Examination & Enforcement Response
Regulated entities such as banks and state licensed lenders (and others subject to routine examination) may be examined once every few years or even several times in a single year. Regulators use many risk factors to determine exam frequency and scope such as maturity of the entity, geographic footprint, number of registered or licensed individuals, production volume, risk to markets and the economy, consumer complaints, ongoing litigation, time elapsed since the last exam, and number and severity of compliance findings in prior exams relative to the size and complexity of the entity. In essence, exams establish the compliance history and overall compliance picture of an entity. In our experience, examiners will usually present initial exam findings to an entity with an opportunity to respond. How a company responds is critical. An incomplete or not applicable response can evidence a lack of compliance knowledge, awareness, controls and culture. Moreover, ineffective responses can result in formal examination findings that regulators use to determine future examination frequency and potential compliance risk to consumers and markets to assess whether additional corrective action should be taken. Our attorneys have successfully assisted clients with rebutting initial compliance findings issued by federal and state examiners. Similarly, federal and state regulators may forgo or supplement an exam with an investigation should the regulator sense widespread violations or significant and ongoing risk or consumer harm that should be addressed promptly. These investigations can be in the form of a civil investigative demand (“CID”) letter or other inquiry. Investigation responses and interactions with enforcement personnel in these situations must be thoughtfully handled, and in some cases follow certain prescribed guidelines. The outcome can significantly impair an entity’s reputation with regulators and also with customers, counterparties, and investors. SeldenLindeke attorneys also have experience assisting with responses to these highly sensitive matters.
