• third party ar
rangements conducted pursuant to written agreements;
• certain stock purchase plans;
• sweep accounts;
affiliate transactions;
• private securities offerings;
• safekeeping and custody activities;
• transactions defined as permissible under GLBA;
• banking products specifically identified by GLBA;
• municipal securities;
• a de minimus number of transactions, i.e., less than 500 per year; or
• trust and fiduciary activities.

• Applies to all retail securities activities transacted with consumer customers¹² of an insured depository institution, regardless of whether the institution offers securities directly or through an arrangement with a third party. Moreover, the Interagency Statement applies to a dual employee of the bank and a third party when the employee effects retail securities transactions.
• Provides for specific actions banks should take with regard to program management, disclosures, sales setting, personnel qualifications, suitability, and compensation to effectively manage its securities sales programs and protect securities customers.

• Applies to any retail securities transactions effected by banks for consumer or commercial customers, with the following exceptions:
• Transactions Effected by Registered Broker/Dealers: This regulation in its entirety does not apply to transactions in which: (1) the broker/dealer is fully disclosed to the bank customer, and (2) the bank customer has a direct contractual agreement with the broker/dealer. This broad exemption extends to arrangements which involve a dual employee of the bank and broker/dealer, when the employee is acting as an employee of, and subject to the supervision of, the registered broker dealer.
• Municipal Securities: This regulation in its entirety does not apply to municipal securities transactions effected at a bank registered with the SEC as a municipal securities dealer.
• Foreign Branches: This regulation in its entirety does not apply to transactions at foreign branches of a bank.
• Small Number of Transactions: Certain recordkeeping and securities trading policies and procedures of the regulation do not apply to a bank effecting an average of fewer than 200 transactions (excluding government securities transactions) per year. ¹³
• Government Securities: The settlement and personal securities trading requirements of the regulation do not apply to banks conducting transactions in government securities; and the recordkeeping requirements do not apply to banks effecting fewer than 500 government securities transactions per year.
• Requires banks to provide customers with written confirmation notices and to maintain appropriate records and controls with respect to retail securities transactions they effect.

• Applies to any bank that retains custody of government securities that are part of a retail repurchase agreement between the bank and its consumer or commercial customers.
• Requires banks to provide customer disclosures, customer transaction confirmation notices, and maintain procedures pertaining to possession and control of government securities.

• Applies to any bank that retains possession of government securities sold under a repurchase agreement with consumer or commercial customers, or banks that hold customer government securities as custodian or in safekeeping.
• Requires banks to issue confirmation or safekeeping receipts for government securities held for customers, properly segregate the securities, and maintain appropriate controls and records for those securities.

• Does the bank conduct retail securities sale activities?
• Is the bank conducting the sale of securities as a registered broker-dealer with the SEC or has the bank already limited its activities to those exempt from registration pursuant to GLBA?
• Does a third party conduct retail securities sales activities on bank premises or through customer referrals from the bank?
• Is the third party a registered broker/dealer with the SEC?
• What type of customers does the bank sell such products to
  – consumer and/or commercial customers?
• How many retail securities transactions (including both sales and purchases) were conducted for customers by the bank per year for the prior three calendar years?
• What type of securities sales activities are conducted
  – stocks, bonds, mutual funds, government securities, annuity products ¹⁴, repurchase agreements, sweep account arrangements, proprietary products, self-directed Individual Retirement Accounts/KEOGHs?

• Address the risks associated with the program;
• Summarize the program’s policies, procedures, and controls; and
• Clearly define the scope of any third party activities, and the bank’s monitoring of the third parties adherence to the Interagency Statement and applicable laws and regulations. Determine that the board of directors periodically reviews and updates, as necessary, the retail securities sales policy statement.

