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Proposed Rule

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Unsafe and Unsound Banking Practices: Brokered Deposits Restrictions

A Proposed Rule by the Federal Deposit Insurance Corporation on 08/23/2024

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• Document Details Published Content - Document Details Agency Federal Deposit Insurance Corporation CFR 12 CFR 303 12 CFR 337 Document Citation 89 FR 68244 Document Number 2024-18214 Document Type Proposed Rule Pages 68244-68272 (29 pages) Publication Date 08/23/2024 RIN 3064-AF99 Published Content - Document Details
• View printed version (PDF)
• Document Dates Published Content - Document Dates Comments Close 10/22/2024 Dates Text Comments must be received by the FDIC no later than October 22, 2024. Published Content - Document Dates

This table of contents is a navigational tool, processed from the headings within the legal text of Federal Register documents. This repetition of headings to form internal navigation links has no substantive legal effect.

FOR FURTHER INFORMATION CONTACT:

Supplementary information:, i. introduction and policy objectives, ii. background, a. brokered deposits—a history of concerns and related research, brokered deposits and troubled institutions, brokered deposits in bank failures 2007-2017, brokered deposits—historical research and changes in law and regulation, b. current statutory and regulatory framework, deposit broker definition in the 2020 final rule, exclusive deposit placement arrangements in the 2020 final rule, the primary purpose exception in the 2020 final rule, the reciprocal deposits limited exception, c. developments post-2020 final rule, call report brokered deposits data, expansion of certain third-party arrangements that deliver deposits to idis, d. need for rulemaking, iii. discussion of the proposed rule, a. deposit broker definition, engaged in the business of placing and facilitating, deposit allocation, b. exclusive deposit placement arrangement, c. primary purpose exception analysis, application process under the primary purpose exception, 1. eligible applicants for the primary purpose exception process, 2. proposed additional factors for primary purpose exception application, d. designated exceptions, 1. 25 percent test designated exception, proposed broker-dealer sweep primary purpose exception, 2. enabling transactions designated exception, 3. other designated business exceptions, e. agent institution status for reciprocal deposits, iv. alternatives, a. no designated exception for sweep deposits, b. designated exception for sweep deposits to affiliated idis, v. expected effects, potential effects on idis, potential effects on less than well-capitalized idis, potential costs to idis of the proposed rule, potential benefits of the proposed rule, potential effects on consumers, potential effects on third parties that may or may not be deposit brokers, reporting compliance costs, vi. administrative law matters, a. regulatory flexibility act, reasons why this action is being considered, policy objectives, legal basis, description of the rule, small entities affected, expected effects, all small, fdic-insured institutions, potential costs to small, fdic-insured institutions, potential benefits to small, fdic-insured institutions, less than well-capitalized institutions, nonbank subsidiaries of small, fdic-insured institutions that may or may not be deposit brokers, third parties that may or may not be deposit brokers, reporting requirements, other statutes and federal rules, b. paperwork reduction act, c. plain language, d. riegle community development and regulatory improvement act of 1994, vii. request for comments, deposit broker definition, primary purpose exception analysis, designated exceptions, reciprocal deposits, alternatives, appendix 1: sweep deposits and brokered deposit reporting, call report, december 31, 2023, list of subjects, 12 cfr part 303, 12 cfr part 337, authority and issuance, part 303—filing procedures, part 337—unsafe and unsound banking practices.

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Federal Deposit Insurance Corporation

• 12 CFR Parts 303 and 337
• RIN 3064-AF99

Federal Deposit Insurance Corporation.

Notice of proposed rulemaking.

The Federal Deposit Insurance Corporation (FDIC) is inviting comment on proposed revisions to its regulations relating to the brokered deposits restrictions that apply to less than well-capitalized insured depository institutions. The proposed rule would revise the “deposit broker” definition and would amend the analysis of the “primary purpose” exception to the “deposit broker” definition. The proposed rule would also amend two of the designated business relationships under the primary purpose exception and make changes to the notice and application process for the primary purpose exception. In addition, the proposed rule would clarify when an insured depository institution can regain status as an “agent institution” under the limited exception for a capped amount of reciprocal deposits.

Comments must be received by the FDIC no later than October 22, 2024.

You may submit comments on this document using any of the following methods:

• Agency Website: https://www.fdic.gov/​resources/​regulations/​federal-register-publications/​ . Follow the instructions for submitting comments on the agency website.
• Email: [email protected] . Include RIN 3064-AF99 in the subject line of the message.
• Mail: James P. Sheesley, Assistant Executive Secretary, Attention: Comments—RIN 3064-AF99, Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, DC 20429.
• Hand Delivery: Comments may be hand delivered to the guard station at the rear of the 550 17th Street NW Building (located on F Street) on business days between 7 a.m. and 5 p.m.
• Public Inspection: Comments received, including any personal information provided, may be posted without change to https://www.fdic.gov/​resources/​regulations/​federal-register-publications/​ . Commenters should submit only information that the commenter wishes to make available publicly. The FDIC may review, redact, or refrain from posting all or any portion of any comment that it may deem to be inappropriate for publication, such as irrelevant or obscene material. The FDIC may post only a single representative example of identical or substantially identical comments, and in such cases will generally identify the number of identical or substantially identical comments represented by the posted example. All comments that have been redacted, as well as those that have not been posted, that contain comments on the merits of the notice will be retained in the public comment file and will be considered as required under all applicable laws. All comments may be accessible under the Freedom of Information Act.

Division of Risk Management Supervision: Thomas F. Lyons, Associate Director, 202-898-6850, [email protected] ; Karen J. Currie, Chief, 202-898-3981, [email protected] ; Judy E. Gross, Senior Policy Analyst, 202-898-7047, [email protected] .

Legal Division: Vivek Khare, Senior Counsel, 202-898-6847, [email protected] ; Chantal Hernandez, Counsel, 202-898-7388, [email protected] ; Ryan McCarthy, Counsel, 202-898-7301, [email protected] .

The FDIC's mission is to maintain stability and public confidence in the nation's financial system by, among other things, overseeing financial institutions for safety and soundness and insuring deposits. Since the enactment of section 29 of the Federal Deposit Insurance Act (FDI Act), [ 1 ] which prohibits less than well-capitalized  [ 2 ] insured depository institutions  [ 3 ] (IDIs) from accepting brokered deposits, [ 4 ] the FDIC has continued to study the role of brokered deposits in the performance of IDIs, their impact on the safety and soundness of IDIs, and how they affect losses to the Deposit Insurance Fund (DIF) when an IDI fails.

The FDIC has found significant reliance on brokered deposits increases an institution's risk profile, particularly as its financial condition weakens. The FDIC's statistical analyses and other studies have found that an IDI's use of brokered deposits in general is correlated with a higher probability of failure and higher losses to the DIF upon failure. [ 5 ]

On December 15, 2020, the FDIC Board adopted a final rule that established a new framework for analyzing whether certain deposit arrangements qualify as brokered deposits (the 2020 Final Rule). [ 6 ] After the 2020 Final Rule took effect, the FDIC initially observed a significant decline in reported brokered deposits. IDIs reported a nearly $350 billion, or 31.8 percent, decline in brokered deposits between the first and second quarters of 2021 after the 2020 Final Rule became effective, which is the largest quarterly decline since brokered deposit reporting began in 1983. [ 7 ] This significant decline can be interpreted as IDIs reclassifying a considerable amount of deposits from brokered to not brokered, as a result of the 2020 Final Rule.

This is because, in large part, the changes made by the 2020 Final Rule have narrowed the types of deposit-related activities that are considered brokered; in the FDIC's view, this narrowing is problematic because these deposits continue to present the same risks as before the 2020 Final Rule. The 2020 Final Rule also expanded the types of business relationships that are eligible to be excepted from the “deposit broker” definition. For instance, the 2020 Final Rule excluded certain factors, such as the payment of fees, from the “deposit broker” definition that had historically been viewed as relevant to whether a deposit is brokered. The 2020 Final Rule also expanded the scope of the primary purpose exception to the deposit broker definition, which has allowed for a ( print page 68245) significant number of business lines to be excluded from the deposit broker definition. [ 8 ] As a result, this has led to certain deposit arrangements that would have been viewed as brokered prior to the 2020 Final Rule as no longer being classified as brokered, even though such deposits present the same or similar risks as brokered deposits.

Based on the FDIC's experience, the decline in reported brokered deposits is also due, in part, to some IDIs misunderstanding and misreporting deposits under the 2020 Final Rule. Despite the FDIC's efforts in conducting industry outreach and providing clarifying information, [ 9 ] the FDIC has observed a number of challenges with entities understanding certain provisions of the 2020 Final Rule, which has resulted in some level of inaccurate and inconsistent application of the rule. Many of these challenges arise from § 337.6(a)(5)(v)(I)( 1 )( i ) in the rule allowing third parties to provide a notice regarding the 25 percent test primary purpose exception. For example, the FDIC has observed that some IDIs receiving deposits through a sweep arrangement have incorrectly relied upon a third party's 25 percent primary purpose exception notice to not report certain deposits as brokered, without conducting analyses, or without having access to the appropriate documentation to conduct analyses, and despite the involvement of an additional third party that meets the “deposit broker” definition. [ 10 ] In turn, this has resulted in some deposits that meet the “brokered deposit” definition under the 2020 Final Rule not being correctly reported as brokered on IDIs' Consolidated Reports of Condition and Income (Call Reports). [ 11 ]

If left unchanged, this underreporting of brokered deposits could have serious consequences for IDIs and the DIF, which is used to protect depositors of insured banks and to resolve failed banks, as such underreporting impedes the ability to evaluate the extent of reliance on brokered deposits and the effects on an IDI's risk profile for supervisory and deposit insurance pricing purposes. Moreover, the FDIC is concerned that these issues expose IDIs individually and the banking system more broadly to the type of risk the brokered deposit restrictions are intended to address—namely that a less than well-capitalized institution could rely on less stable third-party deposits for rapid growth that may weaken the safety and soundness of IDIs and the banking system and expose the FDIC to increased losses.

Additionally, experiences since the 2020 Final Rule have shown that some of the underlying reasons to narrow the coverage of the rule have proved to be problematic. For example, First Republic Bank, [ 12 ] which failed in May 2023 after contagion effects from the failure of Silicon Valley Bank, experienced a significant run on affiliated sweep deposits, and in particular uninsured affiliated sweep deposits. [ 13 ] This suggests that in the case of First Republic, affiliated sweeps were no more “sticky” than unaffiliated sweeps, contrary to the exemption in § 337.6(a)(5)(iii)(C)( 1 ) for affiliated entities. Moreover, in the case of the failure of crypto company Voyager, [ 14 ] it was not considered a “deposit broker”—and Voyager deposits were not considered brokered—because it had an exclusive deposit placement arrangement with one IDI. Under the 2020 Final Rule, exclusive deposit placement arrangements are excluded from the definition of a “deposit broker” even though Voyager's activities were the same as a “deposit broker,” and the failure of Voyager created the same legal, operational, and liquidity risks for its partner IDI as if it had, say two partner banks, and had been classified as a deposit broker. FDIC staff is concerned that less than well-capitalized IDIs may seek these exclusive deposit placement arrangements as their condition is deteriorating without being subject to the limitations on brokered deposits, even though the risk is the same.

To address these concerns and challenges, the FDIC is proposing amendments that would (1) simplify certain definitions of the 2020 Final Rule to reduce operational challenges and reporting burdens on IDIs; (2) help ensure uniform and consistent reporting of brokered deposits by IDIs; and (3) strengthen the safety and soundness of the banking system by ensuring that less than well-capitalized institutions are restricted from relying on brokered deposits to support risky, rapid growth.

Brokered and high-rate deposits became a concern among bank regulators and Congress before any statutory restrictions were enacted. This concern arose because (1) such deposits could facilitate a bank's rapid growth in risky assets without adequate controls; (2) once problems arose, a problem bank could use such deposits to fund additional risky assets to attempt to “grow out” of its problems, a strategy that ultimately increased the losses to the DIF when the institution failed; and (3) brokered and high-rate deposits were sometimes considered less stable because at that time, deposit brokers (on behalf of customers), or the customers themselves, were often drawn to high rates and prone to leave the bank quickly to obtain a better rate or if they became aware of problems at the bank. [ 15 ]

The FDIC has recognized that “historically, most institutions that use brokered deposits have done so in a prudent manner and appropriately measure, monitor, and control risks associated with brokered deposits.”  [ 16 ] ( print page 68246) However, an IDI's use of brokered deposits often raises its risk profile, which has long been a concern among bank regulators  [ 17 ] and Congress. [ 18 ]

As early as the 1970s, the FDIC noted concerns about brokered deposits, as stated in the FDIC's Division of Bank Supervision Manual: “The use of brokered deposits has been responsible for abuses in banking and has contributed to some bank failures, with consequent losses to the larger depositors, other creditors, and shareholders.”  [ 19 ] For example, in 1982, brokered deposits were found to have been a key cause of the largest payout of insured deposits at that time with the failure of Penn Square Bank. Brokered deposits contributed to Penn Square Bank's rapid deposit growth, which were used to fund high risk loans. About $1 billion of these loans were then sold to Continental Illinois Bank, which then suffered significant deposit withdrawals related to problem loans and required open-bank assistance from the FDIC. [ 20 ]

The FDIC and the DIF were significantly affected by the financial crisis between 2007 and 2017. During this time, excluding Washington Mutual, Inc., 530 IDIs failed and were placed in FDIC receivership and, as of March 31, 2024, the estimated loss to the DIF for these institutions is $71.9 billion. [ 21 ]

Based on Call and Thrift Financial Report data, 47 institutions that failed relied heavily on brokered deposits and each caused an estimated loss to the DIF  [ 22 ] of over $100 million as of December 31, 2017. These 47 institutions held total assets representing 20.9 percent of the $396.9 billion in aggregate total assets of the 530 failed institutions, but accounted for $27.3 billion in estimated losses to the DIF, representing 38 percent of the $71.9 billion in all estimated losses to the DIF for that same period. [ 23 ] For example, the largest of these 47 institutions was IndyMac Bank, F.S.B. (IndyMac), which failed on July 11, 2008. As of March 31, 2024, the estimated loss to the DIF for IndyMac is $12.0 billion, representing 39 percent of IndyMac's $30.7 billion in total assets at failure and approximately 16.7 percent of the total $71.9 billion in estimated losses to the DIF from bank failures between 2007 and 2017. In its last Thrift Financial Report (TFR) filed prior to failure, as of June 30, 2008, IndyMac reported brokered deposits of $5.5 billion, which represented 29.0 percent of the institution's $18.9 billion in total deposits. [ 24 ] In its TFR filed for the third quarter of 2005, approximately 12 quarters before the institution failed, IndyMac reported $1.4 billion in brokered deposits, representing 18.4 percent of its then $7.4 billion in total deposits. This data demonstrates that IndyMac accelerated its use of brokered deposits as its problems mounted. [ 25 ]

Another example is ANB Financial National Association (ANB Financial), which failed on May 9, 2008. As of March 31, 2024, the estimated loss to the DIF for ANB Financial was $1.0 billion, representing 54 percent of the institution's $1.9 billion in total assets at failure. In its Call Report filed prior to failure, i.e., as of March 31, 2008, ANB Financial reported brokered deposits of $1.6 billion, which represented 87.0 percent of the institution's $1.8 billion in total deposits. In the Call Report filed for the second quarter of 2005, approximately 12 quarters before the institution failed, ANB Financial reported $257 million in brokered deposits, representing 50.5 percent of its then $508 million in total deposits. [ 26 ]

In the aftermath of the financial crisis of 2008 and 2009, section 1506 of the Dodd-Frank Wall Street Reform and Consumer Protection Act directed the FDIC to conduct a study of core and brokered deposits, which the FDIC completed in 2011. In the FDIC's Study on Core Deposits and Brokered Deposits, [ 27 ] the FDIC found that higher brokered deposit use was associated with higher probability of bank failure and higher DIF losses, and that, on average, brokered deposits were correlated with higher levels of asset growth, higher levels of nonperforming loans, and a lower proportion of core deposit funding. [ 28 ] For example, the FDIC's study describes the following characteristics of brokered deposits that have posed risks to the DIF: (1) rapid growth—brokered deposits could be gathered quickly and used imprudently to fund risky assets or investments; and (2) less stable nature (described in the study as “volatility”)—brokered deposits might flee if the broker (or the underlying customer) moves funds to another IDI, if the IDI holding the deposit becomes troubled, or if rates or terms are more appealing elsewhere. [ 29 ]

In December 2017, the FDIC published Crisis and Response: An FDIC History, 2008-2013, which showed that failures and CAMELS rating ( print page 68247) downgrades were more concentrated among IDIs that made relatively greater use of wholesale funding sources, which includes brokered deposits. Further, it indicated that significant reliance on wholesale funds could reflect an IDI's decision to pursue aggressive growth, and that if an IDI were under stress, wholesale counterparties may be more inclined to withdraw deposits or demand additional collateral. [ 30 ]

Moreover, the Inspectors General of the Federal banking agencies have prepared reports detailing how brokered deposits were sometimes used by failed banks between 2007 and 2017. [ 31 ] In these reports, brokered deposits were commonly cited as contributing to problems at troubled and failed institutions, and IDIs that failed were typically subject to the brokered deposit restrictions because their capital levels deteriorated to below well capitalized. [ 32 ]

In 2019, the FDIC updated its analysis in the 2011 Study on Core Deposits and Brokered Deposits with data through the end of 2017. [ 33 ] As part of that update, statistical analysis found that brokered deposit use is associated with higher probability of an IDI's failure and higher DIF loss rates. Brokered deposits may elevate an IDI's risk profile in part because they are frequently used as a substitute for IDI's core deposits and, less frequently, for equity, and so from the FDIC's perspective, IDIs that use brokered deposits operate with a higher risk liability structure relative to IDIs that do not use brokered deposits. [ 34 ]

Section 29 of the FDI Act, [ 35 ] imposes restrictions on a less than well-capitalized IDI from accepting funds obtained, directly or indirectly, by or through any deposit broker for deposit into one or more deposit accounts (referred to as brokered deposits). [ 36 ] Section 29 does not directly define the term “brokered deposit.” Section 337.6 of the FDIC's Rules and Regulations implements section 29  [ 37 ] and provides that a “brokered deposit” is a deposit obtained, directly or indirectly, from or through the mediation or assistance of a deposit broker. [ 38 ] Thus, the meaning of the term “brokered deposit” turns upon the definition of “deposit broker.”

Under section 29, a “deposit broker” includes any person engaged in the business of placing third-party deposits, or facilitating the placement of third-party deposits, with IDIs or the business of placing deposits with IDIs for the purpose of selling interests in those deposits to third parties. [ 39 ] An agent or trustee also meets the “deposit broker” definition when establishing a deposit account to facilitate a business arrangement with an IDI to use the proceeds of the account to fund a prearranged loan. [ 40 ]

The “deposit broker” definition is subject to the following nine statutory exceptions:  [ 41 ]

1. An insured depository institution, with respect to funds placed with that depository institution;

2. An employee of an insured depository institution, with respect to funds placed with the employing depository institution;

3. A trust department of an insured depository institution, if the trust in question has not been established for the primary purpose of placing funds with insured depository institutions;

4. The trustee of a pension or other employee benefit plan, with respect to funds of the plan;

5. A person acting as a plan administrator or an investment adviser in connection with a pension plan or other employee benefit plan provided that that person is performing managerial functions with respect to the plan;

6. The trustee of a testamentary account;

7. The trustee of an irrevocable trust (other than one described in 12 U.S.C. 1831f(g)(1)(B) ), as long as the trust in question has not been established for the primary purpose of placing funds with insured depository institutions;

8. A trustee or custodian of a pension or profit-sharing plan qualified under section 401(d) or 403(a) of the Internal Revenue Code of 1986; or

9. An agent or nominee whose primary purpose is not the placement of funds with depository institutions (the “primary purpose exception”).

Section 337.6 includes the statutory exceptions to the “deposit broker” definition plus a tenth exception for an IDI acting as an intermediary or agent of a U.S. Government department or agency for a government sponsored minority or women-owned depository institution program. [ 42 ]

In the 2020 Final Rule, the FDIC amended the brokered deposit regulation to further define circumstances under which a third party is a “deposit broker.” More specifically, the 2020 Final Rule provides a person is engaged in the business of placing deposits if that person receives third-party funds and deposits those funds at more than one IDI. [ 43 ] It also provides that a person is engaged in the business of facilitating the placement of deposits if that person is engaging in any of the following activities with respect to third-party deposits placed at more than one IDI:

• The person has legal authority, contractual or otherwise, to close the account or move the third party's funds to another IDI;
• The person is involved in negotiating or setting rates, fees, terms, or conditions for the deposit account; or
• The person engages in matchmaking activities. [ 44 ]

A person is engaged in “matchmaking activities” if the person proposes deposit allocations at, or between, more than one IDI based upon both the particular deposit objectives of a specific depositor or depositor's agent, and the particular deposit objectives of specific IDIs. [ 45 ] The “matchmaking activities” definition further provides that a proposed deposit allocation is based on the particular objectives of:

• A depositor or depositor's agent when the person has access to specific financial information of the depositor or ( print page 68248) depositor's agent and the proposed deposit allocation is based upon this information; and
• An IDI when the person has access to the target deposit-balance objectives of specific IDIs and the proposed deposit allocation is based upon this information. [ 46 ]

The “matchmaking activities” definition, however, excludes deposits placed by a depositor's agent with an IDI affiliated with the depositor's agent. [ 47 ]

As noted above, the 2020 Final Rule provides that a person is engaged in the business of placing deposits or facilitating the placement of deposits of third parties if that person receives third-party funds and deposits those funds at more than one IDI or if that person is engaged in certain activities with respect to deposits placed at more than one IDI. [ 48 ] The preamble to the 2020 Final Rule specified that any person that has an exclusive deposit placement arrangement with one IDI and is not placing or facilitating the placement of deposits at any other IDI, will not be “engaged in the business” of placing, or facilitating the placement of, deposits at IDIs and therefore will not meet the “deposit broker” definition. [ 49 ]

The 2020 Final Rule provides that the primary purpose exception applies when, with respect to a particular business line, the primary purpose of the agent's or nominee's business relationship with its customers is not the placement of funds with depository institutions. [ 50 ] Moreover, the 2020 Final Rule identifies the following 14 designated business exceptions as meeting the primary purpose exception where, with respect to a particular business line:

1. Less than 25 percent of the total assets that the agent or nominee has under administration for its customers is placed at depository institutions (25 percent test);

2. 100 percent of depositors' funds that the agent or nominee places, or assists in placing, at depository institutions are placed into transactional accounts that do not pay any fees, interest, or other remuneration to the depositor (enabling transactions test);

3. A property management firm places, or assists in placing, customer funds into deposit accounts for the primary purpose of providing property management services;

4. The agent or nominee places, or assists in placing, customer funds into deposit accounts for the primary purpose of providing cross-border clearing services to its customers;

5. The agent or nominee places, or assists in placing, customer funds into deposit accounts for the primary purpose of providing mortgage servicing;

6. A title company places, or assists in placing, customer funds into deposit accounts for the primary purpose of facilitating real estate transactions;

7. A qualified intermediary places, or assists in placing, customer funds into deposit accounts for the primary purpose of facilitating exchanges of properties under section 1031 of the Internal Revenue Code;

8. A broker dealer or futures commission merchant places, or assists in placing, customer funds into deposit accounts in compliance with 17 CFR 240.15c3 through 3(e) or 17 CFR 1.20(a) ;

9. The agent or nominee places, or assists in placing, customer funds into deposit accounts for the primary purpose of posting collateral for customers to secure credit-card loans;

10. The agent or nominee places, or assists in placing, customer funds into deposit accounts for the primary purpose of paying for or reimbursing qualified medical expenses under section 223 of the Internal Revenue Code;

11. The agent or nominee places, or assists in placing, customer funds into deposit accounts for the primary purpose of investing in qualified tuition programs under section 529 of the Internal Revenue Code;

12. The agent or nominee places, or assists in placing, customer funds into deposit accounts to enable participation in the following tax-advantaged programs: Individual retirement accounts under section 408(a) of the Internal Revenue Code, Simple individual retirement accounts under section 408(p) of the Internal Revenue Code, or Roth individual retirement accounts under section 408A of the Internal Revenue Code;

13. A Federal, State, or local agency places, or assists in placing, customer funds into deposit accounts to deliver funds to the beneficiaries of government programs; and

14. The agent or nominee places, or assists in placing, customer funds into deposit accounts pursuant to such other relationships as the FDIC specifically identifies as a designated business relationship that meets the primary purpose exception. [ 51 ]

As noted, the 2020 Final Rule allows the FDIC to identify additional relationships as designated business exceptions to the primary purpose exception. [ 52 ] On January 10, 2022, the FDIC published an additional designated exception for certain non-discretionary custodians engaging in specific arrangements related to the placement of deposits. [ 53 ]

For the 25 percent and enabling transactions test exceptions, a third party or an IDI on behalf of a third party must file a notice with the FDIC for a particular business line. [ 54 ] Under the current process, the FDIC provides immediate email acknowledgement of receipt of the notice filing and the third party that is the subject of the notice may rely upon the applicable designated exception for the particular business line. Notice filers under the 25 percent test must also satisfy quarterly reporting requirements, while notice filers under the enabling transactions test must provide an annual certification. [ 55 ] For the other designated exceptions, no notice, application, or reporting is required.

For agents or nominees that do not meet one of the designated business exceptions, such third parties, or an IDI on behalf of a third party, may apply for a primary purpose exception in accordance with the requirements contained in § 303.243(b). [ 56 ] Moreover, the 2020 Final Rule provides a specific application process for a primary purpose exception to enable transactions with fees, interest, or other remuneration provided to the depositor. [ 57 ]

In 2018, section 29 of the FDI Act was amended as part of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), to allow “agent institutions” to except a capped amount of “reciprocal deposits” ( print page 68249) from treatment as brokered deposits. [ 58 ] Section 29 generally provides that reciprocal deposits are excepted when the total amount of reciprocal deposits held by an agent institution does not exceed the lesser of $5 billion or 20 percent of the total liabilities of the agent institution. [ 59 ]

Reciprocal deposits are defined by statute to mean deposits received by an agent institution through a deposit placement network with the same maturity (if any) and in the same aggregate amount as covered deposits placed by the agent institution in other network member banks. [ 60 ] A “covered deposit” is a deposit that is submitted for placement through a deposit placement network by an agent institution and does not consist of funds that were obtained (directly or indirectly) by a deposit broker before their submission for placement in a deposit placement network. [ 61 ] A “deposit placement network” is a network in which IDIs participate for processing and receipt of reciprocal deposits. [ 62 ]

On December 18, 2018, the FDIC adopted a final rule (the 2018 Reciprocal Deposits Rule), to amend its regulations that implement brokered deposits and interest rate restrictions to conform with the changes to section 29 by EGRRCPA. [ 63 ] Consistent with section 29, the 2018 Reciprocal Deposits Rule defines “agent institution” to mean an IDI that places a covered deposit through a deposit placement network at other IDIs in amounts that are less than or equal to the standard maximum deposit insurance amount, specifying the interest rate to be paid for such amounts, if the IDI:

• As of its most recent annual examination under 12 U.S.C. 1820(d) , was found to have a composite condition of outstanding or good and is well capitalized;
• Has obtained a brokered deposit waiver from the FDIC;  [ 64 ] or
• Does not receive an amount of reciprocal deposits that causes the total amount of reciprocal deposits held by the agent institution to be greater than the average of the total amount of reciprocal deposits held by the agent institution on the last day of each of the four calendar quarters preceding the calendar quarter in which the agent institution was found not to have a composite condition of outstanding or good or was determined to be not well capitalized. [ 65 ]

Under the 2018 Reciprocal Deposits Rule, an “agent institution” can except reciprocal deposits from being classified as brokered deposits up to its applicable statutory caps—the “general cap” or “special cap.” Under the “general cap,” an agent institution may except reciprocal deposits up to the lesser of the following amounts from being classified as brokered deposits: $5 billion or an amount equal to 20 percent of the agent institution's total liabilities. Reciprocal deposits in excess of the general cap, as well as those reciprocal deposits that do not meet section 29's limited exception, may not take advantage of the limited exception and are to be reported as brokered deposits. The “special cap” applies if the IDI either was found to not have a composite condition of outstanding or good when most recently examined under section 10(d) of the FDI Act or is not well capitalized and has not received a waiver from the brokered deposit restrictions under section 29(c). In this case, the IDI may still meet the “agent institution” definition if the IDI does not receive reciprocal deposits that result in its total reciprocal deposits to be in excess of the “special cap.” The “special cap” is the average amount of reciprocal deposits held at the IDI on the last day of each of the four calendar quarters preceding the calendar quarter in which the agent institution was found not to have a composite condition of outstanding or good or was determined to be not well capitalized. If, after the IDI becomes subject to the “special cap,” an IDI receives reciprocal deposits that result in its total reciprocal deposits to be in excess of its special cap, it is no longer an agent institution. If an IDI is not an agent institution, it is not eligible to use the limited exception, and all of its reciprocal deposits should be reported as brokered deposits.

As such, the amount of reciprocal deposits excepted from being considered brokered turns on whether the IDI qualifies as an agent institution and if so, whether the IDI is subject to the special cap.

As stated above, following the April 1, 2021, effective date of the 2020 Final Rule, IDIs reported a significant decrease in brokered deposits in their Call Report filings. As illustrated in chart 1, from March 31, 2021, to June 30, 2021, brokered deposits declined by nearly $350 billion, or 31.8 percent, the largest decline since brokered deposit reporting began in 1983. Brokered deposit balances continued to decline through March 31, 2022, following the extended compliance date of January 1, 2022. The FDIC notes, however, that as of the fourth quarter of 2023, brokered deposits at all IDIs are 22.5 percent higher than the quarter before the 2020 Final Rule took effect (first quarter 2021), despite the considerable amount of deposits that are no longer considered brokered based on the 2020 Final Rule changes. This increase in reported brokered deposits is due to increases in insured brokered deposit balances, including brokered reciprocal deposits. These increases may be driven in part by higher interest rates, which have exacerbated competition for deposit funding, and depositors seeking additional deposit insurance coverage, particularly following the failures that occurred in the first half of 2023.

Since the April 1, 2021, effective date of the 2020 Final Rule, the FDIC has observed the continued expansion of IDI arrangements with third parties to deliver deposit products (particularly those with transactional features) for a variety of IDI objectives, including to expand geographic reach, offer innovative products, and raise deposits. In these arrangements, an IDI typically makes deposit products or services available through an arrangement in which a third party, rather than the IDI, markets, distributes, or otherwise provides access to or assists in the placement of customer deposits at particular IDIs. Depending on the services provided by the third party, and the availability of regulatory exceptions to the “deposit broker” definition ( e.g., the “enabling transactions” test under the primary purpose exception or the exclusive placement arrangement exception), the deposits may or may not be considered brokered.

Recent events, however, underscore the precarious nature of these funding arrangements as they can be highly unstable, with either the third party or the underlying customers moving funds based on market conditions or other factors. These arrangements can also be prone to other forms of disruption such as the potential or actual insolvency of the third party, as recently demonstrated by the bankruptcy of Synapse Financial Technologies, Inc. (Synapse). [ 66 ] Synapse, sometimes referred to as a fintech “middleware” company, was a deposit broker that facilitated the placement of customer deposits for various fintech companies looking for banking services with IDIs. Moreover, the rapid growth with such deposits without corresponding growth in risk management practices can expose IDIs to operational, liquidity, and legal risks.

In certain circumstances, these arrangements are excluded from the brokered deposit definition pursuant to changes implemented by the 2020 Final Rule, even though the arrangements exhibit the same risks as brokered deposits. An example is the failure of Voyager, which was exempted from the brokered deposit definition by virtue of the exclusive deposit placement arrangement exception. Where less than well-capitalized institutions may be able to continue to grow with such deposits, because they are not currently treated as brokered deposits, the FDIC believes that these arrangements have the potential to undermine the safety and soundness of such institutions individually, and financial stability more broadly.

Under the current regulations, less than well-capitalized IDIs have unrestricted access to third-party deposits that are excluded from being classified as brokered because certain provisions in the current rule do not fully consider important safety and soundness considerations. This in turn raises the risk that less than well-capitalized IDIs may rely on less stable third-party deposits for rapid growth that could ultimately expose the DIF to increased losses.

In addition, as discussed above, many IDIs do not correctly apply the definitions in the rule, particularly with respect to the involvement of additional third parties within a deposit placement arrangement. This issue has led to a number of IDIs misreporting brokered deposits as nonbrokered. This is particularly concerning because all IDIs, even well-capitalized IDIs, have an obligation to file Call Reports accurately  [ 67 ] and are responsible for understanding the regulation and how the involvement of third parties within a deposit placement arrangement may, or may not, result in the deposits being brokered. [ 68 ]

With respect to the 2018 Reciprocal Deposits Rule, the rule states how an IDI may meet the “agent institution” ( print page 68251) definition, but does not address how an IDI that no longer meets the definition may regain its status as “agent institution” to qualify for the exception. The FDIC has received several questions from IDIs on this issue since the 2018 Reciprocal Deposits Rule took effect.

To address the issues raised above, the FDIC is proposing a rule that would strengthen its brokered deposit regulations by revising certain provisions to further support the statutory language and purpose of the brokered deposit restrictions, as well as simplifying certain provisions that pose operational challenges. To achieve these objectives, and as discussed in more detail below, the proposed rule would:

• Revise certain provisions of the “deposit broker” definition, including removing the “matchmaking activities” prong and replacing it with a deposit allocation provision;
• Eliminate the exclusive deposit placement arrangement exception to restore the regulations' applicability to a third party that otherwise meets the definition of a “deposit broker,” when that third party is involved with deposits placed at one or more IDIs;
• Amend the analysis underlying the “primary purpose” exception to the “deposit broker” definition, including revising the 25 percent test designated exception and eliminating the enabling transactions designated exception; and
• Update the application and notice processes for the primary purpose exception and limit such processes to IDIs.

