of 

§ 1209.15(c). 

(5) Service of pleadings or other 

papers made by facsimile may not 

exceed a total page count of 30 pages. 

Any paper served by facsimile 

transmission shall meet the 

requirements of § 1209.15(c). 

(6) Any party serving a pleading or 

other paper by electronic media under 

paragraph (4) of this section also shall 

concurrently serve that pleading or 

paper by one of the methods specified 

in paragraphs (1) through (5) of this 

section. 

(c) By the Director or the presiding 

officer. (1) All papers required to be 

served by the Director or the presiding 

officer upon a party who has appeared 

in the proceeding in accordance with 

§ 1209.72 shall be served by the means 

specified in paragraph (b) of this 

section. 

(2) If a notice of appearance has not 

been filed in the proceeding for a party 

in accordance with § 1209.72, the 

Director or the presiding officer shall 

make service upon the party by any of 

the following methods: 

(i) By personal service; 

(ii) If the person to be served is an 

individual, by delivery to a person of 

suitable age and discretion at the 

physical location where the individual 

resides or works; 

(iii) If the person to be served is a 

corporation or other association, by 

delivery to an officer, managing or 

general agent, or to any other agent 

authorized by appointment or by law to 

receive service and, if the agent is one 

authorized by statute to receive service 

and the statute so requires, by also 

mailing a copy to the party; 

(iv) By registered or certified mail 

addressed to the person’s last known 

address; or 

(v) By any other method reasonably 

calculated to give actual notice. 

(d) Subpoenas. Service of a subpoena 

may be made: 

(1) By personal service; 

(2) If the person to be served is an 

individual, by delivery to a person of 

suitable age and discretion at the 

physical location where the individual 

resides or works; 

(3) If the person to be served is a 

corporation or other association, by 

delivery to an officer, managing or 

general agent, or to any other agent 

authorized by appointment or by law to 

receive service and, if the agent is one 

authorized by statute to receive service 

and the statute so requires, by also 

mailing a copy to the party; 

(4) By registered or certified mail 

addressed to the person’s last known 

address; or 

(5) By any other method reasonably 

calculated to give actual notice. 

(e) Area of service. Service in any 

State or the District of Columbia, or any 

commonwealth, possession, territory or 

other place subject to the jurisdiction of 

the United States, or on any person 

doing business in any State or the 

District of Columbia, or any 

commonwealth, possession, territory or 

other place subject to the jurisdiction of 

the United States, or on any person as 

otherwise permitted by law, is effective 

without regard to the place where the 

hearing is held. 

(f) Proof of service. Proof of service of 

papers filed by a party shall be filed 

before action is taken thereon. The proof 

of service, which shall serve as prima 

facie evidence of the fact and date of 

service, shall show the date and manner 

of service and may be by written 

acknowledgment of service, by 

declaration of the person making 

service, or by certificate of a 

representative of record. However, 

failure to file proof of service 

contemporaneously with the papers 

shall not affect the validity of actual 

service. The presiding officer may allow 

the proof to be amended or supplied, 

unless to do so would result in material 

prejudice to a party. 

§ 1209.17 Time computations. 

(a) General rule. In computing any 

period of time prescribed or allowed 

under this part, the date of the act or 

event that commences the designated 

period of time is not included. 

Computations shall include the last day 

of the time period, unless the day falls 

on a Saturday, Sunday, or Federal 

holiday. When the last day is a 

Saturday, Sunday or Federal holiday, 

the period of time shall run until the 

end of the next day that is not a 

Saturday, Sunday, or Federal holiday. 

Intermediate Saturdays, Sundays and 

Federal holidays are included in the 

computation of time. However, when 

the time period within which an act is 

to be performed is 10 days or less, not 

including any additional time allowed 

for in paragraph (c) of this section, 

intermediate Saturdays, Sundays and 

Federal holidays are not included. 

(b) When papers are deemed to be 

filed or served. (1) Filing or service are 

deemed to be effective: 

(i) In the case of personal service or 

same day reliable commercial delivery 

service, upon actual service; 

(ii) In the case of U.S. Postal Service 

or reliable commercial overnight 

delivery service, or first class, 

registered, or certified mail, upon 

deposit in or delivery to an appropriate 

point of collection; 

(iii) In the case of transmission by 

electronic media, as specified by the 

authority receiving the filing, in the case 

of filing; or 

(iv) In the case of transmission by 

electronic media or facsimile, when the 

device through which the document 

was sent provides a reliable indicator 

that the document has been received by 

the opposing party, in the case of 

service. 

(2) The effective filing and service 

dates specified in paragraph (b)(1) of 

this section may be modified by the 

Director or the presiding officer, or by 

agreement of the parties in the case of 

service. 

(c) Calculation of time for service and 

filing of responsive papers. Whenever a 

time limit is measured by a prescribed 

period from the service of any notice, 

pleading or paper, the applicable time 

limits shall be calculated as follows: 

(1) If service was made by delivery to 

the U.S. Postal Service for longer than 

overnight delivery service by first class, 

registered, or certified mail, add three 

calendar days to the prescribed period 

for the responsive pleading or other 

filing. 

(2) If service was personal, or was 

made by delivery to the U.S. Postal 

Service or any reliable commercial 

delivery service for overnight delivery, 

add one calendar-day to the prescribed 

period for the responsive pleading or 

other filing. 

(3) If service was made by electronic 

media transmission or facsimile, add 

one calendar-day to the prescribed 

period for the responsive pleading or 

other filing—unless otherwise 

determined by the Director or the 

presiding officer sua sponte, or upon 

motion of a party in the case of filing or 

by prior agreement among the parties in 

the case of service. 

§ 1209.18 Change of time limits. 

Except as otherwise by law required, 

the presiding officer may extend any 

time limit that is prescribed above or in 

any notice or order issued in the 

proceedings. After the referral of the 

case to the Director pursuant to 

§ 1209.53, the Director may grant 

extensions of the time limits for good 

cause shown. Extensions may be 

granted on the motion of a party after 

notice and opportunity to respond is 

afforded all nonmoving parties, or on 

the Director’s or the presiding officer’s 

own motion. 

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§ 1209.19 Witness fees and expenses. 

Witnesses (other than parties) 

subpoenaed for testimony (or for a 

deposition in lieu of personal 

appearance at a hearing) shall be paid 

the same fees for attendance and 

mileage as are paid in the United States 

district courts in proceedings in which 

the United States is a party, provided 

that, in the case of a discovery subpoena 

addressed to a party, no witness fees or 

mileage shall be paid. Fees for witnesses 

shall be tendered in advance by the 

party requesting the subpoena, except 

that fees and mileage need not be 

tendered in advance where FHFA is the 

party requesting the subpoena. FHFA 

shall not be required to pay any fees to 

or expenses of any witness who was not 

subpoenaed by FHFA. 

§ 1209.20 Opportunity for informal 

settlement. 

Any respondent may, at any time in 

the proceeding, unilaterally submit to 

FHFA’s counsel of record written offers 

or proposals for settlement of a 

proceeding without prejudice to the 

rights of any of the parties. No such 

offer or proposal shall be made to any 

FHFA representative other than FHFA 

counsel of record. Submission of a 

written settlement offer does not 

provide a basis for adjourning, deferring 

or otherwise delaying all or any portion 

of a proceeding under this part. No 

settlement offer or proposal, or any 

subsequent negotiation or resolution, is 

admissible as evidence in any 

proceeding. 

§ 1209.21 Conduct of examination. 

Nothing in this part limits or 

constrains in any manner any duty, 

authority, or right of FHFA to conduct 

or to continue any examination, 

investigation, inspection, or visitation of 

any regulated entity or entity-affiliated 

party. 

§ 1209.22 Collateral attacks on 

adjudicatory proceeding. 

If an interlocutory appeal or collateral 

attack is brought in any court 

concerning all or any part of an 

adjudicatory proceeding, the challenged 

adjudicatory proceeding shall continue 

without regard to the pendency of that 

court proceeding. No default or other 

failure to act as directed in the 

adjudicatory proceeding within the 

times prescribed in subpart C of this 

part shall be excused based on the 

pendency before any court of any 

interlocutory appeal or collateral attack. 

§ 1209.23 Commencement of proceeding 

and contents of notice of charges. 

Proceedings under subpart C of this 

part are commenced by the Director by 

the issuance of a notice of charges, as 

defined in § 1209.3(p), that must be 

served upon a respondent. A notice of 

charges shall state all of the following: 

(a) The legal authority for the 

proceeding and for FHFA’s jurisdiction 

over the proceeding; 

(b) A statement of the matters of fact 

or law showing that FHFA is entitled to 

relief; 

(c) A proposed order or prayer for an 

order granting the requested relief; 

(d) Information concerning the nature 

of the proceeding and pertinent 

procedural matters, including: the 

requirement that the hearing shall be 

held in the District of Columbia; the 

presiding officer will set the date and 

location for an evidentiary hearing in a 

scheduling order to be issued not less 

than 30 days or more than 60 days after 

service of the notice of charges; contact 

information for FHFA enforcement 

counsel and the presiding officer, if 

known; submission information for 

filings and appearances, the time within 

which to request a hearing, and citation 

to FHFA Rules of Practice and 

Procedure; and 

(e) Information concerning proper 

filing of the answer, including the time 

within which to file the answer as 

required by law or regulation, a 

statement that the answer shall be filed 

with the presiding officer or with FHFA 

as specified therein, and the address for 

filing the answer (and request for a 

hearing, if applicable). 

§ 1209.24 Answer. 

(a) Filing deadline. Unless otherwise 

specified by the Director in the notice, 

respondent shall file an answer within 

20 days of service of the notice of 

charges initiating the enforcement 

action. 

(b) Content of answer. An answer 

must respond specifically to each 

paragraph or allegation of fact contained 

in the notice of charges and must admit, 

deny, or state that the party lacks 

sufficient information to admit or deny 

each allegation of fact. A statement of 

lack of information has the effect of a 

denial. Denials must fairly meet the 

substance of each allegation of fact 

denied; general denials are not 

permitted. When a respondent denies 

part of an allegation, that part must be 

denied and the remainder specifically 

admitted. Any allegation of fact in the 

notice that is not denied in the answer 

is deemed admitted for purposes of the 

proceeding. A respondent is not 

required to respond to the portion of a 

notice that constitutes the prayer for 

relief or proposed order. The answer 

must set forth affirmative defenses, if 

any, asserted by the respondent. 

(c) Default. Failure of a respondent to 

file an answer required by this section 

within the time provided constitutes a 

waiver of such respondent’s right to 

appear and contest the allegations in the 

notice. If no timely answer is filed, 

FHFA counsel of record may file a 

motion for entry of an order of default. 

Upon a finding that no good cause has 

been shown for the failure to file a 

timely answer, the presiding officer 

shall file with the Director a 

recommended decision containing the 

findings and the relief sought in the 

notice. Any final order issued by the 

Director based upon a respondent’s 

failure to answer is deemed to be an 

order issued upon consent. 

§ 1209.25 Amended pleadings. 

(a) Amendments. The notice or 

answer may be amended or 

supplemented at any stage of the 

proceeding. The respondent must 

answer an amended notice within the 

time remaining for the respondent’s 

answer to the original notice, or within 

10 days after service of the amended 

notice, whichever period is longer, 

unless the Director or presiding officer 

orders otherwise for good cause shown. 

