Financial agencies to adopt post-employment restrictions

A group of financial agencies are moving closer to placing post-employment restrictions on some upper-level employees.

The Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Federal Reserve System jointly released a proposed set of rules for senior examiners in the Federal Register earlier this month.

The proposal comes in response to the 2004 Intelligence Reform and Terrorism Prevention Act, which required agencies to craft regulations barring senior examiners from working at depository institutions that they examined as federal employees for one year after leaving the government, effective Dec. 17, 2005.

Employees who violate this ban must either be removed from their new job and barred from working for any depository institution for up to five years or fined up to $250,000, according to the proposed rules. Agencies also can opt to impose both penalties.

In their proposed rules, the four agencies were careful to define both who qualifies as a senior examiner and what work those employees should avoid during their first year in the private sector.

The proposed rules define a senior examiner as someone who "conduct[s] examinations or inspections on behalf of the relevant agency," has "continuing, broad, and lead responsibility for examining or inspecting the depository institution," and whose responsibilities "represent a substantial portion of the individual's assigned responsibilities and require the individual to routinely interact with officers or employees of the institution."

Employees have to meet all of the requirements in order to be considered a senior examiner. The proposed rules make a point of noting that if, for example, an examiner spends most of his or her time examining one institution, such as conducting an internal audit, but does not have lead responsibility for the agency's examination, he or she would not be considered a senior examiner.

Agencies, under this proposal, would notify employees in writing if their workload would deem them a senior examiner.

If an employee is considered a senior examiner, the rules specify that the employee must have served in that role during at least two of their last 12 months with the agency to fall under the post-employment restriction.

The law prohibits senior examiners from "knowingly accepting compensation as an employee, officer, director or consultant" from the depository institution that they examined, and the proposed rules interpret "consultant" to give employees somewhat more leeway.

Employees, according to the proposed rules, may not "participate in any work that the firm is conducting for a depository institution or company that the former senior examiner would be prohibited from doing directly," and specifies that employees would be able to join consulting firms that perform work for such depository institutions as long as they do not "personally participate in any such work."

In addition to depository institutions themselves, under these rules employees would not be permitted to work for companies that own a depository institution they worked with.

Additionally, the rules provide agency heads with the power to waive the restriction, but the proposal says the agencies "expect to grant waivers only in special circumstances."