Guidance Regarding Prohibitions Imposed by Section 205(d) of the Federal Credit Union Act, 18576-18584 [E8-6031]

Agencies

• National Credit Union Administration

[Federal Register Volume 73, Number 66 (Friday, April 4, 2008)]
[Notices]
[Pages 18576-18584]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-6031]



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NATIONAL CREDIT UNION ADMINISTRATION


Guidance Regarding Prohibitions Imposed by Section 205(d) of the 
Federal Credit Union Act

AGENCY: National Credit Union Administration (NCUA).

ACTION: Proposed Interpretive Ruling and Policy Statement 08-1.

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SUMMARY: The NCUA is proposing to adopt an Interpretive Ruling and 
Policy Statement (IRPS) regarding prohibitions imposed by Section 
205(d) of the Federal Credit Union Act (FCU Act) (12 U.S.C. 
1785(d)(1)). Section 205(d) of the FCU Act prohibits a person who has 
been convicted of any criminal offense involving dishonesty or breach 
of trust, or who has entered into a pretrial diversion or similar 
program in connection with a prosecution for such offense, from 
participating in the affairs of an insured credit union except with the 
prior written consent of the NCUA Board. The proposed IRPS provides 
direction and guidance to federally insured credit unions and those 
persons who may be affected by Section 205(d) because of a prior 
criminal conviction or pretrial diversion program participation by 
describing the actions that are prohibited under the statute and 
describing the procedures for applying for NCUA Board consent on a 
case-by-case basis.

DATES: Comments must be received on or before June 3, 2008.

ADDRESSES: You may submit comments by any of the following methods 
(Please send comments by one method only):
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     NCUA Web Site: https://www.ncua.gov/news/proposed_regs/
proposed_regs.html. Follow the instructions for submitting comments.
     E-mail: Address to regcomments@ncua.gov. Include ``[Your 
name] Comments on Proposed IRPS 08-1'' in the e-mail subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for e-mail.
     Mail: Address to Mary Rupp, Secretary of the Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.

FOR FURTHER INFORMATION CONTACT: Jon Canerday, Trial Attorney, Office 
of General Counsel, at the above address, by e-mail at 
canerday@ncua.gov or by telephone at (703) 518-6548.

SUPPLEMENTARY INFORMATION:

A. Introduction

    Section 205(d) of the FCU Act prohibits, without the prior written 
consent of the NCUA Board, a person convicted of any criminal offense 
involving dishonesty or breach of trust, or who has entered into a 
pretrial diversion or similar program in connection with a prosecution 
for such offense, from becoming or continuing as an institution-
affiliated party, or otherwise participating, directly or indirectly, 
in the conduct of the affairs of an insured credit union. The NCUA 
Board is proposing to issue guidance and provide additional information 
to the public regarding this provision in the form of an IRPS. NCUA 
believes public comment on this IRPS will be helpful, and NCUA 
encourages interested members of the public to provide their comments. 
NCUA also solicits input from the public as to whether the format of 
this guidance as an IRPS is appropriate or whether a regulation would 
be more suitable.

