Retail Nondeposit Investment Products Compliance Audit
The following items, as applicable, should be reviewed for compliance with the federal agencies joint
policy statement on the sale of nondeposit investment products:
•
Written statement on the investment sales program
•
Evidence of board of director review of the statement and compliance reviews
•
Written policies and procedures governing the sale of nondeposit investment products
•
Copy of the minimum disclosure for nondeposit investment products
•
Samples of signed customer statements
•
Samples of confirmations, account statements, and periodic statements
•
Samples of advertisements
•
Evidence of training
•
Copy of any incentive compensation programs
In addition, actual procedures should be checked against the formal program and procedures to ensure
compliance. Interviews should be conducted with the personnel responsible for complying with the joint
policy statement on the sale of nondeposit investment products to ensure adequate knowledge of
responsibilities and appropriate conduct.
The following checklist should be modified to fit the specifics of your institution.
NONDEPOSIT INVESTMENT PRODUCTS
Yes, No
N/A
1. Has the institution’s board of directors adopted a
written statement that addresses the risks associated
with the investment sales program and that contains
a summary of policies and procedures outlining the
features of the institution’s program and addressing
the issues contained in the federal agencies’ joint
policy statement dated February 15, 1994, and the
Consumer Insurance Rule of 2001?
Work
Paper
Reference
Comments
2. Is the institution’s statement reviewed periodically
by the board of directors?
3. Does the statement address the scope of activities of
any third party involved, as well as the procedures
for monitoring compliance by third parties?
4. Do the institution’s written policies and procedures
include:
•
Compliance procedures?
•
Supervision of personnel involved in sales?
•
Criteria governing the selection and review of
each type of product sold or recommended?
•
Permissible use, reuse, and confidentiality of
customer information?
•
Designation of employees to sell investment
products,
including
descriptions
of
responsibilities, appropriate referral activities,
training requirements, and compensation
arrangements?
•
Arrangements with third parties, including
written agreements and review of the third
party?
5. Do compliance procedures:
•
Identify any potential conflicts of interest and
how such conflicts should be addressed?
•
Provide for a system to monitor customer
complaints and their resolution?
•
Provide for verification that third-party sales are
being conducted consistent with the written
agreement, if applicable?
6. Are the results of reviews conducted by the
compliance personnel, as well as the audit function,
reported to the board of directors?
7. Does the institution, when recommending or selling
nondeposit investment products to retail customers,
ensure that customers are fully informed that the
products:
•
Are not insured by the Federal Deposit
Insurance Corporation (FDIC) or any other
agency of the United States, the bank, or any of
its affiliates?
•
Are not deposits or other obligations of the
institution and are not guaranteed by the
institution?
•
Are subject to investment risks, including
possible loss of principal?
8. Is such disclosure provided:
•
Orally during any sales presentation?
•
Orally when investment advice concerning
nondeposit investment products is provided?
•
Orally and in writing prior to or at the time an
investment account is opened to purchase these
products?
•
In advertisements
material?
and
other
promotional
9. Does the institution obtain a signed statement when
a customer opens an investment account
acknowledging that the customer has received and
understands the disclosures?
10. Do confirmations and account statements for such
products contain at least the minimum disclosures if
they contain the name or the logo of the institution
or an affiliate?
11. If a customer’s periodic deposit account statement
includes account information concerning the
customer’s nondeposit investment products, is such
information clearly separate from the information
concerning the deposit account, and is it introduced
with the minimum disclosures and the identity of the
entity conducting the nondeposit transaction?
12. Is information about nondeposit investment products
advertised and disclosed in a manner that clearly
differentiates these products from insured deposits?
13. Do advertisements for nondeposit investment
products conspicuously include at least the
minimum disclosures?
14. Do such advertisements refrain from suggesting or
conveying any inaccurate or misleading impression
about the nature of the product or its lack of FDIC
insurance?
15. Does the institution refrain from recommending or
selling a nondeposit investment product with a name
similar to that of the institution?
16. If the institution conducts investment sales programs
on bank premises, does it do so in a physical
location distinct from the area where retail deposits
are taken?
17. Has the institution taken steps to ensure that tellers
and other personnel located in the routine deposittaking area do not:
•
Make general or specific recommendations
regarding nondeposit investment products?
•
Qualify customers as eligible to purchase such
products?
•
Accept orders for such products, even if
unsolicited?
18. Has the institution taken steps to ensure that
investment sales personnel are properly qualified
and trained?
19. Has the institution taken steps to ensure that
investment sales personnel recommend investments
that are suitable for the particular customer?
20. Has the institution taken steps to ensure that
incentive compensation programs are properly
structured to protect customers and are in
compliance with the calculations in Regulation R
(12 CFR 218.700(c))?
Note: Regulation R will consider a referral fee of
not more than $25 a nominal fee. Fees for referrals
of high net worth individuals may be higher if
certain disclosures are given. ?
21. Do bank officers and employees who make
investment recommendations or decisions for
customers report their personal transactions in
securities to the bank within [10] [30] days after the
end of the quarter in which they are purchased?
Note: FDIC and OTS regulated banks use 30 days
(12 CFR 344.9 and 12 CFR 551.150) — OCC and
Fed regulated banks use 10 days (12 CFR 12.7(4)
and 12 CFR 208.34(g)(4)).