NY State Senate Bill 2025-S1290

Senate Bill S1290

2025-2026 Legislative Session

Allows the department of financial services to impose penalties on unlawfully unlicensed entities

download bill text pdf

Current Bill Status - In Senate Committee Banks Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 09, 2025	referred to banks

2025-S1290 (ACTIVE) - Details

Current Committee:: Senate Banks
Law Section:: Financial Services Law
Laws Affected:: Amd §§305, 404 & 409, add §408-a, Fin Serv L
Versions Introduced in 2023-2024 Legislative Session:: S7420

2025-S1290 (ACTIVE) - Summary

Allows the department of financial services to have additional oversight of banks and insurance companies that are not currently licensed in this state; provides penalties for violations.

2025-S1290 (ACTIVE) - Sponsor Memo

                                 
BILL NUMBER: S1290

SPONSOR: KRUEGER
 
TITLE OF BILL:

An act to amend the financial services law, in relation to allowing the
department of financial services to have additional oversight of banks
and insurance companies that are not currently licensed

 
PURPOSE OR GENERAL IDEA OF BILL:

This bill will resolve faults in penalty provisions of the Banking Law,
Insurance Law, and Financial Services Law that advantage persons who
disregard licensing, registration, and similar authorization require-
ments. The bill does this imposing a penalty for "prohibited unlicensed
acts," which are defined as (1) "engaging in an activity in this state
for which (authorization) by the superintendent is required by" the
Banking, Insurance, or Financial Services laws or the regulations
promulgated thereunder, without being so authorized, and (2) "any act or
omission by a person who is required by (the Banking, Insurance, or
Financial Services laws or the regulations promulgated thereunder, to
be" authorized by the Superintendent to do such business and is not so
authorized, "if such act or omission would constitute a violation of

 
THE BANKING, INSURANCE, OR FINANCIAL SERVICES LAWS) OR THE REGULATIONS
PROMULGATED THEREUNDER, IF SUCH PERSON WERE SO (AUTHORIZED)."

 
SUMMARY OF PROVISIONS:

SECTION 1 STATES THE PURPOSE OF THE BILL.

SECTION 2 PROVIDES THAT THE SUPERINTENDENT OF FINANCIAL SERVICES MAY
HOLD ADJUDICATORY PROCEEDINGS TO ASSESS CIVIL PENALTIES AGAINST PERSONS
WHO HAVE COMMITTED PROHIBITED UNLICENSED ACTS, AS THE SUPERINTENDENT MAY
DO FOR OTHER VIOLATIONS OF THE BANKING, INSURANCE, AND FINANCIAL
SERVICES LAWS.

SECTION 3 AUTHORIZES THE SUPERINTENDENT OF FINANCIAL SERVICES TO INVES-
TIGATE ACTIVITIES THAT MAY CONSTITUTE PROHIBITED UNLICENSED ACTS, AS THE
SUPERINTENDENT MAY DO WITH RESPECT TO OTHER ACTIVITIES WITHIN THE SUPER-
INTENDENT'S JURISDICTION.

SECTION 4 CREATES A NEW SECTION OF LAW, FINANCIAL SERVICES LAW SECTION
408-A, WHICH DEFINES "PROHIBITED UNLICENSED ACT" AND ESTABLISHES THE
APPLICABLE PENALTIES, WHICH MAY BE ASSESSED BY THE SUPERINTENDENT AFTER
NOTICE AND A HEARING. THE PENALTIES ARE AS FOLLOWS:

FOR A PROHIBITED UNLICENSED ACT THAT RELATES TO THE REQUIREMENTS OF THE
BANKING LAW OR THE REGULATIONS PROMULGATED THEREUNDER, THE PENALTY IS AS
PROVIDED IN SECTION 44 OF THE BANKING LAW FOR ANY VIOLATION OF THE BANK-
ING LAW.

FOR ENGAGING WITHOUT AUTHORIZATION IN A BUSINESS FOR WHICH AUTHORIZATION
IS REQUIRED UNDER THE INSURANCE LAW OR THE REGULATIONS PROMULGATED THER-
EUNDER, THE PENALTY IS THE SAME AS THE PENALTY SET FORTH IN SECTION 1102
OF THE INSURANCE LAW.

