U.S. patent application number 10/071053 was filed with the patent office on 2006-09-21 for systems and methods for adminstering return sweep accounts.
This patent application is currently assigned to Reserve Management Corporation. Invention is credited to Bruce Bent, Bruce II. Bent.
Application Number | 20060212389 10/071053 |
Document ID | / |
Family ID | 46278817 |
Filed Date | 2006-09-21 |
United States Patent
Application |
20060212389 |
Kind Code |
A2 |
Bent; Bruce ; et
al. |
September 21, 2006 |
SYSTEMS AND METHODS FOR ADMINSTERING RETURN SWEEP ACCOUNTS
Abstract
Abstract of the Disclosure Novel systems and methods for
managing a plurality of client demand accounts so as to allow a
banking institution to retain client deposits on the bank`s balance
sheets while, at the same time, providing the client with the
capability of implementing up to an unlimited number of
transactions per month and also providing the client with interest
on their account balances. These objectives are achieved through
the use of a pooled deposit account at the client`s savings
institution or bank. Funds are transferred from individual client
demand accounts to the pooled insured deposit account. All or a
portion of the interest accrued from the pooled deposit account is
then distributed to individual clients. The interest may, but need
not, be distributed according to the relative proportions of each
client`s funds in the pooled deposit account. A database keeps
track of deposits to, and withdrawals from, each of the client
demand accounts, as well as each client`s proportionate and/or
monetary share in the pooled deposit account. On a regular,
periodic, or recurring basis, a net transaction is calculated as
the sum of individual client deposits and withdrawals from the
plurality of demand accounts. The net transaction calculation is
used to determine an amount of funds that need to be deposited into
the pooled deposit account to cover client deposits, or an amount
of funds that needs to be withdrawn from the pooled deposit account
to cover client withdrawals. Individual account management
calculations are performed to determine whether to deposit or
withdraw funds from the pooled deposit account to each of a
plurality of individual client demand accounts. The database is
updated for each client`s deposit and withdrawal activities. The
invention permits funds to be deposited into a demand account from
various sources, and also provides for the tendering of payments
from the demand account via different instruments, without
limitation as to the number of transfers, and with accrual of
interest on the deposited funds.
Inventors: |
Bent; Bruce; (Manhasset,
NY) ; Bent; Bruce II.; (New York, NY) |
Correspondence
Address: |
FOLEY AND LARDNER LLP
SUITE 500
3000 K STREET NW
WASHINGTON
DC
20007
US
|
Assignee: |
Reserve Management
Corporation
1250 Broadway
New York
NY
10001
|
Prior
Publication: |
|
Document Identifier |
Publication Date |
|
US 20020091637 A1 |
July 11, 2002 |
|
|
Family ID: |
46278817 |
Appl. No.: |
10/071053 |
Filed: |
February 8, 2002 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
|
|
09/176,340 |
Apr 16, 2002 |
6374231 |
|
|
10071053 |
Feb 8, 2002 |
|
|
|
09/677,535 |
Oct 2, 2000 |
|
|
|
09/176,340 |
Oct 21, 1998 |
|
|
|
Current U.S.
Class: |
705/40 |
Current CPC
Class: |
G06Q 20/102 20130101;
G06Q 40/02 20130101; G06Q 40/00 20130101; Y10S 707/99931
20130101 |
Class at
Publication: |
705/040 |
International
Class: |
G06F 17/60 20060101
G06F017/60 |
Claims
1. A method for managing a plurality of client demand accounts
including the steps of: (a) establishing a Federal Deposit
Insurance Corporation insurable, pooled deposit account at a
client`s bank or savings institution; (b) transferring client funds
from each of a plurality of client demand accounts to the pooled
deposit account at the client`s bank or savings institution, and
(c) distributing all or a portion of the interest accrued from the
pooled deposit account among a plurality of clients; wherein the
client funds are retained by the bank or savings institution, and
the client may implement up to an unlimited number of transactions
per month.
2. The method of claim 1 wherein step (c) further includes the step
of distributing the interest according to the relative proportions
of each client`s funds in the pooled deposit account.
3. The method of claim 1 wherein step (b) further includes the step
of keeping track of deposits to, and withdrawals from, each of the
client demand accounts, as well as each client`s proportionate
share in the pooled deposit account.
4. The method of claim 3 further including the step of, on a
regular, periodic, or recurring basis, calculating a net
transaction as the sum of individual client deposits and
withdrawals from each of the plurality of client demand
accounts.
5. The method of claim 4 further including the step of utilizing
the net transaction calculation to determine an amount of funds
that need to be deposited into the pooled deposit account to cover
client deposits, or an amount of funds that needs to be withdrawn
from the pooled deposit account to cover client withdrawals.
