4000 - Advisory Opinions
Company That Assists Municipalities, Private Investors and Corporations in Locating Depository Institutions Actively Seeking Large Deposits But That Does Not Accept Direct Fee From Institution Must Register as Deposit Broker
December 7, 1992
Valerie J. Best, Counsel
The purpose of this letter is to advise you of the registration requirements applicable to deposit brokers. We were recently contacted by a depository institution asking whether or not [Company] would be considered a "deposit broker" as that term is defined in section 29 of the Federal Deposit Insurance Act ("FDI Act"). Based upon the information available to us, we believe that [Company] is a "deposit broker." Please be advised that 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
Activities of Continental
It is our understanding that [Company] assists municipalities, private investors and corporations in locating banking institutions who are actively seeking large deposits. When a depository institution wants to obtain funds, [Company] can direct its clients to the depository institution. We understand that you do not receive a fee from the depository institution with whom the deposits are placed.
Definition of ``Deposit Broker''
The term "deposit broker" is defined, in part, to include: "any person engaged in the business of placing deposits, or facilitating the placement of deposits, of third parties with insured depository institutions. . . ." 12 U.S.C. 1831f(g)(1)(A).
The fact that your company is never in possession of the investor's principal or interest and never acts as trustee or agent for the investor, does not exempt it from the FDI Act requirements applicable to deposit brokers. The key test is whether your company 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 . . . ."2 In common usage, the term "facilitate" means "to free from difficulty or impediment; to make easy or less difficult."3 We believe the activities of your company make it easier for the investor to place its deposits with insured institutions.
Based on the foregoing, your company and its employees are "deposit brokers" as that term is defined in the FDI Act. As a result, they are subject to the notification requirements imposed by the FDI Act. A company may file a single notice on behalf of all of its employees and/or agents. However, the FDIC reserves the right to require individual information at any time. The notification requirements are outlined in the enclosed financial institutions letter at page 3.
Please call me at (202) 898-3812 or write to me at the above address if you have any questions.
112 U.S.C. 1831f--1(a). 57 Fed. Reg. 23933, 23944 (June 5, 1992) (to be codified at 12 C.F.R. 337.6(h)). Go back to Text
212 U.S.C. 1831f(1)(A) (emphasis added). Go back to Text
3Black's Law Dictionary 591 (6th ed. 1990). Whether or not the activities must be more than merely incidental to the placement of the deposits is not at issue in this case, given the level of activities of your company. Go back to Text