Source: https://www.federalregister.gov/documents/2013/12/19/2013-29786/removal-of-transferred-ots-regulations-regarding-recordkeeping-and-confirmation-requirements-for
Timestamp: 2017-08-16 20:20:59
Document Index: 372516963

Matched Legal Cases: ['art 390', 'art 551', 'art 344', 'arts 390', 'art 390', 'art 551', 'art 390', 'art 390', 'art 344', 'art 390', 'art 344', 'art 344', 'art 390', 'art 344', 'art 344', 'art 390', 'art 390', 'art 344', 'art 344', 'art 344', 'art 344', 'art 390', 'art 344', 'art 344', 'art 390', 'art 344', 'art 344', 'art 344', 'art 390', 'art 344', 'art 344', 'art 390', 'art 551', 'art 551', 'art 344', 'art 390', 'art 344', 'art 390', 'art 344', 'art 344', 'art 344', 'art 390', '§\u2009344', 'art 390', '§\u2009390']

A Rule by the Federal Deposit Insurance Corporation on 12/19/2013
The Final Rule is effective on January 21, 2014.
76721-76728 (8 pages)
3064-AE06
FDIC-2013-0151
A. Removal of Part 390, Subpart K (Former OTS 12 CFR Part 551)
B. Amendments to Part 344
https://www.federalregister.gov/d/2013-29786 https://www.federalregister.gov/d/2013-29786
The Federal Deposit Insurance Corporation (“FDIC”) is adopting a final rule (“Final Rule”) to rescind and remove a regulation entitled “Recordkeeping and Confirmation Requirements for Securities Transactions,” and to amend another regulation also entitled “Recordkeeping and Confirmation Requirements for Securities Transactions.” The rescinded regulation was one of several rules transferred to the FDIC following dissolution of the former Office of Thrift Supervision (“OTS”) in connection with the implementation of applicable provisions of Title III of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). The Dodd-Frank Act provided that the former OTS rules that were transferred to the FDIC would be enforceable by or against the FDIC until they were modified, terminated, set aside, or superseded in accordance with applicable law by the FDIC, by any court of competent jurisdiction, or by operation of law.
The FDIC received no comments on the Proposed Rule and consequently is adopting the Final Rule as proposed in the NPR without change. As a result, the recordkeeping and confirmation requirements for securities transactions effected on behalf of customers by all FDIC-supervised institutions will be found at the existing regulation entitled “Recordkeeping and Confirmation Requirements for Securities Transactions.”.
Anthony J. DiMilo, Examination Specialist, Trust, Division of Risk Management Supervision, (202) 898-7496; John M. Jackwood, Senior Policy Analyst, Division of Depositor and Consumer Protection, (202) 898-3991; Julia E. Paris, Counsel, Legal Division, (202) 898-3821; Grace Pyun, Senior Attorney, Legal Division, (202) 898-3609.
Beginning July 21, 2011, the transfer date established by section 311 of the Dodd-Frank Act, 12 U.S.C. 5411, the powers, duties and functions of the former OTS were divided among the FDIC as to State savings associations, the Office of the Comptroller of the Currency (“OCC”) as to Federal savings associations, and the Board of Governors of the Federal Reserve System as to savings and loan holding companies.[1] Section 316(b) of the Dodd-Frank Act, 12 U.S.C. 5414(b), provides the manner of treatment for all orders, resolutions, determinations, regulations, and advisory materials that had been issued, made, prescribed, or allowed to become effective by the OTS. The section provides that if such regulatory issuances were in effect on the day before the transfer date, they continue in effect and are enforceable by or against the appropriate successor agency until they are modified, terminated, set aside, or superseded in accordance with applicable law by such successor agency, by any court of competent jurisdiction, or by operation of law.
The Dodd-Frank Act directed the FDIC and OCC to consult with one another and to publish a list of continued OTS regulations to be enforced by each respective agency that would continue to remain in effect until the appropriate successor agency modified or removed the regulations in accordance with the applicable laws. The list was published by the FDIC and OCC as a Joint Notice in the Federal Register on July 6, 2011, and shortly thereafter, the FDIC published its transferred OTS regulations as new FDIC regulations in 12 CFR parts 390 and 391. When it republished the transferred OTS regulations as new FDIC regulations, the FDIC specifically noted that its staff would evaluate the transferred OTS rules and might later recommend incorporating the transferred OTS regulations into other FDIC rules, amending them, or rescinding them, as appropriate.
