|
[Main Tabs]
[Table of Contents - 5000]
[Index]
[Previous Page]
[Next Page]
[Search]
5000 - Statements of Policy
{{8-31-98 p.5449}}
JOINT INTERPRETATIONS OF THE INTERAGENCY STATEMENT ON RETAIL SALES
OF NONDEPOSIT INVESTMENT PRODUCTS
The Office of the Comptroller of the Currency (OCC), the Office of
Thrift Supervision (OTS), the Federal Reserve Board (FRB) and the
Federal Deposit Insurance Corporation (FDIC) (banking agencies) have
collectively responded to an American Bankers Association (ABA) letter
regarding the application of the
Interagency Statement on
Retail Sales of Nondeposit Investment Products (the Interagency
Statement) issued February 15, 1994. A copy of the banking agencies'
response is attached.
The banking agencies are also taking this opportunity to communicate
our position regarding abbreviated disclosures and to clarify certain
instances where we believe that it is not necessary to provide the
disclosures outlined in the Interagency Statement. The use of
abbreviated disclosure under the circumstances described offers an
optional alternative to the longer disclosures prescribed by the
Interagency Statement.
RESPONSE TO THE ABA
As more fully explained in the attached letter, the banking
agencies' response to the ABA addresses the following:
Retail sales include (but are not limited to) sales to
individuals by depository institution personnel or third party
personnel conducted in or adjacent to a depository institution's lobby
area.
Sales of government and municipal securities made in a
depository institution's dealer department located away from the lobby
area are not subject to the Interagency Statement.
The Interagency Statement generally does not apply to
fiduciary accounts administered by a depository institution. However,
for fiduciary accounts where the customer directs investments, such as
self-directed individual retirement accounts, the disclosures
prescribed by the Interagency Statement should be provided.
The Interagency Statement applies to affiliated broker
dealers when the sales occur on the premises of the depository
institution. The Statement also applies to sales activities of an
affiliated broker dealer resulting from a referral of retail customers
by the depository institution.
DISCLOSURE MATTERS
The banking agencies would like to address several disclosure
matters with respect to the Interagency Statement. In particular, the
agencies agree there are limited situations in which the disclosure
guidelines need not apply or where a shorter logo format may be used in
lieu of the longer written disclosures called for by the Interagency
Statement.
The Interagency Statement disclosures do not need to be provided in
the following situations:
radio broadcasts of 30 seconds or less;
electronic signs 1
; and
signs, such as banners and posters, when used only as
location indicators.
Additionally, third party vendors not affiliated with the depository
institution need not make the Interagency Statement disclosures on
nondeposit investment product confirmations and in account statements
that may incidentally, with a valid business purpose, contain the name
of the depository institution.
The banking agencies have been asked whether shorter, logo format
disclosures may be used in visual media, such as television broadcasts,
ATM screens, billboards, signs, posters, and in written advertisements
and promotional materials, such as brochures. The text of an acceptable
logo format disclosure would include the following
statements:
{{8-31-98 p.5450}}
Not FDIC Insured
No Bank Guarantee
May Lose Value
The logo format disclosures would be boxed, set in bold face type,
and displayed in a conspicuous manner. The full disclosures prescribed
by the Interagency Statement should continue to be provided in written
acknowledgement forms that are signed by customers. An example of an
acceptable logo disclosure
is:
NOT FDIC
- INSURED
|
May lose value No bank
guarantee
|
---|
Questions on the Interagency Statement may be submitted to:
OCC--Office of the Chief National Bank Examiner, Capital
Markets Group, (202) 874-5070.
OTS--Office of Supervision Policy, (202) 906-5740; Business
Transactions Division, (202) 906-7289.
FRB--Division of Banking Supervision and Regulation,
Securities Regulation Section, (202) 452-2781; Legal Division, (202)
452-2246.
FDIC--Office of Policy, Division of Supervision, (202)
898-6759; Regulation and Legislation Section, Legal Division (202)
898-3796.
{{8-31-98 p.5451}}
Board of Governors of the Federal Reserve Federal Deposit
Insurance CorporationOffice of the Comptroller of the
CurrencyOffice of Thrift Supervision
Ms. Sarah A. Miller Senior Government Relations Counsel Trust
and Securities American Bankers Association 1120 Connecticut
Avenue, NW Washington, DC 20036
Dear Ms. Miller:
This is in response to your letters to the staffs of the Board of
Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation, and the Office of the Comptroller of the Currency (banking
agencies) seeking clarification of the application of the February 15,
1994, Interagency Statement on Retail Sales of Nondeposit Investment
Products. To promote uniformity in the supervision of these activities,
the agencies along with the Office of Thrift Supervision (banking
agencies) are providing this joint response.