(b) Amendments to conform to the 

evidence. When issues not raised in the 

notice or answer are tried at the hearing 

by express or implied consent of the 

parties, or as the presiding officer may 

allow for good cause shown, such issues 

will be treated in all respects as if they 

had been raised in the notice or answer, 

and no formal amendments are 

required. If evidence is objected to at the 

hearing on the ground that it is not 

within the issues raised by the notice or 

answer, the presiding officer may admit 

the evidence when admission is likely 

to assist in adjudicating the merits of the 

action. The presiding officer will do so 

freely when the determination of the 

merits of the action is served thereby 

and the objecting party fails to satisfy 

the presiding officer that the admission 

of such evidence would unfairly 

prejudice that party’s action or defense 

upon the merits. The presiding officer 

may grant a continuance to enable the 

objecting party to meet such evidence. 

§ 1209.26 Failure to appear. 

Failure of a respondent to appear in 

person at the hearing or by a duly 

authorized representative of record 

constitutes a waiver of respondent’s 

right to a hearing and is deemed an 

admission of the facts as alleged and 

consent to the relief sought in the 

notice. Without further proceedings or 

notice to the respondent, the presiding 

officer shall file with the Director a 

recommended decision containing the 

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Agency’s findings and the relief sought 

in the notice. 

§ 1209.27 Consolidation and severance of 

actions. 

(a) Consolidation. On the motion of 

any party, or on the presiding officer’s 

own motion, the presiding officer may 

consolidate, for some or all purposes, 

any two or more proceedings, if each 

such proceeding involves or arises out 

of the same transaction, occurrence or 

series of transactions or occurrences, or 

involves at least one common 

respondent or a material common 

question of law or fact, unless such 

consolidation would cause 

unreasonable delay or injustice. In the 

event of consolidation under this 

section, appropriate adjustment to the 

pre-hearing schedule must be made to 

avoid unnecessary expense, 

inconvenience, or delay. 

(b) Severance. The presiding officer 

may, upon the motion of any party, 

sever the proceeding for separate 

resolution of the matter as to any 

respondent only if the presiding officer 

finds that undue prejudice or injustice 

to the moving party would result from 

not severing the proceeding and such 

undue prejudice or injustice would 

outweigh the interests of judicial 

economy and expedition in the 

complete and final resolution of the 

proceeding. 

§ 1209.28 Motions. 

(a) In writing. (1) Except as otherwise 

provided herein, an application or 

request for an order or ruling must be 

made by written motion. 

(2) All written motions must state 

with particularity the relief sought and 

must be accompanied by a proposed 

order. 

(3) No oral argument may be held on 

written motions except as otherwise 

directed by the presiding officer. 

Written memoranda, briefs, affidavits, or 

other relevant material or documents 

may be filed in support of or in 

opposition to a motion. 

(b) Oral motions. A motion may be 

made orally on the record, unless the 

presiding officer directs that such 

motion be reduced to writing, in which 

case the motion will be subject to the 

requirements of this section. 

(c) Filing of motions. Motions must be 

filed with the presiding officer and 

served on all parties; except that 

following the filing of a recommended 

decision, motions must be filed with the 

Director. Motions for pre-trial relief 

such as motions in limine or objections 

to offers of proof or experts shall be filed 

not less than 10 days prior to the date 

of the evidentiary hearing, except as 

provided with the consent of the 

presiding officer for good cause shown. 

(d) Responses and replies. (1) Except 

as otherwise provided herein, any party 

may file a written response to a nondispositive motion within 10 days after 

service of any written motion, or within 

such other period of time as may be 

established by the presiding officer or 

the Director; and the moving party may 

file a written reply to a written response 

to a non-dispositive motion within five 

days after the service of the response, 

unless some other period is ordered by 

the presiding officer or the Director. The 

presiding officer shall not rule on any 

oral or written motion before each party 

with an interest in the motion has had 

an opportunity to respond as provided 

in this section. 

(2) The failure of a party to oppose a 

written motion or an oral motion made 

on the record is deemed as consent by 

that party to the entry of an order 

substantially in the form of the order 

accompanying the motion. 

(e) Dilatory motions. Frivolous, 

dilatory, or substantively repetitive 

motions are prohibited. The filing of 

such motions may form the basis for 

sanctions. 

(f) Dispositive motions. Dispositive 

motions are governed by §§ 1209.34 and 

1209.35 of this part. 

§ 1209.29 Discovery. 

(a) General rule. (1) Limits on 

discovery. Subject to the limitations set 

out in paragraphs (a)(2), (b), (d), and (e) 

of this section, a party to a proceeding 

under this part may obtain document 

discovery by serving upon any other 

party in the proceeding a written 

request to produce documents. For 

purposes of such requests, the term 

‘‘documents’’ may be defined to include 

records, drawings, graphs, charts, 

photographs, recordings, or data stored 

in electronic form or other data 

compilations from which information 

can be obtained or translated, if 

necessary, by the parties through 

detection devices into reasonably usable 

form (e.g., electronically stored 

information), as well as written material 

of all kinds. 

(2) Discovery plan. (i) In the initial 

scheduling conference held in 

accordance with § 1209.36, or otherwise 

at the earliest practicable time, the 

presiding officer shall require the 

parties to confer in good faith to develop 

and submit a joint discovery plan for the 

timely, cost-effective management of 

document discovery (including, if 

applicable, electronically stored 

information). The discovery plan should 

provide for the coordination of similar 

discovery requests by multiple parties, 

if any, and specify how costs are to be 

apportioned among those parties. The 

discovery plan shall specify the form of 

electronic productions, if any. 

Documents are to be produced in 

accordance with the technical 

specifications described in the 

discovery plan. 

(ii) Discovery in the proceeding may 

commence upon the approval of the 

discovery plan by the presiding officer. 

Thereafter, the presiding officer may 

interpret or modify the discovery plan 

for good cause shown or in his or her 

discretion due to changed 

circumstances. 

(iii) Nothing in paragraph (a)(2) of this 

section shall be interpreted or deemed 

to require the production of documents 

that are privileged or not reasonably 

accessible because of undue burden or 

cost, or to require any document 

production otherwise inconsistent with 

the limitations on discovery set forth in 

this part. 

(b) Relevance and scope. (1) A party 

may obtain document discovery 

regarding any matter not privileged that 

is materially relevant to the charges or 

allowable defenses raised in the 

pending proceeding. 

(2) The scope of available discovery 

shall be limited in accordance with 

subpart C of this part. Any request for 

the production of documents that seeks 

to obtain privileged information or 

documents not materially relevant 

under paragraph (b)(1) of this section, or 

that is unreasonable, oppressive, 

excessive in scope, unduly burdensome, 

cumulative, or repetitive of any prior 

discovery requests, shall be denied or 

modified. 

(3) A request for document discovery 

is unreasonable, oppressive, excessive 

in scope, or unduly burdensome—and 

shall be denied or modified—if, among 

other things, the request: 

(i) Fails to specify justifiable 

limitations on the relevant subject 

matter, time period covered, search 

parameters, or the geographic location(s) 

or data repositories to be searched; 

(ii) Fails to identify documents with 

sufficient specificity; 

(iii) Seeks material that is duplicative, 

cumulative, or obtainable from another 

source that is more accessible, costeffective, or less burdensome; 

(iv) Calls for the production of 

documents to be delivered to the 

requesting party or his or her designee 

and fails to provide a written agreement 

by the requestor to pay in advance for 

the costs of production in accordance 

with § 1209.30, or otherwise fails to take 

into account costs associated with 

processing electronically stored 

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information or any cost-sharing 

agreements between the parties; 

(v) Fails to afford the responding 

party adequate time to respond; or 

(vi) Fails to take into account 

retention policies or security protocols 

with respect to Federal information 

systems. 

(c) Forms of discovery. Discovery 

shall be limited to requests for 

production of documents for inspection 

and copying. No other form of discovery 

shall be allowed. Discovery by use of 

interrogatories is not permitted. This 

paragraph shall not be interpreted to 

require the creation of a document. 

(d) Privileged matter.—(1) Privileged 

documents are not discoverable. (i) 

Privileges include the attorney-client 

privilege, work-product privilege, any 

government’s or government agency’s 

deliberative process privilege, and any 

other privileges provided by the 

Constitution, any applicable act of 

Congress, or the principles of common 

law. 

(ii) The parties may enter into a 

written agreement to permit a producing 

party to assert applicable privileges of a 

document even after its production and 

to request the return or destruction of 

privileged matter (claw back agreement). 

The parties shall file the claw back 

agreement with the presiding officer. To 

ensure the enforceability of the terms of 

any such claw back agreement, the 

presiding officer shall enter an order. 

Any party may petition the presiding 

officer for an order specifying claw back 

procedures for good cause shown. 

(2) No effect on examination 

authority. The limitations on 

discoverable matter provided for in this 

part are not intended and shall not be 

construed to limit or otherwise affect 

the examination, regulatory or 

supervisory authority of FHFA. 

(e) Time limits. All discovery matters, 

including all responses to discovery 

requests, shall be completed at least 20 

days prior to the date scheduled for the 

commencement of the testimonial phase 

of the hearing. No exception to this 

discovery time limit shall be permitted, 

unless the presiding officer finds on the 

record that good cause exists for 

waiving the 20-day requirement of this 

paragraph. 

(f) Production. Documents must be 

produced as they are kept in the usual 

course of business, or labeled and 

organized to correspond with the 

categories in the request, or otherwise 

produced in a manner determined by 

mutual agreement between the 

requesting party and the party or nonparty to whom the request is directed in 

accordance with this part. 

§ 1209.30 Request for document discovery 

from parties. 

(a) General rule. Each request for the 

production of documents must conform 

to the requirements of this part. 

(1) Limitations. Subject to applicable 

limitations on discovery in this part, a 

party may serve (requesting party) a 

request on another party (responding 

party) for the production of any nonprivileged, discoverable documents in 

the possession, custody, or control of 

the responding party. A requesting party 

shall serve a copy of any such document 

request on all other parties. Each request 

for the production of documents must, 

with reasonable particularity, identify or 

describe the documents to be produced, 

either by individual item or by category, 

with sufficient specificity to enable the 

responding party to respond consistent 

with the requirements of this part. 

(2) Discovery plan. Document 

discovery under subpart C of this part 

shall be consistent with any discovery 

plan approved by the presiding officer 

under § 1209.29. 

(b) Production and costs.—(1) General 

rule. Subject to the applicable 

limitations on discovery in this part and 

the discovery plan, the requesting party 

shall specify a reasonable time, place, 

and manner for the production of 

documents and the performance of any 

related acts. The responding party shall 

produce documents to the requesting 

party in a manner consistent with the 

discovery plan. 

(2) Costs. All costs associated with 

document productions—including, 

without limitation, photocopying (as 

specified in paragraph (b)(4) of this 

section) or electronic processing (as 

specified in paragraph (b)(5) of this 

section)—shall be born by the 

requesting party, or otherwise in 

accordance with any discovery plan 

approved by the presiding officer that 

may require such costs be apportioned 

between parties, or as otherwise ordered 

by the presiding officer. If consistent 

with the discovery plan approved by the 

presiding officer, the responding party 

may require receipt of payment of any 

such document production costs in 

advance before any such production of 

responsive documents. 

