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This file was generated by Descript 

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Samantha: Hello, this is Samantha Shares.

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This episode covers N C U A’s Authority
to issue cease and desist orders as

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outlined in its enforcement manual.

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The following is an audio version
of that portion of the manual.

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This podcast is educational
and is not legal advice.

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We are sponsored by Credit Union
Exam Solutions Incorporated, whose

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team has over two hundred and
Forty years of National Credit

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Union  Administration experience.

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We assist our clients with N C
U A so they save time and money.

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If you are worried about a recent,
upcoming or in process N C U A

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examination, reach out to learn how they
can assist at Mark Treichel DOT COM.

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Also check out our other podcast called
With Flying Colors where we provide tips

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on how to achieve success with N C U A.

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And now cease and desist orders.

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1.

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What is a Cease and Desist Order?

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A Cease and Desist (C AND D) Order
normally requires the credit union

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to stop illegal or unsafe or unsound
activities which caused or is likely

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to cause more than a minimal financial
loss to, or have a significant adverse

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effect on, the insured credit union.

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A document called Notice of Charges and
Hearing sets out the specific charges and

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statement of facts supporting the charges.

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The Notice also arranges for
an administrative hearing.

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The C AND D contains the
required corrective actions.

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The C AND D action is designed to
address only actions necessary to

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correct the most significant items.

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A C AND D Order can be issued
against an insured credit union or

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an institution-affiliated party.

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The term institution-affiliated
party means any of the following:

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►		Any committee member, director,
officer, or employee of, or agent

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for, an insured credit union.

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►		Any consultant, joint venture partner, and
any other person as determined by the N C

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U A Board who participates in the conduct
of the affairs of an insured credit union.

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►		Any independent contractor who knowingly
or recklessly participates in any

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violation of any law or regulation,
any breach of fiduciary duty, or

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any unsafe or unsound practice.

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The types of violations most likely to
be remedied by a C AND D Order include:

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►	Failure to maintain
adequate books and records.

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►	Deficient appraisal reports.

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►	Transactions involving
conflicts of interest.

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►	Inadequate due diligence.

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►	Inadequate control and
oversight of operations.

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There is a great deal of flexibility
in what actions N C U A may require.

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In addition to ordering a cessation
of certain activities, a C AND

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D Order may require affirmative
corrective action, including:

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►	Making restitution or provide
reimbursement, indemnification,

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or guarantee against loss
under specific conditions.

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►	Restricting growth.

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►	Rescinding an agreement or contract.

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►	Disposing of any loan or asset.

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►	Employing qualified officers or employees.

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►	Taking such other action N C U
A determines to be appropriate.

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Orders to Cease and Desist
are issued pursuant to the FCU

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Act section206(e), 12 U.S.C.

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section1786(e).

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The provisions for the C AND D Order
are set out in article-by-article

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form and prescribe those restrictions
and corrective and remedial measures

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necessary to correct deficiencies or
violations in the credit union and

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return it to a safe and sound condition.

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Violations of a C AND D Order can
provide the legal basis for assessing

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civil money penalties (CMPs) against
directors, officers, and other

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institution-affiliated parties.

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A C AND D Order may also be enforced
through application to a U.S.

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district court.

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Moreover, a willful violation of a
Final C AND D Order is itself grounds

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for conservatorship under the FCU
Act section206(h)(1)(D), 12 U.S.C.

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section1786(h)(1)(D).

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There are three types of cease and
desist orders available to N C U A:

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a.

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Consent Order

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A Consent Order is an Order to Cease and
Desist that is entered into and becomes

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final through the board of directors'
execution of a Stipulation and Consent

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document on behalf of the credit union.

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This type of order also requires
the issuance of a Notice of Charges.

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The N C U A Board issues the
Consent Order without the need

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for an administrative hearing.

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The Consent Order becomes effective
at the time specified in the Order.

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b.

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Final (Permanent) Cease and Desist Order

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Aside from its title, a Final C AND
D Order is identical in form and

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legal effect to a Consent Order.

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However, a Final C AND D Order is imposed
on an involuntary basis after issuance

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of a Notice of Charges, a hearing
before an administrative law judge,

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and a final decision and order
issued by the N C U A Board.

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A Final C AND D Order is effective 30
days after service upon the credit union.

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Any Final C AND D Order is
subject to review by a U.S.

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Court of Appeals.

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c.

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Temporary Cease and Desist Order

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A Temporary C AND D Order is an
interim order issued by the N C U

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A pursuant to its authority under
the FCU Act section206(f), 12 U.S.C.

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section1786(f), and is used to
impose measures immediately pending

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resolution of a Final C AND D Order.

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Such orders are typically used
only when immediately necessary

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to protect the credit union
against ongoing or expected harm.

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A Temporary C AND D Order
may be challenged in U.S.

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District Court within 10 days of issuance,
but it is effective upon issuance and

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remains in effect unless overturned by the
court or until a final order is in place.

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To issue a temporary order, N C
U A must also issue a Notice of

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Charges initiating a proceeding
to obtain a Final C AND D Order.

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In order to issue a Temporary C
AND D Order, N C U A must determine

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that the violation or threatened
violation or the unsafe or unsound

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practice(s) is likely to either:

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►	Cause insolvency or significant
dissipation of assets or earnings.

