In the Matter of

Francesco Rusciano, Former Institution-Affiliated Party of UBS AG, Zurich, Switzerland

Docket Nos. 09-007-I-E, 09-007-I-CMP

Determination on Request for Private Hearing

Background

This is an enforcement proceeding brought by the Board of Governors of the Federal Reserve System (the "Board") against Francesco Rusciano pursuant to the Federal Deposit Insurance Act (the "FDI Act"). Rusciano traded foreign exchange and debt instruments for the account of UBS AG. In a Notice of Intent to Prohibit and Notice of Assessment of a Civil Money Penalty (the "Notice") issued on January 23, 2009, the Board alleged that Rusciano manipulated UBS's trade recordation systems by falsifying information about actual transactions and entering fictitious trades in order to conceal mounting losses in his trading book. The Notice seeks civil money penalties and an order of prohibition against the Respondent.

In accordance with section 8(u)(2) of the FDI Act, 12 U.S.C. § 1818(u)(2), the Notice advised the Respondent that any hearing held in this matter would be public, unless the Board determines that an open hearing would be contrary to the public interest. The Notice informed Respondent that he could submit a statement detailing any reasons why the hearing should not be public. Respondent duly filed a motion with the Board seeking a private hearing in this matter. Board Enforcement Counsel opposed the motion.

In a brief and conclusory pleading, Respondent asserted that disclosure of the allegations in the Notice would "damage [Respondent's] reputation and good name" and that it would "not be possible to undo the damage" if Respondent is vindicated. Respondent also noted that he has not been affiliated with a Board-supervised institution since 2006, so that public disclosure "is unnecessary to protect the public interest."

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Discussion

The enforcement provisions of the Federal Deposit Insurance Act provide that all administrative hearings must be public unless the Board, in its discretion, determines that a public hearing would be "contrary to the public interest." The Board's regulations echo this requirement (12 CFR 263.33(a)). In two cases in 1999, the Board set forth the standard by which requests for private hearings would be determined. Specifically, the Board ruled that

Before the Board exercises its discretion to close a hearing, there should be a substantial basis for concluding that the case reflects unusual circumstances that overcome the presumption in favor of open hearings. In general, in light of the congressional requirement that the proceeding be open unless "contrary to the public interest," those circumstances should involve serious safety and soundness concerns flowing from a public hearing. . . . [A] party seeking a closed hearing should be required to demonstrate how the effects of this proceeding differ so significantly from those involving other banks in terms of the public interest as to warrant special treatment. In the Matter of Incus Co., Ltd., 85 Federal Reserve Bulletin 284, 285 (1999); In the Matter of Fonkenell, 85 Federal Reserve Bulletin 353 (1999) (same).

The reasons given by Respondent here for closing the hearing to the public do not establish that an open hearing would be contrary to the public interest. The Board has previously rejected the argument that reputational concerns of the respondent or third parties justify closing a hearing to the public. See In the Matter of Zbinden, 80 Federal Reserve Bulletin 360 (1994); Fonkenell, 85 Federal Reserve Bulletin at 354; Incus, 85 Federal Reserve Bulletin at 285. Similarly, the fact that Respondent is not currently employed by a Federal Reserve-regulated institution does not mean that a public hearing is "contrary to the public interest." (12 U.S.C. § 1818(u)(2) (emphasis added)). Accordingly, these arguments fail to meet the standard required by the Board to close a hearing to the public.

Accordingly, Respondent's request for a private hearing is denied.

By order of the Board of Governors, this 1st day of April, 2009.

Board of Governors of the
Federal Reserve System

Robert deV. Frierson
Deputy Secretary of the Board