THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY D. WHITE, PILEGGI, SCHWANK, YUDICHAK, FOLMER, BOSCOLA, ALLOWAY, RAFFERTY, EARLL AND BAKER, JUNE 1, 2012

SENATOR CORMAN, APPROPRIATIONS, RE-REPORTED AS AMENDED, JUNE 11, 2012   

AN ACT

Amending the act of May 15, 1933 (P.L.565, No.111), entitled "An

act relating to the powers and duties of the Department of

Banking and the Secretary of Banking in exercising

supervision over, and taking possession of and conducting or

liquidating the business and property of, corporations,

associations, and persons receiving deposits or otherwise

transacting a banking business, corporations acting as

fiduciaries, and building and loan associations; providing

for the payment of the expenses of the Department of Banking

by supervised corporations, associations, or persons, and

appropriating the Banking Department Fund; authorizing the

Department of Banking, under certain circumstances, to

examine corporations, associations, or persons affiliated, or

having business transactions with supervised corporations,

associations or persons; authorizing appeals to the Supreme

Court, and prescribing and limiting the powers and duties of

certain other courts and their prothonotaries, registers of

wills, recorders of deeds, and certain State departments,

commissions, and officers; authorizing certain local public

officers and State departments to collect fees for services

rendered under this act; providing penalties; and repealing

certain acts and parts of acts," amending the title of the

act; further providing for conflicts of interest and penalty;

reorganizing the Department of Banking and the Pennsylvania

Securities Commission; and making related repeals.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  The title of the act of May 15, 1933 (P.L.565,

No.111), known as the Department of Banking Code, is amended to

read:

AN ACT

Relating to the powers and duties of the Department of Banking

and Securities and the Secretary of Banking and Securities in

exercising supervision over, and taking possession of and

conducting or liquidating the business and property of,

corporations, associations, and persons receiving deposits or

otherwise transacting a banking business, corporations acting

as fiduciaries, and building and loan associations; providing

for the payment of the expenses of the Department of Banking

by supervised corporations, associations, or persons, and

appropriating the Banking Department Fund; authorizing the

Department of Banking, under certain circumstances, to

examine corporations, associations, or persons affiliated, or

having business transactions with supervised corporations,

associations or persons; authorizing appeals to the Supreme

Court, and prescribing and limiting the powers and duties of

certain other courts and their prothonotaries, registers of

wills, recorders of deeds, and certain State departments,

commissions, and officers; authorizing certain local public

officers and State departments to collect fees for services

rendered under this act; regulating securities; providing

penalties; and repealing certain acts and parts of acts.

Section 2.  Section 1 of the act is amended to read:

Section 1.  Short title.--This act shall be known, and may be

cited, as the "Department of Banking and Securities Code."

Section 3.  The definitions of "department," "secretary,"

"licensee" and "institution" in subsection A of section 2 of the

act, amended December 9, 2002 (P.L.1604, No.209) and June 29,

2009 (P.L.46, No.7), are amended and the section is amended by

adding definitions to read:

Section 2.  Definitions.--A.  The following terms shall be

construed in this act to have the following meanings, except in

those instances where the context clearly indicates otherwise:

"Department."  The Department of Banking and Securities of

this Commonwealth.

"Secretary."  The Secretary of Banking and Securities of this

Commonwealth, or his duly authorized deputy or representative.

* * *

"Licensee."  A corporation, person or any other type of

business entity required to be licensed by, registered with or

partially exempt from being licensed by the Department of

Banking and Securities under any law of this Commonwealth

administered by the Department of Banking and Securities. The

term does not include a licensee or registrant under the act of

December 5, 1972 (P.L.1280, No.284), known as the "Pennsylvania

Securities Act of 1972," unless otherwise provided in this act.

* * *

"Institution."  A corporation or a person, as defined in this

section, or other type of business entity, including, but not

limited to, a mutual holding company, which is or was subject to

the supervision of the department. The term does not include

credit unions or licensees unless specifically stated otherwise

and does not include a licensee or registrant under the act of

December 5, 1972 (P.L.1280, No.284), known as the "Pennsylvania

Securities Act of 1972," unless otherwise provided in this act.

