4000 - Advisory Opinions
Legal Requirements Governing Advertisement of Deposits by Deposit Brokers
April 7, 1993
Mark A. Mellon, Attorney
It has been brought to our attention that your firm has placed advertisements soliciting investments in FDIC-insured certificates of deposit ("CDs") which offer a high rate of return. See the enclosed advertisement. We would like to take this opportunity to apprise you of certain legal requirements pertaining to the advertisement of deposits issued by insured depository institutions.
Because you facilitate the placement of deposits of third parties with insured depository institutions, you appear to be a "deposit broker" as that term is defined in section 29(g) of the FDIA (12 U.S.C. 1831f(g)). Deposit brokers are required to register with the FDIC before they may solicit or place deposits with an insured depository institution. See 12 C.F.R. 337.6(h). Our records indicate that your firm has not complied with this requirement. The required notice must be in letter form and should describe the history, nature and volume of its deposit brokerage operations, including the sources and placements of such funds. The notice should be submitted to: FDIC, Office of Specialty Examinations and Financial Reporting, Division of Supervision, Washington, D.C. 20429. If you have any questions on this point, please contact Mr. Thomas C. O'Nell at (202) 898-6863.
Deposit brokers are also required to keep sufficient records of the volume of brokered deposits placed with any insured depository institution for a period of 12 months. The records must disclose the volume of brokered deposits that is currently outstanding, to include the maturities, rates and costs associated with such deposits. See 12 C.F.R. 337.6(h)(2).
As a deposit broker, you are subject to the Truth in Savings Act (the "TISA"). See sections 263(a) and 274(5) of the TISA, 12 U.S.C. 4302(a) and 4313(5). The TISA is not applicable, however, until June 21, 1993, the effective date of the TISA's implementing regulations, 12 C.F.R. Part 230, Reg DD. The TISA requires accurate, non-misleading advertisements of deposits by deposit brokers with respect to such information as the amount of interest that will be paid and the period of time during which that interest rate will be in effect. A copy of Reg DD has been enclosed with this letter for your information.
Your advertisement states that the CDs which your firm offers are "FDIC insured." The language could give rise to the impression that your firm is itself FDIC-insured. We recommend that you amend your advertisements to eliminate any potential ambiguity on this point.
Please respond to this letter within two weeks of its receipt and inform us whether you have registered as a deposit broker and amended the language of your advertisements to make it less ambiguous.
Thank you for your cooperation in this matter.