PRIOR PRINTER'S NOS. 1649, 1904 PRINTER'S NO. 2053
No. 1258 Session of 2002
INTRODUCED BY HOLL, WAGNER, ERICKSON, COSTA, LEMMOND, MOWERY AND
THOMPSON, JANUARY 10, 2002
SENATOR THOMPSON, APPROPRIATIONS, RE-REPORTED AS AMENDED,
JUNE 10, 2002
AN ACT
1 Amending the act of May 15, 1933 (P.L.565, No.111), entitled "An
2 act relating to the powers and duties of the Department of
3 Banking and the Secretary of Banking in exercising
4 supervision over, and taking possession of and conducting or
5 liquidating the business and property of, corporations,
6 associations, and persons receiving deposits or otherwise
7 transacting a banking business, corporations acting as
8 fiduciaries, and building and loan associations; providing
9 for the payment of the expenses of the Department of Banking
10 by supervised corporations, associations, or persons, and
11 appropriating the Banking Department Fund; authorizing the
12 Department of Banking, under certain circumstances, to
13 examine corporations, associations, or persons affiliated, or
14 having business transactions with supervised corporations,
15 associations or persons; authorizing appeals to the Supreme
16 Court, and prescribing and limiting the powers and duties of
17 certain other courts and their prothonotaries, registers of
18 wills, recorders of deeds, and certain State departments,
19 commissions, and officers; authorizing certain local public
20 officers and State departments to collect fees for services
21 rendered under this act; providing penalties; and repealing
22 certain acts and parts of acts," making extensive changes to
23 modernize and update the law IN THE GENERAL AREAS OF <--
24 PRELIMINARY PROVISIONS; JURISDICTION AND MAINTENANCE OF THE
25 DEPARTMENT OF BANKING; RESTRICTIONS UPON DEPARTMENT AND
26 EMPLOYEES; EXAMINATIONS BY AND REPORTS TO THE DEPARTMENT;
27 ACTION BY DEPARTMENT AFTER OFFENSES BY, OR CHANGES IN,
28 CONDITION OF INSTITUTIONS; TAKING OF POSSESSION BY THE
29 SECRETARY OF BANKING AS RECEIVER AND SURRENDER OF POSSESSION;
30 RIGHTS, POWERS AND DUTIES OF SECRETARY AS RECEIVER; SECRETARY
31 IN POSSESSION OF TRUST DEPARTMENT; PROOF OF CLAIMS,
32 ACCOUNTING AND DISTRIBUTION; AND SPECIAL CRIMINAL HISTORY
1 RECORD INFORMATION PROVISIONS.
2 The General Assembly of the Commonwealth of Pennsylvania
3 hereby enacts as follows:
4 Section 1. Section 2A of the act of May 15, 1933 (P.L.565,
5 No.111), known as the Department of Banking Code, amended
6 October 5, 1978 (P.L.1133, No.266), is amended to read:
7 Section 2. Definitions.--A. The following terms shall be
8 construed in this act to have the following meanings, except in
9 those instances where the context clearly indicates otherwise:
10 "Department." The Department of Banking of this Commonwealth.
11 "Secretary." The Secretary of Banking of this Commonwealth,
12 or his duly authorized deputy or representative.
13 "Corporation." A corporation or a joint stock association,
14 organized under the laws of this Commonwealth, of the United
15 States, or of any other state, territory, foreign country, or
16 dependency.
17 "Person." An individual, or an unincorporated association,
18 including a partnership, a limited partnership, or any other
19 form of unincorporated enterprise owned by two or more
20 individuals.
21 "Licensee." A corporation, person or any other type of
22 business entity required to be licensed by, registered with or
23 partially exempt from being licensed by the Department of
24 Banking under any law of this Commonwealth ADMINISTERED BY THE <--
25 DEPARTMENT OF BANKING.
26 "Credit union." A Pennsylvania State-chartered credit union.
27 "Institution." A corporation or a person, as defined in this
28 section, or other type of business entity, including, but not
29 limited to, a mutual holding company, which is subject to the
30 supervision of the department. The term does not include credit
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1 unions or licensees unless specifically stated otherwise.
2 "Court." The court of common pleas of the county in which the
3 corporation or person has its principal or only place of
4 business in this Commonwealth; or, where an institution of which
5 the secretary is receiver is concerned, the particular court in
6 which the certificate of possession, as defined later in this
7 act, is filed; or the Commonwealth Court where specified in this
8 act.
9 "Prothonotary." The prothonotary of such court.
10 "Written." This includes printed, typewritten, engraved,
11 lithographed, photographed, photostated, telephotographed, <--
12 ELECTRONICALLY TRANSMITTED OR RENDERED BY OTHER MEANS APPROVED
13 BY THE DEPARTMENT OF BANKING.
14 "Public body of the United States." The Federal Deposit
15 Insurance Corporation [or the Federal Savings and Loan Insurance
16 Corporation,] or any other agency or instrumentality of the
17 United States which insures deposits of an institution.
18 * * *
19 Section 2. Sections 4, 6 and 8 of the act are amended to
20 read:
21 Section 4. Advertisements, Publications, or Notices in
22 Newspapers.--A. Unless expressly provided otherwise, any
23 advertisement, publication, or notice in a newspaper, required
24 by this act, shall be published once [a week for three
25 successive weeks] (1) in a newspaper of general circulation in
26 the county, as defined by [the Newspaper Advertising Act,
27 approved the sixteenth day of May, one thousand nine hundred
28 twenty-nine (Pamphlet Laws, one thousand seven hundred eighty-
29 four), its supplements and amendments,] 45 Pa.C.S. § 101
30 (relating to definitions) published in the city, borough, or
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1 township in which the principal place of business of the
2 institution is located; and (2) in first-class counties, also in
3 the legal newspaper, if any, published within the county, as
4 defined by [the Newspaper Advertising Act] 45 Pa.C.S. § 101.
5 If there is no newspaper of general circulation published in
6 the city, borough, or township, then the advertisement,
7 publication, or notice shall be inserted in a newspaper of
8 general circulation in the county, published at the county seat.
9 If no newspaper of general circulation in the county is
10 published at the county seat, then such advertisement,
11 publication, or notice shall be inserted in the newspaper of
12 general circulation published nearest to the city, borough, or
13 township in which the principal place of business of such
14 institution is located and within the county. If there is no
15 newspaper of general circulation published within the county,
16 then the advertisement or notice shall be inserted in the
17 newspaper of general circulation published nearest to such city,
18 borough, or township in an adjoining county.
19 B. Any proof of publication required by this act shall be in
20 accordance with the requirements set forth in the definition of
21 proof of publication contained in [the Newspaper Advertising
22 Act] 45 Pa.C.S. § 101.
23 Section 6. Fees.--Except as otherwise specifically provided
24 in this act, any prothonotary or recorder of deeds, and any
25 State department, board, commission, or officer, other than the
26 [Department of Banking] department or its employes, shall be
27 entitled to receive for services performed, as required by this
28 act, such fees as it lawfully charges for such similar services.
29 Section 8. Fees for Copies and Certifications by
30 Department.--A. The department may[, by general rule or
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1 regulation,] prescribe and charge reasonable fees for any copy
2 of a book, account, report, or other paper or record filed in
3 its offices or under its control, and for any certification
4 thereof, authorized or required by law.
5 B. The following apply to methods of payment:
6 (1) Whenever the department is authorized to impose or
7 accept payment for an application fee, examination fee,
8 assessment fee, fine, copy fee, certification fee or any other
9 fee or charge of any kind whatsoever, the department may receive <--
10 DESIGNATE RECEIPT OF such payment by any means, including by <--
11 wire transfer, credit card, debit card, or other similar device.
12 (2) The department may permit such payment to be made using
13 any medium, including telephone, facsimile transmission, wire
14 transmission, electronic mail, World Wide Web site, or any other
15 method related to any transmission mechanism including the
16 Internet.
17 (3) The department may enter into any agreement in order to
18 implement this subsection SECTION. <--
19 (4) The department may increase any fee, assessment, fine or <--
20 charge of any kind whatsoever, including any licensing fee
21 stated in section 603-A of the act of April 9, 1929 (P.L.177,
22 No.175), known as "The Administrative Code of 1929," in order
23 for the department to implement this subsection, without any
24 increased cost to the department.
25 Section 3. Section 15 of the act, amended October 5, 1978
26 (P.L.1133, No.266), is amended to read:
27 Section 15. Act Not Applicable to Credit Unions.--Except
28 where otherwise expressly provided, this act does not apply to,
29 and does not affect any act relating to, credit unions as
30 defined in [the act of September 20, 1961 (P.L.1548, No.658), as
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1 amended, known as the "Credit Union Act."] 17 Pa.C.S. (relating
2 to credit unions).
3 Section 4. Section 201 of the act, amended July 2, 1935
4 (P.L.525, No.202), is amended to read:
5 Section 201. Corporations and Persons Subject to Supervision
6 of Department.--The department shall have the power to
7 supervise--
8 A. (1) All corporations and persons which are authorized to
9 receive or which do receive in this Commonwealth money on
10 deposit or for safe-keeping, or which are authorized to engage
11 or which do engage in this Commonwealth in a banking business,
12 and all corporations which are authorized to act or which do act
13 in this Commonwealth as trustees, guardians, executors,
14 administrators, or in other fiduciary capacities, including, but
15 not limited to, banks, bank and trust companies, trust
16 companies, private banks, savings banks, [and mutual savings
17 funds;] savings associations, branches, agencies, or
18 representative offices of foreign banks in this Commonwealth,
19 mutual holding companies, and interstate banks, but not
20 including hotels or clubs which receive money from guests or
21 members for temporary safe-keeping, express, steamship, or
22 telegraph companies which receive money for transmission, and
23 attorneys at law, real estate agents, and attorneys in fact, who
24 are not engaged in the business of receiving moneys in this
25 Commonwealth for deposit or for transmission but receive and
26 transmit moneys only as an incident to their general business or
27 profession, brokers licensed under the laws of this
28 Commonwealth, holding membership in a lawfully constituted
29 brokerage exchange, who do and have authority to do only such
30 banking as is incidental to their brokerage business;
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1 (2) [All building and loan associations authorized to
2 transact or transacting business in this Commonwealth;
3 (3)] All national banking associations, incorporated under
4 the laws of the United States and located within this
5 Commonwealth, which are authorized to act or which do act in
6 this Commonwealth as trustees, guardians, executors,
7 administrators, or in any other fiduciary capacities, to the
8 extent to which supervision by State authorities is or may be
9 permitted under the laws of the United States.
10 [However, when] B. If any [corporation] institution subject
11 to the supervision of the [Department of Banking shall also
12 engage] department, including any credit union, also engages in
13 a title insurance business[, a mortgage guarantee business,] or <--
14 any other business subject to the supervision of the Insurance
15 Department, then such [branch of its] business shall not be
16 subject to the supervision or examination authority of the
17 [Department of Banking] department except to the extent
18 necessary to determine the safety and soundness of the
19 institution.
20 Section 5. Section 202 of the act, amended July 3, 1957
21 (P.L.463, No.259), is amended to read:
22 Section 202. General Scope of Supervision; Exercise of
23 Discretion.--A. In addition to the powers and duties provided
24 for in this act, the department shall exercise any power and
25 fulfill any duty imposed upon it by any other law of this
26 Commonwealth. Except where otherwise specifically provided, the
27 department shall enforce and administer all laws of this
28 Commonwealth which relate to any institution, and shall exercise
29 such general supervision over institutions as will afford the
30 greatest possible safety to depositors, other creditors, and
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1 shareholders thereof, [insure] ensure the safe and sound conduct
2 of the business of such institutions, conserve their assets,
3 maintain the public confidence in such institutions and protect
4 the public interest.
5 B. Whenever under this act, discretion is vested in the
6 department or any board thereof as to whether, or the manner in
7 which, to exercise a power or fulfill a duty, the department [or
8 board] shall, after such examination or investigation as it
9 shall deem appropriate under the circumstances, exercise such
10 discretion in such a manner as it shall deem necessary to
11 [insure] ensure the safe and sound conduct of the business of
12 any institution subject to its supervision, conserve its assets,
13 maintain public confidence in the business of such institutions
14 and protect the public interest and the interest of depositors,
15 other creditors and shareholders thereof.
16 C. The department may promulgate such rules and regulations
17 as it deems necessary and appropriate to administer this act. <--
18 D. The department may issue statements of policy and
19 interpretive letters as it deems necessary and appropriate to <--
20 administer this act or any other statute within the department's
21 jurisdiction to administer or enforce.
22 Section 6. Section 204 of the act is amended to read:
23 Section 204. Assessment of Expenses of Department upon
24 Institutions.--A. All the expenses of the department, including
25 those enumerated in this act or otherwise authorized by law,
26 shall be charged to and paid by all institutions, including
27 licensees, in such equitable amounts, at such times, and in such
28 manner as the department shall, by general rule or regulation,
29 prescribe. The expenses incurred by the department in connection
30 with any examination or investigation, whether regular or
20020S1258B2053 - 8 -
1 special, including a proportionate part of the salary of any
2 examiner or other employe of the department [engaged in such
3 examination or investigation, and all counsel assigned by the
4 Department of Justice at the request of the Department of
5 Banking to an examination or investigation,] or third-party
6 expenses, including attorneys retained by the department, may be
7 assessed by the [Department of Banking] department upon the
8 particular institution examined or investigated.
9 B. The department shall give written notice to each
10 institution, including licensees, of the amount lawfully charged
11 against it under the provisions of this act. The institution
12 shall pay the amount of such assessment to the department within
13 [thirty] sixty days after [such] the invoice date on the notice.
14 If payment is not made by any institution or licensee within
15 [such thirty-day] the sixty-day period, the department[, through
16 the Department of Justice,] may assess IMPOSE IN ADDITION TO THE <--
17 MONEY ASSESSED a maximum penalty fee of one hundred fifty
18 dollars ($150.00) for that sixty-day period and each successive
19 thirty-day period of delinquency. In addition, the department,
20 through the Office of Attorney General or its authorized
21 designee may institute an appropriate action at law for the
22 amount lawfully assessed against such institution, together with
23 any additional costs incurred by the Department of Banking or
24 the [Department of Justice] Office of Attorney General or its
25 authorized designee by virtue of such failure to pay.