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►	Weaken the condition of the credit
union or otherwise prejudice the

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interest of the credit union's members.

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The FCU Act section206(f)(3), 12 U.S.C.

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section1786(f)(3), provides for
the issuance of a Temporary C AND D

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Order when an insured credit union's
books and records are so incomplete

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or inaccurate that the financial
condition of the credit union or

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details or the purpose of any material
transaction can not be determined.

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This section also applies when a
credit union does not provide adequate

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access to the books and records.

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2.

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What are the grounds for issuance
of a Cease and Desist Order?

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The grounds for a cease and
desist action are set forth in

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the FCU Act section206(e)(1), 12

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U.S.C.

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section1786(e)(1).

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A C AND D Order can be issued
if any insured credit union or

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institution-affiliated party is either:

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►		Engaging in or has engaged in, or the
examiner has reasonable cause to believe

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that the credit union or the persons
involved are about to engage in, an unsafe

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or an unsound practice in conducting
the business of the credit union.

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►		Violating or has violated, or the examiner
has reasonable cause to believe that

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the credit union or persons involved
are about to violate a law, a rule,

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a regulation, any condition imposed
in writing by the N C U A Board, or

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any written agreement entered into
with the N C U A Board, as long as the

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agreement has been published in
accordance with the FCU Act 206(s), 12

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U.S.C.

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section section1786(s).

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The FCU Act section206(q)(3), 12 U.S.C.

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section1786(q)(3), requires that the N C
U A shall issue a cease and desist order

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requiring correction of certain Bank
Secrecy Act problems, such as failure to

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establish a program or failure to correct
a problem with its procedures that have

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previously been identified by an examiner.

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3.

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How are Cease and Desist Orders processed?

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N C U A Rules and Regulations
section747, Subpart A, contains the

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rules and regulations governing cease
and desist administrative hearings.

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a.

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Delegation of Authority

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N C U A Delegation of Authority
SUP 8 provides regional directors,

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with the prior concurrence from
General Counsel, the authority to:

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(1)	Issue Notice of Charges
and Hearing for C AND D orders.

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(2)	Issue and remove Temporary C
AND D Orders pending completion

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of the administrative procedures.

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The N C U A Board must approve
the issuance, modification, and

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termination of Final C AND D Orders.

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b.

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Documentation Needed

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This section is redacted.

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c.

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Mechanics for Final (permanent) Cease
and Desist Order and Consent Order

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Final C AND D Orders are
processed in the following manner:

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1.

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Notice of Charges is issued
setting out charges and statement

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of facts supporting charges.

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Notice fixes a time and place for
a hearing between 30 and 60 days.

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2.

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Respondent may consent, in which case a
final order is issued by the Board without

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the need for an administrative hearing.

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If no consent, a hearing is held before
an Administrative Law Judge (ALJ).

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3.

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ALJ sends Recommended Decision and
hearing record to the N C U A Board.

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4.

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Within 90 days the Board must
render its final decision.

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The Board may disagree with
the ALJ, but the decision must

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be supported by the evidence.

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5.

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Appeal by the respondent,
within 30 days after service

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of the final order, to the U.S.

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Court of Appeals.

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The respondent must prove N C U A acted
in an arbitrary and capricious manner.

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The Order is in effect unless
stayed or modified by the court.

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6.

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Order is effective 30 days
after service on respondent.

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Violation of Order could result
in civil money penalties of up

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to one million dollars per day.

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d.

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Mechanics for Temporary
Cease and Desist Order

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Temporary C AND D Orders are
processed in the following manner:

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1.

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The regional director, with GC
concurrence, issues Temporary Cease and

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Desist Order, usually along with the
Notice of Charges and Hearing which starts

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the normal C AND D administrative process.

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2.

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The administrative process for the
Final Cease and Desist Order continues

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while the credit union is subject
to the temporary restrictions.

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Even if a court modifies or lifts the
temporary order, the Notice of Charges

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and Hearing is still in effect and the
administrative process goes forward.

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e.

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Violations of Cease and Desist Orders

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If an institution or individual
fails to comply with a final

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order, N C U A may seek enforcement
through federal district court.

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If the court determines that a
violation, threatened violation, or

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failure to obey has occurred, by law
the court must enforce the order.

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In addition, any credit union or
individual that violates the terms of

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any final C AND D can be ordered by N C
U A to pay a civil money penalty of up

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to one million dollars  a day for each
day the violation continues, provided

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specific statutory criteria are met.

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f.

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Removing Cease and Desist Orders

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The N C U A Board may withdraw
a C AND D at any time during

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the administrative process.

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A Temporary C AND D Order terminates
automatically when the charges in the

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notice initiating the proceeding for
the Final C AND D Order are dismissed by

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the agency or when a Final C AND D Order
against the same party becomes effective.

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If the N C U A Board approved the
issuance of the C AND D action,

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the removal action will need to
be approved by the N C U A Board

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This concludes the N C U A enforcement
manual on Cease and desist orders.

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If your Credit union could use assistance
with your exam, reach out to Mark Treichel

00:12:14.394 --> 00:12:17.154
on LinkedIn, or at mark Treichel dot com.

00:12:17.704 --> 00:12:20.324
This is Samantha Shares and
we Thank you for listening.