August 25, 2011
Elizabeth M. Murphy, Secretary
Securities and Exchange Commission
100 F Street, N.E.,
Washington, D.C. 20549-1090
RE: Request for Comment – FINRA Proposed Rule 2231; File Number SR-FINRA-2009-028
Dear Ms. Murphy:
People’s Securities, Inc.(PSI) appreciates having the opportunity to respond to FINRA’s proposed
Rule 2231 (Customer Account Statements). We have two comments related to the proposed
linking of the member’s customer account statement requirements to FDIC insurance coverage.
The proposal states that Supplementary Material .01 would permit a member to send quarterly
statements to customers, instead of monthly statements, if:
“(2) The activity to the account consists only of the kind listed below:
(C) the transfer of uninvested customer credit balances into or out of
money market mutual funds or bank deposits pursuant to a
‘‘sweep program’’ pursuant to consent of the customer and
implemented consistent with applicable regulatory guidance,
except where the customer’s balance in the bank deposit
‘‘sweep program’’ during the period exceeds the amount insured by
the FDIC coverage.” [1]
First, PSI believes that it is not possible for a member to know if a, “customer’s balance in the
bank deposit “ sweep program during the period exceeds the amount insured by the FDIC
coverage”? FDIC coverage is determined by aggregating accounts at the insured financial
institution. These accounts are potentially unrelated to the sweep program and outside of the
member’s knowledge. In addition, customers have the ability to “structure” FDIC insurance
using variations of legal titles. In short, a member has no way of determining the amount of
FDIC insurance available to a customer.
Second, the limit of FDIC deposit insurance coverage itself, is not fixed. For example,
according to the FDIC:
“From December 31, 2010 through December 31, 2012, all noninterest-bearing
transaction accounts are fully insured, regardless of the balance of the account
and the ownership capacity of the funds.”
This would mean member firms will have to have specific knowledge of each type of deposit
account a customer maintains at an FDIC insured institution, inasmuch as FDIC insurance
coverage varies-(at least through December 31, 2012)-by type of deposit account.
In conclusion, PSI therefore suggests that the proposed language below, presently included
in (C), be deleted:
“except where the customer’s balance in the bank deposit ‘‘sweep program’’
during the period exceeds the amount insured by the FDIC coverage.”
Thank you.
Sincerely yours,
Robert C. Rungee
Robert C. Rungee
Senior Compliance Specialist
People's Securities, Inc.