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4000 - Advisory Opinions
Whether an Insurance Agent Is a Deposit Broker If It Is
Compensated By a Bank For Referring Deposit Customers to the Bank
FDIC--95--9
June 29, 1995
Andre M. Douek, Counsel
Your letter dated June 2, 1995 was referred to me for a response.
In you letter, you indicate that the Bank you represent is considering
purchasing a company which is a wholesaler of insurance products. This
company has approximately 2,000 independent insurance agents who
deliver insurance through it to their customers. You indicate further
that in order to retain the goodwill of these agents, the Bank is
prepared to offer the agents "a mutually beneficial arrangement, in
which the agents would be compensated for referring their customers to
the Bank for a variety of products and services (including trust,
non-RESPA loan, and deposit products."
Accordingly, you raise two main questions to which you would like an
answer, particularly as they relate to the Bank's future relationship
with these agents. First, will an agreement between one or more
independent insurance agents ("Agents") and ABC Bank ("the
Bank") pursuant to which the Agents will be compensated for
referring their customers to the Bank for various products and
services, including deposit products, render the Agents "deposit
brokers" for purposes of the FDI Act? Second, if the Agents will be
considered deposit brokers, may the Bank, on behalf of the Agents, make
all such filings and maintain all such records that the Agents would,
as deposit brokers, be required to make and retain?
Section 29 of the FDI Act defines the term "deposit broker" to
mean the following:
{{2-29-96 p.4922}}
(A) any person 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; 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)(1)(A)(B).
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. 1
The key test is whether the agent could be considered to be "engaged
in the business of placing deposits, or facilitating the
placement of deposits of third parties with insured depository
institutions. . ." 2
The FDI Act covers situations where the broker "facilitates the
placement" of deposits and situations where the broker acts in a
capacity as agent for others. The scenario you described in your letter
clearly falls within the parameters of this definition, even though the
amount of business generated by the agents may be small compared to
their overall income and business activity.
The circumstances surrounding the involvement of the agents in the
activities you describe differ from those of affinity groups. In an
affinity group, the Bank markets the Bank's products to the affinity
group's members. The Bank, not the affinity group conducts the
marketing aimed at the affinity group members and that in every case,
solicitation materials instruct the members to contact the Bank, not
the affinity group. 3
In the case at hand, however, the agent works "to put the Bank and
the customer together." The agent would conduct the marketing and
would provide advertising literature from the Bank to customers who
might be interested in one of the Bank's products. Under those
circumstances, the role of agents differs from that of affinity groups,
and consequently, they must be considered deposit brokers for purposes
of the Act.
In response to your second question concerning the recordkeeping
requirements of the Act, "[i]t is the FDIC's view that a company
may file a single notice on behalf of all of its employees and/or
agents, although the FDIC reserves the right to require individual
information at any time." 4
Therefore, the FDIC would not object to the Bank's maintaining all
recordkeeping requirements under the Act. Furthermore, the FDIC would
not insist on pre-registration for each agent, but would accept
registration simultaneously with the deposit of funds at the Bank.
This opinion is based upon the facts as presented to the Legal
Division in your letter to Valerie J. Best, Esq. Should the facts
change in the future or some fact be present of which we are not
currently aware, the substance of this opinion may change
also.
112 U.S.C. 1831f-1(a)(1), "A deposit broker, as defined in
section 1831f(g) of this title, shall not solicit or place any deposit
with an insured depository institution, unless such deposit broker has
provided the Corporation with written notice that it is a deposit
broker." Go Back to Text
212 U.S.C. 1831f(1)(A) (emphasis added). Go Back to Text
3Advisory Opinion 93-30
at 4762 (June 15, 1993). Go Back to Text
412 CFR Part 337, 57
Fed.Reg. 23939 (June 5, 1992). Go Back to Text
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