---
kind: "section"
citation: "12 C.F.R. § 1231.4"
title: "12"
number: "1231.4"
heading: "Indemnification payments."
url: "https://uscodex.org/cfr/12/1231.4"
---

# §1231.4. Indemnification payments.

- (a) **Prohibited indemnification payments.** Except as permitted in [paragraph (b)](#b) of this section, a regulated entity or the OF may not make indemnification payments with respect to an administrative proceeding or civil action that has been initiated by FHFA.
- (b) **Permissible indemnification payments.** A regulated entity or the OF may pay:
  - (1) Premiums for any commercial insurance policy or fidelity bonds for directors and officers, to the extent that the insurance or fidelity bond covers expenses and restitution, but not a judgment in favor of FHFA or a civil money penalty imposed by FHFA.
  - (2) Expenses of defending an action, subject to the affiliated party's agreement to repay those expenses if the affiliated party either:
    - (i) When the proceeding results in a final and non-reviewable order, is found culpable for violating a law or regulation that is the basis for the charges to which the expenses specifically relate; or
    - (ii) Enters into a settlement of those charges in which the affiliated party admits culpability with respect to them; or
    - (iii) Is subject to a final and non-reviewable prohibition order under [12 U.S.C. 4636a](/usc/12/4636a.md).
  - (3) Amounts due under an indemnification agreement entered into with a named affiliated party on or prior to September 20, 2016.
- (c) **Process; factors.** With respect to payments under [paragraph (b)(2)](#b-2) of this section:
  - (1) The board of directors of the regulated entity or the OF must conduct a due investigation and make a written determination in good faith that:
    - (i) The affiliated party acted in good faith and in a manner that he or she reasonably believed to be in the best interests of the regulated entity or the OF; and
    - (ii) Such payments will not materially adversely affect the safety and soundness of the regulated entity or the OF.
  - (2) The affiliated party may not participate in the board's deliberations or decision.
  - (3) If a majority of the board are respondents in the action, the remaining board members may approve payment after obtaining a written opinion of outside counsel that the conditions of this regulation have been met.
  - (4) If all of the board members are respondents, they may approve payment after obtaining a written opinion of outside counsel that the conditions of this regulation have been met.
- (d) **Scope.** This section does not apply to a regulated entity operating in conservatorship or receivership or to a limited-life regulated entity.

## Notes

### Amendments

[83 FR 49993, Oct. 4, 2018]

### Authority

Authority: 12 U.S.C. 4511, 4513, 4517, 4518, 4518a, 4526, and 4617.

### Source

Source: 73 FR 53357, Sept. 16, 2008, unless otherwise noted.

### Amendments

[83 FR 49993, Oct. 4, 2018]