• The bank conducted an appropriate review of the third party’s qualifications, experience, regulatory history, financial condition, and references prior to entering into the arrangement;
• The arrangement is controlled by a written agreement that is approved by the bank’s board of directors and contains, at a minimum, the following elements:
• Description of each party’s duties and responsibilities;
• Description of the permissible activities by the third party on bank premises;
• Controls for the use of bank space, personnel, and equipment;
• Detailed compensation arrangements for all bank and third party personnel;
• Requirement that sales representatives are appropriately trained, licensed, and qualified;
• Requirement that the third party comply with all applicable laws, regulations, and the Interagency Statement;
• Authorization for the bank to monitor the activities of the third party and its sales representatives and to periodically review compliance with the agreement;
• Authorization for the bank and its banking regulatory agency to have access to such records of the third party as are necessary or appropriate to evaluate compliance;
• Indemnification for the bank for potential liability caused by the third party’s sales activities; and
• Written employment contracts satisfactory to the bank for personnel employed by both the bank and the third party (dual employees); and
• Bank senior management periodically monitors the third party’s compliance with the agreement. This function should be performed by individuals that are not involved in any part of the investment sales operation. Reviews may be conducted by internal auditors, external auditors, or other independent staffers.

• Determine that the board of directors established policies that guide the management and operations of any proprietary product, and maintains prudent oversight of all proprietary product operations, including those of the bank affiliates.
• Verify that the board’s policies:
• Require separation of duties between trading, sales, management, and accounting;
• Define bank management’s responsibilities;
• Establish an independent review function; and
• Outline strategies for potentially significant events, such as a capital injection.

• Types of products sold;
• Designation of employees to sell investment products;
• Supervision of personnel involved in sales;
• Permissible use of customer information; and
• Compliance procedures to ensure sales activities are conducted in accordance with applicable laws, regulations, and the Interagency Statement.

• Verify that employees do not make investment recommendations, qualify customers, or take orders for investment products, even if unsolicited, while located in the routine deposit-taking area. (This includes reviewing a bank’s policy, procedures, and any prepared scripts on handling deposit customers, or customers whose certificates of deposit are maturing.)

• Determine that management and staff (including tellers and receptionists) adhere to all applicable laws, regulations, the Interagency Statement, and the bank’s securities sales policy when making customer referrals.

• Customer Investment Goals
• Risk tolerance
• Return objectives
• Tax considerations
• Liquidity
• Customer Financial Information
• Assets, liabilities, and net worth
• Income and expenses
• Investment portfolio composition
• Tax status
• Insurance
• Customer Nonfinancial Factors
• Age and retirement plans
• Family status
• Current and anticipated education needs
• Current and anticipated health care needs

• Provides for the crossing of buy and sell orders on a fair and equitable basis to the parties to the transaction, where applicable and where permissible under local law; and
• Provides for the fair and equitable allocation of securities and prices to accounts when orders for the same security are received at approximately the same time and are placed for execution either individually or in combination.

• Determine that the bank enters into written repurchase agreements with customers that contain appropriate disclosures, including a disclosure that the funds held pursuant to the repurchase agreement are not deposits nor insured by the FDIC.
• Verify that the bank maintains proper possession and control of the government securities that are the subject of the agreement with its customers in accordance with Treasury Regulation 450.4(a). (See below)

• Determine that the bank maintains proper possession and control of the government securities it holds for its customer accounts (including where the bank uses another institution or the Federal Reserve Bank to hold the securities).
• Determine that the bank maintains proper possession and control of the government securities it holds as a custodian for customer accounts of other institutions or government securities broker/dealers.

• not insured by the FDIC;
• not deposits or obligations of the bank or its affiliates;
• not guaranteed by the bank or its affiliates; and
• are subject to investment risk, including possible loss of principal

• Verify that any third party advertising or promotional material clearly identifies the company selling the security product and does not suggest that the bank is the seller.

• Additional compensation earned for selling a proprietary product rather than another product;
• The product’s fee structure, as compared to other investment products offered at the bank;
• The product’s risk profile, as compared to other investment products offered at the bank; and
• The product’s historical performance, as compared to other investment products offered at the bank.

• Determine that the bank provides written confirmations at the end of the day of initiation of the repurchase transaction.
• Determine that the written confirmations contain all required information.

• Determine that bank provides a written confirmation or safekeeping receipt for each security held for a customer.
• Determine that the written confirmations or safekeeping receipts contain all required information.

