Q: What is the “primary purpose” exception to the definition of a deposit broker?
A: This exception applies to the following: “An agent or nominee whose primary purpose is not the placement of funds with depository institutions.” This exception is applicable when the intent of the third party, in placing deposits or facilitating the placement of deposits, is to promote some other goal (i.e., other than the goal of placing deposits for others). The primary purpose exception is not applicable when the intent of the third party is to earn fees through the placement of the deposits. Also, the applicability of the primary purpose exception does not depend upon a comparison between the amount of revenue generated by the third party’s deposit-placement activities and the amount of revenue generated by the third party’s other activities. Rather, as previously stated, the applicability of the primary purpose exception depends upon the intent of the third party in placing deposits (or facilitating the placement of deposits).
As a number of examples will illustrate in the next several FAQs, the primary purpose exception applies only infrequently and typically requires a specific request for a determination by the FDIC. On those rare occasions when this exception may apply, the FDIC also may impose restrictions on the activity involved, routine reporting requirements, and regular monitoring. These conditions may be critical to the primary purpose exception determination. As a result, failure to comply with the conditions may trigger a reassessment of the original determination.