12 U.S.C. § 4518 — Prohibition and withholding of executive

Page 1656 TITLE 12—BANKS AND BANKING § 4518 (d) Inspector General There shall be within the Agency an Inspector General, who shall be appointed in accordance with section 403(a) of title 5. (e) Law applicable to examiners The Director and each examiner shall have the same authority and each examiner shall be sub- ject to the same disclosures, prohibitions, obli- gations, and penalties as are applicable to exam- iners employed by the Federal Reserve banks. (f) Technical experts The Director may obtain the services of any technical experts the Director considers appro- priate to provide temporary technical assistance relating to examinations to the Director, offi- cers, and employees of the Office. The Director shall describe, in the record of each examina- tion, the nature and extent of any such tem- porary technical assistance. (g) Oaths, evidence, and subpoena powers In connection with examinations under this section, the Director shall have the authority provided under section 4641 of this title. (h) Appointment of accountants, economists, and examiners (1) Applicability This section shall apply with respect to any position of examiner, accountant, economist, and specialist in financial markets and in technology at the Agency, with respect to su- pervision and regulation of the regulated enti- ties, that is in the competitive service. (2) Appointment authority The Director may appoint candidates to any position described in paragraph (1)— (A) in accordance with the statutes, rules, and regulations governing appointments in the excepted service; and (B) notwithstanding any statutes, rules, and regulations governing appointments in the competitive service. (i) Ombudsman The Director shall establish, by regulation, an Office of the Ombudsman within the Agency, which shall be responsible for considering com- plaints and appeals, from any regulated entity and any person that has a business relationship with a regulated entity, regarding any matter relating to the regulation and supervision of such regulated entity by the Agency. The regu- lation issued by the Director under this sub- section shall specify the authority and duties of the Office of the Ombudsman. (Pub. L. 102–550, title XIII, § 1317, Oct. 28, 1992, 106 Stat. 3949; Pub. L. 110–289, div. A, title I, §§ 1105(a), (b), (e), 1153(b)(1)(A), July 30, 2008, 122 Stat. 2667, 2668, 2774; Pub. L. 111–203, title III, § 365(2), July 21, 2010, 124 Stat. 1555; Pub. L. 117–286, § 4(b)(34), Dec. 27, 2022, 136 Stat. 4347.) Editorial Notes AMENDMENTS 2022—Subsec. (d). Pub. L. 117–286 substituted ‘‘section 403(a) of title 5.’’ for ‘‘section 3(a) of the Inspector Gen- eral Act of 1978.’’ 2010—Subsec. (c). Pub. L. 111–203 substituted ‘‘or the Federal Deposit Insurance Corporation’’ for ‘‘the Fed- eral Deposit Insurance Corporation, or the Director of the Office of Thrift Supervision’’. 2008—Subsec. (a). Pub. L. 110–289, § 1105(a)(1), sub- stituted ‘‘regulated entity’’ for ‘‘enterprise’’ in two places. Subsec. (b). Pub. L. 110–289, § 1105(a)(2), inserted ‘‘of a regulated entity’’ after ‘‘under this section’’ and sub- stituted ‘‘or appropriate’’ for ‘‘to determine the condi- tion of an enterprise for the purpose of ensuring its fi- nancial safety and soundness’’. Subsec. (c). Pub. L. 110–289, § 1105(a)(3), inserted ‘‘to conduct examinations under this section’’ after ‘‘serv- ices of examiners’’. Subsecs. (d) to (f). Pub. L. 110–289, § 1105(a)(4), (5), added subsec. (d) and redesignated former subsecs. (d) and (e) as (e) and (f), respectively. Former subsec. (f) re- designated (g). Subsec. (g). Pub. L. 110–289, § 1153(b)(1)(A), which di- rected technical amendment in subsec. (f) to reference in original act which appears in text as reference to section 4641 of this title, was executed by making the amendment in subsec. (g), to reflect the probable intent of Congress and the redesignation of subsec. (f) as (g) by Pub. L. 110–289, § 1105(a)(4). See below. Pub. L. 110–289, § 1105(a)(4), redesignated subsec. (f) as (g). Subsec. (h). Pub. L. 110–289, § 1105(b), added subsec. (h). Subsec. (i). Pub. L. 110–289, § 1105(e), added subsec. (i). