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4000 - Advisory Opinions
Criteria for Determining Whether a Listing Service Is a
"Deposit Broker" for Purposes of 12 U.S.C. § 1831f and 12
C.F.R. § 337.6
FDIC-92-50
July 24, 1992
Valerie J. Best, Counsel
I am writing in response to your recent inquiry concerning deposit
brokers. In your letter you ask whether a listing service is a
"deposit broker" as that term is defined in the Federal Deposit
Insurance ("FDI") Act. 1
{{10-30-92 p.4655}}
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).
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.
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 criteria listed below. On the other hand, if a deposit listing
service fails to meet any one of the following criteria, it will be
considered a deposit broker.
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
{{10-30-92 p.4656}}
6. Any funds to be invested in deposit accounts are
remitted directly by the depositors to the insured depository
institution and not, directly or indirectly, through the person or
entity providing the listing service; 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).
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
Assuming that the representations made in your letter are accurate,
and further assuming that your letter fully describes the activities of
your company, then we would agree that your company is not a deposit
broker. 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.
Please call me at (202) 898-3812 or write to me at the above address
if you have additional questions. I sincerely apologize for the delay
in our response.
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, 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) and (B). 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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