• Where the bank is registered as a broker-dealer, bank securities representatives must meet applicable professional qualification requirements.
• The following NASD licenses, earned after passing standardized examinations, permit holders to engage in prescribed activities.
  – Series 6: Investment Company and Variable Contract Products Limited Representative, authorized to sell only mutual funds and annuities.
  – Series 7: General Securities Representative, may sell all securities except commodities.
  – Series 11: Assistant Representative - Order Processing, can take and enter unsolicited orders, but cannot determine suitability or provide investment recommendations.
  – Series 24: General Securities Principal, authorized to supervise all sales personnel.
  – Series 52: Municipal Securities Representative, may sell only municipal and government securities.
  – Series 62: Corporate Securities Limited Representative, may sell only corporate obligations.
• Where the bank sells securities pursuant to an exception from broker dealer registration, bank securities representatives must receive training which is the substantive equivalent of NASD licensing requirements required for personnel qualified to sell securities as registered representatives.
• Where the bank sells securities through a third party networking arrangement, sales representatives (dual employees and third party employees) must be NASD licensed and registered
.

• Determine that the bank conducts counts or verifications of government securities held for customers by the bank or by other institutions at least annually, reconciles them with account records, and documents findings within seven days.

• Verify that customer government securities records are properly maintained and kept separate from other records of the bank.

1. Do the board of directors and senior management provide effective oversight of the retail securities sales program?
2. Are policies, procedures, information systems, training, and licensing adequate for such sales activities?
3. Does the institution adequately monitor customer referral and securities sales activities?
4. Does the audit function include the securities sales program, and is it adequate?

• Customers sign appropriate disclosure forms;
• Customer data has been updated periodically;
• Securities sales staff provide complete information to customers regarding potential risks; and
• Recommendations conform to customer goals.

• Evaluate sales activity for questionable practices, such as account churning.
• Determine if promotions have prompted unsuitable recommendation practices. For example, high volumes of volatile instruments or dramatic increases in a particular product's sales may indicate suitability concerns.

• Verify that customers receive at least the minimum required disclosures; and
• Verify that securities sales staff retains documentation (preferably signed by the customer) which shows that the transaction was initiated solely at the customers’ request.

• Verify that customer referral fees are paid as a one-time nominal fee of a fixed dollar amount for each referral, and that the referral fee is paid regardless of whether the referral results in a transaction.
• Determine that incentive compensation for bank employees authorized to sell securities products is not structured in such a way as to result in unsuitable recommendations or sales being made to customers.

• Review the repurchase agreements to ensure that they contain required disclosures pertaining to FDIC insurance and securities substitution, as necessary.
• Sample customer account files and verify that confirmations are delivered to appropriate individuals in the required format within the appropriate timeframe, and that they contain all required information.

• Review custodian ba
nk’s accounts and records to verify that customer government securities are:
• Properly segregated from the assets of the bank, custodian institution, and/or broker-dealer, as appropriate, and
• Kept free from any lien, charge, or claim.
• Sample customer account files and verify that confirmations are delivered to appropriate individuals in the required format and that they contain all required information.
• Determine that the annual counts of government securities held for customers, as conducted by the bank, are reconciled with customer account records and custodian accounts, and properly verified and documented.
• Determine that the bank’s records contain all required information about each customer and each government security held in custody or safekeeping.

• Asset and Accounting Controls
• Customer assets are segregated from bank assets and from other account assets;
• Accounting records reflect segregation of accounts; and
• Accounting controls facilitate proper income reporting, record asset types, and identify individual instruments.
• Documentation
• Documentation clearly identifies and supports each account.

NOTE: IRA documentation should include, at a minimum, the required IRS trust/custodian agreement (Form 5305, 5305A, or equivalent), consumer disclosure agreement, signature card(s), and beneficiary designation.