* * *

"Association."  Any mutual or permanent reserve fund stock

savings association organized under this act the act of December

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14, 1967 (P.L.746, No.345), known as the "Savings Association

Code of 1967," and includes also any building and loan

association or savings and loan association heretofore organized

under or by virtue of any other act or law of this Commonwealth,

as defined in section 102(3) of the act of December 14, 1967

<--

(P.L.746, No.345), known as the "Savings Association Code of

1967."

"Commission."  The Banking and Securities Commission of the

department established in section 1121-A(a) of this act.

"Fund."  The Banking Fund redesignated in section 1113-A of

this act as a continuation of the Banking Department Fund.

Section 4.  The act is amended by adding a section to read:

Section 17.  Act not Applicable to Securities Licensees and

Registrants.--Unless otherwise expressly provided, this act

shall not apply to, and shall not affect, the act of act of May

5, 1921 (P.L.374, No.176), referred to as the Investment

Business Licensing Law, the act of December 5, 1972 (P.L.1280,

No.284), known as the "Pennsylvania Securities Act of 1972," or

the act of March 3, 1976 (P.L.42, No.19), known as the "Takeover

Disclosure Law."

Section 5.  Section 303 of the act, amended December 9, 2002

(P.L.1604, No.209), is repealed:

[Section 303.  Conflicts of Interest; Penalty.--A.  For

purposes of this section, "institution" shall include a licensee

or credit union. The term includes credit unions unless

specifically stated otherwise.

B.  Except as provided in subsection E, neither the

secretary, nor any officer or employe of the department, nor any

deputy receiver or employe of the secretary, as receiver, shall

receive any sum of money or any property as a gift or loan or

otherwise, directly or indirectly from any institution or from

any officer, director or employe thereof. This subsection shall

not apply to loans to employes of the department who function in

a clerical or nondecision making capacity with regard to

institutions, including, but not limited to, clerks, typists and

stenographers.

C.  Neither the secretary, nor any officer or employe of the

department, nor any deputy receiver or employe of the secretary,

as receiver, shall hold any office or position in, have any

direct or indirect pecuniary interest in, or direct or

indirectly own shares or securities issued by an institution,

except that the secretary or any department employe or officer

may continue to own shares or securities issued by an

institution other than a credit union which are owned by the

secretary on the date of his appointment, or by other department

employes on the date of commencement of employment with the

department, and all shares or securities distributed by the

institution and received by any of them on account of the shares

or securities so owned subject to the penalty provisions of this

section. All department employes subject to this subsection

shall provide the department with written notice of his or her

ownership of any such shares or securities prior to or upon his

or her commencement of employment with the department.

Notwithstanding the foregoing, the department may impose terms

on the employe or officer, including, but not necessarily

limited to, requiring the employe or officer to place into a

blind trust, sell or divest of such shares or securities as a

condition of obtaining or continuing employment with the

department, provided such sale or divestment is deemed to be

reasonably necessary under the circumstances, or to recuse

himself or herself from being involved in any department

decision that pertains solely to the institution of which he or

she owns shares or securities.

D.  In the event of such ownership of shares or securities by

the secretary, he shall disclose the ownership, amount and date

of acquisition of such shares or securities in writing to the

Secretary of the Commonwealth immediately after his appointment

and shall not during his term of office participate in any

decision or take any action concerning an institution in which

he owns such shares or securities other than actions or

decisions generally applicable to institutions or classes of

institutions. In the event of disqualification of the secretary

from participation in any decision or action for such reason,

all authority vested in him or her by law shall, for the purpose

of such decision or action, be exercised by the appropriate

deputy secretary in accordance with their jurisdictional

responsibilities.

E.  The prohibitions of subsections B and C shall not apply

to:

(1)  A first lien mortgage loan upon the home of the

secretary or other employe of the department, or an indirect

motor vehicle loan originated under the act of June 28, 1947

(P.L.1110, No.476), known as the "Motor Vehicle Sales Finance

Act," in any and all such mortgage loans or indirect motor

vehicle loans which may be originated by an institution other

than a credit union, where such loan is granted upon the same

terms and in the same manner as provided by law for mortgage

loans or indirect motor vehicle loans granted by such

institutions. All persons subject to this subsection shall

provide the department with written notice of any loan

referenced in this subsection and its terms within thirty days

of receiving the loan. Notwithstanding the foregoing, the

department may impose terms on the employe or officer,

including, but not necessarily limited to, requiring such person

to recuse himself or herself from being involved in any

department decision that pertains solely to the institution from

which he or she received a loan.

