Cease and Desist Orders

Summary

A Cease and Desist order C&D is an injunctive type of action which proscribes certain unsafe or unsound practices and/or violations of law and may require an insured depository institution to take affirmative action

Authorized by

Section 8(b) of the FDIA for Banks and Thrifts
Section 206(e) of the FCA for Credit Unions

Several Federal agencies may join in one or more
actions against one or more related financial institutions and/or IAPs

State supervisors may also join in or issue concurrent orders

FDIC has backup authority to issue a C&D unilaterally if the institution's primary federal regulator does not act upon a written FDIC recommendation to take such enforcement action within 60 days its receipt

The appropriate Federal banking agency or the NCUA may initiate a cease and desist proceeding if the insured institution or IAP has, is , or, based upon a reasonable belief, is about to engage in or commit

An unsafe or unsound practice
A violation of a law, rule or regulation or any condition imposed in writing by a Federal banking agency in connection with any action on any application, notice, or other request by the depository institution or institution affiliated party or
A violation of any written agreement entered into with the agency

Cease and Desist Procedures

Cease and Desist C&D orders may be issued

On a consent basis
On a contested basis after hearings or
By means of a temporary C&D

All C&Ds are public documents

Section 8(u) of the FDIA
Section 206(s) of the FCA

Consent C&D

A respondent may enter into a C&D by consent before or after the issuance of a notice of charges by the agency
A consent C&D is as enforceable as a contested one

Contested C&D

Commenced by the appropriate agency issuing a notice of charges which

Sets forth the facts upon which it is based
Sets a date for an administrative hearing between thirty and sixty days after service

Time may be extended upon request
Agency may issue a C&D based upon the record established at the hearing
Order is effective 30 days after service upon the respondent

Remains effective and enforceable as provided therein
Except to such extent as it is stayed, modified, terminated, or set aside by action of the agency or by a reviewing court

Section 8(b) of the FDIA

Temporary C&D

A temporary C&D can be issued unilaterally when

The agency believes it is necessary to prevent the likely insolvency, significant dissipation of assets or earnings or
Weakening of the condition of the depository institution or
Otherwise prejudice the interests of its depositors prior to the completion of the C&D proceedings conducted pursuant to Section 8(b)

Temporary C&D may also be issued when

Books and records of the institution are so incomplete or inaccurate that the agency cannot determine its financial conditions or details or purposes of transactions through the normal supervisory process

Temporary C&D is issued

With a notice of charges
May contain prohibitions and require affirmative actions
Is effective immediately
Remains in place until the earlier of the completion of the 8(b) proceeding or a determination that the institutions books and records are accurate and reflect the financial condition of the institution

The named party or parties may seek injunctive relief in a federal court within ten days following issuance

The administrative hearing takes place before an administrative law judge ALJ, in accordance with the agencies procedures

ALJ issues a recommended decision, which may be accepted in whole or in part by the agency.
Hearing is open to the public, unless the agency determines that it would be contrary to the public interest to do so

C&D Regulations

OCC - 12 CFR Part 19, Subpart A

FRB - 12 CFR Part 263, Subpart A

FDIC - 12 CFR Part 308, Subpart G

OTS - 12 CFR Part 509, Subpart A

NCUA - 12 CFR Part 747, Subpart A

Enforcement of C&Ds

In case of a violation or threatened violation of, or a failure to obey a temporary C&D

The agency may apply to an appropriate Federal court for an injunction to enforce such order

Court must issue the injunction if it determines that such grounds exist

In the case of a consent or contested C&D

The agency may apply to an appropriate Federal Court for enforcement of any effective and outstanding notice or order

The court can order and require compliance but, subject to certain exceptions, cannot affect the issuance of or compliance with such order, and cannot review, modify, suspend, terminate, or set aside the notice or order

The appropriate agency may assess and collect civil money penalties for violation of any final or temporary C&D order

See topic Civil Money Penalties

Notice under Section 8 after separation from service

The jurisdiction and authority of the appropriate Federal banking agency is not affected by the

Resignation
Termination of employment or participation or
Separation of employment by an IAP

Provided that any notice authorized under Section 8 of the FDIA is served before the end of the 6-year period beginning on the date such party ceased to be such a party with respect to such depository institution

Examples of C&D Orders

Although each agency has its own preferred style, the commonalities far exceed the differences among them

Multi-agency Orders

ABN AMRO Bank - jointly issued by Netherlands banking supervisory agency, the FRB and the Illinois and New York state banking supervisors
The Norcrown Trust and Charles Kushner - issued by the FRB and the FDIC

Consent Orders

Contested Orders

FDIC - 1st State Bank (Crossett, AK)
NCUA - Janice Pressley and Northeastern Federal Credit Union

Temporary Order

FDIC - Highland Community Bank

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