• Illegal Investments
• Illegal investments are not permitted, regardless of any contrary customer instructions.
• IRA funds are not used for certain insider transactions, including:
  – Loans to the account sponsor or beneficiaries.
  – Collateral for loans to the account sponsor or beneficiaries.
  – Purchasing assets from the account sponsor, beneficiaries, or custodian bank.
  – Selling assets to the account sponsor, beneficiaries, or custodian bank.
  – Investments in debt instruments of the custodian bank or its holding company.
  – Investments in equity securities of the custodian bank or its holding company, unless acquired from an independent third-party at fair market value.
• Broker Selection
• Broker selection is based upon two principles: – Management selects the best broker for the account.
  – Brokers are selected based solely on the combination of lowest possible commission and best possible order execution.
  
  NOTE: Management may not select a broker based on insider relationships, personal relationships, compensation of any type, or solely due to community ties (SEC Rule 28(e)).



• Bank Brokerage
• The bank uses its own brokerage operations only when: – Management satisfies securities laws relative to broker selection.
  – The customer receives full written disclosure (pursuant to FDIC General Counsel’s Opinion Number Six) of the bank’s or affiliate’s relationship to the broker and all compensation that the bank will earn.
  – The account agreement expressly authorizes the specific activity.
  – The bank complies with Employee Retirement Income Security Act (ERISA) and Internal Revenue Code provisions stipulating that the bank must either charge no fees, or only charge fees that recover direct costs.
  – The bank automatically uses its brokerage for all transactions unless requested to do otherwise, but provides 30-day advance notice to accounts of all fee increases and permits accounts to immediately cease using the bank’s brokerage without penalty.

Job Aid for Review and Analysis of Common Retail Investment Sales Activities
Common Transaction:	Applicable policy and/or regulation:
A third party (employed dually by the bank and the third party) that is registered with the SEC as a broker/dealer sells or recommends investments to bank customers on bank premises, or through bank customer referrals when the bank receives a benefit for the referral.	Interagency Statement on the Retail Sales of Nondeposit Investment Products FDIC Part 344, except when the broker/dealer is fully disclosed to the customer and the customer has a direct contractual agreement with the broker/dealer
A third party (employed solely by the third party) that is registered with the Securities and Exchange Commission (SEC) as a broker/dealer sells or recommends investments to bank customers on bank premises, or through bank customer referrals when the bank receives a benefit for the referral.	Interagency Statement on the Retail Sales of Nondeposit Investment Products FDIC Part 344, except when the broker/dealer is fully disclosed to the customer and the customer has a direct contractual agreement with the broker/dealer
A bank establishes a cash management sweep account for its customer that transfers funds from a deposit account to purchase securities, and also initiates securities sales or redemptions to replenish a deposit account.	Interagency Statement on the Retail Sales of Nondeposit Investment Products Treasury Regulation Part 403.5(d) Treasury Regulation Part 450 FDIC Part 344, except as provided in Part 344.2, Part 344.7(a), and Part 344.9(b)
A bank establishes a cash management sweep account for its customer that transfers funds from a deposit account to purchase securities, and also initiates securities sales or redemptions to replenish a deposit account.	Interagency Statement on the Retail Sales of Nondeposit Investment Products FDIC Part 344, except as provided in Part 344.2, Part 344.7(a), and Part 344.9(b)
A bank holds government securities as a custodian or in safekeeping for the account of a customer.	Treasury Regulation 450

