SIFMA Comments to FDIC on Brokered Deposits Rulemaking

Washington, D.C., November 21, 2024 - SIFMA submitted a letter to the Federal Deposit Insurance Corporation (FDIC) on a proposal to revise its regulations implementing Section 29 of the Federal Deposit Insurance Act (FDI Act), which impose restrictions on the ability of certain insured depository institutions (IDIs) to accept brokered deposits and define the scope of parties that constitute deposit brokers. The letter focuses on the proposal's application to securities broker-dealers and their brokerage customers, as well as investment advisers and their clients.

"We respectfully request that the FDIC withdraw the proposal due to the lack of evidence justifying its proposed revisions and failure to consider relevant factors," SIFMA wrote in the letter, noting the proposal lacks a sufficient empirical basis and lacks data to estimate its impacts.

The lack of data is particularly concerning, SIFMA wrote, given the potentially negative consequences of the proposal which, as the letter details, "could reduce customer returns and safe banking options, compromise a stable source of deposit funding for IDIs and deter the allocation of excess customer cash to risk-free deposits."

Yesterday, the FDIC announced a "pause" in rulemakings, including this proposal, and the necessity of this proposal should be fully reconsidered during that time.

If the proposal is not withdrawn, the letter recommends the FDIC revise the proposal as outlined below:

• Retain the existing 25% test using assets under administration rather than assets under management metric, which would resolve a number of issues with the Proposal.
• Retain the current Primary Purpose Exception (PPE) notice and application processes, as the proposed notice and application processes are unworkable.
• The proposed changes to the scope of and application/notice processes for the PPE would create significant transition costs that should be addressed.
• The proposed changes to the deposit broker definition are not risk-based, make the definition overinclusive and are unlikely to address operational challenges.
• Other well-established exceptions should be retained:
  • exclusive deposit placement relationships should be retained.
  • when 100% of funds are placed into transactional accounts that do not pay any fees, interest, or other remuneration to the depositor

The comment letter further expands on these views and can be found here.

SIFMA also submitted a joint comment letter with six fellow trade associations detailing how the proposal on brokered deposits violates the Administrative Procedure Act. That letter can be found here.

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SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry's one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA).