AUTHORITY: Secs. 1A, 19 and 23 of the Securities Exchange Act of 1934; 15 U.S.C. 78q-1, 78s and 78w.

SOURCE: 42 FR 19325, Apr. 13, 1977, unless otherwise noted.

§ 342.1 Scope of part.

This part is ussued by the Federal Deposit Insurance Corporation (the Corporation) pursuant to sections 17A, 19 and 23 of the Securities Exchange Act of 1934 as amended (15 U.S.C. 780 (the Act). It applies to applications by banks insured by the Corporation (other than members of the Federal Reserve System) for a stay or review of certain actions by clearing agencies registered under the Act for which the Securities and Exchange Commission is not the appropriate regulatory agency under section 3(a)(34)(B) of the Act (bank clearing agencies).

§ 342.2 Applications for stays of discipli nary sanctions or summary suspensions by a bank clearing agency.

If any bank clearing agency imposes any final disciplinary sanction pursuant to section 17A(b)(3)(G) of the Act, or summarily suspends or limits or prohibits access pursuant to section 17A(b)(5)(C) of the Act, any person aggrieved thereby for which the Corporation is the appropriate regulatory agency may file with the Corporation, by telegram or otherwise, a request for a stay of imposition of such action. Such request shall be in writing and shall include a statement as to why such stay should be granted.

§ 342.3 Applications for review of final disciplinary sanctions, denials of participation, or prohibitions or limitations of access to services imposed by bank clearing agencies.

(a) Proceedings on an application to the Corporation under section 19(d)(2) of the Act for review of any final disciplinary sanction, denial or conditioning of participation, or prohibition or limitation with respect to access to services offered by a bank clearing agency shall be governed by this section.

(b) An application for review pursuant to section 19(d)(2) of the Act shall be filed with the Corporation within

30 days after notice thereof was filed pursuant to section 19(d)(1) of the Act and received by the aggrieved person applying for review, or within such longer period as the Corporation may determine. The Executive Secretary of the Corporation shall serve a copy of the application on the bank clearing agency, which shall, within ten days after receipt of the application, certify and file with the Corporation one copy of the record upon which the action complained of was taken, together with three copies of an index to such record. The Executive Secretary shall serve upon the parties copies of such index and any papers subsequently filed.

(c) Within 20 days after receipt of copy of the index, the applicant shall file a brief or other statement in support of his application which shall state the specific grounds on which the application is based, the particular findings of the bank clearing agency to which objection is taken and the relief sought. Any application not perfected by such timely brief or statement may be dismissed as abandoned.

(d) Within 20 days after receipt of the applicant's brief or statement the bank clearing agency may file an answer thereto, and within 10 days of receipt of any such answer the applicant may file a reply. Any such papers not filed within the time provided by paragraphs (b), (c), or (d) of this section will not be received except upon special permission of the Corporation.

(e) On its own motion, the Corporation may direct that the record under review be supplemented with such additional evidence as it may deem relevant. Nevertheless, the bank clearing agency and persons who may be aggrieved by its actions shall be obliged to present all evidence that they deem relevant in the proceedings before the bank clearing agency, and no such person shall be entitled to present additional evidence unless he shows to the satisfaction of the Corporation that such additional evidence is material and that there were reasonable grounds for his failure to present such evidence in such proceedings. Any request for leave to present additional evidence shall be filed promptly so as

pal securities representative with a bank municipal securites dealer which has filed a Form MSD-4 with the Corporation for that person pursuant to paragraph (a) of this section, such dealer shall file an orignial and two copies of a notification of termination with the Corporation on Form MSD-5, "Uniform Termination Notice for Municipal Securities Principal or Municipal Securities Representative Associated with a Bank Municipal Securities Dealer", completed in accordance with the instructions contained therein.

(d) A

bank municipal securities dealer which files a Form MSD-4, Form MSD-5, or an amending statement with the Corporation under this part shall retain for its own records a copy of each such Form MSD-4, Form MSD-5, or amending statement for at least three years after termination of the associated person with respect to ! whom the filing was made.

