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4000 - Advisory Opinions
Circumstances Under Which Well-Capitalized Bank Need Not Notify
FDIC of Its Employees' Status as Deposit Brokers
FDIC--93--50
July 27, 1993
Valerie J. Best, Counsel
I am writing in response to your letter addressed to the FDIC
Office of Compliance and Special Activities concerning the deposit
broker notification requirements. We had previously advised *** (the
"Bank") that the term "deposit broker" is broadly defined
by statute to include certain depository-institution employees. A copy
of our letter dated August 6, 1992 is attached. In compliance with the
requirements described in the August 6th letter, you have submitted the
names of several employees of the Bank that would be considered
"deposit brokers." They are considered to be deposit brokers
because they are compensated by commission rather than by
salary. 1
It is my understanding that these employees solicit and/or accept funds
for deposit with *** Bank only.
In your letter you state that your Bank is "well capitalized,"
as that term is defined by the brokered deposit regulations. We have
taken the position that an institution that is well capitalized and
that is deemed to be a "deposit broker" solely because it offers
high-rate deposits to its customers, is not required to notify the FDIC
of its status as a deposit broker. See the attached letter dated March
8, 1993 for a further discussion of this issue.
For the same reasons outlined in the March 8th letter, it is my view
that a well-capitalized institution need not notify the FDIC of its
employees' status as deposit brokers if (1) those employees are deemed
to be "deposit brokers" solely because they are compensated
primarily by commission rather than in the form of salary, and (2) the
employees place funds with the employing depository institution
only--they do not solicit and/or accept funds for deposit with any
other entity. Consequently, so long as the Bank continues to be
"well capitalized," as that term is defined in the brokered
deposit
{{4-29-94 p.4788}}regulations (12 C.F.R. § 337.6), the
Bank need not notify the FDIC of the employees' status as deposit
brokers. 2
If the Bank were to become "adequately capitalized," the Bank
would have to obtain a waiver from the FDIC before it could continue to
use the commissioned employees to obtain deposits. If a waiver were
granted by the FDIC, the Bank would also have to notify the FDIC Office
of Compliance and Special Activities of the employees' status as
deposit brokers. 3
If the Bank becomes "undercapitalized," it may not use
commissioned employees to obtain deposits.
Please call me at (202) 898-3812 if you have any
questions.
1It is my understanding that, in all other respects, these
employees meet the definition of "employee" used in the brokered
deposit statute. More specifically, (1) the employees are employed
exclusively by the Bank; (2) the employees do not share their
compensation with a deposit broker; and (3) the employees office space
or place of business is used exclusively for the benefit of the Bank.
12 U.S.C. 1831f(g)(3). Go Back to Text
2The fact that the Bank is not required to notify the FDIC of
the commissioned-employees' status as deposit brokers, does not exempt
the Bank from reporting deposits generated by those employees as
brokered deposits in the Bank's Reports of Condition and Income
("Call Reports"). The employees are "deposit brokers" as
that term is defined by the statute. It is important that the Bank
refer to the instructions and the glossary that accompany the Call
Reports in order to determine what types of deposits are treated as
deposits obtained from a "deposit broker" for Call Report
purposes. For the most part, the Call Report definition of "deposit
broker" tracks the definitions used in the statute and regulation. Go Back to Text
3It is not necessary to submit the names of the individual
employees who are deemed to be deposit brokers. As noted in our August
6th letter, a company may file a single notice on behalf of all of its
employees and/or agents. By this we mean that it is not necessary to
list individual employees by name in the notification. A description of
the activities that results in those employees becoming "deposit
brokers" is generally sufficient. The FDIC reserves the right to
require individual information at any time. Go Back to Text
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