DOB: 2000-01 Administrative Report to the Governor

Administrative Report to the Governor
2000-2001

Agency Mission | Statutory Responsibility | Public Service
Improvements/Achievements | Reducing Waste
Strategic Planning | Equal Employment Opportunity/Affirmative Action

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 - 143

Recurring operating expenses, 2000-01 - $13,178,279

Organization Structure:

  • Administration
  • Bank and Credit Union Regulation
  • Consumer Credit
  • Securities and Business Investments

Agency Mission

The mission of the Department of Banking is to ensure the safety and soundness of the depository institutions it regulates; to administer and enforce the state's banking and related laws; to assist citizens in transactions with financial institutions; and to promote economic growth through capital formation while simultaneously protecting investors against fraudulent practices that undermine the integrity of the securities markets.

Statutory Responsibility

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 Bank Examination Division is responsible for the supervision of state-chartered bank and trust companies, savings banks and savings and loan associations. The division also licenses foreign banking organizations that establish and maintain representative offices, agency offices or branch offices in Connecticut. The division supervises bank holding companies, and has responsibility for analyzing applications for new bank charters, acquisitions, mergers, branches and changes in corporate structure. In addition, the division licenses money forwarders, check cashing services, business and industrial development corporations, and certain non-banking corporations that exercise fiduciary powers.

The Credit Union Division supervises state-chartered credit unions. It has responsibility for analyzing applications for new charters, mergers, requests for field of membership expansion and changes in corporate structure.

The Consumer Credit Division is responsible for the enforcement of Connecticutís laws concerning small loan companies, sales finance companies, debt adjusters, first mortgage lenders and brokers, secondary mortgage lenders and brokers, consumer collection agencies, Truth in Lending and other consumer credit laws.

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 stateís securities, business opportunity and tender offer laws.

The departmentís 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 help protect public funds in depository institutions, offer important investor and consumer protections, assist in dispute resolution and provide valuable 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 laws firms, accounting firms, consumer advocacy groups, trade associations and others, receive information, advice, policies and guidelines from the department.


Public Service

The Department of Banking is strongly committed to maintaining a standard of excellence in meeting its regulatory responsibility, while being responsive to Governor Rowlandís desire to promote a business friendly climate in Connecticut.

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 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 2000-01, over $7 million was returned to consumers and investors through the Departmentís efforts.

In the past fiscal year, the amount of adjustments and reimbursements that were obtained on behalf of consumers from the Consumer Credit Division's complaint function continued to increase. During the period, reimbursements and adjustments to consumers from the complaint handling process increased from $1,532,304 to $1,939,066, a gain of over 26% from the previous fiscal year.

Securities Division intervention in ensuring that Connecticut investors receive rescission and restitution, when possible, remained a primary objective, as did the disgorgement of ill-gotten gains by violators of the stateís securities laws. During 2000-01, Division intervention helped facilitate the return of over $5 million to investors. In addition, monetary sanctions imposed by the Division for violations of state law totaled almost $400,000.

The agencyís security deposit investigator resolved 198 landlord tenant disputes during fiscal year 2000-01 and recovered $53,130 for Connecticut residents who had complained to the department that landlords had unjustly withheld their refundable rental security deposits.

As a means to provide the public with convenient 24-hour access to information and resources, the department maintains a Web site on the Internet at www.ct.gov/dob. During 2000-01, the department significantly expanded the Web site's content, while ensuring that posted information was timely and current. Web site usage grew strongly through the year, with nearly 240 thousand user sessions and approximately 1.5 million "hits" being recorded. The departmentís webmaster served as chair of the ConneCT Management Advisory Committeeís (CMAC) public relations sub-committee. (CMAC oversees the State of Connecticut Web site).

The Department of Banking established a new Advisory Committee on International Banking. The advisory committee, which met for the first time in May, 2001, will provide a forum for international banks licensed by the department to meet with the Commissioner and senior staff to discuss important industry issues.

The Credit Union Division worked closely with various state-chartered institutions to effect expansions of fields of membership and mergers, when needed or appropriate. The division also completed a credit union conversion from a federal charter to a state charter, and initiated the conversion process for other federally-chartered credit unions.

