Federal Register / Vol. 62, No. 146 / Wednesday, July 30, 1997 / Rules and Regulations 40731

net or a multiple of 40,000 pounds net.

Only transportation costs associated

with donations to charitable institutions

may be arranged for and paid by USDA.

USDA will make no other payment with

respect to such potatoes.

* * * * *

4. In § 80.6, paragraph (a)(5) is revised

to read as follows:

§ 80.6 Eligibility for payment.

(a) * * *

(5) Diverts fresh Irish potatoes and

submits required documentation by July

28, 1997, if Form FSA–117 is approved

by USDA from May 29 through July 11,

1997; or diverts fresh Irish potatoes and

submits required documentation by

August 13, 1997, if Form FSA–117 is

approved by USDA from July 14

through July 28, 1997; or diverts fresh

Irish potatoes and submits required

documentation by August 27, 1997, if

Form FSA–117 is approved by USDA

from July 29 through August 27, 1997.

Allocations unused by the applicable

date will no longer be available for that

producer. Final dates to complete

diversions and submit documentation

may be waived by USDA if it is

determined that severe weather

conditions prevented the completion of

the diversion during the allotted time

period.

* * * * *

Dated: July 24, 1997.

Lon Hatamiya,

Administrator, Agricultural Marketing

Service.

[FR Doc. 97–20091 Filed 7–25–97; 3:59 pm]

BILLING CODE 3410–02–P

FEDERAL DEPOSIT INSURANCE

CORPORATION

12 CFR Part 329

RIN 3064–AC09

Prohibition Against Payment of

Interest on Demand Deposits

AGENCY: Federal Deposit Insurance

Corporation (FDIC).

ACTION: Interpretive rule.

SUMMARY: The FDIC has amended an

interpretive rule to provide an

additional exception to the limitations

on premiums that may be given in

connection with demand deposits.

Section 18(g) of the Federal Deposit

Insurance Act (FDI Act) requires that the

FDIC by regulation prohibit the payment

of interest or dividends on demand

deposits. 12 CFR part 329 implements

this prohibition. As an exception to the

prohibition, an interpretive rule permits

premiums of up to $10 for deposits of

less than $5000 and up to $20 for

deposits of $5000 or more not more than

twice per year. The interpretive rule

also limits the timing of such premiums

to the opening of a new account or an

addition to an existing account.

The FDIC has amended the

interpretive rule to provide an

additional exception that permits

premiums which are unrelated to the

balance in a demand deposit account

and the duration of the account balance.

Therefore, insured nonmember banks

and insured branches of foreign banks

are now permitted to give premiums on

demand deposits, without limitation as

to the amount of the premium, provided

that the premiums are not related to, or

dependent upon, the balance in the

account and the duration of the account

balance. This amendment maintains

substantial parity with Regulation Q, 12

CFR Part 217, as recently amended by

the Board of Governors of the Federal

Reserve System (FRB).

DATES: Effective July 30, 1997.

FOR FURTHER INFORMATION CONTACT:

Marc Goldstrom, Counsel, Regulation

and Legislation Section, Legal Division,

(202–898–8807); Louise Kotoshirodo,

Review Examiner, Division of

Compliance and Consumer Affairs,

(202–942–3599).

SUPPLEMENTARY INFORMATION:

Background

Section 18(g) of the FDI Act provides

that the Board of Directors of the FDIC

shall by regulation prohibit the payment

of interest or dividends on demand

deposits in insured nonmember banks

and in insured branches of foreign

banks. (12 U.S.C. 1828(g)). Accordingly,

the FDIC promulgated regulations

prohibiting the payment of interest or

dividends on demand deposits at 12

CFR part 329. The Board of Governors

of the Federal Reserve System (FRB) has

a corresponding prohibition for member

banks at 12 CFR part 217 (Regulation Q).

As an exception to the prohibition, the

FDIC issued an interpretive rule that

generally permits (1) premiums only at

the time of the opening of a new

account or an addition to, or renewal of,

an existing account; (2) no more than

two premiums per deposit in any

twelve-month interval; and (3) that the

value of the premiums does not exceed

$10 for deposits of less than $5000 and

$20 for deposits of $5000 or more. (12

CFR 329.103). The FRB has a

corresponding exception for member

banks at 12 CFR 217.101.

Section 18(g) of the FDI Act also

provides that the FDIC shall make such

exceptions to this prohibition as are

prescribed with respect to demand

deposits in member banks by section 19

of the Federal Reserve Act, as amended,

or by regulation of the FRB. (12 U.S.C.