(3) Organization. Unless otherwise 

provided for in any discovery plan 

approved by the presiding officer under 

§ 1209.29 of this part, or by order of the 

presiding officer, documents must be 

produced as they are kept in the usual 

course of business or they shall be 

labeled and organized to correspond 

with the categories in the document 

request. 

(4) Photocopying charges. 

Photocopying charges are to be set at the 

current rate per page imposed by FHFA 

under the fee schedule pursuant to 

§ 1202.11(c) of this part for requests for 

documents filed under the Freedom of 

Information Act, 5 U.S.C. 552. 

(5) Electronic processing. In the event 

that any party seeks the production of 

electronically stored information (i.e., 

information created, stored, 

communicated, or used in digital format 

requiring the use of computer hardware 

and software), the parties shall confer in 

good faith to resolve common discovery 

issues related to electronically stored 

information, such as preservation, 

search methodology, collection, and 

need for such information; the 

suitability of alternative means to obtain 

it; and the format of production. 

Consistent with the discovery plan 

approved by the presiding officer under 

§ 1209.29, costs associated with the 

processing of such electronic 

information (i.e., imaging; scanning; 

conversion of ‘‘native’’ files to images 

that are viewable and searchable; 

indexing; coding; database or Webbased hosting; searches; branding of 

endorsements, such as ‘‘confidential’’ or 

document control numbering; privilege 

reviews; and copies of production discs) 

and delivery of any such document 

production, shall be born by the 

requesting party, apportioned among the 

parties, or as otherwise ordered by the 

presiding officer. Nothing in this part 

shall be deemed to require FHFA to 

produce privileged documents or any 

electronic records in violation of 

applicable Federal law or security 

protocols. 

(c) Obligation to update responses. A 

party who has responded to a discovery 

request is not required to supplement 

the response, unless: 

(1) The responding party learns that 

in some material respect the information 

disclosed is incomplete or incorrect, 

and 

(2) The additional or corrective 

information has not otherwise been 

made known to the other parties during 

the discovery process or in writing. 

(d) Motions to strike or limit discovery 

requests. (1) Any party served with a 

document discovery request may object 

within 30 days of service of the request 

by filing a motion to strike or limit the 

request in accordance with the 

provisions of § 1209.28 of this part. No 

other party may file an objection. If an 

objection is made only to a portion of 

an item or category in a request, the 

objection shall specify that portion. Any 

objections not made in accordance with 

this paragraph and § 1209.28 are 

waived. 

(2) The party who served the request 

that is the subject of a motion to strike 

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or limit may file a written response in 

accordance with the provisions of 

§ 1209.28. A reply by the moving party, 

if any, shall be governed by § 1209.28. 

No other party may file a response. 

(e) Privilege. At the time other 

documents are produced, all documents 

withheld on a claim of privilege must be 

reasonably identified, together with a 

statement of the basis for the assertion 

of privilege on a privilege log. When 

similar documents that are protected by 

the government’s deliberative process, 

investigative or examination privilege, 

the attorney work-product doctrine, or 

the attorney-client privilege are 

voluminous, such documents may be 

identified on the log by category instead 

of by individual document. The 

presiding officer has discretion to 

permit submission of a privilege log 

subsequent to the document 

production(s), which may occur on a 

rolling basis if agreed to by the parties 

in the discovery plan, and to determine 

whether an identification by category is 

sufficient to provide notice of withheld 

documents. 

(f) Motions to compel production. (1) 

If a party withholds any document as 

privileged or fails to comply fully with 

a document discovery request, the 

requesting party may, within 10 days of 

the assertion of privilege or of the time 

the failure to comply becomes known to 

the requesting party, file a motion in 

accordance with the provisions of 

§ 1209.28 for the issuance of a subpoena 

compelling the production of any such 

document. 

(2) The party who asserted the 

privilege or failed to comply with the 

request may, within five days of service 

of a motion for the issuance of a 

subpoena compelling production, file a 

written response to the motion. No other 

party may file a response. 

(g) Ruling on motions.—(1) 

Appropriate protective orders. After the 

time for filing a response to a motion to 

compel pursuant to this section has 

expired, the presiding officer shall rule 

promptly on any such motion. The 

presiding officer may deny, grant in 

part, or otherwise modify any request 

for the production of documents, if he 

determines that a discovery request, or 

any one or more of its terms, seeks to 

obtain the production of documents that 

are privileged or otherwise not within 

the scope of permissible discovery 

under § 1209.29(b), and may issue 

appropriate protective orders, upon 

such conditions as justice may require. 

(2) No stay. The pendency of a motion 

to strike or limit discovery, or to compel 

the production of any document, shall 

not stay or continue the proceeding, 

unless otherwise ordered by the 

presiding officer. Notwithstanding any 

other provision in this part, the 

presiding officer may not release, or 

order any party to produce, any 

document withheld on the basis of 

privilege, if the withholding party has 

stated to the presiding officer its 

intention to file with the Director a 

timely motion for interlocutory review 

of the presiding officer’s privilege 

determination or order to produce the 

documents, until the Director has 

rendered a decision on the motion for 

interlocutory review. 

(3) Interlocutory review by the 

Director. Interlocutory review of a 

privilege determination or document 

discovery subpoena of the presiding 

officer shall be in accordance with 

§ 1209.33. To the extent necessary to 

rule promptly on such matters, the 

Director may request that the presiding 

officer provide additional information 

from the record. As provided by 

§ 1209.33 of this part, a pending 

interlocutory review of a privilege 

determination or document discovery 

subpoena shall not stay the proceedings, 

unless otherwise ordered by the 

presiding officer or the Director. 

(h) Enforcement of document 

discovery subpoenas.—(1) Authority. If 

the presiding officer or Director issues a 

subpoena compelling production of 

documents by a party in a proceeding 

under this part, in the event of 

noncompliance with the subpoena and 

to the extent authorized by section 

1379D(c)(1) of the Safety and Soundness 

Act (12 U.S.C. 4641(c)(1)), the Director 

or the subpoenaing party may apply to 

the appropriate United States district 

court for an order requiring compliance 

with the subpoena. 

(2) United States district court 

jurisdiction. As provided by section 

1379D(c)(2) of the Safety and Soundness 

Act (12 U.S.C. 4641(c)(2)), the 

appropriate United States district court 

has the jurisdiction and power to order 

and to require compliance with any 

discovery subpoena issued under this 

part. 

(3) No stay; sanctions. The judicial 

enforcement of a discovery subpoena 

shall not operate as a stay of the 

proceedings, unless the presiding officer 

or the Director orders a stay of such 

duration as the presiding officer or 

Director may find reasonable and in the 

best interest of the parties or as justice 

may require. A party’s right to seek 

judicial enforcement of a subpoena shall 

not in any manner limit the sanctions 

that may be imposed by the presiding 

officer or Director against a party who 

fails to produce or induces another to 

fail to produce subpoenaed documents. 

§ 1209.31 Document discovery subpoenas 

to non-parties. 

(a) General rules.—(1) Application for 

subpoena. As provided under this part, 

any party may apply to the presiding 

officer for the issuance of a document 

discovery subpoena addressed to any 

person who is not a party to the 

proceeding. The application must 

contain the proposed document 

subpoena, and a brief statement of facts 

demonstrating that the documents are 

materially relevant to the charges and 

issues presented in the proceeding and 

the reasonableness of the scope of the 

document request. The subpoenaing 

party shall specify a reasonable time, 

place, and manner for production in 

response to the subpoena, and state its 

unequivocal intention to pay for the 

production of the documents as 

provided in this part. 

(2) Service of subpoena. A party shall 

apply for a document subpoena under 

this section only within the time period 

during which such party could serve a 

discovery request under § 1209.30 of 

this part. The party obtaining the 

document subpoena is responsible for 

serving it on the subpoenaed person and 

for serving copies on all other parties. 

Document subpoenas may be served in 

the District of Columbia, or any State, 

Territory, possession, or other place 

subject to the jurisdiction of the United 

States, or as otherwise provided by law. 

(3) Presiding officer’s discretion. The 

presiding officer shall issue promptly 

any document subpoena applied for 

under this section subject to the 

application conditions set forth in this 

section and his or her discretion. If the 

presiding officer determines that the 

application does not set forth a valid 

basis for the issuance of the requested 

document subpoena, or that any of its 

terms are unreasonable, oppressive, 

excessive in scope, unduly burdensome, 

or otherwise objectionable under 

§ 1209.29(b), he may refuse to issue the 

requested document subpoena or may 

issue it in a modified form upon such 

additional conditions as may be 

determined by the presiding officer. 

(b) Motion to quash or modify.—(1) 

Limited appearance. Any non-party to a 

pending proceeding to whom a 

document subpoena is directed may 

enter a limited appearance, through a 

representative or on his or her own 

behalf, before the presiding officer to 

file with the presiding officer a motion 

to quash or modify such subpoena, 

accompanied by a statement of the basis 

for quashing or modifying the subpoena. 

(2) Objections. Any motion to quash 

or modify a document subpoena must 

be filed on the same basis, including the 

assertion of any privileges, upon which 

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a party could object to a discovery 

document request under § 1209.30 and 

during the same time limits during 

which such an objection could be filed. 

(3) Responses and replies. The party 

who obtained the subpoena may 

respond to such motion within 10 days 

of service of the motion; the response 

shall be served on the non-party in 

accordance with this part. Absent 

express leave of the presiding officer, no 

other party may respond to the nonparty’s motion. The non-party may file 

a reply within five days of service of a 

response. 

(4) No stay. A non-party’s right to seek 

to quash or modify a document 

subpoena shall not stay the proceeding, 

or limit in any manner the sanctions 

that may be imposed by the presiding 

officer against a party who induces 

another to fail to produce any such 

subpoenaed documents. No party may 

rely upon the pendency of a non-party’s 

motion to quash or modify a document 

subpoena to excuse performance of any 

action required of that party under this 

part. 

(c) Enforcing document subpoenas to 

non-parties.—(1) Application for 

enforcement of subpoena. If a non-party 

fails to comply with any subpoena 

issued pursuant to this section or with 

any order of the presiding officer that 

directs compliance with all or any 

portion of a document subpoena issued 

pursuant to this section, the 

subpoenaing party or any other 

aggrieved party to the proceeding may, 

to the extent authorized by section 

1379D(c) of the Safety and Soundness 

Act (12 U.S.C. 4641(c)), apply to an 

appropriate United States district court 

for an order requiring compliance with 

the subpoena. 

(2) No stay. A party’s right to seek 

district court enforcement of a non-party 

document production subpoena under 

this section shall not automatically stay 

an enforcement proceeding under of the 

Safety and Soundness Act. 

(3) Sanctions. A party’s right to seek 

district court enforcement of a non-party 

document subpoena shall in no way 

limit the sanctions that may be imposed 

by the presiding officer on a party who 

induces another to fail to comply with 

any subpoena issued under this section. 

§ 1209.32 Deposition of witness 

unavailable for hearing. 

