Securities Lawyer's Deskbook                          published by The University of Cincinnati College of Law

Rule 3a4-2 -- Exemption from the Definition of "Broker" for Bank Calculating Compensation for Effecting Transactions in Fiduciary Accounts

---

1. A bank that meets the conditions for exception from the definition of the term "broker" under Section 3(a)(4)(B)(ii) of the Act, except for the "chiefly compensated" condition in Section 3(a)(4)(B)(ii)(I) of the Act, is exempt from the definition of the term "broker" under Section 3(a)(4) of the Act solely for effecting transactions in securities pursuant to Section 3(a)(4)(B)(ii) of the Act if:
   
   
   1. The bank can demonstrate that sales compensation, as defined in Rule 3b-17(j), received during the immediately preceding year is less than 10% of the total amount of relationship compensation, as defined in Rule 3b-17(i), received during that year;
      
      
   2. The bank maintains procedures reasonably designed to ensure compliance with the "chiefly compensated" condition in Section 3(a)(4)(B)(ii)(I) of the Act with respect to a trust or fiduciary account:
      
      
      1. When the account is opened;
         
         
      2. When the compensation arrangement for the account is changed; and
         
         
      3. When sales compensation, as defined in Rule 3b-17, received from the account is reviewed by the bank for purposes of determining an employee's compensation; and
         
         
   3. The bank complies with Section 3(a)(4)(C) of the Act.
      
      
2. For purposes of this section, the term year means either a calendar year or other fiscal year consistently used by the bank for recordkeeping and reporting purposes.
   
   

	Notice to Users: The Deskbook is made available with the understanding that the University of Cincinnati College of Law is not engaged in rendering legal, accounting or other professional services. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. See Terms and Conditions of Use.   © Copyright 1998-2008, University of Cincinnati, All Rights Reserved  Contact: joseph.hodnicki@uc.edu