Wyo. Code R. 021-0002-14
Banking Division
Chapter 14: Bank Sales of Securities, Insurance and Annuities
Effective Date: 04/18/2014 to Current
Rule Type: Current Rules & Regulations
Reference Number: 021.0002.14.04182014
(a) This Chapter is promulgated in part pursuant to W.S. 13-2-101(a)(xi) (sell insurance or annuities) and (xiii) (authorized bank activities).
(b) This Chapter applies only to banks. It authorizes banks to engage in activities in which national banks may engage, that being to provide brokerage services, act as agent for any insurance company, and to sell annuities. The Commissioner has determined that banks should be authorized to engage in such activities to ensure that banks may maintain an equal competitive position with national banks. This Chapter provides minimum requirements for banks providing brokerage services, acting as agents for an insurance company, or in selling annuities. Brokerage activities, sales of insurance, and sales of annuities must be conducted in such a manner as to avoid misleading or confusing customers and must be consistent with safe and sound banking practices.
(a) As used in this Chapter:
(i) 'Annuity' is defined in W.S. 26-1-102, and includes any insurance or endowment policy or annuity contract under which an insurance company promises to pay money either in a lump sum or periodically for life or for some other specified period.
(ii) 'Appropriate banking regulatory authority' means
(A) as to a federally-chartered depository institution, the appropriate Federal banking agency as defined in 12 U.S.C. 1813(q);
(B) as to an out-of-state bank, the State banking supervisor, as defined in 12 U.S.C. 1813(r); or
(C) as to banks, the Commissioner.
(iii) 'Bank-related sale of insurance' means and includes the sale of insurance or annuities by a covered agent occurring on or from bank premises, or any sale solicited on or from bank premises, or any sale resulting from referral of a bank customer for which the bank or a bank employee receives a benefit or compensation;
(iv) 'Bank-related sale of securities' means and includes the sale of any security directly by a bank employee, or by a dual employee, occurring on bank premises, or any sale solicited by mail from bank premises, or any sale resulting from referral of a bank customer for which the bank or a bank employee receives a benefit or compensation;
(v) 'Bank insurance agent' means a bank employee who is a properly licensed agent qualified to sell insurance in Wyoming and who sells insurance or annuities on or from bank premises on behalf of a bank serving as an insurance agent.
(vi) 'Broker' means a person or entity registered, licensed and qualified under the laws of the United States and of the State of Wyoming, and the regulations of the appropriate federal and state regulatory agencies, to act as a broker or a broker-dealer in the purchase and sale of securities;
(vii) 'Brokerage service' means providing investment advice and executing customer purchase and sale orders for securities, without recourse, solely upon the order of the customer and for the customers account;
(viii) 'Contract agent' means a person properly licensed and qualified to sell insurance and annuities in Wyoming that has entered into an agreement with a bank to sell insurance and/or annuities to bank customers on or from bank premises.
(ix) 'Covered agent' means a bank serving as an insurance agent, a bank insurance agent, a shared employee or a contract agent.
(x) 'Dual employee' means a person who engages in activities or performs services for customers for both a bank and a broker;
(xi) 'Insurance' is defined in W.S. 26-1-102.
(xii) 'Insurance Agent' means a person registered, licensed and qualified under the Wyoming Insurance Code, and the regulations of the appropriate state regulatory agencies, to act as an agent in the sale of insurance and/or annuities;
(xiii) 'Insurance laws' means the Wyoming Insurance Code, the Rules and Regulations of the Insurance Commissioner, and all other applicable state and federal laws, rules and regulations.
(xiv) 'Insurer' is defined in W.S. 26-1-102 and includes a provider or other underwriter of insurance and/or annuities and excludes bank insurance agents.
(xv) 'Insurance Commissioner' means the insurance commissioner appointed pursuant to W.S. 26-2-102(b) to serve as the chief officer of the state department of insurance, as created and existing under W.S. 26-2-101.
