Co-authored by Christina Grigorian

On June 7, the Federal Deposit Insurance Corporation (FDIC) issued Financial Institution Letter 29-2010, Guidance on Deposit Placement and Collection Activities by FDIC-Insured Institutions and Their Affiliates (Guidance). In the Guidance, the FDIC addressed the issue of agreements between insured depository institutions (or such institutions’ affiliates) and third-party affinity groups or trade associations (each, a group) to collect and place deposits.

The FDIC notes that the practice used by the groups, which receive referral fees for the entity’s introduction to the depositor, may raise concerns under the FDIC’s rules regarding “pass through” deposit insurance. According to the FDIC, “pass through” insurance means the insurance coverage (up to $250,000 currently) “passes through” the fiduciary to the actual owners of the funds if three requirements are met: (1) the institution’s records expressly disclose the fiduciary relationship on behalf of others; (2) the records maintained by either the institution, the fiduciary, or an authorized third party identify the actual owner or owners of the funds in the account and their respective ownership interest in the account; and (3) the funds actually are owned by the customer(s) and not the entity performing in a fiduciary capacity.

In addition, the Guidance notes that the institutions receiving such deposits are generally accepting “brokered deposits.” Although well capitalized insured institutions may receive brokered deposits without restriction, an adequately capitalized institution cannot accept brokered deposits unless the institution obtains a waiver from the FDIC. Undercapitalized institutions may not accept brokered deposits at all.

Finally, the FDIC notes that marketing materials, customer statements and disclosures must be accurate and not misleading and must correctly represent whether such funds will receive FDIC deposit insurance coverage.

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