26 Section 7. Section 302 of the act, amended July 6, 1984
27 (P.L.634, No.129), is amended to read:
28 Section 302. Disclosure of Information Forbidden; Penalty;
29 Exceptions.--A. (1) [Neither] This section applies to matters
30 relating to institutions, credit unions and licensees. (2)
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1 Neither the secretary, nor any deputy, examiner, clerk, or other
2 employe of the department, shall publish or divulge to anyone
3 any information contained in or ascertained from any examination
4 or investigation made by the department, or any letter, report,
5 or statement sent to the department, or any other paper or
6 document in the custody of the department, except when the
7 publication or divulgement of such information is made by the
8 department pursuant to the provisions of this act [or of any
9 other law of this Commonwealth], or when the production of such
10 information is required by subpoena or other legal process of a
11 court of competent jurisdiction, or when it is used in deciding
12 whether to prosecute or in prosecutions or other court actions
13 instituted by or on behalf of or at the suggestion REQUEST of <--
14 the department, or when it pertains to referring for <--
15 investigation and possible prosecution a criminal or civil <--
16 matter or administrative matter to any Federal, State or local
17 law enforcement or any Federal or State banking regulatory <--
18 agencies FINANCIAL REGULATORY AGENCY, INCLUDING BANKING, <--
19 INSURANCE AND SECURITIES REGULATORY AGENCIES, or when the
20 department provides information to any Federal or State banking, <--
21 insurance or securities regulatory agencies FINANCIAL REGULATORY <--
22 AGENCY, INCLUDING BANKING, INSURANCE AND SECURITIES REGULATORY
23 AGENCIES, when the information pertains to an enforcement
24 concern including a consumer complaint or a final order issued <--
25 by the department,. THE INFORMATION SHALL BE PROVIDED as may be <--
26 necessary or appropriate, as determined in the discretion of the <--
27 secretary. (3) The service of a subpoena upon the secretary,
28 deputy, examiner, clerk or other employe of the department shall
29 not be construed as requiring such person to disclose any
30 information, but such person shall have all the rights and
20020S1258B2053 - 10 -
1 privileges as any other subpoenaed party to object to production
2 of information on the same basis as provided in the Rules of
3 Civil Procedure, statute [law], regulation or common law. The
4 department may condition the release of such information on an
5 order from a court of competent jurisdiction protecting the
6 information from general disclosure to the public. The
7 department retains and may exercise any and all remedies at law
8 and in equity to quash a subpoena. (4) Any privileges available
9 to Federal financial institution regulators under Federal
10 statute, regulation or common law shall be available to the
11 department. (5) The department may provide to any person,
12 Federal, State or local government agency the following
13 information regarding licensees, to the extent that the
14 department has such information in its possession: whether and
15 for what time period a person's license is current, suspended or
16 revoked pursuant to a final order issued by the department;
17 whether and for what time period an individual is or has been
18 suspended or prohibited from working for or otherwise
19 participating as a licensee pursuant to a final order issued by
20 the department. (6) The department may condition the release of
21 subpoenaed information on an order from a court of competent
22 jurisdiction protecting the information from general disclosure
23 to the public. (7) If the department is subpoenaed for A report <--
24 of examination information, the department may refuse to release
25 the requested information for reasons of safety and soundness <--
26 or, AS THE SECRETARY DEEMS NECESSARY AND APPROPRIATE UNDER THE <--
27 CIRCUMSTANCES, FOR THE FOLLOWING REASONS: SAFETY AND SOUNDNESS;
28 if the department requests and is denied a protective order; or <--
29 if the department requests and is denied redaction of the report
30 of examination to protect the privacy of persons not involved in
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1 the litigation., as the secretary deems necessary and <--
2 appropriate under the circumstances.
3 B. A violation of the provisions of this section by the
4 secretary, or by any deputy, examiner, clerk, or other employe
5 of the department, shall be sufficient ground for his removal
6 from office. In addition the secretary, deputy, examiner, clerk,
7 or other employe [committing] who willfully or knowingly commits
8 such violation shall be deemed guilty of a misdemeanor, and
9 shall, upon conviction thereof, be subject to imprisonment for a
10 period not exceeding one year, or a fine not exceeding one
11 thousand dollars, or both.
12 Section 8. Section 303 of the act, amended or added October
13 5, 1978 (P.L.113, No.266), and July 6, 1984 (P.L.634, No.129),
14 is amended to read:
15 Section 303. Conflicts of Interest; Penalty.--A. For
16 purposes of this section, "institution" shall [mean: a
17 Pennsylvania State-chartered or licensed bank, mutual savings
18 bank, bank and trust company, trust company, private bank,
19 savings and loan association, consumer discount company, motor
20 vehicle sales finance company, licensed self-financing
21 installment seller of motor vehicles, licensed collector-
22 repossessor, money transmitter, pawnbroker] include a licensee
23 or credit union. THE TERM INCLUDES CREDIT UNIONS UNLESS <--
24 SPECIFICALLY STATED OTHERWISE.
25 B. Except as provided in subsection E, neither the
26 [Secretary of Banking] secretary, nor any officer or employe of
27 the department, nor any deputy receiver or employe of the
28 [Secretary of Banking] secretary, as receiver, shall receive any
29 sum of money or any property as a gift or loan or otherwise,
30 directly or indirectly from any institution or from any officer,
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1 director or employe thereof. This subsection shall not apply to
2 loans to employes of the [Department of Banking] department who
3 function in a clerical or nondecision making capacity with
4 regard to institutions, including, but not limited to, clerks,
5 typists and stenographers.
6 C. Neither the [Secretary of Banking] secretary, nor any
7 officer or employe of the department, nor any deputy receiver or
8 employe of the [Secretary of Banking] secretary as receiver,
9 shall hold any office or position in, have any direct or
10 indirect pecuniary interest in, or direct or indirectly own
11 shares or securities issued by an institution, except that the
12 [Secretary of Banking] secretary or any department employe or
13 officer may continue to own shares or securities issued by an
14 institution OTHER THAN A CREDIT UNION which are owned by [him] <--
15 the secretary on the date of his appointment, or by OTHER <--
16 department employes or officers on the date of commencement of <--
17 employment with the department, and all shares or securities
18 distributed by the institution and received by [him] any of them
19 on account of the shares or securities so owned subject to the
20 penalty provisions of this section. All persons DEPARTMENT <--
21 EMPLOYES subject to this subsection shall provide the department
22 with written notice of his or her ownership of any such shares
23 or securities prior to or upon his or her commencement of
24 employment with the department. Notwithstanding the foregoing,
25 the department may impose terms on the employe or officer,
26 including, but not necessarily limited to, requiring the employe
27 or officer to place into a blind trust, sell or divest of such
28 SHARES OR securities as a condition of obtaining or continuing <--
29 employment with the department, provided such sale or divestment
30 is deemed to be reasonably necessary under the circumstances, or
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1 to recuse himself or herself from being involved in any
2 department decision that pertains solely to the institution of
3 which he or she owns shares or securities.
4 D. In the event of such ownership of shares or securities by
5 the [Secretary of Banking] secretary, he shall disclose the
6 ownership, amount and date of acquisition of such shares or
7 securities in writing to the Secretary of the Commonwealth
8 immediately after his appointment and shall not during his term
9 of office participate in any decision or take any action
10 concerning an institution in which he owns such shares or
11 securities other than actions or decisions generally applicable
12 to institutions or classes of institutions. In the event of
13 disqualification of the [Secretary of Banking] secretary from
14 participation in any decision or action for such reason, all
15 authority vested in him OR HER by law shall, for the purpose of <--
16 such decision or action, be exercised by the [senior deputy
17 Secretary of Banking] secretary APPROPRIATE DEPUTY SECRETARY, IN <--
18 ACCORDANCE WITH THEIR JURISDICTIONAL RESPONSIBILITIES.
19 E. The prohibitions of subsections B and C shall not apply
20 to:
21 (1) A first lien mortgage loan or home equity loan upon the <--
22 home of the [Secretary of Banking] secretary, an officer or <--
23 employe of the department, a deputy receiver or an employe of
24 the [Secretary of Banking] secretary as receiver, or a motor <--
25 vehicle loan, in any and all such mortgage loans or motor
26 vehicle loans where such loan is granted upon the same terms and
27 in the same manner as provided by law for mortgage loans] or <--
28 SECRETARY OR OTHER EMPLOYE OF THE DEPARTMENT, OR AN INDIRECT <--
29 MOTOR VEHICLE LOAN ORIGINATED UNDER THE ACT OF JUNE 28, 1947
30 (P.L.1110, NO.476), KNOWN AS THE "MOTOR VEHICLE SALES FINANCE
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1 ACT," IN ANY AND ALL SUCH MORTGAGE LOANS OR INDIRECT MOTOR
2 VEHICLE LOANS WHICH MAY BE ORIGINATED BY AN INSTITUTION OTHER
3 THAN A CREDIT UNION, WHERE SUCH LOAN IS GRANTED UPON THE SAME
4 TERMS AND IN THE SAME MANNER AS PROVIDED BY LAW FOR MORTGAGE
5 LOANS OR INDIRECT motor vehicle loans granted by such
6 institutions. All persons subject to this subsection shall
7 provide the department with written notice of any loan
8 referenced in this subsection and its terms within thirty days
9 of receiving the loan. Notwithstanding the foregoing, the
10 department may impose terms on the employe or officer,
11 including, but not necessarily limited to, requiring such person
12 to recuse himself or herself from being involved in any
13 department decision that pertains solely to the institution from
14 which he or she received a loan.
15 (2) A deposit account with an institution OTHER THAN A <--
16 CREDIT UNION, provided that such account shall not be
17 intentionally overdrawn[; except that an examiner assigned to
18 the examination of savings associations shall not have a savings
19 account in any State-chartered savings association.] and the
20 secretary, department employe or officer does not participate in
21 any vote as a shareholder or member of such institution.
22 F. A violation of the prohibitions of this section by the
23 [Secretary of Banking] secretary, an officer or employe of the
24 department, a deputy receiver or an employe of the [Secretary of
25 Banking] secretary as receiver shall constitute sufficient
26 ground for removal from office. In addition, any such person who
27 willfully or knowingly commits such violation shall be guilty of
28 a misdemeanor and shall, upon conviction thereof, be subject to
29 imprisonment for a period not exceeding one year, or a fine not
30 exceeding one thousand dollars ($1,000.00), or both; and shall
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1 be subject to a further fine equal to the amount of money or
2 value of the property which such individual has directly or
3 indirectly received in violation of this section.
4 Section 9. Section 401 of the act, amended July 6, 1984
5 (P.L.634, No.129), is amended to read:
6 Section 401. Examinations of Institutions.--[A. The
7 department shall examine all institutions thoroughly at least
8 once every two calendar years, and more frequently if it deems
9 such action necessary or advisable to safeguard the interests of
10 depositors, other creditors, or shareholders of such
11 institutions. This examination shall include a complete review
12 of the property, assets, and resources of the institution; the
13 loans and discounts made by it and the collateral deposited with
14 it as security for such loans; the mode of conducting its
15 affairs; the investment of its funds; the interest taken in its
16 affairs by its officers, directors, and employes if a
17 corporation, or by its employes and the partners or individuals
18 owning it if a person; its compliance with the law, and with the
19 terms of its charter or license if it has either; and any other
20 matters, bearing any relation to its condition, which the
21 department shall prescribe.
22 The department may also make special examinations or
23 investigations of any institution at any time the department
24 deems such action necessary or advisable, to protect depositors,
25 other creditors or shareholders thereof.]
26 B. The department, when requested in writing by [a person
27 subject to its supervision, or by the board of directors or the
28 holders of a majority of the shares of capital stock of a
29 corporation subject to its supervision, shall] an owner of all
30 or part of an institution, credit union or licensee, including a
20020S1258B2053 - 16 -
1 shareholder, partner or member, or a director or officer of an
2 institution, credit union or licensee subject to its
3 supervision, may at the department's discretion examine or
4 investigate the affairs and condition of such institution.
5 However, this provision shall not be construed to mean that such
6 person, directors, or shareholders shall have any greater right
7 to require the department to disclose to them the results of any
8 such examination or investigation than they have in the case of
9 any regular examination or investigation.
10 C. The department, upon the receipt of notice from the
11 Insurance Commissioner that he has become receiver of a
12 corporation or person, any branch of the business of which is
13 subject to the supervision of the [Department of Banking]
14 department, [shall] may examine or investigate the affairs and
15 condition of such institution in order to determine whether any
16 action should be taken by the [Department of Banking]
17 department, pursuant to the provisions of this act.
18 D. Examinations or investigations shall be made by the
19 secretary, or by qualified examiners or other qualified employes
20 designated for that purpose by the secretary or by his duly
21 authorized deputy, and empowered, in writing, by the department
22 to make examinations or investigations of institutions,
23 including credit unions and licensees who may be assessed
24 charges to cover the department's costs of such examinations and
25 investigations.
26 E. In the case of an institution which is a member of a
27 Federal Reserve Bank or any other institution including a credit
28 union, the department may, in its discretion, accept the
29 examinations or reports made [under the Federal Reserve Act]
30 pursuant to the requirements of applicable Federal law in lieu
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1 of those required by this act[.] or any other act of this
2 Commonwealth. The department may accept Federal application
3 forms from applicants for charter or other approvals or
4 nonobjections of the department under the statutes administered
5 by the department in lieu of department forms when the
6 department deems such acceptance appropriate.
7 F. In connection with any examination or investigation
8 authorized by this act or any other law, the department shall
9 have, in addition to the authority provided by any other law,
10 power to issue subpoenas requiring the attendance of, or the
11 production of pertinent books [and papers by], papers,
12 electronic data or information of any kind which is in any form,
13 by, the officers, directors, agents, employes, or members,
14 respectively, of any corporation or person, including a credit
15 union or licensee, which the department is authorized, under the
16 provisions of this act or any other law of this Commonwealth, to
17 examine. The department shall have power to issue subpoenas to
18 any other person or entity of any kind whatsoever, provided that
19 the information from such person or entity is necessary for the
20 enforcement of this act or any other law within the jurisdiction
21 of the department. The department shall also have the power to
22 question such witnesses under oath or affirmation, and to
23 examine such books and papers.
24 Any witness who refuses to obey a subpoena issued under this
25 section, or who refuses to be sworn or affirmed, or to testify,
26 or who is guilty of any contempt after summons to appear, may be
27 punished as for contempt of court, and, for this purpose, an
28 application may be made to Commonwealth Court or any court of
29 common pleas within whose territorial jurisdiction the offense
30 was committed, for which purpose such court is hereby given
20020S1258B2053 - 18 -
1 jurisdiction.
