Administrative Report to the Governor
Commissioner - Howard F. Pitkin
Department At A Glance:
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 - 121
Recurring operating expenses, 2008-09 - $18,184,494
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 regulates the activities of mortgage lenders, brokers, and loan originators; small loan companies; sales finance companies; debt adjusters; debt negotiators; consumer collection agencies; money transmitters; issuers of money orders and travelers checks; and check cashing services. The Division is responsible for the licensing and examination of these entities and the enforcement of related Connecticut laws. The Division also administers Truth-in-Lending laws; retail installment sales financing laws; and a major portion of the law relating to rental security deposits.
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, policies 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 agency programs, licensing activity and educational resources, the Department maintains a Web site on the Internet at www.ct.gov/dob. During 2008-2009 approximately 400,000 visitors viewed nearly 2.7 million pages on the agency Web site.
A weekly News Bulletin, now sent electronically or accessed weekly on the agency Web site, provides information on applications before the agency and intended changes in regulations, and other publications are produced as needed. The Securities Division also continued publication of its quarterly Securities Bulletin, also sent electronically, to advise the industry of new regulatory developments. Listserv distribution lists and Web site e-alerts enhanced the delivery of critical information to the securities industry, and provided a significant cost saving to the agency.
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.
The Foreclosure Assistance Hotline, established in 2007, has continued to be a valuable resource for Connecticut residents. Callers to the 800-number receive pertinent advice and guidance regarding their mortgage problems. During the 2008-2009 fiscal year, the hotline received 5,075 calls with an average of 21 calls per day.
During the fiscal year 2008-2009, examiners in the Government Relations and Consumer Affairs Division handled approximately 16,000 telephone inquiries and 2,900 written complaints from the public. As a result of their efforts, the Department obtained approximately $3,755,000 in adjustments and reimbursements on behalf of consumers during the period.
The public received restitution of approximately $450,000 as a result of penalties imposed upon licensees by the Consumer Credit Division as part of the examination process. The Division continued its focus on enforcement activities as evidenced by the taking of approximately 298 actions resulting in penalties in excess of $4,000,000.
Intervention by the Securities and Business Investments Division during the fiscal year resulted in restitution and rescission offers to the investing public totaling $5,075,746. The Division also imposed $7,568,979 in fines for violations of the state's securities and business opportunity laws.
Greater public interest in energy issues lead to a resurgence in oil and gas scams. In one case, the Department imposed fines totaling $6,675,000 against a Kansas issuer for fraudulently selling oil and gas interests to Connecticut residents. In imposing the fine, the Commissioner noted that the Respondents’ conduct was egregious inasmuch as the investments were sold to inexperienced investors; no risks were disclosed; the sales agents received as much as 50% of the investment as a commission; and all of the investors lost money.
In another case, supervisory and recordkeeping lapses related to frequent trading in investment company securities prompted the agency to levy a $50,000 assessment against the issuer. The issuer also agreed to contribute $300,000 to the State of Connecticut Department of Education to promote financial literacy in Connecticut public middle schools.
Additional settlements involved licensing, securities registration and sales practice violations by brokerage firms and investment advisers. One such case, which included allegations of misleading sales scripts, resulted in the imposition of a $50,000 fine against the affected brokerage firm, and a requirement that the firm pay $50,000 to the National White Collar Crime Center for the purpose of training Connecticut regulatory and law enforcement personnel in prosecuting financial fraud perpetrated on Connecticut senior citizens.
To promote efficiency and facilitate capital formation by small business issuers, the Securities Division streamlined the filing requirements for securities private placements in light of SEC Release No. 33-8891 which mandates electronic filing at the federal level by March 15, 2009. The Division communicated the new requirements to affected filers via the agency’s website.
The agency's security deposit investigator resolved 293 landlord tenant disputes in the fiscal year and recovered $114,519.93 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 two state-chartered domestic banks in organization which received their Temporary Certificate of Authority on June 19, 2009: Sachem Bank (Madison) and First Community Bank of New Haven (New Haven). One bank applicant, Harbor Bank & Trust (Fairfield), withdrew its application on July 15, 2008 and surrendered its Temporary Certificate of Authority which was issued on June 18, 2007. On August 29, 2008, The Bank of Fairfield (Fairfield) opened for business as a state-chartered bank.