The Legal Division continued to prepare current compilations of the statutes and regulations within the jurisdiction of the Department of Banking, and certain other related laws, for use by the public and regulated entities. The compilations are revised as necessary to reflect new legislation or changes in regulations, and are available for free download on the Department's Web site.

The Division also continued to post on the Departmentís Web site administrative actions taken against entities within the jurisdiction of the Commissioner.

Additionally, the Legal Division made available on the Internet indexes to advisory opinions issued by the Commissioner concerning banking, credit union, consumer credit, landlord/tenant and business opportunity issues that have arisen under statutes and regulations within the Commissionerís jurisdiction. The indexes cross-reference the advisory opinions by subject matter with a brief description of the position taken, statute, public act and regulation referenced.

All Department job openings are now posted on the Internet so the public may conveniently learn about employment opportunities. Employees may also utilize the Internet to learn about promotional opportunities, collective bargaining contracts, employee benefits and other information.

The Securities and Business Investments Division strives to promote a healthy, competitive business environment by protecting the public from securities and business opportunity-related frauds and other abuses.

During 2000-01, the Securities Division increased its accessibility to investors, the securities industry and others in keeping with longstanding practice. Division staff informed industry groups of regulatory developments through a series of presentations and written outlines. A common audience consisted of Certified Public Accountants seeking to add securities investment advice and financial planning to their client services. Approximately a dozen such meetings were conducted.

New Connecticut-based applicants for broker-dealer and investment adviser registration continued to receive a valuable service from Division staff - personalized "pre-registration meetings" orienting new applicants to their compliance responsibilities, advising them on what to expect during an examination and affording them an opportunity to ask questions in an informal setting. Similarly, small issuers seeking to raise capital in Connecticut were encouraged to meet with staff to walk through the process of complying with securities laws.

The Banking Department places a high priority on outreach to the public. The banking commissioner and staff frequently address consumer, industry, student and other groups.

The department further undertakes educational efforts to help the public understand services provided in the financial marketplace and to recognize fraudulent investment offers. A report on the financial condition of depository institutions is published annually; a weekly Bulletin provides information on applications before the agency and intended changes in regulations; a Securities Bulletin is published quarterly to update industry on regulatory developments; and investor education and other publications are produced as needed.


Improvements/Achievements 2000-01

Commissioner John P. Burke served on the Board of the Conference of State Bank Supervisors (CSBS), and was Chair of the Bylaws Committee, during 2000-01. CSBS is the professional association of state officials responsible for chartering, regulating and supervising the nationís state-chartered banks and state-licensed branches and agencies of foreign banks.

In his capacity as Banking Commissioner, Mr. Burke served as an Ex officio Member of the Board of the Connecticut Housing Finance Authority. Commissioner Burke also served on the Board of Directors of the Community Economic Development Fund Foundation and as a member of the Connecticut Economic Conference Board.

During 2000-01, two new state-chartered banks, The Apple Valley Bank & Trust Company, in Cheshire, and The Communityís Bank, in Bridgeport, opened for business. Three new state-chartered banks were also in organization, and two applications for new banks were pending before the Department. In addition, the Bank of Ireland and Sociťtť Gťneralť opened, respectively, a representative office and a state agency, and two other foreign banks had applications pending to operate in Connecticut.

The Bank Examination Division hosted a CSBS District I fall meeting on October 19-20, 2000, attended by representatives from ten northeastern state banking departments and staff from five federal regulatory agencies. The meeting allowed participants to share a constructive dialogue on common issues affecting state banking departments.

The Bank Examination Division established an off-site monitoring program for the domestic banking institutions it supervises. The Division expanded its risk-focused approach and off-site monitoring for other financial entities it supervises, including limited purpose trust companies and business and industrial development corporations. The Divisionís off-site monitoring program compliments the risk-focused examinations conducted by bank examination staff.

During 2000-01, several significant Division staff changes were announced. Howard Pitkin was appointed Administrator of Depository Institutions, with oversight responsibility for both the Bank Examination and Credit Union Divisions. Mary Ellen OíNeill was promoted to Director of the Bank Examination Division, and Ann Pedevillano was appointed an Assistant Director in the Bank Examination Division.

