26135Federal Register / Vol. 61, No. 102 / Friday, May 24, 1996 / Proposed Rules
delivered to the above address no later than
that time.
I Wish to Cancel
lllllllllllllllllllll
Consumer’s Signature
lllllllllllllllllllll
Date
Supplement I—[Amended]
11. In Supplement I to Part 226, under
Section 226.4—Finance Charge, under
4(a) Definition, paragraph 3. ii. would
be removed.
12. In Supplement I to Part 226, under
Section 226.17—General Disclosure
Requirements, under 17(c) Basis of
disclosures and use of estimates,
Paragraph 17(c)(2) would be
redesignated as Paragraph 17(c)(2)(i):
Supplement I—Official Staff
Interpretations
* * * * *
Section 226.17—General Disclosure
Requirements
* * * * *
17(c) Basis of Disclosures and Use of
Estimates
* * * * *
Paragraph 17(c)(2)fl(i).fi
* * * * *
13. In Supplement I to Part 226, under
Section 226.18—Content of Disclosures,
under 18(d) Finance charge, paragraph
2 would be removed.
14. In Supplement I to Part 226, under
Section 226.23—Right of Rescission,
under 23(b) Notice of right to rescind,
the first sentence of paragraph 3 would
be revised to read as follows:
* * * * *
Section 226.23—right of rescission
* * * * *
23(b) Notice of right to rescind.
* * * * *
3. Content. The notice must include
all of the information outlined in
Section 226.23(b)(1)fl(i) through (v)fi
øthrough 5¿. * * *
* * * * *
By order of the Board of Governors of the
Federal Reserve System, May 15, 1996.
William W. Wiles,
Secretary of the Board
[FR Doc. 96–12685 Filed 5–23–96; 8:45 am]
BILLING CODE 6210–01–P
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 344
RIN 3064–AB74
Recordkeeping and Confirmation
Requirements for Securities
Transactions
AGENCY: Federal Deposit Insurance
Corporation.
ACTION: Advance notice of proposed
rulemaking.
SUMMARY: The Federal Deposit
Insurance Corporation (FDIC) is
considering whether and how to amend
its regulations governing recordkeeping
and confirmation requirements for
securities transactions by state
nonmember banks. The agency’s present
regulation was adopted in 1979 and has
remained essentially unchanged since
that time. The FDIC is undertaking a
review of this regulation with the goal
of modernizing its requirements to,
among other things, reflect the
supervisory role played by other Federal
agencies charged with supervision of
securities transactions. The agency is
soliciting comment on a number of
issues that have been identified. The
responses will be used to aid the FDIC
in developing a proposed amendment
for public comment.
DATES: Comments must be received by
June 24, 1996.
ADDRESSES: Comments should be
directed to Jerry L. Langley, Executive
Secretary, Attention: Room F–402,
Federal Deposit Insurance Corporation,
550 17th Street, NW, Washington, DC
20429. Comments may be delivered to
room F–402, 1776 F Street, NW,
Washington, DC 20429, on business
days between 8:30 am and 5:00 pm or
sent by facsimile transmission to FAX
number 202/898–3838. Internet:
Comments@FDIC.gov. Comments will
be available for inspection and
photocopying in the FDIC Public
Information Center, room 100, 801 17th
Street, NW, Washington, DC 20429,
between 9:00 am and 5:00 pm on
business days.
FOR FURTHER INFORMATION CONTACT:
Curtis Vaughn, Examination Specialist,
Division of Supervision, (202) 898–
6759; John Harvey, Review Examiner
(Trust), Division of Supervision (202)
898–6762; Patrick J. McCarty, Counsel,
Legal Division (202) 898–8708; or
Gerald Gervino, Senior Attorney, Legal
Division (202) 898–3723. Federal
Deposit Insurance Corporation, 550 17th
St., N.W., Washington, D.C. 20429.
