§ 563.23-3 Accounting principles and procedures.

For purposes of examination by and reports to the Corporation and of compliance with this subchapter, each insured institution and service corporation shall:

(a) Employ such specific principles or procedures on particular accounting or reporting matters as the Corporation may require by regulation or otherwise; and

(b) Prepare and maintain such books and records as will support its financial statements and reports to the Corporation and readily permit reconciliation of such statements and reports with its books and records; and

(c) Prepare its other financial statements and reports to the Corporation on the basis of generally accepted accounting principles.

[38 FR 26111, Sept. 18, 1973]

§ 563.24 Sales plans; give-aways.

Every applicant for insurance which uses salesmen, sales agencies, surplus certificates, or other sales plans shall submit, with its application, full details thereof. No insured institution shall, directly or indirectly enter into, extend, or renew any contract, agreement, understanding, or arrangement that authorizes or permits any person other than such institution itself to promise, offer, or give a give-away, or to pay or absorb any of the cost of a give-away promised, offered, or given for or in connection with the solicitation, the opening, or any increase of any account in such institution, or which authorizes or permits any person other than such institution itself to pay or to absorb any of the cost of any give-away advertising for or in connection with any such solicitation, opening, or increase; and no such institution shall accept the opening or any increase of any account for or in

connection with which any person other than such institution gives a give-away or pays or absorbs any of the cost of any give-away advertising, or of any giveaway given, for or in connection with any such solicitation, opening, or increase. As used in this section: the term "give" means to give, to sell or dispose of for less than full monetary value or with any agreement or undertaking, contingent or otherwise, for repurchase or redemption, whether total or partial, or to offer, promise, or agree to do any of the foregoing; the term "give-away" means any money, property, service, or other thing of value, whether tangible or intangible; and the term "account" means an account of an insurable type. [35 F.R. 3752, Feb. 26, 1970]

§ 563.25 Sales commissions.

(a) General provisions. Except as provided in paragraphs (b), (c), (d), and (e) of this section, no insured institution shall, directly or indirectly

(1) Pay any sales commission, except to an employee of such institution;

(2) Pay to any employee of such institution any sales commission the payment or the amount of which is based in whole or in part upon the opening or increasing of any account or accounts in such institution, except a prize in cash or otherwise for participating in a new account drive or contest conducted by such institution; or

(3) Allow to any person any discount or rebate on or with respect to any account in such institution if the allowance or the amount of such discount or rebate is dependent in whole or in part upon another person's having solicited or obtained the opening or increasing of any account or accounts in such institution, or enter into any contract or agreement under which any person other than such institution is allowed to collect or receive from any other person (except such institution) any compensation for or in connection with the opening or increasing of any account or accounts in such institution; or

(4) Enter into, extend, or renew any contract, agreement, understanding, or arrangement, which authorizes or permits any person other than such insured institution itself to pay, or utilize any device whatsoever pursuant to which any person other than such insured institution pays, any compensation to any person for or in connection with the solicitation, the opening, or any increase of any

account in such institution or for any advertising in connection with any such solicitation, opening, or increase, or accept the opening of or any increase in any account in connection with which any person other than such insured institution pays any compensation to any person for or in connection with the solicitation, the opening, or any increase of any account in such institution or for any advertising in connection with any such solicitation, opening, or increase.

(b) Exceptions. The provisions of this section shall not prohibit any action which (1) is permitted by paragraph (c), paragraph (d), or paragraph (e) of this section or (2) constitutes the giving of a giveaway within the meaning of § 563.24 but is not prohibited by § 563.24 for the reason that such giveaway does not exceed the monetary value (as defined in said § 563.24) which is permitted by said section.

(c) Use of brokers-(1) General provisions. The provisions of this section shall not prohibit the payment by any insured institution, within the limitations of this paragraph (c), of sales commissions to brokers, but no insured institution shall accept the opening or any increase of any account as a result of services of any broker or brokers or pay any sales commission pursuant to the permission granted by this paragraph (c) at any time when the outstanding balances of all accounts in such institution which were opened or increased as a result of services of any broker or brokers aggregate a total in excess of five percent of the total of all accounts in such institution at the close of the next preceding December 31 or the next preceding June 30, whichever is later.

