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2000 - Rules and Regulations
Subpart U — Removal, Suspension, and Debarment of Accountants
from Performing Audit Services
§ 308.600 Scope.
This subpart, which implements section 36(g)(4) of the FDIA
(12 U.S.C. 1831m(g)(4)),
provides rules and procedures for the removal, suspension, or debarment
of independent public accountants and accounting firms from performing
independent audit and attestation
{{8-29-03 p.2166.40}}services required by section
36 of the FDIA (12 U.S.C. 1831m) for insured depository institutions
for which the FDIC is the appropriate Federal banking agency.
[Codified to 12 C.F.R. § 308.600]
[Section 308.600 added at 68 Fed. Reg. 48270, August 13, 2000,
effective October 1, 2003]
§ 308.601 Definitions.
As used in this subpart, the following terms shall have the meaning
given below unless the context requires otherwise:
(a) Accounting firm means a corporation, proprietorship,
partnership, or other business firm providing audit services.
(b) Audit services means any service required to be
performed by an independent public accountant by section 36 of the FDIA
and 12 CFR part 363,
including attestation services.
(c) Independent public accountant (accountant) means any
individual who performs or participates in providing audit services.
[Codified to 12 C.F.R. § 308.601]
[Section 308.601 added at 68 Fed. Reg. 48270, August 13, 2003,
effective October 1, 2003]
§ 308.602 Removal, suspension, or debarment.
(a) Good cause for removal, suspension, or debarment.
(1) Individuals. The Board of Directors may remove,
suspend, or debar an independent public accountant under section 36 of
the FDIA from performing audit services for insured depository
institutions for which the FDIC is the appropriate Federal banking
agency if, after service of a notice of intention and opportunity for
hearing in the matter, the Board of Directors finds that the
accountant:
(i) Lacks the requisite qualifications to perform audit services;
(ii) Has knowingly or recklessly engaged in conduct that results
in a violation of applicable professional standards, including those
standards and conflicts of interest provisions applicable to
accountants through the Sarbanes-Oxley Act of 2002 (Pub. L. 107--204,
116 Stat. 745 (2002)) (Sarbanes-Oxley Act) and developed by the Public
Company Accounting Oversight Board and the Securities and Exchange
Commission;
(iii) Has engaged in negligent conduct in the form of:
(A) A single instance of highly unreasonable conduct that results
in a violation of applicable professional standards in circumstances in
which an accountant knows, or should know, that heightened scrutiny is
warranted; or
(B) Repeated instances of unreasonable conduct, each resulting in
a violation of applicable professional standards, that indicate a lack
of competence to perform audit services;
(iv) Has knowingly or recklessly given false or misleading
information, or knowingly or recklessly participated in any way in the
giving of false or misleading information, to the FDIC or any officer
or employee of the FDIC;
(v) Has engaged in, or aided and abetted, a material and knowing
or reckless violation of any provision of the Federal banking or
securities laws or the rules and regulations thereunder, or any other
law;
(vi) Has been removed, suspended, or debarred from practice
before any Federal or state agency regulating the banking, insurance,
or securities industries, other than by an action listed in
§ 308.603, on grounds relevant to the provision of audit services; or
(vii) Is suspended or debarred for cause from practice as an
accountant by any duly constituted licensing authority of any state,
possession, commonwealth, or the District of Columbia.
(2) Accounting firms. If the Board of Directors
determines that there is good cause for the removal, suspension, or
debarment of a member or employee of an accounting firm under paragraph
(a)(1) of this section, the Board of Directors also may remove,
suspend, or debar such firm or one or more offices of such firm. In
considering whether to remove,
{{8-29-03 p.2166.41}}suspend, or debar an
accounting firm or an office thereof, and the term of any sanction
against an accounting firm under this section, the Board of Directors
may consider, for example:
(i) The gravity, scope, or repetition of the act or failure to
act that constitutes good cause for the removal, suspension, or
debarment;
(ii) The adequacy of, and adherence to, applicable policies,
practices, or procedures for the accounting firm's conduct of its
business and the performance of audit services;
(iii) The selection, training, supervision, and conduct of
members or employees of the accounting firm involved in the performance
of audit services;
(iv) The extent to which managing partners or senior officers of
the accounting firm have participated, directly, or indirectly through
oversight or review, in the act of failure to act; and
(v) The extent to which the accounting firm has, since the
occurrence of the act or failure to act, implemented corrective
internal controls to prevent its recurrence.
