Administrative Report to the Governor
Department At A Glance:
Commissioner - John P. Burke
Deputy Commissioner - Alan J. Cicchetti
Established - 1837
Statutory Authority - Titles 36a and 36b,
Connecticut General Statutes, and Related Laws
Central Office -
260 Constitution Plaza
Hartford, CT 06103-1800
Average number of full-time employees - 118
Recurring operating expenses, 2004-05 - $15,180,339
The mission of the Department of Banking is to protect users of financial services from unlawful or improper practices by requiring that regulated entities and individuals adhere to the law, assuring the safety and soundness of state chartered banks and credit unions, educating and communicating with the public and other stakeholders, and promoting cost-efficient and effective regulation.
The Department of Banking is responsible for the regulation and examination of financial institutions and various related entities chartered, licensed or registered by the state. The Banking Commissioner is charged with administering the banking and credit union laws of the state as well as the laws regarding securities, tender offers and business opportunities. The banking commissioner also administers the Truth-in-Lending Act and other consumer credit laws and a major portion of the law concerning rental security deposits.
Specific regulatory functions are assigned to divisions within the department.
The Consumer Credit Division is responsible for the enforcement of Connecticut's laws concerning small loan companies, sales finance companies, debt adjusters, first mortgage lenders and brokers, secondary mortgage lenders and brokers, consumer collection agencies, money transmitters and issuers of money orders or travelers checks, check cashing services, Truth-in-Lending and other consumer credit laws.
The Financial Institutions Division is responsible for the supervision of state-chartered bank and trust companies, savings banks, savings and loan associations and credit unions. The division also licenses foreign banking organizations that establish and maintain representative offices, agency offices or branch offices in Connecticut, and supervises bank holding companies. It has responsibility for analyzing applications for new bank or credit union charters, acquisitions, mergers, branches, changes in corporate structure, and credit union field of membership expansions. In addition, the division licenses business and industrial development corporations and certain non-banking corporations that exercise fiduciary powers.
The Securities and Business Investments Division is responsible for the registration of securities and business opportunity offerings for sale in Connecticut; the registration of broker-dealers and investment advisers, along with their agents and branch offices; the examination of broker-dealer, investment adviser and branch office registrants; and enforcement of the state's securities, business opportunity and tender offer laws.
The department's customers include the general public, representatives of the public, regulated entities and consultants. The public at large, including depositors, borrowers, investors, landlords and tenants, and others who use the services of regulated financial entities, benefits broadly from agency activities. Agency services protect public funds in depository institutions, offer important investor and consumer protections, assist in dispute resolution and provide helpful public information.
Representatives of the public including the Governor and the General Assembly, other elected and appointed officials and federal, state and municipal agencies, receive information, advice, proposed legislation, case referrals and other important services from the department.
Financial entities are subject to regulatory oversight. Consultants, including law firms, accounting firms, consumer advocacy groups, trade associations and others, receive information, advice and guidelines from the department.
The Department of Banking is strongly committed to maintaining a standard of excellence in meeting its regulatory responsibility, while being responsive to Governor Rell’s desire to promote a business friendly climate in Connecticut.
In order to provide the public with convenient 24-hour, 7-day access to information on department programs, licensing activity and educational resources, the department maintains a Web site on the Internet at www.ct.gov/dob. During 2004-2005, over 750,000 visitors viewed approximately 1.73 million pages on the agency Web site.
As a fundamental part of its mission, the department is committed to protecting Connecticut citizens in transactions with financial institutions, as directed by state law, and in assisting with consumer complaints and dispute resolution.
Consumers are encouraged to contact the department whenever they need assistance in dealing with financial institutions. Agency employees will promptly assist consumers with issues involving banks, credit unions, mortgage lending and other consumer credit matters, rental security deposits, and matters relating to securities and business opportunity investments.
During the 2004-2005 fiscal year, examiners in the department’s Government Relations and Consumer Affairs Division handled 18,122 telephone inquiries and 2,222 written complaints from the public. As a result of their efforts, the department obtained $1,235,627 in adjustments and reimbursements on behalf of consumers during the period.
The public further received restitution of excess fees and additional compensation totaling $1,264,189 following an examination of Ameriquest by the Consumer Credit Division. The division also entered into a settlement agreement with Ameriquest Mortgage Company and its affiliates that resulted in the imposition of a $1 million civil penalty; a $250,000 reimbursement to the department for expenses incurred; and a $6 million payment to establish a down payment assistance program to benefit Connecticut consumers.
In addition, intervention by the Securities and Business Investments Division during the fiscal year resulted in restitution and rescission offers to the investing public totaling $6,085,314. The division also imposed $768,650 in fines for violations of the state's securities and business opportunity laws.
In August 2004, the department, through the Securities Division, participated in a national settlement between state and federal securities regulators and Deutsche Bank Securities and Thomas Weisel Partners. The settlement capped an investigation into the conduct of securities industry analysts whose objectivity was undermined by the influence of investment banking personnel. Connecticut’s $354,243 share of the settlement proceeds was dedicated in large part to investor education.
