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4000 - Advisory Opinions

Insurance Coverage Provided for Funds Held by a Depository Institution on Behalf of Company Offering a Consumer Rebate/Annuity Program and Participants Therein

FDIC-91-91 December 2, 1991 Mark A. Mellon, Attorney

This is in response to your letter of November 18, 1991 pertaining to the accounts set up by your firm, ***, with an insured depository institution (the "Bank") pursuant to a program which provides rebates to participants on goods, services and contributions purchased from vendors under contract with ***. The deposit insurance coverage which these accounts would receive has been previously discussed in my letter to you dated May 22, 1991.

Based on your most recent letter and our telephone conversation, it is my understanding that the following changes have been made to the *** program. The funds attributable to program participants will no longer be transferred from the escrow account held by the Bank to the account of an insurance company with another insured depository institution. They will instead be transferred to two other escrow accounts held by the Bank. One account will hold funds for direct rebate to program participants, the other will hold funds which will be swept periodically into annuities purchased by the participants from an insurance company. You state that the records of the Bank disclose that the funds in all three escrow accounts are held by the institution on the behalf of *** and the program participants. You further warrant that the interests of *** and the program participants in the funds are ascertainable either from the records of the Bank or of ***.

In reliance on these representations, it is my opinion that, in the event of an insurance determination, if FDIC disclosure and recordkeeping requirements are met, the funds in all three escrow accounts would be insured up to $100,000 for each owner or beneficiary represented as funds held by an insured depository institution in a fiduciary capacity, separately from any other funds which *** or the program participants may hold in their own right with that institution. 12 C.F.R. § 330.10. Because the funds are held in the same right and capacity, however, funds which are held by any owner or beneficiary in more than one of the escrow accounts will be aggregated and insured to the statutory limit. See 12 C.F.R. § 330.3(a).

I hope that this letter is responsive to your inquiry. Please do not hesitate to contact me if you should have any questions on this or any other matter.

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