FOR ENGAGING WITHOUT AUTHORIZATION IN A BUSINESS FOR WHICH AUTHORIZATION
IS REQUIRED UNDER THE INSURANCE LAW OR THE REGULATIONS PROMULGATED THER-
EUNDER AND, FURTHER, ENGAGING IN AN ACT THAT CONSTITUTES A VIOLATION OF
THE INSURANCE LAW OR THE REGULATIONS PROMULGATED THEREUNDER FOR THOSE
PERSONS WHO ARE PROPERLY AUTHORIZED, THE PENALTY IS THE SAME AS THE
PENALTY FOR VIOLATIONS SET FORTH IN SECTION 109 OF THE INSURANCE LAW OR
ANY OTHER PROVISION OF THE INSURANCE LAW APPLICABLE TO THE ACTIVITY,
WHICHEVER IS HIGHER.

FOR A PROHIBITED UNLICENSED ACT THAT RELATES TO THE REQUIREMENTS OF THE
FINANCIAL SERVICES LAW OR THE REGULATIONS PROMULGATED THEREUNDER, THE
PENALTY IS THE SAME AS THE PENALTY PROVIDED FOR IN FINANCIAL SERVICES
LAW SECTION 408 FOR VIOLATIONS OF THE FINANCIAL SERVICES LAW OR THE
REGULATIONS PROMULGATED THEREUNDER.

ADDITIONALLY, FOR A PROHIBITED UNLICENSED ACT THAT RESULTS IN CONSUMER
HARM, THE SUPERINTENDENT MAY IMPOSE A PENALTY UP TO DOUBLE THE AMOUNT
APPLICABLE TO SUCH VIOLATION SET FORTH ABOVE, AND THE SUPERINTENDENT MAY
ORDER RESTITUTION TO HARMED CONSUMERS.

CONSISTENT WITH EXITING LAW, SECTION 4 OF THE BILL ALSO PROVIDES THAT A
PARTICULAR ACT OR OMISSION CONSTITUTING A PROHIBITED UNLICENSED ACT
CANNOT BE PENALIZED TWICE. IF THE SUPERINTENDENT IMPOSES A FINE FOR A
PROHIBITED UNLICENSED ACT PURSUANT TO THE PROVISIONS OF THE INSURANCE
LAW OR BANKING LAW, THE SUPERINTENDENT MAY NOT ADDITIONALLY IMPOSE A
PENALTY FOR THE SAME ACT OR OMISSION PURSUANT TO THE FINANCIAL SERVICES
LAW.

ALSO CONSISTENT WITH EXISTING LAW, THIS SECTION ESTABLISHES THAT THE
CIVIL PENALTIES THAT THE SUPERINTENDENT OF FINANCIAL SERVICES COLLECTS
FOR PROHIBITED UNLICENSED ACTS MUST BE APPLIED IN THE SAME MANNER AS
CIVIL PENALTIES RECEIVED BY THE SUPERINTENDENT FOR OTHER VIOLATIONS OF
THE FINANCIAL SERVICES LAW.

SECTION 5 OF THE BILL PROVIDES, CONSISTENT WITH EXISTING LAW, THAT IF
THE SUPERINTENDENT BELIEVES THAT A VIOLATION OF THE NEWLY CREATED

SECTION 408-A HAS BEEN ATTEMPTED OR COMMITTED, THE SUPERINTENDENT, IN
THEIR DISCRETION, MAY REPORT SUCH ACTIVITY TO THE APPROPRIATE LICENSING
AUTHORITY OR DISTRICT ATTORNEY OR TO THE NEW YORK STATE ATTORNEY GENER-
AL.

 
JUSTIFICATION:

