By Chris Bruce
Nov. 6 — A bank and a hedge fund may want to stay and settle a case involving the federal bank examination privilege, but federal bank regulators have other ideas, saying the case raises significant questions that must be addressed.
Porter Bancorp (PBIB), a Louisville, Ky., bank holding company, and SBAV LP, a hedge fund in New York that sought to reach Porter Bancorp documents, Nov. 3 asked the U.S. District Court for the Western District of Kentucky to stay the case, saying they have reached a settlement.
SBAV has sought sensitive examination- and enforcement-related documents relating to Porter, testing the bank examination privilege. The privilege, aimed at encouraging a free flow of information, shields certain communications between banks and their regulators.
Senior Judge Thomas B. Russell recently allowed the Federal Reserve and the Federal Deposit Insurance Corp. to intervene to address the privilege questions. The stay sought by Porter and SBAV, if ordered by the court, would cut short briefing by the agencies.
However, the Fed and the FDIC Nov. 5 urged Russell to allow their briefing to continue, saying an earlier ruling by Russell ordering disclosure already is being cited in other litigation.
“The bank examination privilege issues addressed in the Court’s March 31, 2015, decision may no longer be of concern to the plaintiff and defendants, but they remain of serious concern to the agencies,” the brief said.
The Fed and the FDIC have asked Russell to reconsider his March decision, and are scheduled to file briefs Nov. 20.
The Fed and the FDIC's Nov. 5 filing, if approved by the court, would allow briefing to continue, along with their motions either to vacate or reconsider the March ruling.
“The agencies have not entered into any settlements relating to this case, and the parties’ settlement does not moot the issues that the agencies intend to raise in their forthcoming motion,” the Fed and the FDIC said.
At issue is whether Porter Bancorp and its bank unit could prevent disclosure of sensitive materials to SBAV, which claimed Porter Bancorp misrepresented the bank's financial solvency and its standing with federal and state regulators.
Russell in March upheld a magistrate's order directing the bank to produce materials sought by investors.
In May, the Fed and the FDIC weighed in, urging the court to delay production of the materials.
Last month, Russell stayed production and allowed the Fed and the FDIC to intervene.
However, the bank and SBAV Nov. 3 jointly asked the court to stay the case, saying they have reached a settlement agreement. They said its terms likely will be met by the end of the month.
To contact the reporter on this story: Chris Bruce in Washington at email@example.com
To contact the editor responsible for this story: Seth Stern at firstname.lastname@example.org
The joint Fed-FDIC filing Nov. 5 is at http://www.bloomberglaw.com/public/document/SBAV_LP_v_Porter_Bancorp_Inc_et_al_Docket_No_313cv00710_WD_Ky_Jul/4. The Nov. 3 filing is at http://www.bloomberglaw.com/public/document/SBAV_LP_v_Porter_Bancorp_Inc_et_al_Docket_No_313cv00710_WD_Ky_Jul/3.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)