Mr. Pitkin was one of four persons earlier selected to receive a Distinguished Manager of the Year Award, as presented by Governor Rowland, for his significant contributions to state service. In his citation, Commissioner Burke noted the Bank Examination Division, under Mr. Pitkinís leadership, has become recognized as one of the best in the country.

In July, 2000, Deborah Buckley, an examiner with the Bank Examination Division, received the Governorís Customer Service Award. Ms. Buckley serves as the agencyís primary contact for persons with questions or complaints about banks. Her ability to work successfully with the public and institutions to resolve issues epitomizes the programís "customers count" motto.

Each year the department, with the coordination of the Government Relations and Communications Division, conducts an active legislative program. During the 2001 legislative session, six department proposals concerning banks, credit unions, consumer credit and securities were enacted into law.

One proposal, Public Act 01-34, establishes a statutory scheme to curb abusive lending practices in Connecticut. In recent years, there has been a nationwide increase in abusive lending practices in the mortgage market, usually targeted towards low-income and elderly buyers. Another proposal, PA 01-76, keeps intact the stateís current financial privacy laws, while adopting the privacy provisions of the federal Gramm-Leach Bliley Act with respect to certain individuals and entities subject to the Commissionerís jurisdiction. This legislation, by incorporating into state law the opt-out privacy provisions of the federal act that are applicable to specified individuals and entities subject to the jurisdiction of the Commissioner, would give the Commissioner enforcement authority with respect to such federal provisions.

Another proposal, Public Act 01-09, establishes community reinvestment provisions for community-based credit unions with assets over $10 million. Since a community credit unionís field of membership may cover all persons within the community, neighborhood or rural district, it is reasonable to require such a credit union to demonstrate that it will help to meet the credit needs of its community and to consider its performance as part of the approval process of transactions in which it becomes involved.

The departmentís 2000-01 set-aside goals with small contractors formulated by the Business Office were approved with all requested exemptions by the Department of Economic and Community Development. The approval reflects well on the ability of the Business Officeís purchasing unit to establish and meet set-aside goals with small and minority contract vendors.

The Business Office participated as team members in successfully developing financial accounting requirements for Core-Connecticut (Core-CT), a project to develop a new state administrative and financial management system to be used to collect financial transactions and report budgetary performance.

The Banking Commissioner directed the Credit Union Division, with assistance from the Legal Division, to perform a comprehensive review of all Connecticut statutes that relate to credit unions to determine whether they adequately reflect current industry practices, technological advances and federal law development. The Commissionerís goal is to ensure the vitality of the state credit union charter in an evolving financial services marketplace. Upon completion of the review of existing statutes, the Department may propose legislation to the General Assembly.

The Credit Union Division successfully completed an annual re-accreditation review by National Association of State Credit Union Supervisors. Accreditation, which the Division first achieved in 1990, is intended to foster a standard of excellence in the examination and supervision of credit unions.

During 2000-01, the Commissioner directed the Credit Union Division to assess if its examination techniques are helping to accomplish the Departmentís goal of providing risk-focused supervision. The Divisionís examination process was also improved by an upgrade of its computing capacity and continued examination staff training.

The Personnel Division converted from manual to automated Time and Attendance tracking, allowing time keeping and accrual calculations to be accomplished more quickly and efficiently.

Along with the Business Office, the Personnel Division participated in Core-CT, an effort to replace outdated state core personnel and other legacy computer systems. Such systems have been plagued by poor integration, redundant data entry, and time-wasting reconciliation. The Personnel Division provided information to assist with a smooth conversion to the new system.

The Personnel Office continued to offer in-service training to employees. A wide range of courses increased computer software knowledge; improved supervisory, presentation and writing skills; and promoted health and wellness. Further specialized training was also made available to employees.

The Personnel Division coordinated the Departmentís participation in many charitable drives during the year, including the State Employeeís Campaign for Charitable Giving for which the Department won an award for the highest participation in the State.

The Securities Division continued to police broker-dealers that engaged in high pressure sales tactics. The Division also actively investigated cases involving promissory notes, offshore entities and more novel products such as payphone investments. With financial services modernization inviting more newcomers, such as insurance salespersons, to the securities industry, the public is being confronted with individuals that lack the requisite training in securities products and regulatory issues. The Divisionís public outreach program is geared to raising public awareness regarding risks in investing.

