Securities and Exchange Commission § 247.760

§ 247.760 Exemption from definition of dian other than an employee benefit ‘‘’’ for accepting orders plan account or an individual retire- to effect transactions in securities ment account or similar account if: from or on behalf of custody ac- (1) Accommodation. The accepts counts. orders to effect transactions in securi- (a) Employee benefit plan accounts and ties for the account only as an accom- individual retirement accounts or similar modation to the customer; accounts. A bank is exempt from the (2) Employee compensation restriction definition of the term ‘‘broker’’ under and additional conditions. The bank section 3(a)(4) of the Act (15 U.S.C. complies with the employee compensa- 78c(a)(4)) to the extent that, as part of tion restrictions in paragraph (c) of its customary banking activities, the this section and the other conditions in bank accepts orders to effect trans- paragraph (d) of this section; actions in securities for an employee (3) Bank fees. Any fee charged or re- benefit plan account or an individual ceived by the bank for effecting a secu- retirement account or similar account rities transaction for the account does for which the bank acts as a custodian not vary based on: if: (i) Whether the bank accepted the (1) Employee compensation restriction order for the transaction; or and additional conditions. The bank (ii) The quantity or price of the secu- complies with the employee compensa- rities to be bought or sold; tion restrictions in paragraph (c) of (4) Advertisements. Advertisements by this section and the other conditions in or on behalf of the bank do not state paragraph (d) of this section; that the bank accepts orders for securi- (2) Advertisements. Advertisements by ties transactions for the account; or on behalf of the bank do not: (5) Sales literature. Sales literature (i) Advertise that the bank accepts issued by or on behalf of the bank: orders for securities transactions for (i) Does not state that the bank ac- employee benefit plan accounts or indi- cepts orders for securities transactions vidual retirement accounts or similar for the account except as part of de- accounts, except as part of advertising scribing the other custodial or safe- the other custodial or safekeeping serv- keeping services the bank provides to ices the bank provides to these ac- the account; and counts; or (ii) Does not describe the securities (ii) Advertise that such accounts are order-taking services provided to the securities brokerage accounts or that account more prominently than the the bank’s safekeeping and custody other aspects of the custody or safe- services substitute for a securities bro- keeping services provided by the bank kerage account; and to the account; and (3) Advertisements and sales literature (6) Investment advice and recommenda- for individual retirement or similar ac- tions. The bank does not provide invest- counts. Advertisements and sales lit- ment advice or research concerning se- erature issued by or on behalf of the curities to the account, make rec- bank do not describe the securities ommendations to the account con- order-taking services provided by the cerning securities or otherwise solicit bank to individual retirement accounts securities transactions from the ac- or similar accounts more prominently count; provided, however, that nothing than the other aspects of the custody in this paragraph (b)(6) shall prevent a or safekeeping services provided by the bank from: bank to these accounts. (i) Publishing, using or disseminating (b) Accommodation trades for other cus- advertisements and sales literature in todial accounts. A bank is exempt from accordance with paragraphs (b)(4) and the definition of the term ‘‘broker’’ (b)(5) of this section; and under section 3(a)(4) of the Act (15 (ii) Responding to customer inquiries U.S.C. 78c(a)(4)) to the extent that, as regarding the bank’s safekeeping and part of its customary banking activi- custody services by providing: ties, the bank accepts orders to effect (A) Advertisements or sales lit- transactions in securities for an ac- erature consistent with the provisions count for which the bank acts as custo- of paragraphs (b)(4) and (b)(5) of this

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section describing the safekeeping, cus- dling any order for a securities trans- tody and related services that the bank action for the account; and offers; (3) Complies with section (B) A prospectus prepared by a reg- 3(a)(4)(B)(viii)(II) of the Act (15 U.S.C. istered investment company, or sales 78c(a)(4)(B)(viii)(II)) regarding carrying literature prepared by a registered in- broker activities. vestment company or by the broker or (e) Non- administrators and dealer that is the principal underwriter recordkeepers. A bank that acts as a of the registered investment company non-fiduciary and non-custodial admin- pertaining to the registered investment istrator or recordkeeper for an em- company’s products; ployee benefit plan account for which (C) Information based on the mate- another bank acts as custodian may rials described in paragraphs rely on the exemption provided in this (b)(6)(ii)(A) and (B) of this section; or section if: (iii) Responding to inquiries regard- (1) Both the custodian bank and the ing the bank’s safekeeping, custody or administrator or recordkeeper bank other services, such as inquiries con- comply with paragraphs (a), (c) and (d) cerning the customer’s account or the of this section; and availability of sweep or other services, (2) The administrator or record- so long as the bank does not provide in- keeper bank does not execute a cross- vestment advice or research con- trade with or for the employee benefit cerning securities to the account or plan account or net orders for securi- make a recommendation to the ac- ties for the employee benefit plan ac- count concerning securities. count, other than: (c) Employee compensation restriction. (i) Crossing or netting orders for A bank may accept orders pursuant to shares of open-end investment compa- this section for a securities transaction nies not traded on an exchange, or for an account described in paragraph (ii) Crossing orders between or net- (a) or (b) of this section only if no bank ting orders for accounts of the custo- employee receives compensation, in- dian bank that contracted with the ad- cluding a fee paid pursuant to a plan ministrator or recordkeeper bank for under 17 CFR 270.12b–1, from the bank, services. the executing broker or dealer, or any (f) Subcustodians. A bank that acts as other person that is based on whether a a subcustodian for an account for securities transaction is executed for which another bank acts as custodian the account or that is based on the may rely on the exemptions provided quantity, price, or identity of securi- in this section if: ties purchased or sold by such account, (1) For employee benefit plan ac- provided that nothing in this para- counts and individual retirement ac- graph shall prohibit a bank employee counts or similar accounts, both the from receiving compensation that custodian bank and the subcustodian would not be considered incentive com- bank meet the requirements of para- pensation under § 247.700(b)(1) as if a re- graphs (a), (c) and (d) of this section; ferral had been made by the bank em- (2) For other custodial accounts, both ployee, or any compensation described the custodian bank and the subcusto- in § 247.700(b)(2). dian bank meet the requirements of (d) Other conditions. A bank may ac- paragraphs (b), (c) and (d) of this sec- cept orders for a securities transaction tion; and for an account for which the bank acts (3) The subcustodian bank does not as a custodian under this section only execute a cross-trade with or for the if the bank: account or net orders for securities for (1) Does not act in a trustee or fidu- the account, other than: ciary capacity (as defined in section (i) Crossing or netting orders for 3(a)(4)(D) of the Act (15 U.S.C. shares of open-end investment compa- 78c(a)(4)(D)) with respect to the ac- nies not traded on an exchange, or count, other than as a directed trustee; (ii) Crossing orders between or net- (2) Complies with section 3(a)(4)(C) of ting orders for accounts of the custo- the Act (15 U.S.C. 78c(a)(4)(C)) in han- dian bank.