6. The method of claim 5 further including the step of performing
individual account management calculations so as to determine
whether to: (a) move funds into the pooled deposit account to cover
client deposits to any of a plurality of client demand accounts, or
(b) withdraw funds from the pooled deposit account to any of the
plurality of client demand accounts.
7. The method of claim 6 further including the step of updating a
database for each client`s deposit and withdrawal activities.
8. The method of claim 7 further including the step of accepting
client funds for deposit from each of a plurality of clients and
from each of a plurality of sources, without limitation as to the
number of transfers, and with accrual of interest on the deposited
funds.
9. The method of claim 7 further including the step of providing
for the tendering of payments from each of the client demand
accounts via any of a plurality of different financial instruments,
without limitation as to the number of transfers, and with accrual
of interest on at least some of funds deposited by the client in
its respective client demand account.
10. The method of claim 7 further including the steps of: (a)
accepting client funds for deposit from each of a plurality of
clients and from each of a plurality of sources, and (b) providing
for the tendering of payments from each of the client demand
accounts via any of a plurality of different financial instruments,
wherein steps (a) and (b) of this claim are performed without
limitation as to the number of transfers, and with accrual of
interest on the deposited funds.
11. The method of claim 10 further including the steps of: (a)
monitoring requested debits of funds from each of the client demand
accounts, and (b) selectively authorizing or rejecting each of the
requested debits based upon an account balance in a client demand
account or a client`s proportionate share in the pooled deposit
account or based upon both the account balance in the demand
account and the client`s proportionate share in the pooled deposit
account or based upon both the account balance in the demand
account and the client`s proportionate share in the pooled deposit
account.
12. The method of claim 11 further including the step of debiting
or crediting a plurality of deposit accounts at a plurality of
banks or savings institutions on the client`s behalf.
13. The method of claim 10 further including the step of, on a
periodic, repeated, or regular basis, generating a client report
that refers to all of the assets and transactions in each of a
plurality of client demand accounts.
14. A method for managing a plurality of demand accounts for each
of a plurality of clients whose funds are held at a banking
institution in one or more deposit accounts, the method comprising
the steps of: (a) accepting client funds; and (b) the banking
institution retaining client funds while, at the same time,
providing the client with up to an unlimited number of transactions
per month, and also providing the client with interest on account
balances.
15. The method of claim 14 further comprising the steps of:
providing a database having client information for each account;
administering clients` deposits to and withdrawals from each of
their demand accounts; authorizing or rejecting the use of funds in
a particular client`s demand account for each demand payment
requested from that client`s account; determining a net transaction
of the sum of the demand account deposits and withdrawals on a
regular basis; using the determination of the net transaction to
deposit funds to or withdraw funds from said one or more deposit
accounts in which said client`s funds are held; and updating the
database for each clients` deposit and authorized demand
payment.
16. The method of claim 15, further comprising the steps of:
determining whether each client`s deposit account contains more
than a specified amount; and distributing any amounts over said
specified amount into another deposit account at a preselected
banking institution.
17. The method of claim 16, wherein client`s funds are deposited by
at least one method selected from the group consisting of check,
wire or electronic transfer, Automated Clearing House, third party
credits, and a sweep from one of the client`s other accounts.
18. A system for managing a plurality of demand accounts for
multiple clients whose funds are held at a banking institution in
one or more deposit accounts, the system comprising: a database
having client information for each demand account; a device for
administering clients` deposits to and withdrawals from their
demand accounts; a device for authorizing or rejecting the use of
funds in a particular client`s demand account to be used for each
demand payment requested to be paid drawn on funds from that
client`s demand account; a device for determining a net transaction
of the sum of the demand account deposits and withdrawals on a
regular periodic basis; a comparison device for determining from
the net transaction whether to deposit funds to or withdraw funds
from said one or more insured deposit accounts; a device for
distributing interest earned on said deposit account among the
clients; and a device for updating the database for each client`s
deposits and authorized demand payments, wherein the banking
institution retains client funds while, at the same time, providing
the client with up to an unlimited number of transactions per month
and interest on their account balances in the one or more
interest-bearing and insured deposit accounts.
19. The system of claim 18, wherein withdrawals from the demand
accounts are in the form of at least one type selected from the
group consisting of drafts (checks), credit card, debit card,
sweeps, electronic transfers, and combinations thereof.
20. The system of claim 19, wherein deposits to the demand accounts
are in the form of least one type selected from the group
consisting of drafts (checks), sweeps, electronic transfers, and
combinations thereof.
21. The method of claim 1, wherein one or more transfers to or
withdrawals from the pooled deposit account are requested in
person, or by mail, or by messenger, or by telephone and
distributed by mail, or by automated teller machine, or a
combination thereof.
22. The method of claim 14, wherein one or more transfers to or
withdrawals from the one or more deposit accounts are requested in
person, or by mail, or by messenger, or by telephone and
distributed by mail, or by automated teller machine, or a
combination thereof.
