TO THE OFFICER IN CHARGE OF SUPERVISION AT EACH FEDERAL RESERVE BANK
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 attached 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
attached for your use.
Given the broad applicability of the agencies' interpretations, it is requested that
the two documents be distributed to banking organizations and their nonbank affiliates
that conduct sales of nondeposit investment products on depository institution
premises. A suggested transmittal letter is attached for your use.
Should you or your staff have any questions concerning this matter, please call
Howard Amer, Assistant Director (202-452-2958) or Angela Desmond, Senior Counsel
(202-452-3497).
Deputy Associate Director
Cross References:
SR 94-34 (May 26, 1994) - Examination Procedures
Examination Procedures:
Suggested Transmittal Letter to Those Bank Holding Companies, State Member
Banks, and State Licensed U.S. Branches and Agencies of Foreign Banks that
Sell Retail Nondeposit Investment Products on Depository Institution Premises
Dear____________________:
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 attached 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
attached for your use.
If you have any questions about this letter, please call___________
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
FEDERAL DEPOSIT INSURANCE CORPORATION OFFICE OF THE COMPTROLLER OF THE CURRENCY OFFICE OF THRIFT SUPERVISION
ON RETAIL SALES OF NONDEPOSIT INVESTMENT PRODUCTS
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 Statement. The use of
abbreviated disclosure under the circumstances described offers an optional alternative to the
longer disclosures prescribed by the Interagency Statement.
RESPONSE TO THE ABA
As more fully explained in the attached letter, the banking agencies' response to the ABA
addresses the following:
DISCLOSURE MATTERS
The banking agencies would like to address several disclosure matters with respect to the
Interagency Statement. In particular, the agencies agree there are limited situations in which
the disclosure guidelines need not apply or where a shorter logo format may be used in lieu
of the longer written disclosures called for by the Interagency Statement.
The Interagency Statement disclosures do not need to be provided in the following situations:
Additionally, third party vendors not affiliated with the depository institution need not make
the Interagency Statement 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 format disclosures may be used
in visual media, such as television broadcasts, ATM 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:
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 Statement should
continue to be provided in written acknowledgement forms that are signed by customers. An
example of an acceptable logo disclosure is:
Dated: September 12, 1995
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. Miller Senior Government Relations Counsel Trust and Securities American Bankers Association 1120 Connecticut Avenue, NW Washington, DC 20036
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 of the application of the
February 15, 1994, Interagency Statement on Retail Sales of Nondeposit Investment Products.
To promote uniformity in the supervision of these activities, the agencies along with the
Office of 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 of 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 of the Statement be limited to "bank retail
sales of mutual funds and annuities." If this approach is not accepted by the banking
agencies, you suggest that the Statement should not apply to sales of 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 Mutual 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
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 Municipal 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 of 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 non-institutional 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 of nondeposit investment
We appreciate the views of the ABA in helping to clarify the scope of 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 of customer protection.
Dated: September 12, 1995
Footnotes 1. "Electronic 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 ATM's. Return to text |
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