Firms told to get management, board up to snuff – and hire consultant to probe insider trading

Three California financial firms have been told to hire qualified management, beef up their boards and hire an outside consultant to probe insider trading at one of the firms, a bank.

Tuesday, the Fed announced the actions, against Allegiant United Holdings, LLC, Nano Financial Holdings, Inc. Nano Banc – all of Irvine, Calif. – to hire chief executive and financial officers and to build up a “sufficient number of board members,” which the bank is without now. The Fed said the hirings “are vital to the safe and sound operations of the Bank” considering numerous remedial requirements of a written agreement signed by all three firms last year.

That agreement required the bank to retain an independent third party to assess the effectiveness of the Bank’s corporate governance, board and management structures, and staffing needs.

The state regulator has also acted, the Fed noted. On Dec. 15, the California Department of Financial Institutions issued a cease-and-desist order that requires the board of directors of the bank to increase the number of directors in accordance with state law, the Fed said.

The Fed order also focuses on insider trading. The bank is required to engage an independent third party acceptable to the Fed district bank to “identify and conduct a review of all extensions of credit between insiders and the Bank (the ‘Insider Transaction Review’) that have occurred within the two year period immediately prior to the effective date of this Order, or for additional time periods as directed by the Reserve Bank, including but not limited to any loan or personal expense paid to an insider through a corporate credit card, and to prepare a written report detailing the independent third party’s findings (the ‘Insider Transaction Review Report’).”

The review will also include any other financial transaction that the district bank identifies, according to the order.

In another action, announced Thursday, the Fed said it had prohibited a former employee of Manufacturers and Traders Trust Co. of Buffalo, N.Y., for unauthorized use of a bank credit card between 2017-19 that resulted in a loss to the bank of more than $30,000. The agency said Tylifa A. Milton was prohibited after pleading guilty last summer in state court; she was sentenced to probation and ordered to pay restitution of $31,720.93.

Federal Reserve Board issues enforcement action with Allegiant United Holdings, LLC, Nano Financial Holdings, Inc., and Nano Banc, and announces termination of enforcement actions with Iowa Prairie Bank and Mariner’s Bancorp