An insured depository institution has failed. The institution’s
deposit account records have disclosed that your firm may be acting as an agent
or custodian for other parties. In order to provide “pass-through” coverage
to these parties, the FDIC must obtain certain information and documentation
from your firm. Specifically, the FDIC must obtain the following: (1) evidence
that your firm is not an owner but an agent or custodian with respect to some
or all of the funds at issue; (2) a list of all parties for whom your firm
acted as agent or custodian; and (3) the principal amount of funds held by
your firm for each such party as of the date of the depository institution’s
failure. Your firm should submit this information by completing the Affidavit
of Agency Account-Word 166k (Word Help) form.
To the extent that any of your customers held funds in a special ownership
capacity, you also must submit evidence of this capacity. Please refer to the
Section V, Affidavits
and Declarations for the required
forms.
Finally, to the extent that any of your customers were not the actual owners
of funds but merely agents or custodians for other parties, you must obtain
information from your customers about their customers (i.e., the actual owners).
This request for information from you and your customers should not be construed
as a finding by the FDIC that you and/or your customers have satisfied the
FDIC’s disclosure requirements.
We recognize that the insurance of a brokered deposit can be somewhat complicated.
For this reason, as an example, we have prepared the following case involving “Apple
Brokerage.” Please refer to Exhibit
1 located at the end of this section,
which represents a brokered deposit account ownership “tree.” The
tree reflects that Apple Brokerage deposited $5,000,000 with a failed insured
depository institution. The FDIC notifies Apple Brokerage that the institution
has failed and they have funds on deposit for which they are acting in an
agency capacity. The failed institution’s records do not reflect the
level of ownership represented in the tree. Thus, sub-tier notification must
originate with the first-tier broker. The first order of business for Apple
Brokerage is to notify the sub-tier brokers of the closing, to cease all
trading activity on the account and restore the account relationships to
those in effect on the closing date. In our example, Apple Brokerage would
notify Banana Brokerage and the four investors of the closing and request
specific documentation from them to prove ownership of their funds. Banana
Brokerage would in turn notify Coconut Brokers, Inc., Kiwi Brokers and the
investor. Coconut Brokers would have to notify the Newport Family Trust and
Mango Financial who in turn would notify its customers – the nine investors.
Kiwi Brokers would notify its investor and Fourth National Bank who would
notify its customers – the four investors.
During the notification process, all parties with an ownership interest
in a deposit should be informed of the documentation required by the FDIC
to prove ownership of the deposit. All ownership information must be forwarded
up through the tree and eventually provided to Apple Brokerage for submission
to the FDIC. The FDIC will not accept documentation directly from a sub-tier
broker because our records do not show them as owners of the funds. All information
in this ownership tree must flow through Apple Brokerage to the FDIC.
Since the documentation must flow from the last tier up to the first tier,
this discussion of the required documentation will begin with the fourth
tier brokers. Please refer again to the ownership tree. Italics identify
references made to specific forms that can be found in Section
V of this Processing Guide.
MANGO FINANCIAL is required to submit an Affidavit
of Agency Account-Word 166k (Word Help) along
with its Attachment A. The Attachment A would reflect: the owners’ names
of the single ownership accounts; the owners of the joint ownership accounts;
the owners of the IRAs; Rhino Delivery, Inc.; and the grantor/trustee and
the named beneficiaries of the testamentary account. No forms are required
for the single ownership accounts or the corporation account. A Declaration
for IRA/Keogh Deposit-Word 41k (Word Help) form is required for the IRA
accounts. A Declaration
for Joint Ownership Deposit-Word 52k (Word Help) form is required for the joint deposit accounts.
The owner of the testamentary account must complete the Declaration
for Testamentary Deposit (Multiple Grantors)-Word 63k (Word Help). Mango
should then forward this documentation to Coconut Brokers.
FOURTH NATIONAL BANK is required to submit an Affidavit
of Agency Account-Word 166k (Word Help) along with its Attachment A. No forms are required for the single ownership
account or the business account. A Declaration
for Joint Ownership Deposit-Word 52k (Word Help) form must be completed on the joint deposit account. The owner of the testamentary
account must complete the Declaration for
Testamentary Deposit (Single Grantor)-Word 44k (Word Help).
Fourth National would then forward their documentation to Kiwi Brokers.