SUPPLEMENTARY INFORMATION:
Background
Section 303 of the Riegle Community
Development and Regulatory
Improvement Act of 1994 (CDRI Act)
The FDIC is conducting a systematic
review of its regulations and written
policies. Section 303(a) of the CDRI Act
(12 U.S.C. 4803(a)) requires that each
Federal banking agency review its
regulations to streamline them to
improve efficiency, reduce unnecessary
costs and eliminate unwarranted
constraints on credit availability.
Section 303(a) also requires the Federal
banking agencies to work jointly to
make uniform all regulations and
guidelines implementing common
statutory or supervisory policies. As
part of the section 303 process, the FDIC
published in December of 1995 a notice
in the Federal Register describing the
section 303 requirements and inviting
the general public and interested parties
to comment on FDIC regulations and
policy statements. 60 FR 62345
(December 6, 1995).
On July 24, 1979 the FDIC and the
other Federal banking agencies
promulgated regulations addressing
recordkeeping and confirmation
requirements for securities transactions
effected by banks. See 44 FR 43261 (July
24, 1979) (FDIC), 44 FR 43252 (July 24,
1979 (OCC) and 44 FR 43258 (July 24,
1979) (FRB). These regulations were,
and are, virtually identical. With the
exception of two amendments, the
FDIC’s part 344 has remained
unchanged since it was promulgated in
1979. See 45 FR 12777 (February 27,
1980), 60 FR 7111 (February 7, 1995).
The FDIC wishes to review its
recordkeeping and confirmation
requirements for securities transactions
in part 344 with the purposes of section
303 of the CDRI in mind. The Office of
the Comptroller of the Currency (OCC)
and the Board of Governors of the
Federal Reserve System (FRB) have
already proposed amendments to their
regulations concerning recordkeeping
and confirmation requirements for
securities transactions by national and
state member banks, respectively. See
60 FR 66517 (December 22, 1995) and
60 FR 66759 (December 26, 1995).
Before drafting and publishing a
proposed regulation, the FDIC wishes to
receive public comment on several basic
issues underlying the purposes of part
344. The FDIC requests comments at
this stage of regulatory review to assist
development of a specific proposal.
delivered to the above address no later than
that time.
I Wish to Cancel
lllllllllllllllllllll
Consumer’s Signature
lllllllllllllllllllll
Date
Supplement I—[Amended]
11. In Supplement I to Part 226, under
Section 226.4—Finance Charge, under
4(a) Definition, paragraph 3. ii. would
be removed.
12. In Supplement I to Part 226, under
Section 226.17—General Disclosure
Requirements, under 17(c) Basis of
disclosures and use of estimates,
Paragraph 17(c)(2) would be
redesignated as Paragraph 17(c)(2)(i):
Supplement I—Official Staff
Interpretations
* * * * *
Section 226.17—General Disclosure
Requirements
* * * * *
17(c) Basis of Disclosures and Use of
Estimates
* * * * *
Paragraph 17(c)(2)fl(i).fi
* * * * *
13. In Supplement I to Part 226, under
Section 226.18—Content of Disclosures,
under 18(d) Finance charge, paragraph
2 would be removed.
14. In Supplement I to Part 226, under
Section 226.23—Right of Rescission,
under 23(b) Notice of right to rescind,
the first sentence of paragraph 3 would
be revised to read as follows:
* * * * *
Section 226.23—right of rescission
* * * * *
23(b) Notice of right to rescind.
* * * * *
3. Content. The notice must include
all of the information outlined in
Section 226.23(b)(1)fl(i) through (v)fi
øthrough 5¿. * * *
* * * * *
By order of the Board of Governors of the
Federal Reserve System, May 15, 1996.
William W. Wiles,
Secretary of the Board
[FR Doc. 96–12685 Filed 5–23–96; 8:45 am]
BILLING CODE 6210–01–P
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 344
RIN 3064–AB74
Recordkeeping and Confirmation
Requirements for Securities
Transactions
AGENCY: Federal Deposit Insurance
Corporation.