As part of the proposal, IDIs relying on an existing approved primary purpose exception application, a 25 percent test designated exception notice, or an enabling transactions designated exception notice or application, would no longer be able to rely on such exceptions. Such IDIs would need to submit a new primary purpose exception application based upon updated criteria or, if applicable, rely upon a new designated business exception that meets the primary purpose exception based upon the proposed changes discussed below. If a deposit placement activity, however, meets one of the designated exceptions that are preserved under the proposal, the IDI may continue to rely upon the primary purpose exception without further action.

Finally, as part of this release, the FDIC is also proposing to clarify when an IDI that has lost “agent status” because it no longer qualifies for the reciprocal deposit exception, can regain status as an “agent institution”.

The FDIC invites comments on all aspects of this proposal, as well comments in response to specific questions in section VII of this document.

The proposed rule would amend the “deposit broker” definition by revising the “engaged in the business of placing deposits” (“placing”) and “engaged in the business of facilitating the placement of deposits” (“facilitating”) prongs. The revised “deposit broker” definition would (1) combine the “placing” and “facilitating” prongs, (2) remove the term “matchmaking activities” and replace it with a deposit allocation provision, and (3) add a new factor related to fees. Specifically, the proposed rule would provide that a person is engaged in the business of placing or facilitating the placement of deposits of third parties if that person engages in one or more of the following activities:

• The person receives third-party funds and deposits those funds at one or more IDIs;
• The person is involved in negotiating or setting rates, fees, terms, or conditions for the deposit account;
• The person proposes or determines deposit allocations at one or more IDIs (including through operating or using an algorithm, or any other program or technology that is functionally similar); or
• The person has a relationship or arrangement with an IDI or customer where the IDI, or the customer, pays the person a fee or provides other remuneration in exchange for or related to the placement of deposits.

Under the 2020 Final Rule, the “placing” and “facilitating” prongs are currently separate provisions under the “deposit broker” definition. Under section 29, a “deposit broker” includes “any person engaged in the business of placing deposits, or facilitating the placement of deposits, of third parties.”  [ 69 ] The proposed rule would combine the “placing” and “facilitating” parts of the deposit broker definition into a single definition of when a third party is “engaged in the business of placing, or facilitating the placement of, deposits of third parties” with a single set of factors. From the FDIC's experience, some IDIs and other stakeholders have been misapplying the current “deposit broker” definition by only looking at one of these two parts of the “deposit broker” definition in determining whether a particular third party meets the definition. For example, an IDI or other stakeholder may correctly determine that a third party's conduct falls outside the “placing” provision under the current rule but may still incorrectly determine that the deposits are not brokered by failing to review whether the same conduct meets the “facilitating” provisions. The FDIC believes this proposed change of combining the “placing” and “facilitating” regulatory provisions would better align the regulatory text with the statutory language, while also making the “deposit broker” definition more straightforward for IDIs and other stakeholders to apply because it would require review of a single set of closely related factors rather than a review of multiple provisions.

The proposal would retain the first two prongs of the current facilitation definition;  [ 70 ] however, it would remove the term “matchmaking activities” and provide that a person who proposes or determines deposit allocations would meet the “deposit broker” definition.

The FDIC has observed a number of IDIs and other stakeholders incorrectly determining that a third-party deposit allocator is not a “deposit broker” by misapplying the current “matchmaking activities” definition. The FDIC provided clarifications through the issuance of Questions and Answers Related to the Brokered Deposits Rule;   [ 71 ] however, the industry continues to misconstrue this provision. Additionally, IDIs have informed the FDIC of the difficulties in obtaining necessary information, such as third-party contracts, to effectively evaluate whether any party in a deposit arrangement, including any additional third party, meets the “matchmaking” definition and thus the “deposit broker” definition. These challenges have resulted in some IDIs misreporting a significant amount of deposits as nonbrokered.

As such, the FDIC believes eliminating the current “matchmaking activities” definition and replacing it with the proposed deposit allocation ( print page 68252) provision would make it more operationally workable for IDIs and other stakeholders while continuing to focus the definition on the specific conduct that indicates a third party is facilitating the placement of customer deposits—proposing or determining deposit allocations of third-party deposits. The proposal would specify that a “deposit broker” includes a person who proposes or determines deposit allocations, including through the operation or use of an algorithm or functionally similar program or technology. The FDIC views this conduct as objectively within the “deposit broker” definition if the algorithm or functionally similar program or technology proposes or determines deposit allocations among IDIs by directing the flow, or facilitating the flow, of third-party funds to be deposited at a particular IDI.

Moreover, unlike the “matchmaking activities” definition under the 2020 Final Rule, the proposed prong related to deposit allocation services would not exclude third parties that provide these services between affiliated entities. As discussed in the preamble to the 2020 Final Rule, the matchmaking activities prong would not include persons that engage in activities that would otherwise satisfy the matchmaking prong if the activities are conducted between an IDI and an affiliated party. [ 72 ] Under the proposed rule, the FDIC would no longer view deposit allocation functions of third parties as administrative in nature merely due to the affiliated relationship between the person placing or facilitating the placement of deposits and the IDI. Rather, recent experience has demonstrated that third parties do propose or determine deposit allocations at both unaffiliated and affiliated IDIs and these deposits, when uninsured, do not seem to act in a more “sticky” manner just because there is an affiliation between a broker and an IDI. Accordingly, the FDIC would treat affiliated and unaffiliated third parties similarly under the proposed deposit allocation prong of the “deposit broker” definition.

Finally, the proposed rule would add that a person is “engaged in the business of placing, or facilitating the placement of, deposits of third parties” if that person has a relationship or arrangement with an IDI or customer where the IDI, or the customer, pays the person a fee or provides other remuneration in exchange for, or related to, the placement of deposits. The statutory definition of “deposit broker” includes any third party that is engaged in the business of placing deposits, or facilitating the placement of deposits, on behalf of third parties ( i.e., a depositor) with IDIs. As such, the FDIC believes that including fees or other remuneration in determining whether a third party meets the “deposit broker” definition is consistent with the statute as the receipt of fees indicates that the third party is engaged in the business of providing deposit placement services or facilitating the placement of deposits. Fees that would be covered under the proposed “deposit broker” definition would include fees for administrative services provided in connection with a deposit placement arrangement.

Moreover, the FDIC had, for the more than 30 years since enactment of section 29 up until the adoption of the 2020 Final Rule, considered fees in analyzing deposit broker relationships, including whether a person receives fees from IDIs based upon the number of accounts opened or the volume of deposits placed. In the past, FDIC generally found that the amount, nature, and purpose of fees paid for the placement of third-party deposits were relevant to the analysis of the relationship among the IDI, depositor, and third-party intermediary. This was because fees paid to a third-party intermediary reflected whether the involvement of the third-party intermediary was to earn fees (engaged in the business) through placing or facilitating the placement of third-party deposits to the IDI. For example, the FDIC often found that fees paid to a third-party intermediary would play a key role in incentivizing referral volume of third-party deposits to the IDI. Since the 2020 Final Rule took effect, the FDIC has continued to observe that third-party intermediaries receive fees or other remuneration in exchange for, or related to, the placement of third-party deposits, including volume-based fees, but may not be defined as a “deposit broker” under the current regulations. Without a consideration of fees or other remuneration, and assuming the third party does not meet one of the other parts of the “deposit broker” definition, a less than well-capitalized IDI could accept third-party deposits that share characteristics with deposits the FDIC has historically observed as constituting a brokered deposit. For example, such third-party deposits may be more likely to leave the IDI if another IDI were to offer more favorable terms or pay a higher fee, putting stress on the IDI to replace the withdrawn funds on reasonable terms in a timely manner.

Accordingly, the FDIC believes that fees and other remuneration are important considerations when determining whether a person is a “deposit broker” and explicitly including this factor within the definition would be appropriate to further align the regulation with section 29's statutory purpose of restricting less than well-capitalized IDIs' access to brokered deposits. [ 73 ]

Passive Listing Services. Under the proposed rule, it is the FDIC's view that a passive listing service that only advertises information on interest rates offered by IDIs on deposit products would not meet the “deposit broker” definition. It is the FDIC's understanding that such passive listing services do not receive or deposit third-party funds at one or more IDIs nor have the legal authority to close a deposit account or move third party's funds to another IDI. Any funds to be invested in deposit accounts are remitted directly by the depositor to the IDI and not, directly or indirectly, by or through the passive listing service. In addition, such passive listing services are not involved in negotiating or setting rates, fees, terms, or conditions for the deposit account. Further, passive listing services do not propose, allocate, facilitate, or determine deposit allocations. Rather, the passive listing services are simply providing information on the interest rates offered by various IDIs but not directing depositors to a particular IDI. Lastly, the FDIC believes that any fees paid to passive listing services are not in exchange for or related to the placement of deposits. Instead, passive listing services receive subscription fees paid by subscribers for information on the rates gathered by the listing service and listing fees paid by IDIs for the opportunity to list or “post” the IDIs' rates.

Under the FDI Act, the term “deposit broker” is defined, in relevant part, to include “any person engaged in the business of placing deposits, or facilitating the placement of deposits, of third parties with insured depository institutions . . . .”  [ 74 ] In the 31 years between when Congress adopted the brokered deposit restrictions in 1989, ( print page 68253) until the 2020 Final Rule, the FDIC had never construed the reference to “insured depository institutions” in the deposit broker definition to exclude deposits to a single IDI. Call Report instructions for reporting brokered deposits had never excluded deposits where a third party was involved with deposits at only one IDI. This prior approach was consistent with the general statutory interpretation rule that provides that words importing the plural include the singular, unless the statutory context indicates otherwise. [ 75 ]

The 2020 Final Rule amended the FDIC's regulations so that the brokered deposit restrictions do not apply where a third party that otherwise meets the definition of deposit broker has an exclusive deposit placement arrangement at only one IDI. [ 76 ]

Under this change, an IDI can rely for 100 percent of its deposits on an unaffiliated third party without any of those deposits considered brokered. The IDI can fall below well capitalized and still rely on those third-party placed deposits for 100 percent of its funding without any of those deposits being considered brokered, which provides an avenue for less than well-capitalized IDIs to obtain and retain brokered deposits that appears to conflict with intent of the statutory prohibition. An IDI can form multiple “exclusive” third party relationships to fund itself without any of those deposits considered brokered. Thus, the current regulation exposes the banking system to the kind of risk the brokered deposit restrictions were intended to address.

Further, there has never been any dispute that the brokered deposit restrictions are intended to apply to brokered certificates of deposit (CDs). While the 2020 Final Rule makes clear that a brokered CD is not eligible for a primary purpose exception, a market participant has pointed out to the FDIC that, because of the exclusion, the plain meaning of the definitions of “engaged in the business of placing deposits” and “engaged in the business of facilitating the placement of deposits” could be read to exclude a third party that arranges the issuance of a brokered CD for only one IDI.

For these reasons, and to mitigate any unintended effects of the interpretation as related to the statute's purpose and its application to brokered CDs, the FDIC is proposing to revise the brokered deposit regulations to restore their applicability to any third party that meets the definition of deposit broker, including those involved in placing deposits at only one IDI.

The proposed rule would revise the analysis for determining when an agent or nominee meets the primary purpose exception to the “deposit broker” definition. Currently, the statute and regulation state that the term “deposit broker” does not include an agent or nominee whose primary purpose is not the placement of funds with IDIs. [ 77 ] In connection with this provision, the preamble to the 2020 Final Rule provided that the primary purpose exception would apply when the agent's or nominee's business relationship with its customers is not the placement of funds with IDIs. [ 78 ]

Accordingly, the current regulation focuses the primary purpose exception analysis on the third party's business relationship with its customers. While that is an important part of analyzing the exception, the FDIC believes that the relationship between the IDI and third party is also important in determining the purpose motivating the placement of third-party deposits and if the primary purpose is or is not the placement of funds with IDIs.

The statutory definition of the “primary purpose exception” excludes an agent or nominee whose primary purpose is not the placement of third-party funds with IDIs from being considered a “deposit broker.”  [ 79 ] Consistent with the statutory language, the focus of the exception is on the role of the agent or nominee (or third party) and whether that third party places customer deposits at an IDI as a secondary purpose in furtherance of some other “primary purpose.” Understanding the intent of the third party in placing those deposits at a particular IDI or IDIs is necessary in determining whether the deposit placement activity is primary. As such, in understanding why the third party is placing deposits on behalf of customers at particular IDIs, consideration should be given to both the customer-third party relationship and the third party-IDI relationship. This is because the primary purpose of a customer's business relationship with a third party may be distinct from the intention of the third party in placing those customer funds at particular IDIs.

For example, a third party that meets the primary purpose exception under the current rule may also be steering its customers to particular IDIs in an effort to maximize its own fees for the placement of customer deposits. The current rule, however, does not consider this latter purpose in analyzing whether the third party meets the primary purpose exception.

Accordingly, the proposal provides that the primary purpose exception to the “deposit broker” definition would apply when an agent or nominee whose primary purpose in placing customer deposits at IDIs is for a substantial purpose other than to provide a deposit-placement service or FDIC deposit insurance with respect to particular business lines. [ 80 ]

The proposed interpretation of the primary purpose exception would be similar to how the FDIC historically interpreted the exception before 2020. Prior to the 2020 Final Rule, the FDIC through long-standing staff advisory opinions and published FAQs interpreted the primary purpose exception to apply when the intent of the third party, in placing deposits or facilitating the placement of deposits, was to promote some other goal ( i.e., other than the goal of placing deposits for others). [ 81 ] As part of its analysis, the FDIC considered the relationship between the third party and the IDI, including whether fees were paid to the third party, in determining whether the third party's primary intent, or primary purpose, was the placement of deposits. For instance, the FDIC stated, through the published FAQs, that the primary purpose exception would not apply when the intent of the third party was to earn fees through the placement of deposits. [ 82 ]

The FDIC believes that restoring this aspect of the primary purpose exception analysis is necessary to fully consider the intent driving the placement of third-party deposits at an IDI. As detailed below, the proposal would provide additional factors to consider, including fees and other remuneration provided to the third party, in determining whether the intent of the third party in placing deposits at an IDI is for a substantial purpose other than to provide a deposit-placement service or FDIC deposit insurance. ( print page 68254)

The proposed rule would also update the primary purpose application process under § 303.243(b). The 2020 Final Rule allows a third party or an IDI on behalf of a third party to submit a primary purpose exception application. From the FDIC's experience, some third parties have provided insufficient information for the FDIC to process an application, such as failing to provide required information on all parties within a deposit arrangement, including the receiving IDIs. Moreover, the FDIC has observed some IDIs misunderstand the primary purpose exception application approvals provided to third-party applicants, as the IDI was not the applicant and the approval does not apply to its particular deposit placement activity with the third party; these misunderstandings have contributed to problems with IDIs filing accurate Call Reports.

For these reasons, the FDIC proposes to no longer allow third parties to apply for a primary purpose exception. As proposed, each IDI wishing to rely on a primary purpose exception would be required to submit an application for the specific deposit placement arrangement that it has with the third party involved. This would provide the FDIC the opportunity to review the specific facts and circumstances surrounding the deposit placement activity between the individual IDI applicant and the third party in determining whether a primary purpose exception should be approved.

Under the 2020 Final Rule, applicants that seek a primary purpose exception, other than applications for primary purpose exception to enable transactions with fees, interest, or other remuneration, must include, to the extent applicable, the following information:

• A description of the deposit placement arrangements between the third party and IDIs for the particular business line, including the services provided by any relevant third parties;
• A description of the particular business line;
• A description of the primary purpose of the particular business line;
• The total amount of customer assets under management by the third party, with respect to the particular business line;
• The total amount of deposits placed by the third party at all IDIs, including the amounts placed with the applicant, if the applicant is an IDI, with respect to the particular business line;
• Revenue generated from the third party's activities related to the placement, or facilitating the placement, of deposits, with respect to the particular business line;
• Revenue generated from the third party's activities not related to the placement, or facilitating the placement, of deposits, with respect to the particular business line;
• A description of the marketing activities provided by the third party, with respect to the particular business line;
• The reasons the third party meets the primary purpose exception;
• Any other information the applicant deems relevant; and
• Any other information that the FDIC requires to initiate its review and render the application complete. [ 83 ]

The proposed rule would add new factors to be considered as part of the primary purpose exception application. Specifically, the proposed rule would amend § 303.243(b)(4)(ii) to include consideration of whether:

• The IDI, or customer, pays fees or other remuneration to the agent or nominee for deposits placed with the IDI and the amount of such fees or other remuneration, including how the amount of fees or other remuneration is calculated;
• The agent or nominee has discretion to choose the IDI(s) at which customer deposits are or will be placed; and
• The agent or nominee is mandated by law to disburse funds to customer deposit accounts.

The proposed rule would also require IDIs to provide copies of contracts relating to the deposit placement arrangement, including all third-party contracts, to supplement the IDI's description of the deposit placement arrangement that is currently required under the 2020 Final Rule. These new factors would supplement the factors that were provided under the 2020 Final Rule. [ 84 ] The FDIC believes consideration of these factors, in conjunction with the existing factors, is necessary to fully consider the purpose of the placement of third-party deposits at an IDI and whether the third party is eligible for a primary purpose exception. Below, the FDIC discusses how the new factors would be viewed as part of its analysis, but notes that approval of a primary purpose exception application would be based on the consideration of all applicable factors and any additional information provided by the applicant.

Fees. By including the amount of fees or other remuneration, and how the amount is determined, that an IDI or customer pays to the agent or nominee for deposits placed with the IDI, the FDIC would obtain relevant information to help determine whether the third-party intermediary is placing deposits for a substantial purpose other than to provide a deposit-placement service or FDIC deposit insurance. The FDIC would balance the information on fees with the other factors in determining whether the primary purpose exception should be approved.

Discretion. A third party with discretion to choose the IDI(s) to place customer deposits may base their deposit placement decisions on factors such as interest rate competition or fees generated, and may be more likely to move customer funds to other IDIs in a way that makes the deposits less stable. Whether a third party has discretion, however, would be viewed in conjunction with the other factors in determining whether the primary purpose exception is applicable.

Legal obligation. In contrast, a third party disbursing funds mandated by law is discharging its legal obligation and may be less likely to move customers deposits to other IDIs. For example, a third party disbursing customer funds as part of court-mandated settlements could support a finding that the primary purpose in placing customer deposits at IDIs is for a substantial purpose other than to provide a deposit-placement service or FDIC deposit insurance. The FDIC, however, would balance this consideration with the other factors, such as the payment of fees, in determining the third party's primary purpose in placing deposits.

Accordingly, the FDIC believes consideration of these proposed factors, in conjunction with the existing application factors, [ 85 ] would be necessary in analyzing applications under the proposed revised primary purpose exception analysis. Furthermore, under the proposal, primary purpose exception applications previously approved pursuant to the 2020 Final Rule would be revoked. As a result, IDIs and third parties relying on previously approved applications would no longer be able to do so under the proposed rule. IDIs would be required to submit a new application to seek a primary purpose exception and report the associated deposits as brokered, ( print page 68255) until and unless an application is approved.

The proposed rule would amend the 25 percent test and eliminate the enabling transactions test designated exception. In contrast to the other designated business exceptions, based on the FDIC's experience, these exceptions are overly broad and cover a variety of different business lines rather than a narrow set of business lines intended by the FDIC's bright-line designated exceptions. Further, the FDIC would likely find that the current 25 percent and enabling transactions tests would not meet the primary purpose exception under the proposed analysis in that the primary purpose of these arrangements in placing customer deposits at IDIs would often not be for a substantial purpose other than to provide a deposit-placement service or FDIC deposit insurance. Moreover, the current notice process does not allow the FDIC to review submissions before an entity can invoke the exception, and many of the submissions have been incomplete, inaccurate, or vague. For these reasons, and as discussed in more detail below, the FDIC is amending the 25 percent test and eliminating the enabling transactions test in a manner that aligns with the proposed updated analysis of the primary purpose exception.

The 2020 Final Rule provides that the primary purpose of an agent's or nominee's business relationship with its customers will not be considered to be the placement of funds at a depository institution, if less than 25 percent of the total assets that the agent or nominee has under administration for its customers, in a particular business line, is placed at IDIs. [ 86 ] Third parties relying on the 25 percent test or an IDI on its behalf must file a notice with the FDIC. [ 87 ]

Before 2005, all sweeps from broker-dealers were defined as brokered deposits because the broker-dealer was placing third-party (customer) funds at IDIs. Between 2005 and 2020, FDIC staff interpreted the primary purpose exception to apply to a broker-dealer that swept customer funds to an affiliated IDI if the activity was conducted within certain parameters. Among the parameters were that (1) swept deposits did not exceed 10 percent of the affiliate's assets and (2) related fees paid by the IDI to the broker-dealer were “flat” fees ( i.e., a “per account” or “per customer” fee) as payment for recordkeeping or administrative services and not payment for placing deposits.

Under the 2020 Final Rule, a broker-dealer that sweeps customer funds to IDIs meets the “deposit broker” definition but is eligible for the primary purpose exception where less than 25 percent of that broker-dealer's total assets under administration for its customers is placed at IDIs. [ 88 ] The presence of a broker-dealer operating under a primary purpose exception, regardless of whether or not the broker-dealer is affiliated with the IDI receiving the deposits, will not, in and of itself, permit an IDI to report such deposits as nonbrokered. As described above, the 2020 Final Rule included in the “deposit broker” definition a “matchmaking services” prong intended to cover third-party deposit allocation service providers when an additional third party is used to place deposits between a broker-dealer and an IDI that is unaffiliated with the broker-dealer. [ 89 ]

Since the implementation of the 2020 Final Rule, the FDIC has encountered a number of challenges with notice filings submitted under the 25 percent test and with reporting associated with sweep deposits. The challenges became more apparent since the new reporting items related to sweep deposits were added to the Call Report shortly after the 2020 Final Rule became effective. [ 90 ] The FDIC anticipated that most unaffiliated sweep deposits would be classified as brokered deposits because of the understanding that most broker-dealers, even those with valid primary purpose exceptions, outsourced their deposit allocation functions to an intervening third party providing “matchmaking activities” and these additional third parties would thus meet the “deposit broker” definition. This has resulted in a large number of unaffiliated sweep deposits being misreported as nonbrokered. [ 91 ] Approximately 27 percent of all IDIs reported a non-zero amount for total sweep deposits that are not brokered deposits as of December 31, 2023. For additional Call Report information, see the tables in appendix 1 to this document.

Reporting Issues with the 25 percent test. Since the 2020 Final Rule became effective, the FDIC has observed several reasons for this misreporting. An IDI must conduct a detailed analysis to accurately determine the status of all third parties involved in a sweep deposit program. The analysis may include a review of the agreements between the broker-dealer and any additional third party within the deposit placement arrangement, including third parties with which an IDI may not have a direct contractual relationship. [ 92 ] The FDIC acknowledges that there may be challenges that IDIs and regulators face in conducting due diligence with respect to these agreements, particularly in situations when the IDI is not a party to the agreements between the broker dealers and the additional third parties. Additionally, as explained above, the FDIC has observed a number of IDIs and other stakeholders misunderstanding the current “matchmaking activities” definition. This indicates that the “matchmaking activities” definition has not been uniformly understood across the industry. This lack of understanding has likely contributed to IDIs overreporting sweep deposits as not brokered when these deposits should be considered brokered.

The proposed rule would revise the current “25 percent test” designated exception and its notice process to (1) align with the proposed analysis of the primary purpose exception and (2) ensure that the FDIC and the IDI can properly determine whether any additional third parties meet the “deposit broker” definition before the exception can be invoked. In order to more clearly describe the business arrangements intended to qualify for this primary purpose exception, the proposed rule would revise the “25 percent test” and rename it as the “Broker-Dealer Sweep Exception” (BDSE).

As proposed, subject to the additional conditions below, the BDSE would be available only to a broker-dealer or investment adviser registered with the Securities and Exchange Commission and only if less than 10 percent of the total assets that the broker-dealer or investment adviser, as agent or nominee, has under management for its customers, in a particular business line, is placed into non-maturity accounts at ( print page 68256) one or more IDIs, without regard to whether the broker-dealer or investment adviser and depository institutions are affiliated.

The FDIC is proposing the BDSE because a third party that places less than 25 percent of its customer's assets under administration in a bank account does not, by itself, demonstrate that the deposit-placement activity is for a goal other than to provide deposit insurance or a deposit placement service. Rather, placing less than 10 percent of customer funds at IDIs would be more indicative that the primary purpose for broker dealers and investment advisers in placing customer funds at IDIs is to temporarily safe-keep customer free cash balances ( e.g., uninvested funds) that are awaiting reinvestment. The FDIC views the 10 percent threshold as evidence that a de-minimis amount of customer funds are placed into deposit accounts for the primary purpose of re-investment rather than to provide a deposit placement service or deposit insurance. Further, lowering the threshold to 10 percent may reduce potential risks to safety and soundness and to the DIF by providing more transparency regarding the characteristics of the deposits so placed. Despite the business relationship between the IDI and the third party placing those deposits, the latter may well have a fiduciary duty and other incentives to transfer those deposits if the IDI is perceived to be weak.

In addition, the proposal would amend one of the key measures used as part of this designated exception from “customer assets under administration” to “customer assets under management.” From the FDIC's experience with the 2020 Final Rule, “customer assets under administration” is a more appropriate measure when including a broader group of business relationships and business lines, whereas “assets under management” would be appropriate under the proposed rule to accurately reflect the scope of the types of services provided by broker dealers and investment advisers. The proposed rule would define “assets under management” to mean securities portfolios and cash balances with respect to which an investment adviser or broker-dealer provides continuous and regular supervisory or management services.

Prior notice requirement for the BDSE when no additional third parties are involved. In order to ensure accurate and uniform reporting by depository institutions receiving sweep deposits from broker-dealers, the proposed rule would allow an IDI to file a designated exception notice for the BDSE on behalf of broker-dealers that place deposits at the IDI only if no additional third party (including any affiliate) is involved in the sweep program.

Under the proposed rule, an IDI would be required to provide a written notice with the following information:

• A description of the deposit placement arrangement between the IDI and the broker-dealer or investment adviser for the particular business line;
• The registration and contact information for the broker-dealer or investment adviser;
• The total amount of customer assets under management by the broker-dealer or investment adviser;
• The total amount of deposits placed by the broker-dealer or investment adviser on behalf of its customers at all IDIs; and
• A certification that no additional third parties are involved in the deposit placement arrangement.

IDIs would be able to rely on the BDSE if the FDIC has not provided a written disapproval within 90 days from submission. The FDIC, within its discretion, could extend the time period for an additional 90 days to provide a written notice of disapproval to the IDI. Further, the FDIC would be able to request additional information at any time after receipt of a written notice. Submissions that fail to include the required information would be considered incomplete and disapproved. Moreover, notice filers with an effective notice would be required to provide quarterly updates within 30 days of the quarter end, with monthly figures for the quarter, to demonstrate continuous compliance with the exception. Lastly, the proposed rule provides that the FDIC would be able to revoke an effective BDSE notice within 15 days of providing the IDI written notice if:

• The broker-dealer or investment adviser no longer meets the criteria to rely on the BDSE;
• An additional third party is involved in the business line;
• The notice or subsequent reporting is inaccurate; or
• The notice filer fails to submit one or more required reports.

The FDIC believes the BDSE notice requirement would be helpful in ensuring the parties who meet the exception can rely on it. The FDIC also believes this notice process would be more operationally workable than the current 25 percent test notice process as the required information would be tailored to specific information to which the receiving IDI should have access or be able to obtain from the broker-dealer or investment adviser.

Application process for sweep arrangements that use additional third parties. In an effort to ensure that the FDIC has the ability to properly scrutinize the role of additional third parties as part of sweep programs, the proposal would create an application process for IDIs that wish to invoke the BDSE when additional third parties are involved in the arrangement. As provided above, the notice process is not available for sweep programs that use additional third parties. The application process would review whether the broker-dealer or investment adviser meets the criteria under the BDSE and it would review whether any additional third party involved in the deposit placement arrangement meets the “deposit broker” definition. If the additional third party meets the “deposit broker” definition, then the FDIC would deny the application and the deposits being placed through the sweep program would be brokered notwithstanding the broker-dealer itself qualifying for a primary purpose exception. The proposed rule would require an application regardless of whether the sweep arrangement involves IDI-affiliated parties. The FDIC believes treating affiliated and unaffiliated relationships the same when an additional third party is involved would help ensure consistent and equitable treatment of sweep deposits across the industry.

The proposed rule would amend § 303.243(b) to describe a new primary purpose exception application process for sweep arrangements that use additional third parties. Specifically, an IDI, on behalf of a broker dealer or investment adviser that places less than 10 percent of customer funds under management into IDIs through the use of an additional third party, would be required to provide the following as part of an application:

• A description of the deposit placement arrangement between the IDI, the broker-dealer or investment adviser, and the additional third party, including the services provided by the additional third party, for the particular business line, and copies of contracts relating to the deposit placement arrangement, including all third party contracts;
• The total amount of deposits placed by the broker-dealer or investment adviser on behalf of its customers at all IDIs;
• Information on whether the additional third party places or facilitates the placement of deposits at IDIs; ( print page 68257)
• Information on whether the additional third party has legal authority, contractual or otherwise, to close the account or move the third party's funds to another IDI;
• Information on fees and the amount of fees paid from any source to the additional third party with respect to its services provided as part of the deposit placement arrangement;
• Information on whether the additional third party has discretion to choose the IDIs at which customer deposits are or will be placed; and
• Any other information that the FDIC requires to initiate its review and render the application complete.

Moreover, the FDIC would be able to request additional information from the applicant at any time during processing of the application.

The proposed rule provides that within 120 days of receiving a complete application, the FDIC would issue a written determination, but the FDIC could extend its review by 120 additional days, with notice. If necessary, the FDIC could further extend its review period, which is more likely when an application involves complex or novel arrangements or issues. If the FDIC receives an incomplete application, the FDIC would, as soon as possible, notify the applicant and explain what is needed to render the application complete. The FDIC would also be able to request additional information at any time during the processing of the filing.

The FDIC would approve an application under this provision if the FDIC finds that the applicant demonstrates that, with respect to the IDI and the particular business line, the (1) broker-dealer or investment adviser meets the criteria for the BDSE and (2) the additional third party involved in the deposit placement arrangement is not a “deposit broker” as defined under the proposed rule.

Prior to the 2020 Final Rule, the FDIC did not distinguish between acting with the purpose of placing deposits for other parties and acting with the purpose of enabling other parties to use deposits to make purchases. The 2020 Final Rule distinguished these two purposes and created a primary purpose exception for third parties that place deposits to allow their customers to enable transactions. IDIs receiving deposits from deposit brokers relying on this exception do not report these deposits as brokered; however, as described below, many of these deposits would not satisfy the proposed primary purpose exception analysis.

A third party qualifies for the current enabling transactions primary purpose exception by either submitting an application or submitting a notice. In a deposit placement arrangement where interest, fees, or other remunerations are provided to the depositor, the agent or nominee must receive prior approval before relying on the enabling transactions primary purpose exception by submitting an application to the FDIC. [ 93 ] Under the enabling transactions test, where 100 percent of customer funds that have been placed at depository institutions, with respect to a particular business line, are placed into transaction accounts, and no fees, interest, or other remuneration is provided to the depositor, the agent or nominee may file a notice with the FDIC to rely on the enabling transactions designated exception. [ 94 ]

The current enabling transactions test would not satisfy the proposed primary purpose exception because placing deposits into accounts with transactional features would not, by itself, prove that the substantial purpose of the deposit placement arrangement is for a purpose other than providing deposit insurance or a deposit-placement service. The FDIC believes that there is no relevant difference between an agent or nominee's purpose in placing deposits to enable transactions and placing deposits to access a deposit account and deposit insurance.

For these reasons, the FDIC is proposing to eliminate the enabling transactions test and the corresponding notice process. As proposed, IDIs that currently rely on a primary purpose of enabling transactions under the notice process could file an application under the general primary purpose exception application process under current § 303.243(b)(4)(ii) (subject to the amendments under the proposed rule), if they believe that the primary purpose in placing customer deposits at IDIs is for a substantial purpose other than to provide a deposit-placement service or FDIC deposit insurance with respect to the particular business line. As discussed above, only IDIs would be permitted to file an application under the proposed rule.

The proposed rule would also eliminate the application process for the enabling transactions exception where interest, fees, or other remuneration is provided to depositors under § 303.243(b)(4)(i). Applications previously approved under this provision would be rescinded. IDIs would be able to submit a new application to seek a primary purpose exception if they believe that the business line may be eligible for the general primary purpose exception.

Under the 2020 Final Rule, the FDIC identified other designated business exceptions that meet the primary purpose exception in addition to the 25 percent and enabling transactions tests discussed above. The proposed rule would retain the remaining designated business exceptions listed in the 2020 Final Rule, as well as the additional designated exception for non-discretionary custodians engaged in the placement of deposits. While the primary purpose interpretation under the proposed rule differs from the interpretation contained in the 2020 Final Rule, the outcome of whether these specific arrangements meet the primary purpose exception would not necessarily change if evaluated under the proposed revised interpretation based on the FDIC's current understanding of these specific arrangements.

The FDIC believes the remaining existing designated business exceptions are narrowly tailored to address specific business lines or functions and would satisfy the proposed primary purpose exception analysis in that the primary purpose of these arrangements in placing customer deposits at IDIs is for a substantial purpose other than to provide a deposit-placement service or FDIC deposit insurance. However, the FDIC will continue to monitor these specific arrangements, and if any changes indicate that the primary purpose of any of these arrangements is to provide a deposit-placement service or FDIC deposit insurance, the FDIC would revise the designated exceptions through the notice and comment process.

As discussed above, the amount of reciprocal deposits an IDI can except from being considered brokered under the limited exception turns on whether the IDI qualifies as an agent institution and if so, whether the IDI is subject to the special cap. An IDI that meets the agent institution definition can lose its agent institution status due to no longer meeting the qualifying provisions under section 29 and the 2018 Reciprocal Deposits Rule. Section 29 and the 2018 Reciprocal Deposits Rule do not clarify ( print page 68258) how and when an IDI might regain agent institution status after losing such status. As a result, the FDIC has received numerous questions about this issue.