2 Section 10. Section 402 of the act, amended July 2, 1935
3 (P.L.525, No.202), is amended to read:
4 Section 402. Examination of Corporations or Persons
5 Affiliated with Institutions.--[A. The Department of Banking]
6 The department shall have the power to supervise, regulate,
7 examine, limit, or prohibit the activities of corporations or
8 persons affiliated with institutions, including credit unions,
9 to the same extent as such activities of corporations or persons
10 affiliated with national banking associations, Federal savings
11 associations or Federal credit unions, or with members of a
12 Federal Reserve Bank, are, or shall be, supervised, regulated,
13 examined, limited, or prohibited by general law, [or] by Federal
14 statutes or by regulations issued by any Federal authority
15 pursuant to law, but in no event shall the department's
16 examination and enforcement authority over affiliates be less
17 than is permissible for banking institutions under the act of
18 November 30, 1965 (P.L.847, No.356), known as the "Banking Code
19 of 1965," savings associations under the act of December 14,
20 1967 (P.L.746, No.345), known as the "Savings Association Code
21 of 1967," or credit unions under 17 Pa.C.S. (relating to credit
22 unions).
23 [B. For the purpose of determining the condition of, and
24 obtaining full information about, an institution, the department
25 may examine and investigate the property, assets, books, papers,
26 and affairs of any corporation or person affiliated with such
27 institution. A corporation or person shall be deemed to be
28 affiliated with an institution for the purposes of this section
29 if--
30 (1) It is owned directly or indirectly by such institution;
20020S1258B2053 - 19 -
1 or
2 (2) It owns directly or indirectly such institution; or
3 (3) It is owned directly or indirectly by the same person or
4 corporation which owns directly or indirectly such institution;
5 or
6 (4) The election of a majority of its board of directors is
7 controlled directly or indirectly by any instrumentality,
8 agency, or arrangement that controls directly or indirectly the
9 election of a majority of the board of directors of such
10 institution; or
11 (5) A majority of its directors are also directors of such
12 institution; or
13 (6) Members of its board of directors constitute a majority
14 of the board of directors of such institution; or
15 (7) Substantially all of its principal executive officers
16 constitute a majority of the board of directors of any such
17 institution, or comprise all or substantially all of the
18 executive officers of any such institution; or
19 (8) Its board of directors is composed of executive officers
20 of any such institution; or
21 (9) It dominates or controls, in whole or in part, the
22 business or policy of such institution, either by contract or
23 otherwise.
24 Provided, however, that the department shall not have power
25 to examine any corporation or person as an affiliated
26 corporation or person under this section, unless--(1) it either
27 directly or indirectly owns or is owned by an institution; or
28 (2) the institution within the preceding two-year period had
29 investments in, or outstanding loans secured, in whole or in
30 part, by shares of stock or securities of, such corporation or
20020S1258B2053 - 20 -
1 person, which have no readily ascertainable market value.
2 For the purposes of this section, the ownership of more than
3 fifty per centum of the total number of shares, voted upon at
4 the last meeting of the shareholders of a corporation for the
5 election of its directors, shall be deemed to be ownership of
6 such corporation.
7 Shares of stock, held in the name of a nominee of any
8 corporation, for the benefit of such corporation, shall be
9 deemed to be shares owned or controlled by the corporation.]
10 Section 11. Section 403 of the act, amended July 29, 1941
11 (P.L.583, No.247) and August 14, 1963 (P.L.863, No.44), is
12 amended to read:
13 Section 403. Reports to Department; Publication;
14 Penalties.--A. Every institution[, except building and loan
15 associations, shall send to the department at least twice each
16 year, and more frequently if the department shall so order, a
17 complete report of its condition, exhibiting in detail, under
18 appropriate headings, the resources and liabilities of the
19 institution, and shall also send to the department at least once
20 each year, and more frequently if the department shall so order,
21 a complete report of its earnings setting forth in detail all
22 items of income and expense. Every building and loan association
23 shall send such reports to the department once each year, unless
24 the department orders more frequent reports.] shall maintain
25 copies of the complete reports of its condition in such form and
26 as of such dates as may be required by the department, and
27 publish copies or compilations thereof to the extent required by
28 Federal law.
29 The department may also require special reports on the
30 condition of, or any particular facts concerning, any
20020S1258B2053 - 21 -
1 institution at any time the department deems it necessary or
2 advisable for the protection of the depositors, other creditors,
3 or shareholders thereof. The manner of delivery of such reports
4 or special reports may include such electronic or other type of
5 technologically advanced delivery as may be permitted by the
6 department.
7 B. The form of all reports, the information to be contained
8 in them, and the date on which they shall be due shall be
9 prescribed by the department. The reports shall be verified by
10 the oath or affirmation of the president, cashier, secretary,
11 treasurer, or other managing officer of a corporation, or by one
12 of the firm in the case of a partnership or other unincorporated
13 association, or by the banker if an individual or in such other
14 manner as may be provided by the department. In the case of a
15 corporation, the report shall also be attested as correct by the
16 signatures of at least three of its directors or trustees or in
17 such other manner as may be provided by the department.
18 [C. Every institution, except building and loan
19 associations, shall publish during each year, in a newspaper or
20 newspapers in the manner provided by this act, abstract
21 summaries of any two of its reports of condition designated for
22 this purpose by the department, and shall send proof of such
23 publication to the department. Such publication shall be
24 required only once in a newspaper of general circulation, and,
25 in first class counties, once in a legal newspaper. If there is
26 no newspaper of general circulation published at the city,
27 borough or township in which the principal place of business of
28 such institution is located, such publication may be inserted in
29 a newspaper of general circulation published nearest to such
30 city, borough or township, and within the same county. Building
20020S1258B2053 - 22 -
1 and loan associations shall not be required to publish any
2 abstract summaries of reports.
3 D. The department shall furnish to anyone requesting it,
4 upon payment of a reasonable fee to be fixed by the department,
5 an abstract summary of any report then in its possession of any
6 building and loan association subject to its supervision,
7 showing the assets, liabilities, receipts, and disbursements of
8 such building and loan association.]
9 E. (1) Any institution which fails to make or publish any
10 report, or to furnish any proof of publication, in accordance
11 with the provisions of this section, shall pay to the department
12 a penalty of one hundred dollars for each day after the time
13 fixed by the department for filing such report, making such
14 publication, or furnishing such proof of publication, but the
15 department may, in its discretion, relieve any institution from
16 the payment of such penalty, in whole or in part, if good cause
17 be shown to it for the failure of such institution to file or
18 publish the report or to furnish proof of publication thereof.
19 [If an institution] (2) Notwithstanding any licensing statute
20 to the contrary, if a licensee licensed under any respective
21 licensing statute within the department's jurisdiction to
22 enforce fails to notify the department in writing received by
23 the department within ten days of relocating the licensee's
24 licensed office that the licensee has relocated such licensed
25 office to a location stated by the licensee, then the licensee
26 shall pay to the department a fine up to a maximum of two
27 thousand dollars ($2,000.00) per violation for failing to timely
28 notify the department of such change of licensed office
29 location. For the purposes of this subsection, the term
30 "licensing statute" means any State law pursuant to which the
20020S1258B2053 - 23 -
1 department may grant a license.
2 (3) If an institution or licensee fails to pay a penalty
3 from which it has not been relieved, the department may, through
4 the [Department of Justice] Office of Attorney General or its
5 authorized designee, maintain an action at law to recover it,
6 together with any additional costs incurred by the department or
7 the Office of Attorney General or its authorized designee.
8 Section 12. Section 404 of the act is amended to read:
9 Section 404. Disclosure of Information.--A. The department
10 may divulge to an institution, or to any officer, or any
11 director [or trustee], trustee or attorney thereof, any
12 information contained in or ascertained from an examination or
13 investigation of such institution made by the department.
14 Reports of examination issued by the department remain the sole
15 property of the department. A report of examination issued by
16 the department to an institution is strictly confidential. Any
17 copy of a report of examination is and shall remain the property
18 of the department and is furnished to the institution, subject
19 to the express condition that it shall be returned to the
20 department immediately upon a request from the secretary. If a
21 subpoena or other legal process is received calling for
22 production of such a report of examination, or any portion
23 thereof, the department shall be notified immediately by the
24 institution. Under no circumstances shall the institution or any
25 of its directors, trustees, officers, or employes make copies of
26 the report of examination or any portion thereof available to
27 any organization or person who is not officially connected with
28 such institution as a director, trustee, officer, attorney or
29 employe without the prior written approval or nonobjection of
30 the department. Notwithstanding the foregoing, an institution
20020S1258B2053 - 24 -
1 may disclose the existence and contents of an order or other
2 enforcement action issued to it by the department to the extent
3 required by applicable Federal securities law or State
4 securities law.
5 B. The department, on the written request or consent of any
6 institution, authorized in the case of corporations by
7 [resolution of its board of directors, or its board of trustees,
8 as the case may be] the president or senior executive officer of
9 the institution, may discuss with any person or persons selected
10 by the department, or selected by such institution and approved
11 by the department, any matters relating to the financial
12 condition of such institution.
13 C. The department, by itself and in its reasonable
14 discretion for regulatory or enforcement purposes, or on the
15 written request or consent of any institution, authorized in the
16 case of corporations by [resolution of its board of directors,
17 or its board of trustees, as the case may be] the president or
18 senior executive officer of the institution, may furnish to the
19 Federal Reserve Board, to the Federal Reserve Bank of the
20 district in which the place of business of any institution is
21 located, or to any agency or instrumentality of the United
22 States government, or of the Commonwealth of Pennsylvania, or
23 any other supervisor of financial institutions in another state,
24 any information in its possession relating to such institution.
25 D. The department may, from time to time, with the approval
26 of the Governor, cause to be published a summary of the
27 condition of institutions under its supervision, containing such
28 information in relation to such institutions as in its judgment
29 is desirable.
30 E. [This section shall not] Neither this section nor any
20020S1258B2053 - 25 -
1 other statute or regulation shall be construed to require the
2 department to publish or divulge any such information under this
3 section, when in the opinion of the department such publication
4 or divulgement is undesirable.
5 F. The NOTWITHSTANDING ANY OF THE FOREGOING PROVISIONS OF <--
6 THIS SECTION, THE department may enter into such cooperative,
7 coordinating and information-sharing agreements with any other
8 Federal and State banking, insurance or securities regulatory
9 agencies or do so by, with and through any trade association of
10 such agencies, with respect to any examination, supervision,
11 enforcement, criminal referral, consumer complaints or any other
12 regulatory matters related to institutions, including credit
13 unions, trust companies and licensees, as may be reasonably
14 necessary or appropriate, as determined in the discretion of the
15 secretary. The department may enter into joint examinations or
16 joint enforcement actions with any other Federal or state
17 banking regulatory agency, or any insurance or securities
18 regulatory agency having concurrent jurisdiction over any person
19 or entity lawfully or unlawfully engaging in the business of a
20 depository institution, trust company, credit union or licensee,
21 as may be reasonably necessary and appropriate in the discretion
22 of the secretary.
23 G. This section also applies to credit unions and licensees.
24 Section 13. The act is amended by adding a section to read:
25 Section 405. Criminal History Record Information.--A. For
26 the purposes of this section, a "covered individual" has the
27 following meanings:
28 (1) Any individual or owner of a sole proprietorship that
29 initially applies to the department for any kind of a covered
30 license under a licensing statute or any individual that
20020S1258B2053 - 26 -
1 controls such an individual or sole proprietorship, or any
2 branch office manager or other employe of such an individual or
3 sole proprietorship who will engage in activity that will be
4 subject to a licensing statute, provided that such activity is
5 not solely activity known as back office FUNCTIONS or clerical <--
6 work.
7 (2) Any individual who owns thirty per centum or more of any
8 type or class of stock or other ownership interest in a business
9 corporation that initially applies to the department for a
10 covered license under a licensing statute, or, with respect to a <--
11 trust company, ten per centum of such stock or other ownership
12 interest, or any chief executive officer, president, chief
13 financial officer, chief operating officer, corporate secretary,
14 corporate treasurer, or other senior level executive of such
15 business corporation, or any junior level executive of such
16 business corporation that participates in the conduct of such
17 business corporation's affairs that are related to such business
18 corporation's activity in Pennsylvania, or any branch office
19 manager or other employe of such business corporation who will
20 engage in activity that will be subject to a licensing statute,
21 provided that such activity is not solely activity known as back <--
22 office FUNCTIONS or clerical work. <--
23 (3) Any individual with any kind of ownership or membership
24 interest in a noncorporate entity that initially applies to the
25 department for a covered license under a licensing statute, or
26 any officer of any business corporation or noncorporate entity
27 with any kind of ownership or membership interest in another
28 noncorporate entity, or any branch office manager or other
29 employe of a noncorporate entity that applies to the department
30 for a license under a licensing statute who will engage in
20020S1258B2053 - 27 -
1 activity that will be subject to a licensing statute, provided
2 that such activity is not solely activity known as back office <--
3 FUNCTIONS or clerical work. <--
4 B. For the purposes of this section, a "covered license"
5 means a mortgage broker license or limited mortgage broker
6 license under the act of December 22, 1989 (P.L.687, No.90),
7 known as the "Mortgage Bankers and Brokers and Consumer Equity
8 Protection Act," a secondary mortgage broker license under the
9 act of December 12, 1980 (P.L.1179, No.219), known as the
10 "Secondary Mortgage Loan Act," a consumer discount company
11 license used only in the capacity of a broker that is not
12 originating loans under the act of April 8, 1937 (P.L.262,
13 No.66), known as "The Consumer Discount Company Act," a money
14 transmitter license under the act of September 2, 1965 (P.L.490,
15 No.249), referred to as the Money Transmission Business
16 Licensing Law, a check casher license under the act of February
17 18, 1998 (P.L.146, No.22), known as the "Check Casher Licensing
18 Act," a pawnbroker license under the act of April 6, 1937
19 (P.L.200, No.51), known as the "Pawnbrokers License Act," a
20 collector-repossessor license OR INSTALLMENT SELLER LICENSE <--
21 under the act of June 28, 1947 (P.L.1110, No.476), known as the
22 "Motor Vehicle Sales Finance Act," A LICENSE THE DEPARTMENT MAY <--
23 GRANT PURSUANT TO ANY OTHER LICENSING STATUTE, or the articles
24 of incorporation of a trust company under the act of November
25 30, 1965 (P.L.847, No.356), known as the "Banking Code of 1965."
26 C. For the purposes of this section "national criminal
27 history record information" means criminal history records
28 maintained by the Federal Bureau of Investigation Criminal
29 Justice Information Services Division consistent with the act of
30 October 25, 1972 (Public Law 92-544, 86 Stat. 1115).
20020S1258B2053 - 28 -
1 D. For the purposes of this section, "non-corporate entity"
2 means an association, joint venture or joint stock company,
3 partnership, limited partnership, limited partnership
4 association, nonprofit corporation, professional corporation or
5 any other group of individuals, however organized.