TO PROTECT OF USERS OF FINANCIAL PRODUCTS AND SERVICES FROM IMPRUDENT
CONDUCT AND HARMFUL BUSINESS PRACTICES IN NEW YORK'S FINANCIAL SERVICES
MARKETPLACE, ALL PERSONS OFFERING FINANCIAL PRODUCTS AND SERVICES IN NEW
YORK STATE SHOULD BE SUFFICIENTLY DETERRED FROM DISREGARDING THE LAWS
AND REGULATIONS GOVERNING THE OFFERING OF FINANCIAL PRODUCTS OR
SERVICES, REGARDLESS OF WHETHER THEY ARE PROPERLY LICENSED, REGISTERED,
OR OTHERWISE AUTHORIZED TO CONDUCT SUCH BUSINESS. FURTHERMORE, PERSONS
PROVIDING FINANCIAL PRODUCTS AND SERVICES SHOULD NOT BENEFIT FROM THEIR
FAILURE TO BE SO AUTHORIZED. CURRENTLY, AS TO ENGAGEMENT IN MANY ACTIV-
ITIES FOR WHICH AUTHORIZATION FROM THE SUPERINTENDENT OF FINANCIAL
SERVICES IS REQUIRED, A PERSON LACKING SUCH AUTHORIZATION IS NOT SUBJECT
TO CIVIL PENALTY FOR ACTS THAT WOULD CONSTITUTE VIOLATIONS SUBJECT TO
PENALTY IF THE PERSON DID HAVE PROPER AUTHORIZATION, AND THE PERSON MAY
NOT EVEN BE SUBJECT TO A PENALTY FOR CARRYING ON SUCH A BUSINESS WITHOUT
THE REQUIRED AUTHORIZATION. THIS MEANS, FOR EXAMPLE, THAT A PERSON
CONDUCTING A LOAN BUSINESS FOR WHICH A LICENSE IS REQUIRED CANNOT BE
FINED BY THE SUPERINTENDENT FOR DOING THAT BUSINESS WITHOUT A LICENSE.
MOREOVER, IF THAT UNLICENSED PERSON CHARGES AN ILLEGAL RATE OF INTEREST,
THE SUPERINTENDENT STILL CANNOT IMPOSE A FINE. THIS IS INCONGRUOUS WITH
THE PROVISIONS OF THE BANKING LAW THAT SUBJECT PROPERLY LICENSED LENDERS
TO FINES FOR VIOLATING INTEREST RATE LIMITS.

THIS ACT REMEDIATES THIS FAULT IN THE LAW BY PROVIDING THAT ANY PERSON
ENGAGED IN ACTIVITY FOR WHICH SUCH PERSON MUST BE LICENSED BY THE SUPER-
INTENDENT OF FINANCIAL SERVICES WILL BE SUBJECT TO A CIVIL PENALTY FOR
CONDUCTING SUCH ACTIVITY IN A MANNER INCONSISTENT WITH THE LAW, REGARD-
LESS OF SUCH PERSON'S LICENSURE STATUS.

 
PRIOR LEGISLATIVE HISTORY:

2023-24: S.7420/A7770 (BORES) - PASSED SENATE

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

NONE.

 
EFFECTIVE DATE:
THIS BILL WOULD TAKE EFFECT IMMEDIATELY.

2025-S1290 (ACTIVE) - Bill Text download pdf

                             
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   1290
 
                        2025-2026 Regular Sessions
 
                             I N  S E N A T E
 
                              January 9, 2025
                                ___________
 
 Introduced  by  Sen. KRUEGER -- read twice and ordered printed, and when
   printed to be committed to the Committee on Banks
 
 AN ACT to amend the financial services law, in relation to allowing  the
   department of financial services to have additional oversight of banks
   and insurance companies that are not currently licensed

   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section  1.  The  legislature  finds  that  it  is  essential  to  the
 protection  of  users  of financial products and services from imprudent
 conduct and harmful business practices in the financial services market-
 place that all persons offering financial products and services  in  New
 York State be sufficiently deterred from disregarding the laws and regu-
 lations  governing  the  offering  of  financial  products  or services,
 regardless of whether they are properly licensed. Furthermore, to ensure
 that the business of, and the persons providing, financial products  and
 services  are  appropriately  supervised,  the  law should not advantage
 persons who disregard licensing requirements. Currently, as  to  engage-
 ment  in  many activities for which a license from the superintendent of
 financial services is required, an unlicensed  person  not  exempt  from
 licensing is not subject to civil penalty for acts that would constitute
 violations subject to penalty if the person were licensed; such an unli-
 censed  person may be subject to only a limited civil penalty for engag-
 ing in activity without a required license.  This  act  remediates  this
 fault  in  the  law by providing that any person engaged in activity for
 which such person must be licensed by the  superintendent  of  financial
 services will be subject to a civil penalty for conducting such activity
 in  a  manner  inconsistent  with  the  law, regardless of such person's
 licensure status.
   § 2. Subsections (a) and (b) of section 305 of the financial  services
 law are amended to read as follows:

  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD02257-02-5
 S. 1290                             2

