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| I. Structure of a Retail Sweep Arrangement | | | | |
| A. For each retail sweep customer, has the institution established by agreement two legally separate accounts: a transaction account (a NOW account or demand deposit account) and a nontransaction account (usually a savings deposit account that is a money market deposit account or MMDA)? | | | | |
| B. Is the sweep function set up so that the funds are actually moved from the customer's transaction account to his or her savings account on the official books and records of the depository institution as of the close of business on the day on which the depository institution intends to report the funds as savings deposits and not transaction accounts, and vice versa? | | | | |
| C. Is the maximum number of preauthorized or automatic funds transfers ("sweeps") from a savings deposit account into a transaction account limited to not more than six per month? | | | | |
| II. Establishment of a Retail Sweep Account | | | | |
| A. When setting up a retail sweep account for customers with existing transaction accounts, did the depository institution amend its existing account agreement with the customer under applicable contract law to provide for the existence of two distinct accounts (a transaction account and a savings account) rather than a single account? | | | | |
| (Note: The distinct accounts may be referred to as "subaccounts," provided they are legally distinct accounts and not just one account "subdivided" in name only.) | | | | |
| B. If the institution unilaterally amended its existing customer account agreement to initiate a retail sweep service on an existing transaction account, did the original account agreement give the institution the right to amend the agreement unilaterally by giving advance written notice to the customer? | | | | |
| (Note: If the original agreement did not give the institution the right to unilaterally amend the account agreement, it is not sufficient for the institution to simply give advance written notice to its customers of the intended establishment of a retail sweep program or the intended creation of two distinct accounts.) | | | | |
| C. If the institution initiated a retail sweep program at the time it established a new account with a customer, did the account agreement include language providing for the establishment of two distinct accounts (a transaction account and a savings account) rather than a single account (a transaction account only)? | | | | |
| III. Keeping of Books and Records | | | | |
| A. Is the distinction between the customer's two accounts involved in a retail sweep program reflected on the institution's official books and records? | | | | |
| 1. For general ledgers that are sufficiently disaggregated to distinguish between transaction and nontransaction accounts: Does the general ledger entry for the customer's transaction account include the sum of the customer's transaction account balances, and does the entry for the customer's nontransaction (savings) account include the sum of the customer's nontransaction account balances? | | | | |
| 2. For general ledgers that are not sufficiently disaggregated to distinguish between transaction and nontransaction accounts: Is the distinction between the customer's transaction and nontransaction accounts reflected in supplemental records or systems, provided that those supplemental records or systems constitute part of the institution's official books and records? | | | | |
| (Note: To meet the requirements for being official books and records of the depository institution, the supplemental records or systems must be reflected in, and consistent with, the institution's data as reported on its "Report of Transaction Accounts, Other Deposits and Vault Cash" (FR 2900), as well as the data submitted to its banking supervisor, such as on the Consolidated Reports of Condition and Income for Banks ("Call Report"). | | | | |
| In addition, the supplemental records or systems must be subject to the same prudent managerial oversight and control as the general ledger. According to the FRB, the maintenance of supplemental records or systems by a third party may raise questions as to whether those records or systems are subject to prudent managerial oversight and control. Furthermore, a valid retail sweep program may not exist solely in records or on systems that do not constitute official books and records of the depository institution and that are not used for any purpose other than generating "reclassified" FR 2900 deposit reports.) | | | | |
| IV. Movement of Funds | | | | |
| A. Do the official books and records of the institution reflect the movement of funds between the customer's accounts on each day that sweep activity occurs? | | | | |
| (Note: For a sweep to be valid, the funds that the institution intends to sweep into and report as "savings deposits" must actually have been moved from the customer's transaction account to his nontransaction account before the close of business that day. Likewise, funds being swept back into the customer's transaction account must actually have been moved from the savings deposit or MMDA account to the customer's transaction deposit account before the close of that business day. Accordingly, the manner in which the funds are reported (transaction or savings) on any given reporting date in the institution's official books and records must correspond to where the funds are actually located by the close of business.) | | | | |
| B. Does the institution observe a "close of business" that is reasonable and applied consistently as the cut-off time for receipt of work for posting transactions to its general ledger accounts for that day? | | | | |
