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4000 - Advisory Opinions

Custodial Accounts: Recordkeeping Requirements

FDIC-90-17 April 17, 1990 Sandra R. Comenetz, Senior Attorney

This responds to your March 27, 1990 letter regarding proper methods under 12 C.F.R. § 330.1(b) by which CDs issued by FDIC-insured banks and held in bearer, street, or nominee name by ***, may be registered to both maintain liquidity and ensure that FDIC insurance coverage passes through to the beneficial owners of the CDs. You state that: "Details of the parties interests are readily ascertainable," but express concern that "registration of the certificates of deposit in the name of *** as custodian for others would effectively limit the liquidity of the certificates in the marketplace. . . ."

For *** to support a deposit insurance claim on behalf of a customer, it must establish the details of its relationship with the customer and the interest of *** customer in the CD. A proper registration format on the deposit account records of the depository institution should identify *** as custodian for its customer. For example, *** might register the CDs thusly: "[ABC & Co.] as nominee for *** Bank and *** as custodian for its customers." 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 or entity for whom the customer is holding the CDs. 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. 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.

I hope this explanation will assist you in designating custodial accounts held by *** on behalf of its customers. If we can be of further assistance, please let us know.

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