PART 151—RECORDKEEPING AND CONFIRMATION REQUIREMENTS FOR SECURITIES TRANSACTIONS Authority: 12 U.S.C. 1462a, 1463, 1464, 5412(b)(2)(B). Source: 76 FR 49008, Aug. 9, 2011, unless otherwise noted. § 151.10 What does this part do? This part establishes recordkeeping and confirmation requirements that apply when a Federal savings association (“you”) effects certain securities transactions for customers. § 151.20 Must I comply with this part? (a) General. (1) You effect a securities transaction for a customer. (2) You effect a transaction in government securities. (3) You effect a transaction in municipal securities and are not registered as a municipal securities dealer with the SEC. (4) You effect a securities transaction as fiduciary. You also must comply with 12 CFR part 150 when you effect such a transaction. (b) Exceptions Small number of transactions. (2) Government securities. See (3) Municipal securities. see (4) Foreign branches. (5) Transactions by registered broker-dealers. § 151.30 What requirements apply to all transactions? You must effect all transactions, including transactions excepted under § 151.20, in a safe and sound manner. You must maintain effective systems of records and controls regarding your customers' securities transactions. These systems must clearly and accurately reflect all appropriate information and provide an adequate basis for an audit. § 151.40 What definitions apply to this part? Asset-backed security Asset-backed security Common or collective investment fund Completion of the transaction (1) If the customer purchases a security through or from you, except as provided in paragraph (2) of this definition, the time the customer pays you any part of the purchase price. If payment is made by a bookkeeping entry, the time you make the bookkeeping entry for any part of the purchase price. (2) If the customer purchases a security through or from you and pays for the security before you request payment or notify the customer that payment is due, the time you deliver the security to or into the account of the customer. (3) If the customer sells a security through or to you, except as provided in paragraph (4) of this definition, the time the customer delivers the security to you. If you have custody of the security at the time of sale, the time you transfer the security from the customer's account. (4) If the customer sells a security through or to you and delivers the security to you before you request delivery or notify the customer that delivery is due, the time you pay the customer or pay into the customer's account. Customer Customer Debt security Debt security Debt security et seq. Government security (1) A security that is a direct obligation of, or an obligation that is guaranteed as to principal and interest by, the United States; (2) A security that is issued or guaranteed by a corporation in which the United States has a direct or indirect interest if the Secretary of the Treasury has designated the security for exemption as necessary or appropriate in the public interest or for the protection of investors; (3) A security issued or guaranteed as to principal and interest by a corporation if a statute specifically designates, by name, the corporation's securities as exempt securities within the meaning of the laws administered by the SEC; or (4) Any put, call, straddle, option, or privilege on a government security described in this definition, other than a put, call, straddle, option, or privilege: (i) That is traded on one or more national securities exchanges; or (ii) For which quotations are disseminated through an automated quotation system operated by a registered securities association. Investment discretion Investment company plan (1) A customer purchases securities issued by an open-end investment company or unit investment trust registered under the Investment Company Act of 1940, making the payments directly to, or made payable to, the registered investment company, or the principal underwriter, custodian, trustee, or other designated agent of the registered investment company; or (2) A customer sells securities issued by an open-end investment company or unit investment trust registered under the Investment Company Act of 1940 under: (i) An individual retirement or individual pension plan qualified under the Internal Revenue Code; or (ii) A contractual or systematic agreement under which the customer purchases at the applicable public offering price, or redeems at the applicable redemption price, securities in specified amounts (calculated in security units or dollars) at specified time intervals, and stating the commissions or charges (or the means of calculating them) that the customer will pay in connection with the purchase. Municipal security (1) A security that is a direct obligation of, or an obligation guaranteed as to principal or interest by, a state or any political subdivision, or any agency or instrumentality of a state or any political subdivision. (2) A security that is a direct obligation of, or an obligation guaranteed as to principal or interest by, any municipal corporate instrumentality of one or more states; or (3) A security that is an industrial development bond. Periodic plan SEC Security Security Sweep account [76 FR 49008, Aug. 9, 2011, as amended at 82 FR 8110, Jan. 23, 2017] Subpart A—Recordkeeping Requirements § 151.50 What records must I maintain for securities transactions? If you effect securities transactions for customers, you must maintain all of the following records for at least three