6 E. For the purposes of this section, "licensing statute"
7 means the "Mortgage Bankers and Brokers and Consumer Equity
8 Protection Act," the "Secondary Mortgage Loan Act," the
9 "Consumer Discount Company Act," the "Motor Vehicle Sales
10 Finance Act," the Money Transmission Business Licensing Law, the
11 "Check Casher Licensing Act," the "Pawnbrokers License Act," any
12 other statute pursuant to which the department may grant a
13 license or the "Banking Code of 1965" only insofar as it relates
14 to the business of a trust company.
15 F. (1) In connection with any initial application submitted
16 to the department for a covered license under a licensing <--
17 statute, a covered individual shall submit his or her
18 fingerprints to the department or to such other international,
19 Federal, State or local government agency, or designee thereof,
20 selected by the department, including the Pennsylvania State
21 Police and the Federal Bureau of Investigation, in order for the
22 department to receive criminal history record information from
23 any international, Federal, State or local government agency, or
24 designee thereof, including criminal history record information
25 from the Pennsylvania State Police or national criminal history
26 record information from the Federal Bureau of Investigation. The
27 department shall send or receive such criminal history record
28 information or national criminal history record information to
29 or from the Pennsylvania State Police, the Federal Bureau of
30 Investigation or any other international, Federal, State or
20020S1258B2053 - 29 -
1 local government agency, or designee thereof, in a manner that
2 is satisfactory to the department. National criminal history
3 record information received by the department shall be handled
4 or maintained in accordance with Federal Bureau of Investigation
5 policy.
6 (2) Any individual who was not a covered individual at the
7 time an application for a covered license was submitted to the
8 department, but who later occupies a position that would have
9 made that person a covered individual at the time an application
10 for a covered license was submitted to the department, shall
11 comply with all of the requirements of paragraph (1) at the time
12 an application to renew an existing covered license is submitted
13 to the department, or, with regard to a trust company, at any
14 time designated by the department.
15 G. During the initial or renewal license application
16 process, the department may deem the license application as
17 incomplete and therefore not commencing the review period stated
18 in the respective licensing statutes if the department has not
19 received evidence from the applicant that national criminal
20 history record information and other criminal history record
21 information required under this section has been requested from
22 the Federal Bureau of Investigation for national criminal
23 history record information, or the Pennsylvania State Police or
24 any other international, Federal, State or local governmental
25 agency or designee thereof for criminal history record
26 information.
27 H. Notwithstanding any other law to the contrary, the
28 department may suspend its processing and consideration of any
29 initial or renewal license application submitted to the
30 department under a licensing statute unless and until the
20020S1258B2053 - 30 -
1 department receives any and all national criminal history record
2 information from the Federal Bureau of Investigation, criminal
3 history record information from the Pennsylvania State Police,
4 or criminal history record information from any other
5 international, Federal, State or local government agency
6 responsible for such recordkeeping. If the department does not
7 receive the criminal history record information, including
8 national criminal history record information, required under
9 this section, then the department may deny the initial or
10 renewal license application.
11 I. Notwithstanding subsections G and H THE FOREGOING <--
12 PROVISIONS OF THIS SECTION, the department's approval or denial
13 of a covered license application under a licensing statute
14 without the department receiving criminal history record
15 information or national criminal history record information
16 regarding covered individuals as required under this section
17 shall not prohibit the department from taking any action
18 authorized by law including suspension or revocation of such a
19 license. The IN ADDITION, THE department may deny a covered <--
20 license application, or suspend or revoke a covered license
21 based on the contents of criminal history record information, or
22 the untimely receipt or failure to provide criminal history
23 record information, OR MISLEADING OR INACCURATE INFORMATION <--
24 PROVIDED BY THE APPLICANT OR COVERED INDIVIDUAL, pursuant to
25 this section, any licensing statute and other applicable law
26 including 18 Pa.C.S. Ch. 91 (relating to criminal history record
27 information).
28 J. The cost of any criminal history record information,
29 including national criminal history record information, obtained
30 by the department pursuant to this section shall be paid by the
20020S1258B2053 - 31 -
1 initial or renewal license applicant or the individual whose
2 criminal history is being checked. Such cost shall be paid in <--
3 such manner and monetary amount as required jointly and
4 severally by the Pennsylvania State Police, Federal Bureau of
5 Investigation, the department or any other applicable
6 international, Federal, State or local governmental agency or
7 designee thereof.
8 Section 14. Section 501B and C of the act, amended July 1,
9 1981 (P.L.178, No.52), are amended to read:
10 Section 501. Orders by Department.--* * *
11 B. Whenever it shall appear to the department that an
12 attorney, officer, or employe of an institution, and in the case
13 of an incorporated institution, a director or trustee thereof,
14 shall have continued to violate any law relating to such
15 institution, or shall have continued unsafe or unsound practices
16 in conducting the business of such institution, after having
17 been warned by the department to discontinue such violations of
18 law or such unsafe or unsound practices, the department may
19 issue an order directing such attorney, officer, employe,
20 director, or trustee to appear on the day fixed in such order
21 before the department and show cause why he should not be
22 removed from his office or position and such office or position
23 declared vacant. A copy of such order shall be sent to the
24 institution of which such person is an attorney, officer,
25 employe, director, or trustee.
26 The office or position of any attorney, officer, employe,
27 director, or trustee, so ordered by the department to appear,
28 who does not appear on the day fixed in such order, shall,
29 unless the date for his appearance shall previously have been
30 extended by the department, upon such failure to appear, be
20020S1258B2053 - 32 -
1 declared vacant.
2 On the day fixed in the department's order such attorney,
3 officer, employe, director, or trustee shall be heard, in person
4 or by counsel, by the department. If, after such hearing, it
5 shall appear to the department that such attorney, officer,
6 employe, director, or trustee has not shown cause why he should
7 not be removed from his office or position and such office or
8 position declared vacant, the department shall, within sixty
9 days of such hearing, issue an order directing the institution
10 to remove such attorney, officer, employe, director, or trustee
11 from his office or position, and declare such office or position
12 vacant. A copy of such order shall be sent to the attorney,
13 officer, employe, director, or trustee so removed.
14 The department shall set forth in its order the date upon
15 which any such removal and declaration of vacancy shall become
16 effective.
17 If the institution, of which such person, ordered by the
18 department to appear is an attorney, officer, employe, director,
19 or trustee, is an interstate bank or is a member of a Federal
20 Reserve Bank, the Federal Deposit Insurance Corporation[,] or
21 the Federal Home Loan Bank, [or the Federal Savings and Loan
22 Insurance Corporation,] the department may notify such Federal
23 Reserve Bank, Federal Deposit Insurance Corporation, Federal
24 Home Loan Bank, [or Federal Savings and Loan Insurance
25 Corporation,] or other bank supervisory agencies having
26 jurisdiction over an interstate bank, as the case may be, of its
27 order directing such attorney, officer, employe, director, or
28 trustee to appear before the department and of its decisions
29 issued in such a case. At such hearing, any duly authorized
30 representative of such Federal Reserve Bank, Federal Deposit
20020S1258B2053 - 33 -
1 Insurance Corporation, Federal Home Loan Bank or [Federal
2 Savings and Loan Insurance Corporation] other bank supervisory
3 agencies having jurisdiction over such interstate bank, as the
4 case may be, may appear as a witness [against such attorney,
5 officer, employe, director, or trustee].
6 Except as [herein] otherwise specifically provided in this
7 act, the proceedings of the department and its decisions
8 regarding institutions shall not be published or divulged to
9 anyone.
10 Any attorney, officer, employe, director, or trustee, who is
11 removed from his office or position as provided in this section,
12 shall thereafter be disqualified from acting as an attorney,
13 officer, employe, director, or trustee of any institution in
14 this Commonwealth, for such period as the department shall
15 prescribe.
16 C. In connection with any hearing or investigation
17 authorized by this act or by any other law, the department shall
18 have, in addition to the authority provided by any other law,
19 power to issue subpoenas, requiring the attendance of or the
20 production of pertinent books [and], papers, electronic data or
21 information of any kind in any form, by the officers, directors,
22 agents, employes, or members, respectively, of any corporation
23 or person which the department is authorized under the
24 provisions of this act or any other law of this Commonwealth to
25 examine. The department shall also have power to issue subpoenas
26 to any other person or entity of any kind whatsoever provided <--
27 that the information from such person or entity is necessary for
28 the enforcement of this act or any other law within the
29 jurisdiction of the department. The department may, upon
30 application of the attorney, officer, employe, director, or
20020S1258B2053 - 34 -
1 trustee to be heard, subpoena such witnesses as are set forth in
2 such application. The department shall also have the power to
3 question such witnesses under oath or affirmation, and to
4 examine such books and papers. In the event that a person fails
5 to comply with a subpoena for documents or testimony issued by
6 the department, the department may request an order from the
7 Commonwealth Court requiring the person to produce the requested
8 information.
9 Any witness who refuses to obey a subpoena, issued under this
10 section, or who refuses to be sworn or affirmed or to testify,
11 or who is guilty of any contempt, after summons to appear, may
12 be punished as for contempt of court, and for this purpose, an
13 application may be made to the Commonwealth Court or to any
14 court of common pleas, within whose territorial jurisdiction the
15 offense was committed, for which purpose such court is hereby
16 given jurisdiction.
17 * * *
18 Section 15. Section 502 of the act is amended to read:
19 Section 502. Enforcement of Department's Order by Court.--
20 Whenever [an institution] a person, institution, credit union,
21 licensee or other entity of any kind whatsoever shall not comply
22 with the terms of an order of the department which has been
23 properly issued under the circumstances, pursuant to this act or
24 any other law, the department, upon notice to the [institution,
25 may, through the Department of Justice, petition the court of
26 common pleas, either of Dauphin County, or of the county in
27 which the institution has its principal or only place of
28 business,] person, institution, credit union, licensee or entity
29 may, in addition to the authority provided by any other law,
30 through the Office of Attorney General, petition the
20020S1258B2053 - 35 -
1 Commonwealth Court for an order directing the institution to
2 obey the order of the department within such period as shall be
3 fixed by the court. Upon the filing of such petition, the court
4 shall allow a rule to show cause why it should not be granted.
5 Whenever, after a hearing upon the merits, it shall appear that
6 the order of the department was lawfully issued, the court shall
7 grant the petition of the department.
8 Section 16. Section 503 of the act is amended to read:
9 Section 503. Quo Warranto or Injunction Proceedings.--[A.
10 When any corporation subject to the supervision of the
11 department (1) has not had its capital, surplus, or expense fund
12 paid in as required by law, or (2) has not in any manner
13 exercised at least one of the powers conferred upon it by its
14 articles of incorporation within two years after the issuance of
15 its certificate of incorporation by the Department of State, or
16 (3) has formerly exercised any of its corporate powers but for a
17 period of two years has not exercised at least one of them, the
18 department shall notify the Department of Justice of these
19 facts, and the Department of Justice may then proceed by quo
20 warranto against such corporation, in the manner provided by
21 law, to oust it from its corporate powers and privileges.]
22 B. When any institution violates any provision of its
23 articles of incorporation, and refuses to obey a lawfully issued
24 order of the department that it cease such violation, the
25 department may notify the [Department of Justice] Office of
26 Attorney General of these facts, and the [Department of Justice]
27 Office of Attorney General may then institute quo warranto
28 proceedings against such corporation or other type of
29 institution, in the manner provided by law.
30 [C. When any person subject to the supervision of the
20020S1258B2053 - 36 -
1 department has not, for a period of two years, done any act in
2 pursuance of its banking powers, the department shall notify the
3 Department of Justice of these facts, and the Department of
4 Justice may then proceed against such person by the method
5 provided by law to enjoin it permanently from doing a banking
6 business in this Commonwealth.]
7 C. The department may maintain an action in Commonwealth
8 Court or any other court of competent jurisdiction for an
9 injunction or other process against any person to restrain and
10 prevent the person from engaging in any activity violating this
11 act or any other statute or regulation within the department's
12 jurisdiction to administer or enforce.
13 D. This section pertains to institutions and credit unions.
14 Subsection C is applicable to institutions, credit unions and
15 licensees.
16 Section 17. Sections 504, 601 and 604 of the act are amended
17 to read:
18 Section 504. Taking of Possession by Department.--A. The
19 department may take possession as receiver, which throughout
20 this act includes the authority to act as conservator, of the
21 business and property of any institution subject to its
22 supervision whenever it shall appear to it that such
23 institution--
24 (1) Is violating its articles of incorporation, any order of
25 the court issued upon application of the department, any cease
26 and desist or similar order of the department, or any law of the
27 Commonwealth regulating its business; or
28 (2) Is conducting its business in an unsafe manner; or
29 (3) Is in an unsafe or unsound condition to transact its
30 business; or
20020S1258B2053 - 37 -
1 (4) In the case of a corporation, has an impairment of its
2 capital below the minimum required by law or by its articles of
3 incorporation; and in the case of a person, has not made good a
4 depreciation in the value of the bonds or securities deposited
5 with the department below the minimum required by law; or after
6 due examination of the corporation or person, is determined to
7 be insolvent; or has a substantial dissipation of assets or
8 earnings due to any violation of any statute or regulation, or <--
9 any unsafe or unsound practice OR FOR ANY VIOLATION OF FEDERAL <--
10 OR STATE FINANCIAL LAW OR PERTINENT REGULATION; or
11 (5) Has suspended payment of its obligations, without
12 authority of law[, and in the case of a building and loan
13 association, has not, for a period of one year after due demand
14 or notice by a shareholder, paid any matured share or any
15 withdrawal]; or is likely to be unable to pay its obligations or
16 meet its depositors' demands in the normal course of business;
17 or
18 (6) Has refused to submit its records and affairs to, or its
19 officers or directors have refused to be examined upon oath or
20 affirmation concerning its affairs by, the secretary, or any
21 other duly authorized examiner, in connection with any lawful
22 examination or investigation; or
23 (7) Requests the department, by its board of directors or
24 its board of trustees in the case of a corporation, and, in the
25 case of a person, by its individual owner or owners, to take
26 possession for the benefit of depositors, other creditors, and
27 shareholders[.]; or
28 (8) Has assets less than its obligations to its creditors
29 and others, including members of the institution.
30 [B. Before taking possession, the department shall conduct a
20020S1258B2053 - 38 -
1 hearing before the department and the Department of Justice,
2 which may be attended only by, and notice of which shall be
3 given only to, the officers and directors of the corporation, or
4 the officers and individual owner or owners of the person. After
5 such hearing, the department may, if it first procures the
6 consent of the Department of Justice, take possession:
7 Provided, however, That whenever immediate action shall be
8 necessary in order to protect the interests of the depositors,
9 other creditors, or shareholders of an institution, it may take
10 possession without conducting a hearing and without the approval
11 of the Department of Justice.]
