SFBI: Legal Issues Affecting Banks
March 15, 2016
South Florida Banking Institute held a legal experts panel that addressed the topic of “Legal Issues
Affecting the South Florida Banking Industry” at the Coral Gables Country Club on Tuesday, March 15th,
The event began with registration followed by a lively cocktail hour, where many banking industry
professionals had the chance to meet and mingle.
SFBI President, Daniel R. Martinez, welcomed all attendees to the event. After dinner, Moderator
Danny Lipe, Executive Vice President of the Community Bank of Florida, expressed the opening
sentiment for the panel discussion on behalf of all attendees, “I think all of us at our job deal with legal
issues, a wide-range of legal issues. And it seems like every day now.” Lipe then proceeded to introduce
the guest speakers respectively by legal expertise. Members of the panel were Patricia M. Hernandez,
Partner at Avila Rodriguez Hernandez Mena & Ferri LLP; Carl A. Fornaris, Shareholder at Greenberg
Traurig LLP; and S. Marshall Martin, Executive Vice President, Enterprise Risk Executive & Co-General
Counsel at City National Bank.
Among the legal issues facing the banking industry in 2016 the panel discussed compliance in dealing
with personal liability, a forefront issue since the last few years of the financial crisis. On this topic
panelists presented the changes in personal liability and what the regulatory environment currently is.
Two areas were emphasized, the indemnification for the way corporations are set up, and statutory
provisions where you may have a right to be indemnified. Several of the panelists spoke about the
importance of insurance on the process of indemnification, particularly in regards to the perspective of
legal Side A as well as coverage limits and policy. Tail coverage for transactions post-acquisition activities
was recommended, and D&O insurance was mentioned as not enough for banker’s professional liability that should
provide needed overall coverage in an insurance program. There was a careful look at exclusion of
general insurance policies, and preparing for the exceptions and loop-holes in policies.
Additionally, panelists highlighted the importance of the upcoming November elections, as an important
crossroads taking into account political movements holding corporate banking responsible. Developments
of the Department of Justice from Yates Memo were mentioned as an official guideline for corporation
malfeasance by a rogue employee or series of employees, in respect to corporations that deal with the
Department of Justice and what is required.
Federal banking agencies have not been aggressive going after Chief Compliance Officers, but laws
and regulations are passing throughout the states increasing liability of the CCO. Legal counsel was
suggested when a bank finds a case involving the Yates Memo. It was mentioned that some states are
adopting measures to increase personal responsibility through the Yates Memo, and that this is
something to be conscientious about.
Furthermore, panelists mentioned taking measures to assess the ambiguity of fair lending, and the
impact on bankers and the liability involving it. Speakers cautioned that banks should review fair lending
not from a banking institutions perspective of data but from an enforcer’s perspective, to avoid the
potential for liability. There is a shift from consumer lending to small business lending , which speakers
highlighted as a place of impact for banking institutions. Since the banking crisis, the move from co-
borrowers versus guarantors have affected the underwriting process. Panelists spoke about legal
vulnerabilities found in not adding co-borrowers from the beginning in the underwriting process. Lastly,
they highlighted the importance of looking into the language of guarantees applied directly to the business
transactions they are representing in order to avoid legal liability with vague wording.
Other topics discussed included the unintentional disclosure of customer information, and what to do
when it is put at risk of identity fraud. There is a need for banks to look into third party vendors and the
extent of their security systems for customer protection. Liability for banks that may extend through
vendor management is an opportunity to renegotiate contracts. In particular, the analysis of cyber threats
is very important, since an excessive triggering of alerts may render a real alert useless. There is a
liability that comes with having excessive alerts, in some cases banks were found responsible. In
conclusion, it is critical that a bank tailors cyber security to its business and its customers.
Make sure to stay tuned for future events!
Danny Lipe, Executive Vice President, Community Bank of Florida
Patricia M. Hernandez, Partner, Avila Rodriguez Hernandez Mena & Ferri LLP
Carl A. Fornaris, Shareholder, Greenberg Traurig LLP
S. Marshall Martin, Executive Vice President, Enterprise Risk Executive & Co-General Counsel, City