FDIC Law, Regulations, Related Acts
4000 - Advisory Opinions
Circumstances Under Which Well-Capitalized Bank Need Not Notify FDIC of Its Employees' Status as Deposit Brokers
July 27, 1993
Valerie J. Best, Counsel
I am writing in response to your letter addressed to the FDIC Office of Compliance and Special Activities concerning the deposit broker notification requirements. We had previously advised *** (the "Bank") that the term "deposit broker" is broadly defined by statute to include certain depository-institution employees. A copy of our letter dated August 6, 1992 is attached. In compliance with the requirements described in the August 6th letter, you have submitted the names of several employees of the Bank that would be considered "deposit brokers." They are considered to be deposit brokers because they are compensated by commission rather than by salary.1 It is my understanding that these employees solicit and/or accept funds for deposit with *** Bank only.
In your letter you state that your Bank is "well capitalized," as that term is defined by the brokered deposit regulations. We have taken the position that an institution that is well capitalized and that is deemed to be a "deposit broker" solely because it offers high-rate deposits to its customers, is not required to notify the FDIC of its status as a deposit broker. See the attached letter dated March 8, 1993 for a further discussion of this issue.
For the same reasons outlined in the March 8th letter, it is my view that a well-capitalized institution need not notify the FDIC of its employees' status as deposit brokers if (1) those employees are deemed to be "deposit brokers" solely because they are compensated primarily by commission rather than in the form of salary, and (2) the employees place funds with the employing depository institution only--they do not solicit and/or accept funds for deposit with any other entity. Consequently, so long as the Bank continues to be "well capitalized," as that term is defined in the brokered deposit regulations (12 C.F.R. § 337.6), the Bank need not notify the FDIC of the employees' status as deposit brokers.2
If the Bank were to become "adequately capitalized," the Bank would have to obtain a waiver from the FDIC before it could continue to use the commissioned employees to obtain deposits. If a waiver were granted by the FDIC, the Bank would also have to notify the FDIC Office of Compliance and Special Activities of the employees' status as deposit brokers.3 If the Bank becomes "undercapitalized," it may not use commissioned employees to obtain deposits.
Please call me at (202) 898-3812 if you have any questions.
1It is my understanding that, in all other respects, these employees meet the definition of "employee" used in the brokered deposit statute. More specifically, (1) the employees are employed exclusively by the Bank; (2) the employees do not share their compensation with a deposit broker; and (3) the employees office space or place of business is used exclusively for the benefit of the Bank. 12 U.S.C. 1831f(g)(3). Go back to Text
2The fact that the Bank is not required to notify the FDIC of the commissioned-employees' status as deposit brokers, does not exempt the Bank from reporting deposits generated by those employees as brokered deposits in the Bank's Reports of Condition and Income ("Call Reports"). The employees are "deposit brokers" as that term is defined by the statute. It is important that the Bank refer to the instructions and the glossary that accompany the Call Reports in order to determine what types of deposits are treated as deposits obtained from a "deposit broker" for Call Report purposes. For the most part, the Call Report definition of "deposit broker" tracks the definitions used in the statute and regulation. Go back to Text
3It is not necessary to submit the names of the individual employees who are deemed to be deposit brokers. As noted in our August 6th letter, a company may file a single notice on behalf of all of its employees and/or agents. By this we mean that it is not necessary to list individual employees by name in the notification. A description of the activities that results in those employees becoming "deposit brokers" is generally sufficient. The FDIC reserves the right to require individual information at any time. Go back to Text