An IDI that is an agent institution may lose that status, and thereby lose the ability to use the exception. For example, if a well-capitalized IDI with a composite condition of outstanding or good has its CAMELS composite condition downgraded below outstanding or good at its most recent examination conducted under section 10(d) for the FDI Act, it becomes subject to a special cap. If the IDI subsequently receives reciprocal deposits that results in its total reciprocal deposits exceeding its special cap, it is no longer an agent institution. Thus, the IDI no longer qualifies for the limited exception and must report all its reciprocal deposits as brokered deposits.

In response to questions raised, and in recognition that the current statute and regulation do not provide clarity on this issue, the FDIC proposes to add a new § 337.6(e)(3) to provide a path for an IDI to regain agent institution status. An IDI that lost its agent institution status would be eligible to regain its agent institution status as follows:

• If the IDI is well capitalized, the date the IDI is notified that its CAMELS composite condition is rated outstanding or good at its most recent examination under 12 U.S.C. 1820(d) ;
• If the IDI is well-rated, the date the IDI is notified, or is deemed to have notice, that it is well capitalized under regulations implementing section 38 of the FDI Act issued by the appropriate Federal banking agency for that institution;
• The date the FDIC grants a brokered deposit waiver; or
• On the last day of the third consecutive calendar quarter during which the IDI did not at any time receive reciprocal deposits that caused its total reciprocal deposits to exceed its special cap.

To illustrate, if as the result of an examination, a well-capitalized IDI that had had a CAMELS composite rating of “3” receives written notice, including, for example, a transmittal letter, informing it that it had received an upgrade to a composite rating of “2” the IDI would regain its agent institution status as of the date of the written notice under the proposal. If the FDIC grants a brokered deposit waiver to an adequately capitalized IDI, the IDI would regain agent institution status on the date the FDIC grants the waiver. If the IDI does not fit into either of these categories and lost its agent institution status during the fourth quarter of 2024 but can demonstrate that it did not receive any reciprocal deposits that caused its total reciprocal deposits to exceed its special cap at any time during the first, second, or third quarters of 2025, it would regain agent institution status on the last day of the third quarter of 2025.

As part of this proposal, the FDIC is also inviting comment on the following alternatives that are under consideration.

As discussed above, the proposed rule would provide a BDSE that would be available to a broker-dealer or investment adviser that places or facilitates the placement of less than 10 percent of the total assets that it has under management for its customers at one or more IDIs, and no additional third parties are involved in the deposit placement arrangement. Further the proposed rule would provide a specific application process for sweep arrangements that involve an additional third party.

The FDIC is considering whether a designated business exception for sweep deposits should instead be rescinded. Under this alternative, IDIs would be required to report all sweep deposits as brokered because the broker-deal or investment adviser would meet the “deposit broker” definition since it would be placing or facilitating the placement of the third-party deposits. IDIs receiving sweep deposits, however, could apply for the general primary purpose exception. Whether a broker-dealer or an investment adviser would meet the primary purpose exception under this alternative would not be based on a de-minimis amount of customer funds placed at one or more IDIs. Rather, an IDI would be required to submit the required information listed under the general primary purpose exception application process as described in the proposed rule to demonstrate that the deposit-placement activity of the sweep arrangement, including those with an additional third party, is for a substantial purpose other than to provide deposit insurance or a deposit placement service.

The FDIC is also considering whether instead to change the BDSE to apply to a broker-dealer or investment adviser that sweeps customer funds to an affiliated IDI and meets other certain parameters. Under this alternative, a broker-dealer or investment adviser would meet the designated business exception if:

• The broker-dealer or investment adviser places or facilitates the placement of swept funds into non-maturity accounts at an affiliated IDI, and the amount of swept funds are less than 10 percent of the total assets that the broker-dealer or investment adviser has under management for its customers; and
• The related fees paid by the IDI to the broker-dealer or investment adviser are “flat fees” ( i.e., a “per account” or “per customer” fee) as payment for recordkeeping or administrative services and not payment for placing deposits.

This alternative would be similar to the FDIC's treatment of affiliated sweep deposit arrangements prior to the 2020 Final Rule. Under this alternative, the exception would not apply to deposit arrangements where swept funds are placed at unaffiliated IDIs.

As previously stated, the proposed rule would strengthen the FDIC's brokered deposit regulations by revising certain provisions to further support the statutory language and purpose of the brokered deposit restrictions, and clarifying and streamlining provisions that the FDIC observes have posed interpretive challenges. In summary, the proposed rule would (1) streamline and update certain provisions of the “deposit broker” definition; (2) eliminate the exclusive placement arrangement exception and restore the regulations' applicability to cases where a third party, that otherwise meets the definition of deposit broker, is involved with placing deposits at one or more IDIs; (3) amend the “primary purpose” exception to the “deposit broker” definition, including revising the “25 percent test” designated exception to a 10 percent test exception (and narrowing the scope of firms to which the exception may apply) and eliminating the “enabling transactions” designated exception; (4) update the primary purpose exception application and notice processes and make it so that only IDIs may submit an application and/or a notice on behalf of a third party; and (5) clarify how an IDI that loses its “agent institution” status regains that status.

The proposed rule would apply to all IDIs and affect any IDI that currently holds brokered deposits, or holds deposits that could be reclassified as brokered under the proposed rule, including IDIs that are less than well capitalized. As of March 31, 2024, there are 4,577 FDIC-insured depository ( print page 68259) institutions (IDIs) holding approximately $24.06 trillion in assets and $17.60 trillion in total domestic deposits. Additionally, of the 4,577 IDIs, 2,131 report holding $1.34 trillion in brokered deposits. Based on IDIs' reported capital ratios as of the same date, seven IDIs (0.15 percent) were considered less than well capitalized, which is 0.37 percentage points below the average percentage of IDIs considered to be less than well capitalized based on reported capital ratios over the ten-year period ending March 31, 2024 (0.52 percent). [ 95 ]

One likely aggregate effect of the proposed changes is that some deposits currently not reported as brokered would be reported as brokered deposits if the proposal is adopted. This may potentially affect IDIs, consumers, and nonbank firms that may be considered “deposit brokers” under the proposal.

The proposed rule would revise the “deposit broker” definition and would amend the analysis of the “primary purpose” exception to the “deposit broker” definition. The FDIC believes that under the proposed rule fewer entities are likely to be exempt from the definition of deposit broker than is the case currently. Additionally, to the extent such entities continue to place funds at IDIs, the amount of deposits at IDIs considered brokered under the proposed rule is likely to increase. The FDIC does not have the data necessary to estimate the amount of deposits that would be reclassified as brokered under the proposed rule. However, at the end of the first quarter during which the 2020 Final Rule was in effect—April through June of 2021—IDIs reported almost $350 billion fewer brokered deposits than in the previous quarter, a reduction in reported brokered deposits of more than 30 percent. [ 96 ] Therefore the FDIC believes a material amount of deposits could be reclassified as brokered.

The remainder of this subsection considers first the proposed rule's potential effects on less than well-capitalized IDIs specifically, then discusses costs to IDIs more broadly (including those that may be less than well capitalized), and an overview of the proposed rule's expected effects on the number of applications and notices (collectively, filings) sent to the FDIC. This subsection concludes with a discussion of the proposed rule's potential benefits. The subsection “Reporting Compliance Costs” of this document provides more detailed estimates on the expected effects of the proposed rule on the number of filings sent to the FDIC, and the expected dollar cost associated with those filings.

The acceptance of brokered deposits is subject to statutory and regulatory restrictions for banks that are not well capitalized. Adequately capitalized banks may not accept brokered deposits without an approved waiver from the FDIC, and banks that are less than adequately capitalized may not accept them at all. As a result, adequately capitalized and undercapitalized banks generally hold fewer brokered deposits. To the extent less than well-capitalized IDIs are able to rely on deposits that share the characteristics of brokered deposits (such as volatility) but are not currently reported as brokered, such IDIs can operate using a riskier liability structure than one reliant on more stable funding sources, thereby potentially increasing the risk of loss to the DIF. By generally increasing the scope of deposits that are considered brokered, the proposed rule limits the ability of less than well-capitalized banks to rely on potentially less stable third-party deposits that are currently reported as nonbrokered but would be reported as brokered under the proposed rule.

Based on IDIs' reported capital ratios as of March 31, 2024, there are seven less than well-capitalized IDIs, one of which reports holding some volume of brokered deposits. [ 97 ] These seven IDIs together report $1.1 billion in total assets, $1.0 billion in domestic deposits, and $137.0 million in brokered deposits. [ 98 ] Five of the less than well-capitalized IDIs are adequately capitalized as of March 31, 2024, one is undercapitalized, and one is significantly undercapitalized. [ 99 ]

As mentioned above, adequately capitalized banks may not accept brokered deposits without an approved waiver from the FDIC, and because the FDIC believes the proposed rule is likely to increase the amount of deposits considered brokered, it may increase the number of waiver applications the FDIC receives from adequately capitalized IDIs. This potential effect of the proposed rule is difficult to estimate because, as mentioned above, not only does the FDIC not possess the data necessary to estimate the amount of deposits that would be reclassified as brokered at specific banks under the proposed rule, but also the number of adequately capitalized banks depends on other factors, such as economic conditions and asset quality.

The FDIC believes that if the proposed rule was adopted affected IDIs, including well-capitalized and less than well-capitalized IDIs, may incur some costs. First, the proposed rule may lead some IDIs to restructure their liabilities. Second, the proposed rule may affect certain regulatory ratios required to be calculated by some large IDIs. Third, affected IDIs may be incentivized to make changes to their organizational structure. Fourth, affected IDIs may need to make changes to internal systems, policies, or procedures that pertain to brokered deposits. Fifth, the proposed rule is expected to affect the number of filings that IDIs send to the FDIC. Finally, the proposed rule may affect some IDIs' FDIC deposit insurance assessments. Each of these potential costs is discussed below in turn.

IDIs affected by the proposed rule may incur costs associated with making changes to the structure of their liabilities. As discussed above, there was a drop in reported brokered deposits immediately after the effective date of the 2020 Final Rule. The FDIC believes that the changes in the proposed rule are likely to result in a greater proportion of nonbrokered deposits being reclassified as brokered. To the extent affected IDIs are currently operating at their desired ratios of brokered deposits to total liabilities and the proposed rule increases the amount of deposits considered brokered, some affected IDIs may find that, at least initially, the proposed rule may cause them to have a greater than desired share of brokered deposits to liabilities. The FDIC does not have the data to ( print page 68260) estimate the amount of deposits that would be reclassified as brokered by the proposed rule at particular IDIs, nor how many IDIs, if any, might make changes to the structure of their liabilities.

For some large IDIs, brokered deposits can affect the calculation of certain regulatory ratios, such as the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). The FDIC does not have the data to estimate the amount of deposits that would be reclassified as brokered by the proposed rule at individual IDIs, and thus cannot estimate how many IDIs, if any, may incur costs associated with maintaining compliance with, or maintaining management buffers relative to, these regulatory ratios because of the proposed rule.

It is possible that some IDIs may choose to make changes to the organizational structure of their institutions if the proposed rule is adopted. In particular, IDIs that rely on the current exclusive placement exception to obtain nonbrokered deposits from affiliates may be incentivized to stop using these deposits or perhaps change their organizational structure as a result of the proposed rule. The FDIC does not have the information to estimate any such changes or attendant costs.

The FDIC believes that if the proposed rule was adopted, IDIs affected may incur some costs associated with making changes to their internal systems, policies, and procedures associated with deposit brokering activities and arrangements (especially those involving third parties). The FDIC does not have the data to be able to reliably estimate the costs associated with these changes, but expects that they are likely to be modest. Further, the FDIC believes that some of these costs may be ameliorated because the proposed rule is similar to the regulatory framework that existed prior to the 2020 Final Rule, therefore some affected entities may have experience with some of those policies and procedures.

Several aspects of the proposed rule may impact the number of filings that IDIs submit to the FDIC. First, as mentioned previously, the proposed rule may increase the number of brokered deposit waiver applications the FDIC receives from adequately capitalized IDIs. Second, the proposed rule eliminates the “enabling transactions” exception (including its attendant notice), and the FDIC believes that many entities that currently rely on this exception may work with IDIs to file PPE applications. Third, the proposed rule replaces the current “25 percent test” notice exception with two similar but distinct exceptions: the BDSE requiring a notice, for arrangements involving only an IDI and broker-dealer, and the BDSE requiring an application, for arrangements involving an IDI, broker-dealer, and additional third-party. The FDIC believes the BDSE notice will be more operationally workable than the current “25 percent test” notice process, as the information required to complete the BDSE notice would be tailored to specific information the receiving IDI should have access to or be able to obtain from the broker-dealer. Finally, concurrent with the finalization of the proposed rule, the FDIC would rescind notices and applications approved under the 2020 Final Rule, and would eliminate the ability of non-IDIs to file applications or notices. Therefore, the FDIC expects that the proposed rule could result in a significant increase in PPE applications from IDIs, especially in the period immediately following the effective date if the proposed rule were adopted. IDIs may incur costs associated with such submissions, including costs associated with gathering more information from third parties as part of the application process. See the “Reporting Compliance Costs” subsection of this document for a more detailed discussion of the potential effects of the proposed rule on the number and types of filings sent to the FDIC.

The proposed rule could also affect FDIC deposit insurance assessments. Under the FDIC's assessment regulations, IDIs with a significant concentration of brokered deposits may pay higher quarterly assessments, depending on other factors. [ 100 ] To the extent that deposits currently considered nonbrokered would be considered brokered deposits under the proposed rule, an IDI's assessment may increase. The FDIC does not have the information necessary to estimate the proposed rule's expected effects on deposit insurance assessments because it does not possess the data necessary to estimate the amount of deposits that would be reclassified as brokered at particular IDIs under the proposed rule.

The FDIC believes that the proposed rule would pose two primary benefits. First, the proposed rule would clarify certain concepts for affected IDIs. Second, the FDIC believes the proposed rule would improve the safety and soundness of the banking system. The benefits of improved safety and soundness are difficult to quantify, but such benefits are likely to accrue to the public and to all IDIs, not just those that are less than well capitalized. The FDIC discusses these potential benefits below in turn.

The FDIC believes that the proposed rule would improve the safety and soundness of the banking system, as well as covered IDIs. To the extent the proposed rule's changes would better identify deposits that are currently not reported as brokered but share the risk characteristics of brokered deposits, the FDIC believes that the proposal would enhance the ability of the FDIC to ensure the safety and soundness of the banking system. In particular, the rule would limit the ability for a less than well-capitalized institution to rely on a risky funding source and improve clarity so that reliance on brokered deposits, regardless of capitalization, would be correctly reflected in an institution's regulatory reporting, deposit insurance assessments, and regulatory ratios.

As discussed above, the FDIC has found significant reliance on brokered deposits increases an institution's risk profile, particularly as its financial condition weakens. The FDIC's statistical analyses and other studies have found that the use of brokered deposits by IDIs in general is associated with a higher probability of failure and higher losses to the DIF upon failure. The use of brokered deposits by IDIs is correlated with (1) higher levels of asset growth, (2) higher levels of nonperforming loans, and (3) a lower proportion of core deposit  [ 101 ] funding. [ 102 ] As previously described, 47 institutions that failed between 2007 and 2017 relied heavily on brokered deposits and each caused an estimated loss to the DIF of over $100 million as of December 31, 2017. While these 47 institutions held total assets representing nearly 21 percent of the aggregate total assets of the 530 institutions that failed over this period, their losses represented 38 percent of all estimated losses to the DIF for the same ( print page 68261) period. More recently, First Republic Bank, which failed in May of 2023, saw rapid growth in reported brokered deposits in the quarters leading up to its failure. [ 103 ]

The FDIC also believes that the proposed rule would benefit covered IDIs by clarifying certain practices and concepts. For example, the proposed rule includes a provision to clarify how an IDI may regain its “agent institution” status after losing it. The FDIC also believes that the proposed rule would benefit IDIs by promoting accurate reporting and understanding of the regulation and how the involvement of third parties within a deposit placement arrangement may, or may not, result in the deposits being brokered. Based on the FDIC's experience, the initial decline in brokered deposits following the effective date of the 2020 Final Rule was due, in part, to some IDIs misunderstanding and misreporting a significant amount of deposits as nonbrokered. The FDIC believes that increased clarity should reduce costs for affected IDIs and ensure more accurate reporting.

The proposed rule may affect consumers that utilize brokered deposits, deposit placement services or arrangements. To the extent that consumers utilize deposits currently, or in future periods, which are not classified as brokered, but would be as a result of the adoption of the proposed rule, they might experience changes in interest rates on those funds, or costs associated with placing those funds with different entities. The FDIC does not have the information necessary to estimate such changes, and therefore, discusses these effects qualitatively.

If adopted, the proposed rule may pose costs or benefits to consumers by incentivizing them to place their funds with different entities. To the extent that some entities cease offering, or change the terms of, certain services because of a desire to avoid the placement of deposits considered brokered under the proposal, or because IDIs would prefer not to accept deposits considered brokered under the proposal, certain deposit placement arrangements may change. In particular, consumers may change their relationships with certain third-party providers or third-party providers may change their relationships with certain IDIs. Further, to the extent that consumers consider other fund management options, such as money market mutual funds, as substitutes for certain brokered deposits, consumers may change fund placement arrangements. Finally, consumers considering using deposit placement services may also benefit from the increased clarity in the proposed rule on what is and is not considered brokered.

The proposed rule may affect third parties directly or indirectly involved in the provision of brokered deposit products. To the extent that third parties are involved in the provision of deposits currently not designated as brokered, but would be if the proposed rule was adopted, such third parties may incur costs associated with making changes to systems, policies, and procedures. To the extent that third parties may have previously relied on exceptions that existed under 2020 Final Rule but no longer will exist under the proposed rule—such as the “enabling transactions” exception—they may experience costs associated with transitioning their business models (including potentially revising fees, changing revenue structures, etc.) to reflect the new rule.

Third parties may also incur costs associated with the submission of filings to the FDIC by affiliated IDIs on their behalf for deposit placement arrangements. As mentioned previously, the proposed rule rescinds existing primary purpose exceptions and notices granted under the 2020 Final Rule and restricts the application and notice process to IDIs. Therefore, to the extent that third parties who previously applied and received approval for a primary purpose exception wish to continue offering their services to covered IDIs, they may incur costs associated with providing information to those IDIs to support applications and notices to the FDIC. Finally, as the proposed rule's criteria for determining whether an entity is exempt from being considered a deposit broker are generally stricter than the criteria in the 2020 Final Rule, more third parties are likely to be considered deposit brokers under the proposed rule.

The FDIC believes the proposed rule, if adopted, would likely affect the number of applications and notices (collectively, filings) that IDIs submit to the FDIC for a number of reasons. First, the FDIC believes that the proposed rule may increase the share of filings made up of applications because the proposed rule would eliminate the “enabling transactions” notice exception. Based on the FDIC's supervisory experience, many “enabling transactions” notice filers will file PPE applications through IDIs, therefore the proposed rule may result in an increase in filings overall as more deposits are likely to be considered brokered under the proposed rule. Second, the proposed rule would replace the current “25 percent test” notice exception with two similar but distinct exceptions: the BDSE requiring a notice, for arrangements involving only an IDI and broker-dealer, and the BDSE requiring an application, for arrangements involving an IDI, broker-dealer, and an additional third party. Third, the FDIC believes that the proposed rule is likely to result in an increase in filings, at least initially, because the proposed rule would rescind approved applications and notices filed under the 2020 Final Rule. Finally, because the FDIC believes the proposed rule is likely to increase the amount of deposits classified as brokered, the FDIC believes the proposed rule may increase the likelihood that an adequately capitalized IDI submits a waiver application to accept brokered deposits to the FDIC. The FDIC does not have the information necessary to quantify the potential changes in filings that are likely to occur if the proposed rule was adopted. Therefore, to quantify the effect of the proposed rule on filing activity, the FDIC made certain assumptions it deemed reasonable based on its experience with administering the 2020 Final Rule, described below, and relied on the number of filings it received under the 2020 Final Rule as proxies for the number of filings it would receive under the proposed rule.

The proposed rule would likely increase the number of PPE applications received by the FDIC. As mentioned above, the proposed rule would eliminate the “enabling transactions” exception and the FDIC believes that many entities that relied on that exception may work with IDIs that file PPE applications. Thus, in addition to the 12 PPE applications that the FDIC received in the roughly three years since the effective date of the 2020 Final Rule (April 1, 2021, to March 15, 2024), [ 104 ] the FDIC believes it may receive an additional 77 PPE applications, based on the number of “enabling transactions” notices received over the same time period, [ 105 ] for an estimated total of 89 PPE applications. Of the 89 PPE applications, the FDIC estimates 21 ( print page 68262) unique filers of applications based on the number received during the three-year period since the effective date of the 2020 Final Rule, or 4.238 PPE applications per applicant and 7 applicants  [ 106 ] per year. FDIC staff estimate that each PPE application requires 10 labor hours to complete, and 15 minutes of labor per quarter to fulfill associated reporting requirements if the application is approved. Therefore, if the FDIC were to approve all estimated PPE applications received each year under the proposed rule, the estimated associated labor hours would be 330, representing 300 hours  [ 107 ] to complete the applications and 30 hours  [ 108 ] of annual reporting burden. [ 109 ]

The proposed rule would likely change the number of notices received by the FDIC. As mentioned previously, the proposed rule would eliminate the “enabling transactions” exception and its attendant notice if adopted. Further, the proposed rule would replace the “25 percent test” exception by the BDSE. When only an IDI and broker-dealer are involved, the BDSE requires a notice. The FDIC believes a reasonable proxy for the number of BDSE notices under the proposed rule is the number of “25 percent test” exception notices the FDIC received under the 2020 Final Rule for which it did not identify a potential third party, [ 110 ] as the information required for each type of notice is similar. Over the roughly three years since the effective date of the 2020 Final Rule, the FDIC received 24 such notices from 22 notificants, or seven notificants per year and 1.091 notices per notificant. FDIC staff estimate that each BDSE notice would take three hours of labor to complete, and 30 minutes of labor per quarter to satisfy reporting requirements. Thus, assuming the FDIC approves of all eight BDSE notices it is estimated to receive each year, the FDIC estimates that entities would incur 40 labor hours; 24 hours  [ 111 ] to complete the notices and 16 hours  [ 112 ] for annual reporting. [ 113 ]

The proposed rule would adopt a new application process for arrangements between an IDI and a broker-dealer in which a third party is involved in the sweep of funds from the broker-dealer to the IDI (BDSE application). The FDIC believes a reasonable proxy for the number of BDSE applications is the number of “25 percent test” exception notices the FDIC received over the roughly three-year period since the effective date of the 2020 Final Rule for which the FDIC believed a third party may be involved, as such arrangements are not eligible for the BDSE notice. The FDIC received 33 “25 percent test” exception notices from 29 unique notificants that it identified as potentially involving a third party over the roughly three-year period since the effective date of the 2020 Final Rule, [ 114 ] or 10 notificants per year and 1.138 notices per notificant. FDIC staff believe the new BDSE application combines elements of the PPE application with reporting requirements of the BDSE notice, and therefore estimates that each BDSE application would take 10 hours of labor to complete, and 30 minutes of labor per quarter to satisfy reporting requirements. Thus, if the FDIC approved all 10 applications it receives each year, the FDIC estimates that entities would incur 133 labor hours; 110 hours  [ 115 ] to complete the applications and 23 hours  [ 116 ] to comply with the annual reporting requirements. [ 117 ]

Based on the discussion above, the FDIC estimates that the proposed rule would impose 503 labor hours per year associated with reporting requirements if adopted; 434 labor hours to complete applications and notices and 69 labor hours of to satisfy reporting obligations associated with approved applications and notices. [ 118 ] Based on the FDIC's estimation of which occupations are associated with filing applications or notices and fulfilling their associated reporting requirements, the FDIC estimates an hourly cost of compensation of $101.07, [ 119 ] and thus estimates $50,838 in total annual reporting costs associated with the proposed rule.

The Regulatory Flexibility Act (RFA) generally requires an agency, in connection with a proposed rule, to prepare and make available for public comment an initial regulatory flexibility analysis that describes the impact of the proposed rule on small entities. However, an initial regulatory flexibility analysis is not required if the agency certifies that the proposed rule will not, if promulgated, have a significant economic impact on a substantial ( print page 68263) number of small entities. [ 120 ] The Small Business Administration (SBA) has defined “small entities” to include banking organizations with total assets of less than or equal to $850 million. [ 121 ] Generally, the FDIC considers a significant economic impact to be a quantified effect in excess of 5 percent of total annual salaries and benefits or 2.5 percent of total noninterest expenses. The FDIC believes that effects in excess of one or more of these thresholds typically represent significant economic impacts for FDIC-supervised institutions.

The FDIC does not believe that the rule would have a significant economic effect on a substantial number of small entities. However, some expected effects of the rule are difficult to assess or accurately quantify given current information. Therefore, the FDIC has included an initial regulatory flexibility analysis in this section.

As stated previously, the FDIC has found significant reliance on brokered deposits increases an institution's risk profile, particularly as its financial condition weakens. Adoption of the 2020 Final Rule led to certain deposit arrangements that were viewed as brokered prior to the 2020 Final Rule as no longer being classified as brokered, even though the FDIC believes such deposits present similar risks as brokered deposits and could pose serious consequences for IDIs and the DIF. Additionally, the FDIC has observed a number of challenges with entities understanding certain provisions of the 2020 Final Rule, which has resulted in inaccurate and inconsistent application of the rule. Finally, the FDIC wishes to better align certain of its brokered deposit regulations with the statutory language and purpose of section 29 of the FDI Act.

As mentioned above, the FDIC's proposal would clarify and revise certain of its brokered deposit regulations to better support the statutory language and purpose of the brokered deposit restrictions. Additionally, the FDIC seeks to revise the notice and application processes for certain primary purpose exceptions, and eliminate certain existing exceptions, with the objective of increasing industry safety and soundness and decreasing the frequency of misreporting of brokered deposits as nonbrokered. For further discussion of the policy objectives of the proposed rule please refer to section I of this document.

The FDIC is proposing to adopt this rule under authorities granted by section 29 of the FDI Act. The law defines key terms such as “deposit broker” and, among other things, restricts adequately capitalized IDIs from accepting funds obtained, directly or indirectly, by or through any deposit broker for deposit into one or more deposit accounts (referred to as brokered deposits) without a waiver, and prohibits less than adequately capitalized banks from obtaining such funds altogether. For a more detailed discussion of the proposed rule's legal basis please refer to sections II and III of this document.

In summary, the proposed rule would (1) streamline and update certain provisions of the “deposit broker” definition; (2) eliminate the exclusive placement arrangement exception and restore the regulations' applicability to cases where a third party, that otherwise meets the definition of deposit broker, is involved with placing deposits at one or more IDIs; (3) amend the “primary purpose” exception to the “deposit broker” definition, including revising the 25 percent test designated exception to a 10 percent test exception (and narrowing the scope of firms to which the exception may apply) and eliminating the enabling transactions designated exception; (4) update the primary purpose exception application and notice processes and make it so that only IDIs may submit an application and/or a notice on behalf of a third party; and (5) clarify how an IDI that loses its “agent institution” status regains that status. For a more detailed description of the proposed rule, please refer to section III of this document.

As of the quarter ending March 31, 2024, the FDIC insures 4,577 depository institutions; of these, 3,259 are “small entities” by the terms of the RFA. [ 122 ] Additionally, of the 3,259 small, FDIC-insured institutions, 1,237 report holding some volume of brokered deposits. Finally, of the 3,259 small FDIC-insured institutions, 6 are less than well-capitalized based on their reported capital ratios, and none of the 6 report holding brokered deposits. [ 123 ]

There are five categories of effects of the proposed rule on small, FDIC-insured institutions: effects applicable to potentially any small IDI; effects applicable to small, less than well-capitalized institutions; effects applicable to nonbank subsidiaries or affiliates of small institutions that may or may not be deemed deposit brokers under the proposed rule; effects applicable to third parties that may or may not be deemed deposit brokers under the proposed rule; and reporting requirements for small, covered IDIs. Also, the proposed rule may affect certain consumers; however, “natural persons” are not small entities for purposes of the RFA. Therefore, these potential effects are not discussed in this initial regulatory flexibility analysis. [ 124 ] For a discussion of the proposed rule's potential effects on consumers, see section V of this document, above.

If adopted, the proposed rule could directly affect the 1,237 small IDIs that currently report positive amounts of brokered deposits. In addition, the proposed rule could affect all 3,259 small IDIs regarding the types of deposits they choose to accept in the future. The proposed rule would revise the “deposit broker” definition and ( print page 68264) would amend the analysis of the “primary purpose” exception to the “deposit broker” definition. The FDIC believes that under the proposed rule fewer entities would likely be exempt from the definition of deposit broker than currently, and to the extent such entities continue to place funds at IDIs, the amount of deposits at IDIs considered brokered under the proposed rule is likely to increase. The FDIC does not have data to be able to reliably estimate the amount of deposits that would be re-classified as brokered under the proposed rule. However, at the end of the first quarter during which the 2020 Final Rule was in effect—April through June of 2021—small IDIs reported only $276 million fewer brokered deposits than in the previous quarter on a merger-adjusted basis, a reduction in reported brokered deposits of less than three percent. [ 125 ] Therefore, the FDIC believes the amount of deposits reclassified as brokered at small IDIs under the proposed rule is likely to be modest, at least in the aggregate.

The remainder of the discussion in this subsection is divided into potential costs to small IDIs associated with the proposed rule, followed by potential benefits to small IDIs.

Small IDIs affected by the proposed rule may incur costs if they choose to alter the composition of their liabilities as a result of the proposed rule. As discussed above, adoption of the 2020 Final Rule led to certain deposit arrangements that were viewed as brokered prior to the 2020 Final Rule as no longer being classified as brokered. The FDIC believes that the changes in the proposed rule are likely to result in a greater proportion of nonbrokered deposits being reclassified as brokered. To the extent affected IDIs are currently operating at their desired ratios of brokered deposits to total liabilities and the proposed rule increases the amount of deposits considered brokered, some affected IDIs may find that the proposed rule causes them to have a greater than desired share of brokered deposits to liabilities. The FDIC does not have the data to be able to estimate how many institutions might choose to change the composition of their liabilities because of the proposed rule or by how much, in part because the FDIC does not possess the information necessary to estimate for particular banks the amount of deposits, if any, that would be reclassified as brokered by the proposed rule.

If the proposed rule is adopted, it is possible that some small IDIs may choose to make changes to the organizational structure of their institutions. In particular, small IDIs that rely on the current exclusive placement exception to obtain nonbrokered deposits from affiliates may be incentivized to stop using such deposits and perhaps change their organizational structure as a result of the proposed rule.

Small IDIs affected by the proposed rule may also incur some costs associated with changes to their internal systems, policies, and procedures associated with deposit brokering activities and deposit placement arrangements (especially those involving third parties). However, the FDIC believes that some of these costs may be ameliorated because the proposed rule is very similar to the regulatory framework that existed prior to the 2020 Final Rule; therefore, some affected entities may have experience with some of those policies and procedures.

The FDIC also believes the proposed rule may affect the number of applications and notices (collectively, filings) that small IDIs may submit to the FDIC. The effect of the proposed rule on filings submitted by small IDIs is discussed below in the “Reporting Compliance Costs” section of this RFA analysis.

Finally, the proposed rule could also affect FDIC deposit insurance assessments at certain small IDIs. Under the FDIC's assessment regulations, IDIs with a significant concentration of brokered deposits may pay higher quarterly assessments, depending on other factors. [ 126 ] To the extent that deposits currently defined as nonbrokered would be considered brokered deposits under the proposed rule, a small IDI's assessment may increase. The FDIC does not have the information necessary to estimate the proposed rule's expected effects on deposit insurance assessments because it does not possess the data necessary to estimate the amount of deposits that would be reclassified as brokered at particular small IDIs under the proposed rule.

The FDIC believes a primary benefit of the proposed rule is that it would improve the safety and soundness of the banking system, including covered IDIs. As discussed in more detail in section II.A. of this document, “Brokered Deposits—A History of Concerns and Related Research,” and in the “Expected Effects” analysis in section V of this document, the FDIC's own analyses as well as other studies have found that IDI use of brokered deposits in general is associated with a higher probability of failure and higher losses to the DIF upon failure. IDI use of brokered deposits is correlated with (1) higher levels of asset growth, (2) higher levels of nonperforming loans, and (3) a lower proportion of core deposit  [ 127 ] funding. [ 128 ] Thus, to the extent the proposed rule's changes would better identify deposits that are currently not reported as brokered but share the characteristics of brokered deposits, the proposal would enhance the ability of the FDIC to ensure the safety and soundness of the banking system by limiting the ability for a less than well-capitalized small institution to rely on a risky funding source and improve clarity so that reliance on brokered deposits, regardless of capitalization, is correctly reflected in an institution's regulatory reporting and deposit insurance assessments.

Another potential benefit to small IDIs of the proposed rule is the clarification of certain concepts and practices, and by promoting accurate reporting and understanding of the regulation and how the involvement of third parties within a deposit placement arrangement may, or may not, result in the deposits being brokered. For example, the proposed rule includes a provision to clarify how an IDI may regain its “agent institution” status after losing it. The FDIC believes that increased clarity should reduce costs for covered small IDIs and ensure more accurate reporting. As previously described, based on the FDIC's experience, the initial decline in brokered deposits following the effective date of the 2020 Final Rule was due, in part, to some IDIs ( print page 68265) misunderstanding and misreporting a significant amount of deposits as nonbrokered.

The acceptance of brokered deposits is subject to statutory and regulatory restrictions for banks that are not well capitalized. Adequately capitalized banks may not accept brokered deposits without a waiver from the FDIC, and banks that are less than adequately capitalized may not accept them at all. As a result, adequately capitalized and undercapitalized banks generally hold fewer brokered deposits. To the extent less than well-capitalized IDIs are able to rely on deposits that share the characteristics of brokered deposits (such as volatility) but are not currently reported as brokered, such IDIs can operate using a riskier liability structure than one reliant on more stable funding sources, thereby potentially increasing the risk of loss to the DIF. By generally increasing the scope of deposits that are considered brokered, the proposed rule would limit the ability of less than well-capitalized small banks to rely on potentially less stable third-party deposits that are currently reported as nonbrokered but would be reported as brokered under the proposed rule.