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(g) Evasions. In considering whether a tion Plan described in section 501(c)(9) bank meets the terms of this section, of the Internal Revenue Code (26 U.S.C. both the form and substance of the rel- 501(c)(9)), a non-qualified deferred com- evant account(s), transaction(s) and ac- pensation plan (including a rabbi or tivities (including advertising activi- secular trust), a supplemental or mir- ties) of the bank will be considered in ror plan, and a supplemental unem- order to prevent evasions of the re- ployment benefit plan. quirements of this section. (5) Individual retirement account or (h) Definitions. When used in this sec- similar account means an individual re- tion: tirement account as defined in section (1) Account for which the bank acts as 408 of the Internal Revenue Code (26 a custodian means an account that is: U.S.C. 408), Roth IRA as defined in sec- (i) An employee benefit plan account tion 408A of the Internal Revenue Code for which the bank acts as a custodian; (26 U.S.C. 408A), health (ii) An individual retirement account as defined in section 223(d) of the Inter- or similar account for which the bank nal Revenue Code (26 U.S.C. 223(d)), Ar- acts as a custodian; cher medical savings account as de- (iii) An account established by a fined in section 220(d) of the Internal written agreement between the bank Revenue Code (26 U.S.C. 220(d)), Cover- and the customer that sets forth the dell education savings account as de- terms that will govern the fees payable fined in section 530 of the Internal Rev- to, and rights and obligations of, the enue Code (26 U.S.C. 530), or other simi- bank regarding the safekeeping or cus- lar account. tody of securities; or (6) Sales literature means any written (iv) An account for which the bank or electronic communication, other acts as a directed trustee. than an advertisement, that is gen- (2) Advertisement means any material erally distributed or made generally that is published or used in any elec- available to customers of the bank or tronic or other public media, including the public, including circulars, form any Web site, newspaper, magazine or letters, brochures, telemarketing other periodical, radio, television, tele- scripts, seminar texts, published arti- phone or tape recording, videotape dis- cles, and press releases concerning the play, signs or billboards, motion pic- bank’s products or services. tures, or telephone directories (other (7) Principal underwriter has the same than routine listings). meaning as in section 2(a)(29) of the In- (3) Directed trustee means a trustee vestment Company Act of 1940 (15 that does not exercise investment dis- U.S.C. 80a–2(a)(29)). cretion with respect to the account. (4) Employee benefit plan account § 247.771 Exemption from the defini- means a pension plan, retirement plan, tion of ‘‘broker’’ for banks effecting profit sharing plan, bonus plan, thrift transactions in securities issued savings plan, incentive plan, or other pursuant to Regulation S. similar plan, including, without limita- (a) A bank is exempt from the defini- tion, an employer-sponsored plan quali- tion of the term ‘‘broker’’ under sec- fied under section 401(a) of the Internal tion 3(a)(4) of the Act (15 U.S.C. Revenue Code (26 U.S.C. 401(a)), a gov- 78c(a)(4)), to the extent that, as agent, ernmental or other plan described in the bank: section 457 of the Internal Revenue (1) Effects a sale in compliance with Code (26 U.S.C. 457), a tax-deferred plan the requirements of 17 CFR 230.903 of described in section 403(b) of the Inter- an eligible security to a purchaser who nal Revenue Code (26 U.S.C. 403(b)), a is not in the United States; church plan, governmental, multiem- (2) Effects, by or on behalf of a person ployer or other plan described in sec- who is not a U.S. person under 17 CFR tion 414(d), (e) or (f) of the Internal 230.902(k), a resale of an eligible secu- Revenue Code (26 U.S.C. 414(d), (e) or rity after its initial sale with a reason- (f)), an incentive option plan de- able belief that the eligible security scribed in section 422 of the Internal was initially sold outside of the United Revenue Code (26 U.S.C. 422); a Vol- States within the meaning of and in untary Employee Beneficiary Associa- compliance with the requirements of 17

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