On September 30, 2005, the Banking Commissioner closed Circle Trust Company, a Connecticut state-chartered trust bank with operations in Connecticut and Vermont. The Banking Commissioner was appointed Receiver and continues to liquidate the company. On December 15, 2008, the Banking Commissioner closed West Hartford Credit Union, a Connecticut state-chartered credit union and appointed the National Credit Union Administration as Receiver.
On June 30, 2009, Lloyds TSB closed its representative office in Stamford, Connecticut. As of this date, there are five Foreign Banking Organizations (FBOs) operating either a branch or representative office in Connecticut. This includes Royal Bank of Scotland’s completed construction of its planned and fully operational branch office in Stamford, Connecticut.
During this fiscal year, the Banking Commissioner participated in a number of industry related meetings with CEOs of banks and credit unions. The Department held the third Annual CEO Roundtable jointly with the Connecticut Bankers Association in September 2008. During the fourth quarter of 2008, the Banking Commissioner hosted three separate meetings with Governor M. Jodi Rell and the CEOs of Connecticut banks, credit unions, and FBOs to discuss the state’s economic situation, outline a five-point plan to maintain a free flow of credit to Connecticut businesses, and introduce a partnership program between the State and Connecticut’s credit unions that provided new and current students with access to higher education through a new student loan program.
In July 2008, the Banking Commissioner hosted a CEO Roundtable session with Connecticut credit unions which was co-hosted with the National Credit Union Administration (NCUA) and the Credit Union League of Connecticut and provided an opportunity to discuss various economic, industry and regulatory issues. The Department also hosted Connecticut state-chartered credit unions wishing to participate in a National Association of State Credit Union Supervisors (NASCUS) sponsored webinar on filing the Form 990 Information Return of Organizations Exempt from Income Tax Filings, and in April 2009 co-hosted a 990 Filing Conference with the Credit Union League of Connecticut. Additionally, the Banking Commissioner prepared and distributed various Industry Letters related to real estate lending and security related topics.
The Financial Institutions Division continues 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. The Department also produces the “Connecticut Banks Performance Report” which highlights financial performance on a semi-annual basis of institutions operating between five and ten years.
Each year the Department, with the coordination of the Government Relations and Consumer Affairs Division, conducts an active legislative program. During the 2009 legislative session, five agency proposals were enacted into law, three of which the agency worked closely with the Governor’s Office.
Public Act 09-100, An Act Concerning Branching and Authority to Implement the National Defense Authorization Act, eliminates the requirement that banks submit a Community Reinvestment Act plan with certain applications provided certain conditions are met and unless the agency determines the submission of such a plan is appropriate. These plans are costly for the bank to produce and are rarely examined by outside individuals. The act added language which will allow for the preliminary approval of investors who the agency determines to have the funds to assist a bank in crisis. This power is a temporary one, in place for only two years.
Public Act 09-160, An Act Concerning the Connecticut Business Opportunity Investment Act, makes certain technical changes. It clarifies the agency’s business opportunity registration process, enhances disclosures by the seller of a business opportunity and strengthens the enforcement authority of the Department.
The Department worked closely with the Governor’s office in developing the following three pieces of legislation.
Public Act 09-208, An Act Concerning Consumer Credit Licenses, fills certain gaps in the agency’s enforcement authority and provides the Department with certain tools related to licensee and debt adjusters and negotiators. The act also contains new provisions governing payday loans and how to control this type of lending in this state.
Public Act 09-207, An Act Concerning Mortgage Practices, adds new provisions that define residential mortgage fraud. It also makes a single act of residential mortgage fraud a Class D felony and two or more acts of residential mortgage fraud a Class C felony. The act makes certain definitional and technical changes in the banking statutes as well.
The final piece of legislation is Public Act 09-209, An Act Concerning Implementation of the S. A. F. E. Mortgage Licensing Act, the Emergency Mortgage Assistance Program, Foreclosure Procedures and Technical Revisions to the Banking Statutes. The act sets forth the policy statement from the Model Act for Implementation of the S.A.F.E. Mortgage Licensing Act developed by the Conference of State Bank Supervisors/American Association of Residential Mortgage Regulators. The act details the process for the implementation of the act and the requirement specified relating to registration, freedom of information and employment in the industry.
As a benefit to industry and the public, agency attorneys 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.