23. The system of claim 18, wherein one or more transfers to or
withdrawals from the one or more deposit accounts are requested in
person, or by mail, or by messenger, or by telephone and
distributed by mail, or by automated teller machine, or a
combination thereof.
24. The method of claim 1, wherein a plurality of transfers of
client funds between the demand accounts and the pooled deposit
account is via a pooled demand deposit account.
25. The method of claim 14, wherein a plurality of transfers of
client funds between the demand accounts and the one or more
deposit accounts is via a pooled demand deposit account.
26. The system of claim 18, wherein a plurality of transfers of
client funds between the demand accounts and the one or more
deposit accounts is via a pooled demand deposit account.
27. The method of claim 1, wherein the interest is distributed
among said client demand accounts.
28. The method of claim 1, wherein the interest is accounted for
among the clients in a database.
29. The system of claim 18, wherein the interest is distributed
among said client demand accounts.
30. The system of claim 18, wherein the interest is accounted for
among the clients in a database.
31. The method of claim 1, further comprising the steps of:
determining whether the pooled deposit account contains more than a
specified amount for each client; and distributing any amounts over
said specified amount into another deposit account at a different
preselected financial institution.
32. The system of claim 18, further comprising: a device for
determining whether the deposit account contains more than a
specified amount for each client; and a device for distributing any
amounts over said specified amount into another deposit account at
a different preselected financial institution.
33. A program product for managing a plurality of demand accounts
for multiple clients whose funds are held at a financial
institution in one or more deposit accounts, the system comprising:
a computer readable medium containing computer readable program
instructions capable of causing, when executed, a computer to
perform the following steps: maintaining a database having client
information for each demand account; administering clients`
deposits to and withdrawals from their demand accounts; authorizing
or rejecting the use of funds in a particular client`s demand
account to be used for each demand payment requested to be paid
drawn on funds from that client`s demand account; determining a net
transaction of the sum of the demand account deposits and
withdrawals on a regular periodic basis; determining from the net
transaction whether to deposit funds to or withdraw funds from said
one or more insured deposit accounts; distributing interest earned
on said deposit account among the clients; and updating the
database for each client`s deposits and authorized demand payments,
wherein the financial institution retains client funds while, at
the same time, providing the client with up to an unlimited number
of transactions per month and interest on their account balances in
the one or more deposit accounts.
Description
Detailed Description of the Invention
Related Cases
[0001] This is a Continuation-in-Part of Patent Application Serial
No. 09/176,340, filed on October 21.sup.st, 1998, and Patent
Application Serial No. 09/677,535, filed on October 2.sup.nd, 2000,
the disclosures of which are both incorporated by reference
herein.
Background of the Invention
[0002] 1. Field of the Invention: The invention relates generally
to computerized banking techniques and, more specifically, to
techniques by which deposits are kept on a bank`s balance sheet
while being administered as sweep account funds by a third
party.
[0003] 2. Background Art: It would be desirable if investors could
obtain fully-insured, interest-bearing bank accounts that offer an
unlimited number of fund transfers per month. However, present
statutory restrictions prevent banks and savings institutions from
paying interest on certain types of deposit accounts. More
specifically, Title 12, Part 329, of the Code of Federal
Regulations (CFR) provides that "no bank shall, directly or
indirectly, by any device whatsoever, pay interest on any demand
deposit". (12 CFR 329.2). A "deposit" is any money placed into a
checking account, savings account, Certificate of Deposit (CD), or
the like. In a "demand" account, the owner can demand that funds be
drawn and paid to another account (having the same or a different
owner), or to a third party. These demand payments are typically
implemented via bank drafts, checks, credit cards, and debit
cards.
[0004] Not all bank accounts are considered to be demand accounts.
If all, or a fixed amount, of the principal must be maintained in
order to achieve the particular benefits afforded by that account,
then the account is not a "demand" account. According to the CFR, a
"demand deposit" includes any deposit for which the depositor is
authorized to make more than six fund "transfers" during any month
or statement cycle of at least four weeks. Not all fund transfers
will be counted towards the allotted maximum of six; rather, it is
necessary to examine the specific type of fund transfer under
consideration.. A deposit will be considered a "demand" deposit if
the transfer takes place by means of a preauthorized, automatic, or
telephonic order specifying the transfer of funds to another
account of the depositor at the same bank, to the bank itself, or
to a third party. Likewise, a deposit is a "demand" deposit if more
than three of the six transfers are authorized to be made by check,
draft or debit card (12 CFR 329.1(b)(3). On the other hand, an
unlimited number of transfers is allowed between two accounts
registered to the same person or entity, provided that the
transfers are made by messenger, mail, telephone (but only via
check mailed to the depositor), automated teller machine, or in
person. Unless the funds of a deposit are held in a money market
account (18 USC 1832(a)), an account for which a depositor has the
ability to make at least six transfers will be deemed a demand
account, and no interest will be payable on the funds therein.