Further, section 312(c) of the Dodd-Frank Act amended the definition of “appropriate Federal banking agency” contained in section 3(q) of the FDI Act, to add State savings associations to the list of entities for which the FDIC is designated the “appropriate Federal banking agency.” As a result, when the FDIC acts as the designated “appropriate Federal banking agency” (or under similar terminology) for State savings associations, as it does today, it has the authority to issue, modify, and rescind regulations involving such associations as well as for State nonmember banks and insured branches of foreign banks.[2]
On September 4, 2013, the FDIC published an NPR regarding the removal of part 390, subpart K (formerly OTS part 551), which governs recordkeeping and confirmation requirements for securities transactions effected for customers by State savings associations.[3] The former OTS rule was transferred to the FDIC with only nominal changes. The NPR proposed removing part 390, subpart K from the CFR in an effort to streamline FDIC regulations for all FDIC-supervised institutions. As discussed in the Proposed Rule, the FDIC carefully reviewed the transferred rule, part 390, subpart K, and compared it with part 344, an FDIC regulation that existed before the transfer of part 390, subpart K and that continues to remain in effect today. Like the transferred rule, part 344 governs recordkeeping and confirmation requirements for securities transactions Start Printed Page 76722effected for customers by insured State nonmember banks and insured branches of foreign banks.[4] Although the two rules were substantively the same, the FDIC noted some distinctions and minor technical differences between the transferred OTS rule and part 344.[5] The primary distinction between part 390, subpart K and part 344 was the scope of the Small Transaction Exception. The Final Rule conforms the interpretations of that exception, as discussed below.
The Proposed Rule noted that the key difference between part 344 and part 390, subpart K is the number of transactions permitted under each rule's respective Small Transaction Exception. Specifically, the threshold for part 390, subpart K's Small Transaction Exception is an average of 500 or fewer transactions for customers per year over the three prior calendar years, while the threshold under part 344 is fewer than an average of 200 transactions during the same time period.
To reconcile the difference between the two thresholds, the FDIC's Proposed Rule proposed amending 12 CFR 344.2(a)(1) to increase the threshold for the Small Transaction Exception applicable to all FDIC-supervised institutions effecting securities transactions for customers from an average of 200 transactions to 500 transactions per calendar year over the prior three calendar year period.[6] As stated in the Proposed Rule, the FDIC believes that increasing the number of securities transactions to which the Small Transaction Exception would apply will not only ensure parity for all FDIC-supervised institutions, but recognizes that the securities activities of FDIC-supervised institutions have increased over the three decades since the FDIC established the original scope of the Small Transaction Exception.[7]
In addition, the Proposed Rule included a measure designed to clarify that part 344 applies to all insured depository institutions for which the FDIC has been designated the appropriate Federal banking agency. Specifically, the Proposed Rule proposed amending section 344.3 of part 344 to remove the definition of “bank” and add the defined term “FDIC-supervised institution” to the list of defined words.[8] “FDIC-supervised institution” would mean “any insured depository institution for which the FDIC is the appropriate Federal banking agency pursuant to section 3(q) of the FDI Act, 12 U.S.C. 1813(q).” Under the Proposed Rule, the term “FDIC-supervised institution” and its plural form would replace “bank,” “banks,” “state nonmember insured bank (except a District bank)” and “foreign bank having an insured branch” throughout part 344.[9]
The FDIC issued the NPR with a 60-day comment period, which closed on November 4, 2013. The FDIC received no comments on its Proposed Rule, and consequently the Final Rule is adopted as proposed without any changes.
As discussed in the NPR, part 390, subpart K is substantively similar to part 344, and the designation of part 344 as a single authority of recordkeeping requirements for all FDIC-supervised institutions will serve to streamline the FDIC's rules and eliminate unnecessary regulations. To that effect, the Final Rule removes and rescinds 12 CFR part 390, subpart K in its entirety.
Consistent with the Proposed Rule, the Final Rule also amends section 344.2(a)(1) to increase the threshold from an average of fewer than 200 transactions to an average of fewer than 500 transactions for all FDIC-supervised institutions availing themselves of the Small Transaction Exception.
In addition, in the Final Rule, the definition of the term “bank” has been deleted from section 344.3 of part 344 and has been replaced with the term “FDIC-supervised institution.” As discussed in the Proposed Rule, “FDIC-supervised institution” is defined in section 344.3(h) as “any insured depository institution for which the FDIC is the appropriate Federal banking agency pursuant to section 3(q) of the FDI Act, 12 U.S.C. 1813(q).” In the Final Rule, the term “FDIC-supervised institution” and its plural form have replaced the terms “bank,” “banks,” “state nonmember bank (except a District bank)” and “foreign bank(s) having an insured branch” as used in sections 344.1 through 344.9. Section 344.10 of part 344 remains unchanged in the Final Rule.
