Senate Bill No. 442
(By Senators Ross, Bowman, Dittmar,
Kessler, Snyder, White, Deem, Kimble, Wooton, Helmick, Sharpe, Hunter, Jackson, Oliverio, McKenzie, Sprouse, Ball, Anderson, Schoonover, Dugan and Plymale)
____________
[Introduced February 9, 1998; referred to the Committee on Banking and Insurance; and then to the
Committee on the Judiciary.]
____________

A BILL to amend chapter thirty-one-a of the code of West Virginia, one thousand nine hundred thirty-one, as amended, by adding thereto a new article, designated article two-a; and to amend article four of said chapter by adding thereto a new section, designated section ten-a, all relating to limiting access to certain records of financial institutions; providing for the access of certain governmental entities to financial records; defining terms; establishing requirements for government access to records; permitting access upon written authorization of a customer; requiring state entity to certify compliance; enumerating exceptions; establishing subpoena and notice requirements; setting forth procedures when subpoena issued by grand jury; providing for civil and criminal liability and penalties; establishing the statute of limitations and the tolling thereof; authorizing injunctive relief; providing for the exclusiveness of remedies; and limiting stockholder inspection of books and records of state banking institutions.

Be it enacted by the Legislature of West Virginia:
That chapter thirty-one-a of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended by adding thereto a new article, designated article two-a; and that article four of said chapter be amended by adding thereto a new section, designated section ten-a, all to read as follows:
ARTICLE 2A. GOVERNMENTAL ACCESS TO FINANCIAL RECORDS.
§31A-2A-1. Definitions.
As used in this article:
(a) "Customer" means any person who has transacted business with or has used the services of a financial institution or for whom a financial institution has acted as a fiduciary, in relation to an account maintained in such person's name;
(b) "Financial institution" mean a bank, savings and loan association, a trust company or a credit union chartered pursuant to any state or federal law;
(c) "Financial record" means any original, copy or information from any record or document held by a financial institution pertaining to a customer of the financial institution, including any record of a transaction conducted by means of a customer bank communication terminal or other electronic device;
(d) "Investigation" includes, but is not limited to, any inquiry by a state or local law enforcement officer, sheriff or prosecuting attorney, or any inquiry made by a state or local governmental entity for the purpose of determining whether there has been a violation of any law enforceable by imprisonment, fine or other monetary liability;
(e) "Person" means an individual, partnership, corporation, limited liability company, association, trust or any other legal entity;
(f) "State entity" means any state or local governmental office, officer, department, division, bureau, board or commission, including the Legislature, and any other state or local government agency of West Virginia, its political subdivisions and any agent thereof; and
(g) "Subpoena" includes a subpoena duces tecum or any other lawful subpoena to compel testimony or the disclosure or production of documents.
§31A-2A-2. Requirements for government access to records.
(a) No state entity may have access to or obtain from a financial institution financial records or copies of the information contained in the financial records of any customer except as set forth in section four of this article or under the following circumstances:
(1) The customer has executed a written authorization pursuant to section three of this article;
(2) The financial records are disclosed in response to a judicial order, warrant, summons or subpoena issued by a court of competent jurisdiction or a valid administrative order or subpoena of a state entity expressly ordering or requiring the release of the financial records: Provided, That any subpoena issued pursuant to the provisions of this subsection shall comply with the provisions of section five of this article;
(3) The financial records are disclosed in response to a judicial order authorizing the appointment of the state entity or its agent as the person to whom the records are released as guardian of the property or customer, or as administrator or executor of said customer's estate;
(4) The financial records are disclosed pursuant to a state or federal rule of civil or criminal procedure or any comparable rule of another court of competent jurisdiction, or provided in response to a subpoena issued in connection with any pending civil or criminal proceeding to which the state entity and the customer are parties, or in response to interrogatories in aid of execution propounded by a state entity where it is a judgment creditor of the customer;
(5) To law enforcement officers presenting a grand jury or trial subpoena resulting from a criminal investigation: Provided, That any financial records obtained in response to a grand jury subpoena issued hereunder shall be subject to the restrictions set forth in section six of this article; or
(6) As may be required by any state or federal law.
