Opinion ID: 2747343
Heading Depth: 2
Heading Rank: 1

Heading: EverBank’s WorldCurrency CD

Text: Unlike traditional certificates of deposit, an EverBank WorldCurrency CD is denominated in foreign currency. This means that, in addition to earning interest, the principal itself may rise or fall in value over the maturity period of the CD, depending on the strength of the foreign currency relative to U.S. dollars. 4 VATHANA V. EVERBANK When a customer opens a WorldCurrency CD, EverBank adds the customer’s investment to its treasury and credits the customer’s WorldCurrency CD in a foreign currency of the customer’s choice. Under paragraph 2.7.1 of the terms and conditions applicable to the WorldCurrency CDs (the “Terms and Conditions”), the exchange rate that EverBank uses to convert the customer’s initial investment into the foreign currency is a rate “within 1% of the wholesale spot price we pay for your currency.” The “wholesale spot price” is the currency’s price in the wholesale currency market when the customer opens the CD.1 This conversion occurs only as a book transaction: EverBank does not actually exchange the currency invested for the physical currency in which the CD is denominated. Instead, in separate transactions, EverBank purchases “forward contracts” to hedge the risks associated with its foreign currency liabilities to its WorldCurrency CD customers. The forward contracts allow EverBank to acquire a set amount of foreign currency on a specified date and at a set price, or exchange rate, that is based on the currency’s wholesale spot price when EverBank purchases the contract. By entering into forward contracts for the foreign currency in its WorldCurrency CDs, EverBank is assured delivery of the currency from which to pay its customers on the date the CDs mature, should its customers choose to liquidate their investments. Id. The forward contracts protect EverBank 1 The wholesale currency market is where financial institutions like EverBank trade large amounts of currency. By contrast, when an individual goes to a bank to exchange currency, he purchases currency in the retail market. The retail spot price available to an individual exchanging money at a bank can differ from the wholesale spot prices available to banks in the wholesale market. VATHANA V. EVERBANK 5 from the risks of exchange rate fluctuation before the CDs’ maturity dates. Paragraph 2.7.10 of the Terms and Conditions sets out the WorldCurrency CD’s renewal policies upon maturity. It provides in relevant part, Renewal Policies: Except as provided in the Lock-In Alternative section above, your WorldCurrency CD is automatically renewable; however, you may do one of the following options by providing instructions to the Trading Desk at least one week prior to the maturity date of the outstanding CD:

principal.
plus interest). If you choose to roll over the CD, it will be re- invested in the same currency for the same maturity, at the current prevailing interest rate. .... If we do not receive maturity instructions from you at least one week prior to maturity, your CD will automatically renew, reinvesting your principal and any interest into a CD of 6 VATHANA V. EVERBANK the same currency and maturity, at the prevailing interest rate on the date of renewal.