PART 1233—REPORTING OF FRAUDULENT FINANCIAL INSTRUMENTS Authority: 12 U.S.C. 4511, 4513, 4514, 4526, 4642. Source: 75 FR 4258, Jan. 27, 2010, unless otherwise noted. § 1233.1 Purpose. The purpose of this part is to implement the Safety and Soundness Act by requiring each regulated entity to report to FHFA upon discovery that it has purchased or sold a fraudulent loan or financial instrument, or suspects a possible fraud relating to the purchase or sale of any loan or financial instrument. In addition, each regulated entity must establish and maintain internal controls, policies, procedures, and operational training to discover such transactions. § 1233.2 Definitions. The following definitions apply to the terms used in this part: Entity-affiliated party (1) Any director, officer, employee, or controlling stockholder of, or agent for, a regulated entity; (2) Any shareholder, affiliate, consultant, or joint venture partner of a regulated entity, and any other person, as determined by the Director (by regulation or on a case-by-case basis) that participates in the conduct of the affairs of a regulated entity, provided that a member of a Federal Home Loan Bank shall not be deemed to have participated in the affairs of that Federal Home Loan Bank solely by virtue of being a shareholder of, and obtaining advances from, that Federal Home Loan Bank; (3) Any independent contractor for a regulated entity (including any attorney, appraiser, or accountant); (4) Any not-for-profit corporation that receives its principal funding, on an ongoing basis, from any regulated entity; and (5) The Office of Finance. Financial instrument Fraud Possible fraud Purchased or sold or relating to the purchase or sale [75 FR 4258, Jan. 27, 2010, as amended at 78 FR 2323, Jan. 11, 2013] § 1233.3 Reporting. (a) Timeframe for reporting. (2) In addition to submitting a report in accordance with paragraph (a)(1) of this section, in any situation that would have a significant impact on the regulated entity, the regulated entity shall immediately report any fraud or possible fraud to the Director by telephone or electronic communication. (b) Format for reporting. (2) The Director may require a regulated entity to provide such additional or continuing information relating to such fraud or possible fraud that the Director deems appropriate. (3) A regulated entity may satisfy the reporting requirements of this section by submitting the required information on a form or in another format used by any other regulatory agency, provided it has first obtained the prior written approval of the Director. (c) Retention of records. (d) Nondisclosure. (2) The restriction in paragraph (d)(1) of this section does not prohibit a regulated entity from— (i) Disclosing or reporting such fraud or possible fraud pursuant to legal requirements, including reporting to appropriate law enforcement or other governmental authorities; or (ii) Taking any legal or business action it may deem appropriate, including any action involving the party or parties connected with the fraud or possible fraud. (e) No waiver of privilege. § 1233.4 Internal controls, policies, procedures, and training. (a) In general. (b) Examination. § 1233.5 Protection from liability for reports. As provided by section 1379E of the Safety and Soundness Act (12 U.S.C. 4642(b)), a regulated entity that, in good faith, submits a report pursuant to this part, and any entity-affiliated party, that, in good faith, submits or requires a person to submit a report pursuant to this part, shall not be liable to any person under any provision of law or regulation, any constitution, law, or regulation of any State or political subdivision of any State, or under any contract or other legally enforceable agreement (including any arbitration agreement) for such report, or for any failure to provide notice of such report to the person who is the subject of such report, or any other persons identified in the report. § 1233.6 Supervisory action. Failure by a regulated entity to comply with this part may subject the regulated entity or the board members, officers, or employees thereof to supervisory action by FHFA, including but not limited to, cease-and-desist proceedings and civil money penalties.