INTERAGENCY STATEMENT ON RETAIL SALES OF NONDEPOSIT INVESTMENT PRODUCTS PDF

The “Interagency Statement on Retail Sales of Nondeposit Investment Products” ( dated February 15, ), formerly contained in section the OCC specifically incorporates the “Interagency Statement on Retail Sales of Nondeposit Investment Products” issued by the Federal. Sale of Uninsured Debt Obligations and Securities Issued by Bank Holding Interagency Statement on Retail Sales of Nondeposit Investment Products.

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Part of the risk-monitoring program should include a requirement that affiliated and unaffiliated third parties provide risk-monitoring reports that allow a bank to properly oversee the RNDIP sales program, including the nondeposiy and suitability of the RNDIPs sold by an affiliated or third-party broker-dealer. Although it was adopted almost 21 years ago, the Booklet demonstrates the Interagency Statement’s durability and continued relevance for bank RNDIP activities.

Nondeposit Investment Discussions, Answers, and Free Resources for Banking Professionals

The Booklet contains extensive discussion about permissible compensation arrangements and referral fees. Interested in the next Webinar on this Topic? The compliance policies should address the following: On November 30,the Southern District of New York issued an opinion reaffirming the long-standing rule that traders cannot be found liable invesment illegal market manipulation when their nonddposit was motivated by Government Issues Proposed Regulations.

Mine Financing Ingeragency – Video. The OCC emphasizes compliance with the Interagency Statement, Regulation R, and the antifraud provisions of federal securities laws section 10 of the Securities Exchange Act and Rule 10b-5 and a bank’s obligation to take reasonable steps to ensure that any third-party broker-dealer complies with applicable securities laws and Financial Industry Regulatory Authority FINRA rules.

Banks are also expected to identify cross-business-line interdependencies or issues that could present increased risk. RNDIP is defined as “any product with an investment component that, in most instances, is not an FDIC-insured deposit” and includes mutual funds, exchange-traded funds, annuities, equities, and fixed-income securities Booklet, p.

To the extent the bank has clients that may be vulnerable to a broker’s hard sell, the bank should have procedures in place to ensure that these customers are not sold inappropriate investments. In addition, banks should adopt comprehensive compliance policies and procedures that address applicable regulations and guidance, including the Interagency Statement.

More clarity regarding specific OCC expectations and methods for implementing the guidance in the Booklet will be revealed through upcoming examination cycles. The OCC expects the compliance program to include periodic testing of customer accounts and transactions to detect, prevent, and correct abusive practices.

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Real Invetment and Construction. More from this Firm. Overall, the Booklet will be a useful reference tool for banks, broker-dealers, insurance agents, and registered investment advisers that engage in bank RNDIP sales programs as they modify and adjust their risk management of the RNDIP sales program.

The Booklet acknowledges that FINRA Rule regarding suitability of recommended products does not expressly apply to sales or recommendations made directly by a bank. Both banks that directly engage in the sale of retail nondeposit investment products RNDIPs and bank-affiliated or unaffiliated broker-dealers, insurance agents, and registered investment advisers that provide services and products to certain customers on behalf of banks will need to become familiar with the supervisory expectations set out in the Booklet and incorporate, as needed, recommended business and information-sharing practices into their operations.

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The OCC emphasizes the importance of due diligence of third-party providers of RNDIP sales services and that any third parties should provide, on a quarterly basis at a minimum, information regarding the third party’s sales practices; surveillance results; exception tracking; product and service offerings; customer complaints, litigation, and settlements; hiring practices; sales force stability; regulatory findings; and compliance issues.

As mentioned above, the Booklet reflects the OCC’s heightened expectations regarding the adequacy of banks’ compliance and risk-management programs and the need for banks to develop detailed written compliance plans tailored to the complexity of their RNDIP sales activities. Notable Aspects of the Booklet There profucts several aspects of the Booklet that are particularly noteworthy or warrant special mention.

Board of Governors of the Federal Reserve System

The OCC states that it expects every bank to “conduct a comprehensive analysis of its securities activities to ensure compliance with GLBA and Regulation R, and to maintain records to demonstrate compliance.

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter. In accordance with the Interagency Statement, boards should adopt written statements that address the risks, policies, and procedures and risk-management associated with an RNDIP sales program.

In other words, banks cannot abdicate their oversight and compliance responsibilities to the affiliated or third-party broker-dealers and must conduct their own independent analysis of RNDIPs, particularly the suitability of the products for the banks’ customers.

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Food, Drugs, Healthcare, Life Sciences. In addition, banks should require third parties to have sufficient business continuity planning in the event of interruption, as well as the operational capacity and customer service levels that can adequately service customer needs, particularly in times of market stress. The Booklet refers to the Third-Party Relationship Bulletin numerous times and contains a detailed description of third-party risk-management expectations with intteragency to RNDIP sales, including expectations regarding risk assessment by a bank’s board and management, the due diligence process, and the written nnondeposit with and reporting obligations of the third-party broker-dealer.

Worldwide Europe European Union U. At approximately pages, the Booklet is almost three times the length of the version.

Click here to register your Interest. Third-party risk management Qualification and training requirements for bank personnel and supervisors, as well as third-party sales representatives who will recommend or sell RNDIPs Compensation arrangements that comply with applicable regulations GLBA, Regulation R, 12 C. The Interagency Statement is still alive and well: To measure risk, banks are expected to use measurement systems and models appropriate for the nature and complexity of the RNDIP sales program and should periodically test the measurement systems.

Reputation risk may be increased if the RNDIP program actively associates a bank’s name with the offered products and services, including the offering of bank-branded products.

As with other recent OCC guidance, active and meaningful oversight and participation of a bank’s board and senior management is expected and required. Compensation arrangements and referral fees: The Booklet emphasizes the need for banks to retain qualified counsel to help assess and manage the risk by ensuring compliance with applicable regulations. As part of its operational risk management, banks should have internal management information systems that ensure timely transaction confirmations and customer statements and billing and should ensure that any modeling used in an RNDIP sales program is properly designed and managed.

The Booklet replaces the previous booklet of the same name that was issued in February Events from this Firm. The OCC expects each bank to “identify, measure, monitor, and control risk by implementing an effective risk management system appropriate for its size and the complexity of its operations.

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