12 B. Notwithstanding any provision of this act, if any of the <--
13 conditions in subsection A appear to be met, then before taking
14 B. PRIOR TO THE DEPARTMENT TAKING possession, the department <--
15 shall have full authority to take any action it deems
16 appropriate in anticipation of taking possession of an
17 institution, including, but not limited to, seeking and
18 contacting potential acquirers of part or all of the institution
19 that may be taken into possession, and obtaining qualified
20 agents or seeking and contacting potential successor trustees to
21 administer fiduciary accounts.
22 C. In addition, whenever the secretary in his official
23 capacity is appointed receiver by any court of equity, as
24 provided by law, the department shall take possession of the
25 business and property, and the secretary shall act as receiver,
26 of the institution in the same way and with the same rights and
27 limitations as when the department takes possession in the
28 customary manner provided by this act.
29 Section 601. Taking Over Possession by Secretary as
30 Receiver.--Whenever the department takes possession of the
20020S1258B2053 - 39 -
1 business and property of an institution, including a foreign
2 bank office licensed by the department, the secretary shall, by
3 operation of law, simultaneously take over such possession from
4 the department and become receiver of such institution, subject
5 to the provisions of this act. His official title, when thus in
6 possession of the business and property of an institution, shall
7 be receiver of such institution. The secretary may act as
8 receiver without bond.
9 Section 604. Certificates of Possession; Filing; Title To
10 and Liens Against Real Property; Supplements to Certificate of
11 Possession to Surrender or Transfer Receivership.--A. The
12 secretary, upon taking possession of the business and property
13 of an institution as receiver, shall forthwith, under the seal
14 of the department, prepare in duplicate a certificate, to be
15 known as the certificate of possession, setting forth that he
16 has become receiver of the institution. It shall state the name
17 of the deputy receiver whom the secretary, pursuant to the
18 provisions of this act, appoints to take charge of the affairs
19 of the institution, and shall set forth the duties which he
20 delegates to such deputy receiver. If the secretary does not
21 appoint a deputy receiver prior to the date of the filing of the
22 certificate of possession, or if he appoints a new deputy
23 receiver or an additional one, or if he adds to the duties of
24 the deputy receiver, he shall prepare, in duplicate, and file a
25 supplement to the certificate of possession.
26 B. The secretary shall file the original certificate of
27 possession and the original of any supplement thereto in his
28 office in Harrisburg, and the duplicate certificate of
29 possession and the duplicate of any supplement thereto in the
30 office of the prothonotary. The certificate of possession filed
20020S1258B2053 - 40 -
1 in the prothonotary's office, and any supplement thereto, shall
2 be listed in the judgment index in the name of the institution
3 as defendant and of the secretary as plaintiff.
4 C. [In addition the secretary shall, as soon as possible,
5 file a certified copy of the certificate of possession, and of
6 any supplement thereto, in the office of the recorder of deeds
7 in each county in the Commonwealth, or with the proper official
8 in any other state or country, in which any real property shall
9 be situated which belongs to the institution or title to which
10 is in its name, or upon which there is a mortgage or other lien
11 which belongs to the institution or title to which is in its
12 name. Such copy shall be recorded in the current deed book, and
13 shall be indexed in the grantors' index in the name of the
14 institution and in the grantees' index in the name of the
15 secretary, or it shall be filed, indexed, or registered by
16 whatever other method is provided by the law of the particular
17 county, state, or country in which such real property is
18 located.] The certificate of possession filed with the
19 prothonotary shall constitute valid evidence that any real
20 property owned by or upon which there is a lien which belongs to
21 the institution has come into possession of the receiver as of
22 the date specified therein.
23 D. The receiver shall file with the prothonotary a
24 supplementary certificate of possession stating when the
25 receiver has transferred or surrendered possession of the
26 institution to another entity, and stating the entity's name,
27 address and telephone number.
28 Section 18. Section 606 of the act is repealed.
29 Section 19. Sections 607, 608, 701, 702 and 703 of the act
30 are amended to read:
20020S1258B2053 - 41 -
1 Section 607. Taking of Possession upon Request of
2 Institution.--No institution shall make a general assignment of
3 its business and property for the benefit of its creditors by
4 the appointment of an assignee or a trustee, or otherwise. In
5 lieu of the power to make an assignment for the benefit of
6 creditors, an institution may request the department to take
7 possession in the regular manner provided by law. In such cases,
8 the department [shall] may take possession or may take other
9 action deemed appropriate in its discretion, and the secretary
10 [shall] may take over such possession and become receiver, in
11 the same manner and subject to the same provisions of this act
12 as when the department takes possession of the business and
13 property of an institution without the request of such
14 institution[.], unless the secretary determines that the Federal
15 Deposit Insurance Corporation or other appropriate banking
16 agency should take possession and such agency agrees to do so.
17 Section 608. Surrender of Possession; Special Liquidations
18 and Reorganizations.--[A.] The secretary may, upon conditions
19 approved by him, surrender possession of an institution of which
20 he has taken possession as receiver, at any time prior to final
21 liquidation and distribution, under the following circumstances:
22 (1) He may surrender possession to the institution itself
23 when he finds it to be in a safe and sound condition to resume
24 its business;
25 (2) He may surrender possession to the institution itself
26 when he is without funds to liquidate its business and property.
27 In such case, the secretary shall first accord to the
28 shareholders, and the depositors or other creditors of the
29 institution, a period of not less than two weeks in which to
30 advance sufficient funds for the secretary to liquidate the
20020S1258B2053 - 42 -
1 business. Where such funds are advanced, they shall be
2 considered an expense of administration and shall be given the
3 same preference in the distribution of assets as any other
4 expenses of administration. Where possession has been
5 surrendered to an institution under such circumstances, the
6 institution may not conduct any business except the liquidation
7 of the assets. In the distribution of any moneys realized by the
8 institution on its assets, it shall follow the same order and
9 preference as is established by this act for distribution by the
10 secretary of the assets of an institution of which he is in
11 possession as receiver. Upon the approval of his account by the
12 court, and upon the filing of the supplement to the certificate
13 of possession, pursuant to the provisions of this section, the
14 secretary shall be relieved of all duties with reference to such
15 institution. However, if the department shall deem it advisable
16 to resume possession of the institution at any time, it may do
17 so in the same manner as is provided for the taking possession
18 of any institution, in which case the secretary shall again take
19 over possession and become receiver, with all the rights,
20 powers, and duties granted to, or imposed upon the secretary, as
21 receiver, by this act.
22 (3) He may surrender to the institution itself, or to any
23 other corporation or person, possession of all or part of the
24 business, property, moneys, credits, or other assets of the
25 institution of which he is in possession as receiver to permit
26 to be carried into effect a special plan of liquidation,
27 reorganization, or rehabilitation which has been approved by the
28 court and by (a) depositors and other creditors of the
29 institution, to whom is due [ninety per cent] a majority in
30 amount, regardless of the number, of the claims stated in
20020S1258B2053 - 43 -
1 writing by the secretary to be due to depositors and other
2 creditors of such institution, and (b) the holders of a majority
3 of the shares of stock of such institution, if a corporation,
4 except that in the case of a [building and loan] savings
5 association, the approval of the holders of eighty per cent of
6 the shares of stock of such corporation shall be required.
7 However, the secretary shall not authorize any decrease of
8 capital by a corporation affected by the provisions of this
9 section, except upon compliance by such corporation with the
10 provisions of law as to such decrease.
11 [B. Whenever the secretary shall surrender possession under
12 the provisions of this section, he shall forthwith, under the
13 seal of the department, prepare in duplicate a supplement to the
14 certificate of possession, setting forth in detail all the
15 conditions and purposes of such surrender. He shall file the
16 original of such supplement in his office in Harrisburg and the
17 duplicate in the office of the prothonotary, where it shall be
18 indexed in a manner which will, in so far as necessary, satisfy
19 the prior record of the certificate of possession. He shall also
20 file a certified copy of such supplement in the office of the
21 recorder of deeds in each county in the Commonwealth, or with
22 the proper official in any other state or country, in which any
23 real property so surrendered, or any real property upon which
24 there shall be a mortgage or other lien so surrendered, shall be
25 situated.
26 C. Whenever the secretary shall, under the provisions of
27 this section, surrender possession of the entire business and
28 property of an institution of which he is in possession as
29 receiver, he shall file in the court an account, which shall
30 correspond to any other final account which he is required by
20020S1258B2053 - 44 -
1 this act to file. Such account shall be subject to exceptions by
2 shareholders, or depositors, or other creditors, and to
3 confirmation by the court, in the same manner as is provided by
4 this act for any account filed by the secretary as receiver.]
5 Section 701. Status of Secretary as Receiver.--A. Except as
6 otherwise provided in this act, the secretary, when he has taken
7 possession of the business and property of an institution, shall
8 be responsible to the court in which the certificate of
9 possession is filed[, and not to any other court]. His rights,
10 powers, and duties shall be those of a general receiver
11 appointed by any court of equity in this Commonwealth, except as
12 such rights, powers, and duties are increased or limited by the
13 provisions of this act. The secretary as receiver may act as a
14 conservator of the institution. He shall be vested, in his
15 official capacity, with all the rights, titles, privileges,
16 powers, and duties of such institution[;] and of any
17 shareholder, member, accountholder, depositor, officer or
18 director of such institution with the title or the right to
19 possession of all property to which the institution has title or
20 the right to possession, including debts due, and liens and
21 other security therefor and title to OWNERSHIP OF the books, <--
22 records and assets of any previous legal custodian of such
23 institution; and with the institution's rights of action or
24 redemption. This shall be so whether such property and debts
25 due, such liens or other security therefor, or such rights of
26 action or redemption, are held in the name of such institution,
27 or in the name of some other corporation or person. He shall
28 have power to execute in his name, as receiver, any instrument
29 incident to the exercise of any power granted to or any duty
30 imposed upon him as receiver of such institution.
20020S1258B2053 - 45 -
1 The secretary shall be the representative of the creditors of
2 the institution and shall be entitled, as such, to have vacated
3 and set aside, for the benefit of the creditors, any judgment,
4 execution, attachment, sequestration, payment, pledge,
5 assignment, transfer, conveyance, or encumbrance, which could
6 have been avoided by any of the creditors, or by which one
7 creditor is given an unlawful preference over another.
8 B. The secretary may prescribe such regulations as he <--
9 determines to be appropriate regarding the conduct of a
10 receivership.
11 C. The secretary may, as receiver: (i) exercise all powers
12 and authorities, including all incidental powers as shall be
13 necessary to carry out his enumerated duties; and (ii) take any
14 action which the secretary determines is in the best interests
15 of the institution, its depositors, owners, shareholders,
16 creditors, trust accounts or the Commonwealth of Pennsylvania.
17 Section 702. Appointment of Deputy Receivers, Counsel,
18 Independent Receivers and Other Assistants.--A. The secretary
19 may appoint one or more official agents, to be known as deputy
20 receivers, to assist him in the management, reorganization,
21 consolidation, liquidation, or distribution of the assets and
22 affairs of any institution, or administration of fiduciary
23 accounts of which he has taken possession as receiver. The
24 secretary may delegate to each deputy receiver any duty imposed
25 upon, or any right or power granted to, him as receiver. The
26 secretary may also employ such other assistants as he deems
27 necessary, including such deputy attorneys general, special
28 deputy attorneys general, assistant deputy attorneys general, or
29 other attorneys as may be appointed by the [Department of
30 Justice] Office of Attorney General and assigned to the
20020S1258B2053 - 46 -
1 secretary for the handling of any legal business pertaining to
2 the affairs or property of such institution. The secretary may
3 also retain to assist him in the management, reorganization,
4 consolidation, liquidation, or distribution, any officer or
5 other employe of the institution of which he has taken
6 possession.
7 B. (1) On request of the secretary, the court in which the
8 receivership proceeding is pending may appoint an independent
9 receiver, including any appropriate governmental entity, to
10 handle the receivership proceedings consistent with the
11 provisions of this act and may require a suitable bond of the
12 independent receiver. The appointed independent receiver shall
13 have the same status and incidental powers provided to the
14 secretary as receiver in section 701.
15 (2) If an independent receiver is appointed, the secretary
16 is discharged as receiver from any liability for the acts
17 thereafter of the independent receiver but shall remain a party
18 to the receivership proceeding with the right to terminate such
19 independent receiver upon petition to and approval by the court
20 and, with standing to initiate, contest or participate in any
21 actions involving or related to the receivership at the
22 discretion of the secretary. The views of the secretary are
23 entitled to deference if not contrary to the plain meaning of
24 this article.
25 Section 703. Exercise of Discretion by Secretary.--A.
26 Whenever, under this act, discretion as to whether, or the
27 manner in which, to exercise a power or fulfill a duty is vested
28 in the secretary in possession of an institution as receiver, he
29 shall, after such examination or investigation as shall seem
30 appropriate under the circumstances, take such action as he
20020S1258B2053 - 47 -
1 deems to the best interests of the depositors or other
2 creditors[, and, in the case of building and loan associations,
3 also of the shareholders of such institution].
4 B. The words "the best interests of the estate," whenever
5 used in this act, shall be construed to refer to the best
6 interests of the depositors or other creditors[, and in the case
7 of building and loan associations, also of the shareholders of
8 such institution].
9 Section 20. Section 704 of the act, amended October 5, 1978
10 (P.L.1133, No.266), is amended to read:
11 Section 704. Suspension or Continuation of Business.--The
12 secretary is authorized, upon taking possession of the business
13 and property of an institution as receiver, to continue or to
14 suspend the business for such period as he may deem necessary to
15 enable him to determine whether to surrender such possession to
16 the institution, to authorize a merger or consolidation, to seek
17 bids for the purchase of assets and assumption of liabilities of
18 the institution by any State or Federal institution [whose
19 principal place of business is located in Pennsylvania], to
20 liquidate the affairs of such institution, to organize a new
21 institution or to take such other action [as is] authorized by
22 law which is in the best interests of the estate. During such
23 period, he shall take any action he deems necessary to conserve
24 the assets and business, or to protect the best interests of the
25 estate. In addition, the secretary may enter into agreements,
26 conditional or otherwise, for the purchase of assets and
27 assumption of liabilities of the institution and take related
28 actions prior to and in reasonable anticipation of such
29 institution being placed into receivership by the secretary or
30 other banking agency.
20020S1258B2053 - 48 -
1 Section 21. Sections 705, 710A and 711A of the act are
2 amended to read:
3 Section 705. Determination to Liquidate; Filing of
4 Supplemental Certificates Upon Determination to Liquidate
5 Institution.--The secretary shall, within six months after the
6 date on which he takes possession of any institution as
7 receiver, determine whether or not to liquidate the business and
8 property and distribute the assets of the institution. If he
9 shall determine to liquidate, he shall forthwith, under the seal
10 of the department, prepare, in duplicate, a supplement to the
11 certificate of possession, setting forth this fact. He shall
12 file the original supplement in his office in Harrisburg and the
13 duplicate in the office of the prothonotary. He shall then
14 proceed to liquidate the affairs of the institution with as much
15 dispatch as shall appear to be expedient under the
16 circumstances.
