(a) Good cause for removal, suspension, or debarment.
(1) Individuals. The Board may remove, suspend, or debar an independent public accountant
from performing audit services for banking organizations that are
subject to section 36 of the FDIA, if, after notice of and opportunity
for hearing in the matter, the Board 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 conflict-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
formation, to the Board or any officer or employee of the Board;
(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 section 263.403, 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.
8-097.21
(2) Accounting
firms. If the Board 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 also may remove,
suspend, or debar such firm or one or more offices of such firm. In
considering whether to remove, suspend, or debar a firm or an office
thereof, and the term of any sanction against a firm under this section,
the Board may consider, for example—
(i) the gravity, scope,
or repetition of the act or failure to act that constitutes good cause
for 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 or 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, be made applicable to a particular banking organization or
class of banking organizations.
(4) Remedies
not exclusive. The remedies provided in this subpart are in addition
to any other remedies the Board may have under any other applicable
provisions of law, rule, or regulation.
8-097.22
(b) Proceedings to remove, suspend, or
debar.
(1) Initiation of formal removal, suspension, or
debarment proceedings. The Board 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) Hearing 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 in the notice. Hearings conducted under this paragraph
shall be conducted in the same manner as other hearings under the
Uniform Rules of Practice and Procedure (12 CFR part 263, subpart
A).
8-097.23
(c) Immediate
suspension from performing audit services.
(1) In general. If the Board serves a written notice of intention to remove, suspend,
or debar an accountant or accounting firm from performing audit services,
the Board may, with due regard for the public interest and without
a preliminary hearing, immediately suspend such accountant or firm
from performing audit services for banking organizations, if the Board—
(i) has a reasonable basis to believe that the accountant or firm
has engaged in conduct (specified in the notice served on the accountant
or firm under paragraph (b) 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 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 to the respondent.
(3) Petition
to stay. Any accountant or 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 with the Secretary, Board of Governors of the Federal
Reserve System, Washington, DC 20551 for a stay of such immediate
suspension. If no petition is filed within 10 calendar days, the immediate
suspension shall remain in effect.
8-097.24
(4) Hearing on
petition. Upon receipt of a stay petition, the secretary will
designate a presiding officer who shall 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 Board employee engaged in investigative or
prosecuting functions for the Board 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 Board,
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 may also be presented. In hearings held
pursuant to this paragraph there shall be no discovery and the provisions
of sections 263.6 through 263.12, 263.16, and 263.21 of this part
shall apply.
(5) Decision on petition. Within 30 calendar
days after the hearing, the presiding officer shall 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.
(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 presiding officer 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 presiding officer shall
promptly certify the entire record to the Board. Within 60 calendar
days of the presiding officer’s certification, the Board shall issue
an order notifying the affected party whether or not the immediate
suspension should be continued or reinstated. The order shall state
the basis of the Board’s decision.