In accordance with the requirements of the Paperwork Reduction Act (“PRA”) of 1995 (44 U.S.C. 3501-3521), the FDIC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (“OMB”) control number. The information collections contained in part 344 are cleared by OMB under the FDIC's “Recordkeeping and Confirmation Requirements for Securities Transactions” information collection (OMB No. 3064-0028). The FDIC's burden estimates were updated in connection with the collection's 2012 renewal to include State savings associations transferred from the OTS to the FDIC.
The Final Rule rescinds and removes from FDIC regulations part 390, subpart K. Further, with regard to part 344, the Final Rule amends section 344.2(a)(1) to increase the threshold, from an average of 200 transactions to 500 transactions per calendar year over the prior three calendar year period, for the Small Transaction Exception to certain recordkeeping requirements applicable to all FDIC-supervised institutions. The effect of the increased threshold will be to increase the number of institutions that are exempt from more elaborate recordkeeping requirements in part 344 and from the need to have special written management policies and operational procedures relating to the execution of securities transactions for customers. However, the FDIC's burden calculations are based on an estimated average response time across all supervised institutions. Therefore, the nominal increase in exempted institutions will have no significant impact on overall current burden estimates. As such, this provision of the Final Rule will not involve any new collections of information under the PRA.
The Regulatory Flexibility Act (“RFA”), 5 U.S.C. 601 et. seq., generally requires an agency to consider whether a final rule will have a significant economic impact on a substantial number of small entities (defined in regulations promulgated by the Small Business Administration to include banking organizations with total assets of less than or equal to $500 million).[10] Pursuant to section 605(b) of the RFA, a final regulatory flexibility analysis is not required if the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities, and publishes its certification and a short explanatory statement in the Federal Register together with the rule. For the reasons provided below, the FDIC certifies that Start Printed Page 76723the Final Rule will not have a significant economic impact on a substantial number of small entities. Accordingly, a regulatory flexibility analysis is not required.
As discussed previously, part 390, subpart K was transferred from OTS's part 551, which governed recordkeeping and confirmation requirements for Federal and State savings associations that effect securities transactions for customers. OTS's part 551 had been in effect since 2002, and all State savings associations were required to comply with it. Because it is redundant of existing part 344 of the FDIC's Rules, the Final Rule rescinds and removes part 390, subpart K. As a result, all FDIC-supervised institutions—including State savings associations—must comply with part 344 if they effect securities transactions for customers. Consequently, because all State savings associations have been required to comply with substantively similar recordkeeping and confirmation rules when they effected securities transactions for customers since 2002, today's Final Rule will have no significant economic impact on any State savings association.
Further, the Final Rule amends section 344.2(a)(1) to increase the threshold for all FDIC-supervised institutions relying on the Small Transaction Exception from an average of fewer than 200 to 500 transactions for customers per calendar year over the prior three calendar year period. As State savings associations currently comply with a 500-transaction small transaction threshold, the only impact of this portion of the Final Rule is to exempt more State nonmember banks and foreign banks having insured branches from complying with certain recordkeeping and written policy and procedure requirements, thus reducing regulatory burden for these insured depository institutions. There is no existing data that is helpful in determining how many State nonmember banks and foreign banks having insured branches that transact on average between 201 and 500 transactions for customers per calendar year over the prior three calendar year period will take advantage of the increased transaction threshold for the FDIC's Small Transaction Exception in today's Final Rule. Nevertheless, if the Final Rule reduces recordkeeping and written policy procedure requirements for any insured depository institutions, there still is no significant economic impact on a substantial number of small entities.
The Office of Management and Budget has determined that the Final Rule is not a “major rule” within the meaning of the Small Business Regulatory Enforcement Fairness Act of 1996 (“SBREFA”), 5 U.S.C. 801 et seq.
Section 722 of the Gramm-Leach-Bliley Act, 12 U.S.C. 4809, requires each Federal banking agency to use plain language in all of its proposed and final rules published after January 1, 2000. In the NPR, the FDIC invited comments on whether the Proposed Rule was clearly stated and effectively organized, and how the FDIC might make it easier to understand. Although the FDIC did not receive any comments, the FDIC sought to present the Final Rule in a simple and straightforward manner.
