Code of Maine Rules
02 - DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION
032 - OFFICE OF SECURITIES
Chapter 506 - FINANCIAL INSTITUTIONS AND BROKER-DEALERS ENGAGING IN THIRD PARTY BROKERAGE ARRANGEMENTS
Section 032-506-4 - Provisions applicable to financial institutions

A. The financial institution must adopt a written policy which:

B. The financial institution shall enter into a written agreement with the third party broker-dealer that clearly describes the duties and responsibilities of each party, as set forth in Section 5 of this rule. Prior to entering into such a third party brokerage arrangement, the financial institution shall conduct an appropriate due diligence review of the broker-dealer.

C. If the financial institution markets the third party broker-dealer services, it shall market those services in a manner that does not mislead or confuse customers as to the nature of the securities products or their risks.

D. Unlicensed financial institution employees may receive a one-time nominal fee of a fixed dollar amount for each customer referral, if the payment is not contingent on whether the referral results in a transaction.

E. The financial institution must notify the Bureau in writing at least ten days prior to commencing business under a third party brokerage arrangement. Title 9-B M.R.S.A. §446-A does not apply to third party brokerage arrangements between a financial institution and a third party broker-dealer. However, if a financial institution proposes to invest in a broker-dealer, that investment is subject to 9-B M.R.S.A. §446-A.

A. The financial institution's objectives for the third party brokerage arrangement and its strategies to achieve those objectives.

B. The features of the sales program and the roles of licensed and unlicensed personnel.

C. The designation of an executive officer responsible for monitoring the sales program and the designation of senior managers responsible for monitoring the activities and all individuals, including employees of the financial institution and any other party engaged in sales activities. The use of non-financial institution employees does not relieve financial institution management of the responsibility to take reasonable steps to ensure that securities sales activities meet the requirements of this rule.

D. A description of the responsibilities of third party broker-dealer personnel authorized to make investment sales or recommendations. Only personnel licensed by the Maine Office of Securities and registered with the NASD may conduct brokerage activities.

E. A description of the responsibilities of third party broker-dealer personnel who may have contact with retail customers concerning the sales program.

F. A description of relevant referral activities and compensation arrangements.

G. A description of appropriate training requirements for the various classes of personnel.

H. The criteria governing the categories of investments that can be sold to financial institution customers.

I. The implementation of a system to monitor customer complaints and their resolution.

J. The scope and frequency of compliance reviews and the frequency of reporting to the financial institution's governing body.

K. The process for verifying that third party broker-dealer sales are being conducted in accordance with the written agreement.

L. The permissible use of financial institution and broker-dealer customer information, including how compliance with Maine and federal law and with the institution's privacy policy will be achieved.

M. Where applicable, the financial institution shall disclose the existence of any advisory or other material relationship between the institution, including its affiliates, and an investment company whose shares are sold by the broker-dealer. The financial institution shall also disclose the existence of any material relationship between the institution and an affiliate involved in providing securities.