Rules Governing the Procedures for Adjudicatory Proceedings Before the Department of Financial ...

NY-ADR

1/5/22 N.Y. St. Reg. DFS-01-22-00005-E
NEW YORK STATE REGISTER
VOLUME XLIV, ISSUE 1
January 05, 2022
RULE MAKING ACTIVITIES
DEPARTMENT OF FINANCIAL SERVICES
EMERGENCY RULE MAKING
 
I.D No. DFS-01-22-00005-E
Filing No. 1276
Filing Date. Dec. 20, 2021
Effective Date. Dec. 20, 2021
Rules Governing the Procedures for Adjudicatory Proceedings Before the Department of Financial Services
PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following action:
Action taken:
Amendment of Part 2 of Title 23 NYCRR.
Statutory authority:
Financial Services Law, sections 102, 201, 202, 302, 305; State Administrative Procedure Act, section 301
Finding of necessity for emergency rule:
Preservation of public health and general welfare.
Specific reasons underlying the finding of necessity:
COVID-19 has spread to hundreds of millions of people worldwide, with more than 2.8 million confirmed cases and over 57,000 deaths in New York State since March 2020. According to the Centers for Disease Control and Prevention (“CDC”), the Delta variant of SARS-CoV-2, the virus that causes COVID-19, is the predominant variant of the virus in the United States. The Delta variant is a more transmissible and contagious form of the virus, may cause more severe symptoms, and appears to be behind the increase in cases and hospitalizations due to COVID-19 infections across the nation, including this state. Additionally, the Omicron variant, a new variant of SARS-CoV-2, has also been detected in the United States. The CDC reports that the United States designated Omicron as a “variant of concern” on November 30, 2021. Given the public health implications related to COVID-19, it is essential that the Department of Financial Services (“Department”) promulgate regulations that implement protective measures, whenever possible, to help stop its spread.
This amendment adds a new section 2.19 to 23 NYCRR Part 2, specifying that the Department may conduct administrative hearings by videoconference at the Department’s discretion. This is being done so that the parties and hearing officers do not have to be physically present at the same location during hearings. A hearing officer will determine, upon a timely objection filed by a party, if a hearing held by videoconference would either impinge upon the party’s due process rights, or would be fundamentally unfair or impractical, according to section 2.19(d) of the regulation.
The Department is taking special precautions during this unprecedented health crisis to minimize the spread of COVID-19 by, among other things, reducing the number of individuals who may enter the Department’s offices at any given time. Therefore, conducting an administrative hearing by videoconference protects the safety of those participating in, or witnessing the hearing, by avoiding personal contact. This will help limit the spread of COVID-19. Thus, it is imperative that this amendment be promulgated on an emergency basis for the public’s general welfare and the preservation of public health.
Subject:
Rules Governing the Procedures for Adjudicatory Proceedings Before the Department of Financial Services.
Purpose:
To specify that the Department of Financial Services may conduct administrative hearings by videoconference.
Text of emergency rule:
Section 2.19 is added to read as follows:
§ 2.19 Hearings conducted by videoconference.
(a) At the discretion of the Department official who issued the notice of action or proposed action, a hearing held pursuant to this Part may be conducted by videoconference. When a hearing is conducted by videoconference, none of the parties nor the hearing officer need to be physically present at the same location.
(b) All provisions of this Part that are not inconsistent with the specific provisions of this section shall apply to hearings conducted by videoconference. For purposes of § 2.14(b) of this Part, the term hearing room shall mean videoconference when a hearing is conducted by videoconference.
(c) A respondent or applicant may object to conducting the hearing by videoconference by sending a written notice of the objection to the hearing officer by first class mail, overnight mail or electronic mail to an address or email address designated by the Department and posted on the Department’s website. The written notice of objection must be received by the hearing officer at least five business days before the time set for the hearing.
