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Insurance Corporation (FDIC) in two respects: (1) the FDIC was given broad authorityover federally insured banks and savings associations; and (2) the FDIC was givenpower to bring enforcement actions against any “institution-affiliated party,” which isdefined to include, among other things, any director, officer, employee or controllingstockholder (other than a holding company) of an insured depository institution.In addition to administrative remedies such as issuing cease and desist orders,suspension or removal from office, and prohibition orders, FIRREA empowers theFDIC to impose civil money penalties against institution-affiliated parties, includingindividuals who have left the institution, or individuals associated with institutionsthat are now closed. FIRREA sets forth three levels of civil money penalties that maybe imposed against an institution-affiliated party, ranging from less than $5,000to $1 million per day for continuing violations. Criminal penalties may range from$100,000 per day and one year’s imprisonment to $1 million per day and 20 years’imprisonment. These penalties also apply to violations of anti-tying provisions of theBank Holding Company Act, the Change in Bank Control Act, affiliate transactionrestrictions, and the National Bank Act.Statutory and common laws governing the responsibilities of directors of financialinstitutions vary from state to state. Historically, a director’s acts or omissions weretested against an ordinary prudent person standard. However, at least 43 states haveenacted statutes permitting corporations to adopt charter provisions that limit oreliminate the liability of directors (and, in some states, officers) for breach of the dutyof care. FIRREA, however, limits the ability of depository institutions to eliminate adirector’s liability for gross negligence.“Functional regulation”The Gramm-Leach-Bliley Act of 1999 changed how depository institutions and theirholding companies and affiliates are regulated. The Gramm-Leach-Bliley Act promotes“functional regulation,” meaning that traditional depository institution activitiesare regulated by depository institution regulatory agencies, securities activities areregulated by the Securities and Exchange Commission (SEC), insurance activities areregulated by the states, and so on.Many depository institutions offer securities, mutual funds and other types ofinvestments to customers as alternatives to traditional deposit instruments. Customersmay misunderstand the nature of non-deposit products because the products are oftensold within the institution’s premises by the institution’s employees. In many instances,personnel are required to register as brokers (or dealers) with the SEC and NationalAssociation of Securities Dealers. Moreover, the products offered may be “securities”under federal or state securities laws which must be registered with the SEC and/orstate agencies. And, under the Gramm-Leach-Bliley Act, depository institutions that actas advisers to mutual funds must register with the SEC as “investment advisers” underthe Investment Advisers Act of 1940. The Gramm-Leach-Bliley Act also contemplatesthe offering by depository institutions of “hybrid” products – products other thanequity swaps or a limited number of other products not previously regulated by theSEC as a security – and these may be regulated either by the SEC or by the FederalReserve Board, depending on the product in question.11Financial institutions guide
Sarbanes-OxleyThe Sarbanes-Oxley Act of 2002 was enacted by Congress to address several areasof national concern regarding corporate accounting and auditing, fraud and officerliability, and corporate transparency for publicly-held corporations. The most notableprovisions include:• A requirement that an independent accounting board be created to overseecorporate accounting and auditing practices;• A requirement that CEOs and CFOs of public companies participate in thepreparation of financial statements and personally certify the accuracy of suchstatements;• A requirement that an “internal control report” must be included in a publiccompany’s annual report, and that the company’s public accountant must attest tomanagement’s assessment of the company’s internal control structures;• A ban on corporate loans to directors and officers, except in certain limitedcircumstances;• The accelerated reporting of insider trades;• A requirement that audit committees be composed entirely of “independent”directors; and• The forfeiture of bonus and equity compensation for CEOs and CFOs in the eventof a material restatement of a company’s financial statements.The Sarbanes-Oxley Act imposes meaningful deterrents to promote compliance withboth the Act and pre-existing corporate obligations. Among other things, Sarbanes-Oxley establishes substantial monetary penalties and prison sentences for officerswho falsely certify financial statements, criminal charges for the wrongful destructionof documents or for failing to maintain audit records, an extension of the statuteof limitations for private securities fraud lawsuits, and criminal charges for certainfederal securities law violations.In addition to the requirements set forth by Sarbanes-Oxley, directors on auditcommittees of publicly traded companies are subject to additional requirementsimposed by the SEC. Among other things, the SEC requires the following:• The audit committee must prepare and issue an annual report, identifying thecommittee members and including statements regarding the audit committee’sreview of the company’s financials and the committee’s recommendations;• The company must disclose whether the audit committee has adopted a writtenaudit committee charter, which must be reviewed annually; and• Quarterly financial statements must be reviewed by an independent auditorand the results of that review must be discussed with the audit committee or itschairperson prior to the company’s quarterly SEC filing.12Financial institutions guide
Page 6 and 7: • Reviewing how appropriate finan
Page 8: While the scope and application of
Page 11: agents, or servants of the [bank] t
Page 15 and 16: duty; (2) that such violation, prac
Page 17 and 18: • employ any device, scheme or ar
Page 19 and 20: Claims by or on behalf ofthe instit
Page 21 and 22: “In recent years, there hasbeen a
Page 23 and 24: • Copies of regulators’ examina
Page 25 and 26: Most indemnification statutes disti
Page 27 and 28: • An institution may be insolvent
Page 29 and 30: ConclusionCorporate indemnification

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