Therefore, owners of demand accounts do not obtain interest on
their funds.
[0005] One exemplary approach to offering investors fully-insured,
interest-bearing accounts that provide up to an unlimited number of
fund transfers was disclosed in United States Patent Application
Serial No. 09/176,340, referenced above. This application describes
a system for managing a plurality of accounts for multiple clients.
These accounts, which may originate from a variety of sources,
banks, brokerage firms, and/or clients, are held at any of a
plurality of savings institutions or banks. The system provides an
aggregate insured money market deposit account at a bank or savings
institution that is not necessarily an institution at which any of
the client accounts are held. The aggregate insured deposit account
is linked to each of the demand accounts in a manner so as to
permit deposit funds to be placed into a demand account from
various sources, and also so as to provide for the tendering of
payments from the demand account via different instruments, without
limitation as to the number of transfers. Interest is earned on
deposits because funds are transferred from individual client
accounts to the managed aggregate insured deposit account.
[0006] While a substantial advance over other prior art systems,
the above noted system requires the transfer of oftentimes
significant funds to comply with various banking regulations. This
may be difficult in the case of smaller, community-based banks, as
these institutions depend upon such funds as a source for loans.
Moreover, some bank clients are not comfortable with arrangements
that transfer client funds to unfamiliar third parties.
[0007] Pursuant to Regulation Q, banks are prohibited from paying
interest on commercial accounts. However, banks have developed
several approaches in an effort to compete with brokers who offer
interest on cash balances for their commercial customers. These
approaches, which include money fund sweeps and repo sweeps, are
disadvantageous in that they involve a removal of commercial
customer deposits from the bank`s balance sheets.
[0008] A substantial market exists for an interest-bearing return
sweep account that can be readily integrated into the existing
infrastructure of a bank or savings institution, while, at the same
time, permitting account funds to remain on the bank`s balance
sheet, with minimal disruption of existing bank-client
relationships. It was with the foregoing realizations in mind that
the present invention was developed.
Objects and Summary of the Invention
[0009] It is an object of the invention to provide bank and/or
savings institution clients with the ability to implement up to an
unlimited number of transfers while, at the same time, permitting
the bank and/or savings institution to retain client-deposited
funds.
[0010] It is another object of the invention to provide bank and/or
savings institution clients with interest from funds on deposit
while simultaneously providing the ability to implement up to an
unlimited number of transfers.
[0011] It is a further object of the invention to permit the bank
and/or savings institution to retain client-deposited funds on its
books so that these funds can be used as a source for loans.
[0012] It is yet a further object of the invention to provide a
banking method that enables clients to deposit funds into an
account from any of various sources, and to make payments from the
account via any of various instruments, without limitation as to
the number of transfers, while still earning interest on the funds
in the account.
[0013] It is another object of the present invention to provide a
banking method that manages a plurality of demand accounts for
multiple clients whose funds are held in an aggregate insured
deposit account at the client`s banking institution but managed by
a third party agent.
[0014] It is another object of the invention to provide a money
market banking method that has a minimal impact on
presently-existing, bank-to-client relationships.
[0015] It is a further object of the invention to provide a money
market banking method which is readily integrable into the existing
infrastructure of a bank or savings institution.
[0016] These and other objects of the invention are realized in the
form of novel systems and methods for managing a plurality of
client demand accounts so as to allow a banking institution to
retain client deposits on the bank`s balance sheets while at the
same time, providing the client with the capability of implementing
up to an unlimited number of transactions per month and also
providing the client with interest on their account balance. These
objectives are achieved through the use of an aggregate money
market deposit account and an aggregate demand deposit account.
These accounts are held on the books of the client`s savings
institution or bank, but are managed by a third party agent for the
client. In response to client deposits and withdrawals, the agent
initiates a transfer of funds between the aggregate demand deposit
account and the aggregate money market deposit account, If client
deposits exceed client withdrawals, then all or some of the funds
in the aggregate demand deposit account may be transferred to the
aggregate money market deposit account. On the other hand, if
client withdrawals exceed client deposits, then all or some of the
funds in the aggregate money market deposit account are transferred
to the aggregate demand deposit account. The aggregate money market
deposit account is an interest-bearing deposit account, where the
aggregate balances for all clients are deposited.
[0017] One purpose of the aggregate demand deposit account is to
facilitate the movement of funds. On a regular, periodic, or
recurring basis, the agent calculates a net transaction as the sum
of individual client deposits and withdrawals from the plurality of
individual client demand accounts. The net transaction calculation
is used to determine an amount of funds that need to be deposited
into the aggregate money market deposit account to cover client
deposits, or an amount of funds that needs to be withdrawn from the
aggregate money market deposit account to cover client withdrawals.
