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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Retail foreign exchange transactions also present counterparty credit risk where a bank acts as principal in a transaction. 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.
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 nondeposif, litigation, and settlements; hiring practices; sales force stability; regulatory findings; and compliance issues.
onn The Booklet references more than a dozen OCC bulletins, interpretive letters, and other issuances Booklet, p. Events from this Firm. 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 that, because of the changes enacted imteragency the Dodd-Frank Act, offering off-exchange swaps and foreign-exchange transactions to retail customers presents heightened risk to a bank, particularly with respect to possible inadvertent aiding and abetting violations of the Commodity Exchange Act.
More from this Author. At approximately pages, the Booklet is almost three times the length of the version. Risk-Management Program The OCC expects each bank to “identify, measure, monitor, and control risk by nonedposit an effective risk management system appropriate for its size and the complexity of its operations.
Government Issues Proposed Regulations. In addition to the compliance obligations associated with these lending activities, the bank needs to monitor and manage its reail exposures.
Blockchain Legal Resource Blog: In news that no Blockchain Monitor reader wants to hear, technical analysts are sounding the alarm bell on bitcoin. 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 nondepksit.
The Booklet replaces the previous booklet of the same name that was issued in February Overall, the Booklet reflects the OCC’s increasing focus in recent years on the need for banks to implement strong risk-management interagfncy and policies commensurate with their activities, as well as oversight of these activities by senior bank management and banks’ boards of directors.
The OCC identifies operational risk as arising from inadequate oversight of bank employees or third parties, sales practice misconduct, poor customer service, or adverse events that could affect business volume and efficient trade execution. The Booklet also strongly encourages using mystery shopping and call-back programs to test sales programs and ensure that sales activities comply with applicable statemsnt, guidance, and a bank’s policies.
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. In this respect, the Booklet shows that basic regulatory attitudes about bank retail securities activities have not materially changed since There are several aspects of the Booklet that are particularly noteworthy or warrant special mention.
Compensation arrangements and referral fees: The OCC Booklet explicitly notes that banks that offer services to lower-income clients, clients with little to no investment experience, or seniors may present heightened reputation 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.
Reputation risk arises from the way a bank or a third party interacts with customers. 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.
Board of Governors of the Federal Reserve System
Food, Innteragency, Healthcare, Life Sciences. 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. More from this Firm. However, the Booklet identifies the rule as “an appropriate reference for a bank compliance sapes designed to ensure that the bank’s sales of RNDIPs are operated in a safe and sound manner.
Mine Financing In – Video. The Booklet contains extensive discussion about permissible compensation arrangements and referral fees. As noted nondpeosit, these requirements are to be addressed by new networking agreement terms. Banks are also expected to identify cross-business-line interdependencies or issues that could present increased risk.
This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter. 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”.
Media, Telecoms, IT, Entertainment. More clarity regarding specific OCC expectations and methods for implementing the guidance in the Booklet will be revealed through upcoming examination cycles.
The Booklet acknowledges that FINRA Rule regarding suitability of recommended products does not expressly apply to sales or recommendations made directly by a bank.
Nondeposit Investment Discussions, Answers, and Free Resources for Banking Professionals
Risk-Management Categories 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.
Credit risk in an RNDIP may arise if the program provides retail clients with margin lending or securities lending services. Energy and Natural Resources.