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4000 - Advisory Opinions
Company Which Merely Collects Information on Availability and
Terms of Deposit Accounts and Publishes Such Data Is not a Deposit
Broker
FDIC-92-54
August 3, 1992
Valerie J. Best, Counsel
I am writing in response to your letter dated June 16, 1992
notifying the FDIC that *** ("[X]") is a deposit broker. You
believe that [X] is a deposit broker because it publishes two
newsletters, [Newsletter A] and [Newsletter B].
It is our understanding that the only function of [X] is to
collect information on the availability and terms of deposit accounts,
and to publish that data in [Newsletter A] and [Newsletter B].
Assuming our understanding is correct, it would appear that [X] is
not a deposit broker. Rather, it appears that [X] is operating as a
listing service that does not facilitate the placement of deposits, as
further described below. Please review your company's activities in
light of the guidelines set forth below. If, after such a review, you
continue to believe that [X] is a deposit broker, please write to me
at the above address confirming your status as a deposit broker. On the
other hand, if you find that [X] satisfies the criteria described
below, please notify us and we will close our files on this matter. If
we do not hear from you by August 31, 1992, we will assume that you are
a broker and ask you to submit more specific information concerning
your activities, as required by section 337.6(h)(1) of the FDIC
regulations.
Listing Services
At issue is whether a listing service is a "deposit broker" as
that term is defined in the Federal Deposit Insurance ("FDI")
Act. 1
We previously addressed this issue in advisory opinion FDIC--90--24
(copy enclosed). As noted therein, the key test is whether a listing
service may be said to be "engaged in the business of placing
deposits, or facilitating the placement of deposits, of third
parties with insured depository institutions or the business of
placing deposits with insured depository institutions for
the purpose of selling interests in those deposits to third
parties." 12 U.S.C. 1831f(1)(A) (emphasis added).
Where the only function of a deposit listing service is to provide
information on the availability and terms of accounts, we believe that
the listing service is not facilitating the placement of deposits.
Rather, it facilitates the decision of the would-be buyer whether (and
from whom) to buy a certificate of deposit; it is not facilitating the
placement of deposits per se. We also believe
that it would not be feasible to identify deposits placed as a result
of referring to a listing service when the listing service does not
actually participate in the placement process.
{{10-30-92 p.4664}}
Based upon the listing services we have examined to date, we have
identified the following characteristics that we believe serve to
distinguish a service that operates solely as an information-provider
from a service that facilitates the placement of deposits. A deposit
listing service will not be considered a deposit broker if it meets all
of the following criteria:
1. The person or entity providing the listing service is
compensated only by means of subscription fees (i.e., the
fees paid by its subscribers as payment for their opportunity to see
the rates which the listing service has gathered), and such fees are
not calculated on the basis of the number or dollar amount of deposits
placed as the result of information provided by the listing service;
2. The depository institution does not pay a fee, directly
or indirectly, to have its rates listed by the listing service;
3. The depository institution is not required to subscribe
to the service or to purchase or participate in any other services or
businesses offered by the listing service or any of its affiliates as a
condition precedent to being listed; further, the listing service does
not guarantee that subscribers will have their rates
published; 2
4. The depository institution does not pay a commission,
directly or indirectly, for deposits placed as the result of
information provided by the listing
service; 3
5. The service provided is limited to the gathering and
transmission of information concerning the availability of
deposits; 4
6. Any funds to be invested in deposit accounts are
remitted directly by the depositor to the insured depository
institution and not, directly or indirectly, through the person or
entity providing the listing services; and
7. The listing service is not involved in placing the
deposits. If, for example, customers seeking to place deposits gave the
listing service their names and other pertinent information and the
listing service passed that information along to the given depository
institution, that would be viewed as deposit brokering (and this would
be true even if the funds involved were sent directly from the
CD-buying customer to the institution, without any other involvement by
the listing service).
As noted above, the listing service must be limited to the
gathering and transmission of information concerning the availability
of deposits. Further, the listing service must not be involved in
placing deposits. Consequently, a service that enables a customer to
make on-line purchases--that is, a service that provides a link between
the depository institution and the subscriber--is considered to be a
deposit broker.
It should be remembered that deposits coming directly to those
institutions which are listed in a deposit listing service would be
considered brokered deposits if the rate of interest being offered on
them is "significantly higher"--that is, more than 75 basis
points higher--than the rate paid in the relevant market
area. 5
You may call me at (202) 898-3812 or write to me at the above
address if you have any questions.
{{10-30-92 p.4665}}
1The term "deposit broker" is broadly defined in section
29 of the FDI Act to mean:
(A) any person engaged in the business of placing deposits, or
facilitating the placement of deposits, or third parties with insured
depository institutions or the business of placing deposits with
insured depository institutions for the purpose of selling interests in
those deposits to third parties; and
(B) an agent or trustee who establishes a deposit account to
facilitate a business arrangement with an insured depository
institution to use the proceeds of the account to fund a prearranged
loan.
12 U.S.C. 1831f(g).
Deposit brokers are prohibited from soliciting or placing any
deposit with an insured depository institution unless the deposit
broker has provided the FDIC with written notice that it is a deposit
broker. 12 U.S.C. 1831f--1. 57 Fed. Reg. 23933, 23944 (June
5, 1992) to be codified at 12 C.F.R. 337.6(h)). Further,
undercapitalized insured depository institutions are prohibited from
accepting funds obtained by or through any deposit broker. Adequately
capitalized insured depository institutions are prohibited from
accepting funds obtained by or through any deposit broker unless they
first obtain a waiver from the FDIC. Well capitalized insured
depository institutions, however, may accept such funds without
restriction. 12 U.S.C. 1831f. 57 Fed. Reg. 23933 (June 5,
1992) (to be codified at 12 C.F.R. 337.6). Go Back to Text
2In some instances, a listing service is affiliated with a
company that is a deposit broker. In such a situation, the activities
of the listing service and of the affiliate will be examined closely to
make sure that there is no link or quid pro quo among the
listing service, the affiliate, and the insured depository institution
listed. Go Back to Text
3In some instances, depository institutions pay a commission to
a listing service and the service deducts the commission from the
subscription fee paid by the subscriber. In those instances, the
listing service is considered to be receiving a commission from the
depository institution and, consequently, is regarded as a deposit
broker. Go Back to Text
4The listing service does not, for example, negotiate rates on
behalf of subscribers or confirm the execution of trades. Information
that may be conveyed includes the depository institution's name,
location, condition; interest rates and terms; wiring instructions. Go Back to Text
512 U.S.C. 1831f(e), (g)(3), (h). 57 Fed. Reg.
23933, 23942--43 (June 5, 1992) (to be codified at 12 C.F.R.
337.6(a)(5)(iii), (b). Go Back to Text
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