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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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 investmdnt banks to develop detailed written compliance plans tailored to the complexity of nondepoist RNDIP sales activities. 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.

The Booklet references more than a dozen OCC bulletins, interpretive letters, and other issuances Booklet, p. In addition to the compliance obligations associated with these lending activities, the bank needs to monitor and manage its credit exposures. The only statment guidance on these issues was contained in the preamble to Regulation R issued in Such inadvertent violations could occur if a retail customer entering into an off-exchange swap is not an “eligible contract participant,” as well as raise questions about compliance with OCC regulations regarding retail foreign-exchange transactions.

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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 compliance policies should address the following:.

More from this Author. 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.

As with other nondepozit OCC guidance, active and meaningful oversight and participation of a bank’s board and senior management is expected and required.

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. Virtual currencies and the invetment blockchain technology has a profound potential to produfts a driver of economic growth.

There are several aspects of the Booklet that are particularly noteworthy or warrant special mention. Application of the Third-Party Relationship Bulletin: More from this Firm. 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. The compliance program should also incorporate a system to monitor customer complaints and their resolution.


Although it was adopted almost 21 years ago, the Booklet demonstrates the Interagency Statement’s durability and continued relevance for bank RNDIP activities. 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 Booklet also strongly encourages using mystery shopping and call-back programs to test sales programs and ensure that sales nnondeposit comply with applicable regulations, guidance, and a bank’s policies. The Booklet emphasizes the need for banks to retain qualified counsel to help assess and manage the risk by ensuring compliance with applicable regulations.

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 regulations GLBA, Regulation R, 12 C. Credit risk in an RNDIP may arise if the program provides retail clients with margin lending or securities lending services. Compensation arrangements and referral fees: Do you have a Question or Comment?

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.

In turn, the Booklet may serve as a useful compliance guide for banks other than national banks. 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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Events from this Firm. Overall, the Booklet will be a useful reference jnteragency for banks, broker-dealers, insurance agents, and registered investment advisers that engage in bank RNDIP sales programs as they modify and adjust their risk management of the RNDIP sales program. Unsuitable sales practices, client misunderstandings of the risk associated with RNDIP offerings, or poor customer service could result in reputational damage.

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.

Mine Statejent In – Video. As noted above, these requirements are to be addressed by new networking agreement terms. Reputation risk arises from the way a bank or a third party interacts with customers. What has changed, as the Booklet demonstrates, are the regulatory expectations with respect to the nature and strength of the compliance architecture required to manage a RNDIP sales program.


In news that no Blockchain Monitor reader wants to hear, technical analysts are sounding the alarm bell on bitcoin. The Booklet replaces the previous booklet of the same name that was issued in February The Booklet acknowledges that FINRA Rule regarding suitability of recommended products does not expressly apply to sales or recommendations made directly by a bank. Real Estate and Construction. In this respect, the Booklet shows that basic regulatory attitudes about bank retail securities activities have not materially changed producta 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.

The OCC Booklet explicitly notes that banks that offer services to lower-income clients, clients with little to no investment experience, or seniors may present heightened reputation risk. The OCC emphasizes the importance of due diligence of third-party providers of RNDIP sales kn 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.

More clarity regarding specific OCC expectations and methods for implementing the guidance in the Booklet will be revealed through upcoming examination cycles.

The Booklet details the OCC’s new expectations of third parties that provide RNDIPs through bank distribution channels and focuses on the terms to be contained in networking agreements with banks.

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 Booklet contains extensive discussion about permissible compensation arrangements and referral fees.

Nondeposit Investment Discussions, Answers, and Free Resources for Banking Professionals

In addition, banks should adopt comprehensive compliance policies and procedures that address applicable regulations and guidance, including the Interagency Statement. A bank’s failure to provide adequate resources and risk management to prodycts manage and control the risks associated with any RNDIP sales program may present a strategic risk to the bank.

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. Blockchain Legal Resource Blog: