Since its birth in 2011 from the combination of the Banking and Insurance Departments, the New York State Department of Financial Services (DFS) has used all of its statutory powers —and then some—to magnify its supervision of financial companies operating in New York State. A state regulatory agency, DFS has become an extremely active investigator of financial misconduct and, based on the strength of those investigations, has collected over $7.5 billion in fines since 2011. At the same time, DFS has forced to defend certain actions in court, such as when its Superintendent was sued in 2014 by AIG on constitutional grounds, (See Complaint, Am. Int’l Group. v. New York Dep’t of Fin. Serv., No. 14 Civ. 2355 (AJN) (S.D.N.Y. June 2, 2014)). Although the suit was resolved with a payment by AIG, the matter nonetheless demonstrated that there may be some practical limits to DFS’s asserted powers.
The latest development came last month on January 17, when Governor Cuomo released the proposed state 2017-18 Executive Budget. The Budget contains some singular proposed legislation that would meaningfully expand DFS’s powers to enforce its decisions on its own in the state courts and to increase penalties on insurers. Continue reading