17 Section 710. Notice to Holders of Assets; Power of Court to
18 Order Transfer.--A. Upon becoming receiver of any institution,
19 the secretary shall forthwith give notice in writing of such
20 fact to all corporations and persons having custody or
21 possession of any assets or other property which the institution
22 of which he is receiver owns or to which it has the right to
23 possession or custody for any purpose whatsoever. Such notice
24 shall be given at the addresses which appear for such
25 corporations and persons upon the records of the institution or,
26 if none appear there, then at their last known addresses.
27 However, if it shall appear to be in the best interests of the
28 institution, the court may order the secretary to substitute a
29 single advertisement in a newspaper or newspapers, for the
30 individual notice to the corporations and persons.
20020S1258B2053 - 49 -
1 * * *
2 Section 711. Sale of Assets Repledged by Institution;
3 Repledge after Possession.--A. Where assets belonging to
4 others, shall be pledged or given as collateral by an
5 institution of which the secretary subsequently takes possession
6 as receiver, and the pledgee has actual knowledge at the time of
7 the pledge that the assets are not assets of the institution,
8 such pledgee shall not forfeit or sell any such collateral or
9 pledged assets, after the secretary has taken possession,
10 without the written permission of the secretary, any provision
11 in any collateral note or agreement to the contrary
12 notwithstanding; but if the secretary refuses such permission,
13 the pledgee may, after notice to the secretary, petition the
14 court for leave to sell such assets. The court may, after giving
15 the pledgee and the secretary an opportunity to be heard, grant
16 such leave, or it may make such other order as it deems to be in
17 the best interests of all parties concerned.
18 However, if the assets so pledged by any such institution are
19 accompanied by the obligation of the corporation or person
20 owning them, the pledgee shall have the power to exercise all
21 the rights, powers, and privileges contained in such obligation
22 held by such pledgee, including the sale of the assets.
23 * * *
24 Section 22. Section 712B and D of the act, amended July 2,
25 1935 (P.L.525, No.202), are amended to read:
26 Section 712. Liens, Judgments, and Executions; Assignments
27 of Claims.--* * *
28 B. In the case of an institution, of which the secretary has
29 taken possession, [which, at the time of possession, was a
30 member, in the case of a bank, bank and trust company, or
20020S1258B2053 - 50 -
1 savings bank of the Federal Deposit Insurance Corporation, and
2 in the case of a building and loan association of the Federal
3 Savings and Loan Insurance Corporation,] the claims of
4 depositors[, and of shareholders of a building and loan
5 association,] shall be subrogated in favor of the Federal
6 Deposit Insurance Corporation [or the Federal Savings and Loan
7 Insurance Corporation, as the case may be,] to the extent that
8 the Federal Deposit Insurance Corporation [or the Federal
9 Savings and Loan Insurance Corporation] makes available,
10 pursuant to applicable laws of the United States, for payment,
11 the claims of such depositors [or such shareholders]: Provided,
12 That the rights of such depositors [or of such shareholders,] to
13 participate in and receive dividends or other distributions upon
14 that portion of their claims not made available for payment[,]
15 shall not be affected by such subrogation. When the claims of
16 depositors [or of shareholders] have been made available for
17 payment, in whole or in part, by the Federal Deposit Insurance
18 Corporation [or the Federal Savings and Loan Insurance
19 Corporation, as the case may be], the secretary shall file a
20 partial or final account, in the manner required by this act, of
21 his administration of the business and property of the
22 institution.
23 * * *
24 D. No execution or attachment, pending or otherwise, shall
25 respectively issue, or be proceeded with, against any property,
26 moneys, or assets, owned by, or legally in the custody or
27 possession of, an institution of which the secretary is in
28 possession as receiver. [, except that an execution may be
29 permitted by special leave of the court. In lieu of the right to
30 issue an attachment against money or property belonging to
20020S1258B2053 - 51 -
1 others, which is legally in the custody or possession of such
2 institution, a.] A plaintiff may proceed as follows: He may give
3 written notice of his claim to the secretary, or to the deputy
4 receiver of such institution, and he shall thereafter present
5 proof in the regular manner provided by this act for the proof
6 of the claim, which he is attempting to attach. After the filing
7 of the regular account of the secretary, the court shall
8 adjudicate the matter as in the case of other disputed claims.
9 [Where two or more plaintiffs attempt to attach the same claim
10 in this manner, the order in which they shall take, as among
11 themselves, shall be determined by the order in which written
12 notice of their claims was received by the secretary.]
13 Section 23. Section 715 of the act, amended May 26, 1949
14 (P.L.1842, No.546), is amended to read:
15 Section 715. Surrender or Transfer of Burdensome Assets.--
16 The secretary may, with leave of court, surrender to the
17 institution of which he is receiver any real estate which
18 appears to be burdensome and of no advantage to the estate. He
19 may likewise, with leave of court, convey title to any other
20 holder of a mortgage or a lien against property in his
21 possession, where it shall appear that to continue to hold such
22 property is burdensome and of no advantage to the estate.
23 The secretary shall give notice to the depositors or other
24 creditors of the institution[, and, in the case of building and
25 loan associations, to the shareholders,] of the filing of the
26 petition for leave to transfer or convey such property pursuant
27 to the provisions of this section. Such notice shall be given at
28 the addresses which appear for such depositors[,] or other
29 creditors[, or shareholders] upon the books or other records of
30 the institution, or if none appear there, then at their last
20020S1258B2053 - 52 -
1 known addresses. However, the court may, if it shall appear to
2 be in the best interests of the estate, order the secretary to
3 substitute a single advertisement in a newspaper or newspapers,
4 for the individual notice to the depositors and other
5 creditors[, and in the case of a building and loan association,
6 the shareholders]. The court shall grant at least ten days for
7 the filing of objections by the depositors or other creditors of
8 the institution [and, in the case of a building and loan
9 association, the shareholders of such institution].
10 Section 24. Sections 718 and 721A and C of the act are
11 amended to read:
12 Section 718. Sales of Real Property.--[A.] The secretary
13 may, with leave of, and upon the terms and conditions prescribed
14 by, the court, sell any real property of the institution of
15 which he is in possession as receiver. The order of the court
16 authorizing such sale shall state whether the sale shall be
17 entirely for cash or partly for cash and partly for evidences of
18 indebtedness, whether it shall be public or private, whether
19 notice shall be given to depositors, other creditors, and
20 shareholders, or to any of these groups, and whether
21 advertisement shall be made. Unless the court, in any case,
22 deems advertisement or notice necessary or desirable to protect
23 the interests of the estate, such advertisement or notice shall
24 not be required. If the court does require advertisement or
25 notice, then the court shall in no case require more than a
26 single insertion in one newspaper of general circulation in the
27 county of the receivership and one in such other county where
28 the real property may be located.
29 [Where the order of the court provides for advertisement, it
30 shall in no case require that there be more than a single
20020S1258B2053 - 53 -
1 insertion in one newspaper of general circulation in the county,
2 and, in first-class counties, in one legal newspaper. Where real
3 property which is to be sold is situated in a county other than
4 the one in which the institution is located, the court may also
5 authorize a single insertion in a newspaper of general
6 circulation in such other county, and, in first-class counties,
7 in one legal newspaper.]
8 Every such sale of real property shall be confirmed by the
9 court, if all the terms and conditions of its order authorizing
10 such sale have been complied with.
11 [B. When any real property of an institution of which the
12 secretary is in possession as receiver is situated in a county
13 other than the one in which the institution is located, the
14 secretary shall proceed in the same manner as is provided by
15 this section for the sale of real property within the county. In
16 addition, he shall petition the court of common pleas of the
17 county in which the real property is located, and it shall be
18 the duty of such court, to issue an order authorizing the sale
19 upon the terms or conditions prescribed by the order of the
20 court having jurisdiction of the receivership. The secretary
21 shall file a return of the sale in the court of common pleas in
22 the county in which the real estate is located, which court, if
23 all the terms and conditions of the order of the court, in which
24 the certificate of possession is filed, have been met, shall
25 confirm the sale and shall give the secretary a certified copy
26 of the return of the sale and a certified copy of the
27 confirmation thereof. Such certified copies shall be filed with
28 the prothonotary of the court in which the certificate of
29 possession is filed.]
30 Section 721. Sale or Exchange of Personal Property, Listed
20020S1258B2053 - 54 -
1 and Unlisted Securities.--A. The secretary may, without leave
2 of court, sell on any stock exchange or otherwise, at such times
3 and in such manner as he shall deem to be [to] in the best
4 interests of the estate, listed or unlisted securities which
5 belong to the institution of which he is in possession as
6 receiver, or which such institution has the power to sell.
7 * * *
8 C. The secretary may, without leave of court, sell any
9 mortgage or other lien upon real property or any judgment, at
10 such times and in such manner as he shall deem to be in the best
11 interests of the estate.
12 * * *
13 Section 24.1. Section 723 of the act is repealed.
14 Section 25. Section 725 of the act, added October 5, 1978
15 (P.L.266, No.1133), is amended to read:
16 Section 725. Rights of Subrogation.--When a public body of
17 the United States or this Commonwealth has made payment to any
18 depositor, it shall become subrogated to all rights of the
19 depositor against the institution in possession to the extent of
20 such payment.
21 Section 26. The act is amended by adding sections to read:
22 Section 726. Additional Powers of the Receiver.--In addition
23 to any other power, right, privilege, immunity, ability or other
24 authority conferred upon the secretary by this act, the
25 secretary, as receiver of any institution, shall have any power,
26 right, privilege, immunity, ability or other authority conferred
27 upon the Federal Deposit Insurance Corporation by Federal law
28 when acting as conservator or receiver which does not conflict
29 with any power, right, privilege, immunity, ability or other
30 authority conferred upon the secretary by this act, including
20020S1258B2053 - 55 -
1 the powers, rights, privileges, immunities, abilities and
2 authorities conferred upon the Federal Deposit Insurance
3 Corporation by section 11(d) through (w) of the Federal Deposit
4 Insurance Act (64 Stat. 873, 12 U.S.C. § 1821(d) through (w)).
5 The powers, rights, privileges, immunities, abilities and other
6 authorities conferred upon the secretary by this provision are
7 discretionary and nothing in this act or any other law shall
8 require the secretary to exercise any such power, right,
9 privilege, immunity, ability or other authority when the
10 secretary, in his discretion, determines not to do so.
11 Section 727. Taxation.--A. The receiver, including, for
12 purposes of this section, the secretary and the department,
13 shall be exempt from all taxation imposed by any state, county,
14 municipality, local or other taxing authority in any state to
15 the extent permitted by law, and the Federal Government to the
16 extent permitted by Federal law, except that any real property
17 of the receiver shall be subject to applicable state, county,
18 municipal or local taxation to the same extent according to its
19 value as other real property is taxed, except that,
20 notwithstanding the failure of any person to challenge an
21 assessment under State law of such property's value, such value,
22 and the tax thereon, shall be determined as of the period for
23 which such tax is imposed.
24 B. No property of the receiver shall be subject to levy,
25 attachment, garnishment, foreclosure or sale without the consent
26 of the receiver, nor shall an involuntary lien attach to the
27 property of the receiver.
28 C. The receiver shall not be liable for any amounts in the
29 nature of penalties or fines, including those arising from the
30 failure of any person to pay any real property, personal
20020S1258B2053 - 56 -
1 property, probate or recording tax or any recording or filing
2 fees when due.
3 Section 27. Article VIII heading of the act is amended to
4 read:
5 ARTICLE VIII
6 SECRETARY IN POSSESSION OF
7 TRUST COMPANY OR TRUST DEPARTMENT
8 Section 28. Sections 801 and 802 of the act are amended to
9 read:
10 Section 801. Institution as Fiduciary.--References in this
11 act to funds, property, or investments held in a fiduciary
12 capacity by an institution of which the secretary has taken
13 possession, shall apply only to funds, property, or investments
14 held in such fiduciary capacity by the trust company or trust
15 department of such institution, and shall not apply to funds,
16 property or investments which were held by the commercial
17 department of such institution.
18 Section 802. Secretary in Possession of Trust Company or
19 Trust Department.--A. The secretary, upon taking possession of
20 an institution as receiver, shall keep all the funds, property,
21 and investments, if any, which are held by such institution in a
22 fiduciary capacity, separate from the assets of the institution
23 itself.
24 B. The secretary, when in possession of an institution as
25 receiver, shall have all the rights, powers, and duties which
26 such institution had in its fiduciary capacity. He shall have
27 title to all the assets, including debts due, liens and other
28 security therefor, and all rights of action or redemption, of
29 all estates of which the institution, either alone or jointly
30 with someone else, was trustee, executor, administrator,
20020S1258B2053 - 57 -
1 guardian, assignee, or other similar fiduciary, and shall have
2 the power to administer such estates. In pursuance of this
3 power, the secretary may institute any action at law or in
4 equity, or execute and sign any written instruments, which the
5 institution itself could have instituted, executed, or signed.
6 C. The secretary shall not[, however,] have the power to
7 invest funds or property of any such estate, except where it
8 shall appear necessary to purchase any real or personal property
9 or any interest therein, in order to protect an equity which
10 such estate has in such property. Such purchase by the secretary
11 shall not[, however,] be made without the approval of any
12 corporation or person whose approval would have been necessary
13 to such purchase by the institution prior to the taking of
14 possession by the secretary, and of the court which has
15 exercised jurisdiction over such estate. If no court has yet
16 exercised jurisdiction over the estate, then the approval either
17 of the court of common pleas or of the orphans' court of the
18 county in which the place of business of the institution is
19 situated shall be procured.
20 Except where otherwise specifically provided, references in
21 this act to the court which has exercised jurisdiction over an
22 estate of which an institution in possession of the secretary
23 was fiduciary, shall be construed to refer, in cases in which
24 the institution was executor or administrator, to the orphans'
25 court of the county of which the register of wills issued the
26 letters testamentary or letters of administration respectively,
27 and in all other cases, to the court of common pleas or the
28 orphans' court in which an account of the estate has been filed,
29 or which has, in any manner, exercised control or supervision
30 over the administration of such estate by the institution as
20020S1258B2053 - 58 -
1 fiduciary.
