4000 - Advisory Opinions
Deposit Insurance for CDs Purchased in the Name of a National Bank Acting as Nominee
January 12, 1994
Christeena G. Naser, Attorney
This letter is in response to your letter of September 24, 1993 addressed to Claude Rollin and also Mr. *** letter of December 16, 1993 addressed to Roger Hood, both concerning insurance of accounts established by nominees on behalf of customers. Please be advised that neither letter was received until late December, presumably because of an incorrect mailing address. For future reference, the address of FDIC's main office is 550 17th Street, N.W., Washington, D.C. 20429.
Both letters inquired as to the deposit insurance for certificates of deposit which are purchased in the name of a national bank acting as nominee. You have indicated, however, that none of the account titles reflect in any manner the capacity in which the bank is acting. As discussed more fully below, if there is no indication of a fiduciary relationship in the deposit account records of the insured institution at which the funds are deposited, insurance will not flow through to the actual owners of the funds.
The general rule governing accounts established in nominee name is that deposit insurance flows through to the actual owners of the funds so long as the disclosure and recordkeeping requirements set forth in the enclosed FDIC regulations are satisfied.1 12 CFR 330.6. Please be advised, however, that FDIC regulations at 12 CFR 330.4(b)(1) state that no claim for insurance coverage based on a fiduciary relationship (including nominee capacity) will be recognized unless the relationship is evident from the deposit account records of the institution in which the funds are deposited. "Deposit account records" means account ledgers, signature cards, certificates of deposit, passbooks, corporate resolutions authorizing accounts in the possession of the insured depository institution and other books and records of the institution, including records maintained by computer, which relate to the institution's deposit-taking function, but does not mean account statements, deposit slips, items deposited or cancelled checks. 12 CFR 330.1. In addition to this disclosure requirement, the details of the fiduciary relationship as well as the interests of other parties in the account must be ascertainable either from the institution's depository account records or records maintained in the regular course of business by the depositor or some entity that has undertaken to maintain such records for the depositor. 12 CFR 330.4(b)(2). Finally, if multiple fiduciary relationships are involved, the provisions of 12 CFR 330.4(b)(3) would also apply. Thus, in the case of both *** and *** , if the existence of the nominee relationship is not indicated anywhere in the deposit account records of the institution holding the funds, it would appear that deposit insurance would not flow through to the actual owners of the certificates despite the fact that the nominee maintains records of individual ownership.
You should also be aware that FDIC presumes that deposited funds are actually owned in the manner indicated in deposit account records and will not review other documents unless FDIC, in its sole discretion, determines that the deposit account records are ambiguous or unclear. 12 CFR 330.4(a).
I hope the above has been responsive to your inquiry. However, if you have further questions, please do not hesitate to telephone me at (202) 898-3587.
1The general rules of aggregation would apply to funds held by a nominee. Thus, for purposes of determining the $100,000 insurance limit, an individual's ownership interest in the certificates of deposit would be added to any other funds he/she holds in the same right and capacity that are deposited in any branches of the same bank. Go back to Text