Job Aid for 12 CFR §344 Recordkeeping and Confirmation Requirements for Securities Transactions
Negative answers to the following questions indicate violations of FDIC regulations published at Part 344. Questions that are not applicable should be answered "N/A" in the "YES" column.
Item	Section No.	Yes	No
Securities Trading Policies and Procedures 1. Does the bank have written policies and procedures providing for assignment of responsibility for supervision of all officers and employees who transmit orders to or place orders with broker/dealers; or execute transactions in securities for customers?	344.8(a)(1)
2.Does the bank have written policies and procedures providing for assignment of responsibility for supervision and reporting (separate from those in 344.8(a)(1)), for all officers or employees who process orders for notification and settlement purposes, or perform back office functions?	344.8(a)(2)
3. Does the bank have written policies and procedures providing for the fair and equitable allocation of securities and prices to accounts when orders for the same security are received at approximately the same time?	344.8(a)(3)
4. Does the bank have written policies and procedures providing for, where permissible under local law, the crossing of buy and sell orders on a fair and equitable basis to the parties to the transaction?	344.8(a)(4)
Reporting of Personal Securities Trading 5. Do bank officers and employees (subject to exceptions under 344, which exempt dual employees of the bank and broker/dealer when acting as an employee of, and subject to the supervision of, the registered broker/dealer) who make investment recommendations or decisions for the accounts of customers; participate in the determination of such recommendations or decisions; or in connection with their duties obtain information concerning which securities are being purchased or sold or recommended such action, report to the bank within 10 business days after the end of the calendar quarter all transactions in securities made by them or on their behalf in which they have a beneficial interest?	344.9(a)
Written Notification 6. Does the bank provide to the customer at or before completion of each securities transaction either a broker/dealer’s confirmation or a written notification as required by the regulation?	344.5
Notification by Agreement 7. For accounts where the bank does not exercise investment discretion and provides an alternative written notification, does the bank maintain a written agreement with the customer pertaining to the different arrangement (timing and content) for the written notification to the customer; and does the agreement make clear the customer’s right to receive the written notification described in 344.5 at no additional cost?	344.6(a)
Alternative Forms and Times of Notification 8. For accounts where the bank exercises investment discretion in an agency capacity: Does the bank provide the customer, not less frequently than once every three months, an itemized statement that specifies the funds and securities in custody or possession of the bank at the end of such period and all debits, credits and transactions in the customer’s accounts during such period? If requested by the customer, does the bank provide the customer with the written notification described in 344.5 within a reasonable period of time?	344.6(c)(1) 344.6(c)(2) 344.6(d)
9. For securities transactions involving cash management sweep accounts, does bank send their customer a written statement, in the form required by 344.6(f) for each month in which a purchase or sale of a security takes place in such accounts, and not less than once every three months if no securities transactions occur? (For sweep accounts where banks retain custody of government securities that are the subject of a hold-in-custody repurchase agreement with the customer, the bank is also subject to Treasury Regulation confirmation requirements – see Compliance Checklist for 17 CFR 403.5(d).)	344.6(e)
10. For collective investment fund accounts, does the bank provide the customer with a copy of a financial report of the fund as described in this section, or a notice that a copy of such a report is available upon request?
11. For periodic plan accounts: Does the bank provide the customer a written statement, not less than once every three months, showing the funds and securities in the custody or possession of the bank; all service charges and commissions paid by the customer in connection with the transaction; and all other debits and credits of the customer’s account involved in the transaction? If requested by the customer, does the bank provide the customer with the written notification described in 344.5?	344.6(f)
Settlement of Securities Transactions 12. Does the bank settle securities transactions (other than those securities listed in 344.7(a)) no later than the third business day after the date of the contract unless otherwise expressly agreed to by the parties at the time of the contract, or unless the contract is subject to an exception listed in 344.7(b) and (c)?	344.7
Recordkeeping 13. Does the bank maintain required records for at least three years, including: Daily records for each purchase and sale of securities, in chronological order; Account records for each customer; Order tickets for each order to purchase or sell securities (whether executed or canceled); Record of all broker/dealers selected by the bank to effect transactions and the amount of commissions paid or allocated to each broker during the calendar year; and Copies of written notifications provided to customers under the regulation?	344.4(a)

