Underwriting Brokered Deposits | Fidelity Capital Markets

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Want to learn more about the simplified process of underwriting and issuing brokered certificates of deposits? Here are the basics.

Visit https://capitalmarkets.fidelity.com/app/item/RD_13569_20388.html?sapl=youtube to learn more about Fidelity Capital Markets’ services.

Brokered deposits are important tools for banks, because they allow them to gain new deposits they can use to fund loans within their local communities. Many times, Fidelity’s brokered deposits may be less expensive than the rates banks would need to advertise in order to raise deposits locally. They can be an inexpensive alternative to borrowing from the Federal Home Loan Bank, and are almost always more cost effective than online CD listing services.

Here are the steps required for the underwriting and issuance of the Depository Trust Company – or DTC – eligible CD.

1. Completion of a brokerage agreement, which is an industry standard document developed by a leading law firm with extensive banking experience. It outlines the requirements for issuing a certificate of deposit. The issuing bank makes warrants and representations to Fidelity Capital Markets. In turn, Fidelity makes warrants and representations to the issuing bank. This document must be signed by both parties, with a copy kept at both the bank and at Fidelity.

2. The Letter of Representation, which references DTC operational arrangements, must be signed. Then the bank submits it to DTC for signature. DTC then countersigns the letter of representation.

3. A Terms Agreement is created for each individual CD, setting out specific terms such as the settlement date, maturity date, coupon, payment frequency, all-in cost, and more. For each CD, a Term Agreement must be signed and returned to Fidelity Capital Markets.

4. Approximately 2 to 3 business days prior to the settlement date, Fidelity Capital Markets will prepare a Master Certificate for each CD that the firm underwrote for the bank and send them to the bank for review. A designated officer must sign each Master Certificate, keep a copy for the bank’s records, and send the signed certificate via overnight delivery directly to the DTC.

5. In addition, a Master Settlement Sheet is sent to the bank. It summarizes the aggregate money transfer, less Fidelity’s fees, that will take place on the settlement date.

6. Then a CD disclosure statement that describes the FDIC-insured CD in detail is developed for informational purposes only and sent to the clients who purchased the CDs.

7. As part of the deposit-raising efforts, Fidelity will market the CDs to registered broker dealers who have a relationship with the firm. Before a syndicate dealer can offer any CDs that Fidelity underwrites, the dealer must sign a Seller Group Agreement. By signing the agreement, the registered brokerage firms agree to comply with the policies, procedures, and regulations, including all anti-money laundering statutes as they relate to the sale of CDs by FINRA and the SEC.

To learn more about our brokered certificate of deposit process, please call Fidelity Capital Markets at 800-343-2670.

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Fidelity Capital Markets is the institutional trading arm of Fidelity Investments®, providing trading products and services to a wide array of clients, including buy-side institutions and hedge funds, as well as to Fidelity®’s own businesses. Fidelity Capital Markets offers a suite of electronic brokerage products and execution services across multiple asset classes, including equities, fixed income, options, and FOREX, as well prime brokerage, securities lending and municipal and bank issued brokered CD underwriting.

Fidelity Capital Markets is a division of National Financial Services LLC. Member NYSE, SIPC.

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Underwriting Brokered Deposits | Fidelity Capital Markets