(e) Forms MSD-4, Forms MSD-5 and amending statements are to be filed with Director, Division of Bank Supervision, Federal Deposit Insurance Corporation, Washington, DC 20429. The date that the Corporation receives a Form MSD-4, Form MSD-5, or amending statement shall be the date of filing. A Form MSD-4, Form MSD-5, or amending statement which is not prepared and executed in accordance with the applicable requirements may be returned as unacceptable for filing. Acceptance for filing shall not constitute any finding that a Form MSD-4, Form MSD-5 or amending statement has been completed in accordance with the applicable requirements or that any information contained therein is true, current, complete or not misleading. Every Form MSD-4, Form MSD-5, or amending statement filed with the Corporation under this part shall constitute a filing with the Securities and Exchange Commission for purposes of section 17(c)(1) of the Act (15 U.S.C. 78q(c)(1)) and a report, application, or document within the meaning of section 32(a) of the Act (15 U.S.C. 78ff(a)). Forms MSD-4 and MSD-5 can be obtained from the FDIC regional office for the area in which the bank is located.

§ 344.1 Purpose and scope.

(a) Purpose. The purpose of this part is to ensure that purchasers of securities in transactions effected by an insured nonmember bank are provided adequate information concerning the transactions. This part is also designed to ensure that insured nonmember banks maintain adequate records and controls with respect to securities transactions they effect.

(b) Scope. This part is issued by the Federal Deposit Insurance Corporation (FDIC) and applies to insured banks which are not members of the Federal Reserve System (bank).

§ 344.2 Definitions.

fund

For purposes of this part: (a) Collective investment means funds held by a bank as fiduciary and, consistent with local law, invested collectively: (1) In a common trust fund maintained by such bank exclusively for the collective investment and reinvestment of monies contributed thereto by the bank in its capacity as trustee, executor, administrator, guardian, or custodian under the Uniform Gifts to Minors Act, or (2) in a fund consisting solely of assets of retirement, pension, profit sharing, stock bonus or similar trusts which are exempt from Federal income taxation under the Internal Revenue Code;

(b) Customer shall mean any person or account, including any agency, trust, estate, guardianship, committee or other fiduciary account, for which a

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bank effects or participates in effecting the purchase or sale of securities, but shall not include a broker, dealer, dealer bank or issuer of the securities which are the subject of the transactions;

(c) A bank shall be deemed to exercise investment discretion with respect to an account if, directly or indirectly, the bank: (1) Is authorized to determine what securities or other property shall be purchased or sold by or for the account, or (2) makes recommendations as to what securities or other property shall be purchased or sold by or for the account even though some other person may have responsibility for such investment decisions.

(d) Periodic plan means any written authorization for a bank acting as agent to purchase or sell for a customer, a specific security or securities, in specific amounts (calculated in security units or dollars) or (to the extent of dividends and funds available) at specific time intervals, and setting forth the commission or charges to be paid by the customer in connection therewith, or the manner of calculating them;

(e) Security means any interest or instrument commonly known as a security, whether in the nature of debt or equity, including any stock, bond, note, debenture, evidence of indebtedness or any participation in or right to subscribe to or purchase any of the foregoing. The term security does not include:

(1) A deposit or share account in a federally insured depository institution,

(2) A loan participation,

(3) A letter of credit or other form of bank indebtedness incurred in the ordinary course of business,

(4) Currency,

(5) Any note, draft, bill of exchange, or bankers acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited,

(6) Units of a collective investment fund,

(7) Interests in a variable amount (master) note of a borrower of prime credit or

(8) U.S. Savings Bonds.

