Utah Administrative Code

The Utah Administrative Code is the body of all effective administrative rules as compiled and organized by the Division of Administrative Rules (see Subsection 63G-3-102(5); see also Sections 63G-3-701 and 702).

NOTE: For a list of rules that have been made effective since October 1, 2019, please see the codification segue page.

NOTE TO RULEFILING AGENCIES: Use the RTF version for submitting rule changes.


R333. Financial Institutions, Banks.

Rule R333-9. Indemnification of Directors, Officers, and Employees.

As in effect on October 1, 2019

Table of Contents

R333-9-1. Authority, Scope, and Purpose.

(1) This rule is issued pursuant to Sections 7-1-301(4) and 7-3-13.

(2) This rule defines, clarifies and limits the extent to which a state chartered bank may provide in its articles of incorporation or bylaws for the indemnification of directors, officers and employees under the general corporate powers provision of Sections 16-10a-901 through 16-10a-909.

(3) The purpose of this rule is to deter acts that could threaten the safety and soundness of all state chartered banks by specifically prohibiting the indemnification of directors, officers and employees when a supervisory action results in a final order assessing civil money penalties or requiring affirmative action in the form of payment by an individual to a state chartered bank; to specifically set forth the commissioner's authority to deny or modify an indemnification which appears to be inconsistent with the standards stated in the bank's indemnification article or which would jeopardize the safety and soundness of any state chartered bank; and to specifically prohibit any state chartered bank from insuring any of its directors or employees against a final supervisory order assessing civil money penalties.

R333-9-2. Indemnification of Directors, Officers, and Employees.

(1) A state chartered bank may provide in its articles of incorporation or bylaws for the indemnification of directors, officers and employees for expenses personally incurred in actions to which the directors, officers or employees are parties or potential parties by reason of the performance of their official duties. Indemnification articles which substantially reflect the general provisions of Sections 16-10a-901 through 16-10a-909 are presumed by the department to be within the corporate powers of state chartered banks.

(2) The indemnification provisions shall not allow the indemnification, directly or indirectly, of directors, officers, or employees of a state chartered bank against expenses, penalties or other payments incurred in an administrative proceeding or action instituted by an appropriate bank regulatory agency which proceeding or action results in a final order assessing civil money penalties or requiring affirmative action by an individual or individuals in the form of payments to the bank.

(3) In accordance with his supervisory responsibilities, the commissioner may, in his discretion, review the threat to bank safety and soundness posed by any indemnification or proposed indemnification of directors, officers, or employees of any state chartered bank, or for the consistency of any such indemnification with the standards adopted by that bank in its articles of incorporation or bylaws. Based upon this review, the commissioner may direct a modification of a specific indemnification by a bank through appropriate administrative action.

(4) A state chartered bank may provide in its articles of incorporation or bylaws for the payment of premiums for insurance covering the liability of its directors, officers or employees to the extent that the coverage is provided for in Sections 16-10a-901 through 16-10a-909, except that the provision shall explicitly exclude insurance coverage for a formal supervisory order assessing civil money penalties against a bank director, officer or employee.

KEY

banks and banking

Date of Enactment or Last Substantive Amendment

1995

Notice of Continuation

September 15, 2017

Authorizing, Implemented, or Interpreted Law

7-1-301(4); 7-3-13


Additional Information

Contact

For questions regarding the content or application of rules under Title R333, please contact the promulgating agency (Financial Institutions, Banks). A list of agencies with links to their homepages is available at http://www.utah.gov/government/agencylist.html or from http://www.rules.utah.gov/contact/agencycontacts.htm.