The Division continued to improve upon ways to coordinate securities registration procedures and standards with those of other states and with the Securities and Exchange Commission (SEC). Filers of securities registration statements who used the SEC's automated EDGAR database can now opt to have the state review their registration statements on-line rather than in paper format. In addition, the Division partnered with other New England states in developing uniform standards and procedures for reviewing securities offerings of $5 million or less. In sync with industry trends, the Division also developed policy orders governing insurance company demutualizations and transactions effected for foreign broker-dealer customers temporarily in the United States.

On October 2, 2000, the Securities Division sponsored its twelfth annual Securities Forum conference. Over 300 hundred securities industry professionals and others registered for the daylong event in Cromwell. Through a series of breakout seminars and general sessions, Securities Forum 2000 fostered an open, productive dialogue and a free interchange of ideas between regulators and industry participants.

 

Reducing Waste

The Department of Banking continually reviews agency operations to improve efficiency, reduce costs and foster innovation. The Banking Commissioner actively encourages employee suggestions regarding the department's policies and practices, with a goal of simplifying government and identifying any inefficient or redundant operations.

At present, the Department has more than 40 application forms and over twenty legal compilations posted for convenient access on its Web site. During 2000-01, customers downloaded over 26 thousand such files, saving the Department considerable costs in handling and mailing the documents. Additionally, the Department began distributing its Weekly News Bulletin via e-mail to reduce mail subscription costs.

The Bank Examination Division, together with the CSBS Trust Committee, implemented use of the CSBS Uniform Application for Interstate Trust Activities of State Chartered Trust Institutions. In an effort to reduce the burden on institutions operating in multiple states, state departments of banking are working cooperatively to establish a uniform application and an effective information sharing process. This effort is modeled on an earlier, successful Nationwide Cooperative Agreement for Interstate Branching.

The Business Office continued to improve the agencyís budget iteration process during 2000-01. With cooperation from senior management, the budget process is more responsive to the agencyís forecasted goals.

The Business Office also strengthened the agencyís internal controls to avoid identity theft. Improved controls served to prevent fraud, while assuring that agency financial records and files remained secure and confidential. In addition, problems in other areas requiring attention were identified and corrected.

During 2000-01, the Consumer Credit Division agreed to participate in a program to conduct joint compliance examinations with other state regulators. This cooperative effort should improve examination efficiency and reduce costs, benefiting both regulated entities and the agency.

The Personnel Division distributed training catalogs, forms and other information electronically to reduce costs. Employees were further encouraged to utilize direct-deposit payroll to reduce costs associated with traditional paychecks.

The Securities Division made significant progress in establishing a more comprehensive technological framework for licensing and securities registration. During the year ahead, the Division anticipates consolidating database usage by joining with other states in capturing more registrant classes, such as investment adviser agents, in a national, on-line registration system. The Division will continue to assist industry in using the more efficient systems.

The Securities Division relied much more heavily on technology to improve efficiency. All broker-dealers firms and agents seeking new or renewed registration in Connecticut use Web-CRD, a national Internet-based system. Web-CRD provides a means by which broker-dealers and their agents can file for registration in multiple states and with NASD Regulation by using a centralized depository.

The Division frequently used email to distribute requested documents or to point to relevant Web site links, allowing customers quicker, "on demand" access to information

The Division successfully participated in the implementation of Web IARD, a national registration database for investment advisers. Staff provided input to the North American Securities Administrators Association (NASAA) and to the NASD during both the pilot phase of Web IARD and its successful launch. The IARD promises to ultimately eliminate the paper filing of investment adviser registration materials; cut staff processing time; and reduce paper storage costs.

Fiscal year 2000-01 witnessed a full-scale review and revamping of broker-dealer, investment advisory and branch office registration forms to simplify compliance and ensure uniformity with other states. The Securities Division continued to establish informal benchmarks to avoid delays in its registration and licensing processes.

During 2000-01, the Division critically reviewed its records storage policies with an eye toward eliminating redundant or obsolete records, as well as updating records rosters to reflect new technology. The review resulted in a recommendation to reduce the required retention period for certain records, thus cutting expenses associated with maintaining those records at an independent facility. The Division also began using a state facility to further cut storage costs.