(2)  A deposit account with an institution other than a

credit union, provided that such account shall not be

intentionally overdrawn and the secretary, department employe or

officer does not participate in any vote as a shareholder or

member of such institution.

F.  A violation of the prohibitions of this section by the

secretary, an officer or employe of the department, a deputy

receiver or an employe of the secretary as receiver shall

constitute sufficient ground for removal from office. In

addition, any such person who willfully or knowingly commits

such violation shall be guilty of a misdemeanor and shall, upon

conviction thereof, be subject to imprisonment for a period not

exceeding one year, or a fine not exceeding one thousand dollars

($1,000.00), or both; and shall be subject to a further fine

equal to the amount of money or value of the property which such

individual has directly or indirectly received in violation of

this section.]

Section 6.  The act is amended by adding an article to read:

ARTICLE XI-A

BANKING AND SECURITIES

SUBARTICLE A

PRELIMINARY PROVISIONS

Section 1101-A.  Scope.

This article relates to the regulation of banking and

securities.

Section 1102-A.  Purpose.

The purpose of this article is to consolidate regulation of

banking and securities under the department.

SUBARTICLE B

ADMINISTRATION

Section 1111-A.  Agency.

The department shall regulate banking and securities.

Section 1112-A.  Continuation.

(a)  Functions.--The department shall assume functions under

subsection (b). A securities division is established as a

division of the department to perform the functions transferred

to the department under subsection (b). The secretary shall

appoint a deputy secretary to oversee the administration of

these functions.

(b)  Transfers.--The following functions of the Pennsylvania

Securities Commission are transferred to the department:

(1)  Administration of the act of May 5, 1921 (P.L.374,

No.176), referred to as the Investment Business Licensing

Law.

(2)  Imposition of fees under section 615-A of the act of

April 9, 1929 (P.L.177, No.175), known as The Administrative

Code of 1929.

(3)  Administration of the act of December 5, 1972

(P.L.1280, No.284), known as the Pennsylvania Securities Act

of 1972.

(4)  Administration of the act of March 3, 1976 (P.L.42,

No.19), known as the Takeover Disclosure Law.

Section 1113-A.  Fund.

(a)  Continuation.--The Banking Department Fund is

redesignated as the Banking Fund.

(b)  Sources.--The sources of the fund are as follows:

(1)  Money collected or received by the department

arising from:

(i)  fees, assessments, charges and penalties

relating to the regulation of associations, credit

unions, institutions and licensees;

(ii)  the sale by the Department of General Services

of unserviceable property originally paid for out of the

fund; and

(iii)  similar sources.

(2)  The sources of the fund shall not include fees,

assessments, charges and penalties generated from:

(i)  the act of December 5, 1972 (P.L.1280, No.284),

known as the Pennsylvania Securities Act of 1972; or

(ii)  the act of March 3, 1976 (P.L.42, No.19), known

as the Takeover Disclosure Law.

(c)  Use.--The fund shall be used by the department to pay

its expenses, including the following:

(1)  Salaries of the secretary, the deputies, the

examiners, the other employees of the department and

attorneys.

(2)  Rental and other expenses for offices, rooms, garage

space and other accommodations, regardless of the

municipality in which they are located, occupied by the

department. This paragraph excludes offices, rooms, garage

space and accommodations in the Capitol Complex.

(3)  Premiums for workers' compensation insurance

covering the officers and employees of the department.

(4)  Premiums for surety bonds for officers and employees

of the department required by law to furnish the bonds.

(5)  Furniture, stationery, materials, supplies and

overhead expenses of the department.

(d)  Department of General Services.--Purchases and leases

under subsection (c) shall be made through the Department of

General Services, as agent. Contracts of insurance and surety

bonds under subsection (c) shall be placed through the

Department of General Services, as agent.

(e)  Restrictions on appropriations.--

(1)  For fiscal years beginning after June 30, 1995, and

ending before July 1, 2012, the General Assembly shall

appropriate funds as it determines to be necessary from the

fund for use by the department or other Commonwealth

agencies.

