FDIC Identifies New Business Relationship That Qualifies Under Primary Purpose Exception For Brokered Deposits

The FDIC issued a final rule that includes an additional business relationship that meets the "primary purpose" exception to the definition of "deposit broker" in Section 29 of the Federal Deposit Insurance Act. The final rule became effective on January 10, 2022.

Under the rule, an agent or nominee will meet the exception if it (i) is engaged in the business of placing customer funds at insured depository institutions ("IDIs"), (ii) acts in a custodial capacity based on specific instructions received from a depositor, and (iii) neither determines at which insured depository institutions to place funds nor negotiates any rate, terms, fee or conditions for the deposit account. Entities that meet the above criteria are able to rely upon the primary purpose exception to the deposit broker definition, and they need not submit an application or notice.