 
   (a)  Unless  otherwise  provided in this chapter, the banking law, the
 insurance law or any other law, any hearing pursuant to any such law may
 be held before the superintendent, any  deputy  superintendent,  or  any
 designated  salaried employee of the department authorized by the super-
 intendent  for  such purpose. Any adjudicatory proceeding, including any
 hearings to assess civil penalties under section four hundred  eight  OR
 FOUR HUNDRED EIGHT-A of this chapter, held pursuant to the provisions of
 this  chapter,  the  insurance  law or the banking law shall be noticed,
 conducted and administered in compliance with the  state  administrative
 procedure act.
   (b)  The person conducting such hearing shall have power to administer
 oaths, examine  and  cross-examine  witnesses  and  receive  documentary
 evidence,  and  shall report [his or her] SUCH PERSON'S findings, orally
 or in writing, to the superintendent  with  or  without  recommendation.
 Such  report,  if  adopted by the superintendent may be the basis of any
 determination made by the superintendent. One hundred twenty days  after
 the  effective  date of a determination of liability for a civil penalty
 pursuant to section four hundred eight OR FOUR HUNDRED EIGHT-A  of  this
 chapter  or  four hundred three, one thousand one hundred two, two thou-
 sand one hundred two, two thousand one hundred seventeen,  two  thousand
 one  hundred thirty-three or seven thousand eight hundred sixteen of the
 insurance law, such determination of liability for a civil  penalty  may
 be entered as a judgment and enforced, without court proceedings, in the
 same  manner  as the enforcement of a money judgment in civil actions in
 any court of competent jurisdiction or any other place provided for  the
 entry of civil judgment within this state.
   §  3.  Subsection  (a) of section 404 of the financial services law is
 amended to read as follows:
   (a) The superintendent has authority under this article,  the  banking
 law,  the  insurance law and other applicable laws to investigate activ-
 ities that may constitute violations subject  to  section  four  hundred
 eight  OR  FOUR  HUNDRED  EIGHT-A  of  this article or violations of the
 insurance law or banking law and to develop evidence thereon.
   § 4. The financial services law is amended by  adding  a  new  section
 408-a to read as follows:
   §  408-A.  UNLICENSED  ACTIVITIES  PROHIBITED. (A) FOR THE PURPOSES OF
 THIS SECTION, A "PROHIBITED UNLICENSED ACT" SHALL MEAN:
   (1) ENGAGING IN AN ACTIVITY IN THIS STATE FOR WHICH A LICENSE, CERTIF-
 ICATION, REGISTRATION, AUTHORIZATION, CHARTER,  ACCREDITATION,  INCORPO-
 RATION,  OR  APPROVAL BY THE SUPERINTENDENT IS REQUIRED BY THIS CHAPTER,
 THE BANKING LAW, THE INSURANCE LAW, OR THE REGULATIONS PROMULGATED THER-
 EUNDER, WITHOUT  SUCH  LICENSE,  CERTIFICATION,  REGISTRATION,  AUTHORI-
 ZATION,   CHARTER,   ACCREDITATION,  INCORPORATION  OR  APPROVAL  OR  AN
 EXEMPTION FROM SUCH REQUIREMENT; OR
   (2) ANY ACT OR OMISSION BY A PERSON WHO IS REQUIRED BY  THIS  CHAPTER,
 THE BANKING LAW, THE INSURANCE LAW OR THE REGULATIONS PROMULGATED THERE-
 UNDER,  TO  BE  LICENSED,  CERTIFIED, REGISTERED, AUTHORIZED, CHARTERED,
 ACCREDITED, INCORPORATED OR OTHERWISE APPROVED BY THE SUPERINTENDENT AND
 IS  NOT  SO  LICENSED,  CERTIFIED,  REGISTERED,  AUTHORIZED,  CHARTERED,
 ACCREDITED, INCORPORATED, APPROVED OR EXEMPTED FROM SUCH REQUIREMENT, IF
 SUCH  ACT  OR OMISSION WOULD CONSTITUTE A VIOLATION OF THIS CHAPTER, THE
 BANKING LAW, THE INSURANCE LAW OR THE REGULATIONS PROMULGATED THEREUNDER
 IF SUCH PERSON WERE  SO  LICENSED,  CERTIFIED,  REGISTERED,  AUTHORIZED,
 CHARTERED, ACCREDITED, INCORPORATED OR APPROVED.
 S. 1290                             3
 
