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4000 - Advisory Opinions

Brokered Deposits: Employee Compensation May Not Be Adjusted After the Fact to Ensure That Compensation is Primarily Salary


November 3, 1992

Valerie J. Best, Counsel

This letter confirms your telephone conversation with Attorney Adrienne George, FDIC Legal Division, on October 30, 1992.

You ask about the definition of "employee" in the FDIC's brokered deposit regulation, in particular, that part of the definition which defines an "employee" of an insured depository institution as one "whose compensation is primarily in the form of a salary" 57 Fed. Reg. 23,942 (June 5, 1992) (to be codified at 12 C.F.R. § 337.6(a)(6)). You ask whether, under the circumstances you describe below, your client's employees will fit within the regulation's definition of an "employee":

An insured depository institution, which employs several persons on a full-time basis to generate deposits for the institution, is paid both a minimum base salary and a bonus. The bonus is based upon a certain schedule computed on the dollar amount of deposits generated by the employees and the employees' base salary. The compensation of each employee, subject to this employment, is reviewed on a quarterly basis. It is a possibility, however, that an employee could receive more of a bonus than fixed salary during any quarter. But that situation would be remedied by an adjustment at quarter's end to assure salary constitutes the majority of the employees' compensation. These employees are also entitled to all of the benefits offered all other employees of the insured depository institution.

To give you a definitive answer, we would have to know more about the exact mechanics of how the amounts of salary and bonus of an employee are adjusted after the fact to ensure that more than 50% of that employee's compensation consists of salary. However, without knowing more, we can say that any attempt to evade the law by making such an "adjustment" would not be acceptable to the FDIC.

We hope that this information will prove useful to you. If we can be of any further help, write to the above address or call me at (202) 898-3812 or Adrienne George at (202) 898-3859.

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