2 Section 28.1. The act is amended by adding a section to
3 read:
4 Section 802.1. Appointing Successor Trustee.--A. The BEFORE <--
5 OR AFTER DETERMINING TO LIQUIDATE THE INSTITUTION, THE
6 secretary, upon taking possession of an institution as receiver,
7 and either before or after determining to liquidate the <--
8 institution, may enter into any agreement to assign, sell or
9 transfer one or more trust accounts to one or more successor
10 trustees without incurring any liability.
11 B. Upon the sale, assignment or transfer of a trust account
12 pursuant to subsection A, the successor trustee shall be
13 automatically substituted by reason of the sale, assignment or
14 transfer as fiduciary of the trust account without further
15 action and without any order or decree of any court or public
16 officer.
17 C. No designation, nomination or appointment as fiduciary
18 shall lapse by reason of the sale, assignment or transfer of a
19 trust account pursuant to subsection A. The successor trustee
20 shall be entitled to act as fiduciary to the same extent as the
21 institution taken into possession by the secretary.
22 Section 29. Sections 804, 805, 806 and 807 of the act are
23 amended to read:
24 Section 804. Appointment of Substituted Fiduciaries.--A.
25 Upon filing a supplement to the certificate of possession,
26 setting forth his determination to liquidate the affairs of the
27 institution, the secretary shall forthwith give written notice,
28 in so far as the giving of such notice is practicable, to [all
29 parties of whom he has notice, who are interested in any funds,
30 property, or investments held by such institution in a fiduciary
20020S1258B2053 - 59 -
1 capacity.] settlors of the account that has not been assigned,
2 sold, or transferred to a successor trustee under section 802.1,
3 or if the settlor is deceased, to persons who are readily
4 ascertainable as beneficiaries of the account by their receipt
5 of statements of the account, and any co-fiduciary of the
6 account, of whom the secretary has notice. Such notice shall be
7 given at the addresses which appear for such parties upon the
8 books or records of the institution, or if none appears there,
9 then at their last known address. Such notice shall require such
10 parties, within thirty days after the giving of notice, to apply
11 for the appointment of substituted fiduciaries[.], and shall
12 notify such parties that the receiver is statutorily stayed from
13 taking any action regarding the administration of the trust
14 accounts unless otherwise ordered by the court except for
15 transferring the trust account to a successor trustee or a
16 substituted fiduciary. Such application shall be made as
17 follows, with a copy of the application being mailed or
18 delivered to the secretary upon the filing of the application:
19 In any case in which the institution was executor or
20 administrator, application shall be made to the register of
21 wills having jurisdiction to grant new letters in such form as
22 the case shall require; in any other case, application shall be
23 made to any court which has exercised jurisdiction over the
24 estate, or if no court has exercised such jurisdiction, then to
25 the court of common pleas, or the orphans' court, of the county
26 in which the institution has its place of business. However, if
27 the instrument under which the fiduciary relationship was
28 established provides a particular method for the selection of
29 fiduciaries, such method shall be followed.
30 B. However, the THE court may, if it shall appear to be in <--
20020S1258B2053 - 60 -
1 the best interests of the estate, order the secretary to
2 substitute a single advertisement in a newspaper or newspapers
3 for the individual notice to all such3 parties. Such notice
4 shall require such parties, within thirty days after the giving
5 of notice, to apply for the appointment of substituted
6 fiduciaries, and shall notify such parties that the receiver is
7 statutorily stayed from taking any action regarding the
8 administration of the trust accounts unless otherwise ordered by
9 the court except for. THE STAY SHALL NOT APPLY TO transferring <--
10 the trust account to a successor trustee or a substituted
11 fiduciary.
12 C. If the parties to whom [such] notice pursuant to
13 subsection A or B has been given do not, within the thirty-day
14 period designated, make such application, or pursue whatever
15 method is prescribed by the instrument under which the fiduciary
16 relationship was established, for the appointment of a
17 substituted fiduciary, or if it is impracticable to give notice
18 to the parties interested in the estate, then the secretary
19 shall make the application for the appointment of a substituted
20 fiduciary to the court or the register of wills, whichever the
21 case may be, designated above. Such court or register of wills
22 shall appoint a substituted fiduciary upon such petition of the
23 secretary.
24 Section 805. [Transfer of Assets to Substituted Fiduciary
25 without Filing Account.--If a substituted fiduciary has been
26 appointed in accordance with the provisions of this act, and if
27 there is no dispute as to the amount or identity of the funds,
28 property, or investments of the particular estate, and as to the
29 fees, commissions, and expenses due either to the institution
30 before the secretary took possession or to the secretary as
20020S1258B2053 - 61 -
1 receiver since the taking of possession, and if all the parties
2 in interest, being sui juris, agree in writing to waive an
3 accounting in court, the secretary in possession of an
4 institution as receiver, may transfer to such substituted
5 fiduciary all the funds, property, and investments of the
6 particular estate without filing an account in any court. Upon
7 such transfer, he shall procure from all the parties in interest
8 and from the substituted fiduciary a receipt and release in
9 full, which shall discharge the secretary and the institution
10 from any further duty or liability with reference to such
11 estate.] Notice of Transfer; Filing of Disputes.--Within thirty
12 days, or another period of time designated by the department, of
13 the sale, assignment or transfer of a trust account to a
14 successor trustee pursuant to section 802.1.A, or of the
15 appointment of a substituted fiduciary pursuant to section 804,
16 the successor trustee or substituted fiduciary shall provide
17 notice to settlors of the account, or if the settlor is
18 deceased, to persons who are readily ascertainable as
19 beneficiaries of the trust account by their receipt of
20 statements of the account, and any co-fiduciary of the account,
21 of whom the secretary has notice. With respect to trust accounts
22 that have not been transferred, assigned, or sold, the secretary
23 as receiver shall provide the notice required in this section.
24 The notice to such parties shall indicate that the account has
25 been sold, assigned or transferred to the successor trustee or
26 transferred to the substituted fiduciary. Such notice shall
27 require such parties within thirty days of receipt of the notice
28 to notify the receiver and the successor trustee or substituted
29 fiduciary if there is any dispute as to the amount or identity
30 of the funds, property, or investments of the estate, and as to
20020S1258B2053 - 62 -
1 the fees, commissions, and expenses due either the institution
2 before the secretary took possession or to the secretary as
3 receiver since the taking of possession. If such parties do not
4 notify the secretary as receiver and the successor trustee or
5 substituted fiduciary of any dispute, no accounting in court
6 shall be required and the secretary and the institution in
7 receivership shall be discharged and released in full from any
8 further duty or liability with regard to such trust account.
9 Section 806. Filing of Account; Transfer of Assets to
10 Substituted Fiduciary.--A. Except in cases in which the
11 secretary is authorized by the provisions of this act to
12 transfer to a successor trustee or a substituted fiduciary,
13 without filing an account, the funds, property, or investments
14 of an estate of which the institution was fiduciary, he shall
15 file an account for every estate of which such institution was
16 fiduciary and of which the secretary received notice of a
17 dispute under section 805. The secretary, with the assistance of
18 the successor trustee or the substituted fiduciary, shall file
19 each such account upon the date fixed by the instrument creating
20 the fiduciary relationship, or if there is no such date fixed,
21 then as soon as expedient after the filing of a supplement to
22 the certificate of possession, setting forth his determination
23 to liquidate the affairs of the institution. Such account shall
24 be filed in the court which has exercised jurisdiction over the
25 particular estate, or if no court has yet exercised
26 jurisdiction, then in the court of common pleas, or the orphans'
27 court, of the county in which the place of business of the
28 institution is situated. [The secretary shall then transfer or
29 pay to the substituted fiduciary, appointed pursuant to the
30 provisions of this act, any funds, property, or investments in
20020S1258B2053 - 63 -
1 his possession which belong to such estate. Such transfer or
2 payment shall be made in accordance with the order of the court
3 in which the account for such estate is filed. The court, in
4 directing such transfer or payment, may reserve for future
5 determination any question of surcharge.]
6 B. The secretary may seek an order from the court which has
7 exercised jurisdiction over a particular estate of which the
8 institution was fiduciary, or if no court has exercised such
9 jurisdiction, then the court of common pleas, or the orphans'
10 court, of the county in which the institution has its place of
11 business, [may order the secretary] to transfer the funds,
12 property, or investments of the estate to the successor trustee
13 or the substituted fiduciary, even prior to the filing of an
14 account. The court, in such order, may reserve for future
15 determination any question of surcharge, or any other question
16 which may arise upon the audit of the account.
17 C. This section shall not be construed to give any court,
18 other than the one in which the certificate of possession is
19 filed, jurisdiction over disputes involving the identity of
20 funds, property, or investments of an estate of which the
21 institution was fiduciary.
22 Section 807. Deficiencies in Assets Held by Institution as
23 Fiduciary.--Whenever the court, in which the secretary has filed
24 the account of an estate of which an institution in his
25 possession was fiduciary, shall, in the manner provided by law,
26 rule that there is a deficiency in the funds, property, or
27 investments of such estate, or that the institution is liable to
28 surcharge in respect thereto, the amount determined by such
29 court to be due shall constitute a claim against the institution
30 and shall be presented in the same manner as other claims,
20020S1258B2053 - 64 -
1 except that it may be presented at any time within six months
2 after the appointment of a successor trustee or a substituted
3 fiduciary of the estate and the adjudication of the account of
4 such estate by the competent court. Such order or decree of such
5 court shall be conclusive as to the amount due, except for the
6 right of appeal provided by law. Any dispute as to the
7 classification or order of payment of such claim, as
8 distinguished from the amount, shall be adjudicated by the court
9 in which the certificate of possession is filed.
10 If the existence or amount of any such deficiency or
11 surcharge, or the liability of the institution therefor, is in
12 litigation but undetermined at the time dividends for claims
13 having no priority in order of payment over such claims are
14 being distributed, the secretary shall, upon notice of such fact
15 from the successor trustee or substituted fiduciary, withhold
16 and set apart a sufficient amount to pay the proportionate
17 dividend which will be due upon such undetermined claim if it is
18 finally adjudicated in favor of the estate of which the
19 institution was fiduciary.
20 Section 30. Article IX of the act is repealed.
21 Section 31. Sections 1001, 1002, 1003A, 1004, 1006, 1007 and
22 1010 of the act are amended to read:
23 Section 1001. Notice to Depositors[, Shareholders,] and
24 Other Creditors.--After filing a supplement to the certificate
25 of possession, setting forth his determination to liquidate the
26 affairs of an institution of which he has taken possession as
27 receiver, the secretary shall forthwith give notice of such fact
28 to all corporations or persons who appear upon the books of the
29 institution as, or who are otherwise known to the secretary to
30 be or claim to be, depositors or other creditors [and, in the
20020S1258B2053 - 65 -
1 case of a building and loan association, shareholders of such
2 institution]. He shall likewise give notice to any corporation
3 or person who, pursuant to the provisions of this act, has given
4 the secretary notice of his claim to the right of execution or
5 attachment against any assets, owned by, or legally in the
6 custody or possession of, the secretary as receiver of the
7 institution. Such notice shall be given at the addresses which
8 appear for such corporations or persons upon the books or other
9 records of the institution or, if none appear there, then at
10 their last known addresses. However, if it appears to be in the
11 best interests of the estate, the court may order the secretary
12 to substitute a single advertisement in a newspaper or
13 newspapers, for the individual notice to the corporations or
14 persons.
15 The notice to each depositor[, or, in the case of a building
16 and loan association, to each shareholder,] shall state the
17 amount which the books or other records of the institution show
18 to be due to such depositor [or shareholder]. It shall also
19 state that unless such depositor [or shareholder] shall, within
20 a specified time, present to the secretary for settlement, his
21 deposit or pass book, or other evidence of his account, showing
22 a different amount to be due, or unless such depositor [or
23 shareholder] shall, within a specified time from the date of
24 such notice, prove in the manner provided by this act that a
25 different amount is due, the amount shown to be due by the books
26 of the institution will be conclusively presumed to be correct,
27 unless the court, pursuant to the provisions of this act, grants
28 him an extension of time.
29 The notice to each creditor other than a depositor[, or in
30 the case of a building and loan association, other than a
20020S1258B2053 - 66 -
1 shareholder,] shall inform such creditor that he must present
2 his claim in the manner provided by this act, within a specified
3 time from the date of such notice, or else be permanently barred
4 from sharing in any distribution of the assets of the
5 institution, unless the court pursuant to the provisions of this
6 act, grants him an extension of time.
7 The secretary shall also advertise in a newspaper or
8 newspapers, as provided in this act, the fact that he has
9 determined to liquidate the affairs of the institution, and that
10 he has filed an inventory and appraisement in the office of the
11 prothonotary. Such advertisement shall state that all
12 depositors[, or in the case of building and loan associations,
13 all shareholders,] must prove their claims within a specified
14 period or be bound by the amount shown by the books or records
15 of the institution to be due them, and that any corporation or
16 person not appearing upon the books of the institution to be a
17 depositor[, or in the case of a building and loan association, a
18 shareholder,] and not presenting his pass book, or other
19 evidence of the state of his account, or otherwise presenting
20 his claim, will be permanently barred from sharing in any
21 distribution of the assets of the institution, unless the court,
22 pursuant to the provisions of this act, grants him an extension
23 of time. It shall also state that all creditors, other than
24 depositors[, or in the case of building and loan associations,
25 other than shareholders,] not proving their claims in the manner
26 provided by this act and within a specified period will likewise
27 be permanently barred from sharing in any distribution of the
28 assets of the institution, except where the court, pursuant to
29 the provisions of this act, grants to a creditor an extension of
30 time.
20020S1258B2053 - 67 -
1 The secretary shall specify as the last day upon which
2 depositors[,] and creditors[, and in the case of a building and
3 loan association, shareholders,] can present their claims, a
4 date not less than [one hundred twenty] sixty days after the
5 taking of possession of the institution by him as receiver,
6 provided that such date shall be at least thirty days after the
7 date of the sending of such notice. However, claims based upon
8 deficiencies in, or surcharges with respect to funds, property,
9 or investments which such institution held in a fiduciary
10 capacity may be presented at any time within [six months] sixty
11 days after the appointment of a substituted fiduciary of the
12 estate of which such funds, property, or investments were a part
13 and the adjudication of the account of such estate by the
14 competent court.
15 Section 1002. Proof of Claims of Depositors[, or, in
16 Building and Loan Associations, Shareholders].--Any depositor[,
17 or, in the case of a building and loan association, any
18 shareholder,] who disagrees with the amount shown by the books
19 or other records of the institution to be due to him, shall
20 present his claims to the secretary by presenting his deposit or
21 pass books, or other evidence of indebtedness, to the secretary,
22 within the time and in the manner designated by the secretary,
23 pursuant to the provisions of this act. Any such depositor [or
24 shareholder,] who shall not have received or shall have lost his
25 deposit or pass book or other evidence of indebtedness, or who
26 shall believe that the amount shown by such deposit or pass book
27 or other evidence of indebtedness to be due to him is incorrect,
28 shall, within the time designated by the secretary, present his
29 claim to the secretary by whatever method he shall designate.