B. Background

    Under Section 205(d)(1) of the FCU Act, except with the prior 
written consent of the NCUA Board, a person who has been convicted of 
any criminal offense involving dishonesty or breach of trust, or has 
agreed to enter into a pretrial diversion or similar program in 
connection with a prosecution for such offense may not:
     Become, or continue as, an institution affiliated party 
with respect to any insured credit union; or
     Otherwise participate, directly or indirectly, in the 
conduct of the affairs of any insured credit union.
    Section 205(d)(1)(B) further provides that an insured credit union 
may not allow any person described above to participate in the affairs 
of the credit union without NCUA Board consent. Section 205(d)(2) 
imposes a ten-year ban against the NCUA Board's consent for a person 
convicted of certain crimes enumerated in Title 18 of the United States 
Code, absent a motion by the NCUA Board and approval by the sentencing 
court. Finally, Section 205(d)(3) states that ``whoever knowingly 
violates'' (d)(1)(A) or (d)(1)(B) commits a felony, punishable by up to 
five years in jail and a fine of up to $1,000,000 a day.
    Section 19 of the Federal Deposit Insurance Act (FDIA) contains a 
prohibition provision similar to Section 205(d) of the FCU Act. The 
Federal Deposit Insurance Corporation (FDIC) and the Office of Thrift 
Supervision (OTS) have published guidance regarding prohibitions 
imposed by Section 19 of the FDIA.\1\
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    \1\ See, FDIC Statement of Policy Pursuant to Section 19 of the 
Federal Deposit Insurance Act, (63 FR 66177) (Dec. 1, 1998) (FDIC's 
SOP) and also the FDIC's rules at 12 CFR part 303, subpart L and 12 
CFR part 308, subpart M. And see also the OTS' rules at 12 CFR Parts 
509 and 585.
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    The NCUA Board has not previously adopted any policies or 
regulations concerning how it analyzes the conduct of an applicant when 
deciding whether or not to grant consent to participate pursuant to 
Section 205(d). Section 205(d) itself imposes no guidance or 
limitations on the information that the NCUA Board may consider. The 
Board has on occasion looked to the FDIC's SOP for guidance in the past 
when reviewing the limited number of prior requests for consent under 
Section 205(d). However, in light of several recent applications 
requesting the NCUA Board's consent pursuant to Section 205(d), the 
Board believes it may now be appropriate to issue its own guidance on 
this topic. In light of the FDIC's greater experience in this area, 
NCUA has drawn upon the FDIC SOP extensively in creating the proposed 
IRPS.
    NCUA is especially concerned that many insured credit unions, as 
well as institution affiliated parties, may not be aware of the 
prohibition imposed by Section 205(d). NCUA believes that the issuance 
of an IRPS will help put the credit union community on notice of 
Section 205(d) so that insured credit unions can properly screen 
prospective employees prior to making hiring decisions. Furthermore, 
credit unions that failed to adequately examine prospective employees 
before hiring will now be on notice of the need to examine their 
workforce to ensure their compliance with Section 205(d).
    NCUA recognizes that certain offenses are so minor and occurred so 
far in the past so as to not present a risk to the insured credit 
union. For that reason, NCUA is proposing to exclude certain de minimis 
offenses that meet specified requirements and juvenile offenses from 
the need to request consent from the Board.
    The IRPS also establishes the procedures that an applicant seeking 
the necessary approval of the NCUA Board must follow. The proposed IRPS 
requires that an application for the NCUA Board's consent ``should 
thoroughly explain the circumstances surrounding the conviction or 
pretrial diversion program'' and ``demonstrate that, notwithstanding 
the bar, the person is fit to participate in the conduct of the affairs 
of an insured credit union without posing a risk to its

[[Page 18577]]

safety and soundness or impairing public confidence in that 
institution''. The NCUA Board invites comments as to whether such an 
unstructured application or a more formalized application utilizing a 
form, similar to that used by the FDIC, is preferred. A copy of the 
FDIC form is attached.
    The proposed IRPS establishes that the burden of proof for 
convincing the NCUA Board to grant consent rests with the applicant. 
Further, the IRPS sets out the criteria and factors the NCUA Board will 
consider when reviewing requests for consent. Lastly, the proposed IRPS 
explains the appeal rights available to applicants if the NCUA Board 
withholds consent under Section 205(d).

C. Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires that NCUA prepare an 
analysis describing any significant economic impact agency rulemaking 
may have on a substantial number of small credit unions. 5 U.S.C. 601 
et seq. For purposes of this analysis, NCUA considers credit unions 
under $10 million in assets as small credit unions. Since the 
requirements in this IRPS are generally restatements of requirements in 
other laws, NCUA does not believe this proposed IRPS will have a 
significant economic impact on a substantial number of small credit 
unions. NCUA invites the public to comment on this issue.

