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8000 - Miscellaneous Statutes and Regulations
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SUBCHAPTER B—REGULATIONS UNDER TITLE II OF THE
GOVERNMENT SECURITIES ACT OF 1986
PART 450—CUSTODIAL HOLDINGS OF GOVERNMENT SECURITIES BY
DEPOSITORY INSTITUTIONS
Sec.
450.1
Scope of regulations; office responsible.
450.2
Definitions.
450.3
Exemption for holdings subject to fiduciary standards.
450.4
Custodial holdings of government securities.
450.5
Effective date.
AUTHORITY: Sec. 101, Pub. L. 99--571, 100 Stat. 3208 (15 U.S.C.
78o--5(b)(1)(A), (b)(4), (b)(5)(B)); Sec. 201, Pub. L. 99--571, 100
Stat. 3222--23 (31 U.S.C. 3121, 9110).
SOURCE: The provisions of this Part 450 appear at 52 Fed. Reg.
27957, July 24, 1987, except as otherwise noted.
§ 450.1 Scope of regulations; office responsible.
(a) This part applies to depository institutions that hold
government securities as fiduciary, custodian, or otherwise for the
account of a customer, and that are not government securities brokers
or dealers, as defined in sections 3(a)(43) and 3(a)(44) of the
Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(43)--(44)). Depository institutions exempt under
Part 401 of this chapter from the requirements of subchapter A of this
chapter must comply with this part. Certain depository institutions
that are government securities brokers or dealers must also comply with
this part, as well as with additional requirements set forth in
§ 403.5.
(b) The regulations in this subchapter are promulgated by the
Assistant Secretary (Domestic Finance) pursuant to a delegation of
authority from the Secretary of the Treasury. The office responsible
for the regulations is the Office of the Commissioner, Bureau of the
Public Debt. Procedures for obtaining interpretations of the
regulations are set forth at
§ 400.2.
[Codified to 17 C.F.R. § 450.1]
[Section 450.1 amended at 53 Fed. Reg. 28987, August 1,
1988]
§ 450.2 Definitions.
For purposes of this subchapter:
(a) "Appropriate regulatory agency" has the meaning set out
in section 3(a)(34)(G) of the Securities Exchange Act of 1934
(15 U.S.C. 78c(a)(34)(G)),
except that the appropriate regulatory agency for--
(1) A federal credit union as defined in 12 U.S.C. 1752(1) and an
insured credit union as defined in 12 U.S.C. 1752(7) is the National
Credit Union Administration; and
(2) Any depository institution for whom an appropriate regulatory
agency is not explicitly specified by either section 3(a)(34)(G) or
this paragraph, is the SEC;
(b) "Customer" includes, but is not limited to, the
counterparty to a transaction pursuant to a repurchase agreement for
whom the depository institution retains possession of the security sold
subject to repurchase, but does not include a broker or dealer that is
registered pursuant to section 15, 15B or 15C(a)(1)(A) of the Act
(15 U.S.C. 78o,
78o--4,
78o--5(a)(1)(A)) or that has
filed notice of its status as a government securities broker or dealer
pursuant to section 15C(a)(1)(B) of the Act (15 U.S.C. 78o--5(a)(1)(B))
except as provided in § 450.4.
(c) "Depository institution" has the meaning stated in
clauses (i) through (vi) of section 19(b)(1)(A) of the Federal Reserve
Act (12 U.S.C.
461(b)(1)(A)(i)--(vi)) and also includes a foreign bank, an
agency or branch of a foreign bank and a commercial lending company
owned or controlled by a foreign bank (as such terms are defined in the
International Banking Act of 1978, Pub. L. 95--369, 92 Stat.
607);
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(d) "Fiduciary capacity" includes trustee, executor,
administrator, registrar, transfer agent, guardian, assignee, receiver,
managing agent, and any other similar capacity involving the sole or
shared exercise of discretion by a depository institution having
fiduciary powers that is supervised by a federal or state financial
institution regulatory agency; and
(e) Government securities means:
| If . . . |
Then . . . |
|---|
| (1)(i) A
depository institution is a government securities broker or dealer as
defined in sections 3(a)(43) and 3(a)(44) of the Securities Exchange
Act of 1934 (15 U.S.C.