Individual account management calculations are performed to
determine whether to deposit or withdraw funds from the aggregate
demand deposit account to each of a plurality of individual client
return sweep and/or money market accounts. The agent updates its
database for each client`s deposit and withdrawal activities.
[0018] The individual client has two accounts, a client demand
deposit account on the bank`s books, and a return sweep account or
money market account on the agent`s books. Individual transactions
for the client occur between these two client accounts.
[0019] The agent distributes all or a portion of the interest
accrued from the aggregate deposit account to individual clients.
The interest is distributed according to the relative proportions
of each client`s funds in the aggregate deposit account. The agent
maintains a database that keeps track of deposits to, and
withdrawals from, each of the client demand accounts, as well as
each client`s proportionate and/or monetary share in the aggregate
money market deposit account.
[0020] The invention permits funds to be deposited into a demand
account from various sources, and also provides for the tendering
of payments from the demand account via different instruments,
without limitation as to the number of transfers, and with accrual
of interest on the deposited funds. Moreover, the deposited funds
are retained at the client`s bank or savings institution.
Optionally, the debiting of funds from each of the client accounts
is monitored, and debits are selectively authorized or rejected
based upon the client`s account balance and/or their current share
in the aggregate deposit account.
Brief Description of the Drawings
[0021] The following is a brief description of the drawings, in
which:
[0022] FIG. 1 is an information flow diagram showing the transfer
of client funds among a plurality of accounts pursuant to the
techniques of the present invention;
[0023] FIG. 2 is a flowchart showing an illustrative operational
sequence for implementing the techniques of the present invention;
and
[0024] FIGs. 3-6 together comprise a flowchart depicting processing
steps to be performed on behalf of an administrator pursuant to a
further embodiment of the present invention.
Detailed Description of the Preferred Embodiments
[0025] Refer now to FIG. 1, which is a flow diagram showing the
transfer of client funds among a plurality of accounts pursuant to
the techniques of the present invention. A plurality of client
demand accounts, including Client "A" DDA (Demand Deposit Account)
501 and Client "B" DDA Account 503 are managed through the use of
an insured pooled deposit account at the client`s savings
institution or bank. In FIG. 1, this pooled deposit account is
provided in the form of a Pooled MMDA (Money Market Deposit
Account) 509. Excess funds are swept from client DDA accounts
(Client "A" DDA 501 and Client "B" DDA 503, respectively) to
corresponding client Money Market Accounts (Client "A" Money Market
Account 505 and Client "B" Money Market Account 507, respectively).
Excess funds may be calculated in terms of a desired or target
minimum balance for each of the client DDA accounts. The same
target minimum balance could be applied to all DDA accounts, or an
account-specific target balance could be assigned to a certain
account based upon the past history and/or the expected usage of
that account. Alternatively, all funds could be swept from the
client DDA accounts to the Money Market Accounts. After recording
the amount of funds swept into a client Money Market Account, the
funds are then transferred to the Pooled MMDA Account 509.
[0026] The net result of the aforementioned fund transfer activity
is that funds are effectively transferred from individual client
demand accounts, including Client "A" DDA 501 and Client "B" DDA
503, to a pooled insured deposit account (Pooled MMDA Account 509)
at the client`s bank or savings institution. This is advantageous
in that the Pooled MMDA account 509 is an interest-bearing
"nondemand" account pursuant to 12 CFR 329.2 et seq. Moreover, the
Pooled MMDA Account is eligible for full FDIC insurance protection.
This protection covers each client whose deposits are placed into
the pooled account, up to a maximum of $100,000 per client. As the
Pooled MMDA Account 509 accrues interest, all or a portion of this
interest is distributed to individual clients. The interest may,
but need not, be distributed according to the relative proportions
of each client`s funds in the Pooled MMDA Account 509.
[0027] A database keeps track of deposits to, and withdrawals from,
each of the client demand accounts (Client "A" DDA Account 501 and
Client "B" DDA Account 503), as well as each client`s proportionate
and/or monetary share in the Pooled MMDA Account 509. On a regular,
periodic, or recurring basis, a net transaction is calculated as
the sum of individual client deposits and withdrawals from the
plurality of demand accounts. The net transaction calculation is
used to determine an amount of funds, if any, that needs to be
deposited into the Pooled MMDA Account 509 from the individual
client Money Market Accounts (Client "A" Money Market Account 505
and/or Client "B" Money Market Account 507) to cover client
deposits. The net transaction calculation is also used to determine
an amount, if any, of funds that need to be withdrawn from the
Pooled MMDA Account 509 to cover client withdrawals from respective
client DDA Accounts (Client "A" DDA Account 501 and/or Client "B"
DDA Account 503). In the event that fund withdrawals are required,
the necessary funds are first transferred from the Pooled MMDA
Account 509 to a Pooled DDA (Demand Deposit Account) 511 which is
held at the same savings institution or bank as Pooled MMDA Account
509. On an as-needed basis, funds are then transferred from the
Pooled MMDA Account 509 to individual client DDA accounts (Client
"A" DDA Account 501 or Client "B" DDA Account 503) to cover checks
written by these clients, as well as any fund withdrawals or
transfers that clients wish to implement on behalf of their
respective DDA Accounts.