(xvi) 'Rules of Fair Practice' means the Rules of Fair Practice of the National Association of Securities Dealers, Inc.
(xvii) 'Securities' means and includes any mutual fund or other debt or equity instrument qualified for issuance and sale under the securities laws of the United States and the State of Wyoming, and authorized for purchase and sale for customer accounts by the appropriate banking regulatory authority.
(xviii) 'Shared employee' means a bank employee who is also an insurance agent engaged by a contract agent to make bank-related sales of insurance to bank customers.
(a) A bank is authorized to provide brokerage services to its customers, on bank premises, subject to full compliance with all state and federal laws, rules, regulations and regulatory conditions applicable to the bank-related sale of securities.
(b) Brokerage services may be provided directly by the bank through the employees of the bank or under a contract for services with a broker.
(c) A bank is authorized to act as an agent for any fire, life or other insurance company, subject to full compliance with all state and federal laws, rules and regulations applicable to a bank-related sale of insurance.
(d) A bank is authorized to sell annuities, subject to full compliance with all state and federal law, rules and regulations applicable to a bank-related sale of insurance.
(e) A bank may make bank-related sales of insurance but only through the services of a covered agent.
(f) All bank-related sales of insurance and annuities shall be in accordance with the insurance laws applicable to bank-related sales of insurance.
(g) Before engaging in bank-related sales of insurance, a bank must file with the Commissioner a notice that
(i) states the bank's intent to engage in such services,
(ii) indicates whether such services will be provided by the bank serving as an insurance agent, by a bank insurance agent, by a shared employee or by a contract agent, and
(iii) provides such additional information as the Commissioner may request.
(h) A bank shall not be an insurer and shall not underwrite insurance products or pay insurance claims.
(a) A covered agent shall not engage in any practice that would lead a customer to believe that the purchase of insurance or annuities offered by the covered agent was:
(i) a prerequisite to obtaining credit,
(ii) a prerequisite to offering a banking product or service, or
(iii) offering a banking product or service on different terms or conditions because the customer agrees to obtain insurance or annuities from the covered agent or any particular insurer.
(b) A bank or other covered agent may inform a bank customer that insurance is required to obtain a loan or that loan approval is contingent on the customer obtaining acceptable insurance and that such insurance is available from a covered agent. If a covered agent provides such information to a bank customer, the covered agent also shall inform the customer:
(i) That he or she need not purchase the insurance from the covered agent or from any particular insurer or agent thereof;
(ii) That insurance is available through brokers or agents other than the covered agent; and
(iii) That the customer’s choice of insurer will not affect the banks credit decision or credit terms in any way.
(c) A covered agent shall maintain written documentation of the information and disclosures provided to a customer under Section 4(b).
(a) If the bank provides brokerage services directly, the Directors shall adopt written policies and procedures for evaluating comparative risks posed by offered securities and for ensuring that the investment offered and the attendant risks are suitable for the customer. Before a bank insurance agent or shared employee makes any bank-related sales of insurance, the Directors shall adopt written policies and procedures for evaluating comparative risks posed by offered insurance or annuities and for ensuring that the insurance and annuities offered are suitable for the bank customer.
(b) The bank procedures shall require that any bank employee who performs brokerage service activities or executes brokerage transactions shall obtain sufficient information to make a reasoned judgment about the suitability of investment products for each customer. Also, policies and procedures shall require that any bank insurance agent or shared employee shall obtain sufficient information to make a reasoned judgment about the suitability of insurance and annuities for each customer. At a minimum, before making recommendations, and consistent with the Rules of Fair Practice, inquiries shall be made and responses documented concerning the customer’s financial status, investment objectives and specific investment instructions, or coverage objectives and instructions.
