FDIC Law, Regulations, Related Acts
4000 - Advisory Opinions
Custodial Accounts Held by X Corporation on Behalf of Banks and Other Customers
June 14, 1989
Roger A. Hood, Assistant General Counsel
This responds to your May 19th letter asking that I confirm our telephone conversation regarding proper methods by which CDs, issued by FDIC-insured banks and held in the nominee name of ***, may be registered so that the ultimate beneficial owners' interests will be recognized for purposes of determining FDIC insurance limits.
Your first proposed registration format (assuming *** is *** nominee) is as follows: *** as nominee for *** as agent for its customers. The foregoing registration would be adequate to permit *** to prove its claim on behalf of its customers by producing records establishing the details of the relationship and the interest of *** customer in the CD. If *** records disclose that its customer is, in turn, holding in a custodial capacity, reference may be made to that customer's records to determine the details of the relationship and the interest of the person for whom the customer is holding. This process may be continued as long as the records of each party holding in a representative capacity disclose that the person for whom he or she is holding is, in turn, holding in some representative or custodial capacity. When a custodian's records show that the beneficial owner is holding in an individual capacity, that person may not show that he or she is holding in some representative capacity, contrary to the records of the custodian.
Your second proposed registration format is as follows: *** as nominee for *** as agent for ABC Bank as agent for its customers. In this case the insured bank's records reflect both *** capacity and that of ABC Bank. You are correct in your assumption that the records of ABC Bank would be the records which would be used to support a claim based on the beneficial interests of ABC's customers. If ABC is to show that some of its customers are holding in representative capacities, the registration should include the following, after "customers": "holding for themselves or for others." The tiering process could continue as described in the case of the first noted form of registration. In passing on a claim for insurance involving several levels of ownership, the FDIC may require production of records of parties at any and all levels to establish the existence of the purported relationship.
You also asked whether the representative capacity could be shown in the alternative, such as *** as nominee for *** as agent or fiduciary for its customers." This form of registration would be sufficient to permit *** to show the details and nature of its custodial or representative capacity if it were making a claim for "pass-through" deposit insurance.
I hope this explanation will assist you in designating custodial accounts held by *** on behalf of banks and other customers.