(b) No state entity shall provide any financial record obtained pursuant to the provisions of this article to any other state entity unless the other state entity has independently obtained or otherwise has authorization to receive the financial record in accordance with the provisions of this article.
§31A-2A-3. Written authorization of customer; contents; certification of compliance.

(a) A customer may authorize disclosure under section two of this article by signing and dating a statement in which he or she:
(1) Authorizes the disclosure for such period as may be agreed upon;
(2) Indicates an understanding of his or her right to revoke such authorization at any time before the financial records are disclosed;
(3) Identifies the financial records which are authorized to be disclosed;
(4) Specifies the purposes for which, and the state entity to which, such records may be disclosed; and
(5) Is advised of his or her rights under this article.
(b) No authorization as provided in subsection (a) of this section shall be required as a condition of doing business with any financial institution.
(c) No financial institution shall release the financial records of a customer pursuant to his or her authorization under this section until the state entity seeking the records also provides certification in writing to the financial institution that it has complied with the applicable provisions of this article. The written authorization shall be provided to and retained by the financial institution and the state entity seeking to obtain the disclosure.
§31A-2A-4. Exceptions.
(a) Nothing in this article is intended to, or shall prohibit, apply to or interfere with:
(1) The lawful authority or ability of the commissioner of banking or any other state or federal regulatory agency of a financial institution from obtaining any records which may be deemed, in their discretion, appropriate for the examination and regulation of the financial institution;
(2) The lawful authority or ability of the commissioner of insurance or the state auditor from obtaining any records from a financial institution relating to the sale of insurance or securities;
(3) The publication of information derived from financial records if the information cannot be identified to any particular customer, deposit or account, or if the information is in composite form and is not marked or intended to be identified to any particular customer, deposit or account;
(4) The making of reports or returns specifically required or permitted by federal or state law, including applicable tax law or regulations;
(5) The disclosure of any information under the provisions of the uniform commercial code governing the dishonor of a negotiable instrument, or the disclosure to any purported state entity payee or to any purported state entity holder of a check, draft, order or other item, whether or not such instrument has been accepted by such payee or holder as payment, as to whether or not such instrument would be honored if presented at the time of such disclosure;
(6) A state entity obtaining a credit report or consumer credit report from anyone other than a financial institution;
(7) The exchange, in the regular course of business, of information showing the outstanding balance of a mortgage loan account in connection with a sale, refinancing or foreclosure of real property in a transaction to which the state entity is a party; or the disclosure, in the regular course of business, of information on a mortgage or deed of trust on a subject property to a state entity as holder of any subordinate mortgage, deed of trust or security interest;
(8) The disclosure to the department of health and human resources, upon written request, of an individual's financial records which the department determines are necessary to verify or confirm the individual's eligibility or ineligibility for public assistance;
(9) The disclosure of an individual's financial records in response to a written request by the department of health and human resources, as authorized by the federal parent locator service of the United States department of health and human services;
(10) The examination or audit of financial records relating to preneed funeral trust accounts pursuant to article fourteen, chapter forty-seven of this code;
(11) The disclosure of financial records relating to unclaimed property pursuant to article eight, chapter thirty-six of this code, including the examination of financial records by the state treasurer or his or her agent(s) to determine compliance with the handling and reporting of unclaimed property as provided by, and subject to, the limitations set forth in section twenty of said article;
(12) The presentation to appropriate local, state or federal law enforcement authorities of a certificate under oath by an authorized representative of a financial institution drawee that declares the dishonor of the check, draft or order by the drawee, the lack of an account with the drawee at the time of utterance or the insufficiency of the drawer's funds at the time of presentation and utterance in connection with any criminal action for obtaining property or services by a worthless check, draft or order;
(13) The disclosure of information to appropriate local, state or federal law enforcement authorities or regulatory agencies upon the discovery of a suspected violation of criminal law, or as may be required by state or federal law or rule;
(14) The disclosure of information or records by a financial institution to any court or other appropriate state entity, as an incident to recording a lien, perfecting a security interest, proving a claim in bankruptcy or otherwise collecting on a debt owing either to the financial institution itself or in its role as a fiduciary;
(15) The disclosure of information or records by a financial institution, as an incident to processing an application for assistance to a customer in the form of a government loan, loan guaranty, or loan insurance agreement, or as an incident to processing a default on, or administering, a government guaranteed or insured loan or from initiating contact with an appropriate state entity for the purpose of providing any financial record necessary to permit such authority to carry out its responsibilities under a loan, loan guaranty or loan insurance agreement;
(16) The disclosure of information incidental to a transaction in the normal course of business of the financial institution where there is no reasonable cause to believe that the information is intended to be used by the state entity in connection with an investigation of the customer; or
(17) The preparation, review, handling or maintenance of financial records in the ordinary course of business by any officer, employee or agent of a financial institution having custody of the records.
