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4000 - Advisory Opinions
Where Company and Its Clients Are Deposit Brokers, Company May
File Master Notice Registering as Deposit Broker on Behalf of Clients
FDIC-92-60
August 17, 1992
Valerie J. Best, Counsel
This is in response to your recent inquiry concerning deposit
brokers. In your letter you stated that [Company] and its clients (as
described below) are "deposit brokers" as that term is defined in
the Federal Deposit Insurance ("FDI")
Act. 1
Consequently, [Company] and its clients are subject to the
notification requirements imposed by the FDI Act and implementing
regulations. 2
You ask that [Company] be permitted to register as a deposit broker
on behalf of its clients.
{{10-30-92 p.4669}}
Based upon the information provided in your letter, we will permit
[Company] to file a single notice on behalf of its clients provided,
however, that the notice includes the name and required information as
to each client.
Activities of [Company]
You write that [Company] offers an automated system for the
placement of federally insured certificates of deposit ("CDs").
The system is exclusively available through a group of major regional
banks and brokers which you refer to as "clients." Your clients
place CDs, as agent, for their institutional, trust and individual
customers, among others. You collect CD offerings from depository
institutions wishing to obtain deposits through the system. These
offerings are instantaneously made available, through an on-line,
real-time system, to your client banks, who, in turn, make the
offerings available to their customers. Clients may immediately execute
trades through computer terminals linked to [Company].
[Company] transmits by facsimile a confirmation of the executed
trade to the depository institution. The confirmation provides details
of the incoming deposit, including the complete registration of the
account. The client wires the deposit amount to the depository
institution and the account is opened and registered in the client's
name as agent.
[Company] maintains all contact with the issuing institution. You
confirm the placement of each deposit, transmit all information
regarding the deposit and arrange every redemption. You routinely
generate and provide reports, when requested, to both the depository
institution and the client.
You indicate that your clients, as described above, function as
deposit brokers. You contend, however, that it would be more efficient
and accurate if [Company] were permitted to register as a deposit
broker for all of its clients by registering one time for itself. You
state that your company is able to generate and immediately provide any
historical or current data the FDIC may request regarding all deposits
placed by your clients with specific depository institutions. You write
that this data would not be duplicated due to multiple parties
submitting information on the same deposit, should your company as well
as its individual clients be required to submit FDIC requested reports.
You state that all deposits placed through your clients would be
reported to the FDIC.
Discussion
We agree with your conclusion that [Company] is a deposit broker.
The FDI Act covers scenarios where the broker "facilitates the
placement" of deposits, as well as scenarios where the broker places
deposits in its name as nominee or agent for others. In common usage,
the term "facilitate" means "to free from difficulty or
impediment; to make easy or less
difficult." 3
The activities of your company clearly make it easier for the owner of
the funds to place its deposits with insured
institutions. 4
In connection with the collection and transmission of information
concerning CD offerings, your company engages in the following
activities, any one of which facilitates the placement of deposits of
third parties: (1) the owner of the funds--or an intermediary for the
owner of the funds--executes trades through computer terminals linked
to your company; (2) your company transmits confirmation of the
executed trade to the depository institution; (3) your company confirms
the placement of each deposit; (4) your company transmits all
information regarding the deposit and arranges every redemption.
Based on the foregoing, your company and its employees are
"deposit brokers" as that term is defined in the FDI Act. We also
agree with your conclusion that your clients are deposit brokers
because they place deposits of third parties with insured institutions.
As a
{{10-30-92 p.4670}}result, neither [Company] nor its
clients may solicit or place deposits with an insured depository
institution unless they first notify the FDIC of their deposit-broker
status.
As noted above, [Company] may file a master notice on behalf of
its clients provided that the notice includes the name and, as to each
client, all of the information required by the FDI Act and the
implementing regulations. This means that the notice must describe
generally the history, nature and volume of each client's deposit
brokerage operations, including the sources and placement of such
funds.
Aside from the notification requirements, the FDI Act and
implementing regulations impose certain recordkeeping requirements.
More specifically, a deposit broker must maintain records showing the
volume of brokered deposits placed with any insured depository
institution over the preceding 12 months. Such records must also show
the maturities, rates, and costs associated with such deposits. As I
understand your letter, [Company] is not asking for permission to
maintain such records for its clients. Rather, each client will
continue to bear individual responsibility for meeting the
above-described recordkeeping requirements.
I trust this is responsive to your
inquiry.
112 U.S.C. 1831f(g)(1)(A) and (B). Go Back to Text
212 U.S.C. 1831f--1. 57 Fed. Reg. 23933, 23944 (June
5, 1992) (to be codified at 12 C.F.R. 337.6(h)). Go Back to Text
3Black's Law Dictionary 591 (6th ed. 1990). Go Back to Text
4Also see our letter to your company dated May 29, 1990. In
that letter we rejected [Company]'s argument that, because its
product represented less than 11% of the total gross revenues of its
parent corporation, it was not a broker. Based on the information we
had received, we concluded that [Company] does not qualify for the
exclusion applicable to an "agent or nominee whose primary purpose
is not the placement of funds with depository institutions." Go Back to Text
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