SENATE BILL NO. 641
AN ACT TO AMEND CHAPTER 1, TITLE 5, DELAWARE CODE, RELATING TO THE POWERS OF THE STATE BANK COMMISSIONER.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:
Section 1. Amend §101, Chapter 1, Title 5, Delaware Code, by adding a new paragraph (5) as follows:
"(5) 'Financial institution' means any bank, trust company or other institution either licensed under this Title or subject to the supervision and regulation of the State Bank Commissioner."
Section 2. Amend Chapter 1, Title 5, Delaware Code, by adding a new §136 as follows:
'§136. Cease and desist orders
(a) If, in the opinion of the Commissioner, a financial institution subject to the provisions of this Title is engaging in or has engaged in, or if the Commissioner has reasonable cause to believe that such institution or company is about to engage in any of the following:
(1) an unsafe or unsound practice in conducting the business of such financial institution or company;
(2) violation of a law, rule or regulation relating to the supervision of such institution or company;
(3) violation of any written agreement entered into with the Commissioner, the Commissioner shall have the power and authority to issue and serve an order upon such institution or company requiring the institution or company to cease and desist from such violation or practice.
(b) Where, in the opinion of the Commissioner, extraordinary circumstances make such action necessary and appropriate for the protection of depositors, shareholders or the public, the Commissioner may, by order, restrict the withdrawal of funds from one or more financial institutions.
(c) Such order may require the officers or directors of the institution or company to take affirmative action to correct any violation or practice.
(d) A cease and desist order issued pursuant to this section
shall include a statement of the facts upon which the order is based, and specific activities which the financial institution must cease, the affirmative acts required of the financial institution and the effective date of the order. A cease and desist order may be served by any member of the State Bank Commissioner's Office who is designated by the Commissioner. Service may be effected by hand delivering the order to the financial institution at its principal place of business during normal working hours.
(e) Except as provided in subsection (f), a cease and desist order shall not become effective in less than ten (10) days after the order is served. After an order is served, but before its effective date, upon petition of any interested party the Commissioner shall conduct a hearing. At the conclusion of such hearing, the Commissioner may affirm the cease and desist order as originally issued, or, he may modify, amend, or rescind such order.
(f) Whenever, in the opinion of the Commissioner, the violation or practice set forth in subsection (a) represents an immediate danger or substantial harm to the interests of depositors or shareholders or the public, or where such violation or practice, or the continuation thereof, is likely to cause insolvency or substantial dissipation of the assets or earnings of the institution, the Commissioner may issue a cease and desist order pursuant to subsection (a) which shall become effective upon service thereof, without prior notice or hearing. Upon the application of an interested party, the Commissioner shall afford an opportunity for a hearing to consider rescission of any order issued pursuant to this subsection and any action taken promptly thereafter."
Section 3. Amend Chapter 1, Title 5, Delaware Code, by adding a new 4137 as follows:
§4137. Removal of officer or director
The Commissioner shall have the power to remove any officer or director of a financial institution organized pursuant to this Title, in accordance with the procedures and subject to the conditions and limitations set forth in this section.
(a) The Commissioner may serve written notice of intent to remove an officer or director from office or to prohibit his further participation in any manner in the conduct of the affairs of the financial institution if, in the opinion of the Commissioner, such officer or director has:
(1) violated a law, rule, regulation or cease and desist order which has become final;
(2) engaged in or participated in any unsafe or unsound practice; or
(3) committed or engaged in any act, omission, or practice which constitutes a breach of his fiduciary duties as such
officer or director; and the Commissioner determines that as a result of such action by the officer or director the financial institution has suffered or probably will suffer substantial financial loss or other damage, or that the interests of depositors or shareholders could be seriously prejudiced by reason of such violation, practice or breach of fiduciary duty; provided, however, that such violation, practice or breach of fiduciary duty must be found by the Commissioner to be one involving personal dishonesty on the part of such officer or director. The Commissioner may serve written notice of intent to remove an officer or director from office or to prohibit his further participation in any manner in the conduct of the affairs of the financial institution if, in the opinion of the Commissioner, such officer or director has, by conduct with respect to any other business entity which resulted, or is likely to result, in substantial financial loss or other damage, evidenced his personal dishonesty and unfitness to continued as an officer or director.
(b) The written notice required by subsection (a) shall set forth the following:
(1) a statement of the facts upon which such removal or prohibition is based;
(2) the time and place at which a hearing shall be held thereof, which date shall be not less than 30 nor more than 60 days after the service of the notice, unless such officer or director shall request an earlier or later hearing for good cause. The Commissioner shall serve written notice in accordance with Chapter 64, Title 29, Delaware Code, upon the officer or director involved and copies of such notice shall be served upon the financial institution of which he is an officer or director or in the conduct of whose affairs he has participated.
