The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
F ed era l R e se r v e B ank o f New Y ork
New Y ork , N.Y. 10045-0001
AREA CODE 212-720-5000
September 20, 1995
To:
f\T-i0603&
The Chief Executive Officer of Each State Member Bank,
Bank Holding Company, and U.S. Branch or Agency of a
Foreign Bank
Subject:
Interpretations of Interagency Statement on
Retail Sales of Nondeposit Investment
Products
The Federal Reserve, the Federal Deposit Insurance
Corporation, the Office of the Comptroller of the Currency and
the Office of Thrift Supervision ("agencies") have responded to a
request from the American Bankers Association ("ABA") asking for
clarification on the applicability of the February 1994
Interagency Statement on Retail Sales of Nondeposit Investment
Products (SR 94-11, dated February 17, 1994) to a depository
institution's government and municipal securities dealer
departments, trust department, affiliated trust company or
affiliated stand-alone broker dealer. In most instances, it was
concluded that the Interagency Statement's disclosure guidelines
would not apply in these cases. The specifics of the
interpretation are contained in the enclosed letter to the ABA.
In connection with this response, the agencies have
issued a joint statement authorizing the use of alternative
abbreviated minimum disclosures for use in advertisements
pertaining to retail sales of nondeposit investment products by
banking and thrift organizations.
It was also determined that
the minimum disclosures need not be made at all in certain types
of advertisements. The joint statement is also enclosed for your
use.
If you have any questions about this matter, please
call Elizabeth Irwin-McCaughey, Assistant Vice President,
Compliance Examinations Department, at (212) 720-6820.
Very truly yours,
V a ~7 ( V '
William L. Rutledge
Senior Vice President
Enclosures
BOARD O F GO VERN O RS O F TH E FED ER A L R E S E R V E SY ST E M
FED ER A L D E P O SIT INSURANCE C O RPO RA TIO N
O F F IC E O F TH E C O M P T R O L L E R O F T H E C U R REN C Y
O F F IC E O F T H R IF T SU P E R V ISIO N
JO IN T IN T ER PR ET A T IO N S O F TH E IN TERAGEN CY STA TEM EN T
ON R E T A IL SA LES O F N O N D EPO SIT IN V ESTM EN T P R O D U C TS
The O ffice of the Com ptroller of the Currency (O C C ), the O ffice of Thrift Supervision
(O T S), the Federal Reserve Board (F R B ) and the Federal D eposit Insurance
Corporation (F D IC ) (banking agencies) have collectively responded to an Am erican
Bankers Association (A B A ) letter regarding the application o f the Interagency Statem ent
on R etail Sales of Nondeposit Investment Products (the Interagency Statem ent) issued
February 15, 1994. A copy of the banking agencies’ response is attached.
The banking agencies are also taking this opportunity to communicate our position
regarding abbreviated disclosures and to clarify certain instances where we believe that it
is not necessary to provide the disclosures outlined in the Interagency Statem ent. The
use of abbreviated disclosure under the circumstances described offers an optional
alternative to the longer disclosures prescribed by the Interagency Statem ent.
R E SP O N SE TO T H E ABA
As more fully explained in the attached letter, the banking agencies’ response to the
A B A addresses the following:
•
R etail sales include (but are not limited to) sales to individuals by depository
institution personnel or third party personnel conducted in or adjacent to a
depository institution’s lobby area.
•
Sales of government and municipal securities made in a depository institution’s
dealer department located away from the lobby area are not subject to the
Interagency Statem ent.
•
The Interagency Statem ent generally does not apply to fiduciary accounts
administered by a depository institution. However, for fiduciary accounts where
the customer directs investments, such as self-directed individual retirem ent
accounts, the disclosures prescribed by the Interagency Statem ent should be
provided.
2
•
The Interagency Statem ent applies to affiliated broker dealers when the sales
occur on the premises o f the depository institution. The Statem ent also applies to
sales activities of an affiliated broker dealer resulting from a referral of retail
customers by the depository institution.
D ISC L O SU R E M A TTER S
The banking agencies would like to address several disclosure matters with respect to the
Interagency Statem ent. In particular, the agencies agree there are limited situations in
which the disclosure guidelines need not apply or where a shorter logo form at may be
used in lieu of the longer written disclosures called for by the Interagency Statem ent.
The Interagency Statem ent disclosures do not need to be provided in the following
situations:
•
radio broadcasts of 30 seconds or less;
•
electronic signs1, and
•
signs, such as banners and posters, when used only as location indicators.
Additionally, third party vendors not affiliated with the depository institution need not
make the Interagency Statem ent disclosures on nondeposit investment product
confirmations and in account statements that may incidentally, with a valid business
purpose, contain the name of the depository institution.
The banking agencies have been asked whether shorter, logo form at disclosures may be
used in visual media, such as television broadcasts, A TM screens, billboards, signs,
posters, and in written advertisements and promotional materials, such as brochures.
The text of an acceptable logo format disclosure would include the following
statements:
•
•
•
Not F D IC Insured
No Bank G uarantee
May Lose Value
lMElectronic signs" may include billboard-type signs that are electronic, time and
temperature signs, and ticker tape signs. Electronic signs would not include such media
as television, on line services, or A T M ’s.
3
The logo format disclosures would be boxed, set in bold face type, and displayed in a
conspicuous manner. The full disclosures prescribed by the Interagency Statem ent
should continue to be provided in written acknowledgement forms that are signed by
customers. An example of an acceptable logo disclosure is:
NOT
FDIC IN S U R E D
M ay lo se valu e
N o b an k gu aran tee
Questions on the Interagency Statem ent may be submitted to:
OCC--
Office of the Chief National Bank Examiner, Capital Markets Group,
(202) 874-5070.