   (B)  IN  ADDITION  TO ANY CIVIL OR CRIMINAL LIABILITY PROVIDED BY LAW,
 THE SUPERINTENDENT MAY, AFTER NOTICE AND A HEARING, LEVY A CIVIL PENALTY
 FOR ANY PROHIBITED UNLICENSED ACT AS FOLLOWS:
   (1)  THE  PENALTY  FOR A PROHIBITED UNLICENSED ACT THAT RELATES TO THE
 REQUIREMENTS OF THE BANKING LAW OR THE  REGULATIONS  PROMULGATED  THERE-
 UNDER SHALL BE THE SAME AS THE PENALTY PROVIDED IN SECTION FORTY-FOUR OF
 THE BANKING LAW FOR ANY VIOLATION OF THE BANKING LAW.
   (2) THE PENALTY FOR A PROHIBITED UNLICENSED ACT DESCRIBED IN PARAGRAPH
 ONE  OF  SUBSECTION (A) OF THIS SECTION THAT RELATES TO THE REQUIREMENTS
 OF THE INSURANCE LAW OR THE REGULATIONS PROMULGATED THEREUNDER SHALL  BE
 THE SAME AS THE PENALTY FOR VIOLATIONS SET FORTH IN SECTION ONE THOUSAND
 ONE HUNDRED TWO OF THE INSURANCE LAW.
   (3) THE PENALTY FOR A PROHIBITED UNLICENSED ACT DESCRIBED IN PARAGRAPH
 TWO  OF  SUBSECTION (A) OF THIS SECTION THAT RELATES TO THE REQUIREMENTS
 OF THE INSURANCE LAW OR THE REGULATIONS PROMULGATED THEREUNDER SHALL  BE
 THE  SAME AS THE PENALTY FOR VIOLATIONS SET FORTH IN SECTION ONE HUNDRED
 NINE OF THE INSURANCE LAW OR  ANY  OTHER  APPLICABLE  PROVISION  OF  THE
 INSURANCE LAW, WHICHEVER IS HIGHER.
   (4)  THE  PENALTY  FOR A PROHIBITED UNLICENSED ACT THAT RELATES TO THE
 REQUIREMENTS OF THIS CHAPTER OR THE REGULATIONS  PROMULGATED  THEREUNDER
 SHALL  BE  THE  SAME AS THE PENALTY PROVIDED FOR IN SECTION FOUR HUNDRED
 EIGHT OF THIS ARTICLE FOR VIOLATIONS OF THIS CHAPTER OR THE  REGULATIONS
 PROMULGATED THEREUNDER.
   (5)  IF  A  PROHIBITED  UNLICENSED  ACT  RESULTS IN CONSUMER HARM, THE
 PENALTY SHALL BE NOT MORE THAN DOUBLE THE PENALTY AMOUNT  APPLICABLE  TO
 SUCH  VIOLATION  SET  FORTH IN PARAGRAPH ONE, TWO, THREE OR FOUR OF THIS
 SUBSECTION, AS APPLICABLE.
   (C) THE SUPERINTENDENT SHALL NOT IMPOSE OR COLLECT ANY PENALTY  FOR  A
 PROHIBITED  UNLICENSED  ACT PURSUANT TO PARAGRAPH FOUR OF SUBSECTION (B)
 OF THIS SECTION IF THE SUPERINTENDENT IMPOSES OR  COLLECTS  ANY  PENALTY
 PURSUANT  TO  PARAGRAPH  ONE,  TWO  OR  THREE  OF SUBSECTION (B) OF THIS
 SECTION FOR THE SAME ACT OR OMISSION.
   (D) CIVIL PENALTIES RECEIVED BY THE SUPERINTENDENT  PURSUANT  TO  THIS
 SECTION  SHALL BE APPLIED IN THE SAME MANNER AS CIVIL PENALTIES RECEIVED
 BY THE SUPERINTENDENT PURSUANT TO SECTION FOUR  HUNDRED  EIGHT  OF  THIS
 ARTICLE.
   (E) IN ADDITION TO ANY OTHER PENALTY OR SANCTION IMPOSED UPON A PERSON
 BY  LAW  FOR  AN  UNLICENSED ACT, AFTER NOTICE AND A HEARING, THE SUPER-
 INTENDENT MAY ISSUE AN ORDER DIRECTING SUCH PERSON  TO  PAY  RESTITUTION
 FOR SUCH UNLICENSED ACT.
   §  5.  Subsection  (a) of section 409 of the financial services law is
 amended to read as follows:
   (a) Whenever the superintendent is satisfied that a violation  subject
 to section four hundred eight OR FOUR HUNDRED EIGHT-A of this article or
 fraud  or other criminal activity under the insurance law or banking law
 has been committed or attempted, the  superintendent  shall  report  any
 such  violation  of law, as the superintendent deems appropriate, to the
 appropriate licensing agency, the district attorney  of  the  county  in
 which  such  acts  were  committed,  to  the attorney general, and where
 appropriate, to the person who submitted the report of fraudulent activ-
 ity, as provided by the provisions of this article. Within  one  hundred
 twenty  days  of  receipt  of  the superintendent's report, the attorney
 general or the district attorney concerned shall inform the  superinten-
 dent as to the status of the reported violations.
   § 6. This act shall take effect immediately.

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