ACTION: Advance notice of proposed
rulemaking.
SUMMARY: The Federal Deposit
Insurance Corporation (FDIC) is
considering whether and how to amend
its regulations governing recordkeeping
and confirmation requirements for
securities transactions by state
nonmember banks. The agency’s present
regulation was adopted in 1979 and has
remained essentially unchanged since
that time. The FDIC is undertaking a
review of this regulation with the goal
of modernizing its requirements to,
among other things, reflect the
supervisory role played by other Federal
agencies charged with supervision of
securities transactions. The agency is
soliciting comment on a number of
issues that have been identified. The
responses will be used to aid the FDIC
in developing a proposed amendment
for public comment.
DATES: Comments must be received by
June 24, 1996.
ADDRESSES: Comments should be
directed to Jerry L. Langley, Executive
Secretary, Attention: Room F–402,
Federal Deposit Insurance Corporation,
550 17th Street, NW, Washington, DC
20429. Comments may be delivered to
room F–402, 1776 F Street, NW,
Washington, DC 20429, on business
days between 8:30 am and 5:00 pm or
sent by facsimile transmission to FAX
number 202/898–3838. Internet:
Comments@FDIC.gov. Comments will
be available for inspection and
photocopying in the FDIC Public
Information Center, room 100, 801 17th
Street, NW, Washington, DC 20429,
between 9:00 am and 5:00 pm on
business days.
FOR FURTHER INFORMATION CONTACT:
Curtis Vaughn, Examination Specialist,
Division of Supervision, (202) 898–
6759; John Harvey, Review Examiner
(Trust), Division of Supervision (202)
898–6762; Patrick J. McCarty, Counsel,
Legal Division (202) 898–8708; or
Gerald Gervino, Senior Attorney, Legal
Division (202) 898–3723. Federal
Deposit Insurance Corporation, 550 17th
St., N.W., Washington, D.C. 20429.
SUPPLEMENTARY INFORMATION:
Background
Section 303 of the Riegle Community
Development and Regulatory
Improvement Act of 1994 (CDRI Act)
The FDIC is conducting a systematic
review of its regulations and written
policies. Section 303(a) of the CDRI Act
(12 U.S.C. 4803(a)) requires that each
Federal banking agency review its
regulations to streamline them to
improve efficiency, reduce unnecessary
costs and eliminate unwarranted
constraints on credit availability.
Section 303(a) also requires the Federal
banking agencies to work jointly to
make uniform all regulations and
guidelines implementing common
statutory or supervisory policies. As
part of the section 303 process, the FDIC
published in December of 1995 a notice
in the Federal Register describing the
section 303 requirements and inviting
the general public and interested parties
to comment on FDIC regulations and
policy statements. 60 FR 62345
(December 6, 1995).
On July 24, 1979 the FDIC and the
other Federal banking agencies
promulgated regulations addressing
recordkeeping and confirmation
requirements for securities transactions
effected by banks. See 44 FR 43261 (July
24, 1979) (FDIC), 44 FR 43252 (July 24,
1979 (OCC) and 44 FR 43258 (July 24,
1979) (FRB). These regulations were,
and are, virtually identical. With the
exception of two amendments, the
FDIC’s part 344 has remained
unchanged since it was promulgated in
1979. See 45 FR 12777 (February 27,
1980), 60 FR 7111 (February 7, 1995).
The FDIC wishes to review its
recordkeeping and confirmation
requirements for securities transactions
in part 344 with the purposes of section
303 of the CDRI in mind. The Office of
the Comptroller of the Currency (OCC)
and the Board of Governors of the
Federal Reserve System (FRB) have
already proposed amendments to their
regulations concerning recordkeeping
and confirmation requirements for
securities transactions by national and
state member banks, respectively. See
60 FR 66517 (December 22, 1995) and
60 FR 66759 (December 26, 1995).
Before drafting and publishing a
proposed regulation, the FDIC wishes to
receive public comment on several basic
issues underlying the purposes of part
344. The FDIC requests comments at
this stage of regulatory review to assist
development of a specific proposal.