Job Aid for 17 CFR §403.5(d) Protection of Customer Securities and Balances
Negative answers to the following questions indicate violations of Treasury regulations published at 17 CFR §403.5(d). Questions that are not applicable should be answered "N/A" in the "YES" column.
Item	Section No.	Yes	No
Repurchase Agreement 1. For government securities subject to hold-in-custody repurchase agreements between the bank and the customer: Are written repurchase agreements obtained by the bank? Does the repurchase agreement disclose that funds held pursuant to the repurchase agreement are not deposits nor insured by the FDIC? If applicable, is the provision by which the bank retains the right to substitute securities included in the written repurchase agreement? If applicable, is the "Required Disclosure" regarding substitution properly displayed in the repurchase agreement?	403.5(d)(1)
Written Confirmation 2. Does the bank confirm in writing the specific government securities subject to the repurchase transaction at end of day of initiation of the transaction, and at end of any day when securities are substituted resulting in a change to issuer, maturity date, par amount or coupon rate specified in the previous confirmation? 3. Does the confirmation specify: issuer, maturity date, coupon rate, par amount, market value, and, if applicable, CUSIP or mortgage-backed security pool number? 4. If confirmations are not sent to non-U.S. citizens residing outside the United States, does the bank have a written waiver from the customer?	403.5(d)(1)(ii)     403.5(d)(2)(i) 403.5(d)(2)(ii)
Custodial Holdings of Government Securities 5. Does the bank maintain proper possession and control of the government securities that are the subject of the repurchase agreement, except when substituting securities? (see Compliance Checklist for 17 CFR 450 for custodial requirements)	403.5(d)(vi) 450.4(a)

Job Aid for 17 CFR §450 Custodial Holdings of Government Securitires by Depository Institutions
Negative answers to the following questions indicate violations of Treasury regulations published at 17 CFR §450. Questions that are not applicable should be answered "N/A" in the "YES" column.
Item	Section No.	Yes	No
Segregation of Government Securities 1. For banks holding government securities for its customer accounts: (a) Are all government securities held for the account of customers (including securities of counterparties to hold-in-custody repurchase transactions) segregated from the assets of the bank and kept free from lien, charge, or claim of any third party granted or created by the bank? (b) If customer government securities are maintained by the bank at another institution ("custodian institution"), including a depository institution, correspondent bank, or a trust company: (1) Has the bank notified the custodian institution that the securities belong to the customers and should be maintained in a separate, designated customer account? (2) Does the custodian bank maintain customer securities in an account designated for customers, and which does not contain any proprietary securities of the bank? (3) Has the bank instructed the custodian institution to keep such customer securities free of any lien, charge, or claim? (c) For customer government securities maintained by the bank at a Federal Reserve Bank, do any liens, charges, or claims against securities of the bank expressly exclude customer securities? (d) If customer government securities are subject to a securities lending arrangement, agreed to in writing by the customer, is such loan of securities carried out in full compliance with FFIEC Policy Statement on Securities Lending? 2. For banks holding government securities as a custodian for other institutions: (a) If the bank holds government securities that have been identified as customer securities by another depository institution: (1) Does the bank maintain these securities in a separate, designated account for customers of the depository institution? (2) Does the bank keep identified customer securities separate from other securities held for the other institution? (b) If the bank holds government securities that have been identified as customer securities by a government securities broker or dealer, or that the broker or dealer has instructed the bank to place in a "segregated account": (1) Does the bank keep such securities separate from other securities of the broker or dealer and in compliance with the other provisions of this section? (Banks are not required to keep records identifying individual customers of the government securities broker or dealer.) (2) If the bank is a clearing bank and does not transfer securities to a segregated account as instructed by the broker or dealer because of the need for collateral for an extension of clearing credit to such dealer, has it notified the broker or dealer’s regulatory agency and segregated such securities as soon as no longer required by the bank as collateral for the clearing credit?	450.4(a)(1)     450.4(a)(2)(i)               450.4(a)(3)(i)   450.4(a)(6)         450.4(a)(2)(i)(B) 450.4(a)(2)(ii)       450.4(a)(4)
Written Confirmation 3. Does the bank issue a confirmation or safekeeping receipt identifying the issuer, maturity date, par amount, and coupon rate for each security held for a customer? (This provision does not apply to confirmations issued for hold-in-custody repurchase agreement transactions – see Compliance Checklist for 17 CFR 403.5(d) for confirmation requirements) 4. If the bank does not send confirmations to non-U.S. citizens residing outside the United States, does the bank have a written waiver from the customer to support this?	450.4(b)
Counts of Government Securities 5. Are counts or verifications of government securities held for customers by the bank or by other institutions conducted annually, and are these counts reconciled with customer account records and with custodian accounts held for customers? 6. Are securities in transfer, in transit, pledged, loaned, borrowed, deposited, failed to receive, failed to deliver, subject to repurchase or reverse repurchase agreements, or subject to bank’s control but not in its possession verified after thirty days in such status? 7. Are the required counts and reconcilements, along with any differences, documented within seven days?	450.4(d)   450.4(d)(2)   450.4(d)(3)
Recordkeeping 8. Are customer government securities records maintained and kept separate from other records of the bank? 9. Do the records contain the following: (a) Identification of each customer and each government security held for the customer? (Amount of each issue of a security is adequate for book-entry form.) (b) Customer’s interest in each security? (c) Record of all receipts and deliveries of securities, and all related receipts and disbursement of cash made by the bank? (d) Copy of confirmation or safekeeping receipt for each security held? (e) Information adequate to conduct an audit? 10. Are customer records and counts of securities preserved for six years?	450.4(e)                   450.4(f)