Under section 2222 of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (“EGRPRA”), the FDIC is required to review all of its regulations, at least once every 10 years, in order to identify any outdated or otherwise unnecessary regulations imposed on insured depository institutions.[11] The FDIC's EGRPRA review is ongoing and is expected to be completed by 2016. The NPR solicited comments on whether the proposed rescission of part 390, subpart K and amendments to part 344 would impose any outdated or unnecessary regulatory requirements on insured depository institutions. No comments on this issue were received. Upon review, the FDIC does not believe that part 344, as amended by the Final Rule, impose any outdated or unnecessary regulatory requirements on any insured depository institutions.
For the reasons stated in the preamble, the Board of Directors of the Federal Deposit Insurance Corporation revises part 344 of title 12 of the Code of Federal Regulations and amends part 390 of title 12 of the Code of Federal Regulations as set forth below:
Personal securities trading reporting by officers and employees.
(1) Small number of transactions. The requirements of §§ 344.4(a)(2) through (4) and 344.8(a)(1) through (3) do not apply to an FDIC-supervised institution Start Printed Page 76724effecting an average of fewer than 500 securities transactions per year for customers over the prior three calendar year period. The calculation of this average does not include transactions in government securities.
(f) Customer means any person or account, including any agency, trust, estate, guardianship, or other fiduciary account for which an FDIC-supervised institution effects or participates in effecting the purchase or sale of securities, but does not include a broker, dealer, insured depository institution acting as a broker or a dealer, issuer of the securities that are the subject of the transaction or a person or account having a direct, contractual agreement with a fully disclosed broker/dealer.
(g) Debt security means any security, such as a bond, debenture, note, or any other similar instrument that evidences a liability of the issuer (including any security of this type that is convertible into stock or a similar security) and fractional or participation interests in one or more of any of the foregoing; provided, however, that securities issued by an investment company registered under the Investment Company Act of 1940, 15 U.S.C. 80a—1 et seq., shall not be included in this definition.
(1) Is authorized to determine what securities or other property shall be purchased or sold by or for the account; orStart Printed Page 76725
(4) Record of broker/dealers. A record of all broker/dealers selected by the FDIC-supervised institution to effect securities transactions and the amount of commissions paid or allocated to each broker during the calendar year; and
(4) The date and time of execution, or the fact that the time of execution will Start Printed Page 76726be furnished within a reasonable time upon written request of the customer, and the identity, price, and number of shares or units (or principal amount in the case of debt securities) of the security purchased or sold by the customer;
(ii) If the FDIC-supervised institution elects not to disclose the source and amount of remuneration it has received or will receive from a party other than the customer pursuant to paragraph (b)(6)(i)(A), (B), or (C) of this section, the written notification must disclose whether the FDIC-supervised institution has received or will receive remuneration from a party other than the customer, and that the FDIC-supervised institution will furnish within a reasonable time the source and amount of this remuneration upon written request of the customer. This election is not available, however, if, with respect to a purchase, the FDIC-supervised institution was participating in a distribution of that security; or, with respect to a sale, the FDIC-supervised institution was participating in a tender offer for that security;
(12) In the case of a transaction in a debt security, other than a government security, that the security is unrated by a nationally recognized statistical rating organization, if that is the case.
(d) Cash management sweep accounts. An FDIC-supervised institution effecting a securities transaction for a cash management sweep account shall give or send its customer a written statement, in the same form as required under paragraph (f) of this section, for each month in which a purchase or sale of a security Start Printed Page 76727takes place in the account and not less than once every three months if there are no securities transactions in the account. Notwithstanding the provisions of this paragraph (d), FDIC-supervised institutions that retain custody of government securities that are the subject of a hold-in-custody repurchase agreement are subject to the requirements of 17 CFR 403.5(d).
(c) Alternative report. Where an FDIC-supervised institution acts as an investment adviser to an investment company registered under the Start Printed Page 76728Investment Company Act of 1940, the FDIC-supervised institution's officers and employees may fulfill their reporting requirement under paragraph (a) of this section by filing with the FDIC-supervised institution the “access persons” personal securities trading report required by SEC Rule 17j-1, 17 CFR 270.17j-1.
2. The authority citation for part 390 is revised to read as follows:
3. Subpart K—[Removed and reserved]
Remove and reserve subpart K consisting of §§ 390.200 through 390.214.
Dated at Washington, DC, this 10th day of December, 2013.
2. 12 U.S.C. 5412(b)-(c).
3. 78 FR 54403, 54408 (Sept. 4, 2013).
4. Id. at 54406.
7. 78 FR 54406.
11. Public Law 104-208 (Sept. 30, 1996).
[FR Doc. 2013-29786 Filed 12-18-13; 8:45 am]