[0028] Individual account management calculations are performed to
determine whether to deposit or withdraw funds from the Pooled DDA
Account 511 to each of a plurality of individual client demand
accounts. The database is updated for each client`s deposit and
withdrawal activities. The invention permits funds to be deposited
into a client demand account from various sources, and also
provides for the tendering of payments from the client demand
account via different instruments, without limitation as to the
number of transfers, and with accrual of interest on the deposited
funds. Optionally, the debiting of funds from each of the client
demand accounts is monitored, and debits are selectively authorized
or rejected based upon the client`s demand account balance and/or
their current share in the pooled deposit account.
[0029] The foregoing procedures are structured in a manner so as to
permit banks and savings institutions to continue servicing their
clients as they have done in the past. Moreover, if desired, these
procedures could be implemented by an agent acting on behalf of one
or more clients. In this manner, the invention would be virtually
transparent to presently-existing banks and savings institutions.
Bank personnel would not be burdened with the requirement to
perform unfamiliar and potentially time-consuming procedures.
Pursuant to this "agency" approach, the agent effectively provides
a "sweep interface" between a client`s existing DDA account (i.e.,
Client "A" DDA Account 501) and a fully-insured, interest-bearing
pooled account (i.e., the Pooled MMDA Account 509). The agent opens
up the Pooled MMDA Account 509 and the Pooled DDA Account 511 at
the client`s bank or savings institution. The agent is responsible
for several administrative activities, including: (1) recordkeeping
in connection with the individual Client Money Market accounts
(Client "A" Money Market Account 505 and Client "B" Money Market
Account 507); (2) determining each client`s proportionate share in
the Pooled MMDA Account 509; (3) determining an appropriate balance
for the Pooled DDA Account 511; and (4) determining appropriate
transfers from the Pooled DDA Account 511 to any of the client DDA
accounts.
[0030] Although banks and savings institutions can provide DDA,
MMDA and checking account services to clients without utilizing a
third-party agent, under the current statutory scheme, these
institutions cannot pay interest on account balances, and at the
same time, allow for an unlimited number of transactions. Pursuant
to Regulation D, banks and savings institutions are prohibited from
automatically allowing unlimited fund transfers between DDAs and
MMDAs on behalf of clients. A client could open up his own DDA and
MMDA accounts, evaluate daily DDA activities, determine if funds
should be moved between the DDA and the MMDA, and instruct the bank
to transfer the appropriate funds. However, it would be time
consuming and inefficient. The use of an agent provides
administrative expediency, rendering the entire operational scheme
more attractive to the client as well as the banking
institution.
[0031] Advantageously, the agent maintains the client`s original
DDA account number that uniquely identifies that client`s account
at his or her bank or savings institution. This account number is
used as a cross-reference to keep track of each client`s
proportionate interest in the Pooled MMDA Account 509. The client
Money Market Account numbers (for Client "A" Money Market Account
505 and Client "B" Money Market Account 506) are transparent to
these clients, as is the account number for the Pooled MMDA Account
509.
[0032] Effectively, a "sweep interface" exists between each of
respective individual client DDA Accounts (Client "A" DDA Account
501 and Client "B" DDA Account 503) and corresponding individual
client Money Market Accounts (Client "A" Money Market Account 505
and Client "B" Money Market Account 507). Excess funds in the
individual client DDA accounts are swept to the individual client
Money Market accounts to be further credited to the Pooled MMDA
Account 509. If funds are needed to pay for a check or handle a
withdrawal, funds are redeemed via the Pooled DDA Account 511. The
sweep interface may be governed by any of a number of established
or specified parameters. For example, the bank may choose to leave
a certain dollar amount in each of the client DDA accounts to cover
checks and only sweep funds in excess of that amount. Or the bank
may decide to sweep everything and redeem funds based upon the
checks presented for payment. From the standpoint of the bank or
savings institution, no additional work is required. The bank
merely maintains the client`s existing individual DDA account along
with the client`s profile (name, address, check reorders, signature
on file, stop payment orders, etc). Bank clients will be able to
keep their existing checks, and to continue using their existing
DDA accounts. Deposits are credited to these DDA accounts and then
swept to the pooled MMDA account. Many of the required
administrative activities are performed by the agent on behalf of
designated client accounts. These administrative activities
basically involve the monitoring of fund sweeping to and from
individual client DDA accounts and corresponding individual Money
Market accounts, as well as transfers among the individual Money
Market, Pooled MMDA and Pooled DDA Accounts maintained by the
agent. On a daily, regular, repeated, or periodic basis, the bank
or savings institution transmits a transaction sweep data file to
the agent that includes deposit and withdrawal information for each
of a plurality of clients. The bank and the agent periodically or
repeatedly reconcile the sweep data file and agree upon a net
settlement figure. If the net settlement figure is a credit, the
bank or savings institution credits the Pooled DDA Account 511.