78c(a)(43)--(44)). |
"Government
securities" means those obligations described in subparagraphs (A),
(B), (C), or (E) of section 3(a)(42) of the Securities Exchange Act of
1934 (15 U.S.C. 78c(a)(42)(A)--(C), (E)) |
| (ii) A depository
institution is exempt under Part 401 of this chapter from the
requirements of Subchapter A. |
"Government securities" means
those obligations described in subparagraphs (A), (B), (C), or (E) of
section 3(a)(42) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(42)(A)--(C), (E)) |
| (2) A depository institution is not a
government securities broker or dealer as defined in sections 3(a)(43)
and 3(a)(44) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(43)--(44)). |
"Government securities" means those
obligations described in subparagraphs (A), (B), or (C) of section
3(a)(42) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(42)(A)--(C)) |
|
| |
[Codified to 17 C.F.R. § 450.2]
[Section 450.2 amended at 55 Fed. Reg. 6604, February 26, 1990; 66
Fed. Reg. 28654, May 24, 2001; 66 Fed. Reg. 29888, June 1,
2001]
§ 450.3 Exemption for holdings subject to fiduciary standards.
(a) The Secretary has determined that the rules and standards of
the Comptroller of the Currency, the Board of Governors of the Federal
Reserve System, the Federal Deposit Insurance Corporation, and the
Office of Thrift Supervision governing the holding of government
securities in a fiduciary capacity by depository institutions subject
thereto are adequate. Accordingly, such depository institutions are
exempt from this part with respect to their holdings of government
securities in a fiduciary capacity and their holdings of government
securities in a custodial capacity provided that:
(1) Such institution has adopted policies and procedures that
would apply to such custodial holdings all the requirements imposed by
its appropriate regulatory agency that are applicable to government
securities held in a fiduciary capacity, and
(2) Such custodial holdings are subject to examination by the
appropriate regulatory agency for compliance with such fiduciary
requirements.
(b) The Secretary expects that each appropriate regulatory agency
will notify the Department if it materially revises its rules and
standards governing the holding of government securities in a fiduciary
capacity.
[Codified to 17 C.F.R. § 450.3]
[Section 450.3 amended at 70 Fed. Reg. 29446, May 23,
2005]
§ 450.4 Custodial holdings of government securities.
Depository institutions that are subject to this part shall observe
the following requirements with respect to their holdings of government
securities for customer accounts:
(a)(1) Except as otherwise provided in this section, a depository
institution shall maintain possession or control of all government
securities held for the account of customers by segregating such
securities from the assets of the depository institution and keeping
them free of any lien, charge or claim of any third party granted or
created by such depository institution.
(2)(i) Where customer securities are maintained by a depository
institution at another depository institution, including but not
limited to a correspondent bank or a trust company ("custodian
institution"), the depository institution shall be in compliance
with paragraph (a)(1) of this section if:
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(A) The depository institution notifies the custodian institution
that such securities are customer securities;
(B) The custodian institution maintains such securities in an
account that is designated for customers of the depository institution
and that does not contain proprietary securities of the depository
institution; and
(C) The depository institution instructs the custodian
institution to maintain such securities free of any lien, charge, or
claim of any kind in favor of such custodian institution or any persons
claiming through it.
(ii) To the extent that a custodian institution holds securities
that have been identified as customer securities by a depository
institution in accordance with paragraph (a)(2)(i) of this section, the
custodian institution shall treat such securities as customer
securities separate from any other securities held for the account of
the depository institution.
(3)(i) Where securities that a depository institution is
required, pursuant to this Part 450, to keep free of all liens,
charges, or other claims ("customer securities") are maintained
by a depository institution at a Federal Reserve bank, the depository
institution shall be in compliance with paragraph (a)(1) of this
section if any lien, charge or other claim of such Federal Reserve bank
or any person claiming through it against securities of the depository
institution expressly excludes customer securities.
(ii) Notwithstanding paragraph (a)(3)(i) of this section, a
depository institution described in that paragraph shall be in
compliance with paragraph (a)(1) of this section if a Federal Reserve
bank retains a lien on securities received during the day that are
subsequently determined to be customer securities, provided
that,
(A) On that day, the depository institution:
(1) Because of extraordinary circumstances, at the end
of that day either requests a discount window advance or is unable to
eliminate an overdraft with its Federal Reserve bank and the Federal
Reserve bank extends credit to the depository institution in order to
assure the safety and soundness or liquidity of the depository
institution; and
(2) After reasonable efforts, is unable to provide the
Federal Reserve bank with an adequate security interest in other
collateral that is clearly identifiable as pledgeable by the depository
institution sufficient to fully collateralize such extension of credit;
and
(B) The depository institution diligently pursues with the
Federal Reserve bank the substitution of other collateral for
securities determined to be customer securities; and
(C) The Federal Reserve bank agrees that to the extent the lien
extends to collateral of a value greater than the outstanding balance
on the loan, customer securities will be the first collateral released
from the lien.