(a) General rules. (1) If a witness will 

not be available for the hearing, a party 

desiring to preserve that witness’s 

testimony for the record may apply to 

the presiding officer in accordance with 

the procedures set forth in paragraph 

(a)(2) of this section for the issuance of 

a subpoena or subpoena duces tecum 

requiring attendance of the witness at a 

deposition for the purpose of preserving 

that witness’s testimony. The presiding 

officer may issue a deposition subpoena 

under this section upon a showing that: 

(i) The witness will be unable to 

attend or may be prevented from 

attending the testimonial phase of the 

hearing because of age, sickness, or 

infirmity, or will be otherwise 

unavailable; 

(ii) The subpoenaing party did not 

cause or contribute to the unavailability 

of the witness for the hearing; 

(iii) The witness has personal 

knowledge and the testimony is 

reasonably expected to be materially 

relevant to claims, defenses, or matters 

determined to be at issue in the 

proceeding; and 

(iv) Taking the deposition will not 

result in any undue burden to any other 

party and will not cause undue delay of 

the proceeding. 

(2) The application must contain a 

proposed deposition subpoena and a 

brief statement of the reasons for the 

issuance of the subpoena. The subpoena 

must name the witness whose 

deposition is to be taken and specify the 

time and place for taking the deposition. 

A deposition subpoena may require the 

witness to be deposed anywhere within 

the United States, or its Territories and 

possessions, in which that witness 

resides or has a regular place of 

employment or such other convenient 

place as the presiding officer shall fix. 

(3) Subpoenas must be issued 

promptly upon request, unless the 

presiding officer determines that the 

request fails to set forth a valid basis 

under this section for its issuance. 

Before making a determination that 

there is no valid basis for issuing the 

subpoena, the presiding officer shall 

require a written response from the 

party requesting the subpoena or require 

attendance at a conference to determine 

whether there is a valid basis upon 

which to issue the requested subpoena. 

(4) The party obtaining a deposition 

subpoena is responsible for serving it on 

the witness and for serving copies on all 

parties. Unless the presiding officer 

orders otherwise, no deposition under 

this section shall be taken on fewer than 

10 days’ notice to the witness and all 

parties. Deposition subpoenas may be 

served anywhere within the United 

States or its Territories and possessions, 

or on any person doing business 

anywhere within the United States or its 

Territories and possessions, or as 

otherwise permitted by law. 

(b) Objections to deposition 

subpoenas. (1) The witness and any 

party who has not had an opportunity 

to oppose a deposition subpoena issued 

under this section may file a motion 

with the presiding officer under 

§ 1209.28 of this part to quash or modify 

the subpoena prior to the time for 

compliance specified in the subpoena, 

but not more than 10 days after service 

of the subpoena. 

(2) A statement of the basis for the 

motion to quash or modify a subpoena 

issued under this section must 

accompany the motion. The motion 

must be served on all parties. 

(c) Procedure upon deposition. (1) 

Each witness testifying pursuant to a 

deposition subpoena must be duly 

sworn and each party shall have the 

right to examine the witness. Objections 

to questions or documents must be in 

short form, stating the grounds for the 

objection. Failure to object to questions 

or documents is not deemed a waiver 

except where the ground for objection 

might have been avoided if the objection 

had been presented timely. All 

questions, answers, and objections must 

be recorded and transcribed. Videotaped 

depositions must be transcribed for the 

record; copies and transcriptions must 

be supplied to each party. 

(2) Any party may move before the 

presiding officer for an order compelling 

the witness to answer any questions the 

witness has refused to answer or submit 

any evidence that, during the 

deposition, the witness has refused to 

submit. 

(3) The deposition transcript must be 

subscribed by the witness, unless the 

parties and the witness, by stipulation, 

have waived the signing, or the witness 

is ill, cannot be found, or has refused to 

sign. If the deposition is not subscribed 

by the witness, the court reporter taking 

the deposition shall certify that the 

transcript is a true and complete 

transcript of the deposition. 

(d) Enforcing subpoenas. If a 

subpoenaed person fails to comply with 

any subpoena issued pursuant to this 

section or with any order of the 

presiding officer made upon motion 

under paragraph (c)(2) of this section, 

the subpoenaing party or other 

aggrieved party may, to the extent 

authorized by section 1379D(c) of the 

Safety and Soundness Act (12 U.S.C. 

4641(c)), apply to an appropriate United 

States district court for an order 

requiring compliance with the portions 

of the subpoena that the presiding 

officer has ordered enforced. A party’s 

right to seek court enforcement of a 

deposition subpoena in no way limits 

the sanctions that may be imposed by 

the presiding officer on a party who fails 

to comply with or induces a failure to 

comply with a subpoena issued under 

this section. 

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§ 1209.33 Interlocutory review. 

(a) General rule. The Director may 

review a ruling of the presiding officer 

prior to the certification of the record to 

the Director only in accordance with the 

procedures set forth in this section. 

(b) Scope of review. The Director may 

exercise interlocutory review of a ruling 

of the presiding officer if the Director 

finds that: 

(1) The ruling involves a controlling 

question of law or policy as to which 

substantial grounds exist for a difference 

of opinion; 

(2) Immediate review of the ruling 

may materially advance the ultimate 

termination of the proceeding; 

(3) Subsequent modification of the 

ruling at the conclusion of the 

proceeding would be an inadequate 

remedy; or 

(4) Subsequent modification of the 

ruling would cause unusual delay or 

expense. 

(c) Procedure. Any motion for 

interlocutory review shall be filed by a 

party with the presiding officer within 

10 days of his or her ruling. Upon the 

expiration of the time for filing all 

responses, the presiding officer shall 

refer the matter to the Director for final 

disposition. In referring the matter to 

the Director, the presiding officer may 

indicate agreement or disagreement 

with the asserted grounds for 

interlocutory review of the ruling in 

question. 

(d) Suspension of proceeding. Neither 

a request for interlocutory review nor 

any disposition of such a request by the 

Director under this section suspends or 

stays the proceeding unless otherwise 

ordered by the presiding officer or the 

Director. 

§ 1209.34 Summary disposition. 

(a) In general. The presiding officer 

shall recommend that the Director issue 

a final order granting a motion for 

summary disposition if the undisputed 

pleaded facts, admissions, affidavits, 

stipulations, documentary evidence, 

matters as to which official notice may 

be taken, and any other evidentiary 

materials properly submitted in 

connection with a motion for summary 

disposition show that: 

(1) There is no genuine issue as to any 

material fact; and 

(2) The movant is entitled to a 

decision in its favor as a matter of law. 

(b) Filing of motions and responses. 

(1) Any party who believes there is no 

genuine issue of material fact to be 

determined and that such party is 

entitled to a decision as a matter of law 

may move at any time for summary 

disposition in its favor of all or any part 

of the proceeding. Any party, within 30 

days after service of such motion or 

within such time period as allowed by 

the presiding officer, may file a response 

to such motion. 

(2) A motion for summary disposition 

must be accompanied by a statement of 

material facts as to which the movant 

contends there is no genuine issue. 

Such motion must be supported by 

documentary evidence, which may take 

the form of admissions in pleadings, 

stipulations, depositions, investigatory 

depositions, transcripts, affidavits, and 

any other evidentiary materials that the 

movant contends support its position. 

The motion must also be accompanied 

by a brief containing the points and 

authorities in support of the contention 

of the movant. Any party opposing a 

motion for summary disposition must 

file a statement setting forth those 

material facts as to which the party 

contends a genuine dispute exists. Such 

opposition must be supported by 

evidence of the same type as that 

submitted with the motion for summary 

disposition and a brief containing the 

points and authorities in support of the 

contention that summary disposition 

would be inappropriate. 

(c) Hearing on motion. At the request 

of any party or on his or her own 

motion, the presiding officer may hear 

oral argument on the motion for 

summary disposition. 

(d) Decision on motion. Following 

receipt of a motion for summary 

disposition and all responses thereto, 

the presiding officer shall determine 

whether the movant is entitled to 

summary disposition. If the presiding 

officer determines that summary 

disposition is warranted, the presiding 

officer shall submit a recommended 

decision to that effect to the Director, 

under § 1209.53. If the presiding officer 

finds that the moving party is not 

entitled to summary disposition, the 

presiding officer shall make a ruling 

denying the motion. 

§ 1209.35 Partial summary disposition. 

If the presiding officer determines that 

a party is entitled to summary 

disposition as to certain claims only, he 

shall defer submitting a recommended 

decision to the Director as to those 

claims. A hearing on the remaining 

issues must be ordered. Those claims for 

which the presiding officer has 

determined that summary disposition is 

warranted will be addressed in the 

recommended decision filed at the 

conclusion of the hearing. 

§ 1209.36 Scheduling and pre-hearing 

conferences. 

(a) Scheduling conference. After 

service of a notice of charges 

commencing a proceeding under this 

part, the presiding officer shall order the 

representative(s) of record for each 

party, and any party not so represented 

who is appearing pro se, to meet in 

person or to confer by telephone at a 

specified time within 30 days of service 

of such notice for the purpose of setting 

the time and place of the testimonial 

hearing on the record to be held within 

the District of Columbia and scheduling 

the course and conduct of the 

proceeding (the ‘‘scheduling 

conference’’). The identification of 

potential witnesses, the time for and 

manner of discovery, and the exchange 

of any pre-hearing materials including 

witness lists, statements of issues, 

stipulations, exhibits, and any other 

materials also may be determined at the 

scheduling conference. 

(b) Pre-hearing conferences. The 

presiding officer may, in addition to the 

scheduling conference, on his or her 

own motion or at the request of any 

party, direct representatives for the 

parties to meet with (in person or by 

telephone) at a pre-hearing conference 

to address any or all of the following: 

(1) Simplification and clarification of 

the issues; 

(2) Stipulations, admissions of fact 

and the contents, authenticity and 

admissibility into evidence of 

documents; 

(3) Matters of which official notice 

may be taken; 

(4) Limitation of the number of 

witnesses; 

(5) Summary disposition of any or all 

issues; 

(6) Resolution of discovery issues or 

disputes; 

(7) Amendments to pleadings; and 

(8) Such other matters as may aid in 

the orderly disposition of the 

proceeding. 

(c) Transcript. The presiding officer, 

in his or her discretion, may require that 

a scheduling or pre-hearing conference 

be recorded by a court reporter. Any 

transcript of the conference and any 

materials filed, including orders, 

become part of the record of the 

proceeding. A party may obtain a copy 

of a transcript at such party’s expense. 

(d) Scheduling or pre-hearing orders. 

Within a reasonable time following the 

conclusion of the scheduling conference 

or any pre-hearing conference, the 

presiding officer shall serve on each 

party an order setting forth any 

agreements reached and any procedural 

determinations made. 

§ 1209.37 Pre-hearing submissions. 

(a) General. Within the time set by the 

presiding officer, but in no case later 

than 10 days before the start of the 

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hearing, each party shall serve on every 

other party the serving party’s: 

(1) Pre-hearing statement; 

(2) Final list of witnesses to be called 

to testify at the hearing, including name 

and address of each witness, and a short 

summary of the expected testimony of 

each witness; 

(3) List of the exhibits to be 

introduced at the hearing along with a 

copy of each exhibit; and 

(4) Stipulations of fact, if any. 

(b) Effect of failure to comply. No 

witness may testify and no exhibit may 

be introduced at the hearing that is not 

listed in the pre-hearing submissions 

pursuant to paragraph (a) of this section, 

except for good cause shown. 