In March 2005, the department, through the Securities Division, negotiated a $3.5 million settlement with Merrill Lynch resolving claims that the firm failed to supervise agents who engaged in improper “market timing.” Under the settlement, the firm agreed to pay a $1 million fine and contribute $2 million over the next four years to the “Investing Pays Off” financial literacy program. Of the $2 million, $500,000 was specifically earmarked for programs in Connecticut schools. In addition, the firm agreed to pay $500,000 over the next four years to help educate Connecticut regulatory and law enforcement personnel in the detection of securities, financial and banking violations.
During the fiscal year, the agency's security deposit investigator received approximately 3,500 telephone inquiries; resolved 277 landlord tenant disputes; and recovered $90,461 for Connecticut residents who had complained to the department that landlords had unjustly withheld their refundable rental security deposits.
As of the end of the fiscal year, there were four state-chartered banks in various stages of organization: Higher One Bank (New Haven), The Bank of Southeastern Connecticut (New London), the Darien Rowayton Bank (Darien), and The Bank of Greenwich (Greenwich).
The Financial Institutions Division sponsored a June 2005 training conference for credit union board members and CEOs. The program was intended to help participants ensure that their institutions operate safely and soundly and meet all compliance requirements. Topics included responsible corporate governance, strategic planning, the role of a supervisory committee and how to deter financial fraud.
The division continued to produce its quarterly “DeNovo Report” for the benefit of bank executives and boards of directors; industry representatives; and consultants. The report offers a comparative view of the financial performance of new banks in Connecticut.
During 2005, the Financial Institutions Division conducted surveys of Connecticut banks and, for the first time, credit unions regarding their electronic banking activity and the types of revenue producing services they offer to customers. The surveys help the agency monitor industry activity and allow institutions to make peer comparisons. Survey results are posted on the Web for ease of access by industry.
An earlier legislative change to improve licensing efficiency adjusted a staggered annual renewal cycle for consumer credit licenses to a biennial renewal process and newly required the registration of mortgage originators. In September 2004, the Consumer Credit Division faced the very considerable task of managing its mortgage renewals; the division successfully processed approximately 4,200 first and second mortgage licenses and 16,000 loan originator registrations.
During the fiscal year, the Consumer Credit Division continued an increased focus on enforcement; department actions against licensees and related entities increased to 47 from the previous year’s 20 actions.
Each year the department, with the coordination of the Government Relations and Consumer Affairs Division, conducts an active legislative program. During the 2005 legislative session, four department proposals concerning banks, consumer credit and securities were enacted into law.
Public Act 05-39, among other provisions, enhances the Commissioner’ enforcement power concerning domestic and international banking activities; grants the Commissioner additional time to act on new bank applications if good cause is shown; changes the factors the Commissioner must consider before approving a Connecticut bank's branch application; and eliminates certain fees.
Public Act 05-46 relates to consumer credit, check cashing and money transmission. The act prohibits fraudulent conduct and authorizes the Commissioner to issue cease and desist orders, and provides that certain license renewal applications received after the deadline, but accompanied by a fee, are timely and sufficient under the law.
Public Act 05-117 updates the Connecticut Uniform Securities Act and incorporates certain provisions of the Revised Uniform Securities Act (RUSA), including amending the branch office definition, strengthening certain enforcement powers of the Commissioner and providing the Commissioner additional grounds for denying, suspending or revoking registrations.
A fourth bill made technical changes to statutues.
As a benefit to industry and the public, the Legal Division prepared compilations of the statutes and regulations within the department’s jurisdiction and certain other related laws. The compilations are continually revised to reflect new legislation or changes in regulations and are available for free download on the agency Web site.
The division also posted on the Web copies of administrative actions taken by the agency against various entities, as well as indices to advisory opinions issued by the Commissioner concerning bank, credit union, consumer credit, landlord/tenant and business opportunity matters.
During the fiscal year, the Securities and Business Investments Division assisted the NASD in developing a national on-line system for the filing of branch office registrations through the Central Registration Depository. The new system, which promises greater registration efficiency for industry and regulators alike, is tentatively scheduled for an October 2005 roll-out.
As a means to keep industry apprised of new regulatory developments, the division published its quarterly Securities Bulletin, distributed both in paper format and, increasingly, via electronic means to reduce printing costs.
In February 2005, the Securities and Business Investments Division revised its requirements governing investment advisers with custody of client funds or securities. The new policies reflect modern custodial practices in the industry and promote uniformity with the federal approach taken by the Securities and Exchange Commission. At the same time, the Commissioner issued policy statements covering investment advisory codes of ethics and the implementation of compliance programs by state-registered investment advisers.
The department emphasizes educational efforts to help the public understand financial services offered in the marketplace and recognize fraudulent investment offers. A weekly News Bulletin provides information on applications before the agency and intended changes in regulations, and other publications are produced as needed.
The Department of Banking is committed to providing equal employment opportunity on the basis of merit; to assuring nondiscrimination; and to implementing affirmative action and contract compliance programs, as required by law. The department's affirmative action plan, approved by the Commission on Human Rights and Opportunities, reflects the agency's commitment to achieving workforce balance and fairness in all terms and conditions of employment.
