Haw. Code R. § 16-39-405 - Sales of securities at financial institutions
No broker-dealer shall conduct brokerdealer services on the premises of a financial institution where retail deposits are taken unless the broker-dealer complies initially and continuously with the following requirements:
(1) Setting. Wherever
practical, broker-dealer services shall be conducted in a physical location
distinct from the area in which the financial institution's retail deposits are
taken. In those situations where there is insufficient space to allow separate
areas, the broker-dealer has a heightened responsibility to distinguish its
services from those of the financial institution. In all situations, the
broker-dealer shall identify its services in a manner that clearly
distinguishes those services from the financial institution's retail
deposit-taking activities. The broker-dealer's name shall be clearly displayed
in the area in which the broker-dealer conducts its services.
(2) Networking arrangements and program
management. Networking arrangements shall be governed by a written agreement
that sets forth the responsibilities of the parties and the compensation
arrangements. Networking arrangements shall provide that supervisory personnel
of the broker-dealer and representatives of state securities authorities, shall
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 its broker-dealer services. Management of the broker-dealer shall be
responsible for ensuring that the networking arrangement clearly outlines the
duties and responsibilities of all parties, including those of the financial
institution's personnel.
(3)
Customer disclosure and written acknowledgment.
(A) At or prior to 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 shall:
(i) Disclose, orally and in writing, that the
securities purchased or sold in a transaction with the broker-dealer are: not
insured by the FDIC; not deposits or other obligations of the financial
institution and are not guaranteed by the financial institution; and subject to
investment risks, including possible loss of the principal invested;
and
(ii) Make reasonable efforts to
obtain from each customer during the account opening process a written
acknowledgment of the disclosures required by clause (i).
(B) If broker-dealer services include any
written or oral representations concerning insurance coverage, other than FDIC
insurance coverage, then clear and accurate written or oral explanations of the
coverage must also be provided to the customers when the presentations are
first made.
(4)
Communications with the public.
(A) All of the
broker-dealer's confirmations and account statements shall indicate clearly
that the brokerdealer services are provided by the broker-dealer.
(B) Advertisements and sales literature that
announce the location of a financial institution where brokerdealer services
are provided by the broker-dealer, or that are distributed by the broker-dealer
on the premises of a financial institution, shall disclose that the securities:
are not insured by the FDIC; are not deposits or other obligations of the
financial institution and are not guaranteed by the financial institution; and
are subject to investment risks, including possible loss of the principal
invested. The shorter, logo format described in subparagraph (D) may be used to
provide these disclosures.
(C)
Recommendations by a broker-dealer concerning non deposit investment products
with a name similar to that of a financial institution shall only occur
pursuant to policies and procedures reasonably designed to minimize risk of
customer confusion.
(D) The
following shorter, logo format disclosures may be used by a brokerdealer in
advertisements and sales literature, including material published, or designed
for use, in radio or television broadcasts, automated teller machine ("ATM")
screens, billboards, signs, posters and brochures, to comply with the
requirements of subparagraph (B); provided that such disclosures are displayed
in a conspicuous manner:
(i) Not FDIC
insured;
(ii) No bank guarantee;
and
(iii) May lose value.
(E) As long as the omission of the
disclosures required by subparagraph (B) would not cause the advertisement or
sales literature to be misleading in light of the context in which the material
is presented, such disclosures are not required with respect to messages
contained in:
(i) Radio broadcasts of thirty
seconds or less;
(ii) Electronic
signs, including billboard-type signs that are electronic, time, and
temperature signs and ticker tape signs, but excluding messages contained in
such media as television, on-line computer services, or ATMs; and
(iii) Signs, such as banners and posters,
when used only as location indicators.
(5) Notification of termination. The
brokerdealer shall promptly notify the financial institution if any agent of
the brokerdealer who is employed by the financial institution is terminated for
cause by the broker-dealer.
Notes
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