§ 1209.38 Hearing subpoenas. 

(a) Issuance. (1) Upon application of 

a party to the presiding officer showing 

relevance and reasonableness of scope 

of the testimony or other evidence 

sought, the presiding officer may issue 

a subpoena or a subpoena duces tecum 

requiring the attendance of a witness at 

the hearing or the production of 

documentary or physical evidence at 

such hearing. The application for a 

hearing subpoena must also contain a 

proposed subpoena specifying the 

attendance of a witness or the 

production of evidence from any place 

within the United States or its territories 

and possessions, or as otherwise 

provided by law, at the designated place 

where the hearing is being conducted. 

The party making the application shall 

serve a copy of the application and the 

proposed subpoena on every other 

party. 

(2) A party may apply for a hearing 

subpoena at any time before the 

commencement of or during a hearing. 

During a hearing, a party may make an 

application for a subpoena orally on the 

record before the presiding officer. 

(3) The presiding officer shall 

promptly issue any hearing subpoena 

applied for under this section; except 

that, if the presiding officer determines 

that the application does not set forth a 

valid basis for the issuance of the 

subpoena, or that any of its terms are 

unreasonable, oppressive, excessive in 

scope, or unduly burdensome, he may 

refuse to issue the subpoena or may 

issue the subpoena in a modified form 

upon any conditions consistent with 

subpart C of this part. Upon issuance by 

the presiding officer, the party making 

the application shall serve the subpoena 

on the person named in the subpoena 

and on each party. 

(b) Motion to quash or modify. (1) 

Any person to whom a hearing 

subpoena is directed or any party may 

file a motion to quash or modify such 

subpoena, accompanied by a statement 

of the basis for quashing or modifying 

the subpoena. The movant must serve 

the motion on each party and on the 

person named in the subpoena. Any 

party may respond to the motion within 

10 days of service of the motion. 

(2) Any motion to quash or modify a 

hearing subpoena must be filed prior to 

the time specified in the subpoena for 

compliance, but no more than 10 days 

after the date of service of the subpoena 

upon the movant. 

(c) Enforcing subpoenas. If a 

subpoenaed person fails to comply with 

any subpoena issued pursuant to this 

section or any order of the presiding 

officer that directs compliance with all 

or any portion of a hearing subpoena, 

the subpoenaing party or any other 

aggrieved party may seek enforcement 

of the subpoena pursuant to § 1209.31. 

A party’s right to seek court 

enforcement of a hearing subpoena shall 

in no way limit the sanctions that may 

be imposed by the presiding officer on 

a party who induces a failure to comply 

with subpoenas issued under this 

section. 

§§ 1209.39 through 1209.49 [Reserved]. 

§ 1209.50 Conduct of hearings. 

(a) General rules.—(1) Conduct. 

Hearings shall be conducted in 

accordance with chapter 5 of Title 5 and 

other applicable law and so as to 

provide a fair and expeditious 

presentation of the relevant disputed 

issues. Except as limited by this subpart, 

each party has the right to present its 

case or defense by oral and 

documentary evidence and to conduct 

such cross examination as may be 

required for full disclosure of the facts. 

(2) Order of hearing. FHFA counsel of 

record shall present its case-in-chief 

first, unless otherwise ordered by the 

presiding officer or unless otherwise 

expressly specified by law or regulation. 

FHFA counsel of record shall be the first 

party to present an opening statement 

and a closing statement and may make 

a rebuttal statement after the 

respondent’s closing statement. If there 

are multiple respondents, respondents 

may agree among themselves as to the 

order of presentation of their cases, but 

if they do not agree, the presiding officer 

shall fix the order. 

(3) Examination of witnesses. Only 

one representative for each party may 

conduct an examination of a witness, 

except that in the case of extensive 

direct examination, the presiding officer 

may permit more than one 

representative for the party presenting 

the witness to conduct the examination. 

A party may have one representative 

conduct the direct examination and 

another representative conduct re-direct 

examination of a witness, or may have 

one representative conduct the cross 

examination of a witness and another 

representative conduct the re-cross 

examination of a witness. 

(4) Stipulations. Unless the presiding 

officer directs otherwise, all documents 

that the parties have stipulated as 

admissible shall be admitted into 

evidence upon commencement of the 

hearing. 

(b) Transcript. The hearing shall be 

recorded and transcribed. The transcript 

shall be made available to any party 

upon payment of the cost thereof. The 

presiding officer shall have authority to 

order the record corrected, either upon 

motion to correct, upon stipulation of 

the parties, or following notice to the 

parties upon the presiding officer’s own 

motion. 

§ 1209.51 Evidence. 

(a) Admissibility. (1) Except as is 

otherwise set forth in this section, 

relevant, material, and reliable evidence 

that is not unduly repetitive is 

admissible to the fullest extent 

authorized by the Administrative 

Procedure Act (5 U.S.C. 552 et seq.) and 

other applicable law. 

(2) Evidence that would be admissible 

under the Federal Rules of Evidence is 

admissible in a proceeding conducted 

pursuant to subpart C of this part. 

(3) Evidence that would be 

inadmissible under the Federal Rules of 

Evidence may not be deemed or ruled 

to be inadmissible in a proceeding 

conducted pursuant to subpart C of this 

part if such evidence is relevant, 

material, probative and reliable, and not 

unduly repetitive. 

(b) Official notice. (1) Official notice 

may be taken of any material fact that 

may be judicially noticed by a United 

States district court and of any 

materially relevant information in the 

official public records of any Federal or 

State government agency. 

(2) All matters officially noticed by 

the presiding officer or the Director 

shall appear on the record. 

(3) If official notice is requested of any 

material fact, the parties, upon timely 

request, shall be afforded an 

opportunity to object. 

(c) Documents. (1) A duplicate copy 

of a document is admissible to the same 

extent as the original, unless a genuine 

issue is raised as to whether the copy is 

in some material respect not a true and 

legible copy of the original. 

(2) Subject to the requirements of 

paragraph (a)(1) of this section, any 

document, including a report of 

examination, oversight activity, 

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inspection, or visitation prepared by 

FHFA or by another Federal or State 

financial institution’s regulatory agency, 

is admissible either with or without a 

sponsoring witness. 

(3) Witnesses may use existing or 

newly created charts, exhibits, 

calendars, calculations, outlines, or 

other graphic material to summarize, 

illustrate, or simplify the presentation of 

testimony. Such materials may, subject 

to the presiding officer’s discretion, be 

used with or without being admitted 

into evidence. 

(d) Objections. (1) Objections to the 

admissibility of evidence must be timely 

made and rulings on all objections must 

appear in the record. 

(2) When an objection to a question or 

line of questioning is sustained, the 

examining representative of record may 

make a specific proffer on the record of 

what he or she expected to prove by the 

expected testimony of the witness. The 

proffer may be by representation of the 

representative or by direct interrogation 

of the witness. 

(3) The presiding officer shall retain 

rejected exhibits, adequately marked for 

identification, for the record and 

transmit such exhibits to the Director. 

(4) Failure to object to admission of 

evidence or to any ruling constitutes a 

waiver of the objection. 

(e) Stipulations. The parties may 

stipulate as to any relevant matters of 

fact or the authentication of any 

document to be admitted into evidence. 

Such stipulations must be received in 

evidence at a hearing, are binding on the 

parties with respect to the matters 

stipulated, and shall be made part of the 

record. 

(f) Depositions of unavailable 

witnesses. (1) If a witness is unavailable 

to testify at a hearing and that witness 

has testified in a deposition in 

accordance with § 1209.32, a party may 

offer as evidence all or any part of the 

transcript of the deposition, including 

deposition exhibits, if any. 

(2) Such deposition transcript is 

admissible to the same extent that 

testimony would have been admissible 

had that person testified at the hearing, 

provided that if a witness refused to 

answer proper questions during the 

deposition the presiding officer may, on 

that basis, limit the admissibility of the 

deposition in any manner that justice 

requires. 

(3) Only those portions of a 

deposition or related exhibits received 

in evidence at the hearing in accordance 

with this section shall constitute a part 

of the record. 

§ 1209.52 Post-hearing filings. 

(a) Proposed findings and conclusions 

and supporting briefs. (1) Using the 

same method of service for each party, 

the presiding officer shall serve notice 

upon each party that the certified 

transcript, together with all hearing 

exhibits and exhibits introduced but not 

admitted into evidence at the hearing, 

has been filed with the presiding officer. 

Any party may file with the presiding 

officer proposed findings of fact, 

proposed conclusions of law, and a 

proposed order within 30 days after the 

parties have received notice that the 

transcript has been filed with the 

presiding officer, unless otherwise 

ordered by the presiding officer. 

(2) Proposed findings and conclusions 

must be supported by citation to any 

relevant authorities and by page and 

line references to any relevant portions 

of the record. A post-hearing brief may 

be filed in support of proposed findings 

and conclusions, either as part of the 

same document or in a separate 

document. 

(3) A party is deemed to have waived 

any issue not raised in proposed 

findings or conclusions timely filed by 

that party. 

(b) Reply briefs. Reply briefs may be 

filed within 15 days after the date on 

which the parties’ proposed findings 

and conclusions and proposed order are 

due. Reply briefs shall be limited 

strictly to responding to new matters, 

issues, or arguments raised by another 

party in papers filed in the proceeding. 

A party who has not filed proposed 

findings of fact and conclusions of law 

or a post-hearing brief may not file a 

reply brief. 

(c) Simultaneous filing required. The 

presiding officer shall not order the 

filing by any party of any brief or reply 

brief supporting proposed findings and 

conclusions in advance of the other 

party’s filing of its brief. 

§ 1209.53 Recommended decision and 

filing of record. 

(a) Filing of recommended decision 

and record. Within 45 days after 

expiration of the time allowed for filing 

reply briefs under § 1209.52(b), the 

presiding officer shall file with and 

certify to the Director, for decision, the 

record of the proceeding. The record 

must include the presiding officer’s 

recommended decision, recommended 

findings of fact and conclusions of law, 

and proposed order; all pre-hearing and 

hearing transcripts, exhibits and rulings; 

and the motions, briefs, memoranda, 

and other supporting papers filed in 

connection with the hearing. The 

presiding officer shall serve upon each 

party the recommended decision, 

recommended findings and conclusions, 

and proposed order. 

(b) Filing of index. At the same time 

the presiding officer files with and 

certifies to the Director, for final 

determination, the record of the 

proceeding, the presiding officer shall 

furnish to the Director a certified index 

of the entire record of the proceeding. 

The certified index shall include, at a 

minimum, an entry for each paper, 

document or motion filed with the 

presiding officer in the proceeding, the 

date of the filing, and the identity of the 

filer. The certified index shall also 

include an exhibit index containing, at 

a minimum, an entry consisting of 

exhibit number and title or description 

for: each exhibit introduced and 

admitted into evidence at the hearing; 

each exhibit introduced but not 

admitted into evidence at the hearing; 

each exhibit introduced and admitted 

into evidence after the completion of the 

hearing; and each exhibit introduced 

but not admitted into evidence after the 

completion of the hearing. 

§ 1209.54 Exceptions to recommended 

decision. 

