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Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Rules and Regulations
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rule. This may include submitting notices or filing applications by some third parties that seek to avail themselves of the primary purpose exception, or by banks submitting notices or filing applications on behalf of third parties. In certain circumstances, ongoing reporting or certification by these entities is also expected under the final rule.
5. Reporting Compliance Costs As previously discussed, the final rule establishes some reporting obligations for certain insured depository institutions or nonbank third parties that meet the deposit broker definition by either placing or facilitating the placement of customer deposits at insured depository institutions but meet the primary purpose exception. Specifically, the rule provides that entities that wish to invoke two of the designated exceptionsthe 25 percent and enabling transactions business arrangementswill be required to submit a notice to the FDIC. These entities will also be subject to either a quarterly reporting or annual certification requirement.
The final rule also establishes an application process under which any agent or nominee that seeks to avail itself of the primary purpose exception, or an insured depository institution acting on behalf of an agent or nominee, and does not meet one of the designated exceptions, could request that the FDIC consider the agent or nominee as meeting the primary purpose exception. Entities that meet the primary purpose exception via an approved application may also be subject to periodic reporting requirements under the final rule.
These reporting requirements will allow the FDIC to monitor the applicability of the primary purpose exception.
Finally, the FDIC may, with notice, revoke a primary purpose exception of a third party that relies on a designated exception, if the third party no longer meets the criteria for a designated exception, the notice or subsequent reporting is inaccurate, or the notice filer fails to submit the required reports.
For approved applications, the FDIC
may, under certain circumstances and with adequate justification, require the entity to refile a notice, submit an application, reapply for approval, impose additional conditions on the approval, or withdraw a previously granted approval, with notice to the entity.
There were 3,517 Financial Industry Regulatory Authority FINRA

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registered broker-dealer firms in 2019.66
Some of the 3,517 broker-dealers may not engage in activity which would meet the definition of deposit broker but for meeting the primary purpose exception through the 25 percent test, while some firms that do engage in such activity may not be among the 3,517
FINRA registered broker-dealers. In the absence of data to estimate future respondents, consistent with the changes in the rule relative to the NPR, and with its Paperwork Reduction Act analysis of this rule, the FDIC assumes that 703 firms will submit notices for a designated exception under the primary purpose exception based on placing less than 25 percent of customer assets under administration, in the initial year of implementation. Further, the FDIC assumes that 176 firms will submit notices for a designated exception under the primary purpose exception based on placing less than 25
percent of customer assets under administration, on average each year, an ongoing basis.
According to Census data, there are 1,223 establishments within the industry in which deposit brokers are classified.67 Not all 1,223
establishments engage in deposit brokering, and some firms which engage in deposit brokering may be classified in another industry. In the absence of data to estimate future respondents, consistent with the changes in the rule relative to the NPR, and with its Paperwork Reduction Act analysis of this rule, the FDIC assumes that 245
firms will submit notices in reliance on the enabling transactions designated exception in the initial year of implementation. Additionally, the FDIC
assumes that 245 firms submit applications for a primary purpose exception in the initial year of implementation. Finally, in the absence of data to estimate future respondents, the FDIC assumes that 61 will file a notice in reliance upon the enabling transactions designated exception, or a designated exception identified in the future that requires a notice, and an additional 61 will submit an application, on average each year, on an ongoing basis.
In the initial year of implementation, the FDIC assumes that the notice for the 66 2019 FINRA Industry Snapshot, pg. 13, https
www.finra.org/sites/default/files/2020%20
Industry%20Snapshot.pdf.
67 Deposit brokers are classified according to the 2017 North American Industry Classification System as belonging to the Miscellaneous Financial Investment Activities industry NAICS
code 523999. See U.S. Census Bureau, 2017 County Business Patterns Data, available at https
www.census.gov/data/datasets/2017/econ/cbp/
2017-cbp.html.

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25 percent business relationship will be three hours to complete on average, and 0.5 hours per quarter each year after that. In the initial year of implementation, the FDIC assumes that the notice for the enabling transactions will take 5 hours to complete on average, and 0.5 hours each year after that. In the initial year of implementation, the FDIC assumes that the application for entities that do not meet a designated exception, will take 10 hours to complete on average, and 0.25 hour per quarter each year 68 after that. The FDIC also recognizes there will likely be outliers who spend more or less time on notices, applications, and reporting than the FDIC expects at this time, therefore FDIC believes that the compliance burden realized by affected entities will likely vary from labor hours presented. Therefore, based on the above assumptions and methodology, the FDIC estimates the final rule imposes an annual reporting burden of 5,784 hours for the first year and 497.5
hours each year after that for all affected entities. This equates to estimated compliance costs of $613,740 in the first year and $51,589 each year after that for all affected entities.69
Part II. Interest Rate Restrictions A. Policy Objectives The policy objective of Part II of this final rule is to ensure that deposit interest rate caps appropriately reflect the prevailing deposit interest rate 68 This average number reflects that not all approved applications are expected to require ongoing reporting.
69 For the applications relating to exceptions from the definition of deposit broker, the FDIC used the wage estimates from the Bureau of Labor Statistics BLS National Industry Specific Occupational Employment and Wage Estimates:
Securities, Commodity Contracts, and Other Financial Investments and Related Activities Sector May 2018, while for the Application for Waiver of Prohibition on Acceptance of Brokered Deposits, the FDIC used the wage estimates from the BLS National Industry-Specific Occupational Employment and Wage Estimates: Depository Credit Intermediation Sector May 2018. Other BLS data used were the Employer Cost of Employee Compensation data June 2019, and the Consumer Price Index June 2019. Hourly wage estimates at the 75th percentile wage were used, except when the estimate was greater than $100, in which case $100 per hour was used, as the BLS does not report hourly wages in excess of $100. The 75th percentile wage information reported by the BLS in the Specific Occupational Employment and Wage Estimates does not include health benefits and other non-monetary benefits. According to the June 2019 Employer Cost of Employee Compensation data, compensation rates for health and other benefits are 33.8 percent of total compensation.
Additionally, the wage has been adjusted for inflation according to BLS data on the Consumer Price Index for Urban Consumers CPIU, so that it is contemporaneous with the non-wage compensation statistic. The inflation rate was 1.86
percent between May 2018 and June 2019.

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