Highlights:
Regulation R includes the following provisions:
- Third-Party Brokerage (Networking) Arrangements - Rule 700 defines the terms
under which a bank employee may receive a nominal, non-contingent, one-time cash fee of a
fixed-dollar amount for referring a customer to a broker- dealer. Rule 701 contains an exemption
and related definitions that permit a bank employee to receive a higher, contingent fee for
referring an institutional or high net-worth customer to a broker-dealer.
- Trust and Fiduciary Activities - Where a bank effects more than 500 securities
transactions per year, the rules require trust operations to meet a "chiefly compensated" test
unless related exemptions apply. Rules 721 through 723 define the terms "chiefly compensated"
and "relationship compensation," and provide specific exemptions for banks effecting securities
transactions in a trustee or fiduciary capacity, e.g., for short-term and transferred accounts.
- Sweep Activities - Rules 740 and 741 define terms and provide an exemption for
banks sweeping funds into certain money market funds.
- Safekeeping and Custody Activities - Rule 760 provides exemptions for banks
that accept orders to effect securities transactions from or for custody accounts. This rule
comes into play when banks act in a custodial capacity for employee benefit plan accounts, for
individual retirement accounts, and for accommodation trades for other custodial accounts.
Distribution:
FDIC-Supervised Banks (Commercial and Savings)
Suggested Routing:
Chief Executive Officer
Chief Trust Officer
Chief Compliance Officer
Related Topics:
Compliance Examination Procedures and
Supervisory Guidance for Retail Investment Sales
Attachment:
Definitions of Terms and Exemptions
Relating To The "Broker" Exceptions For Banks
Contacts:
Victoria M. Pawelski, Compliance Policy Analyst, at
VPawelski@FDIC.gov or 202-898-3571, or Anthony
J. DiMilo, Trust Examination Specialist, at
ADiMilo@FDIC.gov or 202-898-7496.
Note:
FDIC financial institution letters (FILs) may be
accessed from the FDIC's Web site at
www.fdic.gov/news/news/financial/2007/index.html.
To receive FILs electronically, please visit
http://www.fdic.gov/about/subscriptions/fil.html.
Paper copies of FDIC financial institution letters
may be obtained via the FDIC's Public Information
Center (1-877-275-3342 or 703-562-2200).
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