Paperwork Reduction Act

    This proposed IRPS contains an application requirement. Any insured 
credit union that wishes to seek a waiver for a person who is 
prohibited under Section 205(d) because of a prior conviction for any 
crime involving dishonesty or breach of trust, or a pretrial diversion 
or similar program in connection with a prosecution for such crime, 
must apply for the NCUA Board's written approval before such person may 
participate in its affairs. NCUA has not mandated any specific 
requirements for this application, but anticipates it will consist of a 
letter to the NCUA Board requesting approval and briefly describing the 
nature of the prior conviction or pretrial diversion, along with an 
explanation or justification as to why the Board should grant consent 
for the person's participation in the affairs of an insured credit 
union. Additionally, NCUA anticipates that insured credit unions 
submitting an application may also address the specific factors 
identified in this IRPS that the Board will consider when reviewing 
applications for consent.
    NCUA requests public comment on all aspects of the collection of 
information in this proposed IRPS, including whether a specific form 
should be required. NCUA believes that a relatively small amount of 
time will be necessary for the development of an application for 
consent under Section 205(d) because in many cases the persons 
prohibited will have in their possession copies of the necessary 
documentation pertaining to their prior convictions. In cases where the 
individuals do not have the necessary documentation, either the persons 
or the insured credit unions will have to contact the respective courts 
to obtain copies of the documentation. In addition to obtaining copies 
of documentation pertaining to the prior convictions, the insured 
credit unions must draft a letter to serve as the application to 
request the Board's consent. Based on the length of prior applications 
under Section 205(d), NCUA estimates a burden of two hours per insured 
credit union and will revisit this estimate in light of the comments 
NCUA receives.
    NCUA will submit the collection of information requirements 
contained in the IRPS to the OMB in accordance with the Paperwork 
Reduction Act of 1995. 44 U.S.C. 3507. NCUA will use any comments 
received to develop its new burden estimates. Comments on the 
collections of information should be sent to Office of Management and 
Budget, Reports Management Branch, New Executive Office Building, Room 
10202, Washington, DC 20503; Attention: Mark Menchik, Desk Officer for 
NCUA. Please send NCUA a copy of any comments you submit to OMB.
    The likely respondents are insured credit unions.
    Estimated annual number of respondents: 3.
    Estimated average annual burden hours per respondent: 2 hours.
    Estimated total annual disclosure and recordkeeping burden: 6 
hours.
    NCUA invites comment on:
    (1) The accuracy of NCUA's estimate of the burden of the 
information collections;
    (2) Whether a specific form, similar to the attached form required 
by the FDIC, should be required for the information collections;
    (3) Ways to minimize the burden of the information collections on 
insured credit unions, including the use of automated collection 
techniques or other forms of information technology; and
    (4) Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of services to provide information.
    Recordkeepers are not required to respond to this collection of 
information unless it displays a currently valid Office of Management 
and Budget (OMB) control number. NCUA is currently requesting a control 
number for this information collection from OMB.

Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their actions on state and local interests. In 
adherence to fundamental federalism principles, NCUA, an independent 
regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies 
with the executive order. This proposed IRPS applies to all credit 
unions, but does not have substantial direct effect on the states, on 
the relationship between the national government and the states, or on 
the distribution of power and responsibilities among the various levels 
of government. NCUA has determined that this proposed IRPS does not 
constitute a policy that has federalism implications for purposes of 
the executive order.

The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families

    The NCUA has determined that the proposed IRPS would not affect 
family well-being within the meaning of section 654 of the Treasury and 
General Government Appropriations Act of 1999, Public Law 105-277, 112 
Stat. 2681 (1998).

    By the National Credit Union Administration Board, on March 20, 
2008.
Mary Rupp,
Secretary of the Board.

    Authority: 12 U.S.C. 1752a, 1756, 1766, 1785.

    Interpretive Ruling and Policy Statement 08-1.