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Amendment by Pub. L. 111–203 effective on the trans- fer date, see section 351 of Pub. L. 111–203, set out as a note under section 906 of Title 2, The Congress. § 4518. Prohibition and withholding of executive compensation (a) In general The Director shall prohibit the regulated enti- ties from providing compensation to any execu- tive officer of the regulated entity that is not reasonable and comparable with compensation for employment in other similar businesses (in- cluding other publicly held financial institu- tions or major financial services companies) in- volving similar duties and responsibilities. (b) Factors In making any determination under sub- section (a), the Director may take into consider- ation any factors the Director considers rel- evant, including any wrongdoing on the part of the executive officer, and such wrongdoing shall include any fraudulent act or omission, breach of trust or fiduciary duty, violation of law, rule, regulation, order, or written agreement, and in- sider abuse with respect to the regulated entity. The approval of an agreement or contract pursu- ant to section 1723a(d)(3)(B) of this title or sec- tion 1452(h)(2) of this title shall not preclude the Director from making any subsequent deter- mination under subsection (a). (c) Withholding of compensation In carrying out subsection (a), the Director may require a regulated entity to withhold any payment, transfer, or disbursement of com- pensation to an executive officer, or to place such compensation in an escrow account, during the review of the reasonableness and com- parability of compensation. Page 1657 TITLE 12—BANKS AND BANKING § 4518 (d) Prohibition of setting compensation In carrying out subsection (a), the Director may not prescribe or set a specific level or range of compensation. (e) Authority to regulate or prohibit certain forms of benefits to affiliated parties (1) Golden parachutes and indemnification payments The Director may prohibit or limit, by regu- lation or order, any golden parachute payment or indemnification payment. (2) Factors to be taken into account The Director shall prescribe, by regulation, the factors to be considered by the Director in taking any action pursuant to paragraph (1), which may include such factors as— (A) whether there is a reasonable basis to believe that the affiliated party has com- mitted any fraudulent act or omission, breach of trust or fiduciary duty, or insider abuse with regard to the regulated entity that has had a material effect on the finan- cial condition of the regulated entity; (B) whether there is a reasonable basis to believe that the affiliated party is substan- tially responsible for the insolvency of the regulated entity, the appointment of a con- servator or receiver for the regulated entity, or the troubled condition of the regulated entity (as defined in regulations prescribed by the Director); (C) whether there is a reasonable basis to believe that the affiliated party has materi- ally violated any applicable provision of Federal or State law or regulation that has had a material effect on the financial condi- tion of the regulated entity; (D) whether the affiliated party was in a position of managerial or fiduciary responsi- bility; and (E) the length of time that the party was affiliated with the regulated entity, and the degree to which— (i) the payment reasonably reflects com- pensation earned over the period of em- ployment; and (ii) the compensation involved rep- resents a reasonable payment for services rendered. (3) Certain payments prohibited No regulated entity may prepay the salary or any liability or legal expense of any affili- ated party if such payment is made— (A) in contemplation of the insolvency of such regulated entity, or after the commis- sion of an act of insolvency; and (B) with a view to, or having the result of— (i) preventing the proper application of the assets of the regulated entity to credi- tors; or (ii) preferring