02-032 C.M.R. ch. 506, § 5 - Third party broker-dealer agreement

This section applies to all third party broker-dealer arrangements, whether with a financial institution or a financial institution authorized to do business in this State. In order for a financial institution authorized to do business in this State to qualify for the exclusion from the definition of "broker-dealer" in 32 M.R.S.A. §16102(4), that financial institution authorized to do business in this State must comply with all provisions of this section that are applicable to financial institutions.

There shall be a written agreement ("the Agreement") between the financial institution and the third party broker-dealer that shall, at a minimum, address the areas listed below.

1. Duties and responsibilities. A description of the duties and responsibilities of each party, such as the separation of banking and brokerage service, compliance with disclosure and advertising requirements and the functions and compensation of financial institution employees.

2. Customer information. The use of financial institution and broker-dealer customer information and how compliance with Maine and federal law will be achieved.

3. Compliance. Authority for the financial institution and the third party broker-dealer to monitor transactions and to review and verify compliance with the Agreement.

4. Access to records. Authority for the financial institution and regulators to have access to relevant records of the third party broker-dealer and the financial institution in order to evaluate compliance with the Agreement.

5. Licensed entities and persons. Requirement that the activities be conducted only by the third party broker-dealer and its licensed agents.

6. Agent disapproval and control. The right of the financial institution to disapprove the placement or retention of any agent. The broker-dealer, however, has sole control and authority over agents, including sole responsibility for training and supervision of agents.

Notes

02-032 C.M.R. ch. 506, § 5