---
kind: "section"
citation: "12 U.S.C. § 371c–1"
title: "12"
title_heading: "Banks and Banking"
number: "371c–1"
heading: "Restrictions on transactions with affiliates"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/12/371c-1"
units:
  - "Chapter 3 — Federal Reserve System"
  - "Subchapter X — Powers and Duties of Member Banks"
---

# §371c–1. Restrictions on transactions with affiliates

- (a) **In general—**
  - (1) **Terms—** A [member bank](/usc/12/221a.md?p=a) and its subsidiaries may engage in any of the transactions described in [paragraph (2)](#a-2) only—
    - (A) on terms and under circumstances, including [credit](/usc/12/5481.md?p=7) standards, that are substantially the same, or at least as favorable to such bank or its subsidiary, as those prevailing at the time for comparable transactions with or involving other nonaffiliated companies, or
    - (B) in the absence of comparable transactions, on terms and under circumstances, including [credit](/usc/12/5481.md?p=7) standards, that in good faith would be offered to, or would apply to, nonaffiliated companies.
  - (2) **Transactions covered—** [Paragraph (1)](#a-1) applies to the following:
    - (A) Any covered transaction with an [affiliate](/usc/12/221a.md?p=b).
    - (B) The sale of securities or other assets to an [affiliate](/usc/12/221a.md?p=b), including assets subject to an agreement to repurchase.
    - (C) The payment of money or the furnishing of services to an [affiliate](/usc/12/221a.md?p=b) under contract, lease, or otherwise.
    - (D) Any transaction in which an [affiliate](/usc/12/221a.md?p=b) acts as an agent or broker or receives a fee for its services to the bank or to any other [person](/usc/12/5481.md?p=19).
    - (E) Any transaction or series of transactions with a third party—
      - (i) if an [affiliate](/usc/12/221a.md?p=b) has a financial interest in the third party, or
      - (ii) if an [affiliate](/usc/12/221a.md?p=b) is a participant in such transaction or series of transactions.
  - (3) **Transactions that benefit affiliate—** For the purpose of this subsection, any transaction by a [member bank](/usc/12/221a.md?p=a) or its subsidiary with any [person](/usc/12/5481.md?p=19) shall be deemed to be a transaction with an [affiliate](/usc/12/221a.md?p=b) of such bank if any of the proceeds of the transaction are used for the benefit of, or transferred to, such [affiliate](/usc/12/221a.md?p=b).
- (b) **Prohibited transactions—**
  - (1) **In general—** A [member bank](/usc/12/221a.md?p=a) or its subsidiary—
    - (A) shall not purchase as fiduciary any securities or other assets from any [affiliate](/usc/12/221a.md?p=b) unless such purchase is permitted—
      - (i) under the instrument creating the fiduciary relationship,
      - (ii) by court order, or
      - (iii) by law of the jurisdiction governing the fiduciary relationship; and
    - (B) whether acting as principal or fiduciary, shall not knowingly purchase or otherwise acquire, during the existence of any underwriting or selling syndicate, any security if a principal underwriter of that security is an [affiliate](/usc/12/221a.md?p=b) of such bank.
  - (2) **Exception—** [Subparagraph (B)](#b-1-B) of paragraph (1) shall not apply if the purchase or acquisition of such securities has been approved, before such securities are initially offered for sale to the public, by a majority of the [directors](/usc/12/5481.md?p=10) of the bank based on a determination that the purchase is a sound investment for the bank irrespective of the fact that an [affiliate](/usc/12/221a.md?p=b) of the bank is a principal underwriter of the securities.
  - (3) **Definitions—** For the purpose of this subsection—
    - (A) the term “security” has the meaning given to such term in [section 78c(a)(10) of title 15](/usc/15/78c.md?p=a-10); and
    - (B) the term “principal underwriter” means any underwriter who, in connection with a primary distribution of securities—
      - (i) is in privity of contract with the issuer or an affiliated [person](/usc/12/5481.md?p=19) of the issuer;
      - (ii) acting alone or in concert with one or more other [persons](/usc/12/5481.md?p=19), initiates or directs the formation of an underwriting syndicate; or
      - (iii) is allowed a rate of gross commission, spread, or other profit greater than the rate allowed another underwriter participating in the distribution.
- (c) **Advertising restriction—** A [member bank](/usc/12/221a.md?p=a) or any subsidiary or [affiliate](/usc/12/221a.md?p=b) of a [member bank](/usc/12/221a.md?p=a) shall not publish any advertisement or enter into any agreement stating or suggesting that the bank shall in any way be responsible for the obligations of its [affiliates](/usc/12/221a.md?p=b).
- (d) **Definitions—** For the purpose of this section—
  - (1) the term “[affiliate](/usc/12/221a.md?p=b)” has the meaning given to such term in [section 371c of this title](/usc/12/371c.md) (but does not include any company described in section[^1] (b)(2) of such section or any bank);
  - (2) the terms “bank”, “subsidiary”, “[person](/usc/12/5481.md?p=19)”, and “security” (other than security as used in [subsection (b)](#b)) have the meanings given to such terms in [section 371c of this title](/usc/12/371c.md); and
  - (3) the term “covered transaction” has the meaning given to such term in [section 371c of this title](/usc/12/371c.md) (but does not include any transaction which is exempt from such definition under [subsection (d)](/usc/12/371c.md?p=d) of such section).
- (e) **Regulations—**
  - (1) **In general—** The [Board](/usc/12/221a.md?p=a) may prescribe regulations to administer and carry out the purposes of this section, including—
    - (A) regulations to further define terms used in this section; and
    - (B) subject to [paragraph (2)](#e-2), if the [Board](/usc/12/221a.md?p=a) finds that an exemption or exclusion is in the public interest and is consistent with the purposes of this section, and notifies the Federal Deposit Insurance Corporation of such finding, regulations to—
      - (i) exempt transactions or relationships from the requirements of this section; and
      - (ii) exclude any subsidiary of a bank holding company from the definition of [affiliate](/usc/12/221a.md?p=b) for purposes of this section.
  - (2) **Exception—** The [Board](/usc/12/221a.md?p=a) may grant an exemption or exclusion under this subsection only if, during the 60-day period beginning on the date of receipt of notice of the finding from the [Board](/usc/12/221a.md?p=a) under [paragraph (1)(B)](#e-1-B), the Federal Deposit Insurance Corporation does not object, in writing, to such exemption or exclusion, based on a determination that the exemption presents an unacceptable risk to the Deposit Insurance Fund.