(2) Limitations. Sales commissions permitted by this paragraph (c) shall be only such as are payable to a broker with respect to an account or accounts opened or increased as a result of services of such broker. No such commissions shall exceed, in amount or value, two percent of the amounts paid in for the opening of the accounts involved, in the case of accounts opened, or two percent of the amounts paid in for the increases involved, in the case of accounts increased. As used in this paragraph (c), the term "broker" means a person employed, engaged, or retained by an institution for services consisting in whole or in part of soliciting or obtaining the opening or increasing of accounts in such institution, except (1) an indi

vidual who is an officer, a director, or an employee of such institution, or (11) an agent (as defined in paragraph (d) of this section) or a salesman (as defined in paragraph (e) of this section) utilized by such institution under circumstances permitting the payment of sales commissions to such agent or salesman under said paragraph (d) or said paragraph (e).

(3) Maintenance of records; requirement of written agreements. Each insured institution that accepts any account or any increase in any account as a result of the services of any broker or brokers or that pays any sales commission to any broker or brokers shall, in addition to maintaining such other records as will establish compliance with the provisions of this section, (i) before it accepts any such account or increase, and before it pays any such commission, identify each outstanding account that was opened or increased as a result of services of any broker or brokers, (f) similarly identify each account that is opened or increased subsequent to the effective date of this section as a result of services of any broker or brokers, (iii) establish and maintain by a separate ledger control or otherwise a record which shows at all times the aggregate of the outstanding balances of all accounts that were opened or increased as a result of services of any broker or brokers, and (iv) make and retain an itemized record of each payment of sales commission to any broker, identifying each account and stating the amount thereof in respect to which such sales commission is paid. No insured institution shall accept any account or any increase in any account as a result of services of any broker or pay any sales commission to any broker unless such broker is employed, engaged, or retained by such institution by agreement in writing, stating the service or services to be performed by the broker or brokers and the sales commissions to be paid, and the original or a signed duplicate of each agreement by which an insured institution employs, engages, or retains any broker shall be retained by such institution.

(d) Saving clause; use of agents—(1) General provisions. The provisions of this section shall not prohibit the payment of sales commissions, within the limitations of this paragraph (d), by any insured institution which on October 17, 1958, whether or not it was then an in

sured institution, was utilizing one or more agents having on said date one or more offices located within such institution's regular lending area and no agent who then had any office located outside such area or was being utilized as an agent by any other building and loan, savings and loan, or homestead association or cooperative bank.

(2) Limitations. Sales commissions permitted by this paragraph (d) shall be only such as are payable to an agent or agents having one or more offices located within such institution's regular lending area and having no office located outside such area. No such commissions, except to the extent that the same are separately ascertainable compensation for services other than soliciting or obtaining the opening or increasing of an account or accounts in such institution, shall exceed, in amount or value, two percent of the amounts of funds transmitted through such office or offices to the insured institution for the opening or increasing of accounts in such institution. As used in this paragraph (d), the following terms have the following meanings:

(i) The term "agent" means a person employed, engaged, or retained by an institution for services consisting in whole or in part of soliciting or obtaining the opening or increasing of accounts in such institution, and except as used in subparagraph (1) of this paragraph (d) means such a person other than an individual who is an officer or a director of such institution; and

(ii) The term "office" means a place of business which an agent of an institution maintains for soliciting or obtaining the opening or increasing of accounts in such institution.

(e) Saving clause; use of salesmen(1) General provisions. The provisions of this section shall not prohibit the payment of sales commissions, within the limitations of this paragraph (e), by an insured institution which on October 17, 1958, whether or not it was then an insured institution, was utilizing one or more salesmen.

(2) Limitations. Sales commissions permitted by this paragraph (e) shall be only such as are payable to a salesman or salesmen having no office as defined in the last sentence of this subparagraph (2). No such commissions, so far as the amounts thereof are based upon the opening or increasing of an account or accounts in such institution, shall exceed,

in amount or value, two percent of the par maturity value of the account or accounts involved, in the case of accounts opened, or of the increase in par or maturity value thereof, in the case of accounts increased. As used in this paragraph (e), the following terms have the following meanings:

(i) The term "salesman" means an individual (other than an individual who is an officer or a director of such institution) who is employed, engaged, or retained by an institution for services consisting in whole or in part of soliciting or obtaining the opening or increasing of accounts in such institution and who receives compensation the amount of which is based in whole or in part upon the opening or increasing of accounts in such institution; and

(ii) The term "office" means, with reference to a salesman for an institution, (a) a place of business which such salesman maintains for soliciting or obtaining the opening or increasing of accounts in such institution, except a home of such salesman located within such salesman located outside such area; or a place of business of such institution located within such areas; (b) a home of such salesman located outside such area: or (c) a place of business of such institution, located outside such area, at which such salesman performs services for such institution, at or from which such salesman receives assignments or instructions from such institution, or at or to which such salesman renders reports to such institution.

[24 FR. 9658, Dec. 3, 1959, as amended at 28 F.R. 6062, June 14, 1963]

§ 563.26 Sales commissions; definitions. As used in § 563.25 and in this section

(a) The following terms have the following meanings: (1) "account" means any share, investment certificate, deposit, or savings account in an institution; (2) "compensation" means any salary, fee, commission, or other compensation, whether in the form of money, property, or otherwise; (3) "employee" except where used in paragraph (c) of § 563.25 means, and where so used includes, an individual (other than an individual who is a director of such institution) who is employed by an institution at the principal office or at another office of such institution and performs no services for such institution outside the regular lend

ing area of such institution; (4) "officer" means the president, a vice-president, the secretary, or the treasurer of an institution; (5) "regular lending area” means the territory within fifty miles of an institution's principal office and the territory within which such institution was, within the meaning of the first sentence of 563.9, operating on June 27, 1934; and (6) "sales commission" means any compensation which in whole or in part is compensation for soliciting or obtaining the opening or increasing of an account or accounts in an insured institution or any compensation by an insured institution to a person engaged in whole or in part in soliciting or obtaining the opening or increasing of accounts in any such institution; and

(b) The term "pay" except where first used in subparagraph (3) of paragraph (c) of 563.25, and the term "payment except where used in said subparagraph (3) and where last used in this paragraph (b), include contracting or agreeing to pay, but the terms “pay" and "payment", except where said terms are used in said subparagraph (3), do not include (1) the making to an assignee, designee, or legal representative of any payment otherwise proper under § 563.25 or (2) any payment pursuant to a contract or agreement under which no services remain to be performed; and the term "person" includes groups of persons and artificial persons and includes investors.

[24 F.R. 9659, Dec. 8, 1959, as amended at 28 F.R. 6063, June 14, 1963; 28 F.R. 6494, June 25, 1963]

§ 563.27 Advertising must be accurate.

No insured institution shall use advertising (whether printed, radio, display, or of any other nature) or make any representation which is inaccurate in any particular or which in any way misrepresents its services, contracts, investments, or financial condition.

[36 F.R. 7127, Apr. 15, 1971]

§ 563.28 Advertising of insurance of

accounts.

An insured institution may advertise itself as a "member" of the Federal Savings and Loan Insurance Corporation. [23 F.R. 9917, Dec. 23, 1958]

§ 563.29 Name of association.

No insured institution shall advertise under a name which includes the word "insured" in the name.

[23 F.R. 9917, Dec. 23, 1958]

§ 563.30 Reservation of right concern ing advertising.

The Corporation reserves the right to prescribe the form in which insurance of accounts may be advertised.

[23 F.R. 9917, Dec. 23, 1958]

§ 563.31 Other insurance or guaranty.

(a) An insured institution shall not acquire any insurance or guaranty of all or any part of the accounts of such insured institution in addition to the insurance provided by Title IV of the National Housing Act. As used in this section the term "accounts" shall have the same meaning as the term "withdrawable or repurchasable shares, investment certificates, or deposits" where used in subsection (a) of section 405 of the National Housing Act.

(b) The foregoing provisions of this section shall not be deemed to be violated by any action by a Federal savings and loan association that is in conformity with § 545.24-2 of this chapter or by any action by an insured institution which is not a Federal savings and loan association that would be in conformity with said 545.24-2 if such institution were a Federal savings and loan association which was a "deposit association" within the meaning of that term as used in § 545.1-2 of this chapter.

[39 FR 45256, Dec. 31, 1974]

§ 563.32 Payment of trustee fees on pension trust accounts.

