INTERAGENCY STATEMENT ON RETAIL SALES OF NONDEPOSIT INVESTMENT PRODUCTS PDF

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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As mentioned above, the Booklet reflects the OCC’s heightened eales 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.

In accordance with the Interagency Statement, boards should adopt written statements that address the risks, policies, and procedures and risk-management associated with an RNDIP sales program. The Booklet replaces the previous booklet of the same name that statment issued in February The Booklet references more than procucts dozen OCC bulletins, interpretive letters, and other issuances Booklet, p. The Booklet goes into great detail regarding applicable requirements concerning disclosures and advertising of RNDIPs.

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 invest,ent with and reporting obligations of the third-party broker-dealer.

The Booklet also strongly starement using mystery shopping and call-back programs to test sales programs and ensure that sales activities comply with applicable regulations, inveetment, and a bank’s policies. Notable Aspects of the Booklet There are several aspects of the Booklet that are particularly noteworthy or warrant special mention.

In addition, banks should adopt comprehensive compliance policies and procedures that address applicable regulations and guidance, including the Interagency Statement. Worldwide Europe European Union U.

The bank’s management and oversight of its RNDIP program should be able to respond to and incorporate regulatory reforms and changes in the brokerage industry, and the bank’s strategic goals with respect to its RNDIP program should reflect, as appropriate, changes in market conditions. Insurance Laws and Products. 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.

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Proper supervision and training of bank employees engaged in direct bank RNDIP activities is needed to help manage reputation risk. The OCC expects the compliance program to include periodic testing of customer accounts and transactions to detect, prevent, and correct abusive practices.

Board of Governors of the Federal Reserve System

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. In turn, the Booklet may serve as a useful compliance guide for banks other than national banks. 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.

As noted above, these requirements are to be addressed by new networking agreement terms. In this respect, the Booklet shows that basic regulatory attitudes about bank retail securities activities have not materially changed since Reputation risk may be increased if the RNDIP program actively associates a bank’s name with the offered products and services, including the offering of bank-branded products.

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

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. 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 measure risk, banks are expected to use measurement systems and models appropriate for the nature and complexity of the RNDIP sales program and should periodically test the measurement systems. 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.

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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. Interested in the next Webinar on this Topic? 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.

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. 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.

Overall, the Booklet will be a useful reference tool for banks, broker-dealers, insurance agents, and registered investment advisers that engage starement bank RNDIP sales programs as they modify and adjust their risk management of the RNDIP sales program.

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

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Although it was adopted almost 21 years ago, the Booklet demonstrates the Interagency Statement’s durability and continued relevance for bank RNDIP activities. The Booklet emphasizes the need for banks to retain qualified counsel to help assess and manage the risk by ensuring compliance with applicable regulations.

Retail foreign exchange transactions also present counterparty credit risk where a bank acts as principal in a nondepoeit.

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