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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More from this Author. Real Estate and Construction. Virtual currencies and the underlying blockchain technology has a profound potential to be a driver of economic growth. The OCC expects each bank to “identify, measure, monitor, and control risk by implementing an effective risk management system appropriate for its size and the complexity of its operations. Banks should pay particular attention to the guidance and expectations regarding disclosures and advertising because those aspects of compliance are easily reviewed and tested by examiners.
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The Booklet replaces the previous booklet of the same name that was issued in February In this respect, the Booklet shows that basic regulatory attitudes about bank retail securities activities have not materially changed since Compensation arrangements and referral fees: The OCC states that it expects every bank to “conduct a comprehensive analysis of its securities activities to ensure compliance with GLBA and Regulation R, and to maintain records to demonstrate compliance.
In addition, banks should adopt comprehensive compliance policies and procedures retsil address applicable regulations and guidance, including the Interagency Statement.
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”. The Interagency Statement is still alive and intergency 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 interagebcy, and the bank’s strategic goals with respect to its RNDIP program should reflect, as appropriate, changes in market conditions.
The OCC expects the compliance program to include periodic testing of customer accounts and transactions to detect, prevent, and correct abusive practices. More from this Firm. The Booklet’s major implication is that a bank that engages in an RNDIP sales program should expect increased scrutiny of the program and should be prepared to document and demonstrate through written policies and procedures, board and management oversight records, and other means that the bank is adequately assessing and managing any risks presented by the RNDIP.
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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. Reputation risk arises from the way a bank or a third party interacts with customers. The Booklet emphasizes the need for banks to retain qualified counsel to help assess interagecy 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 transaction. However, the Booklet identifies the rule as “an appropriate reference for a bank compliance program designed to ensure that the bank’s sales of RNDIPs are operated in a safe and sound manner.
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. Credit risk in an RNDIP may arise if the program provides retail clients with margin lending or securities lending statemsnt.
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 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.
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 agreement with and reporting obligations of the third-party broker-dealer.
Blockchain Legal Resource Blog: Banks are also expected to identify cross-business-line interdependencies or issues that could present increased risk. The Booklet details the OCC’s new expectations of third parties that provide RNDIPs through bank distribution channels and focuses on the terms om be contained in networking agreements with banks.
Application of the Third-Party Relationship Bulletin: The compliance program should also nondeposot a system to monitor customer complaints and their produchs. Third-party risk management Qualification and training requirements for bank personnel and supervisors, as well as third-party sales representatives who will recommend or sell RNDIPs Compensation arrangements that comply with applicable interaagency GLBA, Regulation R, 12 C.
In turn, the Booklet may serve as a useful compliance guide for banks other than national banks. 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.
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. Events from this Firm.
As with other recent OCC guidance, active and meaningful oversight and participation of a bank’s board and senior management is expected nonseposit required. 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.
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. At approximately pages, the Booklet inveatment almost three saoes the length of the version.
Although it was adopted almost 21 years ago, the Booklet demonstrates the Interagency Statement’s durability and continued relevance for bank RNDIP activities. 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 xales their activities, as well as oversight of these activities by senior bank management and banks’ boards of directors.
To that end, the examination procedures set forth in the Prodcts, as well as the sample request letters contained in Appendix I to the Booklet, will provide useful guidance to banks as to the likely scope of information requests that will precede their next exam. News About this Firm.
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