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4000 - Advisory Opinions
Would the Distribution of a Brochure Which Describes a Particular
Savings Program for a Bank's Current Customers Violate the Prohibition
on Soliciting Deposits or Would Exceed the De Minimus Exception in
Section 347.206(a)(7) of
FDIC's Regulations
May 10, 2000
FDIC--00--3
Karen L. Main, Counsel
I am writing in response to your letter dated March 15, 2000, to
Jamey Basham of this office. I have read your letter and reviewed the
brochure that you enclosed describing the savings program that your
parent bank, Bank 1, is proposing to implement in Place. The following
is my understanding of the proposed program and is based upon, in
addition to your letter and brochure, our telephone conversation of
April 18, 2000.
Under the program, customers of B2, an uninsured branch in New York
City, would remit funds through B2 branches of the parent bank, Bank 1
in Place. These B2 customers would receive a document(s) in the form of
cheques to acknowledge the remittance of their funds abroad; any
remaining funds would be deposited to the individual customers'
accounts, according to the customers' instructions. A drawing would be
held periodically at Bank 1 in Place to award the holders or the
beneficiaries of the cheques cash prizes.
I have reviewed several parts of the Federal Deposit Insurance
Corporation's (FDIC) Rules and Regulations (regulations) which might
have some applicability to this proposed program as well as
section 20 of the Federal Deposit
Insurance Act (FDI Act). For various reasons, including the
fact that B2 is an uninsured branch, these provisions of the FDIC's
regulations are not relevant. Moreover, because B2 is not a "state
nonmember insured bank", section 20 of the FDI Act (which prohibits
such banks from participating in lotteries) is not applicable to the
program, as described.
The only remaining section which requires consideration is
section 347.206(a)(7) of
the FDIC's regulations which prohibits the branch from soliciting
deposits from the general public "by advertising, display of signs,
or similar activity designed to attract the attention of the general
public". Mr. Basham and I discussed whether B2's pamphlet
represented "advertising" which would contravene section 347.206.
Based upon the representations in your March 15, 2000 letter, it
appears that the brochure will only be offered or provided to current
customers of B2, and not offered or distributed to the general public.
Therefore, we believe that the brochure could be distributed to current
B2 customers without violating the prohibition on soliciting deposits
found in section 347.206(a)(7) of the FDIC's regulations.
There is, however, one other aspect of section 347.206 which
requires some discussion and clarification. It is my impression from
our conversation as well as the brochure that these remittances will
only remain in B2 for a short period of time. During our
telephone
{{4-30-01 p.4984.47}}conversation of April 18, 2000, you
indicated to me that the remittances made by your B2 customers in New
York would not be deposits. However, according to the
provisions of the FDI Act which define and interpret what represents a
"deposit", these remittances will be considered to be
"deposits" by the FDIC. Therefore, it will be important for B2 to
monitor the deposits that are received as part of this remittance
program to ensure that B2 does not exceed the one percent de
minimus exception found in section 347.206(a)(7) of the FDIC's
regulations. This does not seem likely, however, as you have
represented to me that these brochures will only be offered to current
customers of B2 who presumably have a relationship with the uninsured
branch which would allow their deposits to be categorized under
paragraphs (a)(1)--(a)(6) of section 347.206.
I have also shared your letter and the brochure with a review
examiner in the Division of Supervision, International Branch, and she
has expressed no objections to B2's proposed program.
This advisory letter is based upon the facts as known to us at the
present time. Should new information become available or the facts
change, the substance of this opinion may change. I trust that this
discussion is responsive to your inquiry. However, if you should have
any further questions, please do not hesitate to contact me at (202)
898--8838.
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