The Department emphasizes educational efforts to help the public understand financial services offered in the marketplace and recognize fraudulent investment offers. The Government Relations and Consumer Affairs Division increased its effort to educate the public through outreach. Agency employees conducted numerous talks and presentations throughout the state on issues including banking scams, identity theft and investor fraud and protection. The audiences included union groups, rotary clubs, veterans, seniors and professional organizations.
In the fall of 2008, Department staff actively participated in a series of housing fairs organized by the Connecticut Housing Finance Authority for homeowners concerned about foreclosure. The fairs were held in Vernon, Bridgeport, East Hartford, Norwalk and Meriden.
In cooperation with the Governor’s Office, the Department of Banking and the Connecticut Insurance Department collaborated in a series of “Financial Forums” to address residents’ concerns over the safety of their investments, mortgages and bank accounts. Five presentations were held in October 2008 in North Haven, Hartford, Waterbury, Bridgeport and Norwalk.
The Human Resources Office continues in its efforts to employ the most qualified, diverse and talented individuals to work for the Department of Banking. Employees are offered and encouraged to take advantage of the numerous training and educational opportunities available. We are 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, filed with 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.
In order to meet the challenges associated with fulfilling its mission to protect the public, the Department found it necessary to spend nearly 96% of its appropriated budget during the fiscal year. During the year, internal controls pertaining to revenue and expenditure accounting were strengthened, while the Department’s financial reporting capabilities were reviewed and updated.
The Business Office continued to successfully utilize the state’s automated financial management system, CORE-CT. Indicative of this, the Business Office staff attended training for various modules in order to make greater use of the systems capabilities within the agency.
Staff from the agency’s Securities Division conducted a series of educational workshops at senior centers and other venues throughout Connecticut in the spring and summer of 2008. In coordination with AARP-Connecticut, these presentations were designed to help older consumers learn about common scams, make informed investment decisions and protect themselves from fraudulent practices.
On September 24, 2008, the Department of Banking and AARP Connecticut co-sponsored a “Safe Investing Seminar” for mature investors at the Four Points by Sheraton Hotel in Meriden, Connecticut. Funded by a grant from the Investor Protection Trust (a nonprofit organization dedicated to investor education) to AARP, the seminar featured tips on protecting investors from fraud and abusive sales practices. Panelists included state and federal securities regulators and local law enforcement, in addition to experts from the Elder Services Bureau of the Office of the Chief State’s Attorney and Connecticut TRIAD, the financial fraud and crime prevention program for seniors.
The grant also financed a series of investor education radio spots which aired throughout the state beginning in February 2009. The Department partnered with AARP in developing content for the spots which focused on such topics as avoiding investment fraud and picking a stockbroker.
In December 2008, the agency’s Legal Division was reorganized and staff attorneys were reassigned into specific line divisions.
In July 2008, the Department became one of the first states to join the Nationwide Mortgage Licensing System. This web-enabled system streamlines the licensing process for both regulatory agencies and the mortgage industry by providing a centralized and standardized system for mortgage licensing. This initiative was begun by state mortgage regulators in 2004 in response to the increased volume and variety of residential mortgage originators and the need to address these changes with modern tools and authorities. In addition to streamlining the process, the system improves the efficiency and effectiveness of supervision of the mortgage industry, enhances consumer protection, fights mortgage fraud and predatory lending that costs consumers and the industry hundreds of millions of dollars each year, and increases accountability among mortgage industry professionals.
The Consumer Credit Division, in partnership with our legal and legislative teams, successfully implemented the provisions required under the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (S.A.F.E. Act). Passed on July 30, 2008, the S.A.F.E. Act gave states one year to pass legislation requiring the licensure of mortgage loan originators according to national standards and the participation of state agencies on the Nationwide Mortgage Licensing System and Registry.
The Financial Institutions Division remains committed to continuing its communication with industry representatives and will continue to produce various Industry Letters and sponsor meetings with CEOs, CPAs, etc. to discuss relevant industry and regulatory issues. We continue to solicit feedback from every bank and credit union examined by the Division and they are provided a post-examination survey that is 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.
We continue to update and maintain the Department of Banking’s website which includes financial and industry information related to the financial institutions operating in Connecticut. Relevant financial information is updated quarterly for banks and credit unions, in addition to providing the public with easy access to such public filings as the quarterly Call Report information.