(c) Bank procedures shall include a system for monitoring compliance with investment risk evaluations and suitability for customer investment goals and instructions. The bank may sell a security to a customer at the customer’s request, even if the investment is inconsistent with the banks recommendation, but the bank shall document its recommendation. Bank policies and procedures shall include a system for monitoring compliance with customer coverage objectives and instructions. A bank insurance agent or a shared employee may make a bank-related sale of insurance to a bank customer at the customer’s request, even if the insurance or annuity is inconsistent with the bank insurance agents or shared employees recommendation, but the bank insurance agent or shared employee shall document the recommendation.
(d) If a bank insurance agent or shared employee makes a bank-related sale of insurance, the bank insurance agent or shared employee shall forward any customer complaints arising from any bank-related sale of insurance to the Insurance Commissioner, the Commissioner, and the bank.
(a) The bank may lease a portion of the bank premises to a broker to provide brokerage services to bank customers. The brokerage services may be provided exclusively by employees of the broker or by dual employees.
(b) Bank-related sales of insurance may be made exclusively by the contract agent or by a shared employee. No such contract shall be effective unless and until approved by the banks board of directors.
(c) If brokerage services are provided on or from bank premises by contract with a broker, the contract shall be in writing and, at a minimum, shall provide:
(i) A description of the duties and responsibilities of the bank and the broker;
(ii) A description of permissible activities by the broker on the bank's premises, and the terms and conditions of use of the banks space, personnel and equipment;
(iii) That all representatives of the broker engaged in providing brokerage services on the bank premises, including any dual employees, shall be properly licensed and qualified as required by all applicable laws and regulations;
(iv) That the broker shall exercise exclusive supervisory and management control over dual employees when engaged in providing brokerage services and shall determine precisely the standardized investment advice to be provided to bank customers;
(v) That the broker shall recommend and the bank's board of directors shall adopt, distribute and enforce written policies and procedures stating prohibited and permissible activities for the bank's employees that are not dual employees;
(vi) That dual employees shall have written contracts, which shall not become effective unless and until approved by the bank;
(vii) That the bank shall pay the salaries of dual employees;
(viii) That the bank may monitor and periodically review the activities and transactions of the broker and its sales representatives to ensure compliance with the agreement;
(ix) That the bank and the appropriate banking regulatory authority shall have access to such records of the broker as are necessary or appropriate to evaluate compliance with the agreement; and
(x) That the broker shall indemnify the bank and save it harmless from any liability, cost or damages resulting from actions and omissions of the broker in providing brokerage services.
(d) If bank-related sales of insurance are permitted on or from bank premises by a contract agent, the contract shall be in writing and, at a minimum, shall provide:
(i) A description of the duties and responsibilities of the bank, the contract agent and any shared employees;
(ii) A description of permissible activities by the contract agent on or from bank premises;
(iii) The terms and conditions of use of the bank premises, personnel and equipment;
(iv) That all representatives of the contract agent engaged in selling insurance or annuities on or from bank premises, including any shared employees, shall be properly licensed under the insurance laws;
(v) That the contract agent shall provide written policies and procedures for evaluating comparative risks posed by offered insurance or annuities and for ensuring that the insurance and annuities offered are suitable for the bank customer;
(vi) That the contract agent shall provide written policies and procedures stating the standardized advice that shared employees must provide to bank customers;
(vii) That the contract agent shall recommend and the bank’s board of directors shall adopt, distribute and enforce written policies and procedures stating prohibited and permissible activities for the bank’s employees that are not dual employees;
(viii) That shared employees shall have written employment contracts with the contract agent, which shall not become effective unless and until approved by the bank’s board of directors;
(ix) The compensation arrangements for shared employees;
(x) That the bank may monitor and periodically review the activities and transactions of the contract agent and its representatives to ensure compliance with the contract;
(xi) That the bank, the appropriate banking regulatory authority, the Commissioner, the Insurance Commissioner and the Wyoming department of insurance shall have access to such records of the contract agent and its representatives as are necessary or appropriate.
