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4000 - Advisory Opinions
Applicability of 12 C.F.R. Part 344 to Brokerage Networking
Program
FDIC-92-55
August 5, 1992
Pamela E.F. LeCren, Counsel
First let me apologize for the oversight on our part in not
enclosing the attachments along with our original correspondence. Those
attachments have been included herewith.
In so far as the applicability of Part 344 of the FDIC's regulations
to the [brokerage networking] program, please be advised that, for
the purposes of that regulation, any insured nonmember bank that
participates in the program would be "effecting" securities
transactions. As [X] keeps records regarding transactions, sends
confirmations to customers, etc., as a practical matter the only
outstanding obligation a participating bank may have to itself perform
under the regulation would be to disclose to customers the remuneration
it receives in connection with the transactions. Even that obligation
may be discharged by [X] if the confirmation contains the relevant
information. Should you have any further questions regarding Part 344,
I suggest that you contact Mr. Gerald Gervino of this office on (202)
898-3723.
As to the other matters raised in your letter, we do not concur in
the opinion given you by a state bank regulator on the meaning of
section 24 of the Federal Deposit Insurance Act (12 U.S.C. 1831a). The
definition of "activity" as used therein is not limited to the
bank's own investments. Entering into a contract with [X] would be an
"activity" within the meaning of section 24. Furthermore, since
the bank is entering into the contract as principal, the arrangement
would be subject to section 24 if a national bank could not enter into
that type of contract. 1
Lastly, the FDIC has yet to determine whether it will make any
general determinations that certain categories of activities that
require agency consent do not pose a significant risk to the fund or
whether it will proceed strictly on an application basis. We hope to
have a proposed regulation out for comment dealing with this area in
the near future
1Please note that even if the Comptroller of the Currency would
determine that some aspect of the [X] contract would bar national
bank participation, it is possible that the FDIC could determine that
the differences in your contract from a contract that would be
permissible for a national bank are so immaterial that the FDIC would
consider entering into that contract "permissible" for the
purposes of section 24. In that regard, I draw your attention to the
enclosed letter which deals with a related subject in the context of
section 28 of the FDI Act. Go Back to Text
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