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EVP Covers Son's OD - Reg O Violation?

Answered by: 
Jim Bedsole

Question: 
Is the following overdraft a Reg O violation? The adult son of one our Executive Vice Presidents was overdrawn $200.00, the Executive Vice President is not a signer on the account, but the address on the account is the same as his. I paid the item and charged the NSF fee. The Executive Vice President involved made a transfer from his personal account into his son's account on the day of the overdraft. I was told it was a Reg O violation because of the addresses on both accounts being the same?
Answer: 

I don't think you have a Reg O violation unless the EVP received a financial benefit from the payment of the overdraft. Family members are not covered per se under Reg O. There is a definition in 215.2 for "immediate family" and that definition does include the insider's children, including adult children residing in the insider's home, but just the presense of that definition does not automatically bring all of those people under coverage of Reg O. You have to look to where that term is used in the regulation, and the only place where "immediate family" is used is in determining whether a company is owned or controlled by a person. To the extent that shares of that company are owned by a person's immediate family members, they are considered to be owned by the person themselves for purposes of determining ownership or control, so paying the overdraft of the adult son on an account on which the EVP is not an owner or signer is not a violation of Reg O.

First published on BankersOnline.com 8/17/09

First published on 08/17/2009

Filed under: 
Compliance
Filed under compliance as: 
IT
NSF

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