Securities Activities of Banks Exceptions and Exemptions for Banks from the Definition of "Broker"
FIL-89-2008 September 10, 2008
The FDIC is reminding banks that on the first day of an institution's fiscal year beginning after September 30, 2008, the institution must comply with the requirements of Regulation R, "Definitions of Terms and Exemptions Relating to the 'Broker' Exceptions for Banks," and the Gramm-Leach-Bliley Act of 1999 (GLBA). For more information about Regulation R, see FIL-92-2007, dated October 25, 2007, at http://www.fdic.gov/news/news/financial/2007/fil07092.html.
Banks should identify the type and scope of securities transactions (including referrals) they conduct for customers and ensure that such activities qualify for one or more of the GLBA exceptions or the Regulation R exemptions, as appropriate. Once identified, banks should review securities activities to ensure they comply with applicable limitations regarding types and amounts of fees and revenues that an institution can receive; advertising related to securities activities; compensation arrangements for securities transactions, including referral fees; and the manner in which securities transactions must be executed.
Banks that effect a small number of securities transactions per year for customers may qualify for the GLBA "de minimis" exception, which permits a bank to effect a combined total of up to 500 securities transactions per year, in either a riskless principal transaction or in an agency capacity.