• FDIC Warns on Removal of Information
  • April 4, 2012
  • Law Firm: Jones, Walker, Waechter, Poitevent, Carrère & Denègre L.L.P. - Birmingham Office
  • On March 22, 2012, the Federal Deposit Insurance Corporation ("FDIC") issued financial institution letter 14-2012 ("FIL 14-2012"), emphasizing, to directors and officers of financial institutions, their obligations with respect to removal or copying of an institution’s books and records prior to or following the institution’s failure.

    In FIL 14-2012, the FDIC reiterates that directors and officers are fiduciaries of their institutions and, as such (and only as such), have access to confidential information of or pertaining to those institutions. According to FIL 14-2012, they are entitled to use such information only to advance the interests of the institution. That is, directors and officers are not to make use of it in furtherance of their personal interests or for their own benefit. The position of the FDIC is that it is an impermissible breach of the duty of loyalty for directors or officers of insured institutions to photocopy or remove any books or records, or confidential supervisory materials, such as reports of examination, relating to any such institution for personal use (such as in anticipation of litigation in which the director or officer may be a defendant).

    The letter further states that photocopying and removal of books or records of an insured institution may also constitute an impermissible breach of the duty of care by directors and officers. Since some records kept by an institution are not its property (such as examination reports), or are subject to the institution’s information security policies (such as consumer loan documents) or are required under federal law to be kept strictly confidential (such as suspicious activity reports), removal or transmission of such records other than through secured media or off premises may constitute an unsafe or unsound practice.

    Finally, FIL 14-2012 reminds directors and officers that while the FDIC recognizes that they need access to the institution’s confidential information in order to carry out their duties to it, those duties end, and thus the need for access terminates, upon appointment of a receiver for the institution. As a result, any continuing need of directors and officers for access to such information thereafter-in connection with defense of suit by the FDIC, for instance-can properly be addressed only through formal processes undertaken through the FDIC as receiver for the failed institution, and any access thereby permitted may be subject to confidentiality restrictions imposed by the FDIC.