Does Regulation R apply to our bank? We have a trust department and use outside broker/dealers to effectuate purchases and sales of securities. We usually have fewer than 500 trades per year, qualifying us for the de minimis exception. But if we exceeded that threshold, would we be subject to Regulation R?

Yes, your bank would be subject to Regulation R if it exceeds the transaction threshold under the de minimis exception, but it is possible that another exception will apply.

The de minimis exception is just one of many exceptions from the definition of “broker” under the Securities Exchange Act of 1934 and Regulation R. If your institution is disqualified from the de minimis exception, it may be rely on one of many other available exceptions, such as Regulation R’s exceptions for third-party networking arrangements, trust and fiduciary activities, deposit “sweep” activities, custody and safekeeping activities, etc., or the Act’s exceptions for certain stock purchase plans, affiliate transactions, private securities offerings, identified banking products, municipal securities, etc.

For resources related to our guidance, please see:

FRB Small Entity Compliance Guide, Regulation R (“ . . . Regulation R implements the bank broker exceptions relating to third-party networking arrangements, trust and fiduciary activities, deposit ‘sweep’ activities, and custody and safekeeping activities. Section 3(a)(4)(B) of the Exchange Act also includes other ‘broker’ exceptions for banks. These exceptions include transactions in exempt securities (such as U.S. government securities); certain stock purchase plans; affiliate transactions; private securities offerings; identified banking products; municipal securities; and a de minimis number of other securities transactions. Although Regulation R does not include provisions related to these statutory exceptions, they remain in force and available to banks. . . . If more than one broker exception or exemption is available to a bank under the statute or rules for a securities transaction, the bank may choose the exception or exemption on which it relies to effect the transaction without registering as a broker-dealer. . . .”)

Regulation R, 12 CFR Part 218 (Rules on broker exceptions for institutional referrals (12 CFR 218.701), trust and fiduciary activities (12 CFR 218.721), the calculation of trust and fiduciary compensation (12 CFR 218.722), special accounts, transferred accounts, foreign branches and a de minimis number of accounts (12 CFR 218.723), sweep accounts (12 CFR 218.740), money market fund transactions (12 CFR 218.741), custody account transactions (12 CFR 218.760), transactions in securities issued under Regulation S (12 CFR 218.771), securities lending transactions (12 CFR 218.772), excepted or exempted transactions in investment company securities (12 CFR 218.775), and transactions in a company’s securities for its employee benefit plans (12 CFR 218.776).)

Securities Exchange Act of 1934, 15 USC 78c(a)(4)(B) (“Exception for certain bank activities. A bank shall not be considered to be a broker because the bank engaged in any one or more of the following activities under the conditions described: (i) Third party brokerage arrangements. . . . (ii) Trust activities. . . . (iii) Permissible securities transactions. . . . (iv) Certain stock purchase plans. . . . (v) Sweep accounts. . . . (vi) Affiliate transactions. . . . (vii) Private securities offerings. . . . (viii) Safekeeping and custody activities. . . . (ix) Identified banking products. . . . (x) Municipal securities. . . . (xi) De minimis exception. . . .”)