Guidance Regarding Prohibitions Imposed by Section 205(d) of the 
Federal Credit Union Act

I. Background

    This Interpretive Ruling and Policy Statement (IRPS) provides 
requirements, direction, and guidance to federally-insured credit 
unions and individuals regarding the prohibition imposed by operation 
of law by Section 205(d) of the Federal Credit Union Act (FCU Act) (12 
U.S.C. 1785(d)). Section 205(d)(1) provides that, except with the prior 
written consent of the National Credit

[[Page 18578]]

Union Administration (NCUA) Board, a person who has been convicted of 
any criminal offense involving dishonesty or breach of trust, or has 
agreed to enter into a pretrial diversion or similar program in 
connection with a prosecution for such offense may not:
     Become, or continue as, an institution affiliated party 
with respect to any insured credit union; or
     Otherwise participate, directly or indirectly, in the 
conduct of the affairs of any insured credit union.
    Section 205(d)(1)(B) further provides that an insured credit union 
may not allow any person described above to engage in any conduct or to 
continue any relationship prohibited by Section 205(d). The statute 
imposes a ten-year ban against the NCUA Board's consent for a person 
convicted of certain crimes enumerated in Title 18 of the United States 
Code, absent a motion by the NCUA Board and approval by the sentencing 
court. (Section 205(d)(2)). Finally, Section 205(d)(3) states that 
``whoever knowingly violates'' (d)(1)(A) or (d)(1)(B) is committing a 
felony, punishable by up to five years in jail and a fine of up to 
$1,000,000 a day.
    This IRPS provides guidance to credit unions and individuals as to 
who is subject to the prohibition provision of Section 205(d). 
Similarly, the IRPS defines what offenses come within the prohibition 
provision of Section 205(d) and thus require an application for the 
NCUA Board's consent to participate in the affairs of an insured credit 
union. The IRPS also identifies certain offenses that will be excluded 
from Section 205(d) and do not require the NCUA Board's consent. In 
order to assist those who may need the consent of the NCUA Board to 
participate in the affairs of an insured credit union, the IRPS 
explains the procedures to request such consent, clarifies the duty 
imposed on credit unions by Section 205(d), and identifies the factors 
the NCUA Board will consider in deciding whether to provide such 
consent. Finally, the IRPS explains how an applicant could appeal a 
decision by the NCUA Board denying an application for its consent.

II. Policies and Procedures Regarding Prohibitions Imposed by Section 
205(d)

A. Scope of Section 205(d) of the FCU Act

1. Persons covered by Section 205(d)
     Institution-affiliated parties.
    Section 205(d) of the FCU Act applies to institution-affiliated 
parties, as defined by Section 206(r) of the FCU Act (12 U.S.C. 
1786(r)), and others who are participants in the conduct of the affairs 
of an insured institution. Institution-affiliated party means:
    (1) Any committee member, director, officer, or employee of, or 
agent for, an insured credit union;
    (2) any consultant, joint venture partner, and any other person as 
determined by the Board (by regulation or on a case-by case basis) who 
participates in the conduct of the affairs of an insured credit union; 
and
    (3) any independent contractor (including any attorney, appraiser, 
or accountant) who knowingly or recklessly participates in--
    (A) any violation of any law or regulation;
    (B) any breach of fiduciary duty; or
    (C) any unsafe or unsound practice, which caused or is likely to 
cause more than a minimal financial loss to, or a significant adverse 
effect on, the insured credit union. (Section 206(r)).
    Therefore, all officials, committee members and employees of an 
insured credit union fall within the scope of Section 205(d) of the FCU 
Act. Additionally, anyone NCUA determines to be a de facto employee, 
applying generally applicable standards of employment law, will also be 
subject to Section 205(d).
    Under Section 206(r), independent contractors are considered 
institution-affiliated parties if they knowingly or recklessly 
participate in violations, unsafe or unsound practices or breaches of 
fiduciary duty which are likely to cause significant loss to, or a 
significant adverse effect on, an insured credit union. As a general 
rule, an independent contractor who influences or controls the 
management or affairs of an insured credit union, would be covered by 
Section 205(d). In addition, a ``person''' for purposes of Section 
205(d) means an individual, and does not include a corporation, firm or 
other business entity.
     Participants in the affairs of an insured credit union.
    A person who does not meet the definition of institution-affiliated 
party is nevertheless prohibited by Section 205(d) if he or she is 
considered to be participating, directly or indirectly, in the conduct 
of the affairs of an insured credit union. This is a term of art and is 
not capable of precise definition. As the OTS stated in the preamble to 
its regulation regarding Section 19 of the FDIA:

    Given the changes in banking, including financial modernization 
and the rapid pace of technology, a regulatory listing of activities 
that constitute participation is neither practical nor advisable. 
Accordingly, like FDIC's SOP, the interim final rule does not define 
precisely what activities constitute ``participation.'' Rather, 
agency and court decisions will provide the guide as to what 
standards will be applied. As a general proposition, however, 
participation will depend upon the degree of influence or control 
over the management or affairs of the [insured credit union]. Those 
who exercise major policymaking functions at [an insured credit 
union] would fall within this category.

72 FR 25948, at 25949 (May 8, 2007).
    NCUA agrees with that view and will likewise not define what 
constitutes participation in the conduct of the affairs of an insured 
credit union but rather will analyze each individual's conduct on a 
case-by-case basis to determine if their conduct amounts to 
participating in the affairs of an insured credit union.
2. Offenses Covered by Section 205(d)
    Except as indicated in paragraph (3), below, an application 
requesting the consent of the NCUA Board under Section 205(d) is 
required where any adult, or minor treated as an adult, has received a 
conviction by a court of competent jurisdiction for any criminal 
offense involving dishonesty or breach of trust (a covered offense), or 
where such person has entered a pretrial diversion or similar program 
regarding a covered offense. The following definitions apply:
    (i) Conviction. There must be a conviction of record. Section 
205(d) does not apply to arrests, pending cases not brought to trial, 
acquittals, or any conviction which has been reversed on appeal. A 
conviction with regard to which an appeal is pending will require an 
application until or unless reversed. A conviction for which a pardon 
has been granted will require an application.
    (ii) Pretrial Diversion or Similar Program. A pretrial diversion 
program, whether formal or informal, is characterized by a suspension 
or eventual dismissal of charges or criminal prosecution upon agreement 
by the accused to treatment, rehabilitation, restitution, or other non-
criminal or non-punitive alternatives. Whether a program constitutes a 
pretrial diversion is determined by relevant federal, state or local 
law, and will be considered by the NCUA Board on a case-by-case basis.
    (iii) Dishonesty or Breach of Trust. The conviction or entry into a 
pretrial diversion program must have been for a criminal offense 
involving dishonesty or breach of trust.
    ``Dishonesty'' means directly or indirectly to cheat or defraud; to 
cheat or defraud for monetary gain or its equivalent; or wrongfully to 
take property belonging to another in

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violation of any criminal statute. Dishonesty includes acts involving 
want of integrity, lack of probity, or a disposition to distort, cheat, 
or act deceitfully or fraudulently, and may include crimes which 
federal, state or local laws define as dishonest.
    ``Breach of trust'' means a wrongful act, use, misappropriation or 
omission with respect to any property or fund which has been committed 
to a person in a fiduciary or official capacity, or the misuse of one's 
official or fiduciary position to engage in a wrongful act, use, 
misappropriation or omission.
    Whether a crime involves dishonesty or breach of trust will be 
determined from the statutory elements of the crime itself. All 
convictions for offenses concerning the illegal manufacture, sale, 
distribution of or trafficking in controlled substances shall require 
an application for the NCUA Board's consent under Section 205(d).
3. Offenses Not Covered by Section 205(d)
    (i) De minimis Offenses. Approval is automatically granted and an 
application for the NCUA Board's consent under Section 205(d) will not 
be required where the covered offense is considered de minimis, because 
it meets all of the following criteria:
     There is only one conviction or entry into a pretrial 
diversion program of record for a covered offense;
     The offense was punishable by imprisonment for a term of 
less than one year and/or a fine of less than $1,000, and the 
punishment imposed by the court did not include incarceration;
     The conviction or pretrial diversion program was entered 
at least five years prior to the date an application would otherwise be 
required;
     The offense did not involve an insured depository 
institution or insured credit union; and
     The NCUA Board or any other federal financial institution 
regulatory agency has not previously denied consent under Section 
205(d) of the FCU Act or Section 19 of the FDIA, respectively, for the 
same conviction or participation in a pretrial diversion program.
    Any person who meets the foregoing criteria must be covered by a 
fidelity bond to the same extent as other employees in similar 
positions. An insured credit union may not allow any person to 
participate in its affairs, even if that person has a conviction for 
what would constitute a de minimis covered offense, if the person 
cannot obtain required fidelity bond coverage.
    Any person who meets the foregoing criteria for a de minimis 
offense shall disclose the presence of the conviction or pretrial 
diversion program to all insured credit unions or other insured 
institutions in the affairs of which he or she intends to participate.
    (ii) Youthful Offender Adjudgments. An adjudgment by a court 
against a person as a ``youthful offender'' under any youth offender 
law, or any adjudgment as a ``juvenile delinquent'' by any court having 
jurisdiction over minors as defined by state law does not require an 
application for the NCUA Board's consent under Section 205(d). Such 
adjudications will not be considered convictions for criminal offenses.
    (iii) Expunged convictions. A conviction which has been completely 
expunged is not considered a conviction of record and will not require 
an application for the NCUA Board's consent under Section 205(d).

