As reported in our February 15, 2011, and March 1, 2011, Client Advisories, New York Governor Andrew Cuomo released a bill on February 1, as part of his 2011-2012 budget, proposing to merge the State’s Insurance and Banking Departments. On March 31, 2011, the Governor signed the budget into law, including the final version of the merger legislation, entitled the Financial Services Law (the “FSL”), which, effective October 2011, will consolidate the Insurance and Banking Departments into a new, single agency to be known as the Department of Financial Services (the “DFS”). This Client Advisory describes some of the provisions of the adopted legislation most likely to affect individual entities or the industry as a whole.

Establishment of the DFS and the DFS Superintendent

Effective October 2011, the FSL will consolidate the existing Insurance and Banking Departments, as well as the enforcement powers provided under existing insurance, banking and financial services law, into and under the DFS. FSL, Part A, Section 1, Article 1, §102. It will create a new office of the Superintendent of the DFS (the “DFS Superintendent”) to assume the responsibilities of the existing insurance and banking superintendents, as well as new and heightened oversight responsibilities with respect to financial products and services. For example, the DFS Superintendent will have the authority to issue regulations and guidance with respect to a variety of financial products and services. FSL, Part A, Section 1, Article 3, §302. The FSL contemplates that the DFS will consist of two divisions, the insurance and banking divisions, each of which will be respectively overseen by a deputy for insurance and a deputy for banking as selected by the DFS Superintendent. FSL, Part A, Section 1, Article 2, §§202 & 203. Prior versions of the legislation also contemplated merging the Consumer Protection Board into the new agency. This was removed from the final adopted legislation. Instead, the Consumer Protection Board will be replaced by a new Consumer Protection Division in the New York Department of State.

Please click here to review the entire advisory.