26136 Federal Register / Vol. 61, No. 102 / Friday, May 24, 1996 / Proposed Rules
Summary of Concerns
Part 344 sets forth the recordkeeping
and confirmation requirements with
respect to securities transactions
effected for the customers of state
nonmember banks. State nonmember
banks are required to keep four types of
records (1) Chronological records of
original entry containing an itemized
daily record of all purchases and sales,
(2) Account records for each customer,
(3) Separate order tickets for each
transaction, and (4) A record of all
broker/dealers used and the
commissions paid. Section 344.3(a)
through (d). Banks must keep these
records for at least three years. Section
344.3.
Part 344 addresses both the ‘‘form’’
and ‘‘timing’’ of notification to
customers for whom the bank has
effected a securities transaction.
Sections 344.4 through 344.5. Banks
may provide one of two different types
of notification forms to the customer.
Both notification forms are required to
contain such basic information as the
name of the customer, the identity, price
and number of shares or units of the
security purchased or sold by the
customer, the source and amount of any
remuneration to be received by the
broker/dealer and the bank (unless such
remuneration is determined by a prior
written agreement between the bank and
the customer), and the name of the
broker/dealer used. Banks are again
required to retain copies of the
notification form which is provided to
customers for at least three years. Id.
As a general rule, banks are required
to mail the notification form to
customers within five business days of
the transaction. Section 344.5. If a
broker/dealer is used, the bank has 5
business days from the date of receipt of
the broker/dealer’s confirmation to mail
notification to the customer. Id. Banks
are permitted, however, to use alternate
time of notification procedures
depending upon the type of account
involved. Section 344.5(a) through (e).
The time of notification periods vary
greatly from ‘‘as promptly as possible’’
after the transaction for periodic plans
to annual statements for collective
investment funds. Section 344.5(e) and
(d), respectively.
Part 344 also requires banks effecting
securities transactions for customers to
establish written policies and
procedures regarding securities trading.
Section 344.6 Such policies and
procedures must address supervision of
officers and employees who place
orders and execute transactions,
allocation of securities and prices to
accounts when orders are received at
approximately the same time, the
crossing of buy/sell orders, and the
reporting of personal securities
transactions by bank officers and
employees who participate in or make
investment recommendations or
decisions for customer accounts.
The purpose of the FDIC
implementing recordkeeping and
confirmation requirements for securities
transactions is to ensure that purchasers
of securities in transactions effected by
an insured nonmember bank are
provided adequate information
concerning the transactions. The
regulations also are designed to ensure
that insured nonmember banks maintain
adequate records and controls with
respect to securities transactions for
their customers.
As the financial marketplace has
grown, new delivery systems for bank
customer’s securities transactions have
emerged. This array of delivery systems
has led to the overlap of jurisdiction
between the Federal banking agencies
and the Federal securities regulators.
The FDIC supports minimizing
overlapping jurisdiction through a
concept referred to as ‘‘functional
regulation’’. In order for functional
regulation to work properly, it is
important that securities transactions do
not go unregulated and leave customers
unprotected. As currently written, part
344 overlaps existing securities
regulation in certain areas. Although
this overlap ensures that securities
transactions for bank customers are
adequately covered in relation to
confirmation and recordkeeping
requirements, it can create a competitive
imbalance for banks, create customer
confusion, regulatory uncertainty and
additional costs to banks.
Delivery Systems
There are a variety of ways in which
banks play a role in delivering securities
brokerage services to their customers.
Customers of banks may engage in
securities transactions by either dealing
directly with the bank or by dealing
with a third party who has contracted
with the bank to conduct securities
transactions for, or through, the bank.
Third parties may operate on bank
premises using their own employees, or
use persons who are dual employees of
the bank and the third party. Third
party providers may operate both on
and off the bank’s premises with the
bank receiving remuneration for
transactions originating from the bank.
