4000 - Advisory Opinions
Criteria for Determining Whether a Listing Service Is a "Deposit Broker" for Purposes of 12 U.S.C. § 1831f and 12 C.F.R. § 337.6
July 24, 1992
Valerie J. Best, Counsel
I am writing in response to your recent inquiry concerning deposit brokers. In your letter you ask whether a listing service is a "deposit broker" as that term is defined in the Federal Deposit Insurance ("FDI") Act.1
Deposit brokers are prohibited from soliciting or placing any deposit with an insured depository institution unless the deposit broker has provided the FDIC with written notice that it is a deposit broker. 12 U.S.C. 1831f-1. 57 Fed. Reg. 23933, 23944 (June 5, 1992) (to be codified at 12 C.F.R. 337.6(h)). Further undercapitalized insured depository institutions are prohibited from accepting funds obtained by or through any deposit broker. Adequately capitalized insured depository institutions are prohibited from accepting funds obtained by or through any deposit broker unless they first obtain a waiver from the FDIC. Well capitalized insured depository institutions, however, may accept such funds without restriction. 12 U.S.C. 1831f. 57 Fed. Reg. 23933 (June 5, 1992) (to be codified at 12 C.F.R. 337.6).
We previously addressed this issue in advisory opinion FDIC--90--24 (copy enclosed). As noted therein, the key test is whether a listing service may be said to be "engaged" in the business of placing deposits, or facilitating the placement of deposits, of third parties with insured depository institutions or the business of placing deposits with insured depository institutions for the purpose of selling interests in those deposits to third parties." 12 U.S.C. 1831f(1)(A) (emphasis added).
Where the only function of a deposit listing service is to provide information on the availability and terms of accounts, we believe that the listing service is not facilitating the placement of deposits. Rather, it facilitates the decision of the would-be buyer whether (and from whom) to buy a certificate of deposit; it is not facilitating the placement of deposits per se. We also believe that it would not be feasible to identify deposits placed as a result of referring to a listing service when the listing service does not actually participate in the placement process.
Based upon the listing services we have examined to date, we have identified the following characteristics that we believe serve to distinguish a service that operates solely as an information-provider from a service that facilitates the placement of deposits. A deposit listing service will not be considered a deposit broker if it meets all of the criteria listed below. On the other hand, if a deposit listing service fails to meet any one of the following criteria, it will be considered a deposit broker.
1. The person or entity providing the listing service is compensated only by means of subscription fees (i.e., the fees paid by its subscribers as payment for their opportunity to see the rates which the listing service has gathered), and such fees are not calculated on the basis of the number or dollar amount of deposits placed as the result of information provided by the listing service;
2. The depository institution does not pay a fee, directly or indirectly, to have its rates listed by the listing service;
3. The depository institution is not required to subscribe to the service or to purchase or participate in any other services or businesses offered by the listing service or any of its affiliates as a condition precedent to being listed; further, the listing service does not guarantee that subscribers will have their rates published.2
4. The depository institution does not pay a commission, directly or indirectly, for deposits placed as the result of information provided by the listing service;3
5. The service provided is limited to the gathering and transmission of information concerning the availability of deposits;4
6. Any funds to be invested in deposit accounts are remitted directly by the depositors to the insured depository institution and not, directly or indirectly, through the person or entity providing the listing service; and
7. The listing service is not involved in placing the deposits. If, for example, customers seeking to place deposits gave the listing service their names and other pertinent information and the listing service passed that information along to the given depository institution, that would be viewed as deposit brokering (and this would be true even if the funds involved were sent directly from the CD-buying customer to the institution, without any other involvement by the listing service).
It should be remembered that deposits coming directly to those institutions which are listed in a deposit listing service would be considered brokered deposits if the rate of interest being offered on them is "significantly higher"--that is, more than 75 basis points higher--than the rate paid in the relevant market area.5
Assuming that the representations made in your letter are accurate, and further assuming that your letter fully describes the activities of your company, then we would agree that your company is not a deposit broker. Should the facts change in the future or some fact be present of which we are not currently aware, the substance of this opinion may change.
Please call me at (202) 898-3812 or write to me at the above address if you have additional questions. I sincerely apologize for the delay in our response.
1The term "deposit broker" is broadly defined in section
29 of the FDI Act to mean:
2In some instances, a listing service is affiliated with a company that is a deposit broker. In such a situation, the activities of the listing service and of the affiliate will be examined closely to make sure that there is no link or quid pro quo among the listing service, the affiliate, and the insured depository institution listed. Go back to Text
3In some instances, depository institutions pay a commission to a listing service and the service deducts the commission from the subscription fee paid by the subscriber. In those instances, the listing service is considered to be receiving a commission from the depository institution and, consequently, is regarded as a deposit broker. Go back to Text
4The listing service does not, for example, negotiate rates on behalf of subscribers or confirm the execution of trades. Information that may be conveyed includes the depository institution's name, location, condition; interest rates and terms; wiring instructions. Go back to Text
512 U.S.C. 1831f(e), (g)(3), (h). 57 Fed. Reg. 23933, 23942--43 (June 5, 1992) (to be codified at 12 C.F.R. 337.6(a)(5)(iii), (b)). Go back to Text