The key agencies which regulate banks in the United States are the U.S. Federal Reserve Board and the Office of the Comptroller of the Currency, U.S. Department of the Treasury. Beyond these two, there are other agencies which regulate different parts of the financial services industry. Because the Federal Reserve Board and the Office of the Comptroller of the Currency are so well known, I wanted to write a brief refresher on some of the other regulatory agencies.

An agency most of us have some familiarity with is the Federal Deposit Insurance Corporation, known as the FDIC. While it is an official U.S. Government Corporation charted by Congress, the FDIC is not a regulatory agency (although in many ways, it functions as one which is why it is included). Prior to its inception, bank failures and runs on banks happened on a frequent basis. [1] The corporation was created in 1933 during the Great Depression to insure bank deposits. This alone brought a large measure of needed stability to the banking system. The organization receives its funding from insurance premiums banks pay on their deposits. As of 2018, bank accounts were insured up to $250,000. [2]

Because the FDIC is the guarantor of bank deposits, it carefully monitors the industry to identify banks which have the potential to fall into adverse financial positions. As such, it functions as another layer of Federal supervision. As for FDIC insurance, the most important point clients need to understand is the difference between money market funds and Money Market Deposit Accounts. Money market funds are mutual funds. Not one of them can guarantee your funds at one-hundred cents on the dollar. Money Market Deposit Accounts are offered by banks, and they are insured by the FDIC, so deposits are insured for one-hundred cents on the dollar.

Credit unions are supervised and insured by the National Credit Union Administration. Like the FDIC, the NCUA is chartered by Congress as a U.S. Government corporation. It insures deposits in credit unions up to $250,000. [3] The organization is funded by the credit union industry and does not receive federal money. As of 2016, there were approximately 6,000 credit unions with deposits exceeding a trillion dollars. [4] While Cannon has long worked with the credit union industry, many in our business are often surprised when they learn how large the credit union world has become.  

The brokerage industry is regulated by FINRA, the Financial Institution Regulatory Authority. While chartered by Congress, this is an independent regulatory agency funded by the securities industry, although it is supervised by the Securities Exchange Commission (SEC). FINRA is charged by the U.S. government to conduct oversight of all 3,712 broker/dealers in the U.S.  [5] One of the most important services FINRA provides without charge to the investing public is their “Broker Check” database. [6] Anyone can go onto their website and check the background of their broker which will include any fines or enforcement actions taken against your broker.

Almost every brokerage firm is a member of SIPIC, Securities Investor Protection Corporation. The primary function of SIPIC is to oversee the liquidation of brokerage firms which go bankrupt and track down any securities which may be missing from an account. As part of this function, SIPIC insures every brokerage account up to $500,000. However, that guarantee only applies to the first $250,000 in cash in your account.  [7] SIPIC is funded by assessments on broker/dealers.

The municipal bond industry is regulated by the Municipal Securities Rule Making Board or MSRB. Although funded by industry and supervised by the SEC, the organization has no enforcement powers. The board issues rules governing the muni bond market and issues four separate licenses, Series 50, 51, 52, and 53. Those in the trade who are deeply involved in the muni bond market hold at least one of these licenses. The exams are administered by FINRA. [8]

Our industry grows in complexity by the day. Staying current takes work.

 

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Contributing Writer: Subject Matter Expert Charles McCain

 

Resources:

[1] https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corporation

[2] https://www.fdic.gov/deposit/deposits/faq.html

[3] https://www.ncua.gov/About/Pages/default.aspx

[4] https://www.ncua.gov/newsroom/Pages/news-2016-march-call-report-data.aspx

[5] http://www.finra.org/about

[6] https://brokercheck.finra.org/

[7] https://www.sipc.org/about-sipc/the-sipc-fund

[8] http://www.msrb.org/Regulated-Entities/Professional-Qualification.aspx