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OCC BULLETIN 2009-19
To: Chief Executive Officers of All National Banks, Federal Branches and Agencies, Department and Division Heads, and All Examining Personnel

Description: New Notice Requirements for Sweep Accounts

This bulletin reminds national banks of a new Federal Deposit Insurance Corporation (FDIC) rule that requires banks to provide notices to sweep account customers. Specifically, the rule requires that, beginning July 1, 2009, each depository institution prominently disclose, in writing to its sweep account customers, whether the customers' swept funds are "deposits" within the meaning of 12 USC 1813(l), and, if not, the status of such funds in the event of the institution's failure. Such notices must be included in all new sweep account contracts and in all sweep account contract renewals, effective July 1, 2009. For existing sweep accounts, these disclosures must be made within 60 days after July 1, 2009, and at least annually thereafter. In cases when, based on the rules for determining end-of-day balances, it is possible that an account's sweep transaction may not be completed on the day of a bank's failure, the bank must disclose this possibility along with the resulting status of such unswept funds. The disclosure requirements do not apply to sweep accounts in which the transfers are within a single account or sub-account, or to sweep arrangements involving a deposit account-to-deposit account sweep in which the sweep does not affect the customer's insurance coverage.

On February 2, 2009, the FDIC published in the Federal Register the attached final rule "Method for Determining Deposit and other Liability Account Balances at a Failed Insured Depository Institution" (12 CFR 360.8) as an addition to the FDIC's resolution and receivership rules. The effective date of the final rule was March 4, 2009, with the sweep notice requirements effective beginning July 1, 2009. This rule articulates general principles underlying the FDIC's practices and procedures for establishing the final deposit account balances of each customer upon the failure of an insured depository institution for insurance coverage and receivership purposes. This "end-of-day ledger balance" will, with certain exceptions, be based on the cutoff times normally applied by the failed insured depository institution. In certain circumstances, the FDIC may impose an end-of-day cutoff point that is different from the bank's normal end-of-day cutoff point. The rule specifically addresses how the end-of-day ledger balance is determined for sweep accounts and imposes related ongoing notice requirements for sweep accounts.

Sweep accounts involve the pre-arranged transfer of funds from a deposit account to either an investment vehicle located outside the depository institution or another account or investment vehicle located within the institution. Depending upon a number of factors, an automated sweep transaction may or may not be deemed by the FDIC to have been completed when determining the end-of-day ledger balance used by the FDIC for insurance and receivership purposes. Recognizing that there are various types of sweep arrangements in place at insured depository institutions, the FDIC provides numerous examples in the preamble to their final rule. Banks will need to analyze their various sweep arrangements in light of this rule to determine the appropriate information that must be disclosed to their sweep account customers. Further guidance may be forthcoming on the FDIC's Web site.

For further information about this bulletin, contact the Office of the Chief National Bank Examiner (202) 649-6360.

Timothy W. Long
Senior Deputy Comptroller for Bank Supervision Policy
and Chief National Bank Examiner

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