Based on IDIs' reported capital ratios as of March 31, 2024, there are six small, less than well-capitalized IDIs, none of which report holding any brokered deposits. [ 129 ] These six IDIs together report $441 million in total assets and $402 million in domestic deposits. [ 130 ] Five of the six less than well-capitalized IDIs are adequately capitalized as of March 31, 2024, and one is undercapitalized. [ 131 ]

As mentioned above, adequately capitalized banks may not accept brokered deposits without a waiver from the FDIC, and the proposed rule would generally increase the scope of deposits that are considered brokered. Thus, one potential effect of the proposed rule may be to increase the number of brokered deposit waiver applications submitted to the FDIC by adequately capitalized small banks. This potential effect of the proposed rule is difficult to estimate because, as mentioned above, not only does the FDIC not possess the data necessary to estimate the amount of deposits that would be reclassified as brokered at specific small banks under the proposed rule, but also the number of adequately capitalized small banks depends on other factors, such as economic conditions.

The proposed rule could affect nonbank subsidiaries of small IDIs, in particular, nonbank subsidiaries of small IDIs that may not be considered deposit brokers under the 2020 Final Rule, but may be considered deposit brokers under the proposed rule. Additionally, under the 2020 Final Rule nonbanks may avail themselves of the notice or application process in order to seek certain primary purpose exceptions. However, under the proposed rule only IDIs may submit notices or applications with respect to primary purpose exceptions. In addition, to the extent a nonbank subsidiary of a small bank relies on the 2020 Final Rule's exclusive placement arrangement exception to place deposits solely at its parent IDI, the proposed removal of this exception could affect the subsidiary and its parent IDI.

As discussed in “Expected Effects,” section V of this document, the proposed rule may affect third parties directly or indirectly involved with the provision of deposit products. The FDIC does not have information on the number or size of potentially affected third parties; however, the FDIC believes it is likely that some affected third parties may be small entities.

First, concurrent with the finalization of the proposed rule, the FDIC would rescind existing primary purpose exceptions and notices granted under the 2020 Final Rule, and the proposed rule would restrict the application and notice process to IDIs. Therefore, to the extent that small third parties who previously applied and received approval for a primary purpose exception wish to continue offering their services to IDIs, they may incur costs associated with providing information to those IDIs to support applications and notices to the FDIC.

Second, to the extent that small third parties are directly or indirectly involved with the provision of deposits not currently designated as brokered deposits, but that would be if the proposed rule were adopted, such small third parties may incur costs associated with complying with the requirements in the proposed rule. Such costs would include, but would not be limited to (1) costs associated with making changes to systems, policies, and procedures involved in the provision of brokered deposits; (2) costs associated with the submission of filings to the FDIC by affiliated IDIs on their deposit placement arrangements; and (3) other costs associated with transitioning their business models to incorporate the provision of brokered deposits (including potential changes to fees, revenue structures, etc.).

Third, small third parties who are engaged in the provision of deposits that are considered brokered may incur costs associated with making changes to systems, policies, and procedures to comply with the requirements in the proposed rule. Also, such small third parties may experience changes to fee and revenue structures as a result of the requirements in the proposed rule.

Finally, as the proposed rule's criteria for determining whether an entity is a deposit broker are generally stricter than the criteria in the 2020 Final Rule, more small third parties could be considered deposit brokers under the proposed rule.

The FDIC believes the proposed rule would likely affect the number of applications and notices (collectively, filings) that IDIs submit to the FDIC for the reasons discussed in the “Reporting Compliance Costs” section of the “Expected Effects” analysis in section V of this document, above. Briefly, the FDIC believes the proposed rule would likely affect the number of filings because it eliminates the “enabling transactions” exception, and the FDIC's supervisory experience suggests many “enabling transactions” notice filers would file PPE applications through IDIs. Second, the proposed rule would replace the current “25 percent test” notice exception with two similar but distinct exceptions: the BDSE requiring a notice, for arrangements involving only an IDI and broker-dealer, and the BDSE requiring an application, for arrangements involving an IDI, broker-dealer, and an additional third party. Third, the FDIC believes that the proposed rule would likely result in an increase in filings, at least initially, because the proposed rule would rescind approved applications and notices filed under the 2020 Final Rule. Finally, because the FDIC believes the proposed rule would likely increase the amount of deposits classified as brokered, the FDIC believes the ( print page 68266) proposed rule may increase the likelihood that an adequately capitalized IDI submits a waiver application to accept brokered deposits to the FDIC.

While the FDIC does not have the information necessary to quantify the potential changes in filings by small IDIs that are likely to occur if the proposed rule is adopted, based on the number of filings received during the roughly three-year period since the 2020 Final Rule became effective, the FDIC believes the effect is likely to be modest. During the aforementioned period, five small IDIs (out of 29 total IDIs and 46 other entities) submitted a total of only six filings out of 147.

The FDIC has not identified any likely duplication, overlap, and/or potential conflict between this proposed rule and any other Federal rule.

The FDIC invites comments on all aspects of the supporting information provided in this RFA section. In particular, would this proposed rule have any significant effects on small entities that the FDIC has not identified?

Certain provisions of the proposed rule contain “collections of information” within the meaning of the Paperwork Reduction Act (PRA) of 1995 ( 44 U.S.C. 3501 through 3521 ). In accordance with the requirements of the PRA, the FDIC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The information collections contained in the proposed rule have been submitted to OMB for review and approval by the FDIC under section 3507(d) of the PRA ( 44 U.S.C. 3507(d) ) and § 1320.11 of OMB's implementing regulations ( 5 CFR part 1320 ). The FDIC proposes to extend for three years, with revision, the following information collection:

Title of Information Collection: Reporting and Recordkeeping Requirements for Brokered Deposits.

OMB Control Number: 3064-0099.

Respondents: Insured state nonmember banks and state savings associations.

Current Actions: The proposed rule revises the currently-approved information collection as follows:

Section 303.243(b)(3), Notice Submission for Primary Purpose Exception Based on Placement of Less Than 10 Percent of Customer Assets Under Management—Implementation. An insured depository institution must notify the FDIC through a written notice that the insured depository institution will rely upon the 10 percent designated business exception described in § 337.6(a)(5)(iv)(I)( 1 )( i ). See line item two of the table below.

Section 303.243(b)(3)(vii), Notice Submission for Primary Purpose Exception Based on the Placement of Less Than 10 Percent of Customer Assets Under Management—Ongoing. Notice filers that submit a notice under the 10 percent test described in § 337.6(a)(5)(iv)(I)( 1 )( i ) must provide to the FDIC quarterly updates of the figures that were provided as part of the notice. This is the corresponding ongoing reporting requirement associated with line item two. See line item five of the table below.

Section 12 CFR 303.243(b)(4)(i) , Application for Primary Purpose Exception Based on 10 Test With Additional 3rd Party—Implementation. Applicants that seek the primary purpose exception where the broker dealer or investment adviser place less than 10 percent of customer funds into insured depository institutions through the use of an additional third party that does not meet the deposit broker definition must file a primary purpose exception application with the FDIC. See line item three of the table below.

Section 12 CFR 303.243(b)(4)(vi) , Reporting for Primary Purpose Exception Based on the Placement of Less Than 10 Percent of Customer Assets Under Management with Additional 3rd Party—Ongoing. Applicants that receive a written approval for the primary purpose exception will provide reporting to the FDIC. This is the corresponding ongoing reporting requirement associated with line item three. See line item six of the table below.

Estimated Annual Burden:

The total estimated annual burden for OMB No. 3064-0099 is 545 hours, an increase of 168 hours from the most recent PRA renewal. [ 132 ]

Comments are invited on: (a) Whether the collection of information is necessary for the proper performance of the FDIC's functions, including whether the information has practical utility; (b) the accuracy of the estimates of the burden of the information collection, including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. All comments will become a matter of public record.

Comments on aspects of this document that may affect reporting, recordkeeping, or disclosure requirements and burden estimates should be sent to the address listed in the ADDRESSES section of this document. Written comments and recommendations for this information collection also should be sent within 30 days of publication of this document to www.reginfo.gov/​public/​do/​PRAMain . Find this particular information collection by selecting “Currently under 30-day Review—Open for Public Comments” or by using the search function.

Section 722 of the Gramm-Leach-Bliley Act requires the agencies to use plain language in all proposed and final rules published after January 1, 2000. The FDIC invites comment on how to make this proposed rule easier to understand.

For example:

• Have the agencies organized the material to inform your needs? If not, how could the agencies present the proposed rule more clearly?
• Are the requirements in the proposed rule clearly stated? If not, how could the proposal be more clearly stated?
• Does the proposed regulation contain technical language or jargon that is not clear? If so, which language requires clarification?
• Would a different format (grouping and order of sections, use of headings, paragraphing) make the proposed regulation easier to understand? If so, what changes would achieve that?
• Is this section format adequate? If not, which of the sections should be changed and how?
• What other changes can the agencies incorporate to make the proposed regulation easier to understand?

Pursuant to section 302(a) of the Riegle Community Development and Regulatory Improvement Act of 1994  [ 133 ] (RCDRIA), in determining the effective date and administrative compliance requirements for new regulations that impose additional reporting, disclosure, or other requirements on IDIs, each Federal banking agency must consider, consistent with principles of safety and soundness and the public interest, any administrative burdens that such regulations would place on affected depository institutions, including small depository institutions, and customers of depository institutions, as well as the benefits of such regulations. In addition, section 302(b) of the RCDRIA requires new regulations and amendments to regulations that impose additional reporting, disclosures, or other new requirements on IDIs generally to take effect on the first day of a calendar quarter that begins on or after the date on which the regulations are published in final form. [ 134 ] The FDIC invites comments that further will inform its consideration of the RCDRIA.

The FDIC invites comment from all members of the public regarding all aspects of the proposal. In particular, the FDIC seeks feedback on the scope of the proposed rule and its requirements, and responses to the following specific questions:

1. Does the FDIC's proposed amendment to the “deposit broker” definition align more closely with the statutory language and purpose of section 29 of the FDI Act? Why or why not?

2. Is the FDIC's proposed change to remove “matchmaking activities” from the “deposit broker” definition and proposal to add a deposit allocation provision appropriate? Why or why not?

3. Is the consideration of fees appropriate when determining whether a person is a “deposit broker”? Are there any additional factors the FDIC should consider adding to the “deposit broker” definition? Please explain and provide data to support your views.

4. Is the proposed updated primary purpose exception analysis appropriate? Why or why not?

5. Are the proposed changes to the primary purpose exception application process appropriate? Is it appropriate to limit the application process to IDIs? Is the proposed process sufficiently clear to allow IDIs to obtain the required information on all third parties within a deposit placement arrangement?

6. Are there any additional factors the primary purpose exception application process should consider?

7. Should previously approved primary purpose exceptions be added to the regulatory list of “designated exceptions” as meeting the primary purpose exception under the proposed rule if they satisfy the proposed primary purpose exception?

8. Should any of the designated exceptions be removed, or new ones added? Please explain.

9. Should the enabling transactions designated exception be amended to include only non-reloadable prepaid card programs, such as gift cards? Please explain.

10. For the proposed BSDE, is the use of “assets under management” appropriate? Is the definition of “assets under management” sufficiently clear under the proposed rule? Is it appropriate to request the total amount of deposits placed by the broker-dealer or investment adviser on behalf of its customers at all IDIs and the total amount of customer assets under management as of the last quarter and as of the date of the notice filing?

11. Given that the limited reciprocal deposits exception is intended for IDIs that are in good condition and well managed, should there be any ability for an IDI to regain “agent status” absent a return to being a well-rated and well-capitalized IDI?

12. Can allowance of regaining “agent status” potentially run counter to the goals of having an IDI focus on addressing its problems because the exception would potentially allow an IDI that is less than well-capitalized and not well-rated to grow its deposits through this avenue?

13. If an IDI could regain “agent status” absent a return to being a well-rated and well-capitalized IDI, is it appropriate to allow the IDI to regain ( print page 68268) “agent status” after the third consecutive calendar quarter during which the IDI did not at any time receive reciprocal deposits that caused its total reciprocal deposits to exceed its special cap? Should it be a shorter or longer time period?

14. Would rescinding a designated exception for sweep deposits be appropriate? Why or why not?

15. Would limiting the BDSE to sweep deposits placed at affiliated IDIs be appropriate? Why or why not?

16. Are there any additional alternatives the FDIC should consider?

• Administrative practice and procedure
• Bank deposit insurance
• Reporting and recordkeeping requirements
• Savings associations

For the reasons stated in the preamble, the FDIC proposes to amend 12 CFR parts 303 and 337 as follows:

1. The authority citation for part 303 continues to read as follows:

Authority: 12 U.S.C. 378 , 1463 , 1467a , 1813 , 1815 , 1817 , 1818 , 1819(a) (Seventh and Tenth), 1820, 1823, 1828, 1831i, 1831e, 1831o, 1831p-1, 1831w, 1831z, 1835a, 1843(l), 3104, 3105, 3108, 3207, 5412; 15 U.S.C. 1601-1607 .

2. Amend § 303.243 by revising paragraph (b) to read as follows:

(b) Primary purpose exception notices and applications —(1) Scope. This section sets forth a process for an insured depository institution to notify the FDIC that it will rely upon the designated exception in § 337.6(a)(5)(iv)(I)( 1 )( i ) of this chapter and sets forth a process for an insured depository institution to apply for the primary purpose exception, as described in § 337.6(a)(5)(iv)(I)( 2 ) of this chapter.

(2) Definitions. For purposes of this paragraph (b):

Applicant means an insured depository institution that applies for a primary purpose exception described in § 337.6(a)(5)(iv)(I)( 2 ) of this chapter with respect to a particular business line between the insured depository institution and a deposit broker.

Notice filer means an insured depository institution that submits a written notice to the appropriate FDIC regional director indicating that the IDI's relationship with a broker-dealer or an investment adviser registered with the U.S. Securities and Exchange Commission qualifies for the designated business exception in § 337.6(a)(5)(iv)(I)( 1 )( i ) of this chapter.

(3) Prior notice requirement for 10 percent of assets under management designated business exception described in § 337.6(a)(5)(iv)(I)(1)(i) of this chapter. An insured depository institution must notify the FDIC through a written notice that the insured depository institution will rely upon the 10 percent designated business exception described in § 337.6(a)(5)(iv)(I)( 1 )( i ) of this chapter. An IDI may rely on the exception 90 days after filing a complete notice if the FDIC has not disapproved the notice. The FDIC, within its discretion, may extend the time period for an additional 90 days, with notice, to review and provide disapproval before the IDI may rely on the exception.

(i) Contents of notice. The notice must include:

(A) A description of the deposit placement arrangement between the insured depository institution and the broker-dealer or investment adviser for the particular business line;

(B) The registration and contact information for the broker-dealer or investment adviser;

(C) The total amount of customer assets under management (as defined in § 337.6(a)(11) of this chapter) by the broker-dealer or investment adviser as of the last quarter and as of the date of the filing;

(D) The total amount of deposits placed by the broker-dealer or investment adviser on behalf of its customers at all depository institutions as of the last quarter and as of the date of the filing; and

(E) A certification that no additional third parties are involved in the deposit placement arrangement.

(ii) Request for additional information for notices. The FDIC may request additional information from the notice filer at any time after receipt of the notice.

(iii) Notice timing. Within 90 days of receipt of a submission under paragraph (b)(3)(i) of this section, the FDIC will inform the notice filer whether the submission is disapproved. The FDIC may extend its review period by an additional 90 days, as necessary, with notice.

(iv) Notice disapproval. Submissions that do not meet the 10 percent designated business exception (as described in § 337.6(a)(5)(iv)(I)( 1 )( i ) of this chapter) will be disapproved. Submissions that fail to include the required information described in ( print page 68270) paragraph (b)(3)(i) of this section are incomplete and will be disapproved.

(v) Additional notice filers identified by the FDIC at a later date. The FDIC may include notice and/or reporting requirements as part of a designated exception identified under § 337.6(a)(5)(iv)(I)( 1 )( xiv ) of this chapter.

(vi) Subsequent notices. A notice filer that previously submitted a notice under this section shall submit a subsequent notice to the FDIC if, at any point, the business line that is the subject of the notice no longer meets the designated business exception that was the subject of its previous notice.

(vii) Ongoing requirements for notice filers. Notice filers that submit a notice under the 10 percent test described in § 337.6(a)(5)(iv)(I)( 1 )( i ) of this chapter must provide to the FDIC quarterly updates of the figures described in paragraph (b)(3)(i) of this section that were provided as part of the notice.

(viii) Revocation of primary purpose exception. The FDIC may, with notice, revoke a primary purpose exception under paragraph (b)(3)(iii) of this section, if:

(A) The broker dealer or investment adviser no longer meets the criteria to rely on the designated exception;

(B) The notice or subsequent reporting is inaccurate; or

(C) The notice filer fails to submit one or more required reports.

(4) Application requirements. An insured depository institution may submit an application to the FDIC seeking a primary purpose exception for business relationships not designated in § 337.6(a)(5)(iv)(I)( 1 ) of this chapter.

(i) For applications for primary purpose exception to place less than 10 percent of customer funds in insured depository institutions with the use of additional third parties that do not meet the deposit broker definition. Applicants that seek the primary purpose exception where the broker dealer or investment adviser place less than 10 percent of customer funds into insured depository institutions through the use of an additional third party that does not meet the deposit broker definition (see § 337.6(a)(5) of this chapter) must include the following information:

(A) A description of the deposit placement arrangement between the insured depository institution, the broker-dealer or investment adviser, and the additional third party, including the services provided by the additional third party, for the particular business line, and copies of contracts relating to the deposit placement arrangement, including all third-party contracts;

(B) The total amount of customer assets under management by the broker-dealer or investment adviser;

(C) The total amount of deposits placed by the broker-dealer or investment adviser on behalf of its customers at all depository institutions;

(D) Information on whether the additional third party places or facilitates the placement of deposits at insured depository institutions, including through operating or using an algorithm, or any other program or technology that is functionally similar;

(E) Information on whether the additional third party has legal authority, contractual or otherwise, to close the account or move the third party's funds to another insured depository institution, including through operating or using an algorithm, or any other program or technology that is functionally similar;

(F) Information on the amount of fees paid to the additional third party from any source with respect to its services provided as part of the deposit placement arrangement;

(G) Information on whether the additional third party has discretion to choose the insured depository institution(s) at which customer deposits are or will be placed; and

(H) Any other information that the FDIC requires to initiate its review and render the application complete.

(ii) Contents of applications for primary purpose exception not covered by paragraph (b)(4)(i) of this section. Applicants that seek the primary purpose exception, other than applications under paragraph (b)(4)(i) of this section, must include, to the extent applicable:

(A) A description of the deposit placement arrangements between the third party and insured depository institutions for the particular business line, including the services provided by any additional third parties, and copies of contracts relating to the deposit placement arrangement, including all third-party contracts;

(B) A description of the particular business line;

(C) A description of the primary purpose of the particular business line;

(D) The total amount of customer assets under management by the third party, with respect to the particular business line;

(E) The total amount of deposits placed by the third party at all insured depository institutions, including the amounts placed with the applicant, with respect to the particular business line. This includes the total amount of term deposits and transactional deposits placed by the third party, but should be exclusive of the amount of brokered CDs, as defined in § 337.6(a)(5)(iv)(I)( 3 ) of this chapter, being placed by that third party;

(F) Information on whether the insured depository institution or customer pays fees or other remuneration to the agent or nominee for deposits placed with the insured depository institution and the amount of such fees or other remuneration, including how the amount of fees or other remuneration is calculated;

(G) Information on whether the agent or nominee has discretion to choose the insured depository institution(s) at which customer deposits are or will be placed;

(H) Information on whether the agent or nominee is mandated by law to disburse funds to customer deposit accounts;

(I) A description of the marketing activities provided by the third party, with respect to the particular business line;

(J) The reasons the third party meets the primary purpose exception;

(K) Any other information the applicant deems relevant; and

(L) Any other information that the FDIC requires to initiate its review and render the application complete.

(iii) Additional information for applications. The FDIC may request additional information from the applicant at any time during processing of the application.

(iv) Application timing. (A) An applicant that submits a complete application under this section will receive a written determination by the FDIC within 120 days of receipt of a complete application.

(B) If an application is submitted that is not complete, the FDIC will notify the applicant and explain what is needed to render the application complete.

(C) The FDIC may extend the 120-day timeframe to complete its review of a complete application, if necessary, with notice to the applicant, for 120 additional days. If necessary, the FDIC may further extend its review period.

(v) Application approvals. The FDIC will approve an application—

(A) Submitted under paragraph (b)(4)(i) of this section if the FDIC finds that the applicant demonstrates that, with respect to the particular business line, the additional third party involved in the deposit placement arrangement is not a deposit broker, as defined in § 337.6(a)(5) of this chapter, and the applicant otherwise qualifies for the 10 percent of assets under management designated business exception described in § 337.6(a)(5)(iv)(I)( 1 )( i ) of this chapter; or ( print page 68271)

(B) Submitted under paragraph (b)(4)(ii) of this section if the FDIC finds that the applicant demonstrates that, with respect to the particular business line under which the third party places or facilitates the placement of deposits, the primary purpose of the third party's business relationship with the insured depository institution is for a substantial purpose other than to provide a deposit-placement service or FDIC deposit insurance for customer funds placed at the insured depository institution.

(vi) Ongoing reporting for applications. (A) The FDIC will describe any reporting requirements, if applicable, as part of its written approval for a primary purpose exception.

(B) Applicants that receive a written approval for the primary purpose exception, will provide reporting to the FDIC and to its primary Federal regulator, if required under this section.

(vii) Requesting additional information, requiring re-application, imposing additional conditions, and withdrawing approvals. At any time after approval of an application for the primary purpose exception, the FDIC may at its discretion, with written notice:

(A) Require additional information from an applicant to ensure that the approval is still appropriate, or for purposes of verifying the accuracy and correctness of the information submitted to the FDIC as part of the application under this section;

(B) Require the applicant to reapply for approval;

(C) Impose additional conditions on an approval; or

(D) Withdraw an approval.

3. The authority for part 337 continues to read as follows:

Authority: 12 U.S.C. 375a(4) , 375b , 1463 , 1464 , 1468 , 1816 , 1818(a) , 1818(b) , 1819 , 1820(d) , 1821(f) , 1828(j)(2) , 1831 , 1831f , 1831g , 5412 .

4. Amend § 337.6 by revising paragraph (a)(5) and adding paragraphs (a)(9) through (11) and (e)(3) to read as follows:

(5) Deposit broker, as used in this section and § 337.7:

(i) Definition. The term deposit broker means:

(A) Any person engaged in the business of placing or facilitating the placement of deposits of third parties with insured depository institutions;

(B) Any person engaged in the business of placing deposits with insured depository institutions for the purpose of selling those deposits or interests in those deposits to third parties; and

(C) An agent or trustee who establishes a deposit account to facilitate a business arrangement with an insured depository institution to use the proceeds of the account to fund a prearranged loan.

(ii) Engaged in the business of placing or facilitating the placement of deposits. A person is engaged in the business of placing or facilitating the placement of deposits of third parties if that person engages in one or more of the following activities:

(A) The person receives third-party funds and deposits those funds at one or more insured depository institutions;

(B) The person has legal authority, contractual or otherwise, to close the account or move funds of the third party to another insured depository institution;

(C) The person is involved in negotiating or setting rates, fees, terms, or conditions for the deposit account;

(D) The person proposes or determines deposit allocations at one or more insured depository institutions (including through operating or using an algorithm, or any other program or technology that is functionally similar); or

(E) The person has a relationship or arrangement with an insured depository institution or customer where the insured depository institution or the customer pays the person a fee or provides other remuneration in exchange for deposits being placed at one or more insured depository institution.

(iii) Anti-evasion. A person that structures a deposit placement arrangement in a way that evades meeting the deposit broker definition in this section, including a structure involving more than one person engaged in activities that result in placing or facilitating the placement of third-party deposits, while still playing an ongoing role in placing or facilitating the placement of third-party deposits or providing any function related to the placement or facilitating the placement of third-party deposits, may, upon a finding by and with written notice from the FDIC, result in the person meeting the deposit broker definition.

(iv) Exceptions to deposit broker definition. The term deposit broker does not include:

(A) An insured depository institution, with respect to funds placed with that depository institution.

(B) An employee of an insured depository institution, with respect to funds placed with the employing depository institution.

(C) A trust department of an insured depository institution, if the trust or other fiduciary relationship in question has not been established for the primary purpose of placing funds with insured depository institutions.

(D) The trustee of a pension or other employee benefit plan, with respect to funds of the plan.

(E) A person acting as a plan administrator or an investment adviser in connection with a pension plan or other employee benefit plan provided that person is performing managerial functions with respect to the plan.

(F) The trustee of a testamentary account.

(G) The trustee of an irrevocable trust (other than one described in paragraph (a)(5)(i)(B) of this section), as long as the trust in question has not been established for the primary purpose of placing funds with insured depository institutions.

(H) A trustee or custodian of a pension or profit-sharing plan qualified under section 401(d) or 403(a) of the Internal Revenue Code of 1986 ( 26 U.S.C. 401(d) or 403(a) ).

(I) An agent or nominee whose primary purpose in placing customer deposits at insured depository institutions is for a substantial purpose other than to provide a deposit-placement service or to obtain FDIC deposit insurance with respect to particular business lines between the individual insured depository institutions and the agent or nominee.

( 1 ) Designated business exceptions that meet the primary purpose exception in this paragraph (a)(5)(iv)(I). Business relationships are designated as meeting the primary purpose exception, subject to § 303.243(b)(3) of this chapter, where, with respect to a particular business line:

( i ) A broker-dealer or investment adviser that places or facilitates the placement of less than 10 percent of the total assets that it has under management for its customers is placed at depository institutions, and no additional third parties are involved in the deposit placement arrangement;

( ii ) A property management firm places, or assists in placing, customer funds into deposit accounts for the primary purpose of providing property management services;

( iii ) The agent or nominee places, or assists in placing, customer funds into deposit accounts for the primary purpose of providing cross-border clearing services to its customers; ( print page 68272)

( iv ) The agent or nominee places, or assists in placing, customer funds into deposit accounts for the primary purpose of providing mortgage servicing;

( v ) A title company places, or assists in placing, customer funds into deposit accounts for the primary purpose of facilitating real estate transactions;

( vi ) A qualified intermediary places, or assists in placing, customer funds into deposit accounts for the primary purpose of facilitating exchanges of properties under section 1031 of the Internal Revenue Code;

( vii ) A broker dealer or futures commission merchant places, or assists in placing, customer funds into deposit accounts in compliance with 17 CFR 240.15c3 through 3(e) or 17 CFR 1.20(a) ;

( viii ) The agent or nominee places, or assists in placing, customer funds into deposit accounts for the primary purpose of posting collateral for customers to secure credit-card loans;

( ix ) The agent or nominee places, or assists in placing, customer funds into deposit accounts for the primary purpose of paying for or reimbursing qualified medical expenses under section 223 of the Internal Revenue Code;

( x ) The agent or nominee places, or assists in placing, customer funds into deposit accounts for the primary purpose of investing in qualified tuition programs under section 529 of the Internal Revenue Code;

( xi ) The agent or nominee places, or assists in placing, customer funds into deposit accounts to enable participation in the following tax-advantaged programs: individual retirement accounts under section 408(a) of the Internal Revenue Code, Simple individual retirement accounts under section 408(p) of the Internal Revenue Code, and Roth individual retirement accounts under section 408A of the Internal Revenue Code;

( xii ) A Federal, State, or local agency places, or assists in placing, customer funds into deposit accounts to deliver funds to the beneficiaries of government programs;

( xiii ) The agent or nominee places customer funds at insured depository institutions, in a custodial capacity, based upon instructions received from a depositor or depositor's agent specific to each insured depository institution and deposit account, and the agent or nominee neither plays any role in determining at which insured depository institution(s) to place any customers' funds, nor negotiates or set rates, terms, fees, or condition, for the deposit account; and

( xiv ) The agent or nominee places, or assists in placing, customer funds into deposit accounts pursuant to such other relationships as the FDIC specifically identifies as a designated business relationship that meets the primary purpose exception.

( 2 ) Approval required for business relationships not designated in paragraph (a)(5)(iv)(I)(1) of this section. An insured depository institution that does not rely on a designated business exception described in this section must receive an approval under the application process in § 303.243(b) of this chapter in order to qualify for the primary purpose exception in this paragraph (a)(5)(iv)(I).

( 3 ) Brokered CD placements not eligible for primary purpose exception under this paragraph (a)(5)(iv)(I). An agent's or nominee's placement of brokered certificates of deposit as described in 12 U.S.C. 1831f(g)(1)(A) will be considered a discrete and independent business line from other deposit placement businesses in which the agent or nominee may be engaged.

( 4 ) Definition of brokered CD. The term brokered CD means a deposit placement arrangement in which a master certificate of deposit is issued by an insured depository institution in the name of the third party that has organized the funding of the certificate of deposit, or in the name of a custodian or a sub-custodian of the third party, and the certificate is funded by individual investors through the third party, with each individual investor receiving an ownership interest in the certificate of deposit, or a similar deposit placement arrangement that the FDIC determines is arranged for a similar purpose.

(J) An insured depository institution acting as an intermediary or agent of a U.S. Government department or agency for a government sponsored minority or women-owned depository institution deposit program.

(v) Inclusion of insured depository institutions engaging in certain activities. Notwithstanding paragraph (a)(5)(iv) of this section, the term deposit broker includes any insured depository institution that is not well-capitalized, and any employee of any such insured depository institution, which engages, directly or indirectly, in the solicitation of deposits by offering rates of interest (with respect to such deposits) which are significantly higher than the prevailing rates of interest on deposits offered by other insured depository institutions in such depository institution's normal market area.

(9) Broker-dealer means a person that is registered with the United States Securities and Exchange Commission as either a broker, a dealer, or both types of entities.

(10) Investment adviser means a person that is registered with the United States Securities and Exchange Commission as an investment adviser.

(11) Assets under management means securities portfolios and cash balances with respect to which an investment adviser or broker-dealer provides continuous and regular supervisory or management services.

(3) Regaining agent institution status. An insured depository institution that has lost its agent institution status for purposes of the limited exception for reciprocal deposits is eligible to regain its agent institution status as follows:

(i)(A) When most recently examined under section 10(d) of the Federal Deposit Insurance Act ( 12 U.S.C. 1820(d) ) was found to have a composite condition of outstanding or good; and

(B) Is well capitalized;

(ii)(A) As of the date the insured depository institution is notified, or is deemed to have notice, that it is well capitalized under regulations implementing section 38 of the FDI Act issued by the appropriate Federal banking agency for that institution; and

(B) Is well-rated;

(iii) Has obtained a waiver pursuant to paragraph (c) of this section; or

(iv)(A) Does not receive an amount of reciprocal deposits that causes the total amount of reciprocal deposits held by the agent institution to be greater than the average of the total amount of reciprocal deposits held by the agent institution on the last day of each of the four calendar quarters preceding the calendar quarter in which the agent institution was found not to have a composite condition of outstanding or good or was determined to be not well capitalized; and

(B) An insured depository institution that is not in compliance with paragraph (e)(2)(i)(C) of this section may regain its status as an agent institution after complying with paragraph (e)(3)(iv)(A) of this section continuously for two successive reporting quarters.

By order of the Board of Directors.

Dated at Washington, DC, on July 30, 2024.

James P. Sheesley,

Assistant Executive Secretary.

1.   12 U.S.C. 1831f .

2.  For purposes of section 29 of the FDI Act and 12 CFR 337.6 of the FDIC's Rules and Regulations, the terms “well capitalized,” “adequately capitalized,” and “undercapitalized” have the same meaning as to each IDI as provided under the regulations implementing section 38 of the FDI Act issued by the appropriate Federal banking agency for that institution. See 12 CFR 337.6(a)(3)(i) .

3.  Insured depository institutions include banks and savings associations insured by the FDIC. See 12 U.S.C. 1813(c)(2) .

4.  The FDIC may, on a case-by-case basis and upon application by an adequately capitalized IDI, waive the restriction. See 12 U.S.C. 1831f(c) .

5.   See FDIC, Study on Core Deposits and Brokered Deposits (July 8, 2011), available at https://www.fdic.gov/​regulations/​reform/​coredeposit-study.pdf . See also 84 FR 2366 , 2369 (Feb. 6, 2019). The FDIC updated its analysis in the 2011 Study on Core Deposits and Brokered Deposits with data through the end of 2017. See id. at 2384-2400 (appendix 2).

6.   See FDIC, Press Release: FDIC Board Approves Final rule on Brokered Deposit and Interest Rate Restrictions (Dec. 15, 2020), available at https://www.fdic.gov/​news/​press-releases/​2020/​pr20136.html . The 2020 Final rule was published in the Federal Register on January 22, 2021. See Unsafe and Unsound Banking Practices: Brokered Deposits and Interest Rate Restrictions Final Rule, 86 FR 6742 (Jan. 22, 2021). See also infra section II.B of this document (discussing the 2020 Final Rule).

7.   See infra section II.C of this document. As of December 31, 2023, reported brokered deposit balances have since increased to $1.35 trillion. See infra section II.C of this document.

8.   See e.g., FDIC, Public Report of Entities Submitting Notices for a Primary Purpose Exception (PPE). As of March 15, 2024, available at https://www.fdic.gov/​resources/​bankers/​brokered-deposits/​public-report-ppes-notices.pdf .

9.  For example, the FDIC maintains a dedicated brokered deposits web page that includes “Questions and Answers Related to Brokered Deposits Rule” and a “Statement of the [FDIC] Regarding Reporting of Sweep Deposits on Call Reports,” among other resources. See FDIC, Banker Resource Center Brokered Deposits, available at https://www.fdic.gov/​resources/​bankers/​brokered-deposits/​ .

