Proposed regulations aim to improve transparency and consumer access to funds held in pooled accounts.
The FDIC board approved on September 17, 2024, a notice of proposed rulemaking aimed at third-party non-bank companies providing custodial accounts. It is likely to enhance record-keeping requirements for bank deposits subject to custody under the accounts of third-party non-bank companies. The decision was to meet the growing demand related to issues of transparency and the consumer access to their own money following the bankruptcy of Synapse Financial Technologies Inc., which brought unfavourable consequences for numerous consumers making use of their pooled accounts.
New rules would include the requirement for insured depository institutions to carry records that identify: Beneficial owners, respective account balances, and ownership categories whenever offering custodial accounts that have transactional capacity. The latter has been intended for the provision that banks can trace who the owners of funds are in such collective accounts.
IDIs would also have to give annual compliance certification and a detailed report to the FDIC and their primary federal regulator. Such a report would include material changes in information systems related to the new requirements, custodial account holders, total account balances, and results of any independent validations of records kept by third parties.
The FDIC will invite public comment on this proposed rule, published for 60 days after its appearance in the Federal Register. The development represents an important step to a better future for consumer protection and responsibility in the changing landscape of financial services.
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