Highlights:
Regulation R includes the following provisions:

• Third-Party Brokerage (Networking) Arrangements - Rule 700 defines the terms under which a bank employee may receive a nominal, non-contingent, one-time cash fee of a fixed-dollar amount for referring a customer to a broker- dealer. Rule 701 contains an exemption and related definitions that permit a bank employee to receive a higher, contingent fee for referring an institutional or high net-worth customer to a broker-dealer.
• Trust and Fiduciary Activities - Where a bank effects more than 500 securities transactions per year, the rules require trust operations to meet a "chiefly compensated" test unless related exemptions apply. Rules 721 through 723 define the terms "chiefly compensated" and "relationship compensation," and provide specific exemptions for banks effecting securities transactions in a trustee or fiduciary capacity, e.g., for short-term and transferred accounts.
• Sweep Activities - Rules 740 and 741 define terms and provide an exemption for banks sweeping funds into certain money market funds.
• Safekeeping and Custody Activities - Rule 760 provides exemptions for banks that accept orders to effect securities transactions from or for custody accounts. This rule comes into play when banks act in a custodial capacity for employee benefit plan accounts, for individual retirement accounts, and for accommodation trades for other custodial accounts.

Distribution:
FDIC-Supervised Banks (Commercial and Savings)

Suggested Routing:
Chief Executive Officer
Chief Trust Officer
Chief Compliance Officer

Related Topics:
Compliance Examination Procedures and
Supervisory Guidance for Retail Investment Sales

Attachment:
Definitions of Terms and Exemptions Relating To The "Broker" Exceptions For Banks

Contacts:
Victoria M. Pawelski, Compliance Policy Analyst, at
VPawelski@FDIC.gov or 202-898-3571, or Anthony
J. DiMilo, Trust Examination Specialist, at
ADiMilo@FDIC.gov or 202-898-7496.

Printable Format:
FIL-92-2007 - PDF (PDF Help)

Note:
FDIC financial institution letters (FILs) may be accessed from the FDIC's Web site at www.fdic.gov/news/news/financial/2007/index.html.

To receive FILs electronically, please visit http://www.fdic.gov/about/subscriptions/fil.html.

Paper copies of FDIC financial institution letters may be obtained via the FDIC's Public Information Center (1-877-275-3342 or 703-562-2200).