(c) If the Commissioner deems it necessary for the protection of the institution or the interests of its depositors or shareholders, such written notice may suspend the officer or director from office or prohibit him from further participation in any manner in the conduct of the affairs of the institution.
(d) Any officer or director adversely affected by a suspension or prohibition contained in a written notice pursuant to subsection (c) may apply to the Court of Chancery in the county where the financial institution of which he is an officer or director has its main officer for a stay of such suspension or prohibition pending completion of administrative proceedings required under this section. Such court shall have jurisdiction to stay such suspension or prohibition.
(e) The Commissioner shall hold a hearing at the time and place specified by the notice required under subsection (b). Unless the officer or director affected shall appear at such hearing, he shall be deemed to have consented to the issuance of an order for his
removal or prohibition. In the event of consent, or if upon the record made at any such hearing the Commissioner shall find that any of the grounds specified in the notice have been established, he may issue such orders of suspension or removal from office or prohibition from participation in the conduct of the affairs of the financial institution, as he may deem appropriate. Notwithstanding any provision to the contrary such orders shall be issued not later than thirty (30) days after the close of the hearing, if any, held pursuant to this section.
(f) Any order issued pursuant to subsection (e) shall become effective at the expiration of thirty (30) days after service upon the officer or director and the financial institution concerned; provided, however, that an order issued upon consent shall become effective within the time specified therein. In either event, such order shall remain effective and enforceable except to the extent it is stayed, modified, terminated or set aside by action of the Commissioner or a court of competent jurisdiction.
(g) The Commissioner may issue written notice of a suspension or prohibition pursuant to subsections (b) and (e) to any officer or director charged in any information, complaint, or indictment with commission of or participation in a felony involving dishonesty or breach of trust, pursuant to laws of the State of Delaware or of the United States. Such suspension or prohibition shall remain in effect until terminated by the Commissioner or until final disposition of such information, complaint, or indictment. When a judgment or conviction with respect to such offense is entered against an officer or director, and such judgment is not subject to further appellate review, the Commissioner may issue and serve upon such officer or director an order removing him from office or prohibiting him from further participation in the conduct of the affairs of the financial institution except with the written consent of the Commissioner. Such order shall become effective on service upon the officer or director and the financial institution. A finding of not guilty or other disposition of the charge in this subsection shall not preclude the Commissioner from instituting proceedings pursuant to this section on the grounds set forth in subsection (a)."
Section 4. Amend Chapter 1, Title 5, Delaware Code, by adding a new 6138 as follows:
A hearing conducted pursuant to 1136 or 1137 of this Chapter shall be conducted in accordance with the provisions of Chapter 64, Title 29, Delaware Code; provided, however, that such a hearing shall be a non-public hearing, notwithstanding any statute or rule to the contrary. A non-public hearing shall be identical in all respects to a public hearing; provided, however, that the notice of hearing, the transcript, the proposed findings and the conclusions of the Commissioner, the findings and conclusions of the Commissioner, and other papers which are filed in connection with any hearing shall not be made public."
Section 5. Amend Chapter 1, Title 5, Delaware Code, by adding a new §139 as follows:
"§139. Judicial review
Orders issued by the Commissioner pursuant to §136 and §137 shall be enforced by the Court of Chancery, subject to the following conditions and limitations:
(a) Any person aggrieved and directly affected by an order of the Commissioner issued pursuant to §136 and §137 may appeal to the Court of Chancery within thirty (30) days after the issuance of such order.
(b) The filing of an appeal shall not stay the enforcement of an order, but the Court may order a stay on such terms as it deems proper.
(c) The Court may affirm, modify, terminate or set aside, in whole or in part, the order of the Commissioner if such order was issued pursuant to an invalid statute or regulation, in excess of statutory authority, or if such order was not supported by substantial evidence in the record.
(d) The judgment and decrees of the Court shall be final, except that it shall be subject to review by the Supreme Court. No person shall be subjected to any civil or criminal liability for any act or omission to act in good faith in reliance upon a subsisting order, regulation or definition of the Commissioner, notwithstanding a subsequent decision by any court invalidating the order, regulation or definition."
Section 6. Amend Chapter 1, Title 5, Delaware Code, by adding a new §140 as follows:
"§140. Notice to Federal authorities
In connection with any proceeding under this Chapter involving a financial institution under the concurrent supervision of a Federal agency and the Commissioner, the Commissioner shall provide the appropriate Federal agency with notice of any such proceedings and the grounds therefor. Such proceeding may then be continued jointly or by either the Federal agency or the Commissioner. Failure of the Commissioner to give such notice shall not constitute a ground for attacking the validity of the order."
Approved September 15, 1978.