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

The Booklet replaces the previous booklet of the same name that was issued statrment February Compensation arrangements and referral fees: The OCC expects each bank ztatement “identify, measure, monitor, and control risk by implementing an effective risk management system appropriate for its size and the complexity of its operations.

Banks should pay particular attention to the guidance and expectations regarding disclosures and advertising because those aspects of compliance are easily reviewed and tested by examiners. 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.

A bank’s failure to provide adequate resources and risk management to properly manage and control the risks associated with any RNDIP sales program may present a strategic risk invwstment the 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.

Banks that are active in retail securities activities should expect that their next examination will involve detailed questions and requests for information regarding their RNDIP sales programs. 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.

The Fed – Supervisory Policy and Guidance Topics – Securities

The Booklet emphasizes that banks must have ongoing and substantive involvement in the administration and oversight of any RNDIP sales program and cannot rely solely on representations made by broker-dealers regarding quality and suitability of RNDIPs and sales practices. Credit risk in an RNDIP may arise if the program provides retail clients with margin lending or securities lending services.


As noted above, these requirements are to be addressed by new networking agreement terms.

Third-party risk management Qualification and product 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.

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Such inadvertent violations could occur if a retail customer entering into an off-exchange swap is not an “eligible contract participant,” as well as raise questions about compliance with OCC regulations regarding retail foreign-exchange transactions. Do you have a Question or Comment?

The Booklet’s major implication is that a bank that engages in an Itneragency sales program should expect increased scrutiny of the program and should be prepared to document and demonstrate through written policies and procedures, board and management oversight records, and other means that the bank is adequately assessing and managing any risks presented by the RNDIP.

The OCC states stateement 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.

Banks’ boards of directors must establish the banks’ strategic direction and risk tolerance with respect to any RNDIP sales program and communicate the same through policies and procedures that establish responsibility and authority.

As with other recent OCC guidance, active and meaningful oversight and participation of a bank’s board and senior management is expected and required. 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.

The Booklet emphasizes the need for banks to retain qualified counsel to help assess and manage the risk by ensuring compliance with applicable regulations. The Booklet states that “[b]y referring its customers to a broker-dealer, the bank is tacitly endorsing the RNDIP sales made by those brokers to those customers. Retail foreign exchange transactions also present counterparty credit risk where a bank acts as principal in a transaction. This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.


In addition to the compliance obligations associated with these lending activities, the bank needs to monitor and manage its credit exposures.

What has changed, as the Booklet demonstrates, are the regulatory expectations with respect to the nature and strength of the compliance architecture required to manage a RNDIP sales program. The OCC emphasizes the importance of due diligence of third-party providers of RNDIP sales services and that any investkent 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.

Insurance Laws and Products. More from this Firm. More clarity regarding specific OCC expectations and methods for implementing the guidance in the Booklet will be revealed through intfragency examination cycles. The Booklet refers to the Third-Party Relationship Bulletin numerous times and contains a detailed description of third-party risk-management expectations with respect to RNDIP sales, including expectations regarding risk assessment by a bank’s board and management, the due diligence process, and the written agreement with and reporting obligations of the third-party broker-dealer.

The Booklet contains extensive discussion about permissible compensation arrangements and referral fees. In news that no Blockchain Monitor reader wants to hear, technical analysts are sounding the alarm bell on bitcoin. On December 13,the Treasury Department and the Internal Revenue Service issued highly-anticipated proposed regulations regarding the base erosion and anti-abuse tax generally referred to as the “BEAT”.

The Booklet reflects the OCC’s emphasis on the importance of strong and effective risk-management processes, which continues investkent regulatory theme articulated by the OCC in recent years.