Q: What factors are considered when determining if a third party is a deposit broker?
A: The definition of deposit broker applies to third parties engaged in “placing deposits” and “facilitating the placement of deposits.” The term “facilitating the placement of deposits” is interpreted broadly to include actions taken by third parties to connect insured depository institutions with potential depositors. As a result, a third party could be a deposit broker even when the third party does not open bank accounts on behalf of depositors or directly place funds into bank accounts.
The third party may qualify as a deposit broker even if it receives no fees or other direct compensation from the depository institution where the funds are placed. The fee structure is simply one factor used by the FDIC in determining whether a particular party is a deposit broker. Other factors include the nature of the fees (i.e., whether the amount of the fees is connected to the amount of deposits placed at the insured depository institution), the purported purpose of the fees (i.e., whether the fees are intended to reward the third party for placing deposits as opposed to rewarding the third party for providing some other service), and the degree of involvement by the third party in placing the deposits. Ultimately, brokered deposit and deposit broker classifications are fact specific, and each determination is considered on a case-by-case basis.