COCONUT BROKERS is required to submit an Affidavit
of Agency Account-Word 166k (Word Help) along
with its Attachment A. The Attachment A would reflect: Mango Financial as
Agent and the Newport Family Trust. The trustee for the Newport Family Trust
must execute the Declaration for Trust-Word 69k (Word Help) and provide a complete copy of the
trust document. Coconut Brokers would forward its Affidavit
of Agency Account-Word 166k (Word Help),
the Newport Family Trust documentation and the information submitted by Mango
Financial to Banana Brokerage.
KIWI BROKERS is required to submit an Affidavit
of Agency Account-Word 166k (Word Help) along
with its Attachment A. The Attachment A would reflect: Fourth National Bank
as Agent and the name of the owner of the single ownership account. No form
is required for the single ownership account. Kiwi Brokers would forward
its Affidavit
of Agency Account-Word 166k (Word Help) and
the documentation submitted by Fourth National Bank to Banana Brokerage.
BANANA BROKERAGE is required to submit an Affidavit
of Agency Account-Word 166k (Word Help) along
with its Attachment A. The Attachment A would reflect: Coconut Brokers As
Agent; Kiwi Brokers as Agent and the owners of the joint account. A Declaration
for Joint Ownership Deposit-Word 52k (Word Help) form must be completed for the joint deposit
account. Banana Brokerage would forward its Affidavit
of Agency Account-Word 166k (Word Help),
joint account documentation and the documentation submitted by both Coconut
Brokers and Kiwi Brokers to Apple Brokerage.
APPLE BROKERAGE is required to submit an Affidavit
of Agency Account-Word 166k (Word Help) along
with its Attachment A. The Attachment A would reflect: Banana Brokerage as
Agent; Tiger Corporation, Inc. Defined Benefit Plan; City of Duvet; the grantor/trustee
and the named beneficiaries of the testamentary account; and the single ownership
account. The trustee for Tiger Corporation’s defined benefit plan must
complete the Declaration for Plan and Trust-Word 46k (Word Help) and have an actuary complete the Declaration
for Defined Benefit Plan-Word 46k (Word Help). These declarations also
require certain documentation to be submitted. Please refer to the specific
declaration.
The official custodian for the City of Duvet must complete the Declaration
for Public Unit Deposit-Word 52k (Word Help) and attach the supporting documentation. The owner
of the testamentary account must complete the Declaration
for Testamentary Deposit (Single Grantor)-Word 44k (Word Help). Apple Broker would then forward its Affidavit
of Agency Account-Word 166k (Word Help) along with the documentation submitted by Banana Brokerage;
Tiger Corporation; City of Duvet and the grantor/trustee of the testamentary
account to the FDIC.
In addition to the requirements outlined above, each broker
must attach a copy of its standard form of agency agreement. Also needed
is the account
setup sheet on all deposits $100,000 or greater in the aggregate.
If the broker does not use a standard form of agency agreement, then a copy
of each
customer agreement or other written documentation of the agency relationship
must be submitted. This requirement is referenced in the Affidavit
of Agency Account-Word 166k (Word Help) form. Additional documentation may be required after
we process your data.
The last item the FDIC requires to be submitted is a diskette loaded with
the individual investor/owner information. The Deposit Broker Processing
Guide which will include an explanation of the data layout, file format and
required field indicators is available through Section
VI of the Table of Contents. The first-tier broker is responsible for submitting a diskette(s)/compact
disc(s) and ensuring that the balances of the deposits in its ownership tree
and the balances reflected on the diskette(s)/compact disc(s) are equal.
If the balances are not equal, the diskette(s)/compact disc(s) will be rejected.
Also, the principal amount/book value of the data submitted must balance
to the closed institution’s records. Otherwise, the data will be deemed
invalid and will require correction before it can be processed. Each broker
may load owner/investor information on a diskette(s)/compact disc(s) and
forward it along to where it eventually reaches the first-tier broker. Then,
it will be the first-tier broker’s responsibility to either consolidate
the data onto one diskette/compact disc (or more if necessary for large files)
or submit the individually loaded diskette(s)/compact disc(s). The FDIC prefers
that the information be consolidated and only one diskette/compact disc submitted.
Please remember to note your firm’s name and broker number, if applicable,
on the diskette(s)/compact disc(s).
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