4000 - Advisory Opinions
Whether an Insurance Agent Is a Deposit Broker If It Is Compensated By a Bank For Referring Deposit Customers to the Bank
June 29, 1995
Andre M. Douek, Counsel
Your letter dated June 2, 1995 was referred to me for a response. In you letter, you indicate that the Bank you represent is considering purchasing a company which is a wholesaler of insurance products. This company has approximately 2,000 independent insurance agents who deliver insurance through it to their customers. You indicate further that in order to retain the goodwill of these agents, the Bank is prepared to offer the agents "a mutually beneficial arrangement, in which the agents would be compensated for referring their customers to the Bank for a variety of products and services (including trust, non-RESPA loan, and deposit products."
Accordingly, you raise two main questions to which you would like an answer, particularly as they relate to the Bank's future relationship with these agents. First, will an agreement between one or more independent insurance agents ("Agents") and ABC Bank ("the Bank") pursuant to which the Agents will be compensated for referring their customers to the Bank for various products and services, including deposit products, render the Agents "deposit brokers" for purposes of the FDI Act? Second, if the Agents will be considered deposit brokers, may the Bank, on behalf of the Agents, make all such filings and maintain all such records that the Agents would, as deposit brokers, be required to make and retain?
(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)(B).
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 The key test is whether the agent could be considered to be "engaged in the business of placing deposits, or facilitating the placement of deposits of third parties with insured depository institutions. . ."2 The FDI Act covers situations where the broker "facilitates the placement" of deposits and situations where the broker acts in a capacity as agent for others. The scenario you described in your letter clearly falls within the parameters of this definition, even though the amount of business generated by the agents may be small compared to their overall income and business activity.
The circumstances surrounding the involvement of the agents in the activities you describe differ from those of affinity groups. In an affinity group, the Bank markets the Bank's products to the affinity group's members. The Bank, not the affinity group conducts the marketing aimed at the affinity group members and that in every case, solicitation materials instruct the members to contact the Bank, not the affinity group.3 In the case at hand, however, the agent works "to put the Bank and the customer together." The agent would conduct the marketing and would provide advertising literature from the Bank to customers who might be interested in one of the Bank's products. Under those circumstances, the role of agents differs from that of affinity groups, and consequently, they must be considered deposit brokers for purposes of the Act.
In response to your second question concerning the recordkeeping requirements of the Act, "[i]t is the FDIC's view that a company may file a single notice on behalf of all of its employees and/or agents, although the FDIC reserves the right to require individual information at any time."4 Therefore, the FDIC would not object to the Bank's maintaining all recordkeeping requirements under the Act. Furthermore, the FDIC would not insist on pre-registration for each agent, but would accept registration simultaneously with the deposit of funds at the Bank.
This opinion is based upon the facts as presented to the Legal Division in your letter to Valerie J. Best, Esq. 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 also.
112 U.S.C. 1831f-1(a)(1), "A deposit broker, as defined in section 1831f(g) of this title, shall not solicit or place any deposit with an insured depository institution, unless such deposit broker has provided the Corporation with written notice that it is a deposit broker." Go back to Text
212 U.S.C. 1831f(1)(A) (emphasis added). Go back to Text