(d) In the event that the hearing officer receives a timely written objection to conducting the hearing by videoconference in accordance with subdivision (c) of this section, the hearing officer may determine that the hearing shall not be conducted by videoconference and shall be conducted with the respondent or applicant and the hearing officer physically present at the same location, when in the judgment of the hearing officer:
(1) the respondent’s or applicant’s due process rights would best be served by conducting a hearing in-person; or
(2) there are circumstances presented by the respondent or applicant that make proceeding with the hearing by videoconference fundamentally unfair or impractical.
This notice is intended
to serve only as a notice of emergency adoption. This agency intends to adopt this emergency rule as a permanent rule and will publish a notice of proposed rule making in the State Register at some future date. The emergency rule will expire March 19, 2022.
Text of rule and any required statements and analyses may be obtained from:
Sally Geisel, Department of Financial Services, One State Street, New York, NY 10004, (212) 480-7608, email: [email protected]
Regulatory Impact Statement
1. Statutory authority: Financial Services Law (“FSL”) Sections 102, 201, 202, 302 and 305 and the State Administrative Procedure Act Section 301.
FSL Section 102 states the legislative goals for the Department of Financial Services (“Department”) as including, among other things, “to establish a modern system of regulation, rule making and adjudication that is responsive to the needs of the banking and insurance industries and to the needs of the state’s consumers and residents”, and “to promote the reduction and elimination of fraud, criminal abuse and unethical conduct by, and with respect to, banking, insurance and other financial services institutions and their customers”.
FSL Section 201 authorizes the Superintendent of Financial Services (“Superintendent”) to take such actions as she believes is necessary to, among other things, “foster the growth of the financial industry in New York and spur state economic development through judicious regulation and vigilant supervision”; “ensure the continued solvency, safety, soundness and prudent conduct of the providers of financial products and services”; and “eliminate financial fraud, other criminal abuse and unethical conduct in the industry”.
FSL Section 202 establishes the Office of the Superintendent.
FSL Section 302 empowers the Superintendent to, among other things, prescribe, amend, or withdraw rules and regulations involving financial products and services consistent with the Banking Law, Insurance Law, Financial Services Law, and any other law in which the Superintendent is given authority, including but not limited to governance of the procedures to be followed in the practice of the Department.
FSL Section 305 sets forth provisions regarding hearings held by the Department.
State Administrative Procedure Act (“SAPA”) Article 3 governs adjudicatory proceedings. SAPA Section 301 directs all state agencies subject to SAPA to adopt rules governing the procedures on adjudicatory proceedings and appeals.
2. Legislative objectives: The statutory sections cited above establish the Legislature’s intentions for the Superintendent to modernize adjudication proceedings; ensure the financial solvency and sound practices of the individuals and entities that are regulated by the Superintendent; and protect consumers from fraud, criminal abuse and unethical conduct through the Superintendent’s supervision and regulation of the financial services, banking and insurance industries. This proposed amendment accords with the public policy objectives that the Legislature sought to advance in the foregoing sections by specifying that the Department may hold administrative hearings by videoconference.
3. Needs and benefits: COVID-19 has spread to hundreds of millions of people worldwide, with more than 2.8 million confirmed cases and over 57,000 deaths in New York State since March 2020. According to the Centers for Disease Control and Prevention (“CDC”), the Delta variant of SARS-CoV-2, the virus that causes COVID-19, is the predominant variant of the virus in the United States. The Delta variant is a more transmissible and contagious form of the virus, may cause more severe symptoms, and appears to be behind the increase in cases and hospitalizations due to COVID-19 infections across the nation, including this state. Additionally, the Omicron variant, a new variant of SARS-CoV-2, has also been detected in the United States. The CDC reports that the United States designated Omicron as a “variant of concern” on November 30, 2021. Given the public health implications related to COVID-19, it is essential that the Department promulgate regulations that implement protective measures, whenever possible, to help stop its spread.