§ 344.3 Recordkeeping.

securities

Every bank effecting transactions for customers shall maintain the following records of those transactions for at least three years:

(a) Chronological records of original entry containing an itemized daily record of all purchases and sales of securities. These shall include the account for which each such transaction was effected, the description of the securities, the unit and aggregate purchase or sale price (if any), the trade date, and the name or other designation of the broker/dealer or other person from whom purchased or to whom sold;

(b) Account records for each customer which shall reflect all purchases and sales of securities, all receipts and deliveries of securities, and all other debits and credits pertaining to each account including all receipts and disbursements of cash;

(c) A separate memorandum (order ticket) of each order to purchase or sell securities (whether executed or cancelled), which shall include:

(1) The accounts for which the transaction was effected;

(2) Whether the transaction was a market order, limit offer, or subject to special instructions;

(3) The time the order was received by the trader or other bank employee responsible for effecting the transaction;

(4) The time the order was placed with the broker/dealer, or if there was no broker/dealer, the time the order was executed or cancelled;

(5) The price at which the order was executed; and

(6) The broker/dealer utilized;

(d) A record of all broker/dealers selected by the bank to effect securities transactions and the amount of commissions paid or allocated to each broker during the calendar year.

Nothing contained in paragraph (d) of this section shall require a bank to maintain the records required by this section in any given manner, Provided, That the information required to be shown is clearly and accurately re

flected and provides an adequate basis for the audit of such information.

[44 FR 43261, July 24, 1979; 44 FR 45375, Aug. 2, 1979]

§ 344.4 Form of notification.

Every bank effecting a securities transaction for a customer shall maintain for at least three years and, except as provided in § 344.5, mail or otherwise furnish to such customer either of the following types of notifications:

(a) (1) A copy of the confirmation of a broker/dealer relating to the securities transaction; and

(2) If the bank is to receive remuneration from the customer or any other source in connection with the transaction, and the remuneration is not determined pursuant to a prior written agreement between the bank and the customer, a statement of the source and the amount of any remuneration to be received; or

(b) A written notification disclosing: (1) The name of the bank; (2) The name of the customer;

(3) Whether the bank is acting as agent for the customer, as agent for both the customer and some other person, as prinicipal for its own account, or in any other capacity;

(4) The date and time of execution (or the fact that the time of execution will be 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;

(5) The amount of any remuneration received or to be received, directly or indirectly, by any broker/dealer from the customer in connection with the transaction;

(6) The amount of any remuneration received or to be received by the bank from the customer and the source and amount of any other remuneration to be received by the bank in connection with the transaction, unless remuneration is determined pursuant to a written agreement between the bank and the customer, Provided, however, In the case of U.S. Government securities, Federal agency obligations and municipal obligations, paragraph

(b)(6) of this section shall apply only with respect to remuneration received by the bank in an agency transaction; and

(7) (i) The name of the broker/ dealer utilized; or (ii) where no broker/dealer is utilized, the name of the person from whom the security was purchased or to whom it was sold, or the fact that such information will be furnished within a reasonable time upon written request.

§ 344.5 Time of notification.

The time for mailing or otherwise furnishing the written notification described in § 344.4 shall be five business days from the date of the transaction, or if a broker/dealer is utilized, within five business days from the receipt by the bank of the broker/dealer's confirmation, but the bank may elect to use the following alternative procedures if the transaction is effected for:

(a) Accounts (except periodic plans) where the bank does not excercise investment discretion and the bank and the customer agree in writing to a different arrangement as to the time and content of the notification; provided, however, that such agreement makes clear the customer's right to receive the written notification within the above prescribed time period at no additional cost to the customer;

(b) Accounts (except collective investment funds) where the bank exercises investment discretion in other than an agency capacity, in which instance the bank shall, upon request of the person having the power to terminate the account or, if there is no such person, upon the request of any person holding a vested beneficial interest in such account, mail or otherwise furnish to such person the written notification within a reasonable time. The bank may charge such person a reasonable fee for providing this information;

(c) Accounts where the bank excercises investment discretion in agency capacity, in which instance:

an

(1) The bank shall mail or otherwise furnish to each customer, at least once every three months, an itemized statement that specifies the funds and securities in the custody or possession of