During routine, day-to-day system operations, the only transactions
that occur in the Pooled MMDA Account 509 are transfers either to
or from the Pooled DDA Account. Pursuant to an optional alternative
approach, the bank could allocate credits to the Pooled MMDA
Account 509. In any event, if the net settlement figure is a debit,
the bank or savings institution debits the Pooled DDA Account 511.
The agent provides instructions by messenger to transfer funds from
the Pooled MMDA Account 509 to the Pooled DDA Account 511 to cover
the debit balance in the account. At the end of a predetermined
period of time (such as a month), the agent can provide a monthly
statement file to the bank or savings institution. This file may
include activity for a client`s individual money market account as
maintained in an agent database. The bank or savings institution
can then use this monthly statement file to generate month end
statements for its clients. According to one preferred embodiment
of the invention, activity pertaining to other accounts is tracked
and maintained by the bank or savings institution. However,
pursuant to an alternate embodiment, this statement file could
optionally include Pooled MMDA, Pooled DDA, individual Money
Market, and/or individual DDA account activity.
[0033] Refer now to FIG. 2, which is a flowchart showing an
illustrative operational sequence for implementing the techniques
of the present invention. The procedure commences at block 701,
where a client makes a deposit to their individual DDA Account
(i.e., Client "A" DDA 501, FIG. 1), or at block 703, where a client
makes a withdrawal from their individual DDA Account. Irrespective
of whether the transaction is a withdrawal or a deposit, a sweep
process is performed (block 707) to sweep any excess account funds
out of the client`s individual DDA account, or to sweep required
funds into this DDA account. A test is performed at block 709 to
ascertain whether or not there are excess funds in the individual
client`s DDA account. If so, program control jumps ahead to block
713, whereas if not, the program continues on to block 711. At
block 713, the excess funds are swept to the agent, who then
updates the individual client Money Market account (block 717).
[0034] The negative branch from block 709 leads to block 711, where
a test is performed to ascertain whether or not there is an
insufficient minimum balance in the individual client`s DDA
account. If not, the program exits. If so, program control advances
to block 715 where funds are swept from the agent. The agent then
updates the individual client Money Market account (block 717).
Next, on a periodic, repeated, or scheduled basis, the agent
calculates the net sweep account activity (block 719). A test is
performed at block 721 to ascertain whether or not the net sweep
activity is a credit. If so, program control advances to block 723
and, if not, program control continues to block 725. At block 723,
the agent receives payment from the bank for the credit. Payment
can be received, for example, in the form of a wire transfer or a
credit to the pooled DDA account. Next, the agent instructs the
bank to deposit the received funds into the pooled MMDA account
(block 727). Funds are transferred into the pooled MMDA account
(block 731), and the program exits.
[0035] The negative branch from block 721 leads to block 725 where
a test is performed to ascertain whether or not the net sweep
activity is a debit. If not, the program exits and, if so, the
program continues to block 729. At block 729, a messenger is
instructed to initiate a fund transfer from the pooled MMDA account
to the pooled DDA account. The funds are transferred from the
pooled MMDA to the pooled DDA (block 733), and the agent pays the
bank or savings institution from the pooled DDA account for the
sweep debit. The program then exits.
[0036] FIGs. 3 and 4 together comprise a flowchart depicting
processing steps to be performed on behalf of an agent or
administrator pursuant to a further embodiment of the present
invention. This agent or administrator can be a brokerage firm, a
bank, or another financial entity with which clients can institute
financial transactions such as deposits, withdrawals and on-demand
payments. The administrator or agent appears to each client as if
it were, at least in part, a bank, by accepting deposits for the
client`s account, and, subsequently, by authorizing (and then
implementing) payments demanded by the client from his or her
account. The funds for all of the clients are pooled into a single
deposit account that is maintained as an insured deposit account at
a licensed bank or savings institution.