one creditor over another. (4) Golden parachute payment defined (A) In general For purposes of this subsection, the term ‘‘golden parachute payment’’ means any payment (or any agreement to make any payment) in the nature of compensation by any regulated entity for the benefit of any affiliated party pursuant to an obligation of such regulated entity that— (i) is contingent on the termination of such party’s affiliation with the regulated entity; and (ii) is received on or after the date on which— (I) the regulated entity became insol- vent; (II) any conservator or receiver is ap- pointed for such regulated entity; or (III) the Director determines that the regulated entity is in a troubled condi- tion (as defined in the regulations of the Director). (B) Certain payments in contemplation of an event Any payment which would be a golden parachute payment but for the fact that such payment was made before the date re- ferred to in subparagraph (A)(ii) shall be treated as a golden parachute payment if the payment was made in contemplation of the occurrence of an event described in any sub- clause of such subparagraph. (C) Certain payments not included For purposes of this subsection, the term ‘‘golden parachute payment’’ shall not in- clude— (i) any payment made pursuant to a re- tirement plan which is qualified (or is in- tended to be qualified) under section 401 of title 26, or other nondiscriminatory ben- efit plan; (ii) any payment made pursuant to a bona fide deferred compensation plan or arrangement which the Director deter- mines, by regulation or order, to be per- missible; or (iii) any payment made by reason of the death or disability of an affiliated party. (5) Other definitions For purposes of this subsection, the fol- lowing definitions shall apply: (A) Indemnification payment Subject to paragraph (6), the term ‘‘indem- nification payment’’ means any payment (or any agreement to make any payment) by any regulated entity for the benefit of any person who is or was an affiliated party, to pay or reimburse such person for any liabil- ity or legal expense with regard to any ad- ministrative proceeding or civil action insti- tuted by the Agency which results in a final order under which such person— (i) is assessed a civil money penalty; (ii) is removed or prohibited from par- ticipating in conduct of the affairs of the regulated entity; or (iii) is required to take any affirmative action to correct certain conditions result- ing from violations or practices, by order of the Director. (B) Liability or legal expense The term ‘‘liability or legal expense’’ means— Page 1658 TITLE 12—BANKS AND BANKING § 4518a (i) any legal or other professional ex- pense incurred in connection with any claim, proceeding, or action; (ii) the amount of, and any cost incurred in connection with, any settlement of any claim, proceeding, or action; and (iii) the amount of, and any cost in- curred in connection with, any judgment or penalty imposed with respect to any claim, proceeding, or action. (C) Payment The term ‘‘payment’’ includes— (i) any direct or indirect transfer of any funds or any asset; and (ii) any segregation of any funds or as- sets for the purpose of making, or pursu- ant to an agreement to make, any pay- ment after the date on which such funds or assets are segregated, without regard to whether the obligation to make such pay- ment is contingent on— (I) the determination, after such date, of the liability for the payment of such amount; or (II) the liquidation, after such date, of the amount of such payment. (6) Certain commercial insurance coverage not treated as covered benefit payment No provision of this subsection shall be con- strued as prohibiting any regulated entity from purchasing any commercial insurance policy or fidelity bond, except that, subject to any requirement described in paragraph (5)(A)(iii), such insurance policy or bond shall not cover any legal or liability expense of the regulated entity which is described in para- graph (5)(A). (Pub. L. 102–550, title XIII, § 1318, Oct. 28, 1992, 106 Stat. 3949; Pub. L. 