Guidance Regarding Indemnification Agreements And Payments

Guidance Regarding Indemnification Agreements And Payments

The choice of reports in an OD policy should be based on a thorough analysis of costs and benefits, and an important reflection is the potential impact on directors and executives, which could result from exclusions. The Federal Reserve is asking each board member and each executive to understand the answers to the following questions regarding the reports of an OD policy, particularly with respect to extensions and changes to existing guidelines: reserve banks should distribute this letter to all covered financial institutions in their districts and to appropriate supervisory staff. Please ask questions about this letter to: Conni L. Allen, Special Counsel/Manager, Division of Supervision and Regulation at (202) 912-4334 or Jason Gonzalez, Senior Special Counsel, Legal Division at (202) 452-3274. In a letter of supervision, the Federal Reserve Board reminds member banks and holding companies of the compensation restrictions imposed by Section 18 (k) of the Federal Deposit Insurance Act, added by the 1990 Crime Control Act, and the provisions of the Federal Deposit Insurance Corporation. The legislation aims to preserve the deterrent effects of administrative enforcement by ensuring that those subject to final enforcement are borne by the costs of judgments, fines and the resulting legal costs, and that the assets of financial institutions are protected. There are a few instances where financial institutions may believe that compensation does not apply properly, or the RDFI seeks additional insurance from the ODFI. These situations may include cases where the initial ACH entry was not defective; The total amount of the original ACH entry is not available. or funds are returned outside the ACH network.

In cases where a written request and compensation are sought, Nacha encourages financial institutions to use the following compensation agreement, instead of negotiating independently and without singlos the terms of any claim for return of funds. The ODFI, which is requesting the return of the funds, should provide the RDFI with a compensation agreement and insert correct information in all the documents indicated. The compensation agreement should be signed by a person entitled to conclude the agreement on behalf of ODFI. A RDFI is not required to take action in response to obtaining an ODFI compensation agreement. Member State banks and holding banks should review their statutes and all outstanding compensation agreements and insurance policies to ensure that they comply with the requirements of federal and federal law. In the event that a member bank or a state holding bank does not take appropriate steps to bring its compensation provisions into compliance with federal laws and regulations, appropriate follow-up action may be taken. Applications involving banks or bank holding companies with compensation problems identified as part of the monitoring process are audited by Federal Reserve staff to verify compliance with federal laws and regulations. In addition, holding bank companies issue securities to the public as part of a prospectus declared effective by the United States.

The Securities and Exchange Commission should note that sec S-K (17 CFR 229.512) requires: that the prospectus contains the following statement: To the extent that compensation for debts arising from the Securities Act of 1933 may be authorized for directors, senior executives or persons controlling the registrant, the registrant has been informed that such compensation is, according to the SEC, contrary to public policy as set out in the law and, therefore, unenforceable. Nacha publishes the attached form entitled “Compensation Agreement – Request for Restitution of Funds from ach Entry” (“Compensation Agreement”) for use by financial institutions in certain situations where an ODFI seeks restitution of funds from an ACH transaction, and the RDFI wants a written decompensation in addition to the compensation contained in the rules of operation of nacha (“rules”

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