Other third party providers operate
solely off bank premises. The bank may
or may not receive remuneration for
referring customers to the provider.
Categories of third party providers
also vary by whether or not the provider
is affiliated with the bank and the type
of affiliation. Third party providers may
be owned by the bank, while in other
situations the bank and third party
provider are commonly owned or have
common officers or directors. In other
cases, the bank may be an advisor to a
mutual fund sponsored by a third party.
Within the bank itself, the institution
may be engaged in retail
recommendation and sale of securities,
or the bank may be engaging in
accommodation transactions only for
customers of the bank. A limited
number of banks operate municipal and
government securities dealer
departments separately registered under
government securities regulations or
regulations of the Municipal Securities
Rulemaking Board (MSRB). Where there
is sufficient demand, banks may engage
in private banking for their higher
income customers. In areas where
capital markets are not well established,
banks may engage in the sale of their
own stock or the stock of their affiliates.
Historically banks have been most
commonly involved in securities
transactions through their Trust
Departments. These transactions occur
both when the bank has some fiduciary
responsibility and when the bank is
acting as an agent or custodian. A bank
may have no investment discretion,
partial investment discretion or full
investment discretion over its trust
accounts. Trust Departments often
sponsor collective investment funds for
their customers. They may also act as
the customers’ agent under a periodic
investment plan, such as a stock-
purchase plan or a dividend
reinvestment plan. Each situation
presents different customer needs
relative to confirmation and
recordkeeping requirements related to
securities transactions.
Request for Comment
The FDIC is seeking comment from
interested parties concerning the
applicability of part 344 to securities
transactions conducted under each of
these delivery systems. Specifically, if
the transactions under a specific
delivery system are covered by another
regulatory system, what coverage should
an FDIC regulation provide, if any?
Additionally, the FDIC seeks comment
on whether other delivery systems, i.e.,
dedicated phone lines to broker/dealers
and mutual fund complexes, or internet
sites, should be considered in deciding
on the scope of coverage of part 344.
Commenters are asked to identify types
of securities transactions which by their
unique characteristics should be
Summary of Concerns
Part 344 sets forth the recordkeeping
and confirmation requirements with
respect to securities transactions
effected for the customers of state
nonmember banks. State nonmember
banks are required to keep four types of
records (1) Chronological records of
original entry containing an itemized
daily record of all purchases and sales,
(2) Account records for each customer,
(3) Separate order tickets for each
transaction, and (4) A record of all
broker/dealers used and the
commissions paid. Section 344.3(a)
through (d). Banks must keep these
records for at least three years. Section
344.3.
Part 344 addresses both the ‘‘form’’
and ‘‘timing’’ of notification to
customers for whom the bank has
effected a securities transaction.
Sections 344.4 through 344.5. Banks
may provide one of two different types
of notification forms to the customer.
Both notification forms are required to
contain such basic information as the
name of the customer, the identity, price
and number of shares or units of the
security purchased or sold by the
customer, the source and amount of any
remuneration to be received by the
broker/dealer and the bank (unless such
remuneration is determined by a prior
written agreement between the bank and
the customer), and the name of the
broker/dealer used. Banks are again
required to retain copies of the
notification form which is provided to
customers for at least three years. Id.
As a general rule, banks are required
to mail the notification form to
customers within five business days of
the transaction. Section 344.5. If a
broker/dealer is used, the bank has 5
business days from the date of receipt of
the broker/dealer’s confirmation to mail
notification to the customer. Id. Banks
are permitted, however, to use alternate
time of notification procedures
depending upon the type of account
involved. Section 344.5(a) through (e).
The time of notification periods vary
greatly from ‘‘as promptly as possible’’
after the transaction for periodic plans
to annual statements for collective
investment funds. Section 344.5(e) and
(d), respectively.
Part 344 also requires banks effecting
securities transactions for customers to
establish written policies and
procedures regarding securities trading.
