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Reg D and an Interest on Demand CD

Answered by: 
Jim Bedsole

Question: 
Is it permissible to offer a Certificate of Deposit that pays interest to the customer "on demand" regardless of maturity date? Could this type of CD be offered without a penalty? When would this type of product cross the line of becoming a transaction type account on which we could not pay interest for Reg D?
Answer: 

Assuming you are talking about it paying interest that has already been credited to the CD on demand, I think that is perfectly permissible assuming you've made the proper TIS disclosure about yield assuming interest remains on deposit until maturity. On the other hand, if you are talking about the ability to make withdrawals from the account based on anticipated interest crediting, I don't think that would fly.

First published on BankersOnline.com 1/22/07

First published on 01/22/2007

Filed under: 
Compliance
Filed under compliance as: 
Certificate of Deposit
IT

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