B. Duty Imposed on Credit Unions

    Section 205(d) imposes a duty upon every insured credit union to 
make a reasonable inquiry regarding the history of every applicant for 
employment. NCUA believes that inquiry should consist of taking steps 
appropriate under the circumstances, consistent with applicable law, to 
avoid hiring or permitting participation in its affairs by a person who 
has a conviction or participation in a pretrial diversion program for a 
covered offense. The NCUA believes that at a minimum, each insured 
credit union should establish a screening process which provides the 
insured credit union with information concerning any convictions or 
pretrial diversion programs pertaining to a job applicant.
    This would include, for example, the completion of a written 
employment application which requires a listing of all convictions and 
pretrial diversion programs. When the credit union learns that a 
prospective employee has a prior conviction or entered into a pretrial 
diversion program for a covered offense, the credit union must submit 
an application requesting the NCUA Board's consent under Section 205(d) 
prior to hiring the person or otherwise permitting him or her to 
participate in its affairs.
    If an insured credit union discovers that an employee, official, or 
anyone else who is an institution-affiliated party or who participates, 
directly or indirectly, in its affairs, is in violation of Section 
205(d), the credit union must immediately place that person on a 
temporary leave of absence from the credit union and file an 
application seeking the NCUA Board's consent under Section 205(d). The 
person must remain on such temporary leave of absence until such time 
as the NCUA Board has acted on the application. When NCUA learns that 
an institution-affiliated party or a person participating in the 
affairs of an insured credit union should have received the NCUA 
Board's consent under Section 205(d) but did not, NCUA will look at the 
circumstances of each situation to determine whether the inquiry made 
by the credit union was reasonable under the circumstances.

C. Procedures for Requesting the NCUA Board's Consent Under Section 
205(d)

    Section 205(d) of the FCU Act serves, by operation of law, as a 
statutory bar to participation in the affairs of an insured credit 
union, absent the written consent of the NCUA Board. When an 
application for the NCUA Board's consent under Section 205(d) is 
required, the insured credit union must file a written application with 
the appropriate NCUA Regional Director. The purpose of an application 
is to provide the applicant an opportunity to demonstrate that, 
notwithstanding the bar, the person is fit to participate in the 
conduct of the affairs of an insured credit union without posing a risk 
to its safety and soundness or impairing public confidence in that 
institution. Such an application should thoroughly explain the 
circumstances surrounding the conviction or pretrial diversion program. 
The application should also address the relevant factors and criteria 
the NCUA Board will consider in determining whether to grant consent, 
specified below. The burden is upon the applicant to establish that the 
application warrants approval.
    The application must be filed by an insured credit union on behalf 
of a person unless the NCUA Board grants a waiver of that requirement. 
Such waivers will be considered on a case-by-case basis where 
substantial good cause for granting a waiver is shown.