The Financial Institutions Division staff are active members of both the Conference of State Bank Supervisors (CSBS) and the National Association of State Credit Union Supervisors (NASCUS).
The Securities 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.
On October 23, 2008, the Department held its 20th annual Securities Forum in Stamford, Connecticut. Presentations by Department speakers, Securities Advisory Council members and others kept securities industry members abreast of critical regulatory and compliance developments. Nearly 300 attendees from the securities industry and the private bar attended the event which featured six panel presentations and an opening general session on New Directions for the Financial Services Industry. Yale University Professor Robert Shiller, author of the book Subprime Solution: How the Global Financial Crisis Happened and What to Do About It, delivered the keynote address.
Ralph Lambiase, director of the Securities and Business Investments Division, continued his active participation in the North American Securities Administrators Association, Inc. (NASAA). Organized in 1919 and dedicated to investor protection, NASAA is a voluntary association whose membership consists of 67 state, provincial and territorial securities administrators in the 50 states, the District of Columbia, Canada, Mexico, Puerto Rico and the U.S. Virgin Islands. During 2008-09, Mr. Lambiase served on NASAA’s Broker-dealer Section Committee.
During 2008 and 2009, the Securities and Business Investments Division continued to participate in quarterly meetings conducted by the Connecticut Corporate Fraud Working Group, a body comprised of 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.
Since 1992, state-chartered banks have submitted Home Mortgage Disclosure Act (HMDA) information to their primary federal regulator, usually the Federal Deposit Insurance Corporation (FDIC). That agency examines banks in accordance with prescribed regulatory timeframes once every two years for compliance with HMDA and other regulations. The Department of Banking receives and reviews copies of all of these confidential compliance examination reports. Based on the department's review of recent community reinvestment act (CRA) and compliance examination summaries during 2008, no evidence of discriminatory practices by state-chartered institutions was disclosed.
As of July 1, 2009, five banks headquartered in Connecticut operated 188 branches or limited branches that were located outside of Connecticut. Correspondingly, 20 banks chartered or headquartered out of state operated 494 branches or limited branches located within Connecticut. In addition, five foreign banks operated state agencies, branches or representative offices in Connecticut.
Bank Mergers and Acquisitions for Fiscal Year 2008-2009
On August 15, 2008, pursuant to Section 36a-185 of the Connecticut General Statutes, the Commissioner issued a notice of intent not to disapproved the acquisition by BNC Financial Group, Inc., of 100 percent of the voting securities of The Bank of Fairfield, Fairfield, Connecticut.
On April 24, 2009, pursuant to Section 36a-126(a) of the Connecticut General Statutes, the Commissioner approved the merger of Enfield Federal Savings and Loan Association, a federal bank, with and into Valley Bank, a Connecticut bank, both wholly-owned subsidiaries of New England Bancshares Inc., the resultant bank to operate under the name New England Bank.
On May 18, 2009, pursuant to Section 36a-125 of the Connecticut General Statutes, the Commissioner approved the merger of The Apple Valley Bank & Trust Company, a Connecticut bank, with and into New England Bank, a Connecticut bank that is a wholly owned subsidiary of New England Bancshares, Inc., a Connecticut holding company, the resultant bank to operate under the name New England Bank. On May 18, 2009, pursuant to Section 36a-185 of the Connecticut General Statutes, the Commissioner issued a notice of intent not to disapprove the acquisition by New England Bancshares, Inc. of 100% of the voting securities of The Apple Valley Bank & Trust Company through such merger.
On May 28, 2009, pursuant to Section 36a-198 of the Connecticut General Statutes, the Commissioner approved the application of Collinsville Savings Mutual Holding Company, for the establishment of a subsidiary holding company to be known as Collinsville Stock Holding Company, and, pursuant to Section 36a-185 of the Connecticut General Statutes, the Commissioner issued a notice of intent not to disapprove the acquisition by Connecticut Mutual Holding Company, of 100% of the outstanding shares of common stock of Collinsville Stock Holding Company, and, indirectly, Collinsville Savings Society.
On June 22, 2009, pursuant to Section 36a-125 of the Connecticut General Statutes, the Commissioner approved the merger of Castle Bank & Trust Company, a Connecticut bank, with and into Naugatuck Savings Bank, a Connecticut bank, both wholly-owned subsidiaries of Nutmeg Financial, MHC, the resultant bank to operate under the name Naugatuck Savings Bank.