The Interagency Statement was issued to address the expansion by
depository institutions of activities involving the recommendation and
sale to retail customers of nondeposit investment products, including
mutual funds and annuities as well as stocks and other investment
products. The Statement focuses on issues that pertain specifically to
the retail sale of investment products to customers on depository
institution premises, and seeks to avoid customer confusion of such
products with those that are FDIC insured primarily through disclosure
and separation of sales of investment products from other banking
activities. In addition, the Statement provides guidance to depository
institutions with respect to sales practices that are consistent with
those applicable to registered securities brokers and dealers.
You suggest that the application of the Statement be limited to
"bank retail sales of mutual funds and annuities." If this
approach is not accepted by the banking agencies, you suggest that the
Statement should not apply to sales of nondeposit investment products
by a depository institution's government and municipal securities
dealer departments, to a trust department or to an affiliated trust
company, to custodial accounts, or to a bank-affiliated stand alone
brokerage operation.
Limitation to Sales of Mutual Funds and Annuities
Although some depository institutions limit their sales of
nondeposit investment products to mutual funds and annuities, others
advertise and offer a fuller range of securities brokerage or financial
advisory services to retail customers. The banking agencies are
concerned that conducting these activities on bank premises also could
engender customer confusion and raise concerns about safe and sound
banking practices. Thus, it would not be appropriate to limit the
application of the Statement to mutual funds and annuities as you
requested.
Sales From Lobby Area Presumed Retail
The banking agencies agree with your assessment that retail sales
include (but are not limited to) sales to individuals by depository
institution personnel or third party personnel conducted in or adjacent
to, a depository institution's lobby area. Sales activities occurring
in another location of a depository institution may also be retail
sales activities covered by the Interagency Statement depending on the
facts and circumstances.
Government or Municipal Securities Dealers or Desks
Sales of government and municipal securities made from a depository
institution's dealer department away from the lobby area would not be
subject to the Interagency Statement. Such departments already are
regulated by the banking agencies and are subject to the
{{8-31-98 p.5452}}statutory requirements for registration of
government and municipal securities brokers and dealers. Further, such
brokers and dealers are subject to sales practice and other regulations
of the Department of the Treasury or the Securities and Exchange
Commission, and of designated securities self regulatory organizations.
Fiduciary Accounts, Affiliated Trust Companies and Custodian
Accounts
In general, the banking agencies agree with your view that the
Interagency Statement does not apply to fiduciary accounts administered
by a depository institution. However, the disclosures prescribed by the
Interagency Statement should be provided to noninstitutional customers
who direct investments for their fiduciary accounts, such as self
directed individual retirement accounts. Nevertheless, disclosures need
not be made to customers acting as professional money managers.
Fiduciary accounts administered by an affiliated trust company on the
depository institution's premises would be treated the same way as the
fiduciary accounts of the institution.
With respect to custodian accounts maintained by a depository
institution, the Interagency Statement does not apply to the activities
described in your letter, e.g., collecting interest and dividend
payments for securities held in the accounts and handling the delivery
or collection of securities or funds in connection with a transaction.
Affiliated Stand Alone Broker Dealers
Finally, you ask how the Interagency Statement applies to bank
affiliated stand alone broker dealers. The Statement applies
specifically to sales of nondeposit investment products on the premises
of a depository institution, e.g., whenever sales occur in the lobby
area. The Statement also applies to sales activities of an affiliated
broker dealer resulting from a referral of retail customers by the
depository institution to the broker dealer.
We appreciate the views of the ABA in helping to clarify the scope
of the Interagency Statement. We hope that this letter will provide
additional guidance to the industry in complying with the Statement in
a safe and sound manner consistent with principles of customer
protection.
SIGNED:
JAMES I. GARNER Deputy Associated Director Division of
Banking Supervision & Regulation For: Board of Governors for
the Federal Reserve System
|
SIGNED: NICHOLAS J. KETCHA,
JR. Acting Director Division of Supervision For:
Federal Deposit Insurance Corporation
|
|
SIGNED:
DAVID P. APGAR Senior Policy Advisor For: The
Office of the Comptroller of the Currency
|
SIGNED: JOHN
F. DOWNEY Director of Supervision For: Office
of Thrift Supervision
|
Dated: September 12, 1995
[Source: FDIC Financial Institutions Letter
(FIL--61--95), dated September 13, 1995]
1"Electronic signs" may include billboard-type signs that
are electronic, time and temperature signs, and ticker tape signs.
Electronic signs would not include such media as television, on line
services, or ATM's. Go Back to Text
[Main Tabs]
[Table of Contents - 5000]
[Index]
[Previous Page]
[Next Page]
[Search]
|