10.   See e.g., FDIC, Decision of the Supervision Appeals Review Committee, In the Matter of * * *, Case No. 2022-02 (Apr. 26, 2023), available at https://www.fdic.gov/​resources/​regulations/​appeals-of-material-supervisory-determination/​appeals/​sarc202202.pdf .

11.  “Call Reports” consist of the Consolidated Reports of Condition and Income for a Bank with Domestic and Foreign Offices (FFIEC 031), the Consolidated Reports of Condition and Income for a Bank with Domestic Offices Only (FFIEC 041), and the Consolidated Reports of Condition and Income for a Bank with Domestic Offices Only and Total Assets Less than $5 Billion (FFIEC 051).

12.   See Off. of Inspector Gen., FDIC, Material Loss Review of First Republic Bank, Report No. EVAL-24-03 (Nov. 28, 2023) available at https://www.fdicoig.gov/​sites/​default/​files/​reports/​2023-12/​EVAL-24-03.pdf .

13.  During the quarter leading up to failure, First Republic Bank reported a sharp decline in affiliate sweep deposits that were not fully insured, from $8.3 billion to $1.1 billion from December 31, 2022, to March 31, 2023; they also experienced a decline from $1.9 billion to $1.4 billion in insured affiliated sweep deposits. Over the same period, First Republic Bank reported an increase in fully insured non-affiliate sweep deposits, from $7.3 billion to $8.7 billion.

14.   See In re Voyager Digital Holdings, Inc. et al., No. 22-10943 (Bankr. S.D.N.Y July 6, 2022).

15.  Brokered deposits are not considered core deposits or a stable funding source due to the brokered status and wholesale characteristics. See FDIC RMS Manual of Examination Policies, section 6.1 Liquidity and Funds Management at 6.1-9 (Apr. 2024). Core deposits are not defined by statute. Rather, core deposits are defined for analytical and examination purposes in the Uniform Bank Performance Report (UBPR) as the sum of all transaction accounts, money market deposit accounts (MMDAs), nontransaction other savings deposits (excluding MMDAs), and time deposits of $250,000 and below, less fully insured brokered deposits of $250,000 and less.

16.   See Unsafe and Unsound Banking Practices: Brokered Deposits and Interest Rate Restrictions Advance Notice of Proposed Rulemaking, 84 FR 2366 (Feb. 6, 2019).

17.  The FDIC recognizes that institutions sometimes are concerned that the use of brokered deposits can have other regulatory consequences, or may be viewed negatively by investors or other stakeholders.

18.  Congressional hearings regarding brokered deposits were held between 1984 and 1988, and in 1989, as part of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). See 84 FR 2368 . See also “Problems of the Federal Savings and Loan Insurance Corporation: Hearings Before the Committee on Banking, Housing, and Urban Affairs of the United States Senate,” (part II) 101st Cong., 1st Sess. 230-231 (1989). See also, e.g., Congressional testimony of Senators Graham and Sarbanes on Comprehensive Deposit Insurance Reform and Taxpayer Protection Act of 1991, Proceedings and Debates of the 102nd Cong., 1st Sess., November 21, 1991, 137 Cong. Rec. S17322-01, 1991 WL 243977 (“One of the lessons from the thrift crisis is their ability to gather deposits through brokered deposits and increase the size of the institution and the funds they had available very rapidly without additional capital and, quite frankly, without additional management. Then, to take these funds out and invest them in what turned out to be very risky matters, is certainly a lesson America has to learn and look at.”) (referring to testimony of the President of the Independent Bankers Association provided in April 1990).

19.   See FDIC, Division of Bank Supervision Manual, section L, page 3 (Nov. 1, 1973).

20.   84 FR 2366 , 2367 (Feb. 6, 2019); FDIC, History of the Eighties—Lessons for the Future, Chapters 2 and 9, passim (Dec. 1997), available at https://www.fdic.gov/​bank/​historical/​history/​ ; Phillip L. Zwieg, Belly Up: The Collapse of the Penn Square Bank, Chapter 9 (1985).

21.  The estimated loss data is available at: https://banks.data.fdic.gov/​bankfind-suite/​failures .

22.  Specifically, these failed institutions reported a ratio of brokered to total deposits greater than 10 percent in their last quarter prior to failure or three years prior to failure, and reported annual average asset growth of at least 30 percent during the three years leading to failure, or during the five years leading to failure, or between three and five years prior to failure, and were estimated to cost the DIF over $100 million as of December 31, 2017.

23.  The estimated loss data is as of March 31, 2024, available at: https://banks.data.fdic.gov/​bankfind-suite/​failures .

24.  Of the $5.5 billion in brokered deposits that IndyMac reported on its TFR for June 30, 2008, 98.4 percent were in brokered certificates of deposits documented as master certificates of deposits issued in the name of CEDE & Co, a subsidiary of DTC, as sub-custodian for deposit brokers.

25.   See Off. of Inspector Gen., U.S. Dep't of Treasury, Safety and Soundness: Material Loss Review of IndyMac Bank, FSB (Feb. 26, 2009), available at https://oig.treasury.gov/​sites/​oig/​files/​Documents/​oig09032.pdf .

26.   See Off. of Inspector Gen., U.S. Dep't of Treasury, Safety and Soundness: Material Loss Review of ANB Financial National Association (Nov. 28, 2008), available at https://www.govinfo.gov/​content/​pkg/​GOVPUB-T72-PURL-LPS107594/​pdf/​GOVPUB-T72-PURL-LPS107594.pdf .

27.   See FDIC, Study on Core Deposits and Brokered Deposits (July 8, 2011), available at https://www.fdic.gov/​regulations/​reform/​coredeposit-study.pdf .

28.   See 84 FR 2366 , 2369 (Feb. 6, 2019).

29.  However, the volatility of brokered deposits tends to be mitigated somewhat by deposit insurance, as insured depositors have less incentive to flee a problem situation. See 84 FR 2366 , 2369 (Feb. 6, 2019).

30.  FDIC, Crisis and Response: An FDIC History, 2008-2013 at 121-22 (2017), available at https://www.fdic.gov/​resources/​publications/​crisis-response/​index.html .

31.   See 84 FR 2366 , 2369-70 (Feb. 6, 2019) (citing Safety and Soundness: Analysis of Bank Failures Reviewed by the Department of the Treasury Office of Inspector General, OIG-16-052 (Aug. 15, 2016); Off. of Inspector Gen., FDIC, Follow Up Audit of FDIC Supervision Program Enhancements, Report No. MLR-11-010 (Dec. 2011); Off. of Inspector Gen., Bd. of Governors of the Fed. Rsrv. Sys., Summary Analysis of Failed Bank Reviews (Sept. 2011)).

32.   See 84 FR 2366 , 2369-70 (Feb. 6, 2019).

33.   See 84 FR 2384-2400 (appendix 2).

34.   See 84 FR 2366 , 2385 (Feb. 6, 2019).

35.   12 U.S.C 1831f .

36.   12 U.S.C. 1831f(a) . An “undercapitalized” depository institution is prohibited from accepting deposits from a deposit broker. An “adequately capitalized” insured depository institution may accept deposits from a deposit broker only if it has received a waiver from the FDIC. See 12 U.S.C. 1831f(c) . A waiver may be granted by the FDIC “upon a finding that the acceptance of such deposits does not constitute an unsafe or unsound practice” with respect to that institution. See id. Well-capitalized insured depository institutions are not restricted from accepting deposits from a deposit broker. The statute also restricts a less than well-capitalized institution generally from offering interest rates that significantly exceed the market rates offered in an institution's normal market area. See 12 U.S.C. 1831f .

37.   12 CFR 337.7 implements section 29's interest rate restrictions. The proposed rule would not amend these provisions.

38.   12 CFR 337.6(a)(2) .

39.   12 U.S.C. 1831f(g)(1)(A) .

40.   12 U.S.C. 1831f(g)(1)(B) .

41.   12 U.S.C. 1831f(g)(2) .

42.   See 12 CFR 337.6(a)(5)(v)(J) .

43.   12 CFR 337.6(a)(5)(ii) .

44.   See 12 CFR 337.6(a)(5)(iii) .

45.   See 12 CFR 337.6(a)(5)(iii)(C) ( 1 ).

46.   See id.

47.   See id.

48.   12 CFR 337.6(a)(5)(ii) and (iii) .

49.   See 86 FR 6742 , 6745 (Jan. 22, 2021).

50.   See 12 CFR 337.6(a)(5)(v)(I) .

51.   See 12 CFR 337.6(a)(5)(v)(I) ( 1 ).

52.   See 12 CFR 337.6(a)(5)(v)(I) ( 1 )( xiv ).

53.   See Unsafe and Unsound Banking Practices: Brokered Deposits, 87 FR 1065 (Jan. 10, 2022).

54.   See 12 CFR 303.243(b) . Where customer funds placed at depository institutions are placed into transaction accounts, and fees, interest, or other remuneration are provided to the depositor, an applicant can apply for a primary purpose exception, with respect to the particular business line, according to the requirements listed in 12 CFR 303.243(b)(4)(i) .

55.   See 12 CFR 303.243(b) (3(v).

56.   See 12 CFR 337.6(a)(5)(v)(I) ( 2 ).

57.   See 12 CFR 303.243(b)(4)(i) .

58.   12 U.S.C. 1831f(i)(2)(E) .

59.   12 U.S.C. 1831f(i)(1) .

60.   12 U.S.C. 1828f(i)(2)(E) .

61.   12 U.S.C. 1831f(i)(2)(B) .

62.   12 U.S.C. 1831f(ii)(2)(C) .

63.   See 84 FR 1346 (Feb. 4, 2019). The Reciprocal Deposits Rule was effective March 6, 2019. 12 CFR 337.6(e) implements section 29's limited exception for reciprocal deposits.

64.  The FDIC can only grant brokered deposit waivers for institutions that are classified as adequately capitalized; IDIs that are well capitalized but not well rated or are undercapitalized are not eligible. See 12 U.S.C. 1831f ; 12 CFR 337.6(c) .

65.   12 CFR 337.6(e)(2)(i) .

66.   See In re Synapse Fin. Tech., Inc., No. 1:24-bk-10646-MB (Bankr. C.D. Cal. R. Apr. 22, 2024).

67.  Under section 7 of the FDIC Act, 12 U.S.C. 1817 , IDIs are responsible for filing accurate Call Reports, including reporting accurately the amount of brokered deposits.

68.   See 86 FR 6756 (stating in the preamble to the 2020 Final Rule that “IDIs that receive deposits from agents or nominees that meet the primary purpose exception should be aware of any other third parties involved in the placement of deposits and whether those other third parties meet the deposit broker definition in order to properly complete their . . . [Call Reports], which require reporting of brokered deposits held by IDIs.”).

69.   See 12 U.S.C. 1831f(g)(1)(A) .

70.  The proposed rule would retain 12 CFR 337.6(a)(5)(iii)(A) through (B) .

71.   See FDIC, Questions and Answers Related to Brokered Deposits Rule—As of July 15, 2022, available at https://www.fdic.gov/​resources/​bankers/​brokered-deposits/​brokered-deposits-qa.pdf .

72.   86 FR 6742 , 6747 (Jan. 22, 2021).

73.   See 12 U.S.C. 1831f . Notwithstanding the presence of fees, under the proposed rule, the FDIC could grant a primary purpose exception based on a consideration of factors related to the purpose of placing of deposits. See infra section III.C of this document.

74.   12 U.S.C. 1831f(g)(1) ( emphasis added ).

75.   See 1 U.S.C. 1 .

76.   See 12 CFR 337.6(a)(5)(ii) and (iii) .

77.   12 CFR 337.6(a)(5)(v)(I) .

78.   See 86 FR 6742 , 6750 (Jan. 22, 2021).

79.   See 12 U.S.C. 1831f(g)(2)(I) .

80.  The FDIC would view a third party placing funds for the primary purpose of providing FDIC deposit insurance to third parties as not meeting the statutory exception, as the purpose of providing FDIC insurance coverage is indistinguishable from the placement of deposits.

81.   See FDIC, Frequently Asked Questions Regarding Identifying, Accepting, and Reporting Brokered Deposits, E7 (Nov. 13, 2015) (inactive) available at https://www.fdic.gov/​sites/​default/​files/​2024-03/​fil15051b.pdf .

82.   See id.

83.   See 12 CFR 303.243(b)(4)(ii) .

84.   See 12 CFR 303.243(b)(4)(ii) .

85.   See 12 CFR 303.243(b)(4)(ii) .

86.   See 12 CFR 337.6(a)(5)(v)(I) ( 1 )( i ).

87.   See 12 CFR 303.243(b) .

88.   12 CFR 337.6(a)(5)(v)(I) ( 1 )( i ). To operate under a PPE based on less than 25 percent of the total assets that the agent or nominee has under administration for its customers is placed at depository institutions, a notice was required to be filed with the FDIC. 12 CFR 303.243(b)(3)(i)(A) .

89.   12 CFR 337.6(a)(5)(iii)(C) .

90.   86 FR 27961 (May 24, 2021).

91.  The FDIC has identified a few IDIs that retain these functions in house and are properly reporting unaffiliated sweep deposits as not brokered.

92.   See FDIC, Statement of the [FDIC] Regarding Reporting of Sweep Deposits on Call Reports (July 15, 2022), available at https://www.fdic.gov/​resources/​bankers/​brokered-deposits/​statement-sweep-deposits.pdf .

93.   12 CFR 303.243(b)(4)(i) .

94.   12 CFR 303.243(b)(3)(i)(B) .

95.  FDIC Call Report data, June 30, 2014, through March 31, 2024. For purposes of the analysis presented in the Expected Effects section, an IDI is considered less than well capitalized based on its reported capital ratios. Less than well-capitalized IDIs do not include any quantitatively well capitalized institutions that may have been administratively classified as less than well capitalized. See generally 12 CFR 324.403(d) (FDIC); 12 CFR 208.43(b)(1)(v) (Board of Governors of the Federal Reserve System); 12 CFR 6.4(c)(1)(v) (Office of the Comptroller of the Currency).

96.  FDIC Call Report Data from March 31, 2021, and June 30, 2021.

97.  March 31, 2024 Call Report data. For purposes of estimating the expected effects of the proposed rule, this analysis uses an IDI's reported capital ratios to determine whether that IDI is well capitalized. The determination does not take into account written agreements, orders, capital directives, or prompt corrective action directives issued to specific IDIs. See generally 12 CFR 324.403(d) (FDIC); 12 CFR 208.43(b)(1)(v) (Board of Governors of the Federal Reserve System); 12 CFR 6.4(c)(1)(v) (Office of the Comptroller of the Currency).

98.   Id.

99.   Id.

100.   See 12 CFR part 327 .

101.   See FDIC, Study on Core Deposits and Brokered Deposits (July 8, 2011), available at https://www.fdic.gov/​regulations/​reform/​coredeposit-study.pdf . See also 84 FR 2366 , 2369 (Feb. 6, 2019). The FDIC updated its analysis in the 2011 Study on Core Deposits and Brokered Deposits with data through the end of 2017 (“Updated Study”). “Core deposits” is defined in the updated study as total domestic deposits net of time deposits over the insurance limit and fully insured brokered deposits. See Updated Study at 2384. Prior to 2011, the definition of core deposits included fully insured brokered deposits.

102.   See Updated Study at 2384-2400 (Appendix 2).

103.  First Republic Bank's reported total brokered deposits went from $597 million as of June 30, 2022, to $7.1 billion as of March 31, 2023. See First Republic Bank's Call Report data.

104.  FDIC applications data.

105.   See https://www.fdic.gov/​resources/​bankers/​brokered-deposits/​public-report-ppes-notices.pdf .

106.  Seven applicants equals the quotient of 21 unique PPE filers over three years.

107.  300 hours equals the product of 7 applicants per year, 4.238 applications per applicant, and 10 hours per application. The result is 300 hours because the FDIC rounded the product of the first two numbers. Otherwise, the result would be 297 hours.

108.  Applicants must report quarterly for each business line for which an application is approved. Assuming every application is approved, applicants would submit a total number of quarterly reports per year equal to four multiplied by the number of applications per applicant (4 * 4.238 = 16.952). Thus, the annual reporting burden of PPE applications is estimated as 30 hours, which is the product of 7 applicants per year, 16.952 reports per applicant, and 0.25 hours per report.

109.  330 hours equals 300 hours plus 30 hours.

110.   See the 25 percent notices at https://www.fdic.gov/​resources/​bankers/​brokered-deposits/​public-report-ppes-notices.pdf that are not marked with an asterisk.

111.  24 hours equals the product of 7 notificants per year, 1.091 notices per notificant, and 3 hours per notice. The result is 24 hours because the FDIC's burden calculator rounds the product of the first two numbers. Otherwise, the result would be 23 hours.

112.  Notificants must report quarterly for each business line for which a notification is approved. Assuming every notice is approved, notificants would submit a total number of quarterly reports per year equal to four multiplied by the number of notices per notificant (4 * 1.091 = 4.364). Thus, the annual reporting burden of BDSE notices is estimated as 16 hours, which equals the product of 7 notificants per year, 4.364 reports per notificant, and 0.5 hours per report. The result is 16 hours because the FDIC rounded the product of the first two numbers. Otherwise, the result would be 15 hours.

113.  38 hours equals 24 hours plus 14 hours.

114.   See the 25 percent notices at https://www.fdic.gov/​resources/​bankers/​brokered-deposits/​public-report-ppes-notices.pdf that are marked with an asterisk.

115.  110 hours is the product of 10 applicants per year, 1.138 application per applicant, and 10 hours per application. The result is 110 hours because the FDIC rounded the product of the first two numbers. Otherwise, the result would be 114 hours.

116.  Applicants must report quarterly for each business line for which an application is approved. Assuming every application is approved, applicants would submit a total number of quarterly reports per year equal to four multiplied by the number of applications per applicant (4 * 1.138 = 4.552). Thus, the annual reporting burden of BDSE applications is estimated as 23 hours, which is the product of 10 applicants per year, 4.552 reports per applicant, and 0.5 hours per report.

117.  133 hours equals 110 hours plus 23 hours.

118.  This estimate is 42 fewer hours than the total hours reported in the Paperwork Reduction Act section of this document because it only includes reporting requirements affected by the proposed rulemaking. See section VI.B of this document.

119.  The FDIC used the following Bureau of Labor Statistics (BLS) data sources to estimate an hourly cost of compensation associated with the reporting requirements in the proposed rule: National Industry-Specific Occupational Employment and Wage Estimates (OEWS): Industry: Credit Intermediation and Related Activities (5221 and 5223 only) (May 2023), Employer Cost of Employee Compensation (ECEC) (March 2023), and Employment Cost Index (March 2023 and March 2024). To estimate the average cost of compensation per hour, the FDIC used the 75th percentile hourly wages reported by the BLS OEWS data for the occupations in the Depository Credit Intermediation sector the FDIC judges would be involved in satisfying the proposed rule's reporting requirements. However, the latest OEWS wage data are as of May 2023 and do not include non-wage compensation. To adjust these wages, the FDIC multiplied the OEWS hourly wages by approximately 1.53 to account for non-wage compensation, using the BLS ECEC data as of March 2023 (the latest published release prior to the OEWS wage data). The FDIC then multiplied the resulting compensation rates by approximately 1.04 to account for the change in the seasonally adjusted Employment Cost Index for the Credit Intermediation and Related Activities sector (NAICS Code 522) between March 2023 and March 2024.

120.   5 U.S.C. 601 et seq.

121.  The SBA defines a small banking organization as having $850 million or less in assets, where an organization's “assets are determined by averaging the assets reported on its four quarterly financial statements for the preceding year.” See 13 CFR 121.201 (as amended by 87 FR 69118 , effective December 19, 2022). In its determination, the “SBA counts the receipts, employees, or other measure of size of the concern whose size is at issue and all of its domestic and foreign affiliates.” See 13 CFR 121.103 . Following these regulations, the FDIC uses an insured depository institution's affiliated and acquired assets, averaged over the preceding four quarters, to determine whether the insured depository institution is “small” for the purposes of RFA.

122.  March 31, 2024, Call Report data.

123.   Id. March 31, 2024, Call Report data. For purposes of estimating the expected effects of the proposed rule, this analysis uses an IDI's reported capital ratios to determine whether that IDI is well capitalized. The determination does not take into account written agreements, orders, capital directives, or prompt corrective action directives issued to specific IDIs. See generally 12 CFR 324.403(d) (FDIC); 12 CFR 208.43(b)(1)(v) (Board of Governors of the Federal Reserve System); 12 CFR 6.4(c)(1)(v) (Office of the Comptroller of the Currency).

124.  The RFA applies to small entities, which is defined in 5 U.S.C. 601(6) as having the same meaning as the terms “small business”, “small organization,” and “small governmental jurisdiction” defined in paragraphs (3), (4) and (5) of” 5 U.S.C. 601 . As such, a rule or information collection that affects only natural persons does not affect any small entities.

125.  FDIC Call Report Data from March 31, 2021, and June 30, 2021. IDIs reporting during the aforementioned periods were merger-adjusted to March 31, 2024, and categorized as “small entities” or not based on the definition of “small entity” in effect as of March 31, 2024, in order to facilitate comparison with the small entities that may be affected by the proposed rule.

126.   See 12 CFR part 327 .

127.  “Core deposits” is defined in the updated study as total domestic deposits net of time deposits over the insurance limit and fully insured brokered deposits. See Updated Study at 2385. Prior to 2011, the definition of core deposits included insured brokered deposits. See Updated Study at 2384.

128.   See FDIC, Study on Core Deposits and Brokered Deposits (July 8, 2011), available at https://www.fdic.gov/​regulations/​reform/​coredeposit-study.pdf . See also 84 FR 2366 , 2369 (Feb. 6, 2019). See also Updated Study at 2384-2400 (appendix 2).

129.  March 31, 2024, Call Report data. For purposes of estimating the expected effects of the proposed rule, this analysis uses an IDI's reported capital ratios to determine whether that IDI is well capitalized. The determination does not take into account written agreements, orders, capital directives, or prompt corrective action directives issued to specific IDIs. See generally 12 CFR 324.403(d) (FDIC); 12 CFR 208.43(b)(1)(v) (Board of Governors of the Federal Reserve System); 12 CFR 6.4(c)(1)(v) (Office of the Comptroller of the Currency).

130.   Id.

131.   Id.

132.   See FDIC Application for Waiver of Prohibition on Acceptance of Brokered Deposits Information Collection Request, OMB No. 3064-0099, https://www.reginfo.gov/​public/​do/​PRAViewICR?​ref_​nbr=​202308-3064-001 .

133.   12 U.S.C. 4802(a) .

134.   12 U.S.C. 4802(b) .

[ FR Doc. 2024-18214 Filed 8-22-24; 8:45 am]

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Article Contents

Introduction, materials and methods, acknowledgment, disclosure statement, conflict of interest, data availability.

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Daily light exposure profiles and the association with objective sleep quality in patients with Parkinson’s disease: The PHASE study

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Kenji Obayashi, Keigo Saeki, Yoshiaki Tai, Yuki Yamagami, Yuichi Esaki, Tadanobu Yoshikawa, Kazuma Sugie, Hiroshi Kataoka, Daily light exposure profiles and the association with objective sleep quality in patients with Parkinson’s disease: The PHASE study, Sleep , Volume 47, Issue 8, August 2024, zsae036, https://doi.org/10.1093/sleep/zsae036

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Light information crucially influences sleep initiation and continuity. The purpose of this study was to compare daily light exposure between patients with Parkinson’s disease (PD) and non-PD older adults and evaluate the association of daily light exposure with objective sleep measures in patients with PD.

In this cross-sectional study of 189 outpatients with PD and 1101 community-dwelling older adults (controls), daily light exposure was measured using wrist light meters during the daytime and light meters set in the bedrooms during the nighttime, and objective sleep quality was measured by wrist actigraphy.

The median duration of exposure to ≥ 1000 lux light was significantly shorter in patients with PD than in controls. The median nighttime light intensity was higher in patients with PD than in controls. Among patients with PD, multivariable analysis suggested that the highest quartile of exposure to ≥ 1000 lux light during the daytime was linked to significantly higher sleep efficiency (SE) by 8.0% and shorter wake after sleep onset (WASO) by 36.9 minutes than the lowest quartile. During the nighttime, the highest quartile of mean light intensity had significantly lower SE by 6.8%, longer WASO by 24.1 minutes, longer sleep onset latency, and higher fragmentation index, than the lowest quartile. Importantly, daytime and nighttime light levels were independently associated with objective sleep measures.

The present study illustrated that greater daytime light exposure and lower nighttime light exposure are significantly associated with better objective sleep measures in patients with PD.

The present cross-sectional study suggested that patients with Parkinson’s disease have lower daytime light exposure and higher nighttime light exposure than older adults without Parkinson’s disease, and among patients with Parkinson’s disease, greater daytime light exposure and lower nighttime light exposure were significantly associated with better objective sleep measures independent of potential confounders, including daytime physical activity and disease stage. Importantly, daytime and nighttime light exposure was independently associated with objective sleep measures. Further studies are warranted to explore the nature of this observation.

Sleep–wake cycles are behavioral and physiological processes controlled by the circadian timing system in the suprachiasmatic nucleus (SCN) of the hypothalamus [ 1 ]. Light information crucially influences this system, and light exposure inappropriately timed against the solar cycle can desynchronize the internal biological rhythms, resulting in circadian misalignment [ 2 ]. Previous studies performed under controlled laboratory conditions have shown that the daytime and nighttime inputs of light information into the SCN can change the core body temperature, melatonin secretion, and brain activity [ 3–5 ]. In a recent systematic review of epidemiological studies, sleep quality was affected by light exposure at night (LAN) [ 6 ].

Parkinson’s disease (PD) is a major cause of disability globally [ 7 ]. Patients with PD frequently experience sleep problems related to the initiation and maintenance of sleep [ 8 , 9 ]. Neurodegeneration of the sleep regulatory area is a potential cause of sleep problems in patients with PD. Notably, circadian misalignment, which is prevalent in PD, is another major cause of sleep problems [ 10 ]. A recent systematic review and meta-analysis of two randomized controlled trials suggested no significant changes in sleep quality following bright light therapy in patients with PD [ 11 ]. These studies exposed patients to 10 000 lux bright light in the morning and evening, but evening exposure to bright light causes melatonin suppression and circadian phase delay, possibly resulting in decreased sleep quality [ 12–16 ]. Thus, the associations of daytime and nighttime light exposure with sleep initiation and continuity remain uncertain. In addition, daytime and nighttime light exposure among patients with PD in real-life settings remains unclear.

The purpose of this study was to compare daily light exposure between patients with PD and non-PD older adults and evaluate the association of daily light exposure with objective sleep measures, especially in sleep initiation and continuity in patients with PD.

Study participants

We enrolled 202 outpatients with PD in the “Parkinson’s disease and the relationships with circadian biological rhythms and sleep” (PHASE) study at Nara Medical University Hospital and its related hospitals between October 2014 and April 2017 [ 17 ]. PD was diagnosed using the UK Parkinson’s disease Society Brain Bank criteria [ 18 ]. Among the 202 outpatients, 189 successfully completed actigraphic and bedroom light assessments, maintained a sleep diary for 7 days consecutively, and underwent basic neurologic examinations. All patients were administered stable medication doses for at least 1 month before enrollment. None of the patients exhibited multiple-system atrophy, progressive supranuclear palsy, dementia with Lewy bodies, or any other atypical parkinsonian syndrome such as vascular Parkinsonism. Moreover, no patient presented large vessel disease, cerebral infarction, brain tumor, or a history of cranial surgical intervention, including deep brain stimulation surgery.

Individuals residing in the community were selected from the “Housing environments and health investigation among Japanese older people in Nara, Kansai region: a prospective community-based cohort” (HEIJO-KYO) study to form the control group [ 19 ]. A baseline survey was conducted between September 2010 and April 2014 for 1127 individuals aged ≥ 60 years. We excluded controls diagnosed with PD and those who did not complete the home actigraphy measurements, resulting in 1101 remaining participants. The study protocol was approved by the Ethics Committee of Nara Medical University, and all participants provided written informed consent.

Measurement of daily light exposure

Daytime light exposure from rising time to bedtime was measured in 1-minute intervals using a wrist light meter (Actiwatch 2; Respironics Inc., Murrysville, PA, USA) worn on the non-dominant wrist for over 7 days in patients with PD and 2 days in controls. The device includes a photodiode with a spectral sensitivity similar to that of the human eye (luminance sensitivity, 0–150 000 lux). Special rubber bands were used to prevent interference with the participants’ shirtsleeves. Daytime values < 1 lux were excluded from the data calculations, as they were considered artifact data due to sensor coverage. If more than half of the daytime period light data were interpreted as artifacts, they were declared missing. The duration of exposure to light exceeding 1000 lux in intensity during the daytime was measured.

Nighttime light exposure from bedtime to rising time was measured in < 2-minute intervals using portable light meters (TR-74Ui [luminance sensitivity, 0–130 000 lux; accuracy, ±5%]; T&D Corp. Nagano, Japan; and LX-28SD [luminance sensitivity, 0–100 000 lux; accuracy, ±4%]; Sato Shouji Inc., Kanagawa, Japan) for seven nights in patients with PD and two nights in controls. The light meters were different between PD and controls (PD, TR-74Ui; and controls, LX-28SD), and these two light meters were not validated. The devices were placed facing the ceiling 60 cm above the floor at the head of the participant’s bed. The light meter and wrist light meter measurements were synchronized. The time above the threshold intensity of 10 lux in minutes was determined to reflect the value with minimal effects on human physiology.

Measurements of objective sleep quality

Physical activity was measured in 1-minute intervals using Actiwatch 2 worn on the non-dominant wrist for seven nights for patients with and two nights for controls. To assess the sleep quality, the participants used standardized sleep diaries to report the clock time of their bedtime and rising time. Actiware version 5.5 software (Respironics Inc.) automatically determined the sleep status in each epoch, sleep onset, and sleep termination, using the specified algorithm. Awake epochs were defined as > 10 activity counts and > 40 counts/min for patients with PD and controls, respectively, because lower activity thresholds have better correlations with polysomnographic data in patients with PD [ 20 ]. Sleep onset was defined as the initial minute of immobility followed by immobility lasting at least 5 minutes in patients with PD and 10 minutes in controls. Similarly, sleep termination in patients with PD and controls was defined as the last minute after a 5-minute and 10-minute period of immobility, respectively.

The following five objective sleep parameters were determined from the actigraphic and self-reported bedtime and rising time data:

Sleep efficiency (SE): the percentage of sleeping time relative to the total time between bedtime and rising time.

Wake after sleep onset (WASO): the time spent awake between sleep onset and offset.

Sleep onset latency (SOL): the time between bedtime and sleep onset.

Total sleep time: the time between bedtime and rising time × SE.

Fragmentation index (FI): the percentage of the number of 1-minute epochs scored as immobile divided by the total number of epochs scored as immobile during the time in bed.

Other variables

Body weight and height were used to compute the body mass index (BMI). Furthermore, a self-administered questionnaire was used to record smoking, drinking, and socioeconomic information. Based on the participants’ current therapies, hypertension, and diabetes diagnoses were recorded. The sleep medications included benzodiazepine receptor agonists, non-benzodiazepine hypnotics, melatonin receptor agonists, and orexin antagonists. A standardized urination diary was used to log the nocturnal void frequency, excluding the last void at bedtime and the first-morning void. Actiwatch 2 was used to record the daytime physical activity at 1-minute intervals. The day length (sunrise to sunset) was determined based on the first day of measurements in Nara, Japan, from the National Astronomical Observatory of Japan website. PD stage in the “ON” state was categorized according to the Hoehn–Yahr staging system as early (I–II) or late (III–V) [ 21 ]. The daily dose of anti-parkinsonian agents during the start of the study was converted to the levodopa equivalent dose as follows [ 22 ]: (regular levodopa dose × 1) + (levodopa-controlled release dose × 0.75) + (entacapone or Stalevo dose × 0.33) + (pramipexole dose × 100) + (ropinirole dose × 20) + (rotigotine dose × 30) + (pergolide and cabergoline doses × 67) + (bromocriptine dose × 10) + (selegiline dose × 10) + (amantadine dose × 1).

Statistical analysis

Normally distributed variables are expressed as the means ± standard deviations and non-normally distributed variables as medians and interquartile ranges (IQRs). The SOL and FI data were analyzed after natural log transformation. Averages of the objective sleep measures over the measurement period were calculated. Inter-group comparisons of the means and medians were performed using unpaired t -tests and the Mann–Whitney U test, respectively, while categorical data were compared using the chi-square test. According to the light exposure, patients were divided into quartiles (lowest to highest, Q1–Q4), and associations among the variables were analyzed using linear regression models. Multivariable linear regression models comparing the objective sleep measures among the patients with PD according to light exposure were adjusted for age (per year), sex, BMI (per kg/m 2 ), current smoking, drinking status (daily or not), education period (≥13 or < 13 years), household income (≥4 or < 4 million Japanese yen/year), hypertension, diabetes, use of sleeping drug agents, nocturnal void frequency (≥2 or < 2 times), bedtime (per minute), daytime physical activity (per count/min), daylength (per quartile), and Hoehn–Yahr stage (early or late). Statistical analyses were performed using Statistical Product and Service Solutions (version 24.0 for Windows; IBM Inc., Armonk, NY, USA). Two-sided P -values < 0.05 were considered statistically significant.

Although the mean age did not differ significantly between patients with PD and controls, the BMI, household income, daytime physical activity, measured day length, and habitual drinking and hypertension prevalence were significantly lower and nocturnal void frequency was significantly higher in the former than in the latter ( Table 1 ). The median duration after PD diagnosis was 57 months (IQR, 33–102), and the mean daily levodopa equivalent dose was 470 ± 360 mg. Among the patients with PD, 116 had early-stage PD (stage I, n  = 35; stage II, n  = 81), and 73 had late-stage PD (stage III, n  = 29; stage IV/V, n  = 44).

Basic and Clinical Characteristics Between Patients With PD and non-PD Controls

SD, standard deviation; IQR, interquartile range; PD, Parkinson’s disease; JPY, Japanese Yen.