The Securities Division strives to keep its personnel apprised on key regulatory developments through training, frequent staff meetings and staff input into the decision-making process. Cross-training efforts have enabled staff to be flexibly assigned to critical work tasks.

 

Strategic Planning

In striving for continued excellence in regulation, the agency devotes considerable effort to strategic planning.

The Bank Examination Divisionís Strategic and Operating Plan provides management with a framework reflective of the Departmentís history and that of the industry. It identifies the Divisionís strengths and weaknesses, highlights opportunities and threats, and outlines strategies necessary to reach its goals.

The Bank Examination Divisionís mission statement is: "To effectively serve the State of Connecticut and its citizens by ensuring the safety and soundness of state regulated institutions and entities with honesty, integrity, and a responsiveness to changes within the financial services industry."

The Division established several Specialty Examination Teams to draw on and further develop examinersí skills and knowledge in areas such as capital markets, information systems, international banking, trusts, and the Community Reinvestment Act.

In addition, the Division established an Accounting Group which includes examiners who hold professional accounting designations. The Group focuses on key accounting issues that impact financial institutions and provides research and training to examiners in addressing significant industry topics.

The Consumer Credit Divisionís management regularly meets with staff to discuss ways to improve workflow and the manner in which staff perform their duties. In addition, staff members are encouraged to submit suggestions to increase the effectiveness and efficiency of Division business processes.

The Credit Union Division developed a strategic plan for 2001-02, with an emphasis on assuring the safety and soundness of state-chartered credit unions. The plan also calls for flexibility and responsiveness to credit union industry changes.

The Legal Division has embarked on a three-year plan to make all of its documents issued since 1976 available electronically to improve customer service. This substantial effort will streamline division workflow, while realizing savings in research time and photocopying expenses. An eventual goal is to post certain documents on the agencyís Web site, greatly increasing their availability and reducing opinion and Freedom of Information requests.

Financial services modernization, the increasing federalization of securities regulation and technological change present unique challenges for the Securities Division. As more firms enter the securities business, the Divisionís mission will be one of education and even-handed enforcement. As federal and state regulatory schemes become more seamless, the Division will adopt a more interdisciplinary approach to regulation.

Management of the Securities Division proactively engages in strategic planning and regularly meets to discuss operational improvements. General objectives are periodically established and re-evaluated by management to ensure their success.

The Division is assisted by a Securities Advisory Council, comprised of industry representatives, academics and members of the bar, all of whom serve without compensation. Among other things, the Securities Advisory Council offers insight on new regulatory initiatives.

Throughout 2000-01, the Division actively participated in NASAA, ensuring that Connecticut securities regulation was responsive to new developments and uniform with that of other jurisdictions. The department's participation with other regulators in shared databases enhanced enforcement efforts.

The Division continues to encourage dialogue with broker-dealers experiencing compliance and operational difficulties, and requires that they file periodic status reports until their problems are resolved.

Leveraging technology, the Division more fully utilized the Internet as an enforcement and research tool. Emphasis was placed on "chat rooms" and Bulletin Boards where low-priced securities are commonly promoted with little or no accurate disclosure. The Division continued to participate with other states and federal agencies in organized efforts to "surf" the Internet for investment abuses.


Equal Employment Opportunity and Affirmative Action

The Department of Banking is very committed to providing equal employment opportunity on the basis of merit; to assuring nondiscrimination; and to implementing affirmative action and contract compliance, as required by sections 46a-60, 46a-68, 46a-70 and 46a-71 of the Connecticut General Statutes. The departmentís annual Affirmative Action Plan, approved by the Commission on Human Rights and Opportunities, reflects significant achievement in attaining a diverse workforce reflective of the institutions the agency regulates and the customers the agency serves.

As a regulatory agency, the Department of Banking takes every appropriate action within its statutory authority to promote equal opportunity in mortgage lending, consumer credit and other financial services.

The department pursues an aggressive outreach strategy through the use of internships that provide students with exposure to state service and a meaningful entry into the workforce. This approach is supplemented by an active recruitment effort conducted at local high schools and college career fairs.