(A) to evaluate compliance with the contract and the insurance laws; and
(B) to establish that the assets and records of the bank and the contract agent are segregated;
(xii) That the contract agent shall indemnify the bank and save it harmless from any liability, cost or damages resulting from actions or omissions of the contract agent and its representative arising out of all sales of insurance and annuities on or from bank premises, including all bank-related sales of insurance; and (xiii) That the contract agent shall forward any customer complaints arising from any bank-related sale of insurance to the Insurance Commissioner, the Commissioner, and the bank.
(e) At a minimum, before making recommendations to a bank customer, a contract agent or shared employee shall make inquiries and document responses concerning the customer's coverage objectives and instructions. A contract agent or shared employee may make a bank-related sale of insurance to a bank customer at the customer's request, even if the insurance or annuity is inconsistent with the contract agent's or shared employee's recommendation, but the contract agent or shared employee shall document the recommendation.
(f) If the bank receives or learns of any complaint arising out of a bank-related sale of insurance made by a contract agent or a shared employee, the bank shall forward the complaint to the Insurance Commissioner and to the Commissioner.
(a) If the bank leases a portion of the bank's premises to a broker, the bank may negotiate whatever terms are usual and customary in the leasing of commercial office space. The bank may be compensated by a percentage share of commissions or revenue earned from the brokerage transactions conducted at the leased premises, provided the compensation is for services performed or for rent of space and equipment provided.
(b) A bank may contract to lease a portion of bank premises to a covered agent to make bank-related sales of insurance to bank customers. If the bank leases a portion of bank premises to a covered agent, the bank may negotiate whatever terms are usual and customary in the leasing of commercial office space. The bank may be compensated from revenue earned from insurance or annuities sales made at or from the leased premises (including sales that are not bank-related sales of insurance), provided the compensation is for services performed or for rent of space and equipment provided and is not commission-sharing in violation of W.S. 26-9-132.
(c) The method of compensation must not result in a partnership or joint venture relationship between the bank and the broker, or make the bank a guarantor of, or liable for, operating costs, losses or debts of the covered agent. If the compensation agreement provides for a percentage of revenues after deduction of losses resulting from failure of bank customers to perform their obligations, the loss deductions may not exceed the amount of revenues accruing to the bank's credit after the losses are incurred.
The place where the bank or a broker provides brokerage services to bank customers, or where bank-related sales of insurance are made, shall be located in an area of the bank clearly distinguishable from the areas in which banking business is conducted.
(a) Either the bank or the broker on bank premises must provide a complete and accurate disclosure when selling, advertising or marketing any security. A covered agent who makes bank-related sales of insurance must provide a complete and accurate disclosure when selling, advertising or marketing any insurance or annuities. The disclosure shall be designed to ensure that customers of either the bank, the broker, or the covered agent are advised that the security, insurance or annuity:
(b) The disclosure required by subsection (a) shall be made by posting the same in conspicuous places where it may be readily seen by the customers of both the bank and the broker or covered agent.
(c) The disclosure required by subsection (a) shall also be given in writing to each customer
(i) at the time a securities account is opened by the bank or the broker and before any security purchase or sale is executed; or
(ii) (including customers who are not bank customers) at the time a bank-related sale of insurance is made by a covered agent and before any such sale is executed.
(iii) A written acknowledgment of receipt of the disclosure statement shall be signed by the customer and retained by the bank, the broker, or the covered agent in the customer's account file.
(d) The disclosure statement shall be printed or featured conspicuously in all written or oral sales presentations, advertising and promotional materials used by the bank or the broker in conducting brokerage business on or from bank premises or those premises used by a covered agent. For brokerage services, a prospectus prepared in compliance with requirements of the U.S. Securities and Exchange Commission is not advertising, sales or promotional material within the meaning of this subsection.
(e) Any disclosures regarding particular insurance or annuity products shall identify clearly
(ii) that the bank is not the insurer.