1828(g)). The FRB has recently amended

its interpretation to establish an

additional exception with respect to

member banks. The amendment permits

member banks to give premiums on

demand deposits, without regard to the

amount of the premium, provided that

the premiums are not related to, or

dependent upon, the balance in an

account and the duration of the account

balance. (12 CFR 217.101(b)). The FDIC

is now amending its interpretive rule to

provide a similar exception for state

nonmember banks and insured branches

of foreign banks.

Premium limitations were first

adopted by the FDIC and the FRB in

1970. These premium limitations

originally applied to all types of

deposits and were established in part to

prevent evasion of interest rate ceilings

at a time when interest rates were

regulated. The Depository Institutions

Deregulation and Monetary Control Act

of 1980 deregulated interest rates on

time and savings deposits (including

NOW accounts). In 1980, the Depository

Institutions Deregulation Committee

adopted these premium limitations with

respect to time and savings deposits in

an effort to preserve a relatively level

playing field during the period of

deposit interest rate deregulation, which

ended in 1986. Since then, banks have

been permitted to offer premiums on

interest-bearing accounts, including

NOW, time, and savings accounts,

without regard to the premium

limitations. The premium limitations,

therefore, have only applied to demand

deposit accounts.

Because the preexisting exception is

restricted to the opening of, addition to,

or renewal of, a deposit account, it has

constrained the ability of depository

institutions to offer incentives to use

their products, including the use of new

services such as ATM or debit cards. In

the past, the exception has prevented a

bank from offering incentives to existing

demand deposit customers who signed

up for an ATM card because the

incentives did not coincide with the

opening of, addition to, or renewal of,

an account. For the same reason the

exception has prevented another bank

from offering incentives to encourage

deposit customers to use an ATM card

more than three times per month.

Premiums from the use of a debit card,

which reduces the amount on deposit,

would also constitute interest on the

deposit under the preexisting exception,

since they are also not paid upon the
40732 Federal Register / Vol. 62, No. 146 / Wednesday, July 30, 1997 / Rules and Regulations

1See Securities Exchange Act Release No.

37619A (September 6, 1996), 61 FR 48290

(September 12, 1996) (‘‘Adopting Release’’).

2 17 CFR 240.11Ac1–1(c)(5)(i).

3 17 CFR 240.11Ac1–1(c)(5)(ii).

4 17 CFR 240.11Ac1–1(a)(25).

5 17 CFR 11Ac1–1(c)(1). See Securities Exchange

Act Release No. 38110 (January 2, 1997), 62 FR

1279 (January 9, 1997) which postponed the

effective date of the 1% Rule, with respect to the

amended definition of ‘‘subject security,’’ from

January 10, 1997, to April 10, 1997. See also

Securities Exchange Act Release No. 38490 (April

opening of, addition to, or renewal of,

an account.

The FDIC believes that in cases where

a premium is not related to, or

dependent on, the balance in a demand

deposit account and the duration of that

balance, such a premium generally

should not be viewed as interest. From

an economic point of view, such

premiums do not appear to constitute

interest on the account, since interest is

generally a payment to, or for the

account of, a depositor as compensation

for the use of the depositor’s funds. (12

CFR 329.1(c)).

As an additional matter, since interest

rates on time deposits were deregulated,

there is no longer any need to provide

that premiums that are paid at the time

of renewal are permissible. This

revision removes the reference to

renewal in the preexisting exception.

In light of all the foregoing, the FDIC

is amending its interpretive rule

effective on date of publication in the

Federal Register to except from the

prohibition of the payment of interest

on demand deposits, any premiums that

are not related to the balance in an

account and the duration of the account

balance.

Regulatory Flexibility Act

The Regulatory Flexibility Act (5

U.S.C. 601–612) requires an agency to

publish a regulatory flexibility analysis

for any final rule for which the agency

was required to publish a general notice

of proposed rulemaking. Under 5 U.S.C.

553(b), a general notice of proposed

rulemaking is not required for

interpretative rules. Accordingly, no

regulatory flexibility analysis is required

in this case.

Under 5 U.S.C. 553(d), a 30-day

period between publication date and

effective date is not required for

interpretative rules. Accordingly, this

interpretive rule is effective on date of

publication in the Federal Register.

Paperwork Reduction Act

No collections of information

pursuant to the Paperwork Reduction

Act are contained in the rule.

