When broker-dealers sell securities at a bank, credit union, or savings association, customers can easily confuse uninsured investment products with insured deposits. This section covers the specific disclosures NASAA requires to prevent that confusion.
Disclosures at Financial Institutions
When broker-dealers conduct securities transactions at a financial institution (bank, credit union, savings association), the North American Securities Administrators Association (NASAA) Rules for Sales of Securities at Financial Institutions (1998) require specific disclosures to prevent customer confusion between insured deposits and uninsured securities.
The Four Required Disclosures
- Securities products are NOT insured by the Federal Deposit Insurance Corporation (FDIC) (or the National Credit Union Administration (NCUA), as applicable)
- Securities products are NOT deposits or obligations of the financial institution
- Securities products are NOT guaranteed by the financial institution
- Securities products are subject to investment risks, including possible loss of principal
How and When Disclosures Must Be Made
| Method | Timing |
|---|---|
| Oral disclosure | Before or at the time of the securities transaction |
| Written disclosure | On or before completion of the transaction |
| On account statements and confirmations | Ongoing for the account |
Exam Tip: Gotchas
The "not FDIC insured, not a bank deposit, may lose value" disclosure is required whenever securities are sold at a bank or similar financial institution. The disclosure must be both oral AND written; doing only one is not sufficient.