In a state electing the federal AMC registration program, a covered AMC is not owned and controlled by an insured depository institution and is not regulated by a federal financial institutions regulatory agency. What does 12 CFR 34.213(b)(1) require?
Correct Answer
A) State registration and supervision under the applicable program
Under the stated federal AMC registration framework, covered non-federally-regulated AMCs are subject to state registration and supervision under 34.213(b)(1). Federally regulated AMCs have a different framework under 34.215. The rule is not a universal assertion that every business using the AMC label must register in every state.
Why This Is the Correct Answer
Option A is correct because, under 12 CFR 34.213(b)(1), a covered AMC that is not federally regulated in a state electing the program is subject to state registration and supervision under the applicable program. The state is the body that registers and supervises such AMCs. Federally regulated AMCs fall under a separate framework in 34.215.
Why the Other Options Are Wrong
Option B: Ownership exclusively by licensed appraisers
Option B is wrong because the cited provision concerns state registration and supervision, not a requirement that the AMC be owned exclusively by licensed appraisers. An ownership-by-appraisers mandate does not follow from the facts given.
Option C: A one-million-dollar federal minimum net worth for the AMC
Option C is wrong because the cited provision addresses state registration and supervision, not a one-million-dollar federal minimum net worth for the AMC. That figure does not follow from the rule described in the question.
Option D: A prohibition on fees charged to appraisers by the AMC
Option D is wrong because the provision requires state registration and supervision; it does not prohibit the AMC from charging fees to appraisers. Nothing in the described rule creates such a fee prohibition.
Not federal? Then state supervises
If the AMC is not federally regulated, the participating state registers and supervises it.
How to use: Use this to decide which regulator oversees an AMC based on whether it is federally regulated.
Exam Tip
When a question stresses that an AMC is not federally regulated, expect the answer to involve state registration and supervision.
Common Mistakes to Avoid
- -Assuming all AMCs are supervised by a federal agency
- -Confusing the rules for federally regulated AMCs with those for non-federally-regulated AMCs
- -Assuming the registration rule requires appraiser ownership of the AMC
Concept Deep Dive
Analysis
This question tests the structure of the federal AMC registration framework. In a participating state, a covered AMC that is not owned and controlled by an insured depository institution and not regulated by a federal financial institutions regulatory agency falls under state registration and supervision. Federally regulated AMCs are handled under a different provision.
Background Knowledge
Federal rules set minimum requirements for states that register and supervise appraisal management companies. AMCs that are not federally regulated are registered and supervised by participating states, while AMCs owned and controlled by insured depository institutions and regulated by federal agencies are covered under a separate provision. The framework applies to covered AMCs rather than to any business that simply uses the AMC label.
Real-World Application
An independent AMC that is not owned by a bank begins operating in a state that participates in the federal AMC program. The AMC registers with the state appraiser regulatory agency and becomes subject to its supervision. A bank-owned, federally regulated AMC would follow a different framework.
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