Capital One 2013 Annual Report Download - page 27

The Department of Treasury, in consultation with the Federal Reserve and other federal financial institution
regulators, has promulgated rules and regulations implementing the Patriot Act that prohibit correspondent
accounts for foreign shell banks at U.S. financial institutions; require financial institutions to maintain certain
records relating to correspondent accounts for foreign banks; require financial institutions to produce certain
records upon request of the appropriate federal banking agency; require due diligence with respect to private
banking and correspondent banking accounts; facilitate information sharing between government and financial
institutions; require verification of customer identification; and require financial institutions to have an anti-
money laundering program in place.
Funding
Under the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), as discussed in
“MD&A—Liquidity Risk,” only well-capitalized and adequately-capitalized institutions may accept brokered
deposits. Adequately-capitalized institutions, however, must first obtain a waiver from the FDIC before accepting
brokered deposits, and such deposits may not pay rates that significantly exceed the rates paid on deposits of
similar maturity from the institution’s normal market area or, for deposits from outside the institution’s normal
market area, the national rate on deposits of comparable maturity. The FDIC is authorized to terminate a bank’s
deposit insurance upon a finding by the FDIC that the bank’s financial condition is unsafe or unsound or that the
institution has engaged in unsafe or unsound practices or has violated any applicable rule, regulation, order or
condition enacted or imposed by the bank’s regulatory agency. The termination of deposit insurance for a bank
could have a material adverse effect on its liquidity and its earnings.
In addition to the provision requiring a securitizer to retain a portion of the credit risk of an asset-backed
securitization, the Dodd-Frank Act also prohibits conflicts of interest relating to securitizations.
Non-Bank Activities
Our non-bank subsidiaries are subject to supervision and regulation by various other federal and state authorities.
Capital One Investment Services LLC, Capital One Securities, Inc. and Capital One Sharebuilder, Inc. are
registered broker-dealers regulated by the SEC and the Financial Industry Regulatory Authority. Our broker-
dealer subsidiaries are subject to, among other things, net capital rules designed to measure the general financial
condition and liquidity of a broker-dealer. Under these rules, broker-dealers are required to maintain the
minimum net capital deemed necessary to meet their continuing commitments to customers and others, and are
required to keep a substantial portion of their assets in relatively liquid form. These rules also limit the ability of
broker-dealers to transfer capital to parent companies and other affiliates. Broker-dealers are also subject to other
regulations covering their business operations, including sales and trading practices, public offerings, publication
of research reports, use and safekeeping of client funds and securities, capital structure, record-keeping and the
conduct of directors, officers and employees.
Capital One Asset Management LLC, which provides investment advice to customers of Capital One, N.A.,
which includes high net worth individuals, institutions, foundations, endowments and other organizations, is an
SEC-registered investment adviser regulated under the Investment Advisers Act of 1940. ShareBuilder Advisors,
LLC is also an SEC-registered investment adviser. Capital One Financial Advisors LLC is a state-registered
investment adviser.
Finally, Capital One Agency LLC is a licensed insurance agency that provides both personal and business
insurance services to retail and commercial clients and is regulated by the New York State Department of
Financial Services in its home state and by the state insurance regulatory agencies in the states in which it
operates.
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