AN
ACT Relating to the confidentiality of voluntary compliance efforts by
financial institutions; and adding a new chapter to Title 7 RCW.
BE IT
ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW
SECTION. Sec. 1. The
legislature finds and declares that efforts by financial institutions to comply
voluntarily with state and federal statutory and regulatory requirements are
vital to the public interest; that possible discovery and use in civil litigation
of work produced in connection with such voluntary compliance efforts has an
undesirable chilling effect on the use, scope, and effectiveness of voluntary
compliance efforts by financial institutions; and that the public interest in
encouraging aggressive voluntary compliance review outweighs the value of this
work product in civil litigation.
NEW
SECTION. Sec. 2. The
definitions in this section apply throughout this chapter unless the context
clearly requires otherwise.
(1)
"Affiliate" means any person that controls, is controlled by, or is
under common control with a financial institution.
(2)
"Civil action" means a civil proceeding pending in a court or other
adjudicatory tribunal with jurisdiction to issue a request or subpoena for
records, including a voluntary or mandated alternative dispute resolution
mechanism under which a party may compel the production of records.
"Civil action" does not include an examination or enforcement
proceeding initiated by a governmental agency with primary regulatory
jurisdiction over a financial institution in possession of a compliance review
document.
(3)
"Compliance review personnel" means a person or persons assigned and
directed by the board of directors or management of a financial institution or
affiliate to conduct a compliance review, and any person engaged or assigned by
compliance review personnel or by the board of directors or management to
assist in a compliance review.
(4)
"Compliance review" means a self-critical analysis conducted by
compliance review personnel to test, review, or evaluate past conduct,
transactions, policies, or procedures for the purpose of confidentially (a)
ascertaining, monitoring, or remediating violations of applicable state and
federal statutes, rules, regulations, or mandatory policies, statements, or
guidelines, (b) assessing and improving loan quality, loan underwriting
standards, or lending practices, or (c) assessing and improving financial
reporting to federal or state regulatory agencies.
(5)
"Compliance review document" means any record prepared or created by
compliance review personnel in connection with a compliance review. "Compliance
review document" includes any documents created or data generated in the
course of conducting a compliance review, but does not include other underlying
documents, data, or factual materials that are the subject of, or source materials
for, the compliance review, including any documents in existence prior to the
commencement of the compliance review that are not themselves compliance review
documents related to a past compliance review.
(6)
"Financial institution" means a bank, trust company, mutual savings
bank, savings and loan association, or credit union authorized by federal or
state law to accept deposits in this state.
(7)
"Person" means an individual, group, committee, partnership, firm,
association, corporation, limited liability company, or other entity, including
a financial institution or affiliate and its agents, employees, legal counsel,
auditors, and consultants.
NEW
SECTION. Sec. 3.
Except as provided in section 4 of this act:
(1)
Compliance review documents are confidential and are not discoverable or
admissible as evidence in any civil action.
(2)
Compliance review personnel shall not be required to testify at deposition or
trial in any civil action concerning the contents of or matters addressed in
any compliance review or any compliance review documents, nor as to the actions
or activities undertaken by or at the direction of the financial institution or
affiliate in connection with a compliance review.
NEW
SECTION. Sec. 4.
Section 3 of this act does not:
(1)
Limit the discovery or admissibility in any civil action of any documents that
are not compliance review documents;
(2)
Limit the discovery or admissibility of the testimony as to the identity of
relevant witnesses or the identification of any relevant documents other than
compliance review documents;
(3)
Apply if the financial institution or affiliate expressly waives the privilege
in writing;
(4)
Apply if a compliance review document or matters learned in connection with a
compliance review are voluntarily disclosed, but only to the extent of that
disclosure, to a nonaffiliated third party other than a federal or state
regulatory agency or legal counsel for or independent auditors of the financial
institution or affiliate; or
(5)
Apply to any information required by statute, rule, or federal regulation to be
maintained by or provided to a governmental agency while the information is in
the possession of the agency, to the extent applicable law authorizes its
disclosure.
NEW
SECTION. Sec. 5. In a
proceeding in which the privilege provided by this chapter is asserted, a court
of competent jurisdiction may determine after in camera review that the
privilege does not apply to any or all of the documents for which the privilege
is claimed, and if so, the court may order the materials disclosed but shall
protect from disclosure any other material in or related to compliance review
documents or to activities of compliance review personnel to which the
privilege does apply.
NEW
SECTION. Sec. 6. This
chapter does not limit, waive, or abrogate the scope or nature of any other
statutory or common law privilege of this state or the United States, including
the attorney-client privilege.
NEW
SECTION. Sec. 7.
Sections 1 through 6 of this act constitute a new chapter in Title 7 RCW.