(a) Filing exceptions. Within 30 days 

after service of the recommended 

decision, recommended findings and 

conclusions, and proposed order under 

§ 1209.53, a party may file with the 

Director written exceptions to the 

presiding officer’s recommended 

decision, recommended findings and 

conclusions, and proposed order; to the 

admission or exclusion of evidence; or 

to the failure of the presiding officer to 

make a ruling proposed by a party. A 

supporting brief may be filed at the time 

the exceptions are filed, either as part of 

the same document or in a separate 

document. 

(b) Effect of failure to file or raise 

exceptions. (1) Failure of a party to file 

exceptions to those matters specified in 

paragraph (a) of this section within the 

time prescribed is deemed a waiver of 

objection thereto. 

(2) No exception need be considered 

by the Director if the party taking 

exception had an opportunity to raise 

the same objection, issue, or argument 

before the presiding officer and failed to 

do so. 

(c) Contents. (1) All exceptions and 

briefs in support of such exceptions 

must be confined to the particular 

matters in or omissions from the 

presiding officer’s recommendations to 

which that party takes exception. 

(2) All exceptions and briefs in 

support of exceptions must set forth 

page or paragraph references to the 

specific parts of the presiding officer’s 

recommendations to which exception is 

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taken, the page or paragraph references 

to those portions of the record relied 

upon to support each exception, and the 

legal authority relied upon to support 

each exception. Exceptions and briefs in 

support shall not exceed a total of 30 

pages, except by leave of the Director on 

motion. 

(3) One reply brief may be submitted 

by each party opposing the exceptions 

within 10 days of service of exceptions 

and briefs in support of exceptions. 

Reply briefs shall not exceed 15 pages, 

except by leave of the Director on 

motion. 

§ 1209.55 Review by Director. 

(a) Notice of submission to the 

Director. When the Director determines 

that the record in the proceeding is 

complete, the Director shall serve notice 

upon the parties that the case has been 

submitted to the Director for final 

decision. 

(b) Oral argument before the Director. 

Upon the initiative of the Director or on 

the written request of any party filed 

with the Director within the time for 

filing exceptions, the Director may order 

and hear oral argument on the 

recommended findings, conclusions, 

decision and order of the presiding 

officer. A written request by a party 

must show good cause for oral argument 

and state reasons why arguments cannot 

be presented adequately in writing. A 

denial of a request for oral argument 

may be set forth in the Director’s final 

decision. Oral argument before the 

Director must be transcribed. 

(c) Director’s final decision and order. 

(1) Decisional employees may advise 

and assist the Director in the 

consideration and disposition of the 

case. The final decision of the Director 

will be based upon review of the entire 

record of the proceeding, except that the 

Director may limit the issues to be 

reviewed to those findings and 

conclusions to which opposing 

arguments or exceptions have been filed 

by the parties. 

(2) The Director shall render a final 

decision and issue an appropriate order 

within 90 days after notification to the 

parties that the case has been submitted 

for final decision, unless the Director 

orders that the action or any aspect 

thereof be remanded to the presiding 

officer for further proceedings. Copies of 

the final decision including findings of 

fact and an appropriate order of the 

Director shall be served upon each party 

to the proceeding and as otherwise 

required by statute. 

(3) The Director may modify, 

terminate, or set aside an order in 

accordance with section 1373(b)(2) of 

the Safety and Soundness Act (12 U.S.C. 

4633(b)(2)). 

§ 1209.56 Exhaustion of administrative 

remedies. 

To exhaust administrative remedies as 

to any issue on which a party disagrees 

with the presiding officer’s 

recommendations, a party must file 

exceptions with the Director under 

§ 1209.54 of this part. A party must 

exhaust administrative remedies as a 

precondition to seeking judicial review 

of any final decision and order issued 

under this part. 

§ 1209.57 Judicial review; no automatic 

stay. 

(a) Judicial review. Judicial review of 

any final order of the Director shall be 

exclusively as provided by section 1374 

of the Safety and Soundness Act (12 

U.S.C. 4634). 

(b) No automatic stay. 

Commencement of proceedings for 

judicial review of a final decision and 

order of the Director may not, unless 

specifically ordered by the Director or a 

reviewing court, operate as a stay of any 

order issued by the Director. The 

Director may, in his or her discretion 

and on such terms as he finds just, stay 

the effectiveness of all or any part of an 

order of the Director pending a final 

decision on a petition for review of that 

order. 

§§ 1209.58 through 1209.69 [Reserved]. 

Subpart D—Parties and 

Representational Practice Before the 

Federal Housing Finance Agency; 

Standards of Conduct 

§ 1209.70 Scope. 

Subpart D of this part contains rules 

governing practice by parties or their 

representatives before FHFA. This 

subpart addresses the imposition of 

sanctions by the presiding officer or the 

Director against parties or their 

representatives in an adjudicatory 

proceeding under this part. This subpart 

also covers other disciplinary 

sanctions—censure, suspension, or 

disbarment—against individuals who 

appear before FHFA in a 

representational capacity either in an 

adjudicatory proceeding under this part 

or in any other matters connected with 

presentations to FHFA relating to a 

client’s or other principal’s rights, 

privileges, or liabilities. This 

representation includes, but is not 

limited to, the practice of attorneys and 

accountants. Employees of FHFA are 

not subject to disciplinary proceedings 

under this subpart. 

§ 1209.71 Definitions. 

Practice before FHFA for the purposes 

of subpart D of this part, includes, but 

is not limited to, transacting any 

business with FHFA as counsel of 

record, representative, or agent for any 

other person, unless the Director orders 

otherwise. Practice before FHFA also 

includes the preparation of any 

statement, opinion, or other paper by a 

counsel, representative or agent that is 

filed with FHFA in any certification, 

notification, application, report, or other 

document, with the consent of such 

counsel, representative, or agent. 

Practice before FHFA does not include 

work prepared for a regulated entity or 

entity-affiliated party solely at the 

request of such party for use in the 

ordinary course of its business. 

§ 1209.72 Appearance and practice in 

adjudicatory proceedings. 

(a) Appearance before FHFA or a 

presiding officer.—(1) By attorneys. A 

party may be represented by an attorney 

who is a member in good standing of the 

bar of the highest court of any State, 

commonwealth, possession or territory 

of the United States, or the District of 

Columbia, and who is not currently 

suspended or disbarred from practice 

before FHFA. 

(2) By non-attorneys. An individual 

may appear on his or her own behalf, 

pro se. A member of a partnership may 

represent the partnership and a duly 

authorized officer, director, employee, 

or other agent of any corporation or 

other entity not specifically listed 

herein may represent such corporation 

or other entity; provided that such 

officer, director, employee, or other 

agent is not currently suspended or 

disbarred from practice before FHFA. A 

duly authorized officer or employee of 

any Government unit, agency, or 

authority may represent that unit, 

agency, or authority. 

(b) Notice of appearance. Any person 

appearing in a representative capacity 

on behalf of a party, including FHFA, 

shall execute and file a notice of 

appearance with the presiding officer at 

or before the time such person submits 

papers or otherwise appears on behalf of 

a party in the adjudicatory proceeding. 

Such notice of appearance shall include 

a written declaration that the individual 

is currently qualified as provided in 

paragraph (a)(1) or (a)(2) of this section 

and is authorized to represent the 

particular party. By filing a notice of 

appearance on behalf of a party in an 

adjudicatory proceeding, the 

representative thereby agrees and 

represents that he is authorized to 

accept service on behalf of the 

represented party and that, in the event 

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of withdrawal from representation, he or 

she will, if required by the presiding 

officer, continue to accept service until 

a new representative has filed a notice 

of appearance or until the represented 

party indicates that he or she will 

proceed on a pro se basis. Unless the 

representative filing the notice is an 

attorney, the notice of appearance shall 

also be executed by the person 

represented or, if the person is not an 

individual, by the chief executive 

officer, or duly authorized officer of that 

person. 

§ 1209.73 Conflicts of interest. 

(a) Conflict of interest in 

representation. No representative shall 

represent another person in an 

adjudicatory proceeding if it reasonably 

appears that such representation may be 

limited materially by that 

representative’s responsibilities to a 

third person or by that representative’s 

own interests. The presiding officer may 

take corrective measures at any stage of 

a proceeding to cure a conflict of 

interest in representation, including the 

issuance of an order limiting the scope 

of representation or disqualifying an 

individual from appearing in a 

representative capacity for the duration 

of the proceeding. 

(b) Certification and waiver. If any 

person appearing as counsel or other 

representative represents two or more 

parties to an adjudicatory proceeding, or 

also represents a non-party on a matter 

relevant to an issue in the proceeding, 

that representative must certify in 

writing at the time of filing the notice 

of appearance required by § 1209.72 of 

this part as follows: 

(1) That the representative has 

personally and fully discussed the 

possibility of conflicts of interest with 

each affected party and non-party; and 

(2) That each affected party and nonparty waives any right it might 

otherwise have had to assert any known 

conflicts of interest or to assert any nonmaterial conflicts of interest during the 

course of the proceeding. 

§ 1209.74 Sanctions. 

(a) General rule. Appropriate 

sanctions may be imposed during the 

course of any proceeding when any 

party or representative of record has 

acted or failed to act in a manner 

required by applicable statute, 

regulation, or order, and that act or 

failure to act: 

(1) Constitutes contemptuous 

conduct, which includes dilatory, 

obstructionist, egregious, contumacious, 

unethical, or other improper conduct at 

any phase of any proceeding, hearing, or 

appearance before a presiding officer or 

the Director; 

(2) Has caused some other party 

material and substantive injury, 

including, but not limited to, incurring 

expenses including attorney’s fees or 

experiencing prejudicial delay; 

(3) Is a clear and unexcused violation 

of an applicable statute, regulation, or 

order; or 

(4) Has delayed the proceeding 

unduly. 

(b) Sanctions. Sanctions that may be 

imposed include, but are not limited to, 

any one or more of the following: 

(1) Issuing an order against a party; 

(2) Rejecting or striking any testimony 

or documentary evidence offered, or 

other papers filed, by the party; 

(3) Precluding the party from 

contesting specific issues or findings; 

(4) Precluding the party from offering 

certain evidence or from challenging or 

contesting certain evidence offered by 

another party; 

(5) Precluding the party from making 

a late filing or conditioning a late filing 

on any terms that may be just; or 

(6) Assessing reasonable expenses, 

including attorney’s fees, incurred by 

any other party as a result of the 

improper action or failure to act. 

(c) Procedure for imposition of 

sanctions. (1) The presiding officer, on 

the motion of any party, or on his or her 

own motion, and after such notice and 

responses as may be directed by the 

presiding officer, may impose any 

sanction authorized by this section. The 

presiding officer shall submit to the 

Director for final ruling any sanction 

that would result in a final order that 

terminates the case on the merits or is 

otherwise dispositive of the case. 

(2) Except as provided in paragraph 

(d) of this section, no sanction 

authorized by this section, other than 

refusing to accept late papers, shall be 

imposed without prior notice to all 

parties and an opportunity for any 

representative or party against whom 

sanctions may be imposed to be heard. 

The presiding officer shall determine 

and direct the appropriate notice and 

form for such opportunity to be heard. 

The opportunity to be heard may be 

limited to an opportunity to respond 

verbally immediately after the act or 

inaction in question is noted by the 

presiding officer. 