This amendment adds a new section 2.19 to 23 NYCRR Part 2, specifying that the Department may conduct administrative hearings by videoconference at the Department’s discretion so that parties and hearing officers do not have to be physically present at the same location during hearings, subject to a determination by the hearing officer upon a timely objection filed by the respondent or applicant that a hearing held by videoconference would either impinge upon the respondent’s or applicant’s due process rights, or would be fundamentally unfair or impractical, as expressed in section 2.19(d) of the regulation. The amendment accords with the Legislature’s goals for the Department to modernize adjudication proceedings and protect the public from harmful actions committed by regulated parties, while also protecting the safety of those participating in, or witnessing a hearing, by avoiding personal contact in a way that will help limit the spread of COVID-19.
4. Costs: The rule making is not expected to impose any costs on any individual who or entity that may be impacted by the rule making.
5. Local government mandates: This amendment does not impose any program, service, duty, or responsibility upon a county, city, town, village, school district, fire district, or other special district.
6. Paperwork: The rulemaking should not result in any individual who or entity that is impacted by the amendment to generate any additional paperwork.
7. Duplication: The rule making does not duplicate, overlap, or conflict with any existing New York or federal laws, rules, or other legal requirements.
8. Alternatives: There were no significant alternatives to consider.
9. Federal standards: There are no minimum standards of the federal government for the same or similar subject areas.
10. Compliance schedule: The rulemaking will take effect immediately upon filing the Notice of Emergency Adoption with the Secretary of State.
Regulatory Flexibility Analysis
1. Effect of rule: The rule making has the potential to impact small businesses as defined by State Administrative Procedures Act (“SAPA”) Section 102(8), which are defined as both independently owned and operated and have 100 or less employees. Licensees and non-licensees that are small businesses may become parties to Department of Financial Services (“Department”) adjudicatory proceedings for having been charged with a violation of the Banking Law, Insurance Law, Financial Services Law, or any other law that authorizes the Superintendent of Financial Services to take action. The actual number of participants in adjudicatory proceedings in a given year may reach into the hundreds, based on prior history.
The rule making does not apply to any local government.
2. Compliance requirements: The rule making does not impose any recordkeeping, reporting or other affirmative acts upon any small business that may be impacted by this rule making, or any local government because the rule making does not apply to any local government.
3. Professional services: No small business impacted by the rule making will need to retain professional services to comply with the rule making, or any local government because the rule making does not apply to any local government.
4. Compliance costs: The rule making does not impose any compliance costs on any small business or local government.
5. Economic and technological feasibility: No small business impacted by the rule making should experience any economic or technological impact as a result of the rule making, or any local government because the rule making does not apply to any local government.
6. Minimizing adverse impact: The Department believes that no small business will be adversely affected by the rule making, or any local government because the rule making does not apply to any local government.
7. Small business and local government participation: The Department will comply with SAPA Section 202-b(6) by publishing the rule making in the State Register and posting the rule making on the Department’s website.
Rural Area Flexibility Analysis
The Department of Financial Services finds that this rule making, which adds a new section 2.19 to 23 NYCRR Part 2, specifying that the Department may conduct administrative hearings by videoconference at the Department’s discretion so that parties and hearing officers do not have to be physically present at the same location during hearings, subject to a determination by the hearing officer upon a timely objection filed by the respondent or applicant that a hearing held by videoconference would either impinge upon the respondent’s or applicant’s due process rights, or would be fundamentally unfair or impractical, as expressed in section 2.19(d) of the regulation, does not impose any additional burdens on persons located in rural areas, and will not have an adverse impact on rural areas because it applies uniformly to all persons that are resident or do business in both rural and non-rural areas of New York State.
Job Impact Statement
The Department of Financial Services (“Department”) finds that this rulemaking should not adversely impact job or employment opportunities in New York. This rulemaking adds a new section 2.19 to 23 NYCRR Part 2, specifying that the Department may conduct administrative hearings by videoconference at the Department’s discretion so that parties and hearing officers do not have to be physically present at the same location during hearings, subject to a determination by the hearing officer upon a timely objection filed by the respondent or applicant that a hearing held by videoconference would either impinge upon the respondent’s or applicant’s due process rights, or would be fundamentally unfair or impractical, as expressed in section 2.19(d) of the regulation.
The Department has no reason to believe that the rulemaking will result in any adverse impact on job or employment, including self-employment, opportunities in New York.
End of Document