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4000 - Advisory Opinions


Deposit Insurance for Separate Accounts Maintained by Non-Profit Association and Its Subsidiaries and Affiliates Where Funds Are Derived from Government Contracts that Prohibit Commingling of Funds

FDIC 91-39 May 2, 1991 Roger A. Hood, Assistant General Counsel

This responds to your January 17 letter to Regional Director Nicholas J. Ketcha, Jr. regarding the insurability of various accounts maintained by multiple account holders.

As an example, you furnished information with respect to 35 separate accounts maintained by a not-for-profit corporation, its five subsidiaries and its three affiliates. The various funds are derived from several government contracts which require that the funds not be co-mingled, but be separated as to contract, and frequently by year. In addition, you noted that many of the accounts were labeled "as agent".

You are advised that the following general principles apply to the insurance of accounts such as you described in your letter.

1.  Each separate corporation engaged in an independent activity is separately recognized and insured for its deposits in any one insured bank to the maximum amount of $100,000. (12 C.F.R. § 330.9(a)) An "independent activity'' is one primarily for some purpose other than to increase insurance. (12 C.F.R. § 330.9(d))

The notes to the parent corporation's financial statements furnished with your letter state that the financial statements of the corporation do not include five wholly owned subsidiaries because their operations are different in nature. This is strong evidence that the subsidiaries and the parent are engaged in independent activities within the meaning of § 330.9.

The functions of the affiliates are not stated so I am unable to make an independent determination that they are engaged in independent activities, but assuming their activities are separate and they can be said to be operated primarily for some purpose other than to increase deposit insurance, the deposits of each corporation would be separately insured from those of its parent corporation or its subsidiaries or affiliates.

2.  The source of the funding is not relevant for deposit insurance purposes as to funds owned and deposited by a corporation. The grant of funds to a corporation by different governmental agencies with a requirement that the funds not be co-mingled does not, itself, affect the corporate ownership of such funds. As such, the various accounts maintained by a single corporation comprised of funds received by the corporation under different grants from the same or different governmental agencies would be aggregated and insured to the maximum amount of $100,000.

3.  The designation "as agent" in the account titles would permit the depositor to present details of the relationship in an effort to establish the right to separate insurance based on "pass-through" coverage to a principal, beneficiary or other person for whom the depositor may be holding funds. (12 C.F.R. §§ 330.4(b), 330.6, 330.11). Such a designation would not, however, establish the existence of any custodial, trust or agency relationship.

From the materials furnished with your letter, it is not apparent for whom the depositor is acting as agent. In Exhibit C (the Neighborhood Preservation Agreement), paragraph 15 provides, in part:

The Company acknowledges and agrees that it is an independent contractor and is not an agent or employee of the State of New York, Division of Housing and Community Renewal, Commissioner nor any agency or subdivision of the foregoing . . . . (Emphasis added.)

Likewise, Exhibit D (Excerpts from HUD Contract) refers to the "owner" and does not have any provisions which suggest that the depositor is other than the outright owner of the deposited funds. Mere restrictions on the use and handling of the funds by the grantor would not create an agency relationship.

In summary, it appears from the materials furnished for our review that each separate corporation depositing funds would be separately insured to the maximum amount of $100,000 with respect to all deposits which it maintains in the same insured bank. The opinion expressed in this letter is based on extracts from only a few of the relevant records and, accordingly, should be considered only as guidance for your bank and its customers. In the event claims were made for insurance of these or similar deposits, all relevant records would be reviewed in order to determine the insurance coverage applicable to them.

I trust this is responsive to your request and wish to express my regret for the delay in responding to your letter.


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