(3) Limited scope orders. An order of removal,
suspension (including an immediate suspension), or debarment may, at
the discretion of the Board of Directors, be made applicable to a
limited number of insured depository institutions for which the FDIC is
the appropriate Federal banking agency.
(4) Remedies not exclusive. The remedies provided in
this subpart are in addition to any other remedies the FDIC may have
under any other applicable provision of law, rule, or regulation.
(b) Proceedings to remove, suspend or debar.
(1) Initiation of formal removal, suspension, or debarment
proceedings. The Board of Directors may initiate a proceeding to
remove, suspend, or debar an accountant or accounting firm from
performing audit services by issuing a written notice of intention to
take such action that names the individual or firm as a respondent and
describes the nature of the conduct that constitutes good cause for
such action.
(2) Hearings under paragraph (b) of this section. An
accountant or firm named as a respondent in the notice issued under
paragraph (b)(1) of this section may request a hearing on the
allegations contained in the notice. Hearings conducted under the
paragraph shall be conducted in the same manner as other hearings under
the Uniform Rules of Practice and Procedure (12 CFR part 308, subpart
A) (Uniform Rules).
(c) Immediate suspension from performing audit services.
(1) In general. If the Board of Directors serves a
written notice of intention to remove, suspend, or debar an accountant
or accounting firm from performing audit services, the Board of
Directors may, with due regard for the public interest and without a
preliminary hearing, immediately suspend such accountant or firm from
performing audit services for insured depository institutions for which
the FDIC is the appropriate Federal banking agency if the Board of
Directors:
(i) Has a reasonable basis to believe that the accountant or
accounting firm has engaged in conduct (specified in the notice served
upon the accountant or accounting firm under paragraph (b)(1) of this
section) that would constitute grounds for removal, suspension, or
debarment under paragraph (a) of this section;
(ii) Determines that immediate suspension is necessary to avoid
immediate harm to an insured depository institution or its depositors
or to the depository system as a whole; and
(iii) Serves such respondent with written notice of the immediate
suspension.
(2) Procedures. An immediate suspension notice issued
under this paragraph will become effective upon service. Such
suspension will remain in effect until the date the Board of Directors
dismisses the charges contained in the notice of intention, or the
effective date of a final order of removal, suspension, or debarment
issued by the Board of Directors to the respondent.
(3) Petition to stay. Any accountant or accounting
firm immediately suspended from performing audit services in accordance
with paragraph (c)(1) of this section may, within 10 calendar days
after service of the notice of immediate suspension, file a
petition
{{8-29-03 p.2166.42}}with the Executive Secretary
for a stay of such immediate suspension. If no petition is filed within
10 calendar days, the immediate suspension shall remain in effect.
(4) Hearing on petition. Upon receipt of a stay
petition, the Executive Secretary will designate a presiding officer
who will fix a place and time (not more than 10 calendar days after
receipt of the petition, unless extended at the request of petitioner)
at which the immediately suspended party may appear, personally or
through counsel, to submit written materials and oral argument. Any
FDIC employee engaged in investigative or prosecuting functions for the
FDIC in a case may not, in that or a factually related case, serve as a
presiding officer or participate or advise in the decision of the
presiding officer or of the FDIC, except as witness or counsel in the
proceeding. In the sole discretion of the presiding officer, upon a
specific showing of compelling need, oral testimony of witnesses also
may be presented. Enforcement counsel may represent the agency at the
hearing. In hearings held pursuant to this paragraph there shall be no
discovery, and the provisions of
§§ 308.6 through 308.12,
§ 308.16, and § 308.21
of the Uniform Rules will apply.
(5) Decision on petition. Within 30 calendar days
after the hearing, the presiding officer will issue a decision. The
presiding officer will grant a stay upon a demonstration that a
substantial likelihood exists of the respondent's success on the
issues raised by the notice of intention and that, absent such relief,
the respondent will suffer immediate and irreparable injury, loss, or
damage. In the absence of such a demonstration, the presiding officer
will notify the parties that the immediate suspension will be continued
pending the completion of the administrative proceedings pursuant to
the notice of intention. The presiding officer will serve a copy of the
decision on, and simultaneously certify the record to, the Executive
Secretary.
