Title 3 . Commerce, Community, and Economic Development

Chapter 8 . Land Sales

Section 65. Sales of securities at financial institutions

3 AAC 08.065. Sales of securities at financial institutions

(a) This section applies exclusively to broker-dealer services conducted by broker-dealers on the premises of a financial institution where retail deposits are taken. This section does not apply to broker-dealer services provided to non-retail customers, such as institutional investors within the meaning of AS 45.55.990 (3)(D)(i) - (iii).

(b) A broker-dealer may not conduct broker-dealer services on the premises of a financial institution where retail deposits are taken, unless the broker-dealer complies with the following requirements:

(1) if practical, broker-dealer services must be conducted in a physical location distinct from the area in which the financial institution's retail deposits are taken; the broker-dealer must identify its services in a manner that clearly distinguishes those services from the financial institution's deposit-taking activities; the broker-dealer's name must be clearly displayed in the area in which the broker-dealer conducts its services;

(2) networking and brokerage affiliate arrangements must be governed by a written agreement that sets out the responsibilities of the parties and the compensation arrangements; that agreement must provide that supervisory personnel of the broker-dealer and representatives of the administrator are to be permitted access to the financial institution's premises where the broker-dealer conducts broker-dealer services in order to inspect the books and records and other relevant information maintained by the broker-dealer with respect to broker-dealer services; the broker-dealer must ensure that the agreement clearly outlines the duties and responsibilities of each party;

(3) at or before the time that a customer's securities brokerage account is opened by a broker-dealer on the premises of a financial institution where retail deposits are taken, the broker-dealer must

(A) disclose, orally and in writing, that the securities products purchased or sold in a transaction with the broker-dealer are

(i) not insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Share Insurance Fund (NCUSIF), as appropriate;

(ii) not deposits or other obligations of the financial institution and are not guaranteed by the financial institution; and

(iii) subject to investment risks, including possible loss of the principal invested; and

(B) make reasonable efforts to obtain from each customer during the account-opening process a written acknowledgment of the disclosures required by (A) of this paragraph;

(4) if broker-dealer services include any written or oral representations concerning insurance coverage, other than coverage through the FDIC or NCUSIF, clear and accurate written or oral explanations of the coverage must also be provided to the customers when those representations are first made;

(5) each of the broker-dealer's confirmations and account statements must indicate clearly that the broker-dealer services are provided by the broker-dealer;

(6) recommendations by a broker-dealer concerning non-deposit investment products with a name similar to that of the financial institution must occur under a sales program designed to minimize the risk of customer confusion;

(7) advertisements and sales literature that announce the location of a financial institution where broker-dealer services are provided by the broker-dealer, or that are distributed by the broker-dealer on the premises of a financial institution, must disclose that securities products are

(A) not insured by the FDIC or NCUSIF, as appropriate;

(B) not deposits or other obligations of the financial institution and are not guaranteed by the financial institution; and

(C) subject to investment risks, including possible loss of the principal invested;

(8) to comply with (7) of this subsection, a broker-dealer may use the following shorter, logo format disclosures in advertisements and sales literature, including material published, or designed for use, in a radio or television broadcast or on the screen of an automated teller machine, billboards, signs, posters, and brochures, if those disclosures are displayed in a conspicuous manner:

(A) "Not FDIC Insured," or "Not NCUSIF Insured," as appropriate;

(B) "No Bank Guarantee";

(C) "May Lose Value";

(9) if the omission of the disclosures required by (7) of this subsection does not cause the advertisement or sales literature to be misleading in the context in which the material is presented, those disclosures are not required for messages contained in

(A) radio broadcasts of 30 seconds or less;

(B) electronic signs, including billboard-type signs that are electronic, time and temperature signs, and ticker tape signs; for purposes of this subparagraph, electronic signs do not include television, on-line computer services, or automated teller machines; and

(C) signs, banners, and posters if used only as location indicators;

(10) the broker-dealer must promptly notify the financial institution if any agent of the broker-dealer who is employed by the financial institution is terminated for cause by the broker-dealer.

(c) This section does not relieve a broker-dealer from compliance with AS 45.55, this chapter, or other applicable laws, rules, or regulations that govern the operations of broker-dealers and their agents, including supervisory obligations.

(d) In this section,

(1) "affiliate" means a company that controls, is controlled by, or is under common control with a broker-dealer as defined in NASD Rule 2720(b);

(2) "broker-dealer services" means the investment banking or securities business; for purposes of this paragraph, "investment banking or securities business" has the meaning given in paragraph (p) of Article I of the by-laws of the NASD, as incorporated by NASD Rule 121;

(3) "financial institution" means one of the following institutions, if located in this state:

(A) a federal, national, or state-chartered bank, savings and loan association, savings bank, or credit union; or

(B) a service corporation of an institution listed in (A) of this paragraph;

(4) "networking arrangement" and "brokerage affiliate arrangement" mean a contractual or other arrangement between a broker-dealer and a financial institution under which the broker-dealer conducts broker-dealer services on the premises of the financial institution where retail deposits are taken.

History: Eff. 4/19/2000, Register 154

Authority: AS 45.55.025

AS 45.55.060

AS 45.55.950