years: (a) Chronological records. (1) The account or customer name for which you effected each transaction; (2) The name and amount of the securities; (3) The unit and aggregate purchase or sale price; (4) The trade date; and (5) The name or other designation of the registered broker-dealer or other person from whom you purchased the securities or to whom you sold the securities. (b) Account records. (1) Purchases and sales of securities; (2) Receipts and deliveries of securities; (3) Receipts and disbursements of cash; and (4) Other debits and credits pertaining to transactions in securities. (c) Memorandum (order ticket). (1) The account or customer name for which you effected each transaction; (2) Whether the transaction was a market order, limit order, or subject to special instructions; (3) The time the trader received the order; (4) The time the trader placed the order with the registered broker-dealer, or if there was no registered broker-dealer, the time the trader executed or cancelled the order; (5) The price at which the trader executed the order; (6) The name of the registered broker-dealer you used. (d) Record of registered broker-dealers. (e) Notices. § 151.60 How must I maintain my records? (a) In general. (b) Use of third party. [82 FR 8110, Jan. 23, 2017] Subpart B—Content and Timing of Notice § 151.70 What type of notice must I provide when I effect a securities transaction for a customer? If you effect a securities transaction for a customer, you must give or send the customer the registered broker-dealer confirmation described at § 151.80, or the written notice described at § 151.90. For certain types of transactions, you may elect to provide the alternate notices described in § 151.100. § 151.80 How do I provide a registered broker-dealer confirmation? (a) If you elect to satisfy § 151.70 by providing the customer with a registered broker-dealer confirmation, you must provide the confirmation by having the registered broker-dealer send the confirmation directly to the customer or by sending a copy of the registered broker-dealer's confirmation to the customer within one business day after you receive it. (b) Unless you have determined remuneration in a written agreement with the customer, if you have received or will receive remuneration from any source, including the customer, in connection with the transaction, you must provide a statement of the source and amount of the remuneration in addition to the registered broker-dealer confirmation described in paragraph (a) of this section. [76 FR 49008, Aug. 9, 2011, as amended at 82 FR 8110, Jan. 23, 2017] § 151.90 How do I provide a written notice? If you elect to satisfy § 151.70 by providing the customer a written notice, you must give or send the written notice at or before the completion of the securities transaction. You must include all of the following information in a written notice: (a) Your name and the customer's name. (b) The capacity in which you acted (for example, as agent). (c) The date and time of execution of the securities transaction (or a statement that you will furnish this information within a reasonable time after the customer's written request), and the identity, price, and number of shares or units (or principal amount in the case of debt securities) of the security the customer purchased or sold. (d) The name of the person from whom you purchased or to whom you sold the security, or a statement that you will furnish this information within a reasonable time after the customer's written request. (e) The amount of any remuneration that you have received or will receive from the customer in connection with the transaction unless the remuneration paid by the customer is determined under a written agreement, other than on a transaction basis. (f) The source and amount of any other remuneration you have received or will receive in connection with the transaction. If, in the case of a purchase, you were not participating in a distribution, or in the case of a sale, were not participating in a tender offer, the written notice may state whether you have or will receive any other remuneration and state that you will furnish the source and amount of the other remuneration within a reasonable time after the customer's written request. (g) That you are not a member of the Securities Investor Protection Corporation, if that is the case. This does not apply to a transaction in shares of a registered open-end investment company or unit investment trust if the customer sends funds or securities directly to, or receives funds or securities directly from, the registered open-end investment company or unit investment trust, its transfer agent, its custodian, or a designated broker or dealer who sends the customer either a confirmation or the written notice in this section. (h) Additional disclosures. You must provide all of the additional disclosures described in the following chart for transactions involving certain debt securities: If you effect a transaction involving . . . You must provide the following additional information in your written notice . . . (1) A debt security subject to redemption before maturity A statement that the issuer may redeem the debt security in whole or in part before maturity, that the redemption could affect the represented yield, and that additional redemption information is available upon request. (2) A debt security that you effected exclusively on the basis of a dollar price (i) The dollar price at which you effected the transaction; and (A) The issuer may extend