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

Board of Governors of the Federal Reserve System

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.

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”.

Although investjent one measurement system will be appropriate for all RNDIP sales programs, the OCC expects that the measurement process will assess risks of individual transactions, aggregate client portfolios, and interdependencies, correlations, and risks across business lines. Banks that are active in retail securities activities should expect that their next examination retakl involve detailed questions and requests for information regarding their RNDIP sales programs.

In this respect, the Booklet shows that basic regulatory attitudes about investemnt retail securities activities have not materially changed since On November 30,the Southern District of New York issued an opinion reaffirming the long-standing rule that traders cannot be found liable for illegal market manipulation when their trading was motivated by 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.

Events from this Firm. 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 only previous guidance on these issues was contained in the preamble to Regulation R issued in As part of its operational risk management, banks should have internal management information systems that ensure timely transaction confirmations and customer statements and billing and should ensure that any modeling used in an RNDIP sales program is properly designed and managed.


Proper supervision and training of bank employees engaged in direct bank RNDIP activities is needed to help manage reputation risk. 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. Food, Drugs, Healthcare, Life Sciences. The compliance policies should address the following:.

The Fed – Supervisory Policy and Guidance Topics – Securities

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. 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.

The Booklet acknowledges that FINRA Rule regarding suitability of recommended products does not expressly apply to sales or recommendations made directly by a bank. 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 complaints, litigation, and settlements; hiring practices; sales force stability; regulatory findings; and compliance issues.

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.

Part of the risk-monitoring program should include a requirement that affiliated and unaffiliated third parties provide risk-monitoring reports that allow a bank to properly oversee the RNDIP sales program, including the quality and suitability of the RNDIPs sold by an affiliated or third-party broker-dealer.

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


Real Estate and Construction. The OCC states that the Booklet itself is intended to explain “the risks inherent in banks’ retail nondeposit investment product RNDIP sales programs and provide[] a framework for banks to manage those risks.

Compensation arrangements and referral fees: In addition to the compliance obligations associated with these lending activities, the bank needs to monitor and manage its credit lnteragency. The Booklet replaces the previous booklet of the same name that was issued in February Reputation risk arises from the way a bank or a third party interacts with customers.

Although it was adopted almost 21 years ago, the Booklet demonstrates the Interagency Statement’s durability and continued relevance for bank RNDIP activities. Ln from this Firm. Government Issues Proposed Regulations.

Energy and Natural Resources. In addition, banks should adopt comprehensive compliance policies and procedures that address applicable regulations and guidance, including the Interagency Statement.

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

To measure risk, banks are ztatement to use measurement systems and models appropriate for the nature and complexity of the RNDIP sales program and should periodically test the measurement systems. Click here to register your Interest.

Banks are also expected to identify cross-business-line interdependencies or issues that could present increased risk. It is intended to provide guidance for bank examiners on activities of national banks and federal savings associations collectively, banks involved in recommending and selling nondeposit investment products to retail customers. To that end, the examination procedures set forth in the Booklet, as well as the sample request letters contained in Appendix I to the Retwil, will provide useful guidance to banks as to the likely scope of information requests that will precede their interavency exam.