STAFF CONTACT :
BILL
SUBJECT
DATE
The Business Council opposes this legislation which would add a new Financial Services Law §105 to allow the Superintendent of the Department of Financial Services(DFS) to permanently disqualify an individual operating under a DFS license, or employed by a DFS licensee, from serving as an owner, director, trustee, officer, employee, member or partner of a DFS-regulated business or from holding a DFS-issued license if, after a hearing, the Superintendent finds that the individual has committed a “disqualifying event” that is of such severity as to have a direct bearing on the individual’s fitness or ability to continue to participate in the financial services industry.
A disqualifying event is so broadly defined in the legislation that it is unclear what the standards are for triggering such an event other than the discretion of the Superintendent. A disqualifying event can be as vague as deciding that there has been a violation of an oral or written agreement with the Superintendent, or that an individual has engaged or participated in “unsafe or unsound practice.” No criteria for such allegations are provided in the proposed legislation.
In addition, if the Superintendent has “reason to believe” that an individual may have committed a disqualifying event, she/he has complete discretion to determine the severity of the alleged violation and impose the sanction. This expansive authority to arbitrarily decide what actions can qualify under the broad spectrum of the definition without due process is inappropriate.
Of course it is of the utmost importance to ensure that those in the financial services industry are engaged in ethical work behavior. Bad actors will be and should be identified. However, there are extensive federal and state laws and regulations already in place to address any alleged wrongdoings. DFS has acknowledged this is a very small number of individuals - then why is this authority necessary? DFS can and should per statute report acts of fraud or other criminal activity to the Office of the Attorney General for enforcement. There is no rational basis for providing a state agency with authority that is already been established in the Attorney General. This is duplicative and unnecessary. The Department of Law has certainly been aggressive investigating alleged wrongdoings and ensuring that the financial services community maintains a high standard. This legislation is another example of administrative overreach into the constitutional jurisdiction of the Attorney General.
For the above reasons, The Business Council strongly opposes this proposal.