(3) For purposes of interlocutory 

review, motions for the imposition of 

sanctions by any party and the 

imposition of sanctions shall be treated 

the same as motions for any other ruling 

by the presiding officer. 

(4) Nothing in this section shall be 

read to preclude the presiding officer or 

the Director from taking any other 

action or imposing any other restriction 

or sanction authorized by any 

applicable statute or regulation. 

(d) Sanctions for contemptuous 

conduct. If, during the course of any 

proceeding, a presiding officer finds any 

representative or any individual 

representing themself to have engaged 

in contemptuous conduct, the presiding 

officer may summarily suspend that 

individual from participating in that or 

any related proceeding or impose any 

other appropriate sanction. 

§ 1209.75 Censure, suspension, 

disbarment, and reinstatement. 

(a) Discretionary censure, suspension, 

and disbarment. (1) The Director may 

censure any individual who practices or 

attempts to practice before FHFA or 

suspend or revoke the privilege to 

appear or practice before FHFA of such 

individual if, after notice of and 

opportunity for hearing in the matter, 

that individual is found by the 

Director— 

(i) Not to possess the requisite 

qualifications or competence to 

represent others; 

(ii) To be seriously lacking in 

character or integrity or to have engaged 

in material unethical or improper 

professional conduct; 

(iii) To have caused unfair and 

material injury or prejudice to another 

party, such as prejudicial delay or 

unnecessary expenses including 

attorney’s fees; 

(iv) To have engaged in, or aided and 

abetted, a material and knowing 

violation of the Safety and Soundness 

Act, the Federal Home Loan Mortgage 

Corporation Act, the Federal National 

Mortgage Association Charter Act, or the 

rules or regulations issued under those 

statutes, or any other applicable law or 

regulation; 

(v) To have engaged in contemptuous 

conduct before FHFA; 

(vi) With intent to defraud in any 

manner, to have willfully and 

knowingly deceived, misled, or 

threatened any client or prospective 

client; or 

(vii) Within the last 10 years, to have 

been convicted of an offense involving 

moral turpitude, dishonesty, or breach 

of trust, if the conviction has not been 

reversed on appeal. A conviction within 

the meaning of this paragraph shall be 

deemed to have occurred when the 

convicting court enters its judgment or 

order, regardless of whether an appeal is 

pending or could be taken and includes 

a judgment or an order on a plea of nolo 

contendere or on consent, regardless of 

whether a violation is admitted in the 

consent. 

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(2) Suspension or revocation on the 

grounds set forth in paragraphs (a)(1)(ii) 

through (vii) of this section shall only be 

ordered upon a further finding that the 

individual’s conduct or character was 

sufficiently egregious as to justify 

suspension or revocation. Suspension or 

disbarment under this paragraph shall 

continue until the applicant has been 

reinstated by the Director for good cause 

shown or until, in the case of a 

suspension, the suspension period has 

expired. 

(3) If the final order against the 

respondent is for censure, the 

individual may be permitted to practice 

before FHFA, but such individual’s 

future representations may be subject to 

conditions designed to promote high 

standards of conduct. If a written letter 

of censure is issued, a copy will be 

maintained in FHFA’s files. 

(b) Mandatory suspension and 

disbarment. (1) Any counsel who has 

been and remains suspended or 

disbarred by a court of the United States 

or of any State, commonwealth, 

possession or territory of the United 

States, or the District of Columbia; any 

accountant or other licensed expert 

whose license to practice has been 

revoked in any State, commonwealth, 

possession or territory of the United 

States, or the District of Columbia; any 

person who has been and remains 

suspended or barred from practice by or 

before the Department of Housing and 

Urban Development, the Office of the 

Comptroller of the Currency, the Board 

of Governors of the Federal Reserve 

System, the Office of Thrift Supervision, 

the Federal Deposit Insurance 

Corporation, the National Credit Union 

Administration, the Federal Housing 

Finance Board, the Farm Credit 

Administration, the Securities and 

Exchange Commission, or the 

Commodity Futures Trading 

Commission is also suspended 

automatically from appearing or 

practicing before FHFA. A disbarment 

or suspension within the meaning of 

this paragraph shall be deemed to have 

occurred when the disbarring or 

suspending agency or tribunal enters its 

judgment or order, regardless of whether 

an appeal is pending or could be taken 

and regardless of whether a violation is 

admitted in the consent. 

(2) A suspension or disbarment from 

practice before FHFA under paragraph 

(b)(1) of this section shall continue until 

the person suspended or disbarred is 

reinstated under paragraph (d)(2) of this 

section. 

(c) Notices to be filed. (1) Any 

individual appearing or practicing 

before FHFA who is the subject of an 

order, judgment, decree, or finding of 

the types set forth in paragraph (b)(1) of 

this section shall file promptly with the 

Director a copy thereof, together with 

any related opinion or statement of the 

agency or tribunal involved. 

(2) Any individual appearing or 

practicing before FHFA who is or within 

the last 10 years has been convicted of 

a felony or of a misdemeanor that 

resulted in a sentence of prison term or 

in a fine or restitution order totaling 

more than $5,000 promptly shall file a 

notice with the Director. The notice 

shall include a copy of the order 

imposing the sentence or fine, together 

with any related opinion or statement of 

the court involved. 

(d) Reinstatement. (1) Unless 

otherwise ordered by the Director, an 

application for reinstatement for good 

cause may be made in writing by a 

person suspended or disbarred under 

paragraph (a)(1) of this section at any 

time more than three years after the 

effective date of the suspension or 

disbarment and, thereafter, at any time 

more than one year after the person’s 

most recent application for 

reinstatement. An applicant for 

reinstatement hereunder may, in the 

Director’s sole discretion, be afforded a 

hearing. 

(2) An application for reinstatement 

for good cause by any person suspended 

or disbarred under paragraph (b)(1) of 

this section may be filed at any time, but 

not less than one year after the 

applicant’s most recent application. An 

applicant for reinstatement for good 

cause hereunder may, in the Director’s 

sole discretion, be afforded a hearing. 

If, however, all the grounds for 

suspension or disbarment under 

paragraph (b)(1) of this section have 

been removed by a reversal of the order 

of suspension or disbarment or by 

termination of the underlying 

suspension or disbarment, any person 

suspended or disbarred under paragraph 

(b)(1) of this section may apply 

immediately for reinstatement and shall 

be reinstated by FHFA upon written 

application notifying FHFA that the 

grounds have been removed. 

(e) Conferences.—(1) General rule. 

The FHFA counsel of record may confer 

with a proposed respondent concerning 

allegations of misconduct or other 

grounds for censure, disbarment, or 

suspension, regardless of whether a 

proceeding for censure, disbarment or 

suspension has been commenced. If a 

conference results in a stipulation in 

connection with a proceeding in which 

the individual is the respondent, the 

stipulation may be entered in the record 

at the request of either party to the 

proceeding. 

(2) Resignation or voluntary 

suspension. In order to avoid the 

institution of or a decision in a 

disbarment or suspension proceeding, a 

person who practices before FHFA may 

consent to censure, suspension, or 

disbarment from practice. At the 

discretion of the Director, the individual 

may be censured, suspended, or 

disbarred in accordance with the 

consent offered. 

(f) Hearings under this section. 

Hearings conducted under this section 

shall be conducted in substantially the 

same manner as other hearings under 

this part, except that in proceedings to 

terminate an existing FHFA suspension 

or disbarment order, the person seeking 

the termination of the order shall bear 

the burden of going forward with an 

application and with proof and that the 

Director may, in the Director’s sole 

discretion, direct that any proceeding to 

terminate an existing suspension or 

disbarment by FHFA be limited to 

written submissions. All hearings held 

under this section shall be closed to the 

public unless the Director, on the 

Director’s own motion or upon the 

request of a party, otherwise directs. 

§§ 1209.76 through 1209.79 [Reserved]. 

Subpart E—Civil Money Penalty 

Inflation Adjustments 

§ 1209.80 Inflation adjustments. 

The maximum amount of each civil 

money penalty within FHFA’s 

jurisdiction, as set by the Safety and 

Soundness Act and thereafter adjusted 

in accordance with the Inflation 

Adjustment Act, on a recurring fouryear cycle, is as follows: 

U.S. Code citation Description 

Adjusted 

maximum 

penalty amount 

12 U.S.C. 4636(b)(1) ................................................................ First Tier ................................................................................... $10,000 

12 U.S.C. 4636(b)(2) ................................................................ Second Tier .............................................................................. 50,000 

12 U.S.C. 4636(b)(4) ................................................................ Third Tier (Entity-Affiliated party) ............................................. 2,000,000 

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U.S. Code citation Description 

Adjusted 

maximum 

penalty amount 

12 U.S.C. 4636(b)(4) ................................................................ Third Tier (Regulated entity) .................................................... 2,000,000 

§ 1209.81 Applicability. 

The inflation adjustments set out in 

§ 1209.80 shall apply to civil money 

penalties assessed in accordance with 

the provisions of the Safety and 

Soundness Act, 12 U.S.C. 4636, and 

subparts B and C of this part, for 

violations occurring after the effective 

date of July 30, 2008. 

§§ 1209.82 through 1209.99 [Reserved]. 

Subpart F—Suspension or Removal of 

an Entity-Affiliated Party Charged With 

Felony 

§ 1209.100 Scope. 

Subpart F of this part applies to 

informal hearings afforded to any entityaffiliated party who has been 

suspended, removed, or prohibited from 

further participation in the business 

affairs of a regulated entity by a notice 

or order issued by the Director under 

section 1377(h) of the Safety and 

Soundness Act (12 U.S.C. 4636a(h)). 

§ 1209.101 Suspension, removal, or 

prohibition. 

(a) Notice of suspension or 

prohibition. (1) As provided by section 

1377(h)(1) of the Safety and Soundness 

Act (12 U.S.C. 4636a(h)(1)), if an entityaffiliated party is charged in any 

information, indictment, or complaint, 

with the commission of or participation 

in a crime that involves dishonesty or 

breach of trust that is punishable by 

imprisonment for more than one year 

under State or Federal law, the Director 

may, if continued service or 

participation by such party may pose a 

threat to the regulated entity or impair 

public confidence in the regulated 

entity, by written notice served upon 

such party, suspend such party from 

office or prohibit such party from 

further participation in any manner in 

the conduct of the affairs of any 

regulated entity. 

(2) In accordance with section 

1377(h)(1) of the Safety and Soundness 

Act (12 U.S.C. 4636a(h)(1)), the notice of 

suspension or prohibition is effective 

upon service. A copy of such notice will 

be served on the relevant regulated 

entity. The notice will state the basis for 

the suspension and the right of the party 

to request an informal hearing as 

provided in § 1209.102. The suspension 

or prohibition is to remain in effect until 

the information, indictment, or 

complaint is finally disposed of, or until 

terminated by the Director, or otherwise 

as provided in paragraph (c) of this 

section. 

(b) Order of removal or prohibition. 

As provided by section 1377(h)(2) of the 

Safety and Soundness Act (12 U.S.C. 