30 Any depositor[, or, in the case of a building and loan
20020S1258B2053 - 68 -
1 association, any shareholder,] who shall not present his claim
2 within the designated time and in the manner provided by this
3 section, shall be bound by the amount appearing to be due to him
4 upon the books or records of the institution, or where the name
5 of such depositor [or shareholder] does [nor] not appear at all
6 upon the books or records of the institution, or appears on such
7 books or records but with no balance appearing to be due to him
8 by the institution, shall be permanently barred from sharing in
9 any distribution of the assets of the institution. However, the
10 court may, upon petition and adequate cause shown, permit any
11 depositor[, or, in the case of a building and loan association,
12 any shareholder,] to file his claim upon a later date, but no
13 claim shall in any event be allowed to be filed after the last
14 day for the filing of exceptions to the first account of the
15 secretary.
16 This section shall not, however, be construed to deprive any
17 such depositor [or shareholder] of any right of action at law or
18 in equity which he may have against an employe or former employe
19 of the institution, or upon the bond of such employe or former
20 employe, for any act committed by such employe which resulted in
21 such depositor's [or shareholder's] not appearing upon the books
22 of the institution, or appearing upon them but being credited
23 with an amount below that actually due.
24 The secretary shall prescribe the form for the proof of claim
25 of all depositors[, or, in the case of building and loan
26 associations, shareholders,] and for the affidavit to be
27 included therein. Whenever requested by any such depositor [or
28 shareholder] to prepare such proof of claim or to take the
29 affidavit thereto, the secretary shall do so without any charge
30 to such depositor [or shareholder].
20020S1258B2053 - 69 -
1 Section 1003. Proof of Claims of Creditors.--A. Creditors
2 other than depositors[, or in the case of a building and loan
3 association, other than shareholders,] shall not share in any
4 distribution of the assets of the institution, unless the
5 creditor, or someone for him, shall, within the time specified
6 by the secretary, pursuant to the provisions of this act,
7 present to the secretary a statement of his claim, together with
8 a copy of any book entries pertaining thereto, any note or other
9 instrument received as evidence thereof, and a list of any
10 collateral or agreement of pledge received in connection
11 therewith.
12 However, the court may, upon petition and adequate cause
13 shown, permit any creditor to file his claim upon a later date,
14 but no claim shall in any event be allowed to be filed after the
15 last day for the filing of exceptions to the first account of
16 the secretary.
17 The statement of a creditor's claim, required by this
18 section, shall be verified by affidavit in substantially the
19 following form:
20 "I, (name of claimant), do solemnly swear (or affirm) that
21 the above is a true statement of my claim against (name of
22 institution); that there are no credits or allowances against
23 this claim except as therein set forth; that there is no
24 collateral security for this indebtedness or any part thereof
25 held by me or by anyone else, other than as above set forth; and
26 that I am not the owner or the obligee, directly or indirectly,
27 of any contract of indemnity or insurance covering this claim,
28 except as set forth above."
29 If the creditor shall be a corporation, such affidavit shall
30 be made by the treasurer or assistant treasurer thereof, and if
20020S1258B2053 - 70 -
1 a partnership, by any member thereof. In either such case the
2 form of the affidavit shall be modified accordingly.
3 * * *
4 Section 1004. Allowance of Claims.--For the purposes of the
5 accounting provided for in this act, the secretary shall allow
6 the claims of depositors[, or, in the case of a building and
7 loan association, shareholders,] for the amounts shown to be due
8 to them upon the books or other records of the institution, or
9 for such other amounts as they shall, within the time and in the
10 manner provided by this act, prove to the satisfaction of the
11 secretary are due to them. He shall likewise allow the claims of
12 all other creditors, when presented within the time and in the
13 manner provided by this act, if he shall be satisfied that the
14 amounts claimed are rightfully due. He shall reject all other
15 claims of depositors[,] and other creditors[, and, in the case
16 of building and loan associations, shareholders].
17 Section 1006. Expenses of Administration.--Any reasonable
18 expenditure made by the secretary as receiver of an institution,
19 including any expense incurred in the management,
20 reorganization, consolidation, liquidation, or distribution of
21 the assets and affairs of the institution, and any compensation
22 paid to the deputy receiver or any other person employed to
23 assist the secretary in such management, reorganization,
24 consolidation, liquidation, or distribution, and to any deputy
25 attorney general, special deputy attorney general, assistant
26 deputy attorney general, or other attorney who has been assigned
27 by the [Department of Justice] Office of Attorney General to the
28 secretary to handle for him any legal business pertaining to the
29 affairs or property of such institution, shall be paid out of
30 the assets of the institution, provided it is included in any
20020S1258B2053 - 71 -
1 partial or final account filed by the secretary, pursuant to the
2 provisions of this act, and is approved by the court in which
3 such account is filed.
4 Where such expenses are incurred, or such compensation is
5 paid, for the benefit of the estate of more than one institution
6 in the possession of the secretary as receiver, an equitable
7 portion of such expenses or compensation shall be paid out of
8 the assets of each institution on whose behalf such expenditures
9 were made.
10 Section 1007. Partial or Final Account; Objections.--A. At
11 any time after the expiration of the period fixed by the
12 secretary, pursuant to the provisions of this act, for the
13 presentation of claims, he shall file a partial or final account
14 of his administration of the business and property of the
15 institution, duly verified by him under oath or affirmation, in
16 the office of the prothonotary.
17 If the secretary shall not file his first account within one
18 year after he takes possession of an institution, any
19 depositor[,] or other creditor[, or shareholder] of such
20 institution may petition the court to order the secretary to
21 file an account. The court may, in its discretion, grant or
22 refuse the petition.
23 The account shall present his administration of the estate,
24 including a statement of all receipts or expenditures by the
25 secretary, as receiver, a list of all claims which have been
26 allowed and a separate list of claims which have been objected
27 to or are disputed, showing as to all depositors[,] and other
28 creditors[, and, in the case of a building and loan association,
29 shareholders,] their names and addresses, the amounts due or
30 claimed to be due to them, and any priorities in the order of
20020S1258B2053 - 72 -
1 distribution granted to or claimed by them.
2 B. The secretary shall forthwith give written or printed
3 notice of such filing of an account to all corporations or
4 persons whom he knows to be, or to claim to be, depositors[,]
5 and other creditors[, and, in the case of building and loan
6 associations, shareholders,] of the institution, at the
7 addresses which respectively appear for them upon the books of
8 the institution, or if none appear there, at their last known
9 respective addresses. However, if it shall appear to be in the
10 best interests of the estate, the court may order the secretary
11 to substitute a single advertisement in a newspaper or
12 newspapers, for the individual notice to such corporations or
13 persons. Such notice shall also state that unless an exception
14 to the account or to any item therein is filed with the court
15 within thirty days from the date of the filing thereof, it will
16 be confirmed absolutely.
17 He shall likewise give notice to any corporation or person
18 who, pursuant to the provisions of this act, has given the
19 secretary notice of his claim to the right of execution or
20 attachment against any assets, owned by, or legally in the
21 custody or possession of, the secretary as receiver of the
22 institution.
23 He shall also advertise such notice in a newspaper or
24 newspapers as provided in this act, stating the date upon which
25 he has filed his partial or final account and the fact that all
26 exceptions to the account must be filed within thirty days from
27 the date of the filing of such account.
28 The secretary shall forthwith file with the court, under oath
29 or affirmation, a statement that he has, in the manner provided
30 by this act, sent both the notice of his determination to
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1 liquidate and the notice of his filing of an account to all
2 corporations or persons entitled thereto, whose names appear in
3 the account, at the addresses stated therein. He shall also file
4 the proofs of publication of the advertisements which he has
5 inserted, pursuant to the provisions of this act, which
6 respectively set forth his determination to liquidate and his
7 filing of an account.
8 C. The prothonotary shall not be under any duty to recopy or
9 otherwise record such account. He shall make no charge except
10 the regular fee for filing such or similar papers.
11 Section 1010. Confirmation of Account; Distribution of
12 Dividends.--A. If the secretary has approved all depositors'
13 claims[, or, in the case of building and loan associations, all
14 shareholders' claims,] as presented by them pursuant to the
15 provisions of this act, or if not presented, as they appear upon
16 the books or other records of the institution, and if no
17 exception has been filed to an account or to any item thereof
18 within thirty days after the filing of such account by the
19 secretary, the court shall confirm the account absolutely. If
20 any funds are available for distribution, the secretary shall
21 then declare and pay out of such funds a partial or a final
22 dividend, according to the priorities established by law.
23 If the secretary has rejected any such deposit or claim, or
24 if any such exception has been filed, the court shall confirm
25 the account as to all other matters and claims. The secretary
26 may then declare and pay out of the funds available for
27 distribution, if any, a dividend, according to the priorities
28 established by law. The dividend shall be calculated as if all
29 deposits and other claims were valid and approved. The
30 secretary, before paying any such dividend, shall set apart the
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1 proportion of such dividend which would be properly
2 apportionable to any claim which has been rejected by the
3 secretary, or to which an exception has been filed, if the
4 amount and the priority claimed were sustained by the court. If
5 any such claim shall be determined by the court to be valid, the
6 secretary shall pay to the corporation or person entitled
7 thereto the dividend which has been set apart in the manner
8 provided by this section. If any such claim shall be determined
9 by the court to be invalid, the dividend which has been set
10 apart in the manner provided by this section shall be
11 distributed in the order of the priorities established by law,
12 to those whose claims have been approved by the court.
13 B. The confirmation of any account after the adjudication of
14 all claims therein which have been rejected by the secretary, or
15 to which exceptions have been filed, and of all other exceptions
16 to such account, shall be conclusive as to all matters therein.
17 Except as otherwise provided in this act, no claim of any
18 depositor [or other creditor or, in the case of a building and
19 loan association, any shareholder,] shall be valid if not listed
20 and approved in the first account which has been filed.
21 The confirmation of the final account and distribution
22 thereunder shall discharge the secretary, the deputy receiver,
23 any other employe, and the legal counsel, as well as the surety
24 for any of them, from all further civil liability for any act
25 done in his official capacity as receiver, deputy receiver,
26 employe, or legal counsel of the institution.
27 C. If the receiver in all other respects is in a position to
28 close the receivership proceeding, the proposed closing is
29 sufficient grounds for the rejection of any remaining claim
30 based on an unliquidated or undetermined demand. The receiver
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1 shall notify the claimant of the intention to close the
2 proceeding. If the demand is not liquidated or determined before
3 the sixty-first day after the date of the notice, the receiver
4 may reject the claim.
5 Section 32. Section 1011 of the act is repealed.
6 Section 33. Sections 1012, 1013 and 1101 of the act are
7 amended to read:
8 Section 1012. Liquidation of Balance by Trustees.--Except in
9 the case of a [building and loan association] mutual
10 institution, the secretary shall dispose in the following manner
11 of any unliquidated assets of an institution of which he was
12 receiver, which are still in his possession after the filing and
13 confirmation of his final account, the payment in full of the
14 claims of all depositors, creditors, and other claimants which
15 have been approved by the court, the return to shareholders, pro
16 rata, of any amounts paid by them pursuant to an assessment made
17 by the secretary, under the provisions of this act, which have
18 proved unnecessary to pay in full the duly presented and
19 approved claims of depositors and other creditors, and the
20 distribution to shareholders of any cash balance remaining
21 thereafter.
22 The secretary shall call a meeting of all the shareholders of
23 the institution by giving them written notice at least thirty
24 days before the day fixed for the meeting. At such meeting, the
25 shareholders shall elect by ballot a trustee or trustees, who
26 shall complete the liquidation. A majority of the shares present
27 in person or by proxy shall be necessary to elect such trustee
28 or trustees. The secretary shall file one copy of the
29 proceedings of such shareholders' meeting in his office, and one
30 in the office of the prothonotary. Both copies shall be prepared
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1 by him under oath or affirmation.
2 If no trustee is elected in this manner on the day
3 designated, the secretary shall petition the court in which the
4 certificate of possession is filed for the appointment of a
5 trustee or trustees.
6 The trustee or trustees who are thus elected by the
7 shareholders or appointed by the court shall give bond to the
8 Commonwealth, in such amount, with such surety and under such
9 conditions as the court may direct. The secretary shall then
10 transfer to such trustee or trustees all the assets of the
11 institution which are still in his possession.
12 After such transfer by the secretary to a trustee or trustees
13 for the benefit of the shareholders, the institution shall have
14 no corporate powers or privileges whatsoever. The trustee or
15 trustees shall not succeed to any of its powers or privileges
16 except such as shall be necessary to the liquidation of the
17 remaining assets which have been transferred to such trustee or
18 trustees by the secretary.
19 Section 1013. Unclaimed Dividends.--Whenever, upon the audit
20 or adjudication of the final account of the secretary in
21 possession of an institution as receiver, there shall be and
22 remain in his possession any dividends which shall have been
23 awarded to any depositor or other creditor the whereabouts of
24 whom or of whose legal representatives the secretary has been
25 unable to ascertain, or any dividends which otherwise are by law
26 escheatable to the Commonwealth, he shall file in the court the
27 sworn statement required by law, and shall thereupon pay the
28 dividends into the State Treasury, through the Department of
29 Revenue, in accordance with the provisions of law, such moneys
30 to be subject to refund to any corporation or person entitled
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1 thereto, pursuant to the provisions of law.
2 This section shall not be construed to relieve the secretary
3 of any of the duties with respect to such unclaimed or
4 escheatable dividends imposed by law, to the extent applicable,
5 upon any receiver appointed by any court within this
6 Commonwealth.
7 Section 1101. Criminal Prosecutions.--Upon discovery, by
8 report or otherwise, of any alleged violation of any criminal
9 law of this Commonwealth, which relates to an institution, the
10 department [shall institute criminal proceedings in the manner
11 provided by law.] shall refer the matter to the proper criminal
12 enforcement authorities and notify other regulatory agencies.
13 SECTION 34. THE DEPARTMENT OF BANKING SHALL HAVE AUTHORITY <--
14 TO PROMULGATE REGULATIONS TO IMPLEMENT AND ADMINISTER THE
15 PROVISIONS OF THIS ACT. EXISTING REGULATIONS NOT CLEARLY
16 INCONSISTENT WITH THE PROVISIONS OF THIS ACT SHALL REMAIN IN
17 EFFECT UNTIL REPLACED, REVISED OR AMENDED.
18 Section 34 35. This act shall take effect immediately. <--
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