N.Y. Banking Law § 41: Removal and prohibition

§ 41. Removal and prohibition. 1. Grounds for enforcement action.

Whenever the superintendent has reason to believe that any director,

trustee, officer, member or partner, or, in the case of a foreign

banking corporation, the person in charge, or an officer, of a branch or

agency (for purposes of this section, each a "covered individual"), of

any bank, trust company, limited purpose trust company, private bank,

savings bank, safe deposit company, savings and loan association, credit

union, investment company, bank holding company (as such term is defined

in article three-A of this chapter), foreign banking corporation,

licensed lender, licensed casher of checks, budget planner, mortgage

banker, mortgage loan servicer, mortgage broker, licensed transmitter of

money or student loan servicer (for purposes of this section, each a

"covered entity") has, directly or indirectly: (a) caused, facilitated,

permitted or participated in any violation by a covered entity of a law

or regulation, order issued by the superintendent or any written

agreement between such covered entity or covered individual and the

superintendent; (b) engaged or participated in any unsafe or unsound

practice in connection with any covered entity; or (c) engaged or

participated in any willful material act or omitted to take any material

act that directly contributed to the failure of a covered entity; the

superintendent may bring an action to remove such covered individual

from office.

2. Notice and hearing. (a) Whenever the superintendent has reason to

believe that any grounds exist to remove a covered individual, the

superintendent may serve a statement of the charges against such covered

individual, either personally or, upon a finding that such individual

cannot be served personally within this state, by registered mail at the

last address of such individual shown on the department's records, and a

notice of an opportunity to appear before the superintendent to show

cause why such covered individual should not be removed from office. A

copy of such notice shall also be sent to any affected covered entity.

(b) If after notice and a hearing, the superintendent finds that the

covered individual has engaged in conduct described in subdivision one

of this section, or if such covered individual waives a hearing, or

fails to appear in person or by a duly authorized representative without

good cause shown at the time and place set for the hearing, the

superintendent may issue an order removing the covered individual from

office and prohibiting the covered individual's employment or the

performance of any contractual agreements with any covered entity.

(c) Such order and the findings of fact upon which it is based shall

be effective upon service on such covered individual personally or, upon

a finding that such individual cannot be served personally within this

state, by registered mail, and may not be made public or disclosed to

anyone, except as provided in subdivision ten of section thirty-six of

this article or in connection with proceedings relating to a violation

of this section. Such order shall also be served upon any affected

covered entity served with the statement of charges in the proceeding

resulting in the order. Any such order shall remain in effect, unless it

is amended or rescinded by the superintendent or a court of competent

jurisdiction, or replaced by an order issued pursuant to subdivision

three of this section.

(d) To the extent consistent with the requirements in this section, a

proceeding to remove a covered individual pursuant to this section shall

be conducted in accordance with the requirements of article three of the

financial services law and regulations promulgated pursuant thereto.

3. Suspension pending determination of charges. Upon, or at any time

after service of written notice pursuant to subdivision two of this

section, the superintendent may suspend, pending the determination of

the charges, a covered individual from office or prohibit such

individual from participating in any manner in the conduct of the

affairs of any covered entity for a period of up to one hundred eighty

days if the superintendent has reason to believe that by reason of the

conduct described in subdivision one of this section: (a) a covered

entity has suffered or will probably suffer financial loss that impacts

its ability to operate in a safe and sound manner; (b) the interests of

the depositors at a covered entity have been or could be prejudiced; or

(c) the covered individual demonstrates willful disregard for the safety

and soundness of a covered entity. The superintendent may extend the

suspension for additional periods of up to one hundred eighty days if

the hearing is not completed within the prior suspension period due to

the request of the covered individual.

4. Effect of order for removal or suspension. Any covered individual

subject to an order issued pursuant to this section shall be prohibited

from participating, in any manner, in the conduct of the affairs of any

covered entity unless permitted to, in writing, by the superintendent.

Any covered individual who thereafter, without permission of the

superintendent, participates in any manner in the management of a

covered entity shall be guilty of a misdemeanor.

5. Manner of review. Any order issued pursuant to this section may be

reviewed in the manner provided by article seventy-eight of the civil

practice law and rules.