FDIC Law, Regulations, Related Acts
4000 - Advisory Opinions
Opinion regarding whether "listing services" would be considered deposit brokers
November 13, 2002
Christopher L. Hencke
This responds to your inquiry concerning the FDIC's criteria in determining when a "listing service" is a "deposit broker." You question the FDIC's position that a depository institution's payment of a flat fee to a "listing service" for the opportunity to "post" the institution's CD rates on a website operated by the "listing service" qualifies the service as a "deposit broker." Also, you specifically ask about a company called X. As explained below, we agree with you that the FDIC's criteria should recognize that the payment of a flat fee by itself will not qualify a "listing service" as a "deposit broker." Nonetheless, we conclude that X is a "deposit broker" because the company is "engaged in the business of placing deposits, or facilitating the placement of deposits, of third parties with insured depository institutions. . . ." 12 U.S.C. § 1831f(g)(1)(A); 12 C.F.R. § 337.6(a)(5)(i)(A).
A "listing service" is a company that compiles information
about the interest rates offered on certificates of deposit
("CDs") by insured depository institutions. In a number of
advisory opinions, the FDIC staff has taken the position that a
"listing service" is not a "deposit broker" when the
service does nothing more than offer such information to the public.
The FDIC staff has explained this position as follows:
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.
Advisory Opinion 9254 (August 3, 1992). In accordance with this position, the FDIC has developed criteria for determining when a "listing service" is a mere provider of information as opposed to a "facilitator" in the placement of deposits. Under these criteria, a "listing service" is treated as a "deposit broker" if a depository institution must "pay a fee, directly or indirectly, to have its rates listed by the listing service." See id.
In this case, X operates a website at which banks "post" interest rates on CDs. In order to "post" its rates, a depository institution must pay a "subscription" fee. (According to the website, "[o]ne low subscription rate covers everything.") The charging of this fee means that X--under the FDIC's existing criteria--is a "deposit broker."
You have questioned the FDIC's criteria. In your letter, you presented the following argument: "[W]e fail to see the distinction between paying a flat fee to post our rates on the service's website and paying a fee to a newspaper to advertise our rates. Is it the FDIC's position that, under the criteria you cited, a newspaper would also qualify as a deposit broker and therefore any deposits acquired through newspaper advertisements be classified as brokered deposits?"
In fact, the FDIC does not take the position that newspapers and other media companies (such as radio and television stations) are "deposit brokers." Rather, the FDIC views such companies as mere providers of information provided that two conditions are satisfied. First, the company must not provide assistance to the depositor in placing the deposit or communicating with the depository institution. The company must provide information to the depositor (or would-be depositor) and nothing more. Second, in exchange for providing this information to depositors, the company must charge a flat fee (or no fee) against the depository institution. The fee must not be based upon the number or volume of deposits attracted by the depository institution through the "posted" information or advertisement. Assuming the satisfaction of these conditions, the amount of deposits attracted by the depository institution through the newspaper or other media should be controlled adequately by the interest rate restrictions applicable to adequately capitalized and undercapitalized insured depository institutions. See 12 U.S.C. § 1831f; 12 C.F.R. § 337.6.
No apparent reason exists to treat the Internet differently than other forms of media (such as newspapers and television and radio). Accordingly, we agree with you that a paid advertisement in a newspaper is equivalent to a paid "posting" on an Internet website. Whether the Internet company should be classified as a "deposit broker" depends upon (1) whether the company provides assistance to the depositor in placing the deposit or communicating with the depository institution; or (2) whether the company charges a fee based upon the number or volume of deposits placed at the depository institution.
In this case, X does not merely provide information about depository institutions (such as the interest rate offered by the depository institution and the address or telephone number of the depository institution). Rather, X participates in the placement of deposits (or "facilitates" the placement of deposits) by sending purchase orders and "trade confirmations." Therefore, X is a "deposit broker."1
The analysis above means that the FDIC must revise its criteria for determining when a "listing service" is a "deposit broker." As explained above, we agree with you that the charging of a flat "posting" fee--by itself--should not result in the classification of a "listing service" as a "deposit broker." On the other hand, a "listing service" will be treated as a "deposit broker" if the service participates in the placement of deposits. These conclusions are incorporated in the new criteria presented below. Also, we have attempted to simplify our criteria by eliminating several redundant requirements.
Under the new criteria, a "listing service" is not a "deposit broker" if the following requirements are satisfied:
1. The person or entity providing the listing service is compensated solely by means of subscription fees (i.e., the fees paid by subscribers as payment for their opportunity to see the rates gathered by the listing service) and/or listing fees (i.e., the fees paid by depository institutions as payment for their opportunity to list or "post" their rates). The listing service does not require a depository institution to pay for other services offered by the listing service or its affiliates as a condition precedent to being listed.
2. The fees paid by depository institutions are flat fees: they are not calculated on the basis of the number or dollar amount of deposits accepted by the depository institution as a result of the listing or "posting" of the depository institution's rates.
3. In exchange for these fees, the listing service performs no service except the gathering and transmission of information concerning the availability of deposits. This information may include an insured depository institution's name, address (including e-mail address), telephone number and interest rates. Except for providing this information, the listing service does not serve as a liaison between depositors and depository institutions. For example, the listing service does not pass information about a depositor (or potential depositor) to a depository institution.
4. The listing service is not involved in placing deposits
or confirming the placement of deposits. Any funds to be invested in
deposit accounts are remitted directly by the depositor to the insured
depository institution and not, directly or indirectly, by or through
the listing service.
Thank you for your inquiry. Please contact us if you have any questions.
1I am unsure whether the possibility exists of entering into an arrangement with X whereby this company will not send purchase orders or "trade confirmations" or otherwise participate in the placement of deposits. As explained in this letter, the FDIC distinguishes a mere provider of information from a "facilitator" in the placement of deposits. A "facilitator" is a "deposit broker." Go back to Text