• misunderstand the safety of insurance products sold by banks, i.e., assume incorrectly that they are backed by the FDIC or another federal agency, or
• be coerced into believing they must purchase an insurance product or annuity in order to obtain a loan.

• it represents that it is doing so; or
• it pays the bank commissions for receiving customer referrals; or
• documents that evidence the sales transaction refer to the bank.

• identify any insurance or annuities sales activities the institution conducts directly or through other entities on its behalf; and
• obtain copies of relevant policies and procedures, third party agreements, disclosures and acknowledgment forms, advertising copy, records and reports.

• The bank conducted an appropriate review of the third party’s qualifications, experience, regulatory history, financial condition, and references prior to entering into the arrangement;
• The arrangement is controlled by a written agreement that is approved by the bank’s board of directors and contains the following elements:
• Description of each party’s duties and responsibilities;
• Description of the permissible activities by the third party on bank premises;
• Controls for the use of bank space, personnel, and equipment;
• Detailed compensation arrangements for all bank and third party personnel;
• Requirement that sales representatives are appropriately trained, licensed, and qualified;
• Requirement that the third party comply with all applicable laws and regulations;
• Authorization for the bank to monitor the activities of the third party and its sales representatives and to periodically review compliance with the agreement;
• Authorization for the bank and its banking regulatory agency to have access to such records of the third party as are necessary or appropriate to evaluate compliance;
• Indemnification for the bank for potential liability caused by the third party’s sales activities; and
• Written employment contracts satisfactory to the bank for personnel employed by both the bank and the third party; and
• Bank senior management periodically monitors the third party’s compliance with the agreement.

• Types of products sold;
• Supervision of personnel involved in sales; and
• Compliance procedures to ensure sales activities are conducted in accordance with Part 343.

• Employees do not make insurance recommendations, or take orders for insurance products, even if unsolicited, while located in the routine deposit-taking area. (This includes reviewing any prepared scripts on handling deposit customers, or customers whose certificates of deposit are maturing.)

• Management and staff (including tellers and receptionists) adhere to part 343 and the bank’s insurance sales policy when making customer referrals.

• extensions of credit are tied to the sale of insurance or annuities;
• insurance or annuities are backed by the federal government; or
• products that carry investment risk do not do so.

• NOT A DEPOSIT
• NOT FDIC-INSURED
• NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
• NOT GUARANTEED BY THE BANK
• MAY GO DOWN IN VALUE

1. Do the board of directors and senior management provide effective oversight of the retail insurance sales program?
2. Are policies, procedures, information systems, training, and licensing adequate for such sales activities?
3. Does the institution adequately monitor customer referral and insurance sales activities?
4. Does the audit function include the insurance sales program, and is it adequate?