[0037] Referring to FIG. 3, financial entity 100 may be a bank,
savings institution, brokerage firm, or other entity where
financial transactions take place or can be facilitated. This
financial entity 100 creates transaction files 101 which are
transmitted to Reserve 105. Reserve 105 (or the Reserve System) is
the administrator or other entity in charge of administering at
least one of the deposit accounts. New account files 102 can be
transmitted to Reserve 105. For example, a new investor account may
need to be opened. This activity necessitates organizing and
coordinating information to service a new investor for the present
system, even though that investor may already be a client of a
financial entity 100 for other investment vehicles. A new account
102 effectively becomes part of an existing pooled bank deposit
account 129 that collects earned income 130, all or a portion of
which is eventually conveyed to the client`s accounts 131. Of
course, at some point in time, the deposit account must first be
established with clients` funds. The transaction files represent
the addition of funds by check (to be drawn on another institution,
or to be drawn from a different demand account at the same
institution), wire or electronic transfer, ACH, credits (such as
from a debit or credit card merchant), or a sweep from one of the
client`s other accounts. Accordingly, encompassed in the
transaction file are deposits 103 and withdrawals 104. A "sweep"
includes the automatic transfer of funds, such as the automated
transfer of interest from one account into the client`s account, as
well as the automated transfer of funds out of the client`s account
(such as for payment of a securities trade); thus, a sweep may be
from one of the client`s accounts to another. The responsibility
for maintaining the deposit account can be assigned by the
administrator to a third party.
[0038] Referring now to FIG. 4, Reserve System 50 contains an
insured deposit database 75 where a position file for debit/credit
card users is created 132 and transmitted to a bank for a
debit/credit card network 133 where the bank then updates the
network 134. The system updates the data base 75 and processes
transactions 106 (from 105, FIG. 3) and opens a new account 107
where application and check deposits are processed 110. The bank
preference 107A is the list of banks and the order of preference
for deposits and withdrawals held on the account, including a list
of banks to be excluded (if any), and the maximum percentage and/or
amount of funds to be held in each bank. The client`s bank
preference data is added to the account at 107B. If the client does
not select values for any of these variables, the system can
provide default values for the banks and their order at 107C
sufficient for all of the client`s funds. When possible, the system
can be configured to assign a bank that is in the state in which
the client resides. Referring to FIG. 5, it can be seen that when a
deposit, either a check deposit 111, federal wire deposit 112, ACH
deposit, sweep, or other deposit is credited to the client`s
account 108, the system will review where the existing funds of the
accounts are deposited 108A. If the client`s balance has reached
the maximum allowable balance for the existing bank 108B, as shown
in FIG. 6, the system will then select the next bank on the
preference list attached to the account 108C. If the maximum
allowable balance has not been reached in the existing bank, the
system will credit the additional funds to that bank 108D.
[0039] Still referring to FIG. 5, the procedure for processing
withdrawals can be seen. Various methods of withdrawing funds are
debit withdrawal 109, processing debit or credit card transactions
such as debit/credit card files 115, direct debit accounts 215, and
processing of files 121. Processing of a debit/credit card file 115
utilizes data accumulated from debit/credit card transactions
received from the banks 114. The processing of file 121 procedure
utilizes one of various sources of data such as a check presented
for payment 116, ACH debits 117, touch tone bill paying 118, and/or
internet bill paying 119.
[0040] After processing the debit procedure, the system will review
the bank preference list and select the appropriate bank to debit
125A. The system will sort all the daily transactions by the bank
125B (see FIG. 6). The activity for each bank will then be netted
126 and the appropriate deposit or withdrawals made.
[0041] The system will then determine whether funds are available
122, which function is also associated with other participant
withdrawals 120. If the funds are available, the account is debited
225. If the funds are not available, however, the system determines
whether a credit line is available 123. If a credit line is
available, then funds are advanced 230 to cover the debit; if not
the transaction is rejected 124.
[0042] Referring to FIG. 6, as previously stated, the system
determines whether the client`s balance reaches its maximum 108B.
If so, the next bank on the list selected by the client is credited
108C. If the maximum is not reached, then the existing bank is
credited 108D. Information and activities associated with processed
debits and credits of the client`s accounts from 125A are sorted by
the bank 125B and the net activity by the bank is determined 126.
The system then determines whether the deposits and credits were
greater than the withdrawals and debits 240. If so, the excess
funds are deposited into a deposit account 127. If the debits and
withdrawals were greater than the credits, the difference is
redeemed from the deposit account 128.
[0043] Thus, by practicing the embodiment of the invention
described in connection with FIGs. 3-6, an individual client is
effectively provided with FDIC insurance in excess of $ 100,000.
This result is brought about because the individual client`s
holdings are maintained in multiple insured deposit accounts, which
may be in multiple banks.
[0044] The foregoing description is intended to be illustrative and
not limiting. Any of various changes, modifications, and/or
additions may become apparent to the skilled artisan upon a perusal
of this specification, and, as such, are intended to be within the
scope and spirit of the invention as defined by the claims.
* * * * *