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4000 - Advisory Opinions
Advertisement of "FDIC Insured" CDs by Deposit Brokers
FDIC--99--3
March 15, 1999
Marc. J. Goldstrom, Counsel
It has been brought to our attention that your firm has advertised
certificates of deposit ("CDs") containing the statement "FDIC
insured." A copy of one such advertisement is enclosed. We would
like to take this opportunity apprise you of certain legal requirements
pertaining to the solicitation of such deposits.
Because you facilitate the placement of deposits of third parties
with insured depository institutions, you appear to be a "deposit
broker" as that term is defined in section 29(g) of the Federal
Deposit Insurance Act ("FDIA")
(12 U.S.C. § 1831f(g)).
Deposit brokers are required to register with the FDIC before they may
solicit or place deposits with an insured depository institution. See
12 C.F.R. § 337.6(h). Our
records indicate that your firm has not complied with this requirement.
The required notice must be in letter form and should describe the
history, nature and volume of its deposit brokerage operations,
including the sources and placements of such funds. The notice should
be submitted to: FDIC, Office of Specialty Examinations and Financial
Reporting, Division of Supervision, 550 17th Street, NW, Washington,
D.C. 20429. If you have any questions on this point, please contact
Vincent M. Filippini at (202) 898--6863.
Also, as a "deposit broker" you are subject to the Truth in
Savings Act ("TISA") (12
U.S.C. §§ 4302(a) and
4313(5)) and Regulation DD
issued by the Board of Governors of the Federal Reserve System
(12 CFR Part 230). The
regulation includes the following provision:
If an advertisement states a rate of return, it shall state
the rate as an "annual percentage yield" using that term. The
abbreviation "APY" may be used provided the term "annual
percentage yield" is stated at least once in the advertisement.) The
advertisement shall not state any other rate, except that the
"interstate rate," using that term, may be stated in conjunction
with, but not more conspicuously than, the annual percentage yield to
which it relates.
12 CFR § 230.8(b). In
accordance with this regulation please ensure that future
advertisements state the rate of return as an "annual percentage
yield," rather than "YTM."
Finally, the statement "FDIC insured" and its placement in the
enclosed advertisement may mislead consumers into believing that your
firm itself is FDIC insured. In order to avoid any further confusion by
members of the general public, please either remove this statement from
future advertisements in any medium, or amend such advertisements to
clarify that the CDs are FDIC insured, not your firm.
Within 15 days of the date of this letter, please inform us whether
you have registered as a deposit broker and let us know the actions you
intend to take to alleviate the potential for
{{2-29-00 p.4984.38}}confusion and to comply with TISA and
Regulation DD. If you have any questions or concerns, please fee free
to contact me at (202) 898--8807. Thank you for your
cooperation.
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