4636a(h)(2)), at such time as a judgment 

of conviction is entered (or pretrial 

diversion or other plea bargain is agreed 

to) in connection with a crime as 

referred to above in paragraph (a) (the 

‘‘conviction’’), and the conviction is no 

longer subject to appellate review, the 

Director may, if continued service or 

participation by such party may pose a 

threat to the regulated entity or impair 

public confidence in the regulated 

entity, issue an order removing such 

party from office or prohibiting such 

party from further participation in any 

manner in the conduct of the affairs of 

the regulated entity without the prior 

written consent of the Director. A copy 

of such order will be served on the 

relevant regulated entity, at which time 

the entity-affiliated party shall 

immediately cease to be a director or 

officer of the regulated entity. The 

notice will state the basis for the 

removal or prohibition and the right of 

the party to request a hearing as 

provided in § 1209.102. 

(c) Effective period. Unless terminated 

by the Director, a notice of suspension 

or order of removal issued under section 

1377(h)(1) or (2) of the Safety and 

Soundness Act (12 U.S.C. 4636a(h)(1), 

(2)) shall remain effective and 

outstanding until the completion of any 

informal hearing or appeal provided 

under section 1377(h)(4) of the Safety 

and Soundness Act (12 U.S.C. 

4636a(h)(4)). The pendency of an 

informal hearing, if any, does not stay 

any notice of suspension or prohibition 

or order of removal or prohibition under 

subpart F of this part. 

(d) Effect of acquittal. As provided by 

section 1377(h)(2)(B)(ii) of the Safety 

and Soundness Act (12 U.S.C. 

4636a(h)(2)(B)(ii)), a finding of not 

guilty or other disposition of the charge 

does not preclude the Director from 

instituting removal, suspension, or 

prohibition proceedings under section 

1377(a) or (b) of the Safety and 

Soundness Act (12 U.S.C. 4636a(a), (b)). 

(e) Preservation of authority. Action 

by the Director under section 1377(h) of 

the Safety and Soundness Act (12 U.S.C. 

4636a(h)), shall not be deemed as a 

predicate or a bar to any other 

regulatory, supervisory, or enforcement 

action under the Safety and Soundness 

Act. 

§ 1209.102 Hearing on removal or 

suspension. 

(a) Hearing requests.—(1) Deadline. 

An entity-affiliated party served with a 

notice of suspension or prohibition or 

an order of removal or prohibition, 

within 30 days of service of such notice 

or order, may submit to the Director a 

written request to appear before the 

Director to show that his or her 

continued service or participation in the 

affairs of the regulated entity will not 

pose a threat to the interests of, or 

threaten to impair public confidence in, 

the Enterprises or the Banks. The 

request must be addressed to the 

Director and sent to the Federal Housing 

Finance Agency at 1700 G Street, NW., 

Washington, DC 20552, by: 

(i) Overnight U.S. Postal Service 

delivery or delivery by a reliable 

commercial delivery service for same 

day or overnight delivery to the address 

stated above; or 

(ii) First class, registered, or certified 

mail via the U.S. Postal Service. 

(2) Waiver of appearance. An entityaffiliated party may elect in writing to 

waive his or her right to appear to make 

a statement in person or through 

counsel and have the matter determined 

solely on the basis of his or her written 

submission. 

(b) Form and timing of hearing.—(1) 

Informal hearing. Hearings under 

subpart F of this part are not subject to 

the formal adjudication provisions of 

the Administrative Procedure Act (5 

U.S.C. 554 through 557), and are not 

conducted under subpart C of this part. 

(2) Setting of the hearing. Upon 

receipt of a timely request for a hearing, 

the Director will give written notice and 

set a date within 30 days for the entityaffiliated party to appear, personally, or 

through counsel, before the Director or 

his or her designee(s) to submit written 

materials (or, at the discretion of the 

Director, oral testimony and oral 

argument) to make the necessary 

showing under paragraph (a) of this 

section. The entity-affiliated party may 

submit a written request for additional 

time for the hearing to commence, 

without undue delay, and the Director 

may extend the hearing date for a 

specified time. 

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(3) Oral testimony. The Director or his 

or her designee, in his or her discretion, 

may deny, permit, or limit oral 

testimony in the hearing. 

(c) Conduct of the hearing.—(1) 

Hearing officer. A hearing under this 

section may be presided over by the 

Director or one or more designated 

FHFA employees, except that an officer 

designated by the Director (hearing 

officer) to conduct the hearing may not 

have been involved in an underlying 

criminal proceeding, a factually related 

proceeding, or an enforcement 

proceeding in a prosecutorial or 

investigative role. This provision does 

not preclude the Director otherwise 

from seeking information on the matters 

at issue from appropriate FHFA staff on 

an as needed basis consistent with 

§ 1209.101(d)(2). 

(2) Submissions. All submissions of 

the requestor and FHFA’s counsel of 

record must be received by the Director 

or his or her designee no later than 10 

days prior to the date set for the hearing. 

FHFA may respond in writing to the 

requestor’s submission and serve the 

requestor (and any other interested 

party such as the regulated entity) not 

later than the date fixed by the hearing 

officer for submissions or other time 

period as the hearing officer may 

require. 

(3) Procedures.—(i) Fact finding 

authority of the hearing officer. The 

hearing officer shall determine all 

procedural matters under subpart F of 

this part, permit or limit the appearance 

of witnesses in accordance with 

paragraph (b)(3) of this section, and 

impose time limits as he or she deems 

reasonable. All oral statements, witness 

testimony, if permitted, and documents 

submitted that are found by the hearing 

officer to be materially relevant to the 

proceeding and not unduly repetitious 

may be considered. The hearing officer 

may question any person appearing in 

the proceeding, and may make any 

ruling reasonably necessary to ensure 

the full and fair presentation of 

evidence and to facilitate the efficient 

and effective operation of the 

proceeding. 

(ii) Statements to an officer. Any oral 

or written statement made to the 

Director, a hearing officer, or any FHFA 

employee under subpart F of this part is 

deemed to be a statement made to a 

Federal officer or agency within the 

meaning of 18 U.S.C. 1006. 

(iii) Oral testimony. If either the 

requestor or FHFA counsel of record 

desires to present oral testimony to 

supplement the party’s written 

submission he or she must make a 

request in writing to the hearing officer 

not later than 10 days prior to the 

hearing, as provided in paragraph (c)(2) 

of this section, or within a shorter time 

period as permitted by the hearing 

officer for good cause shown. The 

request should include the name of the 

individual(s), a statement generally 

descriptive of the expected testimony, 

and the reasons why such oral 

testimony is warranted. The hearing 

officer generally will not admit 

witnesses, absent a strong showing of 

specific and compelling need. 

Witnesses, if admitted, shall be sworn. 

(iv) Written materials. Each party 

must file a copy of any affidavit, 

memorandum, or other written material 

to be presented at the hearing with the 

hearing officer and serve copies on any 

other interested party (such as the 

affected regulated entity) not later than 

10 days prior to commencement of the 

informal hearing, as provided in 

paragraph (c)(2), or within a shorter 

time period as permitted by the hearing 

officer for good cause shown. 

(v) Relief. The purpose of the hearing 

is to determine whether the suspension 

or prohibition from participation in any 

manner in the conduct of the affairs of 

the regulated entity will be continued, 

terminated, or otherwise modified, or 

whether the order removing such party 

from office or prohibiting the party from 

further participation in any manner in 

the conduct of the affairs of the 

regulated entity will be rescinded or 

otherwise modified. 

(vi) Ultimate question. In deciding on 

any request for relief from a notice of 

suspension or prohibition, the hearing 

officer shall not consider the ultimate 

question of guilt or innocence with 

respect to the outstanding criminal 

charge(s). In deciding on a request for 

relief from a removal order, the hearing 

officer shall not consider challenges to 

or efforts to impeach the validity of the 

conviction. In either case, the hearing 

officer may consider facts that show the 

nature of the events on which the 

conviction or charges were based. 

(4) Record. If warranted under the 

circumstances of the matter, the hearing 

officer may require that a transcript of 

the proceedings be prepared at the 

expense of the requesting party. The 

hearing officer may order the record be 

kept open for a reasonable time 

following the hearing, not to exceed five 

business days, to permit the filing of 

additional pertinent submissions for the 

record. Thereafter, no further 

submissions are to be admitted to the 

record, absent good cause shown. 

§ 1209.103 Recommended and final 

decisions. 

(a) Recommended decision.—(1) 

Written recommended decision of the 

hearing officer. Not later than 20 days 

following the close of the hearing (or if 

the requestor waived a hearing, from the 

deadline for submission of the written 

materials), the hearing officer will serve 

a copy of the recommended decision on 

the parties to the proceeding. The 

recommended decision must include a 

summary of the findings, the parties’ 

respective arguments, and support for 

the determination. 

(2) Five-day comment period. Not 

later than five business days after 

receipt of the recommended decision, 

the parties shall submit written 

comments in response to the 

recommended decision, if any, to the 

hearing officer. The hearing officer shall 

not grant any extension of the stated 

time for responses to a recommended 

decision. 

(3) Recommended decision to be 

transmitted to the Director. The hearing 

officer shall promptly forward the 

recommended decision, and written 

comments, if any, and the record to the 

Director for final determination. 

(b) Decision of the Director. Within 60 

days of the date of the hearing, or if the 

requestor waived a hearing the date 

fixed for the hearing, the Director will 

notify the entity-affiliated party in 

writing by registered mail of the 

disposition of his or her request for 

relief from the notice of suspension or 

prohibition or the order of removal or 

prohibition. The decision will state 

whether the suspension or prohibition 

will be continued, terminated, or 

otherwise modified, or whether the 

order removing such party from any 

participation in the affairs of the 

regulated entity will be rescinded or 

otherwise modified. The decision will 

contain a brief statement of the basis for 

an adverse determination. The 

Director’s decision is a final and nonappealable order. 

(c) Effect of notice or order. A removal 

or prohibition by order shall remain in 

effect until terminated by the Director. 

A suspension or prohibition by notice 

remains in effect until the criminal 

charge is disposed of or until terminated 

by the Director. 

(d) Reconsideration. A suspended or 

removed entity-affiliated party 

subsequently may petition the Director 

to reconsider the final decision any time 

after the expiration of a 12-month 

period from the date of the decision, but 

no such request may be made within 12 

months of a previous petition for 

reconsideration. An entity-affiliated 

party must submit a petition for 

reconsideration in writing; the petition 

shall state the specific grounds for relief 

from the notice of suspension or order 

or removal and be supported by a 

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Federal Register / Vol. 76, No. 166 / Friday, August 26, 2011 / Rules and Regulations 53629 

memorandum and any other 

documentation materially relevant to 

the request for reconsideration. No 

hearing will be held on a petition for 

reconsideration, and the Director will 

inform the requestor of the disposition 

of the reconsideration request in a 

timely manner. A decision on a request 

for reconsideration shall not constitute 

an appealable order. 

CHAPTER XVII—OFFICE OF FEDERAL 

HOUSING ENTERPRISE OVERSIGHT, 

DEPARTMENT OF HOUSING AND URBAN 

DEVELOPMENT 

Subchapter D—Rules of Practice and 

Procedure 

PART 1780—[REMOVED] 

■ 3. Remove part 1780. 

Dated: August 16, 2011. 

Edward J. DeMarco, 

Acting Director, Federal Housing Finance 

Agency. 

[FR Doc. 2011–21378 Filed 8–25–11; 8:45 am] 

BILLING CODE 8070–01–P 

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