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4000 - Advisory Opinions


Applicability of 12 C.F.R. Part 344 to Brokerage Networking Program

FDIC-92-55

August 5, 1992

Pamela E.F. LeCren, Counsel

First let me apologize for the oversight on our part in not enclosing the attachments along with our original correspondence. Those attachments have been included herewith.

In so far as the applicability of Part 344 of the FDIC's regulations to the [brokerage networking] program, please be advised that, for the purposes of that regulation, any insured nonmember bank that participates in the program would be "effecting" securities transactions. As [X] keeps records regarding transactions, sends confirmations to customers, etc., as a practical matter the only outstanding obligation a participating bank may have to itself perform under the regulation would be to disclose to customers the remuneration it receives in connection with the transactions. Even that obligation may be discharged by [X] if the confirmation contains the relevant information. Should you have any further questions regarding Part 344, I suggest that you contact Mr. Gerald Gervino of this office on (202) 898-3723.

As to the other matters raised in your letter, we do not concur in the opinion given you by a state bank regulator on the meaning of section 24 of the Federal Deposit Insurance Act (12 U.S.C. 1831a). The definition of "activity" as used therein is not limited to the bank's own investments. Entering into a contract with [X] would be an "activity" within the meaning of section 24. Furthermore, since the bank is entering into the contract as principal, the arrangement would be subject to section 24 if a national bank could not enter into that type of contract.1

Lastly, the FDIC has yet to determine whether it will make any general determinations that certain categories of activities that require agency consent do not pose a significant risk to the fund or whether it will proceed strictly on an application basis. We hope to have a proposed regulation out for comment dealing with this area in the near future

1Please note that even if the Comptroller of the Currency would determine that some aspect of the [X] contract would bar national bank participation, it is possible that the FDIC could determine that the differences in your contract from a contract that would be permissible for a national bank are so immaterial that the FDIC would consider entering into that contract "permissible" for the purposes of section 24. In that regard, I draw your attention to the enclosed letter which deals with a related subject in the context of section 28 of the FDI Act. Go back to Text


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