When used with respect to the
third-party brokerage arrangements (“networking”) exception from the
definition of the term broker in section 3(a)(4)(B)(i) of
the act (15 USC 78c(a)(4)(B)(i)) in the context of transactions with
a customer, the following terms shall have the meaning provided:
(a) Contingent on whether the referral results
in a transaction means dependent on whether the referral results
in a purchase or sale of a security; whether an account is opened
with a broker or dealer; whether the referral results in a transaction
involving a particular type of security; or whether it results in
multiple securities transactions; provided, however, that a referral
fee may be contingent on whether a customer—
(1) contacts or keeps an appointment with
a broker or dealer as a result of the referral; or
(2) meets any objective, base-line qualification
criteria established by the bank or broker or dealer for customer
referrals, including such criteria as minimum assets, net worth, income,
or marginal federal or state income tax rate, or any requirement for
citizenship or residency that the broker or dealer, or the bank, may
have established generally for referrals for securities brokerage
accounts.
3-3502
(b) (1) Incentive compensation means compensation that is intended to encourage a bank employee
to refer customers to a broker or dealer or give a bank employee an
interest in the success of a securities transaction at a broker or
dealer. The term does not include compensation paid by a bank under
a bonus or similar plan that is—
(i) paid on a discretionary
basis; and
(ii) based
on multiple factors or variables and—
(A) those factors or variables
include multiple significant factors or variables that are not related
to securities transactions at the broker or dealer;
(B) a referral made by the employee is not
a factor or variable in determining the employee’s compensation under
the plan; and
(C) the
employee’s compensation under the plan is not determined by reference
to referrals made by any other person.
(2) Nothing in this paragraph
(b) shall be construed to prevent a bank from compensating an officer,
director, or employee under a bonus or similar plan on the basis of
any measure of the overall profitability or revenue of—
(i) the
bank, either on a stand-alone or consolidated basis;
(ii) any affiliate of the bank (other
than a broker or dealer), or any operating unit of the bank or an
affiliate (other than a broker or dealer), if the affiliate or operating
unit does not over time predominately engage in the business of making
referrals to a broker or dealer; or
(iii) a broker or dealer if—
(A) such measure
of overall profitability or revenue is only one of multiple factors
or variables used to determine the compensation of the officer, director,
or employee;
(B) the factors
or variables used to determine the compensation of the officer, director,
or employee include multiple significant factors or variables that
are not related to the profitability or revenue of the broker or dealer;
(C) a referral made by the
employee is not a factor or variable in determining the employee’s
compensation under the plan; and
(D) the employee’s compensation under the
plan is not determined by reference to referrals made by any other
person.
3-3503
(c) Nominal one-time cash fee of a fixed dollar amount means
a cash payment for a referral, to a bank employee who was personally
involved in referring the customer to the broker or dealer, in an
amount that meets any of the following standards:
(1) the payment does not exceed—
(i) twice
the average of the minimum and maximum hourly wage established by
the bank for the current or prior year for the job family that includes
the employee; or
(ii) 1/1000th of the average of the minimum and maximum annual base
salary established by the bank for the current or prior year for the
job family that includes the employee; or
(2) the payment does not exceed
twice the employee’s actual base hourly wage or 1/1000th of the employee’s
actual annual base salary; or
(3) The payment does not exceed 25 dollars
($25), as adjusted in accordance with paragraph (f) of this section.
(d) Job family means a group of
jobs or positions involving similar responsibilities, or requiring
similar skills, education, or training, that a bank, or a separate
unit, branch or department of a bank, has established and uses in
the ordinary course of its business to distinguish among its employees
for purposes of hiring, promotion, and compensation.
3-3504
(e) Referral means the action taken by one or more bank employees
to direct a customer of the bank to a broker or dealer for the purchase
or sale of securities for the customer’s account.
(f) Inflation adjustment.
(1) In general. On April 1, 2012, and on the first day of each subsequent five-year
period, the dollar amount referred to in paragraph (c)(3) of this
section shall be adjusted by—
(i) dividing the annual
value of the Employment Cost Index For Wages and Salaries, Private
Industry Workers (or any successor index thereto), as published by
the Bureau of Labor Statistics, for the calendar year preceding the
calendar year in which the adjustment is being made by the annual
value of such index (or successor) for the calendar year ending December
31, 2006; and
(ii)
multiplying the dollar amount by the quotient obtained in paragraph
(f)(1)(i) of this section.
(2) Rounding. If the adjusted dollar amount determined under paragraph (f)(1)
of this section for any period is not a multiple of $1, the amount
so determined shall be rounded to the nearest multiple of $1.