the maturity date of the security with a variable interest rate; or (B) The security is an asset-backed security that represents an interest in, or is secured by, a pool of receivables or other financial assets that are subject continuously to prepayment. (3) A debt security that you effected on basis of yield (i) The yield at which the transaction, including the percentage amount and its characterization (e.g., current yield, yield to maturity, or yield to call). If you effected the transaction at yield to call, you must indicate the type of call, the call date, and the call price; (ii) The dollar price calculated from that yield; and (iii) The yield to maturity and the represented yield, if you effected the transaction on a basis other than yield to maturity and the yield to maturity is lower than the represented yield. You are not required to disclose this information if: (A) The issuer may extend the maturity date of the security with a variable interest rate; or (B) The security is an asset-backed security that represents an interest in, or is secured by, a pool of receivables or other financial assets that are subject continuously to prepayment. (4) A debt security that is an asset-backed security that represents an interest in, or is secured by, a pool of receivables or other financial assets that are subject continuously to prepayment (i) A statement that the actual yield of the asset-backed security may vary according to the rate at which the underlying receivables or other financial assets are prepaid; and (5) A debt security, other than a government security A statement that the security is unrated by a nationally recognized statistical rating organization, if that is the case. § 151.100 What are the alternate notice requirements? You may elect to satisfy § 151.70 by providing the alternate notices described in the following chart for certain types of transactions. If you effect a securities transaction . . . Then you may elect to . . . (a) For or with the account of a customer under a periodic plan, sweep account, or investment company plan Give or send to the customer within five business days after the end of each quarterly period a written statement disclosing: (1) Each purchase and redemption that you effected for or with, and each dividend or distribution that you credited to or reinvested for, the customer's account during the period; (2) The date of each transaction; (3) The identity, number, and price of any securities that the customer purchased or redeemed in each transaction; (4) The total number of shares of the securities in the customer's account; (5) Any remuneration that you received or will receive in connection with the transaction; and (6) That you will give or send the registered broker-dealer confirmation described in § 151.80 or the written notice described in § 151.90 within a reasonable time after the customer's written request. (b) For or with the account of a customer in shares of an open-ended management company registered under the Investment Company Act of 1940 that holds itself out as a money market fund and attempts to maintain a stable net asset value per share Give or send to the customer the written statement described at paragraph (a) of this section on a monthly basis. You may not use the alternate notice, however, if you deduct sales loads upon the purchase or redemption of shares in the money market fund. (c) For an account for which you do not exercise investment discretion, and for which you and the customer have agreed in writing to an arrangement concerning the time and content of the written notice Give or send to the customer a written notice at the agreed-upon time and with the agreed-upon content, and include a statement that you will furnish the registered broker-dealer confirmation described in § 151.80 or the written notice described in § 151.90 within a reasonable time after the customer's written request. (d) For an account for which you exercise investment discretion other than in an agency capacity, excluding common or collective investment funds Give or send the registered broker-dealer confirmation described in § 151.80 or the written notice described in § 151.90 within a reasonable time after a written request by the person with the power to terminate the account or, if there is no such person, any person holding a vested beneficial interest in the account. (e) For an account in which you exercise investment discretion in an agency capacity Give or send each customer a written itemized statement specifying the funds and securities in your custody or possession and all debits, credits, and transactions in the customer's account. You must provide this information to the customer not less than once every three months. You must give or send the registered broker-dealer confirmation described in § 151.80 or the written notice described in § 151.90 within a reasonable time after a customer's written request. (f) For a common or collective investment fund (1) Give or send to a customer who invests in the fund a copy of the annual financial report of the fund, or (2) Notify the customer that a copy of the report is available and that you will furnish the report within a reasonable time after a written request by a person to whom a regular periodic accounting would ordinarily be rendered with respect to each participating account. § 151.120 May I charge a fee for a notice? You may not charge a fee for providing a notice required under this subpart B, except that you may charge a reasonable fee for the notices