(2)  For fiscal years beginning after June 30, 2012, the

General Assembly shall appropriate the funds as it determines

to be necessary from the fund for use only by the department

and not for any other Commonwealth agency.

(f)  Warrant.--Money in the fund appropriated to the

department shall be paid out upon warrant of the State Treasurer

drawn after requested by the secretary.

(g)  Institution Resolution Account.--

(1)  The Institution Resolution Account is established as

a restricted account within the fund.

(2)  The sources of the account are as follows:

(i)  An amount determined by the secretary each

fiscal year based upon economic and regulatory conditions

from assessments, fees and administrative penalties

generated from statutes administered by the department

other than:

(A)  the act of December 5, 1972 (P.L.1280,

No.284), known as the Pennsylvania Securities Act of

1972; or

(B)  the act of March 3, 1976 (P.L.42, No.19),

known as the Takeover Disclosure Law.

(ii)  Amounts received from court litigation

involving the department.

(3)  The secretary may use the money in the account to

pay for costs associated with any of the following:

(i)  Resolution of an institution or an association,

under Article X. Money under this subparagraph may be

used in lieu of paying expenses from the assets of an

institution or association under section 1006.

(ii)  Seizure and liquidation of a credit union under

17 Pa.C.S. § 503 (relating to regulation by department).

Section 1114-A.  Conflicts of interest.

Appointed officials and employees of the department shall

only be subject to:

(1)  section 605 of the act of December 5, 1972

(P.L.1280, No.284), known as the Pennsylvania Securities Act

of 1972; and

(2)  statutes, regulations and statements of policy,

generally governing the ethical conduct of appointed

officials and State employees in regard to conflicts of

interest and other ethics issues.

SUBARTICLE C

COMMISSION

Section 1121-A.  Organization.

(a)  Establishment.--The Banking and Securities Commission is

established within the department.

(b)  Composition.--The commission shall consist of the

following commissioners:

(1)  The secretary, who may be represented by a designee.

(2)  A designee of the Governor.

(3)  Three individuals appointed by the Governor with the

advice and consent of a majority of the members of the

Senate.

(c)  Terms.--

(1)  The secretary shall serve ex officio.

(2)  A commissioner under subsection (b)(2) or (3) shall

serve at the pleasure of the Governor and until a successor

is appointed and qualified.

(d)  Officers.--The Governor shall designate a commissioner

under subsection (b)(3) as chair. The secretary or the

secretary's designee shall serve as the vice chair.

(e)  Meetings.--The commission shall convene:

(1)  on a schedule determined by the secretary; but

(2)  at least every three months.

(f)  Quorum.--A majority of serving commissioners constitutes

a quorum. Action taken at a meeting at which a quorum is present

shall be the lawful act of the commission for all purposes.

(g)  Compensation and expenses.--

(1)  A commissioner under subsection (b)(1) or (2) shall

not receive an additional salary in compensation for

membership on the commission.

(2)  A commissioner under subsection (b)(3) shall receive

an annual salary of $36,000, subject to annual cost-of-living

increases under section 3(e) of the act of September 30, 1983

(P.L.160, No.39), known as the Public Official Compensation

Law.

(3)  All commissioners shall be reimbursed for reasonable

and necessary expenses incurred in the performance of their

duties in accordance with 4 Pa. Code Ch. 40 (relating to

travel and subsistence).

Section 1122-A.  Powers and duties.

The commission has the following powers and duties:

(1)  Be the final adjudicator of every administrative

proceeding which requires the appointment of a hearing

officer and which is instituted by the department under any

law administered by the department. An action under this

paragraph is subject to 2 Pa.C.S. Chs. 5 Subch. A (relating

to practice and procedure of Commonwealth agencies) and 7

Subch. A (relating to judicial review of Commonwealth agency

action).

(2)  Perform functions authorized by the secretary.

SUBARTICLE D

TRANSITIONAL PROVISIONS

Section 1131-A.  Transition and implementation.

In order to facilitate the reorganization under this article,

all of the following shall occur:

(1)  Reorganization. The following shall apply:

(i)  The secretary shall review and assess the

Pennsylvania Securities Commission's organizational

structure for an October 1, 2012 reorganization under

this article. This subparagraph includes personnel and

staffing, budgetary needs and considerations, operations,

and statutory and regulatory enforcement requirements,

for the purpose of determining the organizational

structure and staffing.