(4)(i) To the extent that a depository institution holds
securities that have been identified to such depository institution as
customer securities by a government securities broker or dealer, or
that the government securities broker or dealer has instructed the
depository institution to place in a segregated account, in accordance
with Part 403 of subchapter
A of this chapter, the depository institution shall treat such
securities as customer securities separate from any other securities
held for the account of the government securities broker or dealer and
shall comply with all of the provisions of this section with respect to
such customer securities, except as provided in paragraph (a)(4)(ii) of
this section.
(ii) A clearing bank that provides clearing services for a
government securities broker or dealer and that maintains a segregated
account as described in § 403.4 of this chapter shall not be required
to transfer securities to such account upon the instruction of the
broker or dealer for whom such account is maintained if the clearing
bank determines that such securities continue to be required as
collateral for an extension of clearing credit to such dealer. Whenever
a clearing bank does not segregate securities as of the close of
business upon the instruction of such broker or dealer, it shall send a
notification to the appropriate regulatory agency of the broker or
dealer for whom such account is maintained. Such securities shall
thereafter be segregated pursuant to the instruction of the broker or
dealer as soon as they are no longer required by the clearing bank as
collateral for the extension of clearing credit.
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(5) A depository institution that is subject to Part 403 is not
required to maintain possession or control of margin securities as that
term is defined in
§ 403.5(f)(1).
(6) Notwithstanding the requirement of paragraph (a)(1) to
maintain possession or control of customer securities, a depository
institution may lend such securities to a third party pursuant to the
written agreement of the customer, if such loan of securities is
carried out in full compliance with supervisory guidelines of its
appropriate regulatory agency that expressly govern securities lending
practices.
(b)(1) Except as otherwise provided in paragraph (b)(2) of this
section, a depository institution shall issue a confirmation or a
safekeeping receipt for each security held for a customer in accordance
with this section with the exception of securities that are the subject
of repurchase transactions which are subject to the requirements of
§ 403.5(d) of this chapter. The confirmation or safekeeping receipt
shall identify the issuer, maturity date, par amount and coupon rate
of the security being confirmed. The confirmation may be supplied to
the customer in any manner that complies with applicable federal
banking regulations.
(2) A depository institution shall not be required to send the
confirmation or safekeeping receipt required by paragraph (b)(1) of
this section to a customer that is a non-U.S. citizen residing outside
the United States or a foreign corporation, partnership, or trust, if
such customer expressly waives in writing the right to receive such
confirmation or safekeeping receipt.
(c) Records of government securities held for customers shall be
maintained and shall be kept separate and distinct from other records
of the depository institution. Such records shall:
(1) Provide a system for identifying each customer, and each
government security (or the amount of each issue of a government
security issued in book-entry form) held for the customer;
(2) Describe the customer's interest in the government security;
(3) Indicate all receipts and deliveries of government securities
and all receipts and disbursements of cash by the depository
institution in connection with such securities;
(4) Include a copy of the safekeeping receipt or a confirmation
issued for each government security held; and
(5) Provide an adequate basis for audit of such information.
(d) Counts of government securities held for customers in both
definitive and book-entry form shall be conducted at least annually and
such counts shall be reconciled with customer account records.
(1) Counts of book-entry securities and of definitive securities
held outside the possession of the depository institution shall be made
by reconciliation of the records of the depository institution with
those of any depository, depository institution, or Federal Reserve
bank on whose books the depository institution has securities accounts.
(2) The depository institution conducting the count shall also
verify any such securities in transfer, in transit, pledged, loaned,
borrowed, deposited, failed to receive, failed to deliver, subject to
repurchase or reverse repurchase agreements or otherwise subject to the
depository institution's control or direction that are not in its
physical possession, where the securities have been in such status for
longer than thirty days.
(3) The dates and results of such counts and reconciliations
shall be documented with differences noted in a security count
difference account not later than seven business days after the date of
each required count and verification as provided in this paragraph (d).
(e) For purposes of this section, a depository institution shall
treat a government securities broker or dealer as a customer with
respect to securities maintained by such government securities broker
or dealer in a Segregated Account as defined in § 403.4(f)(1) of this
chapter and with respect to securities otherwise identified to the
depository institution as customer securities for purposes of
maintaining possession or control of such securities as required by
Part 403 of this chapter. The recordkeeping requirements of paragraph
(c) of this section require the depository institution to treat such
securities as customer securities separate from any other securities
held for the account of the government securities broker or dealer, but
do not require the depository institution to keep records identifying
individual customers of the government securities broker or dealer.
(f) The records required by paragraphs (c) and (d)(3) of this
section shall be preserved for not less than six years, the first two
years in an easily accessible place.
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[Codified to 17 C.F.R. § 450.4]
[Section 450.4 amended at 60 Fed. Reg. 11026, March 1, 1995,
effective March 31, 1995]
§ 450.5 Effective date.
This part shall be effective October 31, 1987.
[Codified to 17 C.F.R. § 450.5]
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