O TS--
Office of Supervision Policy (202) 906-5740; Business Transactions Division,
(202) 906-7289
FRB-
Division of Banking Supervision and Regulation, Securities Regulation
Section, (202)452-2781; Legal Division, (202) 452-2246.
F D IC -
Office of Policy, Division of Supervision, (202) 898-6759; Regulation and
Legislation Section, Legal Division (202) 898-3796.
Board of Governors of the Federal Reserve System
Federal Deposit Insurance Corporation
Office of the Comptroller of the Currency
Office of Thrift Supervision
Ms. Sarah A. M iller
Senior Government Relations Counsel
Trust and Securities
American Bankers Association
1120 Connecticut Avenue, NW
Washington, DC 20036
September 12, 1995
Dear Ms. Miller:
This is in response to your letters to the staffs of the Board of Governors of
the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of
the Comptroller of the Currency (banking agencies) seeking clarification o f the application of
the February 15, 1994, Interagency Statement on Retail Sales o f Nondeposit Investment
Products. To promote uniformity in the supervision of these activities, the agencies along
with the Office o f Thrift Supervision (banking agencies) are providing this joint response.
The Interagency Statement was issued to address the expansion by depository
institutions of activities involving the recommendation and sale to retail customers of
nondeposit investment products, including mutual funds and annuities as well as stocks and
other investment products. The Statement focuses on issues that pertain specifically to the
retail sale of investment products to customers on depository institution premises, and seeks
to avoid customer confusion of such products with those that are FDIC insured primarily
through disclosure and separation o f sales of investment products from other banking
activities. In addition, the Statement provides guidance to depository institutions with respect
to sales practices that are consistent with those applicable to registered securities brokers and
dealers.
You suggest that the application o f the Statement be limited to "bank retail
sales of mutual funds and annuities." I f this approach is not accepted by the banking
agencies, you suggest that the Statement should not apply to sales o f nondeposit investment
products by a depository institution’s government and municipal securities dealer
departments, to a trust department or to an affiliated trust company, to custodial accounts, or
to a bank-affiliated stand alone brokerage operation.
Limitation to Sales of M utual Funds and Annuities
Although some depository institutions limit their sales of nondeposit investment
products to mutual funds and annuities, others advertise and offer a fuller range of securities
brokerage or financial advisory services to retail customers. The banking agencies are
concerned that conducting these activities on bank premises also could engender customer
2
confusion and raise concerns about safe and sound banking practices. Thus, it would not be
appropriate to limit the application of the Statement to mutual funds and annuities as you
requested.
Sales From Lobby Area Presumed Retail
The banking agencies agree with your assessment that retail sales include (but
are not limited to) sales to individuals by depository institution personnel or third party
personnel conducted in or adjacent to, a depository institution’s lobby area. Sales activities
occurring in another location of a depository institution may also be retail sales activities
covered by the Interagency Statement depending on the facts and circumstances.
Government or M unicipal Securities Dealers or Desks
Sales of government and municipal securities made from a depository
institution’s dealer department away from the lobby area would not be subject to the
Interagency Statement. Such departments already are regulated by the banking agencies and
are subject to the statutory requirements for registration of government and municipal
securities brokers and dealers. Further, such brokers and dealers are subject to sales practice
and other regulations of the Department o f the Treasury or the Securities and Exchange
Commission, and of designated securities self regulatory organizations.
Fiduciary Accounts, Affiliated Trust Companies and Custodian Accounts
In general, the banking agencies agree with your view that the Interagency
Statement does not apply to fiduciary accounts administered by a depository institution.
However, the disclosures prescribed by the Interagency Statement should be provided to noninstitutional customers who direct investments for their fiduciary accounts, such as self
directed individual retirement accounts. Nevertheless, disclosures need not be made to
customers acting as professional money managers. Fiduciary accounts administered by an
affiliated trust company on the depository institution’s premises would be treated the same
way as the fiduciary accounts of the institution.
With respect to custodian accounts maintained by a depository institution, the
Interagency Statement does not apply to the activities described in your letter, e .g ., collecting
interest and dividend payments for securities held in the accounts and handling the delivery
or collection of securities or funds in connection with a transaction.
Affiliated Stand Alone Broker Dealers
Finally, you ask how the Interagency Statement applies to bank affiliated stand
alone broker dealers. The Statement applies specifically to sales o f nondeposit investment
products on the premises of a depository institution, e .g ., whenever sales occur in the lobby
area. The Statement also applies to sales activities o f an affiliated broker dealer resulting
from a referral o f retail customers by the depository institution to the broker dealer.
3
We appreciate the views o f the ABA in helping to clarify the scope o f the
Interagency Statement. We hope that this letter will provide additional guidance to the
industry in complying with the Statement in a safe and sound manner consistent with
principles o f customer protection.
Sincerely,
lames I. Gamer, Deputy Associate Director
D^yision o f Banking Supervision & Regulation
)r: Board o f Governors for the
Federal Reserve System
David P. Apgar
Senior Policy Advisor
For: The Office o f the Comptroller
o f the Currency
Dated:
September 12, 1995
Nicholas J. Ketcha, J r ., Acting Director
Division o f Supervision
For: Federal Deposit Insurance
Corporation
Viehn F. Downey
Director of Supervision
For: Office of Thrift Supervision
@FedFRASER