Adhering to a fiscally conservative approach, the department underspent its budget during the fiscal year by about $640,000 or 4 percent. Significant savings were achieved in non-personnel expenses and equipment expenditures.
The department reorganized several of its business units in February 2004 to improve its organizational efficiency and customer service. This reorganization process continued into FY 2004-2005.
The Consumer Credit Division was earlier re-aligned into separate licensing/registration and examination/enforcement units. Building upon that enhancement during the fiscal year, the licensing unit, itself, was restructured into three working groups: new applications, renewal applications and loan originators to improve work flow and customer service.
The division’s licensing unit worked closely with the Department of Information Technology during the past fiscal year in developing a new browser-based licensing database system. When finished, the new system will allow applicants to complete renewal applications and make license status checks via the Internet, greatly reducing paper flow and improving turnaround times.
The Government Relations and Communications Division, in cooperation with other divisions, began the process of migrating the department’s Web site to the CT.gov portal. Staff significantly re-organized the site’s nearly 2,000 pages into a sharper customer focus, added considerable new content, and streamlined consumer assistance pages. The department expects to launch its revamped Web site in September 2005.
The Consumer Credit Division modified its existing forms to allow for easier license amendments. In preparation for an eventual transfer of the function to the licensing unit from the examination unit, the division adjusted its check cashing service and money transmitter licensing procedures to match its other license types.
The division’s examination unit worked closely with the Financial Institutions Division to ensure the latter unit’s examiners were currently trained to assist in examining banks for compliance with the state’s Truth-in-Lending Act.
The Financial Institutions Division continued to refine its structure after an earlier merger of the agency’s Bank Examination and Credit Union Divisions created the new division.
The division remained committed to reducing the regulatory burden on state-chartered institutions, streamlining its application process wherever possible. The department began accepting the “interagency application” for creation of new banks and the “interstate branching application” for banks branching in-state or across state borders. The latter application will be received electronically by the agency via a bank’s filing with the FDIC.
In consideration of a long-standing record of compliance with both state and federal community reinvestment act requirements, as evidenced by ratings assigned at on-site performance evaluations, the department has discontinued its use of state-only CRA lending data forms to reduce the regulatory burden on institutions. The department continues to receive and review federal CRA examination reports and is provided with an annual update to banks’ CRA profiles to monitor compliance.
Every bank and credit union examined by the division is provided a post-examination survey that may be privately returned to the Commissioner. Institutions are given the opportunity via the survey to comment on staff performance, examination efficiency and examination time demands in an effort to improve future examinations.
During 2005, the department was re-accredited by the National Association of State Credit Union Supervisors, a distinction demonstrating that the agency adheres to the highest level of professional standards in its supervision and regulation of Connecticut state-chartered credit unions.
The Business Office continued to successfully implement the state’s new automated financial management system, CORE-CT. The department exceeded both its small and minority business enterprise purchasing goals in the fiscal year.
Human Resources, in consultation with the Department of Administrative Services, improved the agency’s anti-harassment and affirmative action policies. Human Resources also began an extensive review to develop new performance measures for employee ratings. A comprehensive 12-session training program for all managers was conducted to improve agency leadership.
The Legal Division recently changed its on-line research vendor. While the division was previously charged for the time a user was on-line, as well as for each transaction, its new contract limits users, but provides access to vast resources for an unlimited amount of time and transactions at a fixed price. As a result, the division saved $32,300 during the fiscal year.
The Securities and Business Investments Division is assisted by a Securities Advisory Council, comprised of industry representatives, academics and members of the bar, all of whom serve without compensation, that offers the Commissioner and staff insight on new regulatory initiatives.
In October 2004, the department held its 16th annual Securities Forum. Approximately 350 attendees from industry and the private bar attended the event which featured nine panel presentations and a general session on the increasing transparency of financial markets. Speakers kept attendees abreast of critical regulatory and compliance developments. Governor M. Jodi Rell provided the opening remarks, and was joined at the podium by U.S. Attorney Kevin J. O’Connor who stressed the significant enforcement efforts by his office in combating white collar crime.
Ralph Lambiase, director of the Securities and Business Investments Division, completed a very successful term as president of the North American Securities Administrators Association (NASAA). Mr. Lambiase maintained his seat on the NASAA board of directors during FY 2004-05, and continued his dedicated involvement with the association’s activity to further investor rights and advance state regulation of securities.
In October 2004, Helen Crane, Administrative Assistant in the Securities and Business Investments Division, received the Governor’s Service Award. The Governor’s Service Award program was established to recognize those individuals who routinely provide exceptional customer service in the performance of their jobs.
During 2004 and 2005 the division participated in the CT Corporate Fraud Working Group, a meeting held quarterly in conjunction with the U.S. Attorney’s Office, other federal law enforcement agencies, the Chief State’s Attorney’s Office and the Department of Insurance to discuss and coordinate current and future enforcement cases of interest to each agency.