provided under §§ 151.100(a), (d), and (e). Subpart C—Settlement of Securities Transactions § 151.130 When must I settle a securities transaction? (a) You may not effect or enter into a contract for the purchase or sale of a security that provides for payment of funds and delivery of securities later than the latest of: (1) The number of business days in the standard settlement cycle followed by registered broker dealers in the United States after the date of the contract. The number of business days in the standard settlement cycle shall be determined by reference to paragraph (a) of SEC Rule 15c6-1, 17 CFR 240.15c6-1(a); (2) The fourth business day after the contract, if the contract involves the sale for cash of securities that are priced after 4:30 p.m. Eastern Standard Time on the date the securities are priced and are sold by an issuer to an underwriter under a firm commitment underwritten offering registered under the Securities Act of 1933, 15 U.S.C. 77a, et seq., (3) Such time as the SEC may specify pursuant to an order of exemption in accordance with paragraph (b)(2) of SEC Rule 15c6-1; or (4) Such time as the parties expressly agree at the time of the transaction. The parties to a contract are deemed to have expressly agreed to an alternate date for payment of funds and delivery of securities at the time of the transaction for a contract for the sale for cash of securities under a firm commitment offering, if the managing underwriter and the issuer have agreed to the date for all securities sold under the offering and the parties to the contract have not expressly agreed to another date for payment of funds and delivery of securities at the time of the transaction. (b) The deadlines in paragraph (a) of this section do not apply to the purchase or sale of limited partnership interests that are not listed on an exchange or for which quotations are not disseminated through an automated quotation system of a registered securities association. [76 FR 49008, Aug. 9, 2011, as amended at 83 FR 26349, June 7, 2018] Subpart D—Securities Trading Policies and Procedures § 151.140 What policies and procedures must I maintain and follow for securities transactions? If you effect securities transactions for customers, you must maintain and follow policies and procedures that meet all of the following requirements: (a) Your policies and procedures must assign responsibility for the supervision of all officers or employees who: (1) Transmit orders to, or place orders with, registered broker-dealers; (2) Execute transactions in securities for customers; or (3) Process orders for notice or settlement purposes, or perform other back office functions for securities transactions that you effect for customers. Policies and procedures for personnel described in this paragraph (a)(3) must provide supervision and reporting lines that are separate from supervision and reporting lines for personnel described in paragraphs (a)(1) and (2) of this section. (b) Your policies and procedures must provide for the fair and equitable allocation of securities and prices to accounts when you receive orders for the same security at approximately the same time and you place the orders for execution either individually or in combination. (c) Your policies and procedures must provide for securities transactions in which you act as agent for the buyer and seller (crossing of buy and sell orders) on a fair and equitable basis to the parties to the transaction, where permissible under applicable law. (d) Your policies and procedures must require your officers and employees to file the personal securities trading reports described at § 151.150, if the officer or employee: (1) Makes investment recommendations or decisions for the accounts of customers; (2) Participates in the determination of these recommendations or decisions; or (3) In connection with their duties, obtains information concerning which securities you intend to purchase, sell, or recommend for purchase or sale. § 151.150 How do my officers and employees file reports of personal securities trading transactions? An officer or employee described in § 151.140(d) must report all personal transactions in securities made by or on behalf of the officer or employee if he or she has a beneficial interest in the security. (a) Contents and filing of report. (1) The date of each transaction, the title and number of shares, the interest rate and maturity date (if applicable), and the principal amount of each security involved. (2) The nature of each transaction (i.e., purchase, sale, or other type of acquisition or disposition). (3) The price at which each transaction was effected. (4) The name of the broker, dealer, or other intermediary effecting the transaction. (5) The date the officer or employee submitted the report. (b) Report not required for certain transactions. (1) He or she has no direct or indirect influence or control over the account for which the transaction was effected or over the securities held in that account; (2) The transaction was in shares issued by an open-end investment company registered under the Investment Company Act of 1940; (3) The transaction was in direct obligations of the government of the United States; (4) The transaction was in bankers' acceptances, bank certificates of deposit, commercial paper or high quality short term debt instruments, including repurchase agreements; or (5) The officer or employee had an aggregate amount of purchases and sales of $10,000 or less during the calendar quarter. (c) Alternate report.