110–289, div. A, title I, §§ 1113(a), 1114, July 30, 2008, 122 Stat. 2678, 2679.) Editorial Notes AMENDMENTS 2008—Pub. L. 110–289, § 1113(a)(1), substituted ‘‘and withholding of executive’’ for ‘‘of excessive’’ in section catchline. Subsec. (a). Pub. L. 110–289, § 1113(a)(2), substituted ‘‘regulated entity’’ for ‘‘enterprise’’ and ‘‘regulated en- tities’’ for ‘‘enterprises’’. Subsecs. (b) to (d). Pub. L. 110–289, § 1113(a)(3), (4), added subsecs. (b) and (c) and redesignated former sub- sec. (b) as (d). Subsec. (e). Pub. L. 110–289, § 1114, added subsec. (e). Statutory Notes and Related Subsidiaries EQUITY IN GOVERNMENT COMPENSATION Pub. L. 114–93, Nov. 25, 2015, 129 Stat. 1310, provided that: ‘‘SECTION 1. SHORT TITLE. ‘‘This Act may be cited as the ‘Equity in Government Compensation Act of 2015’. ‘‘SEC. 2. DEFINITIONS. ‘‘In this Act: ‘‘(1) DIRECTOR.—The term ‘Director’ means the Di- rector of the Federal Housing Finance Agency. ‘‘(2) ENTERPRISE.—The term ‘enterprise’ means— ‘‘(A) the Federal National Mortgage Association and any affiliate thereof; and ‘‘(B) the Federal Home Loan Mortgage Corpora- tion and any affiliate thereof. ‘‘SEC. 3. REASONABLE PAY FOR CHIEF EXECUTIVE OFFICERS. ‘‘(a) SUSPENSION OF CURRENT COMPENSATION PACKAGE AND LIMITATION.—The Director shall suspend the com- pensation packages approved for 2015 for the chief exec- utive officers of each enterprise and, in lieu of such packages, subject to the limitation under subsection (b), establish the compensation and benefits for each such chief executive officer at the same level in effect for such officer as of January 1, 2015, and such com- pensation and benefits may not thereafter be increased. ‘‘(b) LIMITATION ON BONUSES.—Subsection (a) shall not be construed to affect the applicability of section 16 of the STOCK Act (12 U.S.C. 4518a) to the chief execu- tive officer of each enterprise. ‘‘(c) APPLICABILITY.—Subsection (a) shall only apply to a chief executive officer of an enterprise if the enter- prise is in conservatorship or receivership pursuant to section 1367 of the Federal Housing Enterprises Finan- cial Safety and Soundness Act of 1992 (12 U.S.C. 4617). ‘‘SEC. 4. FANNIE AND FREDDIE CHIEF EXECUTIVE OFFICERS NOT FEDERAL EMPLOYEES. ‘‘Any chief executive officer affected by any provision under section 3 shall not be considered a Federal em- ployee.’’ § 4518a. Limitation on bonuses to executives of Fannie Mae and Freddie Mac Notwithstanding any other provision in law, senior executives at the Federal National Mort- gage Association and the Federal Home Loan Mortgage Corporation are prohibited from re- ceiving bonuses during any period of con- servatorship for those entities on or after April 4, 2012. (Pub. L. 112–105, § 16, Apr. 4, 2012, 126 Stat. 303.) Editorial Notes CODIFICATION Section was enacted as part of the Representative Louise McIntosh Slaughter Stop Trading on Congres- sional Knowledge Act, also known as the STOCK Act, and not as part of the Federal Housing Enterprises Fi- nancial Safety and Soundness Act of 1992 which com- prises this chapter. § 4519. Authority to provide for review of regu- lated entities The Director may, on such terms and condi- tions as the Director deems appropriate, con- tract with any entity to conduct a review of the regulated entities. (Pub. L. 102–550, title XIII, § 1319, Oct. 28, 1992, 106 Stat. 3950; Pub. L. 109–291, § 4(b)(4), Sept. 29, 2006, 120 Stat. 1337; Pub. L. 110–289, div. A, title I, § 1105(d), July 30, 2008, 122 Stat. 2668; Pub. L. 111–203, title IX, § 939(b), July 21, 2010, 124 Stat. 1886.) Editorial Notes AMENDMENTS 2010—Pub. L. 111–203 struck out ‘‘that is a nationally recognized statistical rating organization, as such term is defined in section 78c(a) of title 15,’’ after ‘‘entity’’. 2008—Pub. L. 110–289 substituted ‘‘regulated entities’’ for ‘‘enterprises by rating organization’’ in section catchline and ‘‘regulated entities’’ for ‘‘enterprises’’ in text. 2006—Pub. L. 109–291 substituted ‘‘that is a nationally recognized statistical rating organization, as such term is defined in section 78c(a) of title 15’’ for ‘‘effectively