Daytime light exposure was lower and nighttime light exposure was higher in patients with PD than in controls ( Table 2 ). The daytime mean light intensities were 201.1 lux (IQR, 101.2–305.7) in patients with PD and 337.7 lux (IQR, 165.6–719.8) in controls ( p  < 0.001). The mean nighttime light intensities were 2.0 (IQR, 0.5–7.8) and 0.7 lux (IQR, 0.1–3.3) in the PD and control groups, respectively, ( p  < 0.001). Patients with PD had significantly less daytime exposure to ≥ 1000 lux light (median, 24.7 minutes vs. 50.5 minutes; P  < 0.001) and significantly greater nighttime exposure to ≥ 10 lux light than the controls (median, 12.6 minutes vs. 5.5 minutes; P  < 0.001). These associations were consistent in analyses stratified by gender and day length ( Supplementary Table ). In addition, all objective sleep measures, excluding SOL, were worse in patients with PD than in controls (mean SE, 70.8 ± 13.3% vs. 84.6 ± 7.7%, p  < 0.001; mean WASO, 107.7 ± 58.7 minutes vs. 49.8 ± 29.1 minutes, p  < 0.001; median SOL, 12.6 minutes (IQR, 6.4–19.7) vs. 18.5 minutes (IQR, 9.5–36.5), P  < 0.001; median FI, 2.6 (IQR, 1.5–4.3) vs. 2.2 (IQR, 1.3–3.6), P  = 0.006; mean total sleep time, 338.8 ± 99.7 minutes vs. 420.1 ± 69.6 minutes, p  < 0.001). Sensitivity analysis regarding 2 days light data in patients with PD suggested that the median duration of daytime exposure to ≥ 1000 lux light in 2 days and 7 days was 26.0 minutes (IQR, 9.0–57.0) and 24.7 minutes (IQR, 8.8–45.7), respectively, which did not significantly differ ( p  = 0.66). The Spearman’s correlation coefficient of duration of daytime exposure to ≥ 1000 lux light between data in 2 days and 7 days in patients with PD was 0.86. Consistently, the median nighttime light intensities in 2 days and 7 days were 1.6 lux (IQR, 0.3–6.8) and 2.0 minutes (IQR, 0.5–7.8), respectively, which did not significantly differ ( p  = 0.24). The Spearman’s correlation coefficient of nighttime light intensity between data in 2 days and 7 days in patients with PD was 0.89. Furthermore, patients with PD had consistently and significantly less daytime exposure to ≥ 1000 lux light (median, 26.0 vs. 50.5 minutes; p  < 0.001, respectively), and were exposed to greater nighttime light intensity (median, 1.6 vs. 0.7 lux; p  < 0.001, respectively) than the controls.

Light Exposure and Objective Sleep Measures Between Patients With PD and non-PD Controls

SD, standard deviation; IQR, interquartile range; PD, Parkinson’s disease; SE, sleep efficiency; WASO, wake after sleep onset; SOL, sleep onset latency; FI, fragmentation index; TST, total sleep time.

Considering the PD stage, daytime light exposure was lower and nighttime light exposure was higher in patients with late-stage PD than in those with early-stage PD ( Table 3 ). The mean daytime light intensities were 239.3 lux (IQR, 133.1–347.4) in patients with early-stage PD and 118.8 lux (IQR, 60.7–224.5) in patients with late-stage PD ( p  < 0.001). The mean nighttime light intensities in these groups were 1.1 (IQR, 0.3–3.4) and 3.4 lux (IQR, 1.1–12.7), respectively, ( p  = 0.001). The duration of daytime exposure to ≥ 1000 lux light was significantly shorter among patients with late-stage PD than among those with early-stage PD (median, 11.2 vs. 31.3 minutes; p  < 0.001). Conversely, PD with late-stage patients had significantly less nighttime exposure to ≥ 10 lux light than patients with early-stage PD (median, 21.4 vs. 8.9 minutes; p  = 0.016).

Light Exposure Parameters Between Patients With Early and Late PD Stage

IQR, interquartile range; PD, Parkinson’s disease.

Greater daytime light exposure was significantly associated with higher SE and shorter WASO ( Figure 1 ), whereas greater nighttime light exposure was significantly associated with lower SE, longer WASO and SOL, and higher FI.

Associations of daytime and nighttime light exposure (lowest–highest, Q1–Q4) with objective sleep measures. Solid and error bars indicate means and standard deviations. P -values were calculated for the associations determined using linear regression analysis. SE, sleep efficiency; WASO, wake after sleep onset; SOL, sleep onset latency; FI, fragmentation index; TST, total sleep time.

After adjustment for potential confounders, greater daytime exposure to ≥ 1000 lux light was significantly associated with higher SE and shorter WASO ( p for trend = 0.018 and 0.011, respectively; Table 4 ). Compared with the shortest quartile group (Q1) of daytime exposure to ≥ 1000 lux light, SE was increased by 8.0% (95% confidence interval [CI]: 2.1 to 13.4; p  = 0.008) and WASO was reduced by 36.9 minutes (95% CI: 13.4 to 60.3; p  = 0.002) in the highest quartile group (Q4). During the nighttime, compared with Q1 of mean light intensity, Q4 had significantly lower SE by 6.8% (95% CI: 1.3 to 12.3; p  = 0.016), longer WASO by 24.1 minutes (95% CI: 1.8 to 46.4; p  = 0.034), longer SOL by 0.7 log min (95% CI: 0.3 to 1.0; p  < 0.001), and higher FI by 0.3 log units (95% CI: 0.0 to 0.5; p  = 0.006). Importantly, the multivariable model simultaneously including both daytime and nighttime light levels suggested independent associations of daytime and nighttime light exposure with SE and WASO (SE: p for trend = 0.027 and 0.039, respectively; WASO, p for trend = 0.016 and 0.031, respectively).

Associations Between Light Exposure and Objective Sleep Measures in Patients With PD ( n  = 189)

CI, confidence interval; SD, standard deviation; IQR, interquartile range; SE, sleep efficiency; WASO, wake after sleep onset; SOL, sleep onset latency; FI, fragmentation index; TST, total sleep time; LAN, light at night.

* Adjusted for age, gender, body mass index, current smoking, habitual drinking, past education, household income, hypertension, diabetes, sleep medication, nocturnal void frequency, bedtime, daytime physical activity, day length, and Hoehn–Yahr Stage.

The present study suggested that patients with PD have lower daytime light exposure and higher nighttime light exposure than older adults without PD, and among patients with PD, greater daytime light exposure and lower nighttime light exposure were significantly associated with better objective sleep measures independent of potential confounders, including daytime physical activity and disease stage. Importantly, daytime and nighttime light exposure was independently associated with objective sleep measures. To the best of our knowledge, such findings have not been reported previously.

Daily light exposure profiles in patients with PD were provided compared with those in non-PD older adults in the present study. PD is frequently accompanied by circadian misalignment, which is influenced by light exposure [ 2 , 10 ]. Therefore, daily light exposure profiles are important behavioral features of patients with PD; however, daytime and nighttime light exposure among patients with PD in real-life situations has not been clarified. In our results, patients with PD were exposed to nearly half lower daytime light (median time ≥ 1000 lux, 24.7 vs. 50.5 minutes) and nearly three times higher nighttime light (mean light intensity, 2.0 vs. 0.7 lux) than non-PD older adults. In addition, late-stage patients with PD were exposed to nearly one-third lower daytime light (median time ≥ 1000 lux, 11.2 vs. 31.3 minutes) and nearly three times higher nighttime light (mean light intensity, 3.4 vs. 1.1 lux) than early-stage patients with PD. Although we suggested only average light data during daytime and nighttime in the present study, further investigations regarding most effective timing of light exposure, such as morning, midday, or evening, on sleep among patients with PD were needed.

Our findings suggested that higher daytime light exposure was significantly associated with better actigraphic sleep measures, although previous randomized controlled trials suggested no significant changes in objective sleep measures following bright light exposure. Although some studies recorded the effects of light therapy on subjective sleep, conflicting results were reported for subjective and objective sleep measures [ 12 , 13 , 23 , 24 ]. In addition, objective sleep measures appear more suitable for quantitative analysis than subjective measures. A systematic review and meta-analysis of two randomized controlled trials suggested no significant changes in objective sleep quality following bright light exposure. One study of 31 American patients with PD suggested that exposure to 10 000 lux light significantly improved subjective sleep scores but not actigraphic sleep measures [ 12 ]. Another study including 18 Canadian patients with PD obtained similar results [ 13 ]. However, these studies provided intervention in the morning and/or evening, but evening exposure to bright light causes melatonin suppression and circadian phase delay, possibly resulting in decreased sleep quality [ 14 , 15 ]. Thus, the present study is the first to find that higher daytime light exposure is significantly associated with better objective sleep measures in patients with PD. To better understand the effects of daytime light exposure on objective sleep measures, further interventional studies standing viewpoints of circadian physiology were warranted.

We demonstrated a significant association between indoor LAN and poor sleep quality in patients with PD for the first time, and the observed magnitude of influence might be significant. A recent systematic review indicated that most studies regarding LAN and sleep estimated outdoor LAN using satellite images, providing surrogate data of individuals’ LAN; thus, indoor LAN measured using light meters in the bedrooms was appropriate [ 6 ]. Recently, we reported the association between indoor LAN and sleep disturbances in 2947 Japanese adults [ 25 ]. To the best of our knowledge, only one clinical study reported an association between indoor LAN and poor actigraphic sleep measures in Japanese patients with bipolar disorders [ 26 ]. The present findings of lower SE in the highest LAN intensity quartile suggested a 14.5% higher risk of cardiovascular mortality when data from an 11-year prospective cohort study were considered [ 27 ].

Previous studies identified potential mechanisms underlying the associations of higher daytime and lower nighttime light exposure with better objective sleep measures. Light information crucially influences the circadian timing system in the SCN, and light exposure against the solar cycle can result in circadian misalignment [ 2 ]. Daytime bright light exposure increases nocturnal melatonin secretion, improving circadian alignment [ 5 ]. Conversely, LAN suppresses melatonin secretion, increases core body temperature, and stimulates brain activity [ 3 , 4 ]. These effects of LAN on physiologic process were observed even at low light intensity (<10 lux) [ 28 ]. In our epidemiological studies, longer daytime exposure to ≥ 1000 lux light was significantly associated with higher melatonin levels [ 19 ]. In addition, LAN was significantly associated with poor objective sleep measures in a dose-dependent manner [ 29 ]. Interestingly, it was reported that LAN-induced dopamine neuron damage can trigger neuroinflammation and neurodegeneration [ 30 ]. In the present study, even patients with early-stage PD had lower daytime and higher nighttime light exposure than controls. In fact, we previously reported poor objective sleep quality in patients with early-stage PD [ 31 ]. Further interventional studies evaluating the mechanisms underlying the association between light exposure and sleep quality are needed.

The strengths of this study include the objective measurement of daily light exposure and sleep parameters in a large cohort comprising patients with PD and controls. However, this study has several limitations. First, since the cross-sectional design precluded causal inferences, additional longitudinal studies investigating the light exposure effects on objective sleep quality in patients with PD are warranted. Second, although the sleep measures were determined using a method validated against polysomnography, significant wrist tremors, dyskinesia, and REM sleep behavior disorder may have influenced the actigraphic data. However, no analytical methods are currently available to compensate for these involuntary movements. Third, light exposure and sleep measures were assessed only for 2 days in the control group, which may have led to misclassification. A moderately high correlation has been reported for sleep data obtained over 2 nights and 14 nights [ 32 ]. Although day-to-day reproducibility of both daytime and nighttime mean light intensities were moderately correlated ( r  = 0.61–0.70) [ 19 ] and inter-seasonal reproducibility was fair ( r  = 0.45–0.47) [ 16 ], it is unclear whether individual’s light exposure patterns are fixed or not in the long-term. Furthermore, nighttime light data were measured using two different light meters, and these were not validated. Luminance sensitivity and accuracy were similar but visibility and measurable area may be different between the two light meters. Fourth, the control group was not randomly selected, possibly leading to selection bias, although the BMI and estimated glomerular filtration rate data were similar to those obtained from a nationwide survey [ 33 ]. In addition, this study was conducted within a Japanese population, so light exposure habits and sleep behaviors may be different from non-Japanese population. Further studies are needed among different races. Fifth, although Hoehn–Yahr stage and sleep medication were adjusted for in the analytic models, residual confounding effects, such as disease severity and sleep disorders, might exist. In addition, cataracts or prior cataract surgery that related to light reception were not adjusted in the models. Lastly, the PD diagnosis was not supported by myocardial scintigraphy, albeit no prompt mistakes were observed during follow-up.

In conclusion, the present study suggested that patients with PD had lower daytime and higher nighttime light exposure than controls, and these findings were significantly associated with worse objective sleep measures independent of potential confounders, including daytime physical activity and disease stage. Importantly, independent associations of daytime and nighttime light exposure with objective sleep measures were detected. Although the present study treated light intensity, it would be important not only intensity but timing and wavelength when considering effect of light on sleep. Therefore, further studies are required regarding exposure to timing and wavelength of light in patients with PD. Also, further randomized trials are warranted to better understand the effects of daytime and nighttime light exposure on objective sleep measures.

We would like to thank Naomi Takenaka, Sachiko Sogahara, and Keiko Nakajima for their valuable help with data collection and analysis.

Financial disclosure: This work was supported by research funding from JSPS KAKENHI (grant numbers: 15K09356 and 22K07496) and Nara Medical University Grant-in-Aid for Collaborative Research Projects. The funder had no role in the study design, data collection and analysis, decision to publish, or preparation of the manuscript. Nonfinancial disclosure: None.

Drs. Obayashi and Saeki received research grant from YKK AP, Inc.; Ushio, Inc.; Tokyo Electric Power Company; EnviroLife Research Institute Co., Ltd.; Sekisui Chemical Co., Ltd; LIXIL Corp.; Kyocera Corp.; ENDO Lighting Corp.; and Kaneka Corp. The other authors reported no conflict of interest.

The data sets generated and analyzed during the current study are not publicly available due no consent was obtained for publishing raw data but are available from the corresponding author on reasonable request.

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Q&A: Understanding and Preventing Youth Firearm Violence

Jessika Bottiani discusses her research on the significant disparities in youth firearm violence and how understanding those gaps can help future prevention efforts.

Leslie Booren

August 26, 2024

This summer the United States Surgeon General Dr. Vivek Murthy released a landmark advisory on firearm violence , declaring it a public health crisis. According to the advisory, gun violence reaches across the lifespan and is currently the leading cause of death for children and adolescents in America.

Researchers at Youth-Nex, the UVA Center to Promote Effective Youth Development, have been examining some of the root causes of youth firearm violence disparities to better understand this crisis and how future prevention efforts may work.

Recently, the Society for Research on Adolescence (SRA) recognized Dr. Jessika Bottiani, an associate research professor at the UVA School of Education and Human Development and faculty affiliate at Youth-Nex, and her co-authors with the 2024 Social Policy Publication Award for a paper on the prevention of youth firearm violence disparities . SRA highlighted this review as work that should be read by all policymakers.

We sat down with Bottiani to learn more about this research review.

Q: Your paper examined research on youth firearm violence and firearm risk. What did you find?

A: Our review and synthesis of data demonstrated striking differences in firearm risk across intersectional identities. We separated out different types of firearm violence (e.g., homicide, suicide, injury), which revealed distinctions in risk across different demographic groups–most saliently gun homicide among Black boys and young men in urban settings.

A staggering degree of inequity in firearm fatalities is shouldered by Black boys and young men in this country, where the rate of firearm homicide is more than 20 times higher among Black boys and young men ages 15-24 than for white boys and young men in the same age groups. We also saw higher rates of gun suicide among white and Indigenous American boys and young men in rural areas of the United States.

When we examined rates by geography, we identified intersectional differences in risk that are important for policymakers to understand. For example, we saw that higher rates of firearm homicide among Black boys and young men were most salient in urban areas of the Midwest and south of the United States. Overlaying data onto maps demonstrated how young male suicide by firearm is also clustered geographically, for example, in rural counties in the Midwest and west for Indigenous young males, and in in rural counties in the west for White male youth (who have the second highest rate of suicide by firearm after Indigenous young males).

Q: Why was a review of the research specifically focused on disparities in youth firearm violence needed?

A: A lot of systematic and scoping reviews on firearm violence had come out in the literature around this time, but none of them focused on understanding why Black boys and young men in urban areas were so disproportionately affected, or why we were also seeing gaps affecting rural White boys and young men. This paper presented data that revealed the degree of these disparities and tried to understand the root causes.

We don’t pay enough attention to the role of racist historical policies and regulations that have calcified into today’s racially segregated geographies and poverty. With this paper, we wanted to reveal the way in which youth gun violence is inextricably bound to the history of race, place, and culture in the United States. The paper also delves into cultural norms around guns and masculinity. We feel insights on these aspects of context are vital for understanding how to address youth firearm violence.

Q: What future prevention efforts do you suggest in your paper?

A: We put forth a number of evidence-based solutions for settings ranging from emergency rooms to schools to address firearm violence at the individual level. Yet perhaps more importantly, we also provide suggestions for tackling the structural and sociocultural factors that underlie firearm violence.

At the community level, our recommendations range from violence interrupters to programs and policies that seek to disrupt racial segregation and redress housing inequities. We also note the potential for media campaigns addressing sociocultural norms to be a tool for prevention.

We provided a review of gun restriction and safety policies, and their potential effectiveness in addressing youth firearm violence (while also acknowledging the political climate wherein such policies have been increasingly challenged). We point out that some recent firearm related policies, purportedly race neutral in their language, had harmful impacts specifically on communities and people of color.

Individual level interventions or policies that seek to address only one piece of the puzzle are bound to be ineffective at scale. Rather, what is required are multisector, place-based initiatives that address structural factors related to poverty and the built environment in under-resourced segregated neighborhoods.

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Fact-checking warnings from Democrats about Project 2025 and Donald Trump

This fact check originally appeared on PolitiFact .

Project 2025 has a starring role in this week’s Democratic National Convention.

And it was front and center on Night 1.

WATCH: Hauling large copy of Project 2025, Michigan state Sen. McMorrow speaks at 2024 DNC

“This is Project 2025,” Michigan state Sen. Mallory McMorrow, D-Royal Oak, said as she laid a hardbound copy of the 900-page document on the lectern. “Over the next four nights, you are going to hear a lot about what is in this 900-page document. Why? Because this is the Republican blueprint for a second Trump term.”

Vice President Kamala Harris, the Democratic presidential nominee, has warned Americans about “Trump’s Project 2025” agenda — even though former President Donald Trump doesn’t claim the conservative presidential transition document.

“Donald Trump wants to take our country backward,” Harris said July 23 in Milwaukee. “He and his extreme Project 2025 agenda will weaken the middle class. Like, we know we got to take this seriously, and can you believe they put that thing in writing?”

Minnesota Gov. Tim Walz, Harris’ running mate, has joined in on the talking point.

“Don’t believe (Trump) when he’s playing dumb about this Project 2025. He knows exactly what it’ll do,” Walz said Aug. 9 in Glendale, Arizona.

Trump’s campaign has worked to build distance from the project, which the Heritage Foundation, a conservative think tank, led with contributions from dozens of conservative groups.

Much of the plan calls for extensive executive-branch overhauls and draws on both long-standing conservative principles, such as tax cuts, and more recent culture war issues. It lays out recommendations for disbanding the Commerce and Education departments, eliminating certain climate protections and consolidating more power to the president.

Project 2025 offers a sweeping vision for a Republican-led executive branch, and some of its policies mirror Trump’s 2024 agenda, But Harris and her presidential campaign have at times gone too far in describing what the project calls for and how closely the plans overlap with Trump’s campaign.

PolitiFact researched Harris’ warnings about how the plan would affect reproductive rights, federal entitlement programs and education, just as we did for President Joe Biden’s Project 2025 rhetoric. Here’s what the project does and doesn’t call for, and how it squares with Trump’s positions.

Are Trump and Project 2025 connected?

To distance himself from Project 2025 amid the Democratic attacks, Trump wrote on Truth Social that he “knows nothing” about it and has “no idea” who is in charge of it. (CNN identified at least 140 former advisers from the Trump administration who have been involved.)

The Heritage Foundation sought contributions from more than 100 conservative organizations for its policy vision for the next Republican presidency, which was published in 2023.

Project 2025 is now winding down some of its policy operations, and director Paul Dans, a former Trump administration official, is stepping down, The Washington Post reported July 30. Trump campaign managers Susie Wiles and Chris LaCivita denounced the document.

WATCH: A look at the Project 2025 plan to reshape government and Trump’s links to its authors

However, Project 2025 contributors include a number of high-ranking officials from Trump’s first administration, including former White House adviser Peter Navarro and former Housing and Urban Development Secretary Ben Carson.

A recently released recording of Russell Vought, a Project 2025 author and the former director of Trump’s Office of Management and Budget, showed Vought saying Trump’s “very supportive of what we do.” He said Trump was only distancing himself because Democrats were making a bogeyman out of the document.

Project 2025 wouldn’t ban abortion outright, but would curtail access

The Harris campaign shared a graphic on X that claimed “Trump’s Project 2025 plan for workers” would “go after birth control and ban abortion nationwide.”

The plan doesn’t call to ban abortion nationwide, though its recommendations could curtail some contraceptives and limit abortion access.

What’s known about Trump’s abortion agenda neither lines up with Harris’ description nor Project 2025’s wish list.

Project 2025 says the Department of Health and Human Services Department should “return to being known as the Department of Life by explicitly rejecting the notion that abortion is health care.”

It recommends that the Food and Drug Administration reverse its 2000 approval of mifepristone, the first pill taken in a two-drug regimen for a medication abortion. Medication is the most common form of abortion in the U.S. — accounting for around 63 percent in 2023.

If mifepristone were to remain approved, Project 2025 recommends new rules, such as cutting its use from 10 weeks into pregnancy to seven. It would have to be provided to patients in person — part of the group’s efforts to limit access to the drug by mail. In June, the U.S. Supreme Court rejected a legal challenge to mifepristone’s FDA approval over procedural grounds.

WATCH: Trump’s plans for health care and reproductive rights if he returns to White House The manual also calls for the Justice Department to enforce the 1873 Comstock Act on mifepristone, which bans the mailing of “obscene” materials. Abortion access supporters fear that a strict interpretation of the law could go further to ban mailing the materials used in procedural abortions, such as surgical instruments and equipment.

The plan proposes withholding federal money from states that don’t report to the Centers for Disease Control and Prevention how many abortions take place within their borders. The plan also would prohibit abortion providers, such as Planned Parenthood, from receiving Medicaid funds. It also calls for the Department of Health and Human Services to ensure that the training of medical professionals, including doctors and nurses, omits abortion training.

The document says some forms of emergency contraception — particularly Ella, a pill that can be taken within five days of unprotected sex to prevent pregnancy — should be excluded from no-cost coverage. The Affordable Care Act requires most private health insurers to cover recommended preventive services, which involves a range of birth control methods, including emergency contraception.

Trump has recently said states should decide abortion regulations and that he wouldn’t block access to contraceptives. Trump said during his June 27 debate with Biden that he wouldn’t ban mifepristone after the Supreme Court “approved” it. But the court rejected the lawsuit based on standing, not the case’s merits. He has not weighed in on the Comstock Act or said whether he supports it being used to block abortion medication, or other kinds of abortions.

Project 2025 doesn’t call for cutting Social Security, but proposes some changes to Medicare

“When you read (Project 2025),” Harris told a crowd July 23 in Wisconsin, “you will see, Donald Trump intends to cut Social Security and Medicare.”

The Project 2025 document does not call for Social Security cuts. None of its 10 references to Social Security addresses plans for cutting the program.

Harris also misleads about Trump’s Social Security views.

In his earlier campaigns and before he was a politician, Trump said about a half-dozen times that he’s open to major overhauls of Social Security, including cuts and privatization. More recently, in a March 2024 CNBC interview, Trump said of entitlement programs such as Social Security, “There’s a lot you can do in terms of entitlements, in terms of cutting.” However, he quickly walked that statement back, and his CNBC comment stands at odds with essentially everything else Trump has said during the 2024 presidential campaign.

Trump’s campaign website says that not “a single penny” should be cut from Social Security. We rated Harris’ claim that Trump intends to cut Social Security Mostly False.

Project 2025 does propose changes to Medicare, including making Medicare Advantage, the private insurance offering in Medicare, the “default” enrollment option. Unlike Original Medicare, Medicare Advantage plans have provider networks and can also require prior authorization, meaning that the plan can approve or deny certain services. Original Medicare plans don’t have prior authorization requirements.

The manual also calls for repealing health policies enacted under Biden, such as the Inflation Reduction Act. The law enabled Medicare to negotiate with drugmakers for the first time in history, and recently resulted in an agreement with drug companies to lower the prices of 10 expensive prescriptions for Medicare enrollees.

Trump, however, has said repeatedly during the 2024 presidential campaign that he will not cut Medicare.

Project 2025 would eliminate the Education Department, which Trump supports

The Harris campaign said Project 2025 would “eliminate the U.S. Department of Education” — and that’s accurate. Project 2025 says federal education policy “should be limited and, ultimately, the federal Department of Education should be eliminated.” The plan scales back the federal government’s role in education policy and devolves the functions that remain to other agencies.

Aside from eliminating the department, the project also proposes scrapping the Biden administration’s Title IX revision, which prohibits discrimination based on sexual orientation and gender identity. It also would let states opt out of federal education programs and calls for passing a federal parents’ bill of rights similar to ones passed in some Republican-led state legislatures.

Republicans, including Trump, have pledged to close the department, which gained its status in 1979 within Democratic President Jimmy Carter’s presidential Cabinet.

In one of his Agenda 47 policy videos, Trump promised to close the department and “to send all education work and needs back to the states.” Eliminating the department would have to go through Congress.

What Project 2025, Trump would do on overtime pay

In the graphic, the Harris campaign says Project 2025 allows “employers to stop paying workers for overtime work.”

The plan doesn’t call for banning overtime wages. It recommends changes to some Occupational Safety and Health Administration, or OSHA, regulations and to overtime rules. Some changes, if enacted, could result in some people losing overtime protections, experts told us.

The document proposes that the Labor Department maintain an overtime threshold “that does not punish businesses in lower-cost regions (e.g., the southeast United States).” This threshold is the amount of money executive, administrative or professional employees need to make for an employer to exempt them from overtime pay under the Fair Labor Standards Act.

In 2019, the Trump’s administration finalized a rule that expanded overtime pay eligibility to most salaried workers earning less than about $35,568, which it said made about 1.3 million more workers eligible for overtime pay. The Trump-era threshold is high enough to cover most line workers in lower-cost regions, Project 2025 said.

The Biden administration raised that threshold to $43,888 beginning July 1, and that will rise to $58,656 on Jan. 1, 2025. That would grant overtime eligibility to about 4 million workers, the Labor Department said.

It’s unclear how many workers Project 2025’s proposal to return to the Trump-era overtime threshold in some parts of the country would affect, but experts said some would presumably lose the right to overtime wages.

Other overtime proposals in Project 2025’s plan include allowing some workers to choose to accumulate paid time off instead of overtime pay, or to work more hours in one week and fewer in the next, rather than receive overtime.

Trump’s past with overtime pay is complicated. In 2016, the Obama administration said it would raise the overtime to salaried workers earning less than $47,476 a year, about double the exemption level set in 2004 of $23,660 a year.

But when a judge blocked the Obama rule, the Trump administration didn’t challenge the court ruling. Instead it set its own overtime threshold, which raised the amount, but by less than Obama.

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Introduction to Research Objectives

Definition:

“The research objectives can be defined as the statement of the specific knowledge skills and attitudes that student is expected to achieve through their experiences which are gained with the help of conducting a study”

Importance of Research Objective:

The most important thing in a research work is to choose the research objectives . They will guide your work and point us in the right way.

• The first step in defining the research objectives is the identification of the research problem.
• The main part of the research work involves deep thinking about the research objectives.
• The research objectives should be related to the statement of the problem and will summarize what we hope to achieve from the study.
• It is derived from the knowledge gaps and states what is new and special that particular activity necessarily needs investigation. The research objective means what to do and what to achieve.

SMART Research Objectives:

The research objectives must be SMART, which means that;

• They must be Specific (Relating to one thing not to another)
• Measurable (can be measured in terms of output)
• Achievable (describes a task which can be achieved)
• Realistic (accepting things as they are in reality and not making decisions based on unlikely hopes for the future)
• There must be a time limit (set deadlines and milestones, times when you will sit down and reflect on and review your progress).

How the Research Objectives Be Stated?

• The research objectives must be stated using specific action verbs and to be measured, like “to compare”, “to calculate”, “to determine” etc.
• Research objective writing is essential for writing an effective and credible research paper.
• Keeping the research paper free of Bias (supporting or opposing a particular person or thing unfairly by allowing personal opinions to influence your judgment).

Evaluate the Source:

The first aspect is to evaluate the sources for bias means using reliable and credible sources for the research work.

• Firstly, sticking to scholarly journal articles and publications is one of the ways to avoid bias.
• A second is to seek websites which have “.edu”,”.gov”, and”.org” domain extensions.
• There are many types of information sources used in the research work such as books and journals

What can be achieved from this research:

• The second aspect is to express the thoughts explicitly by using this we can achieve the research objectives in a trusted manner.
• For example, by using “most of the world” instead of this we must “write 82 percent of the world’s population”. It will keep the objectives and argument credible.

Balancing Objective:

• The third aspect is to balance the position with opposing views it means that a good research paper must be balanced from every side by using strong arguments of the concerned topic.
• These arguments will take a different position and explain the competing viewpoints of the research paper efficiently.
• You can prove the opposing viewpoint with supporting evidence that logically shows why an unbiased argument is a stronger one.

Presentation:

• The fourth aspect is to use the research objectives language and not use the subjective language.
• By presenting the information fairly and credibly we must use objective language, so with the help of this someone can conclude easily.

The usefulness of Research Objectives:

• The research objective is to find the answer to certain questions through the application of scientific procedures.
• The first form is exploratory which means to discover and identify the new problems.
• The second form is the constructive in which you will develop solutions for the problems which you have to discover.

The third form is the empirical in which we can test the feasibility of a solution using empirical evidence.

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21 Research Objectives Examples (Copy and Paste)

Chris Drew (PhD)

Dr. Chris Drew is the founder of the Helpful Professor. He holds a PhD in education and has published over 20 articles in scholarly journals. He is the former editor of the Journal of Learning Development in Higher Education. [Image Descriptor: Photo of Chris]

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Research objectives refer to the definitive statements made by researchers at the beginning of a research project detailing exactly what a research project aims to achieve.

These objectives are explicit goals clearly and concisely projected by the researcher to present a clear intention or course of action for his or her qualitative or quantitative study. 

Research objectives are typically nested under one overarching research aim. The objectives are the steps you’ll need to take in order to achieve the aim (see the examples below, for example, which demonstrate an aim followed by 3 objectives, which is what I recommend to my research students).

Research Objectives vs Research Aims

Research aim and research objectives are fundamental constituents of any study, fitting together like two pieces of the same puzzle.

The ‘research aim’ describes the overarching goal or purpose of the study (Kumar, 2019). This is usually a broad, high-level purpose statement, summing up the central question that the research intends to answer.

Example of an Overarching Research Aim:

“The aim of this study is to explore the impact of climate change on crop productivity.” 

Comparatively, ‘research objectives’ are concrete goals that underpin the research aim, providing stepwise actions to achieve the aim.

Objectives break the primary aim into manageable, focused pieces, and are usually characterized as being more specific, measurable, achievable, relevant, and time-bound (SMART).

Examples of Specific Research Objectives:

1. “To examine the effects of rising temperatures on the yield of rice crops during the upcoming growth season.” 2. “To assess changes in rainfall patterns in major agricultural regions over the first decade of the twenty-first century (2000-2010).” 3. “To analyze the impact of changing weather patterns on crop diseases within the same timeframe.”

The distinction between these two terms, though subtle, is significant for successfully conducting a study. The research aim provides the study with direction, while the research objectives set the path to achieving this aim, thereby ensuring the study’s efficiency and effectiveness.

How to Write Research Objectives

I usually recommend to my students that they use the SMART framework to create their research objectives.

SMART is an acronym standing for Specific, Measurable, Achievable, Relevant, and Time-bound. It provides a clear method of defining solid research objectives and helps students know where to start in writing their objectives (Locke & Latham, 2013).

Each element of this acronym adds a distinct dimension to the framework, aiding in the creation of comprehensive, well-delineated objectives.

Here is each step:

• Specific : We need to avoid ambiguity in our objectives. They need to be clear and precise (Doran, 1981). For instance, rather than stating the objective as “to study the effects of social media,” a more focused detail would be “to examine the effects of social media use (Facebook, Instagram, and Twitter) on the academic performance of college students.”
• Measurable: The measurable attribute provides a clear criterion to determine if the objective has been met (Locke & Latham, 2013). A quantifiable element, such as a percentage or a number, adds a measurable quality. For example, “to increase response rate to the annual customer survey by 10%,” makes it easier to ascertain achievement.
• Achievable: The achievable aspect encourages researchers to craft realistic objectives, resembling a self-check mechanism to ensure the objectives align with the scope and resources at disposal (Doran, 1981). For example, “to interview 25 participants selected randomly from a population of 100” is an attainable objective as long as the researcher has access to these participants.
• Relevance : Relevance, the fourth element, compels the researcher to tailor the objectives in alignment with overarching goals of the study (Locke & Latham, 2013). This is extremely important – each objective must help you meet your overall one-sentence ‘aim’ in your study.
• Time-Bound: Lastly, the time-bound element fosters a sense of urgency and prioritization, preventing procrastination and enhancing productivity (Doran, 1981). “To analyze the effect of laptop use in lectures on student engagement over the course of two semesters this year” expresses a clear deadline, thus serving as a motivator for timely completion.

You’re not expected to fit every single element of the SMART framework in one objective, but across your objectives, try to touch on each of the five components.

Research Objectives Examples

1. Field: Psychology

Aim: To explore the impact of sleep deprivation on cognitive performance in college students.