(6) Review of presiding officer's decision. The
parties may seek review of the presiding officer's decision by filing
a petition for review with the Executive Secretary within 10 calendar
days after service of the decision. Replies must be filed within 10
calendar days after the petition filing date. Upon receipt of a
petition for review and any reply, the Executive Secretary will
promptly certify the entire record to the Board of Directors. Within 60
calendar days of the Executive Secretary's certification, the Board of
Directors will issue an order notifying the affected party whether or
not the immediate suspension should be continued or reinstated. The
order will state the basis of the Board's decision.
[Codified to 12 C.F.R. § 308.602]
[Section 308.602 added at 68 Fed. Reg. 48270, August 13, 2003,
effective October 1, 2003]
§ 308.603 Automatic removal, suspension, and debarment.
(a) An independent public accountant or accounting firm may not
perform audit services for insured depository institutions for which
the FDIC is the appropriate Federal banking agency if the accountant or
firm:
(1) Is subject to a final order of removal, suspension, or
debarment (other than a limited scope order) issued by the Board of
Governors of the Federal Reserve System, the Office of the Comptroller
of the Currency, or the Office of Thrift Supervision under section 36
of the FDIA;
(2) Is subject to a temporary suspension or permanent revocation
of registration or a temporary or permanent suspension or bar from
further association with any registered public accounting firm issued
by the Public Company Accounting Oversight Board or the Securities and
Exchange Commission under sections 105(c)(4)(A) or (B) of the
Sarbanes-Oxley Act (15 U.S.C. 7215(c)(4)(A) or (B)); or
(3) Is subject to an order of suspension or denial of the
privilege of appearing or practicing before the Securities and Exchange
Commission.
(b) Upon written request, the FDIC, for good cause shown, may grant
written permission to such accountant or firm to perform audit services
for insured depository institutions for which the FDIC is the
appropriate Federal banking agency. The written request must comply
with the requirements of § 303.3 of this chapter.
{{8-29-03 p.2166.43}}
[Codified to 12 C.F.R. § 308.603]
[Section 308.603 added at 68 Fed. Reg. 48271, August 13, 2003,
effective October 1, 2003]
§ 308.604 Notice of removal, suspension, or debarment.
(a) Notice to the public. Upon the issuance of a final
order for removal, suspension, or debarment of an independent public
accountant or accounting firm from providing audit services, the FDIC
will make the order publicly available and provide notice of the order
to the other Federal banking agencies.
(b) Notice to the FDIC by accountants and firms. An
accountant or accounting firm that provides audit services to any
insured depository institution for which the FDIC is the appropriate
Federal banking agency must provide the FDIC with written notice of:
(1) any currently effective order or other action described in
§§ 308.602(a)(1)(vi)
through (a)(1)(vii) or §§ 308.603(a)(2) through (a)(3); and
(2) any currently effective action by the Public Company
Accounting Oversight Board under sections 105(c)(4)(C) or (G) of the
Sarbanes-Oxley Act (15 U.S.C. 7215(c)(4)(C) or (G)).
(c) Timing of notice. Written notice required by this
paragraph shall be given no later than 15 calendar days following the
effective date of an order or action, or 15 calendar days before an
accountant or accounting firm accepts an engagement to provide audit
services, whichever date is earlier.
[Codified to 12 C.F.R. § 308.604]
[Section 308.604 added at 68 Fed. Reg. 48271, August 13, 2003,
effective October 1, 2003]
§ 308.605 Application for reinstatement.
(a) Form of petition. Unless otherwise ordered by the
Board of Directors, an application for reinstatement by an independent
public accountant, an accounting firm, or an office of a firm that was
removed, suspended, or debarred under § 308.602 may be made in
writing at any time. The application must comply with the requirements
of § 303.3 of this chapter.
(b) Procedure. An applicant for reinstatement under this
section may, in the sole discretion of the Board of Directors, be
afforded a hearing. In reinstatement proceedings, the person seeking
reinstatement shall bear the burden of going forward with an
application and proving the grounds asserted in support of the
application, and the Board of Directors may, in its sole discretion,
direct that any reinstatement proceeding be limited to written
submissions. The removal, suspension, or debarment shall continue until
the Board of Directors, for good cause shown, has reinstated the
applicant or until the suspension period has expired. The filing of an
application for reinstatement will not stay the effectiveness of the
removal, suspension, or debarment of an accountant or firm.
[Codified to 12 C.F.R. § 308.605]
[Section 308.605 added at 68 Fed. Reg. 48271, August 13, 2003,
effective October 1, 2003]
[The page following this is 2167.]
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