## Footnotes

[^1]: So in original. Probably should be “subsection”.

## Source credit

(Dec. 23, 1913, ch. 6, § 23B, as added Pub. L. 100–86, title I, § 102(a), Aug. 10, 1987, 101 Stat. 564; amended Pub. L. 106–102, title VII, § 738, Nov. 12, 1999, 113 Stat. 1480; Pub. L. 111–203, title VI, § 608(b), July 21, 2010, 124 Stat. 1610.)

## Notes

### Editorial Notes

### Amendments

2010—Subsec. (e). Pub. L. 111–203, § 608(b)(1)–(4), designated existing provisions as par. (1) and inserted heading, redesignated former pars. (1) and (2) as subpars. (A) and (B), respectively, of par. (1), redesignated former subpars. (A) and (B) of par. (2) as cls. (i) and (ii), respectively, of par. (1)(B), realigned margins, and struck out concluding provisions which read as follows: “if the Board finds such exemptions or exclusions are in the public interest and are consistent with the purposes of this section.”

Subsec. (e)(1)(B). Pub. L. 111–203, § 608(b)(5)(A), inserted “subject to paragraph (2), if the Board finds that an exemption or exclusion is in the public interest and is consistent with the purposes of this section, and notifies the Federal Deposit Insurance Corporation of such finding,” before “regulations” in introductory provisions.

Subsec. (e)(1)(B)(ii). Pub. L. 111–203, § 608(b)(5)(B), substituted period for comma at end.

Subsec. (e)(2). Pub. L. 111–203, § 608(b)(6), added par. (2).

1999—Subsec. (b)(2). Pub. L. 106–102 amended text of par. (2) generally. Prior to amendment, text read as follows: “Subparagraph (B) of paragraph (1) shall not apply if the purchase or acquisition of such securities has been approved, before such securities are initially offered for sale to the public, by a majority of the directors of the bank who are not officers or employees of the bank or any affiliate thereof.”

### Statutory Notes and Related Subsidiaries

### Effective Date of 2010 Amendment

Amendment by Pub. L. 111–203 effective 1 year after the transfer date, see section 608(d) of Pub. L. 111–203, set out as a note under section 371c of this title.