• Objective 1: To compare cognitive test scores of students with less than six hours of sleep and those with 8 or more hours of sleep.
• Objective 2: To investigate the relationship between class grades and reported sleep duration.
• Objective 3: To survey student perceptions and experiences on how sleep deprivation affects their cognitive capabilities.

2. Field: Environmental Science

Aim: To understand the effects of urban green spaces on human well-being in a metropolitan city.

• Objective 1: To assess the physical and mental health benefits of regular exposure to urban green spaces.
• Objective 2: To evaluate the social impacts of urban green spaces on community interactions.
• Objective 3: To examine patterns of use for different types of urban green spaces. 

3. Field: Technology

Aim: To investigate the influence of using social media on productivity in the workplace.

• Objective 1: To measure the amount of time spent on social media during work hours.
• Objective 2: To evaluate the perceived impact of social media use on task completion and work efficiency.
• Objective 3: To explore whether company policies on social media usage correlate with different patterns of productivity.

4. Field: Education

Aim: To examine the effectiveness of online vs traditional face-to-face learning on student engagement and achievement.

• Objective 1: To compare student grades between the groups exposed to online and traditional face-to-face learning.
• Objective 2: To assess student engagement levels in both learning environments.
• Objective 3: To collate student perceptions and preferences regarding both learning methods.

5. Field: Health

Aim: To determine the impact of a Mediterranean diet on cardiac health among adults over 50.

• Objective 1: To assess changes in cardiovascular health metrics after following a Mediterranean diet for six months.
• Objective 2: To compare these health metrics with a similar group who follow their regular diet.
• Objective 3: To document participants’ experiences and adherence to the Mediterranean diet.

6. Field: Environmental Science

Aim: To analyze the impact of urban farming on community sustainability.

• Objective 1: To document the types and quantity of food produced through urban farming initiatives.
• Objective 2: To assess the effect of urban farming on local communities’ access to fresh produce.
• Objective 3: To examine the social dynamics and cooperative relationships in the creating and maintaining of urban farms.

7. Field: Sociology

Aim: To investigate the influence of home offices on work-life balance during remote work.

• Objective 1: To survey remote workers on their perceptions of work-life balance since setting up home offices.
• Objective 2: To conduct an observational study of daily work routines and family interactions in a home office setting.
• Objective 3: To assess the correlation, if any, between physical boundaries of workspaces and mental boundaries for work in the home setting.

8. Field: Economics

Aim: To evaluate the effects of minimum wage increases on small businesses.

• Objective 1: To analyze cost structures, pricing changes, and profitability of small businesses before and after minimum wage increases.
• Objective 2: To survey small business owners on the strategies they employ to navigate minimum wage increases.
• Objective 3: To examine employment trends in small businesses in response to wage increase legislation.

9. Field: Education

Aim: To explore the role of extracurricular activities in promoting soft skills among high school students.

• Objective 1: To assess the variety of soft skills developed through different types of extracurricular activities.
• Objective 2: To compare self-reported soft skills between students who participate in extracurricular activities and those who do not.
• Objective 3: To investigate the teachers’ perspectives on the contribution of extracurricular activities to students’ skill development.

10. Field: Technology

Aim: To assess the impact of virtual reality (VR) technology on the tourism industry.

• Objective 1: To document the types and popularity of VR experiences available in the tourism market.
• Objective 2: To survey tourists on their interest levels and satisfaction rates with VR tourism experiences.
• Objective 3: To determine whether VR tourism experiences correlate with increased interest in real-life travel to the simulated destinations.

11. Field: Biochemistry

Aim: To examine the role of antioxidants in preventing cellular damage.

• Objective 1: To identify the types and quantities of antioxidants in common fruits and vegetables.
• Objective 2: To determine the effects of various antioxidants on free radical neutralization in controlled lab tests.
• Objective 3: To investigate potential beneficial impacts of antioxidant-rich diets on long-term cellular health.

12. Field: Linguistics

Aim: To determine the influence of early exposure to multiple languages on cognitive development in children.

• Objective 1: To assess cognitive development milestones in monolingual and multilingual children.
• Objective 2: To document the number and intensity of language exposures for each group in the study.
• Objective 3: To investigate the specific cognitive advantages, if any, enjoyed by multilingual children.

13. Field: Art History

Aim: To explore the impact of the Renaissance period on modern-day art trends.

• Objective 1: To identify key characteristics and styles of Renaissance art.
• Objective 2: To analyze modern art pieces for the influence of the Renaissance style.
• Objective 3: To survey modern-day artists for their inspirations and the influence of historical art movements on their work.

14. Field: Cybersecurity

Aim: To assess the effectiveness of two-factor authentication (2FA) in preventing unauthorized system access.

• Objective 1: To measure the frequency of unauthorized access attempts before and after the introduction of 2FA.
• Objective 2: To survey users about their experiences and challenges with 2FA implementation.
• Objective 3: To evaluate the efficacy of different types of 2FA (SMS-based, authenticator apps, biometrics, etc.).

15. Field: Cultural Studies

Aim: To analyze the role of music in cultural identity formation among ethnic minorities.

• Objective 1: To document the types and frequency of traditional music practices within selected ethnic minority communities.
• Objective 2: To survey community members on the role of music in their personal and communal identity.
• Objective 3: To explore the resilience and transmission of traditional music practices in contemporary society.

16. Field: Astronomy

Aim: To explore the impact of solar activity on satellite communication.

• Objective 1: To categorize different types of solar activities and their frequencies of occurrence.
• Objective 2: To ascertain how variations in solar activity may influence satellite communication.
• Objective 3: To investigate preventative and damage-control measures currently in place during periods of high solar activity.

17. Field: Literature

Aim: To examine narrative techniques in contemporary graphic novels.

• Objective 1: To identify a range of narrative techniques employed in this genre.
• Objective 2: To analyze the ways in which these narrative techniques engage readers and affect story interpretation.
• Objective 3: To compare narrative techniques in graphic novels to those found in traditional printed novels.

18. Field: Renewable Energy

Aim: To investigate the feasibility of solar energy as a primary renewable resource within urban areas.

• Objective 1: To quantify the average sunlight hours across urban areas in different climatic zones. 
• Objective 2: To calculate the potential solar energy that could be harnessed within these areas.
• Objective 3: To identify barriers or challenges to widespread solar energy implementation in urban settings and potential solutions.

19. Field: Sports Science

Aim: To evaluate the role of pre-game rituals in athlete performance.

• Objective 1: To identify the variety and frequency of pre-game rituals among professional athletes in several sports.
• Objective 2: To measure the impact of pre-game rituals on individual athletes’ performance metrics.
• Objective 3: To examine the psychological mechanisms that might explain the effects (if any) of pre-game ritual on performance.

20. Field: Ecology

Aim: To investigate the effects of urban noise pollution on bird populations.

• Objective 1: To record and quantify urban noise levels in various bird habitats.
• Objective 2: To measure bird population densities in relation to noise levels.
• Objective 3: To determine any changes in bird behavior or vocalization linked to noise levels.

21. Field: Food Science

Aim: To examine the influence of cooking methods on the nutritional value of vegetables.

• Objective 1: To identify the nutrient content of various vegetables both raw and after different cooking processes.
• Objective 2: To compare the effect of various cooking methods on the nutrient retention of these vegetables.
• Objective 3: To propose cooking strategies that optimize nutrient retention.

The Importance of Research Objectives

The importance of research objectives cannot be overstated. In essence, these guideposts articulate what the researcher aims to discover, understand, or examine (Kothari, 2014).

When drafting research objectives, it’s essential to make them simple and comprehensible, specific to the point of being quantifiable where possible, achievable in a practical sense, relevant to the chosen research question, and time-constrained to ensure efficient progress (Kumar, 2019). 

Remember that a good research objective is integral to the success of your project, offering a clear path forward for setting out a research design , and serving as the bedrock of your study plan. Each objective must distinctly address a different dimension of your research question or problem (Kothari, 2014). Always bear in mind that the ultimate purpose of your research objectives is to succinctly encapsulate your aims in the clearest way possible, facilitating a coherent, comprehensive and rational approach to your planned study, and furnishing a scientific roadmap for your journey into the depths of knowledge and research (Kumar, 2019). 

Kothari, C.R (2014). Research Methodology: Methods and Techniques . New Delhi: New Age International.

Kumar, R. (2019). Research Methodology: A Step-by-Step Guide for Beginners .New York: SAGE Publications.

Doran, G. T. (1981). There’s a S.M.A.R.T. way to write management’s goals and objectives. Management review, 70 (11), 35-36.

Locke, E. A., & Latham, G. P. (2013). New Developments in Goal Setting and Task Performance . New York: Routledge.

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Handy Tips To Write A Clear Research Objectives With Examples

Introduction.

Research objectives play a crucial role in any research study. They provide a clear direction and purpose for the research, guiding the researcher in their investigation. Understanding research objectives is essential for conducting a successful study and achieving meaningful results.

In this comprehensive review, we will delve into the definition of research objectives, exploring their characteristics, types, and examples. We will also discuss the relationship between research objectives and research questions, as well as provide insights into how to write effective research objectives. Additionally, we will examine the role of research objectives in research methodology and highlight the importance of them in a study. By the end of this review, you will have a comprehensive understanding of research objectives and their significance in the research process.

Definition of Research Objectives: What Are They?

A research objective is defined as a clear and concise statement that outlines the specific goals and aims of a research study. These objectives are designed to be specific, measurable, achievable, relevant, and time-bound (SMART), ensuring they provide a structured pathway to accomplishing the intended outcomes of the project. Each objective serves as a foundational element that summarizes the purpose of your study, guiding the research activities and helping to measure progress toward the study’s goals. Additionally, research objectives are integral components of the research framework , establishing a clear direction that aligns with the overall research questions and hypotheses. This alignment helps to ensure that the study remains focused and relevant, facilitating the systematic collection, analysis, and interpretation of data.

Characteristics of Effective Research Objectives

Characteristics of research objectives include:

• Specific: Research objectives should be clear about the what, why, when, and how of the study.
• Measurable: Research objectives should identify the main variables of the study that can be measured or observed.
• Relevant: Research objectives should be relevant to the research topic and contribute to the overall understanding of the subject.
• Feasible: Research objectives should be achievable within the constraints of time, resources, and expertise available.
• Logical: Research objectives should follow a logical sequence and build upon each other to achieve the overall research goal.
• Observable: Research objectives should be observable or measurable in order to assess the progress and success of the research project.
• Unambiguous: Research objectives should be clear and unambiguous, leaving no room for interpretation or confusion.
• Measurable: Research objectives should be measurable, allowing for the collection of data and analysis of results.

By incorporating these characteristics into research objectives, researchers can ensure that their study is focused, achievable, and contributes to the body of knowledge in their field.

Types of Research Objectives

Research objective can be broadly classified into general and specific objectives. General objectives are broad statements that define the overall purpose of the research. They provide a broad direction for the study and help in setting the context. Specific objectives, on the other hand, are detailed objectives that describe what will be researched during the study. They are more focused and provide specific outcomes that the researcher aims to achieve. Specific objectives are derived from the general objectives and help in breaking down the research into smaller, manageable parts. The specific objectives should be clear, measurable, and achievable. They should be designed in a way that allows the researcher to answer the research questions and address the research problem.

In addition to general and specific objectives, research objective can also be categorized as descriptive or analytical objectives. Descriptive objectives focus on describing the characteristics or phenomena of a particular subject or population. They involve surveys, observations, and data collection to provide a detailed understanding of the subject. Analytical objectives, on the other hand, aim to analyze the relationships between variables or factors. They involve data analysis and interpretation to gain insights and draw conclusions.

Both descriptive and analytical objectives are important in research as they serve different purposes and contribute to a comprehensive understanding of the research topic.

Examples of Research Objectives

Here are some examples of research objectives in different fields:

1. Objective: To identify key characteristics and styles of Renaissance art.

This objective focuses on exploring the characteristics and styles of art during the Renaissance period. The research may involve analyzing various artworks, studying historical documents, and interviewing experts in the field.

2. Objective: To analyze modern art trends and their impact on society.

This objective aims to examine the current trends in modern art and understand how they influence society. The research may involve analyzing artworks, conducting surveys or interviews with artists and art enthusiasts, and studying the social and cultural implications of modern art.

3. Objective: To investigate the effects of exercise on mental health.

This objective focuses on studying the relationship between exercise and mental health. The research may involve conducting experiments or surveys to assess the impact of exercise on factors such as stress, anxiety, and depression.

4. Objective: To explore the factors influencing consumer purchasing decisions in the fashion industry.

This objective aims to understand the various factors that influence consumers’ purchasing decisions in the fashion industry. The research may involve conducting surveys, analyzing consumer behavior data, and studying the impact of marketing strategies on consumer choices.

5. Objective: To examine the effectiveness of a new drug in treating a specific medical condition.

This objective focuses on evaluating the effectiveness of a newly developed drug in treating a particular medical condition. The research may involve conducting clinical trials, analyzing patient data, and comparing the outcomes of the new drug with existing treatment options.

These examples demonstrate the diversity of research objectives across different disciplines. Each objective is specific, measurable, and achievable, providing a clear direction for the research study.

Aligning Research Objectives with Research Questions

Research objectives and research questions are essential components of a research project. Research objective describe what you intend your research project to accomplish. They summarize the approach and purpose of the project and provide a clear direction for the research. Research questions, on the other hand, are the starting point of any good research. They guide the overall direction of the research and help identify and focus on the research gaps .

The main difference between research questions and objectives is their form. Research questions are stated in a question form, while objectives are specific, measurable, and achievable goals that you aim to accomplish within a specified timeframe. Research questions are broad statements that provide a roadmap for the research, while objectives break down the research aim into smaller, actionable steps.

Research objectives and research questions work together to form the ‘golden thread’ of a research project. The research aim specifies what the study will answer, while the objectives and questions specify how the study will answer it. They provide a clear focus and scope for the research project, helping researchers stay on track and ensure that their study is meaningful and relevant.

When writing research objectives and questions, it is important to be clear, concise, and specific. Each objective or question should address a specific aspect of the research and contribute to the overall goal of the study. They should also be measurable, meaning that their achievement can be assessed and evaluated. Additionally, research objectives and questions should be achievable within the given timeframe and resources of the research project. By clearly defining the objectives and questions, researchers can effectively plan and execute their research, leading to valuable insights and contributions to the field.

Guidelines for Writing Clear Research Objectives

Writing research objective is a crucial step in any research project. The objectives provide a clear direction and purpose for the study, guiding the researcher in their data collection and analysis. Here are some tips on how to write effective research objective:

1. Be clear and specific

Research objective should be written in a clear and specific manner. Avoid vague or ambiguous language that can lead to confusion. Clearly state what you intend to achieve through your research.

2. Use action verbs

Start your research objective with action verbs that describe the desired outcome. Action verbs such as ‘investigate’, ‘analyze’, ‘compare’, ‘evaluate’, or ‘identify’ help to convey the purpose of the study.

3. Align with research questions or hypotheses

Ensure that your research objectives are aligned with your research questions or hypotheses. The objectives should address the main goals of your study and provide a framework for answering your research questions or testing your hypotheses.

4. Be realistic and achievable

Set research objectives that are realistic and achievable within the scope of your study. Consider the available resources, time constraints, and feasibility of your objectives. Unrealistic objectives can lead to frustration and hinder the progress of your research.

5. Consider the significance and relevance

Reflect on the significance and relevance of your research objectives. How will achieving these objectives contribute to the existing knowledge or address a gap in the literature? Ensure that your objectives have a clear purpose and value.

6. Seek feedback

It is beneficial to seek feedback on your research objectives from colleagues, mentors, or experts in your field. They can provide valuable insights and suggestions for improving the clarity and effectiveness of your objectives.

7. Revise and refine

Research objectives are not set in stone. As you progress in your research, you may need to revise and refine your objectives to align with new findings or changes in the research context. Regularly review and update your objectives to ensure they remain relevant and focused.

By following these tips, you can write research objectives that are clear, focused, and aligned with your research goals. Well-defined objectives will guide your research process and help you achieve meaningful outcomes.

The Role of Research Objectives in Research Methodology

Research objectives play a crucial role in the research methodology . In research methodology, research objectives are formulated based on the research questions or problem statement. These objectives help in defining the scope and focus of the study, ensuring that the research is conducted in a systematic and organized manner.

The research objectives in research methodology act as a roadmap for the research project. They help in identifying the key variables to be studied, determining the research design and methodology, and selecting the appropriate data collection methods .

Furthermore, research objectives in research methodology assist in evaluating the success of the study. By setting clear objectives, researchers can assess whether the desired outcomes have been achieved and determine the effectiveness of the research methods employed. It is important to note that research objectives in research methodology should be aligned with the overall research aim. They should address the specific aspects or components of the research aim and provide a framework for achieving the desired outcomes.

Understanding The Dynamic of Research Objectives in Your Study

The research objectives of a study play a crucial role in guiding the research process, ensuring that the study is focused, purposeful, and contributes to the advancement of knowledge in the field. It is important to note that the research objectives may evolve or change as the study progresses. As new information is gathered and analyzed, the researcher may need to revise the objectives to ensure that they remain relevant and achievable.

In summary, research objectives are essential components in writing an effective research paper . They provide a roadmap for the research process, guiding the researcher in their investigation and helping to ensure that the study is purposeful and meaningful. By understanding and effectively utilizing research objectives, researchers can enhance the quality and impact of their research endeavors.

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This is where you describe briefly and clearly why you are writing the paper. The introduction supplies sufficient background information for the reader to understand and evaluate the experiment you did. It also supplies a rationale for the study.

• Present the problem and the proposed solution
• Presents nature and scope of the problem investigated
• Reviews the pertinent literature to orient the reader
• States the method of the experiment
• State the principle results of the experiment

It is important to cite sources in the introduction section of your paper as evidence of the claims you are making. There are ways of citing sources in the text so that the reader can find the full reference in the literature cited section at the end of the paper, yet the flow of the reading is not badly interrupted. Below are some example of how this can be done:     "Smith (1983) found that N-fixing plants could be infected by several different species of Rhizobium."     "Walnut trees are known to be allelopathic (Smith 1949,  Bond et al. 1955, Jones and Green 1963)."     "Although the presence of Rhizobium normally increases the growth of legumes (Nguyen 1987), the opposite effect has been observed (Washington 1999)." Note that articles by one or two authors are always cited in the text using their last names. However, if there are more than two authors, the last name of the 1st author is given followed by the abbreviation et al. which is Latin for "and others". 

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• Outline the purpose and announce the present research, clearly indicating what is novel and why it is significant.
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What Are Research Objectives and How to Write Them (with Examples)

Table of Contents

Introduction

Research is at the center of everything researchers do, and setting clear, well-defined research objectives plays a pivotal role in guiding scholars toward their desired outcomes. Research papers are essential instruments for researchers to effectively communicate their work. Among the many sections that constitute a research paper, the introduction plays a key role in providing a background and setting the context. 1 Research objectives, which define the aims of the study, are usually stated in the introduction. Every study has a research question that the authors are trying to answer, and the objective is an active statement about how the study will answer this research question. These objectives help guide the development and design of the study and steer the research in the appropriate direction; if this is not clearly defined, a project can fail!

Research studies have a research question, research hypothesis, and one or more research objectives. A research question is what a study aims to answer, and a research hypothesis is a predictive statement about the relationship between two or more variables, which the study sets out to prove or disprove. Objectives are specific, measurable goals that the study aims to achieve. The difference between these three is illustrated by the following example:

• Research question : How does low-intensity pulsed ultrasound (LIPUS) compare with a placebo device in managing the symptoms of skeletally mature patients with patellar tendinopathy?
• Research hypothesis : Pain levels are reduced in patients who receive daily active-LIPUS (treatment) for 12 weeks compared with individuals who receive inactive-LIPUS (placebo).
• Research objective : To investigate the clinical efficacy of LIPUS in the management of patellar tendinopathy symptoms.

This article discusses the importance of clear, well-thought out objectives and suggests methods to write them clearly.

What is the introduction in research papers?

Research objectives are usually included in the introduction section. This section is the first that the readers will read so it is essential that it conveys the subject matter appropriately and is well written to create a good first impression. A good introduction sets the tone of the paper and clearly outlines the contents so that the readers get a quick snapshot of what to expect.

A good introduction should aim to: 2,3

• Indicate the main subject area, its importance, and cite previous literature on the subject
• Define the gap(s) in existing research, ask a research question, and state the objectives
• Announce the present research and outline its novelty and significance
• Avoid repeating the Abstract, providing unnecessary information, and claiming novelty without accurate supporting information.

Why are research objectives important?

Objectives can help you stay focused and steer your research in the required direction. They help define and limit the scope of your research, which is important to efficiently manage your resources and time. The objectives help to create and maintain the overall structure, and specify two main things—the variables and the methods of quantifying the variables.

A good research objective:

• defines the scope of the study
• gives direction to the research
• helps maintain focus and avoid diversions from the topic
• minimizes wastage of resources like time, money, and energy

Types of research objectives

Research objectives can be broadly classified into general and specific objectives . 4 General objectives state what the research expects to achieve overall while specific objectives break this down into smaller, logically connected parts, each of which addresses various parts of the research problem. General objectives are the main goals of the study and are usually fewer in number while specific objectives are more in number because they address several aspects of the research problem.

Example (general objective): To investigate the factors influencing the financial performance of firms listed in the New York Stock Exchange market.

Example (specific objective): To assess the influence of firm size on the financial performance of firms listed in the New York Stock Exchange market.

In addition to this broad classification, research objectives can be grouped into several categories depending on the research problem, as given in Table 1.

Table 1: Types of research objectives

Characteristics of research objectives

Research objectives must start with the word “To” because this helps readers identify the objective in the absence of headings and appropriate sectioning in research papers. 5,6

• A good objective is SMART (mostly applicable to specific objectives):
• Specific—clear about the what, why, when, and how
• Measurable—identifies the main variables of the study and quantifies the targets
• Achievable—attainable using the available time and resources
• Realistic—accurately addresses the scope of the problem
• Time-bound—identifies the time in which each step will be completed
• Research objectives clarify the purpose of research.
• They help understand the relationship and dissimilarities between variables.
• They provide a direction that helps the research to reach a definite conclusion.

How to write research objectives?

Research objectives can be written using the following steps: 7

• State your main research question clearly and concisely.
• Describe the ultimate goal of your study, which is similar to the research question but states the intended outcomes more definitively.
• Divide this main goal into subcategories to develop your objectives.
• Limit the number of objectives (1-2 general; 3-4 specific)
• Assess each objective using the SMART
• Start each objective with an action verb like assess, compare, determine, evaluate, etc., which makes the research appear more actionable.
• Use specific language without making the sentence data heavy.
• The most common section to add the objectives is the introduction and after the problem statement.
• Add the objectives to the abstract (if there is one).
• State the general objective first, followed by the specific objectives.

Formulating research objectives

Formulating research objectives has the following five steps, which could help researchers develop a clear objective: 8

• Identify the research problem.
• Review past studies on subjects similar to your problem statement, that is, studies that use similar methods, variables, etc.
• Identify the research gaps the current study should cover based on your literature review. These gaps could be theoretical, methodological, or conceptual.
• Define the research question(s) based on the gaps identified.
• Revise/relate the research problem based on the defined research question and the gaps identified. This is to confirm that there is an actual need for a study on the subject based on the gaps in literature.
• Identify and write the general and specific objectives.
• Incorporate the objectives into the study.

Advantages of research objectives

Adding clear research objectives has the following advantages: 4,8

• Maintains the focus and direction of the research
• Optimizes allocation of resources with minimal wastage
• Acts as a foundation for defining appropriate research questions and hypotheses
• Provides measurable outcomes that can help evaluate the success of the research
• Determines the feasibility of the research by helping to assess the availability of required resources
• Ensures relevance of the study to the subject and its contribution to existing literature

Disadvantages of research objectives

Research objectives also have few disadvantages, as listed below: 8

• Absence of clearly defined objectives can lead to ambiguity in the research process
• Unintentional bias could affect the validity and accuracy of the research findings

Key takeaways

• Research objectives are concise statements that describe what the research is aiming to achieve.
• They define the scope and direction of the research and maintain focus.
• The objectives should be SMART—specific, measurable, achievable, realistic, and time-bound.
• Clear research objectives help avoid collection of data or resources not required for the study.
• Well-formulated specific objectives help develop the overall research methodology, including data collection, analysis, interpretation, and utilization.
• Research objectives should cover all aspects of the problem statement in a coherent way.
• They should be clearly stated using action verbs.

Frequently asked questions on research objectives

Q: what’s the difference between research objectives and aims 9.

A: Research aims are statements that reflect the broad goal(s) of the study and outline the general direction of the research. They are not specific but clearly define the focus of the study.

Example: This research aims to explore employee experiences of digital transformation in retail HR.

Research objectives focus on the action to be taken to achieve the aims. They make the aims more practical and should be specific and actionable.

Example: To observe the retail HR employees throughout the digital transformation.

Q: What are the examples of research objectives, both general and specific?

A: Here are a few examples of research objectives:

• To identify the antiviral chemical constituents in Mumbukura gitoniensis (general)
• To carry out solvent extraction of dried flowers of Mumbukura gitoniensis and isolate the constituents. (specific)
• To determine the antiviral activity of each of the isolated compounds. (specific)
• To examine the extent, range, and method of coral reef rehabilitation projects in five shallow reef areas adjacent to popular tourist destinations in the Philippines.
• To investigate species richness of mammal communities in five protected areas over the past 20 years.
• To evaluate the potential application of AI techniques for estimating best-corrected visual acuity from fundus photographs with and without ancillary information.
• To investigate whether sport influences psychological parameters in the personality of asthmatic children.

Q: How do I develop research objectives?

A: Developing research objectives begins with defining the problem statement clearly, as illustrated by Figure 1. Objectives specify how the research question will be answered and they determine what is to be measured to test the hypothesis.

Q: Are research objectives measurable?

A: The word “measurable” implies that something is quantifiable. In terms of research objectives, this means that the source and method of collecting data are identified and that all these aspects are feasible for the research. Some metrics can be created to measure your progress toward achieving your objectives.

Q: Can research objectives change during the study?

A: Revising research objectives during the study is acceptable in situations when the selected methodology is not progressing toward achieving the objective, or if there are challenges pertaining to resources, etc. One thing to keep in mind is the time and resources you would have to complete your research after revising the objectives. Thus, as long as your problem statement and hypotheses are unchanged, minor revisions to the research objectives are acceptable.

Q: What is the difference between research questions and research objectives? 10

Q: Are research objectives the same as hypotheses?

A: No, hypotheses are predictive theories that are expressed in general terms. Research objectives, which are more specific, are developed from hypotheses and aim to test them. A hypothesis can be tested using several methods and each method will have different objectives because the methodology to be used could be different. A hypothesis is developed based on observation and reasoning; it is a calculated prediction about why a particular phenomenon is occurring. To test this prediction, different research objectives are formulated. Here’s a simple example of both a research hypothesis and research objective.

Research hypothesis : Employees who arrive at work earlier are more productive.

Research objective : To assess whether employees who arrive at work earlier are more productive.

To summarize, research objectives are an important part of research studies and should be written clearly to effectively communicate your research. We hope this article has given you a brief insight into the importance of using clearly defined research objectives and how to formulate them.

• Farrugia P, Petrisor BA, Farrokhyar F, Bhandari M. Practical tips for surgical research: Research questions, hypotheses and objectives. Can J Surg. 2010 Aug;53(4):278-81.
• Abbadia J. How to write an introduction for a research paper. Mind the Graph website. Accessed June 14, 2023. https://mindthegraph.com/blog/how-to-write-an-introduction-for-a-research-paper/
• Writing a scientific paper: Introduction. UCI libraries website. Accessed June 15, 2023. https://guides.lib.uci.edu/c.php?g=334338&p=2249903
• Research objectives—Types, examples and writing guide. Researchmethod.net website. Accessed June 17, 2023. https://researchmethod.net/research-objectives/#:~:text=They%20provide%20a%20clear%20direction,track%20and%20achieve%20their%20goals .
• Bartle P. SMART Characteristics of good objectives. Community empowerment collective website. Accessed June 16, 2023. https://cec.vcn.bc.ca/cmp/modules/pd-smar.htm
• Research objectives. Studyprobe website. Accessed June 18, 2023. https://www.studyprobe.in/2022/08/research-objectives.html
• Corredor F. How to write objectives in a research paper. wikiHow website. Accessed June 18, 2023. https://www.wikihow.com/Write-Objectives-in-a-Research-Proposal
• Research objectives: Definition, types, characteristics, advantages. AccountingNest website. Accessed June 15, 2023. https://www.accountingnest.com/articles/research/research-objectives
• Phair D., Shaeffer A. Research aims, objectives & questions. GradCoach website. Accessed June 20, 2023. https://gradcoach.com/research-aims-objectives-questions/
• Understanding the difference between research questions and objectives. Accessed June 21, 2023. https://board.researchersjob.com/blog/research-questions-and-objectives

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Formulating Research Aims and Objectives

Formulating research aim and objectives in an appropriate manner is one of the most important aspects of your thesis. This is because research aim and objectives determine the scope, depth and the overall direction of the research. Research question is the central question of the study that has to be answered on the basis of research findings.

Research aim emphasizes what needs to be achieved within the scope of the research, by the end of the research process. Achievement of research aim provides answer to the research question.

Research objectives divide research aim into several parts and address each part separately. Research aim specifies WHAT needs to be studied and research objectives comprise a number of steps that address HOW research aim will be achieved.

As a rule of dumb, there would be one research aim and several research objectives. Achievement of each research objective will lead to the achievement of the research aim.

Consider the following as an example:

Research title: Effects of organizational culture on business profitability: a case study of Virgin Atlantic

Research aim: To assess the effects of Virgin Atlantic organizational culture on business profitability

Following research objectives would facilitate the achievement of this aim:

• Analyzing the nature of organizational culture at Virgin Atlantic by September 1, 2022
• Identifying factors impacting Virgin Atlantic organizational culture by September 16, 2022
• Analyzing impacts of Virgin Atlantic organizational culture on employee performances by September 30, 2022
• Providing recommendations to Virgin Atlantic strategic level management in terms of increasing the level of effectiveness of organizational culture by October 5, 2022

Figure below illustrates additional examples in formulating research aims and objectives:

Formulation of research question, aim and objectives

Common mistakes in the formulation of research aim relate to the following:

1. Choosing the topic too broadly . This is the most common mistake. For example, a research title of “an analysis of leadership practices” can be classified as too broad because the title fails to answer the following questions:

a) Which aspects of leadership practices? Leadership has many aspects such as employee motivation, ethical behaviour, strategic planning, change management etc. An attempt to cover all of these aspects of organizational leadership within a single research will result in an unfocused and poor work.

b) An analysis of leadership practices in which country? Leadership practices tend to be different in various countries due to cross-cultural differences, legislations and a range of other region-specific factors. Therefore, a study of leadership practices needs to be country-specific.

c) Analysis of leadership practices in which company or industry? Similar to the point above, analysis of leadership practices needs to take into account industry-specific and/or company-specific differences, and there is no way to conduct a leadership research that relates to all industries and organizations in an equal manner.

Accordingly, as an example “a study into the impacts of ethical behaviour of a leader on the level of employee motivation in US healthcare sector” would be a more appropriate title than simply “An analysis of leadership practices”.

2. Setting an unrealistic aim . Formulation of a research aim that involves in-depth interviews with Apple strategic level management by an undergraduate level student can be specified as a bit over-ambitious. This is because securing an interview with Apple CEO Tim Cook or members of Apple Board of Directors might not be easy. This is an extreme example of course, but you got the idea. Instead, you may aim to interview the manager of your local Apple store and adopt a more feasible strategy to get your dissertation completed.

3. Choosing research methods incompatible with the timeframe available . Conducting interviews with 20 sample group members and collecting primary data through 2 focus groups when only three months left until submission of your dissertation can be very difficult, if not impossible. Accordingly, timeframe available need to be taken into account when formulating research aims and objectives and selecting research methods.

Moreover, research objectives need to be formulated according to SMART principle,

 where the abbreviation stands for specific, measurable, achievable, realistic, and time-bound.

Examples of SMART research objectives

At the conclusion part of your research project you will need to reflect on the level of achievement of research aims and objectives. In case your research aims and objectives are not fully achieved by the end of the study, you will need to discuss the reasons. These may include initial inappropriate formulation of research aims and objectives, effects of other variables that were not considered at the beginning of the research or changes in some circumstances during the research process.

John Dudovskiy

• Aims and Objectives – A Guide for Academic Writing
• Doing a PhD

One of the most important aspects of a thesis, dissertation or research paper is the correct formulation of the aims and objectives. This is because your aims and objectives will establish the scope, depth and direction that your research will ultimately take. An effective set of aims and objectives will give your research focus and your reader clarity, with your aims indicating what is to be achieved, and your objectives indicating how it will be achieved.

Introduction

There is no getting away from the importance of the aims and objectives in determining the success of your research project. Unfortunately, however, it is an aspect that many students struggle with, and ultimately end up doing poorly. Given their importance, if you suspect that there is even the smallest possibility that you belong to this group of students, we strongly recommend you read this page in full.

This page describes what research aims and objectives are, how they differ from each other, how to write them correctly, and the common mistakes students make and how to avoid them. An example of a good aim and objectives from a past thesis has also been deconstructed to help your understanding.

What Are Aims and Objectives?

Research aims.

A research aim describes the main goal or the overarching purpose of your research project.

In doing so, it acts as a focal point for your research and provides your readers with clarity as to what your study is all about. Because of this, research aims are almost always located within its own subsection under the introduction section of a research document, regardless of whether it’s a thesis , a dissertation, or a research paper .

A research aim is usually formulated as a broad statement of the main goal of the research and can range in length from a single sentence to a short paragraph. Although the exact format may vary according to preference, they should all describe why your research is needed (i.e. the context), what it sets out to accomplish (the actual aim) and, briefly, how it intends to accomplish it (overview of your objectives).

To give an example, we have extracted the following research aim from a real PhD thesis:

Example of a Research Aim

The role of diametrical cup deformation as a factor to unsatisfactory implant performance has not been widely reported. The aim of this thesis was to gain an understanding of the diametrical deformation behaviour of acetabular cups and shells following impaction into the reamed acetabulum. The influence of a range of factors on deformation was investigated to ascertain if cup and shell deformation may be high enough to potentially contribute to early failure and high wear rates in metal-on-metal implants.