(b) Nothing in this article shall preclude a state entity from obtaining information that is public record without regard to this article although the information may have been derived from a financial institution.
(c) Nothing in this article shall preclude a state entity from obtaining information or financial records voluntarily submitted to it by others in an attempt to seek governmental assistance or redress of a grievance, including legislative change: Provided, That the financial record or information was not solicited by the state entity in an effort to evade the requirements of this article or submitted by a financial institution in contravention of section seven of this article.
§31A-2A-5. Subpoena and notice requirements.
(a) A financial institution may disclose or produce financial records or information derived from financial records to a state entity in compliance with a subpoena served upon it if:
(1) The subpoena contains a certification that a copy of the subpoena has been served on the person whose records are sought by the state entity seeking disclosure or production of the records at least ten days prior to the date on which disclosure or production is sought; or
(2) The subpoena contains a certification that service has been waived by the court, administrative tribunal or lawful issuing state entity, as the case might be, for good cause.
(b) Any person whose financial records are sought pursuant to a subpoena issued under the provisions of subdivision (1), subsection (a) of this section may challenge the subpoena by filing a motion to quash in a court of competent jurisdiction within the ten day notice period provided in such subdivision. After the filing and service of the motion upon the financial institution and the person or state entity issuing the subpoena, the records shall not be released, without liability to the financial institution, until the court holds a hearing on the motion and an order is entered sustaining, modifying or quashing the subpoena.
§31A-2A-6. Subpoena issued by grand jury.
In addition to the requirements of section five of this article, financial records relating to a customer obtained from a financial institution pursuant to a subpoena issued under the authority of a grand jury:
(1) Shall be returned and actually presented to the grand jury;
(2) Shall be used only for the purpose of considering whether to issue an indictment or presentment by that grand jury, or of prosecuting a crime for which that indictment or presentment is issued, or for a purpose authorized by applicable West Virginia rules of criminal procedure;
(3) Shall be destroyed or returned to the financial institution if not used for one of the purposes specified in subdivision (2) of this section; and
(4) Shall not be maintained, or a description of the contents of such records shall not be maintained by any governmental authority other than in the sealed records of the grand jury, unless such record has been used in the prosecution of a crime for which the grand jury issued an indictment or presentment or for a purpose authorized by applicable West Virginia rules of criminal procedure.
§31A-2A-7. Penalties.
(a) Any state, county or local government official or employee who knowingly and willfully discloses financial records with intent to violate this article, or who knowingly and willfully induces or attempts to induce an officer, employee, agent, or director of a financial institution to disclose financial records to a state entity with intent to violate this article is guilty of a misdemeanor and, upon conviction thereof, may be fined not more than one thousand dollars.
(b) Any financial institution which negligently discloses financial records or the information contained therein, and any state entity which negligently obtains or discloses financial records or the information contained therein, in violation of this article, shall be liable to the customer in an amount equal to the sum of:
(1) Up to one thousand dollars in civil damages, as penalty, without regard to the volume of records involved or lack of actual damages;
(2) Any actual damages sustained by the customer as a result of the disclosure; and
(3) The costs of the action, including reasonable attorney's fees, as may be allowed by the court.
(c) No financial institution or person shall be held liable, notwithstanding subsection (a) or (b) of this section, for disclosure of financial records pursuant to a subpoena, summons, warrant, court order or administrative order which on its face appears to have been issued upon lawful authority. No financial institution or agent or employee thereof who discloses financial records pursuant to this article in good-faith reliance upon either a certificate by any state entity that this article has been complied with, or pursuant to the provisions of subsection thirteen, section four of this article, shall be liable under this article or any other law or regulation of this state or any political subdivision hereof.
