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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More clarity regarding specific OCC expectations and methods for implementing the guidance in the Booklet will be revealed through producs examination cycles. Reputation risk arises from the way a bank or a third party interacts with customers. 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.
Application of the Third-Party Relationship Bulletin: In news that no Blockchain Monitor reader wants to hear, technical analysts are sounding the alarm bell on bitcoin. The compliance policies should address the following:. At approximately pages, the Booklet is almost three times the length of the version. The Booklet also strongly encourages using mystery shopping and call-back programs to test sales programs and ensure that sales activities comply with applicable regulations, guidance, and a bank’s policies.
Interested in the next Webinar on this Topic? The Booklet reflects the OCC’s emphasis on the importance of strong and effective risk-management processes, which continues a regulatory theme articulated by the OCC in recent years. 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.
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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.
Click here to register your Interest. The compliance policies should address the following: Energy and Natural Resources. Media, Telecoms, IT, Entertainment. Credit risk can also arise if a bank advances payments to client accounts even intraday or allows overdrafts in client accounts. 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.
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Proper supervision and training of bank employees engaged in direct bank RNDIP activities is needed to help manage reputation risk. These requirements are extensive and unlikely to be satisfied with existing networking arrangements.
Credit risk in an RNDIP may arise if the program provides retail clients with margin lending or securities lending services. The Booklet emphasizes that, because of the changes enacted by 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.
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Risk-Management Program The OCC expects inveetment 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.
The Interagency Statement is still alive and well: As noted above, these requirements are to be addressed by new networking agreement terms.
The Booklet contains extensive discussion about permissible compensation arrangements and referral fees. 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.
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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 compliance program should also incorporate a system to monitor customer complaints and their resolution. Overall, the Booklet reflects the OCC’s increasing focus in recent years on the need for banks to implement strong risk-management processes and policies commensurate with their activities, as well as oversight of these activities by senior bank management and banks’ boards of directors.
Real Estate and Construction. Although it was adopted almost 21 years ago, the Booklet demonstrates the Interagency Statement’s durability and continued relevance for bank RNDIP activities. 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. 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.
Insurance Laws and Products.
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. In addition, banks should adopt comprehensive compliance policies and procedures that address applicable regulations and guidance, including the Interagency Statement.