(f) Advertisement of any insurance guaranty association coverage is prohibited by W.S. 26-42-116.
(g) If applicable, either the bank or the broker conducting the brokerage business shall disclose:
(i) The existence of any advisory or other relationship between the bank or broker and any affiliate involved in providing, underwriting or marketing the security; and
(ii) The existence of any early withdrawal or cancellation penalties, surrender charges or penalties, deferred sales charges, or any cost or expense to which the customer may be subjected as a result of purchasing the security.
(h) If applicable, a covered agent shall disclose:
(i) The existence of any advisory or other relationship between or among the bank, the covered agent, and any affiliate involved in providing or marketing the insurance policy or annuity contract; and
(ii) The existence of any deferred sales charges or other cost or expense to which the customer may be subjected as a result of purchasing the insurance policy or annuity contract.
(i) Shared employees shall clearly and fully disclose the nature of their agency relationship to bank customers so that the customers will know the identity of the insurer.
(a) A bank which provides brokerage services directly shall provide for a continuing education program to ensure that all bank personnel who provide brokerage services or who execute brokerage transactions are properly qualified to represent the interests of the customers. The program shall include training in the nature of mutual funds, debt and equity securities and any security marketed on or from bank premises, their differences, their comparative risks, and how they may be used to serve the different needs of the customer, as well as training and education in proper sales practices.
(b) A bank shall provide to all bank insurance agents and shared employees a continuing education program pursuant to the insurance laws.
(c) Any bank employee who performs brokerage services shall be licensed and qualified as required by applicable law or regulation.
(d) All bank insurance agents and shared employees shall be insurance agents.
(a) A bank shall comply with all applicable state and federal restrictions to prevent a conflict of interest in
(i) transactions involving the purchase of securities with funds held by the bank in a trust, fiduciary or discretionary account by the use of brokerage services provided by the bank or by a broker which compensates the bank; or
(ii) bank-related sales of insurance.
(b) The bank shall not execute securities transactions involving funds or securities held by the bank as fiduciary, with its own brokerage service or with a broker which compensates the bank, unless such transactions are authorized by the instrument creating the fiduciary relationship, by state statute or by court order.
(c) The bank shall not execute securities transactions involving funds held by the bank in a discretionary account, with its own brokerage service or with a broker which compensates the bank, unless the transaction is authorized by the beneficial owner of the account.
(d) The compensation of bank employees or dual employees based on commissions for brokerage transactions executed could provide an incentive for the employee to sell securities unsuitable to the customer, or to sell securities rather than bank deposit investments. Such a method of compensating employees, while not a conflict of interest per se, may be subject to criticism and correction upon examination.
(a) The brokerage activities of a bank and the bank’s relationship with a broker on bank premises are subject to examination by the Commissioner. Violation of any state or federal law, or violation of a regulation of the Commissioner or any state or federal agency with jurisdiction over the sale of securities, or a regulation of the FRB or the FDIC governing the sale of securities by member or nonmember state banks, or any act or omission in the performance of brokerage services which places the bank at risk of liability for losses, penalties or damages, may constitute an unsound and unauthorized practice. The Commissioner may invoke such remedies as provided by law for any such violation.
(b) The transactions of a bank and its relationship with a covered agent is subject to examination by the Commissioner for compliance with all state and federal laws applicable to depository institutions.
(c) Transactions involving bank-related sales of insurance are subject to examination by the Insurance Commissioner for compliance with the insurance laws.
(d) Violation of any state or federal laws or regulations applicable to bank-related sales of insurance, or any act or omission in the performance of bank-related sales of insurance which places the bank at risk of liability for losses, penalties or damages, may constitute an unsafe, unsound and unauthorized practice. For any violation found, the Commissioner may invoke such remedies under the Banking Statutes or these Regulations, and the Insurance Commissioner may invoke such remedies under the insurance laws.