Job Aid for Review of Retail Sales of Insurance and Annuities
Policies and Procedures	Yes	No	N/A	Comments
1. Do the bank’s policies and procedures prohibit sales practices which materially mislead consumers into believing that: extensions of credit are tied to the sale of insurance or annuities; insurance or annuities are backed by the federal government; or products that carry investment risk do not do so? See §343.30(a) and (b)
2. Do the bank’s policies and procedures detail sales employee qualification, training, licensing and compensation practices? See §343.60.
3. Do the bank’s policies and procedures establish referral procedures for employees who are not authorized to sell insurance which include limits on referral compensation to a one-time, fixed dollar, nominal fee that is not tied to whether the referral results in a transaction? See §343.50(b)
4. To the extent practical, do the bank’s policies and procedures require that the area in which insurance is sold is physically distinct from the area in which retail deposits are taken? See §343.50(a)
5. Do the bank’s policies and procedures prohibit discrimination against victims of domestic violence or providers of services to such victims? See §343.30 (c)
Disclosures	Yes	No	N/A	Comments
6. Are disclosures readily understandable and meaningful? See §343.40(c)(5)& (6);
7. Are written customer acknowledgment forms available for all insurance product disclosures, including those which must be provided when credit applications are taken? See §343.40(c)(7);
8. Do disclosures contain at least the minimum required content? "Minimum required content" means that: Except to the extent that it is not accurate, disclosures inform customers that insurance and annuities are: not deposits or obligations of the bank or its affiliates; See §343.40(a)(1) not guaranteed by the bank or its affiliates; See §343.40(a)(1) not insured by the FDIC; See §343.40(a)(2) not insured by or any other agency of the United States or any affiliate of the bank; See §343.40(a)(2) and are subject to investment risk, including potential loss of principal. See §343.40(a)(3)
9. Where insurance is solicited, offered, or sold in connection with a credit application, do disclosures state that the bank may not condition the extension of credit on either: the consumer’s purchase of an insurance product or annuity from the bank or any of its affiliates See §343.40(b)(1); or the consumer’s agreement not to obtain, or a prohibition on obtaining, an insurance product or annuity from an unaffiliated entity? See §343.40(b)(2)
Advertising and Promotional Materials	Yes	No	N/A	Comments
10. Are they readily understandable and meaningful? See §343.40(c)(5)and (6);
11. Do they contain at least the minimum required disclosures, unless they are not accurate for a particular product? The minimum disclosures explains that the product is NOT A DEPOSIT NOT FDIC-INSURED NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT GUARANTEED BY THE BANK MAY GO DOWN IN VALUE See §343.40(c)(5)
Training	Yes	No	N/A	Comments
12. Does the bank’s training program cover insurance sales? Does it offer appropriate training to all employees and management? See §343.60
Monitoring	Yes	No	N/A	Comments
Sales Practices 13. Does the bank ensure that sales representatives do not engage in misleading or coercive sales practices? See §343.30. 14. Does the bank ensure that tellers or other employees who are not authorized or qualified to sell insurance do not make sales recommendations or take orders for such products? See §343.60
Manner and Timing of Disclosures 15. Does the bank ensure that disclosures are made in an appropriate and timely way? Does the bank’s monitoring system ensure that: disclosures are provided orally and in writing before an initial sale is completed, See §343.40(c)(1), disclosures are provided in advertisements, unless general in nature, See §343.40(d) where insurance is solicited, offered, or sold in connection with a credit application, disclosures are provided orally and in writing when the credit application is taken. See §343.40(c)(1)
16. Does the bank’s monitoring system consider that: For insurance transactions completed by mail or through electronic media, oral disclosures are not required. See §343.40(c)(2) and (4)(ii); For insurance transactions completed by telephone, written disclosures may be provided by mail within three business days after the sale is completed or the credit application is taken. See §343.40(c)(3) For insurance transactions completed electronically, written disclosures may be provided electronically, if the consumer affirmatively consents and the disclosures are provided in a format that the consumer may retain or obtain later. See §343.40(c)(4).
Customer Acknowledgment of Receipt of Disclosures 17. Does the bank’s monitoring system ensure that a written customer acknowledgement of receipt of all insurance disclosures, including those which must be provided when credit applications are taken, is obtained: either when such disclosures are given or before an initial sale is completed. See §343.40(c)(7) Except that oral acknowledgements are sufficient for telephone transactions, as long as the bank maintains documentation which shows that acknowledgements have been received and makes reasonable attempts to obtain written acknowledgements from consumers. See §343.40(c)(7)(I) and (ii).