(ii)  In accordance with the review and assessment

under subparagraph (i), by August 31, 2012, the secretary

shall submit a reorganization plan to carry out the

reorganization under this article to the Executive Board

for approval under section 709(b) and (h) of the act of

April 9, 1929 (P.L.177, No.175), known as The

Administrative Code of 1929.

(iii)  If the Executive Board approves the

reorganization plan under subparagraph (ii), the plan

shall take effect September 28, 2012.

(2)  Personnel actions. Notwithstanding the

reorganization plan required under paragraph (1)(iii), after

June 30, 2012, no member of the Pennsylvania Securities

Commission or Pennsylvania Securities Commission personnel

shall hire new staff or promote or terminate existing staff

without the approval of the secretary.

(3)  Budgeting and procurement. After June 30, 2012, and

before October 1, 2012, without the approval of the

secretary, the Pennsylvania Securities Commission may not:

(i)  expend funds, other than for payroll; or

(ii)  procure goods and services.

SUBARTICLE E

MISCELLANEOUS PROVISIONS

Section 1141-A.  References.

In statutes, regulations and orders, a reference to the

Pennsylvania Securities Commission shall be deemed a reference

to the department.

Section 7.  Repeals are as follows:

(1)  The General Assembly declares as follows:

(i)  The repeal under paragraph (2)(i) is necessary

to effectuate the addition of section 1113-A of the act.

(ii)  The repeal under paragraph (2)(ii) is necessary

to effectuate section 1121-A(g)(2) of the act.

(iii)  The repeal under paragraph (2)(iii) is

necessary to effectuate the addition of section 1121-A of

the act.

(2)  The following acts and parts of acts are repealed:

(i)  Section 1605 of the act of April 9, 1929

(P.L.177, No.175), known as The Administrative Code of

1929.

(ii)  Section 601.1 of the act of December 5, 1972

(P.L.1280, No.284), known as the Pennsylvania Securities

Act of 1972.

(iii)  As much of the definition of "independent

agency" in section 102 of the act of October 15, 1980

(P.L.950, No.164), known as the Commonwealth Attorneys

Act, as refers to the Pennsylvania Securities Commission.

(3)  The following parts of acts are repealed insofar as

they are inconsistent with this act:

(i)  Section 209 of the act of June 7, 1923 (P.L.498,

No.274), known as The Administrative Code.

(ii)  Sections 206 and Article XXVIII-B of The

Administrative Code of 1929.

(iii)  Section 601 of the Pennsylvania Securities Act

of 1972.

(iv)  Section 201 of the Commonwealth Attorneys Act.

Section 8.  Continuation is as follows:

(1)  The addition of section 1112-A(b)(3) of the act

effectively continues the act of December 5, 1972 (P.L.1280,

No.284), known as the Pennsylvania Securities Act of 1972, 

<--

and the act of March 3, 1976 (P.L.42, No.19), known as the

Takeover Disclosure Law. The following apply:

(i)  Except as otherwise provided in the act, all

activities initiated under the Pennsylvania Securities

Act of 1972 or the Takeover Disclosure Law shall continue

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and remain in full force and effect and may be completed

under section 1112-A(b)(3) of the act.

(ii)  Resolutions, orders, regulations, rules and

decisions which were made under the Pennsylvania

Securities Act of 1972 or the Takeover Disclosure Law and

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which are in effect on October 1, 2012, shall remain in

full force and effect until revoked, vacated or modified

under section 1112-A(b)(3) of the act.

(iii)  Contracts, obligations and agreements entered

into under the Pennsylvania Securities Act of 1972 or the

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Takeover Disclosure Law are not affected nor impaired by

the transfer under section 1112-A(b)(3) of the act.

(2)  (Reserved).

Section 9.  This act shall take effect as follows:

(1)  The following provisions shall take effect

immediately:

(i)  Section 7(1) of this act.

(ii)  Section 8 of this act.

(iii)  This section.

(2)  The addition of Subarticles A and D of Article XI-A

of the act shall take effect July 1, 2012, or immediately,

whichever is later.

(3)  The remainder of this act shall take effect October

1, 2012.