§31A-2A-8. Statute of limitations; tolling of statute.
(a) An action to enforce any provision of this article may be brought in any circuit court of competent jurisdiction in this state within three years from the date on which the violation occurs or the date of discovery of such violation, whichever is later.
(b) If any person files a motion or application under this article which has the effect of delaying the access of a state entity to financial records pertaining to such person, any applicable statute of limitations shall be tolled for the period extending from the date such motion or application was filed until the date an order is entered pursuant thereto.
§31A-2A-9. Injunctive relief; recovery of attorney fees.
In addition to any other remedy contained in this article, injunctive relief shall be available to require compliance with any procedure established in this article. Any party awarded injunctive relief pursuant to this section may recover costs and reasonable attorney's fees as determined by the court.
§31A-2A-10. Exclusive remedies.
The remedies provided in this article are exclusive for any violations or alleged violations of this article.
ARTICLE 4. BANKING INSTITUTIONS AND SERVICES GENERALLY.
§31A-4-10a. Stockholder inspection of books and records.
(a) Any stockholder or group of stockholders of a state banking institution, holding of record the number of voting shares of such bank specified below, upon making written demand stating a proper purpose, shall have the right to examine, in person or by agent or attorney, at any reasonable time or times, nonconfidential portions of its books and records of account, minutes and record of stockholders and to make extracts therefrom. Such right of examination is limited to a stockholder or group of stockholders holding of record:
(1) Voting shares having a cost of not less than one hundred thousand dollars or constituting not less than one percent of the total outstanding voting shares: Provided, That such stockholder or group of stockholders have held of record such voting shares for a period of at least six months before making such written demand; or
(2) Not less than five percent of the total outstanding voting shares.
(b) Except as provided in this subsection (a) of this section and in section ten of this article with respect to inspection of a list of stockholders, no stockholder or group of stockholders of a state banking institution shall have any other right under this section or common law to examine its books and records of account, minutes and record of stockholders.
(c) The right to examination authorized by subsection (a) of this section and any right to inspect the list of stockholders provided by a bank's bylaws in a manner greater than that authorized under section ten of this article may be denied to any stockholder or group of stockholders upon the refusal of any such stockholder or group of stockholders to furnish such institution, its transfer agent or registrar an affidavit that such examination or inspection is not desired for any purpose which is in the interest of a business or object other than the business of the institution, that such stockholder has not within the five years preceding the date of the affidavit sold or offered for sale, and does not now intend to sell or offer for sale, any list of stockholders of the bank or of any other bank or bank holding company, and that such stockholder has not within said five-year period aided or abetted any other person in procuring any list of stockholders for purposes of selling or offering such list for sale.
(d) Notwithstanding any provision of this section or any common law, no stockholder or group of stockholders shall have the right to obtain, inspect or copy any portion of any books or records of a state banking institution containing:
(1) A list of depositors in, borrowers from or customers of such banking institution;
(2) The addresses of the banking institution's depositors, borrowers or customers;
(3) Individual deposit or loan balances or records of the banking institution's depositors, borrowers or customers; or
(4) Any data from which such information could be reasonably constructed.
(e) For purposes of this section the term "confidential record" includes, but is not limited to:
(1) Any document or information relating to a non-public market strategy or plan of the bank;
(2) Any document or information relating to matters declared confidential under state or federal law, including, but not limited to bank regulatory reports;
(3) Any document or information relating to a proposed merger, acquisition or sale of assets which has not yet been disclosed to the public by the bank, including any document or information which constitutes inside information for purposes of state or federal securities law; and
(4) Any document or information deemed by the bank as proprietary relating to the loan policy established by the bank.

NOTE: The purpose of this bill is to establish limitations on access to records of financial institutions. The bill limits state and local government access to financial records and establishes privacy rights of customers of financial institutions. The bill also establishes limits on stockholder examination of the books and records of banking institutions.

This article is new; therefore, strike-throughs and underscoring have been omitted.)