Section 344.6 Such policies and
procedures must address supervision of
officers and employees who place
orders and execute transactions,
allocation of securities and prices to
accounts when orders are received at
approximately the same time, the
crossing of buy/sell orders, and the
reporting of personal securities
transactions by bank officers and
employees who participate in or make
investment recommendations or
decisions for customer accounts.
The purpose of the FDIC
implementing recordkeeping and
confirmation requirements for securities
transactions is to ensure that purchasers
of securities in transactions effected by
an insured nonmember bank are
provided adequate information
concerning the transactions. The
regulations also are designed to ensure
that insured nonmember banks maintain
adequate records and controls with
respect to securities transactions for
their customers.
As the financial marketplace has
grown, new delivery systems for bank
customer’s securities transactions have
emerged. This array of delivery systems
has led to the overlap of jurisdiction
between the Federal banking agencies
and the Federal securities regulators.
The FDIC supports minimizing
overlapping jurisdiction through a
concept referred to as ‘‘functional
regulation’’. In order for functional
regulation to work properly, it is
important that securities transactions do
not go unregulated and leave customers
unprotected. As currently written, part
344 overlaps existing securities
regulation in certain areas. Although
this overlap ensures that securities
transactions for bank customers are
adequately covered in relation to
confirmation and recordkeeping
requirements, it can create a competitive
imbalance for banks, create customer
confusion, regulatory uncertainty and
additional costs to banks.
Delivery Systems
There are a variety of ways in which
banks play a role in delivering securities
brokerage services to their customers.
Customers of banks may engage in
securities transactions by either dealing
directly with the bank or by dealing
with a third party who has contracted
with the bank to conduct securities
transactions for, or through, the bank.
Third parties may operate on bank
premises using their own employees, or
use persons who are dual employees of
the bank and the third party. Third
party providers may operate both on
and off the bank’s premises with the
bank receiving remuneration for
transactions originating from the bank.
Other third party providers operate
solely off bank premises. The bank may
or may not receive remuneration for
referring customers to the provider.
Categories of third party providers
also vary by whether or not the provider
is affiliated with the bank and the type
of affiliation. Third party providers may
be owned by the bank, while in other
situations the bank and third party
provider are commonly owned or have
common officers or directors. In other
cases, the bank may be an advisor to a
mutual fund sponsored by a third party.
Within the bank itself, the institution
may be engaged in retail
recommendation and sale of securities,
or the bank may be engaging in
accommodation transactions only for
customers of the bank. A limited
number of banks operate municipal and
government securities dealer
departments separately registered under
government securities regulations or
regulations of the Municipal Securities
Rulemaking Board (MSRB). Where there
is sufficient demand, banks may engage
in private banking for their higher
income customers. In areas where
capital markets are not well established,
banks may engage in the sale of their
own stock or the stock of their affiliates.
Historically banks have been most
commonly involved in securities
transactions through their Trust
Departments. These transactions occur
both when the bank has some fiduciary
responsibility and when the bank is
acting as an agent or custodian. A bank
may have no investment discretion,
partial investment discretion or full
investment discretion over its trust
accounts. Trust Departments often
sponsor collective investment funds for
their customers. They may also act as
the customers’ agent under a periodic
investment plan, such as a stock-
purchase plan or a dividend
reinvestment plan. Each situation
presents different customer needs
relative to confirmation and
recordkeeping requirements related to
securities transactions.
Request for Comment
The FDIC is seeking comment from
interested parties concerning the
applicability of part 344 to securities
transactions conducted under each of
these delivery systems. Specifically, if
the transactions under a specific
delivery system are covered by another
regulatory system, what coverage should
an FDIC regulation provide, if any?
Additionally, the FDIC seeks comment
on whether other delivery systems, i.e.,
dedicated phone lines to broker/dealers
and mutual fund complexes, or internet
sites, should be considered in deciding
on the scope of coverage of part 344.
Commenters are asked to identify types
of securities transactions which by their
unique characteristics should be