D. Evaluation of Section 205(d) Applications

    The essential criteria used by the NCUA Board in assessing an 
application for consent under Section 205(d) are whether the person has 
demonstrated his or her fitness to participate in the conduct of the 
affairs of an insured credit union, and whether the employment, 
affiliation, or participation by the person in the conduct of the 
affairs of the insured credit union may constitute a threat to the 
safety and soundness of the institution or the interests of its members 
or threaten to impair public confidence in the insured credit union.

[[Page 18580]]

    In evaluating an application, the NCUA Board will consider:
    (1) The conviction or pretrial diversion program and the specific 
nature and circumstances of the covered offense;
    (2) Evidence of rehabilitation, including the person's reputation 
since the conviction or pretrial diversion program, the person's age at 
the time of conviction or pretrial diversion program, and the time 
which has elapsed since the conviction or pretrial diversion program;
    (3) The position to be held or the level of participation by the 
person at the insured credit union;
    (4) The amount of influence and control the person will be able to 
exercise over the management or affairs of the insured credit union;
    (5) The ability of management of the insured credit union to 
supervise and control the person's activities;
    (6) The applicability of the insured institution's fidelity bond 
coverage to the person;
    (7) For state chartered, federally insured credit unions, the 
opinion or position of the state regulator; and
    (8) Any additional factors in the specific case that appear 
relevant.
    The foregoing criteria will also be applied by the NCUA Board to 
determine whether the interests of justice are served in seeking an 
exception in the appropriate court when an application is made to 
terminate the ten-year ban for certain enumerated offenses in violation 
of Title 18 of the United States Code prior to its expiration date. 
NCUA believes such requests will be extremely rare and will be made 
only upon a showing of compelling reasons.
    Some applications can be approved without an extensive review 
because the person will not be in a position to present any substantial 
risk to the safety and soundness of the insured credit union. Persons 
who will occupy clerical, maintenance, service or purely administrative 
positions, generally fall into this category. A more detailed analysis 
will be performed in the case of persons who will be in a position to 
influence or control the management or affairs of the insured credit 
union. Approval by the NCUA Board will be subject to the condition that 
the person shall be covered by a fidelity bond to the same extent as 
others in similar positions.
    In cases in which a waiver of the institution filing requirement 
has been granted to an individual, approval of the application will be 
conditioned upon that person disclosing the presence of the conviction 
to all insured credit unions or other insured financial institutions in 
the affairs of which he or she wishes to participate. When deemed 
appropriate, approval may also be subject to the condition that the 
prior consent of the NCUA Board will be required for any proposed 
significant changes in the person's duties and/or responsibilities. 
Such proposed changes may, in the discretion of the appropriate 
Regional Director, require a new application for the NCUA Board's 
consent. When approval has been granted for a person to participate in 
the affairs of a particular insured credit union and subsequently that 
person seeks to participate in the affairs of another insured credit 
union, approval does not automatically follow. In such cases, another 
application must be submitted. Moreover, any person who has received 
consent from the NCUA Board under Section 205(d) and subsequently 
wishes to become an institution affiliated party or participate in the 
affairs of an FDIC-insured institution, he or she must obtain the prior 
approval of the FDIC pursuant to Section 19 of the FDIA.

E. Appeal Rights Following the Denial of an Application Under Section 
205(d)

    If the NCUA Board withholds consent under Section 205(d), the 
insured credit union (or in the case where a waiver has been granted, 
the individual that submitted the application) may request a hearing by 
submitting a written request within 30 days following the date of the 
NCUA Board's action. The NCUA Board will apply the process contained in 
regulations governing prohibitions based on felony convictions, found 
at Part 747, Subpart D of Title 12, Code of Federal Regulations, to any 
request for a hearing. The insured credit union (or in the case where a 
waiver has been granted, the individual that submitted the application) 
may also waive a hearing and request that the NCUA Board determine the 
matter on the basis of written submissions.
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