The Federal Deposit Insurance Corp. answered common questions Monday about banks' requirements to disclose the deposit insurance status of swept funds.
A January FDIC rule explained when sweep account funds, which despite a sweep arrangement may not transfer into a new account immediately, are considered among a bank's deposits upon the institution's failure. It also ordered that starting July 1 institutions spell out the treatment of a consumer's sweep account funds in the event of failure.
In its "frequently asked questions" document, the agency clarified which types of sweep accounts are covered by the disclosure requirements, the vehicles through which disclosures can be made and how often institutions should make such disclosures, among other topics.
The FAQ said sweep account disclosures must be in writing through means such as client letters, account statements and transaction confirmation statements. After an initial disclosure to account holders, institutions must submit the disclosure again annually.