List of Subjects in 12 CFR Part 329

Banks, banking, Interest rates.

For the reasons set forth in the

preamble, the FDIC amends 12 CFR part

329 as set forth below:

PART 329—INTEREST ON DEPOSITS

1. The authority citation for part 329

continues to read as follows:

Authority: 12 U.S.C. 1819, 1828(g) and

1832(a).

2. In § 329.103, paragraph (a)(1) is

amended by removing ‘‘, or renewal

of,’’, and a new paragraph (e) is added

after paragraph (d) to read as follows:

* * * * *

§ 329.103 Premiums.

* * * * *

(e) Notwithstanding paragraph (a) of

this section, any premium that is not,

directly or indirectly, related to or

dependent on the balance in a demand

deposit account and the duration of the

account balance shall not be considered

the payment of interest on a demand

deposit account and shall not be subject

to the limitations in paragraph (a) of this

section.

By order of the Board of Directors.

Dated at Washington, D.C. this 23rd day of

July, 1997.

Federal Deposit Insurance Corporation.

Robert E. Feldman,

Executive Secretary.

[FR Doc. 97–20018 Filed 7–29–97; 8:45 am]

BILLING CODE 6714–01–P

SECURITIES AND EXCHANGE

COMMISSION

17 CFR Part 240

[Release No. 34–38870; File No. S7–30–95]

RIN 3235–AG66

Order Execution Obligations

AGENCY: Securities and Exchange

Commission.

ACTION: Revised compliance dates;

exemptive order.

SUMMARY: The Securities and Exchange

Commission (‘‘Commission’’) is

announcing the final phase-in schedule

for compliance with Rules 11Ac1–

1(c)(5) (‘‘ECN Amendment’’ of the

‘‘Quote Rule’’) and 11Ac1–4 (‘‘Limit

Order Display Rule’’) under the

Securities Exchange Act of 1934

(‘‘Exchange Act’’) and is providing

exemptive relief to accommodate the

new schedule. In addition, the

Commission is providing temporary

exemptive relief from compliance with

the 1% requirement of the Quote Rule

with respect to non-19c–3 securities.

DATES: Effective Date: July 24, 1997.

Compliance Dates: The phase-in

schedule with respect to the remaining

approximately 5,766 Nasdaq securities

will be as follows: 250 Nasdaq securities

on August 4, 1997; 250 Nasdaq

securities on August 11, 1997; 850

Nasdaq securities on September 8, 1997;

850 Nasdaq securities on September 15,

1997; 850 Nasdaq securities on

September 22, 1997; 850 Nasdaq

securities on September 29, 1997; 850

Nasdaq securities on October 6, 1997;

and the remaining approximately 930

Nasdaq securities on October 13, 1997.

Concurrently, the Commission is

exempting responsible broker and

dealers, electronic communications

networks, exchanges and associations

from compliance with the Order

Execution Rules, with respect to the

Nasdaq securities that are not phased in

under such schedule, until October 13,

1997. In addition, the Commission is

exempting substantial market makers

and specialists from compliance with

the 1% requirement of the Quote Rule

with respect to non-Rule 19c–3

securities until September 30, 1997.

FOR FURTHER INFORMATION CONTACT:

Gail Marshall-Smith, Special Counsel,

or David Oestreicher, Special Counsel,

(202) 942–0158, Division of Market

Regulation, Securities and Exchange

Commission, 450 Fifth Street, NW., Mail

Stop 5–1, Washington, DC 20549.

SUPPLEMENTARY INFORMATION:

Background

On August 28, 1996, The Commission

adopted Rule 11Ac1–4, the Limit Order

Display Rule, and amendments to Rule

11AC1–1, the Quote Rule under the

Exchange Act.1 The Limit Order Display

Rule requires over-the-counter (‘‘OTC’’)

market makers and exchange specialists

to publicly display certain customer

limit orders. The ECN Amendment of

the Quote Rule requires OTC market

makers and specialists to publicly

disseminate the best prices that they

enter into an electronic communications

network (‘‘ECN’’),2 or to comply

indirectly with the ECN Amendment by

using an ECN that furnishes the best

market maker and specialist prices

therein to the public quotation system

(the ‘‘ECN Display Alternative’’).3 In

addition, the Quote Rule term ‘‘subject

security’’ 4 was amended, thereby

requiring OTC market makers and

specialist to publish quotes in any

exchange-listed security if their volume

in that security exceeds 1% of the

aggregate volume during the most recent

calendar quarter.5