Notwithstanding any other provision of this subchapter, annual payment by an insured institution of a nominal fee, even if computed with reference to the number of persons having interests in the trust, may be made to the trustee of a trust qualified under the SelfEmployed Individuals Tax Retirement Act of 1962, as amended, during the period that the account for such trust is maintained in such institution. [34 F.R. 5376, Mar. 19, 1969]

§ 563.34 Selection of depositary.

(a) Except with the prior written approval of the Corporation, as provided in paragraph (b) of this section, and except as is otherwise provided in this subparagraph, no insured institution may (1) establish a depositary relationship on or after July 1, 1972, with a depositary with which it has an interlock; or (2) maintain an existing depository relationship if an interlock with such depositary occurs on or after

July 1, 1972. Any depositary arrangement involving an interlock existing prior to July 1, 1972, may be continued on and after such date unless such arrangement has been specifically disapproved by the Corporation. The provisions of this section shall not apply to a depositary relationship between an insured institution and a Federal Home Loan Bank. For the purposes of this section and "interlock" will be deemed to exist between an insured institution and a depositary whenever any officer, director, or controlling person of the insured institution, or attorney regularly serving the institution in the capacity of attorney at law, or the spouse of any of the foregoing, is an officer, partner, director, or trustee of the depositary or the owner of ten percent or more of the depositary's stock:

(b) Any request for such Corporation approval shall be filled with a Supervisory Agent of the Corporation at the Federal Home Loan Bank of the district in which the institution is located. In taking action with respect to depositary arrangements, including disapproval of existing arrangements, the Corporation will consider the size of the depositary relative to the deposits maintained by the institution, the amount of the deposits relative to the size of the institution, the degree of the interlocking relationships, and any other factor which is or may be detrimental to the institution or investors or depositors therein or borrowers therefrom.

(Sec. 407, 48 Stat. 1260; 12 U.S.C. 1780) [35 FR 18038, Nov. 25, 1970, as amended at 38 FR 26111, Sept. 18, 1973] § 563.35

Certain conditions prohibited.

(a) No insured institution or director, officer, or employee thereof may grant any loan or extend any other service of the institution on the prior condition, agreement, or understanding that the borrower contract for any of the following with any specific firm, agency, or person:

(1) Insurance (except insurance or a guaranty provided by a government agency);

(2) Building materials;

(3) Legal services, including title examination, and escrow and abstract services; and

(4) Services of a real estate agent or broker.

(b) The prohibition contained in subparagraph (1) of paragraph (a) of

this section shall not be construed to prohibit an insured institution from refusing to grant a loan or extend any other service if the borrower wishes to contract, in connection with such loan or service, with a particular company, firm, agency, or person whose services, in such connection, are believed by the insured institution, on reasonable grounds, to afford it insufficient protection.

(c) The prohibition contained in subparagraph (3) of paragraph (a) of this section shall not be construed to prohibit the insured institution from requiring the borrower to pay an initial loan charge to reimburse the institution for legal services rendered to it by an attorney selected by the institution in connection with the processing and closing of a loan.

(Sec. 407, 48 Stat. 1260; 12 U.S.C. 1730) [35 FR. 18039, Nov. 25, 1970]

§ 563.36 Equal Opportunity in Employ

ment.

(a) General. Executive Order 11246, "Equal Opportunity in Employment", requires employers contracting with the Federal Government to provide equal employment opportunities. The Office of Federal Contract Compliance of the Department of Labor, which has administrative responsibility under such Order, has determined that for purposes of the Order insured institutions are government contractors. The Corporation is therefore required by the Order and by Department of Labor Regulations to insert in the contract of insurance of each insured institution the "Equal Employment Opportunity Clause" contained in paragraph (b) of this section, and such clause shall be deemed to be expressly incorporated in each such contract of insurance. The determination that insurance of accounts is a Government contract for the purposes of such Order is not considered by the Corporation or the Department of Labor to be a determination that such insurance is a "contract" for other purposes.

(b) Equal Employment Opportunity Clause. The following language shall constitute the "Equal Employment Opportunity Clause" referred to in paragraph (a) of this section:

(1) No insured institution shall discriminate against any employee or applicant for employment because of race, color, religion, sex, or national origin.

(2) Each insured institution shall take affirmative action to insure that appli