Note: Extracted with permission from thesis titled “T he Impact And Deformation Of Press-Fit Metal Acetabular Components ” produced by Dr H Hothi of previously Queen Mary University of London.

Research Objectives

Where a research aim specifies what your study will answer, research objectives specify how your study will answer it.

They divide your research aim into several smaller parts, each of which represents a key section of your research project. As a result, almost all research objectives take the form of a numbered list, with each item usually receiving its own chapter in a dissertation or thesis.

Following the example of the research aim shared above, here are it’s real research objectives as an example:

Example of a Research Objective

• Develop finite element models using explicit dynamics to mimic mallet blows during cup/shell insertion, initially using simplified experimentally validated foam models to represent the acetabulum.
• Investigate the number, velocity and position of impacts needed to insert a cup.
• Determine the relationship between the size of interference between the cup and cavity and deformation for different cup types.
• Investigate the influence of non-uniform cup support and varying the orientation of the component in the cavity on deformation.
• Examine the influence of errors during reaming of the acetabulum which introduce ovality to the cavity.
• Determine the relationship between changes in the geometry of the component and deformation for different cup designs.
• Develop three dimensional pelvis models with non-uniform bone material properties from a range of patients with varying bone quality.
• Use the key parameters that influence deformation, as identified in the foam models to determine the range of deformations that may occur clinically using the anatomic models and if these deformations are clinically significant.

It’s worth noting that researchers sometimes use research questions instead of research objectives, or in other cases both. From a high-level perspective, research questions and research objectives make the same statements, but just in different formats.

Taking the first three research objectives as an example, they can be restructured into research questions as follows:

Restructuring Research Objectives as Research Questions

• Can finite element models using simplified experimentally validated foam models to represent the acetabulum together with explicit dynamics be used to mimic mallet blows during cup/shell insertion?
• What is the number, velocity and position of impacts needed to insert a cup?
• What is the relationship between the size of interference between the cup and cavity and deformation for different cup types?

Difference Between Aims and Objectives

Hopefully the above explanations make clear the differences between aims and objectives, but to clarify:

• The research aim focus on what the research project is intended to achieve; research objectives focus on how the aim will be achieved.
• Research aims are relatively broad; research objectives are specific.
• Research aims focus on a project’s long-term outcomes; research objectives focus on its immediate, short-term outcomes.
• A research aim can be written in a single sentence or short paragraph; research objectives should be written as a numbered list.

How to Write Aims and Objectives

Before we discuss how to write a clear set of research aims and objectives, we should make it clear that there is no single way they must be written. Each researcher will approach their aims and objectives slightly differently, and often your supervisor will influence the formulation of yours on the basis of their own preferences.

Regardless, there are some basic principles that you should observe for good practice; these principles are described below.

Your aim should be made up of three parts that answer the below questions:

• Why is this research required?
• What is this research about?
• How are you going to do it?

The easiest way to achieve this would be to address each question in its own sentence, although it does not matter whether you combine them or write multiple sentences for each, the key is to address each one.

The first question, why , provides context to your research project, the second question, what , describes the aim of your research, and the last question, how , acts as an introduction to your objectives which will immediately follow.

Scroll through the image set below to see the ‘why, what and how’ associated with our research aim example.

Note: Your research aims need not be limited to one. Some individuals per to define one broad ‘overarching aim’ of a project and then adopt two or three specific research aims for their thesis or dissertation. Remember, however, that in order for your assessors to consider your research project complete, you will need to prove you have fulfilled all of the aims you set out to achieve. Therefore, while having more than one research aim is not necessarily disadvantageous, consider whether a single overarching one will do.

Research Objectives

Each of your research objectives should be SMART :

• Specific – is there any ambiguity in the action you are going to undertake, or is it focused and well-defined?
• Measurable – how will you measure progress and determine when you have achieved the action?
• Achievable – do you have the support, resources and facilities required to carry out the action?
• Relevant – is the action essential to the achievement of your research aim?
• Timebound – can you realistically complete the action in the available time alongside your other research tasks?

In addition to being SMART, your research objectives should start with a verb that helps communicate your intent. Common research verbs include:

Table of Research Verbs to Use in Aims and Objectives

Last, format your objectives into a numbered list. This is because when you write your thesis or dissertation, you will at times need to make reference to a specific research objective; structuring your research objectives in a numbered list will provide a clear way of doing this.

To bring all this together, let’s compare the first research objective in the previous example with the above guidance:

Checking Research Objective Example Against Recommended Approach

Research Objective:

1. Develop finite element models using explicit dynamics to mimic mallet blows during cup/shell insertion, initially using simplified experimentally validated foam models to represent the acetabulum.

Checking Against Recommended Approach:

Q: Is it specific? A: Yes, it is clear what the student intends to do (produce a finite element model), why they intend to do it (mimic cup/shell blows) and their parameters have been well-defined ( using simplified experimentally validated foam models to represent the acetabulum ).

Q: Is it measurable? A: Yes, it is clear that the research objective will be achieved once the finite element model is complete.

Q: Is it achievable? A: Yes, provided the student has access to a computer lab, modelling software and laboratory data.

Q: Is it relevant? A: Yes, mimicking impacts to a cup/shell is fundamental to the overall aim of understanding how they deform when impacted upon.

Q: Is it timebound? A: Yes, it is possible to create a limited-scope finite element model in a relatively short time, especially if you already have experience in modelling.

Q: Does it start with a verb? A: Yes, it starts with ‘develop’, which makes the intent of the objective immediately clear.

Q: Is it a numbered list? A: Yes, it is the first research objective in a list of eight.

Mistakes in Writing Research Aims and Objectives

1. making your research aim too broad.

Having a research aim too broad becomes very difficult to achieve. Normally, this occurs when a student develops their research aim before they have a good understanding of what they want to research. Remember that at the end of your project and during your viva defence , you will have to prove that you have achieved your research aims; if they are too broad, this will be an almost impossible task. In the early stages of your research project, your priority should be to narrow your study to a specific area. A good way to do this is to take the time to study existing literature, question their current approaches, findings and limitations, and consider whether there are any recurring gaps that could be investigated .

Note: Achieving a set of aims does not necessarily mean proving or disproving a theory or hypothesis, even if your research aim was to, but having done enough work to provide a useful and original insight into the principles that underlie your research aim.

2. Making Your Research Objectives Too Ambitious

Be realistic about what you can achieve in the time you have available. It is natural to want to set ambitious research objectives that require sophisticated data collection and analysis, but only completing this with six months before the end of your PhD registration period is not a worthwhile trade-off.

3. Formulating Repetitive Research Objectives

Each research objective should have its own purpose and distinct measurable outcome. To this effect, a common mistake is to form research objectives which have large amounts of overlap. This makes it difficult to determine when an objective is truly complete, and also presents challenges in estimating the duration of objectives when creating your project timeline. It also makes it difficult to structure your thesis into unique chapters, making it more challenging for you to write and for your audience to read.

Fortunately, this oversight can be easily avoided by using SMART objectives.

Hopefully, you now have a good idea of how to create an effective set of aims and objectives for your research project, whether it be a thesis, dissertation or research paper. While it may be tempting to dive directly into your research, spending time on getting your aims and objectives right will give your research clear direction. This won’t only reduce the likelihood of problems arising later down the line, but will also lead to a more thorough and coherent research project.

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Research Objectives

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Research objectives are specific goals or purposes that guide a study or investigation. They are clearly defined statements that outline what the researcher aims to achieve through their research . These objectives help to focus the study, provide direction, and establish the scope of the research design . They typically include the main questions or problems the research seeks to address and are essential for designing the methodology, data collection, and analysis processes. By defining research objectives , researchers can ensure their study remains on track and addresses the key issues relevant to their topic.

What Are Research Objectives?

Research objectives are clear, specific goals that guide a study’s direction and scope. They outline what the researcher aims to achieve, helping to focus the research, design methodologies, and guide data collection and analysis. These objectives ensure the research stays on track and addresses key issues relevant to the topic.

Examples of Research Objectives

• To determine the impact of social media on adolescent mental health.
• To analyze the effectiveness of online learning platforms in primary education.
• To investigate the relationship between diet and cognitive function in adults.
• To assess customer satisfaction with a new product line.
• To explore the effects of climate change on local agriculture.
• To identify key factors influencing employee job satisfaction in the tech industry.
• To evaluate the success of a community health intervention program.
• To compare the environmental benefits of electric vs. hybrid vehicles.
• To examine the role of leadership styles in organizational performance.
• To measure the economic impact of tourism in a specific region.

Examples of Qualitative Research Objectives

• To explore the experiences of patients undergoing chronic pain management.
• To understand the perceptions of teachers on the integration of technology in the classroom.
• To investigate the motivations behind volunteerism in community service organizations.
• To examine the cultural influences on dietary habits among immigrant families.
• To assess the impact of workplace culture on employee morale in remote teams.
• To identify the challenges faced by first-generation college students in higher education.
• To analyze the role of social support networks in the lives of single parents.
• To study the decision-making processes of consumers when choosing organic products.
• To explore the lived experiences of individuals recovering from addiction.
• To understand the factors influencing career choices among high school students.

Examples of Research Objectives in a Research Proposal

• To investigate the effects of social media usage on high school students’ academic performance.
• To explore the relationship between work-life balance and job satisfaction among healthcare professionals.
• To assess the impact of urban green spaces on residents’ mental health in metropolitan areas.
• To analyze the effectiveness of bilingual education programs in enhancing language proficiency among elementary students.
• To determine the influence of corporate social responsibility initiatives on consumer loyalty in the retail industry.
• To examine the role of leadership styles in fostering innovation within technology startups.
• To identify barriers to accessing healthcare services in rural communities.
• To evaluate the success of digital marketing strategies in small businesses.
• To understand the factors affecting voter turnout in local elections.
• To study the impact of remote work on team collaboration and productivity in the IT sector.

Research Objectives in Business

• To evaluate the effectiveness of digital marketing strategies in increasing online sales.
• To analyze customer satisfaction levels with the company’s new product line.
• To investigate the impact of employee training programs on productivity.
• To determine the key factors influencing consumer purchasing decisions in the retail industry.
• To assess the role of corporate social responsibility in enhancing brand reputation.
• To explore the relationship between workplace diversity and employee performance.
• To examine the effects of remote work on team collaboration and company culture.
• To identify market trends and opportunities for business expansion in emerging markets.
• To study the influence of pricing strategies on customer retention and loyalty.
• To measure the impact of leadership styles on organizational innovation and growth.

Why are Research Objectives Important?

Research objectives are crucial because they provide clear direction and focus for a study, ensuring that the research stays on track and addresses the specific goals set by the researcher. They help in the formulation of research questions and the design of the methodology, guiding data collection and analysis processes. Well-defined objectives make it easier to measure the study’s success and ensure that the findings are relevant and meaningful. They also enhance the credibility and reliability of the research by outlining a precise plan, making it easier for others to understand and replicate the study.

Importance of Research Objectives

• Provide Clarity and Focus: Research objectives clearly outline what the study aims to achieve, helping to narrow down the scope and maintain a clear direction throughout the research process.
• Guide Research Design: They help in formulating research questions and determining the most appropriate methodology, ensuring that data collection and analysis are aligned with the study’s goals.
• Ensure Relevance: Well-defined objectives ensure that the research addresses specific, relevant issues, making the findings more meaningful and applicable.
• Measure Success: They provide benchmarks against which the success of the study can be measured, making it easier to assess whether the research has achieved its intended goals.
• Enhance Credibility: Clearly stated objectives enhance the credibility and reliability of the research by demonstrating a systematic and organized approach.

Types of Research Objectives

1. Descriptive Objectives

Descriptive objectives aim to describe the characteristics or functions of a particular phenomenon or population. These objectives focus on answering the “what” aspect of research. Example : To describe the demographic characteristics of smartphone users in the United States.

2. Exploratory Objectives

Exploratory objectives aim to explore new areas where little information is available. They seek to gain insights and familiarize the researcher with the subject area. Example : To explore the potential factors influencing consumer preferences for electric vehicles.

3. Explanatory Objectives

Explanatory objectives aim to explain the relationships or causality between variables. These objectives focus on understanding the “why” and “how” aspects of research. Example : To explain the relationship between social media usage and academic performance among college students.

4. Predictive Objectives

Predictive objectives aim to predict the future trends, behaviors, or outcomes based on current data or trends. These objectives are used to forecast and anticipate future scenarios. Example : To predict the impact of climate change on agricultural productivity over the next decade.

5. Evaluative Objectives

Evaluative objectives aim to assess the effectiveness or impact of an intervention, program, or policy. These objectives focus on determining the success or value of something. Example : To evaluate the effectiveness of a new employee training program on job performance.

Characteristics of Research Objectives

Research objectives are crucial components of any study as they define the purpose and goals of the research. Well-crafted research objectives provide clarity, direction, and focus to the study. Here are the key characteristics of research objectives:

1. Specific

Research objectives should be clear and precise, leaving no room for ambiguity. They should clearly state what the research intends to achieve. Example: Specific Objective: “To determine the impact of social media marketing on consumer purchasing decisions.”

2. Measurable

Objectives should be quantifiable, allowing researchers to assess the extent to which they have been achieved. This involves using metrics or indicators that can be measured. Example: Measurable Objective: “To measure the increase in sales by 15% after implementing a social media marketing campaign.”

3. Achievable

The objectives should be realistic and attainable within the scope and resources of the study. Setting achievable goals ensures that the research can be completed successfully. Example: Achievable Objective: “To survey 500 consumers within a three-month period to understand their social media usage patterns.”

4. Relevant

Objectives must be relevant to the research problem and aligned with the overall purpose of the study. They should address the key issues and contribute to solving the research problem. Example: Relevant Objective: “To analyze the relationship between social media engagement and brand loyalty among teenagers.”

5. Time-bound

Objectives should have a clear timeframe within which they are to be achieved. This helps in planning and maintaining the research schedule. Example: Time-bound Objective: “To complete data collection within six months and publish findings within one year.”

How to write Research Objectives?

1. identify the research problem.

• Clearly define the research problem.
• Understand the main issue or question you want to address.

2. Conduct a Literature Review

• Review existing literature to understand what has already been done in the field.
• Refine your research problem and identify gaps.

3. Define the Scope of Your Study

• Determine the boundaries of your research.
• Specify what aspects of the problem you will address and what you will exclude.

4. Formulate Specific Questions

• Break down your research problem into specific, clear, and focused questions.

5. Use Action Verbs

• Use specific action verbs such as “analyze,” “determine,” “evaluate,” “explore,” and “compare” to articulate your aims.

6. Be Clear and Concise

• Ensure your objectives are clear, concise, and easy to understand.
• Avoid ambiguous language and make each objective specific and measurable.

7. Align with Research Goals

• Ensure that your objectives are aligned with the overall goals of your research.
• Each objective should contribute to achieving these goals.

8. Prioritize Objectives

• List your objectives in order of importance.
• Focus on primary objectives first, followed by secondary ones.

9. Ensure Feasibility

• Make sure your objectives are realistic and achievable within the scope of your resources, time, and capabilities.

10. Review and Refine

• Review your objectives to ensure they are comprehensive and cover all aspects of your research problem.
• Refine them as necessary for clarity and focus.

Advantages and Disadvantages of Research Objectives

Advantages of research objectives.

• Clarity and Focus Objectives provide a clear direction, helping you stay on track. Example: “To study the impact of social media on teenagers’ mental health” keeps your research focused on a specific topic.
• Guidance for Methodology They help in choosing the right methods and tools for your research. Example: “To test the effectiveness of new teaching methods” suggests using experiments and tests.
• Measurement and Evaluation Objectives make it easy to measure success. Example: “To improve test scores by 15% with a new teaching method” provides a clear goal to aim for.
• Resource Allocation They ensure efficient use of time, money, and effort. Example: If your objective is “To survey 500 people,” you can plan your resources accordingly.
• Communication Objectives help explain your research to others. Example: Clear objectives can be shared in grant proposals to get funding.

Disadvantages of Research Objectives

• Rigidity Objectives can be too rigid, limiting flexibility. Example: If new data shows something unexpected, a fixed objective might stop you from exploring it.
• Over-Simplification They might oversimplify complex issues. Example: “To study the effect of diet on health” might ignore the many factors that influence health.
• Bias Introduction Specific objectives can lead to focusing too narrowly. Example: Studying only the positive effects of a new drug might overlook side effects.
• Pressure to Achieve They can create pressure to meet specific outcomes, risking research integrity. Example: You might feel pressured to show that a new teaching method works, even if it doesn’t.
• Resource Constraints Some objectives may require more resources than available. Example: “To survey 1,000 people” might be hard if you have limited funds.

FAQ’s

Why are research objectives important.

Research objectives provide direction and focus for the study, ensuring that the research stays on track and addresses relevant questions.

How do you formulate research objectives?

Formulate research objectives by identifying key questions your research aims to answer, ensuring they are specific, measurable, achievable, relevant, and time-bound (SMART).

What is the difference between research objectives and research questions?

Research objectives outline the goals of the study, while research questions specify what the researcher aims to find out.

Can research objectives change during the study?

Yes, research objectives can be refined or adjusted as the study progresses, especially if new insights emerge.

How many research objectives should a study have?

The number of research objectives depends on the scope of the study but typically ranges from two to five.

How do research objectives relate to hypotheses?

Research objectives guide the study, while hypotheses are testable predictions derived from these objectives.

Can research objectives be qualitative or quantitative?

Yes, research objectives can be either qualitative, focusing on understanding phenomena, or quantitative, focusing on measuring variables.

How do you prioritize research objectives?

Prioritize research objectives based on their relevance to the research problem and feasibility within the study’s constraints.

What role do research objectives play in a literature review?

Research objectives help structure the literature review, guiding the selection of relevant studies and identifying gaps in existing research.

How do research objectives influence data collection?

Research objectives determine the type of data needed and the appropriate methods for collecting this data.

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Research Aims, Objectives & Questions

The “Golden Thread” Explained Simply (+ Examples)

By: David Phair (PhD) and Alexandra Shaeffer (PhD) | June 2022

The research aims , objectives and research questions (collectively called the “golden thread”) are arguably the most important thing you need to get right when you’re crafting a research proposal , dissertation or thesis . We receive questions almost every day about this “holy trinity” of research and there’s certainly a lot of confusion out there, so we’ve crafted this post to help you navigate your way through the fog.

Overview: The Golden Thread

• What is the golden thread
• What are research aims ( examples )
• What are research objectives ( examples )
• What are research questions ( examples )
• The importance of alignment in the golden thread

What is the “golden thread”?  

The golden thread simply refers to the collective research aims , research objectives , and research questions for any given project (i.e., a dissertation, thesis, or research paper ). These three elements are bundled together because it’s extremely important that they align with each other, and that the entire research project aligns with them.

Importantly, the golden thread needs to weave its way through the entirety of any research project , from start to end. In other words, it needs to be very clearly defined right at the beginning of the project (the topic ideation and proposal stage) and it needs to inform almost every decision throughout the rest of the project. For example, your research design and methodology will be heavily influenced by the golden thread (we’ll explain this in more detail later), as well as your literature review.

The research aims, objectives and research questions (the golden thread) define the focus and scope ( the delimitations ) of your research project. In other words, they help ringfence your dissertation or thesis to a relatively narrow domain, so that you can “go deep” and really dig into a specific problem or opportunity. They also help keep you on track , as they act as a litmus test for relevance. In other words, if you’re ever unsure whether to include something in your document, simply ask yourself the question, “does this contribute toward my research aims, objectives or questions?”. If it doesn’t, chances are you can drop it.

Alright, enough of the fluffy, conceptual stuff. Let’s get down to business and look at what exactly the research aims, objectives and questions are and outline a few examples to bring these concepts to life.

Research Aims: What are they?

Simply put, the research aim(s) is a statement that reflects the broad overarching goal (s) of the research project. Research aims are fairly high-level (low resolution) as they outline the general direction of the research and what it’s trying to achieve .

Research Aims: Examples  

True to the name, research aims usually start with the wording “this research aims to…”, “this research seeks to…”, and so on. For example:

“This research aims to explore employee experiences of digital transformation in retail HR.”   “This study sets out to assess the interaction between student support and self-care on well-being in engineering graduate students”  

As you can see, these research aims provide a high-level description of what the study is about and what it seeks to achieve. They’re not hyper-specific or action-oriented, but they’re clear about what the study’s focus is and what is being investigated.

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Research Objectives: What are they?

The research objectives take the research aims and make them more practical and actionable . In other words, the research objectives showcase the steps that the researcher will take to achieve the research aims.

The research objectives need to be far more specific (higher resolution) and actionable than the research aims. In fact, it’s always a good idea to craft your research objectives using the “SMART” criteria. In other words, they should be specific, measurable, achievable, relevant and time-bound”.

Research Objectives: Examples  

Let’s look at two examples of research objectives. We’ll stick with the topic and research aims we mentioned previously.  

For the digital transformation topic:

To observe the retail HR employees throughout the digital transformation. To assess employee perceptions of digital transformation in retail HR. To identify the barriers and facilitators of digital transformation in retail HR.

And for the student wellness topic:

To determine whether student self-care predicts the well-being score of engineering graduate students. To determine whether student support predicts the well-being score of engineering students. To assess the interaction between student self-care and student support when predicting well-being in engineering graduate students.

  As you can see, these research objectives clearly align with the previously mentioned research aims and effectively translate the low-resolution aims into (comparatively) higher-resolution objectives and action points . They give the research project a clear focus and present something that resembles a research-based “to-do” list.

Research Questions: What are they?

Finally, we arrive at the all-important research questions. The research questions are, as the name suggests, the key questions that your study will seek to answer . Simply put, they are the core purpose of your dissertation, thesis, or research project. You’ll present them at the beginning of your document (either in the introduction chapter or literature review chapter) and you’ll answer them at the end of your document (typically in the discussion and conclusion chapters).  

The research questions will be the driving force throughout the research process. For example, in the literature review chapter, you’ll assess the relevance of any given resource based on whether it helps you move towards answering your research questions. Similarly, your methodology and research design will be heavily influenced by the nature of your research questions. For instance, research questions that are exploratory in nature will usually make use of a qualitative approach, whereas questions that relate to measurement or relationship testing will make use of a quantitative approach.  

Let’s look at some examples of research questions to make this more tangible.

Research Questions: Examples  

Again, we’ll stick with the research aims and research objectives we mentioned previously.  

For the digital transformation topic (which would be qualitative in nature):

How do employees perceive digital transformation in retail HR? What are the barriers and facilitators of digital transformation in retail HR?  

And for the student wellness topic (which would be quantitative in nature):

Does student self-care predict the well-being scores of engineering graduate students? Does student support predict the well-being scores of engineering students? Do student self-care and student support interact when predicting well-being in engineering graduate students?  

You’ll probably notice that there’s quite a formulaic approach to this. In other words, the research questions are basically the research objectives “converted” into question format. While that is true most of the time, it’s not always the case. For example, the first research objective for the digital transformation topic was more or less a step on the path toward the other objectives, and as such, it didn’t warrant its own research question.  

So, don’t rush your research questions and sloppily reword your objectives as questions. Carefully think about what exactly you’re trying to achieve (i.e. your research aim) and the objectives you’ve set out, then craft a set of well-aligned research questions . Also, keep in mind that this can be a somewhat iterative process , where you go back and tweak research objectives and aims to ensure tight alignment throughout the golden thread.

The importance of strong alignment 

Alignment is the keyword here and we have to stress its importance . Simply put, you need to make sure that there is a very tight alignment between all three pieces of the golden thread. If your research aims and research questions don’t align, for example, your project will be pulling in different directions and will lack focus . This is a common problem students face and can cause many headaches (and tears), so be warned.

Take the time to carefully craft your research aims, objectives and research questions before you run off down the research path. Ideally, get your research supervisor/advisor to review and comment on your golden thread before you invest significant time into your project, and certainly before you start collecting data .  

Recap: The golden thread

In this post, we unpacked the golden thread of research, consisting of the research aims , research objectives and research questions . You can jump back to any section using the links below.

As always, feel free to leave a comment below – we always love to hear from you. Also, if you’re interested in 1-on-1 support, take a look at our private coaching service here.

Psst... there’s more!

This post was based on one of our popular Research Bootcamps . If you're working on a research project, you'll definitely want to check this out ...

41 Comments

Thank you very much for your great effort put. As an Undergraduate taking Demographic Research & Methodology, I’ve been trying so hard to understand clearly what is a Research Question, Research Aim and the Objectives in a research and the relationship between them etc. But as for now I’m thankful that you’ve solved my problem.

Well appreciated. This has helped me greatly in doing my dissertation.

An so delighted with this wonderful information thank you a lot.

so impressive i have benefited a lot looking forward to learn more on research.

I am very happy to have carefully gone through this well researched article.

Infact,I used to be phobia about anything research, because of my poor understanding of the concepts.

Now,I get to know that my research question is the same as my research objective(s) rephrased in question format.

I please I would need a follow up on the subject,as I intends to join the team of researchers. Thanks once again.

Thanks so much. This was really helpful.

I know you pepole have tried to break things into more understandable and easy format. And God bless you. Keep it up

i found this document so useful towards my study in research methods. thanks so much.

This is my 2nd read topic in your course and I should commend the simplified explanations of each part. I’m beginning to understand and absorb the use of each part of a dissertation/thesis. I’ll keep on reading your free course and might be able to avail the training course! Kudos!

Thank you! Better put that my lecture and helped to easily understand the basics which I feel often get brushed over when beginning dissertation work.

This is quite helpful. I like how the Golden thread has been explained and the needed alignment.

This is quite helpful. I really appreciate!

The article made it simple for researcher students to differentiate between three concepts.

Very innovative and educational in approach to conducting research.

I am very impressed with all these terminology, as I am a fresh student for post graduate, I am highly guided and I promised to continue making consultation when the need arise. Thanks a lot.

A very helpful piece. thanks, I really appreciate it .

Very well explained, and it might be helpful to many people like me.

Wish i had found this (and other) resource(s) at the beginning of my PhD journey… not in my writing up year… 😩 Anyways… just a quick question as i’m having some issues ordering my “golden thread”…. does it matter in what order you mention them? i.e., is it always first aims, then objectives, and finally the questions? or can you first mention the research questions and then the aims and objectives?

Thank you for a very simple explanation that builds upon the concepts in a very logical manner. Just prior to this, I read the research hypothesis article, which was equally very good. This met my primary objective.

My secondary objective was to understand the difference between research questions and research hypothesis, and in which context to use which one. However, I am still not clear on this. Can you kindly please guide?

In research, a research question is a clear and specific inquiry that the researcher wants to answer, while a research hypothesis is a tentative statement or prediction about the relationship between variables or the expected outcome of the study. Research questions are broader and guide the overall study, while hypotheses are specific and testable statements used in quantitative research. Research questions identify the problem, while hypotheses provide a focus for testing in the study.

Exactly what I need in this research journey, I look forward to more of your coaching videos.

This helped a lot. Thanks so much for the effort put into explaining it.

What data source in writing dissertation/Thesis requires?

What is data source covers when writing dessertation/thesis

This is quite useful thanks

I’m excited and thankful. I got so much value which will help me progress in my thesis.

where are the locations of the reserch statement, research objective and research question in a reserach paper? Can you write an ouline that defines their places in the researh paper?

Very helpful and important tips on Aims, Objectives and Questions.

Thank you so much for making research aim, research objectives and research question so clear. This will be helpful to me as i continue with my thesis.

Thanks much for this content. I learned a lot. And I am inspired to learn more. I am still struggling with my preparation for dissertation outline/proposal. But I consistently follow contents and tutorials and the new FB of GRAD Coach. Hope to really become confident in writing my dissertation and successfully defend it.

As a researcher and lecturer, I find splitting research goals into research aims, objectives, and questions is unnecessarily bureaucratic and confusing for students. For most biomedical research projects, including ‘real research’, 1-3 research questions will suffice (numbers may differ by discipline).

Awesome! Very important resources and presented in an informative way to easily understand the golden thread. Indeed, thank you so much.

Well explained

The blog article on research aims, objectives, and questions by Grad Coach is a clear and insightful guide that aligns with my experiences in academic research. The article effectively breaks down the often complex concepts of research aims and objectives, providing a straightforward and accessible explanation. Drawing from my own research endeavors, I appreciate the practical tips offered, such as the need for specificity and clarity when formulating research questions. The article serves as a valuable resource for students and researchers, offering a concise roadmap for crafting well-defined research goals and objectives. Whether you’re a novice or an experienced researcher, this article provides practical insights that contribute to the foundational aspects of a successful research endeavor.

A great thanks for you. it is really amazing explanation. I grasp a lot and one step up to research knowledge.

I really found these tips helpful. Thank you very much Grad Coach.

I found this article helpful. Thanks for sharing this.

thank you so much, the explanation and examples are really helpful

This is a well researched and superbly written article for learners of research methods at all levels in the research topic from conceptualization to research findings and conclusions. I highly recommend this material to university graduate students. As an instructor of advanced research methods for PhD students, I have confirmed that I was giving the right guidelines for the degree they are undertaking.

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Research Objectives: Definition and Examples

Research objectives indicate your study’s goals and why you are conducting them. They help in summing up the approach and motive behind conducting the project. It also helps in focusing the research on a particle area.

Your research paper’s introduction should include your objectives after the problem statement. They ought to

• Set up the extent and depth of your project.
• Support your research design
• Describe how your project will advance understanding in the field.

What exactly are the research objectives?

The research objective explains the intention behind the research project. They should guide every phase of the research procedure, such as the data collection, argument construction, and conclusion development.

Although your research objectives may change slightly as you go along, they should always be following the actual research you do and the substance of your article.

Research aims

It is common practice to distinguish between research aims and objectives.

A research aim is often a broad assertion outlining the overall objective of your research study. It should follow your problem statement and come before your research goals.

Your study’s exact emphasis and methodology are indicated by your research objectives, which are more detailed than your research purpose. You probably have many objectives, even if you have one research goal.

Example of Research aim

To investigate the contributing elements of muscle retention in an aged population.

Example of Research objectives

To evaluate the participant’s sedentary behaviors concerning muscle atrophy.

To ascertain how the participant’s muscular health is affected by dietary parameters, notably protein consumption.

To ascertain the impact of exercise on participant’s muscular health.

Why are research objectives crucial?

Research objectives are crucial since they:

• Define the extent and depth of your project : It assists you in avoiding pointless research. It also implies assessing your research method, and the conclusion will be simple.
• Contribute to your research design : Knowing your objectives can help you decide which approaches are best for your study once you have a complete idea.
• Explain how your study will support existing research : They allow you to demonstrate your knowledge of current research, use or improve upon current research techniques, and make an effort to add to ongoing discussions.

How to write aims and objectives for research?

Once you’ve identified a research problem you wish to examine, you must choose a strategy. It is here that the research aim and objectives will play a significant role.

Step 1: Select a common aim. The research aim must reflect the research problem and should be somewhat broad.

Sample: Research aim To evaluate the self-driving car’s safety components and response times.

Step 2: Select particular objectives. Reduce your aim to a manageable amount of steps that will enable you to tackle your research problem. What particular facets of the issue do you wish to investigate or comprehend?

Sample: Research objective To gauge how quickly self-driving cars react to pedestrians.

Step 3: Create your aims and objectives Once you determine the research aim and objectives, you must succinctly and effectively convey them to the reader.

After your problem statement, which is included in your introduction, you will list your aims and objectives. Utilize clear declarative language to frame them, and use the right verbs to describe the task you’ll be doing appropriately.

Sample: Explaining your research aim and objectives The study aims to evaluate self-driving automobiles’ safety attributes and reaction times. Using quantitative techniques, I’ll gauge how quickly self-driving cars react to moving objects, first to other moving vehicles and later to pedestrians. Additionally, I’ll check their awareness of any adjacent inanimate objects (e.g., sidewalks).

What are SMART research objectives?

When discussing research aims, the abbreviation “SMART” is frequently employed. It indicates that the following should be there in the objectives:

Specific : Make sure your objectives aren’t too ambiguous. To get results that are helpful, your study must be precisely specified.

Measurable : Be aware of the metrics you’ll use to gauge the success of your objectives.

Achievable : Your objectives may be challenging, but they should be feasible. Verify that your issue has undergone appropriate research and that relevant primary or secondary sources are available. Additionally, ensure access to the necessary research facilities (labs, library resources, research databases, etc.).

Relevant : Ensure that they contribute to the state of research in your field and directly address the research problem you wish to work on.

Time-based : Establish precise due dates for the goals to keep the project on course.

Frequently asked questions about research objectives

What is a research objective.

Research objectives explain the intention behind the research project. It concludes the project’s approach and motive and helps maintain focus. Therefore, the introduction of the research paper should include the objectives after the problem statement.

What’s an example of a research objective?

Your research objectives should be specific and should point out how you plan to address your research problem:

Sample: Research objectives To determine how well a knee joint made of a cobalt-chromium alloy can withstand impact loads.

How do I write a research objective?

You must define your study objectives and then describe them towards the conclusion of your problem description in your article. Keep your research goals concise and clear, and use the right verbs to describe the work you will do for each one appropriately.

What’s the difference between research aims and objectives?

A research aim is an expansive declaration outlining the overall goal of your research study. It should follow your problem description and come before your study objectives in your introduction. Compared to your research aim, research objectives are more detailed. They outline the strategies you’ll use to achieve the main goal.

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The Importance Of Research Objectives

Imagine you’re a student planning a vacation in a foreign country. You’re on a tight budget and need to draw…

Imagine you’re a student planning a vacation in a foreign country. You’re on a tight budget and need to draw up a pocket-friendly plan. Where do you begin? The first step is to do your research.

Before that, you make a mental list of your objectives—finding reasonably-priced hotels, traveling safely and finding ways of communicating with someone back home. These objectives help you focus sharply during your research and be aware of the finer details of your trip.

More often than not, research is a part of our daily lives. Whether it’s to pick a restaurant for your next birthday dinner or to prepare a presentation at work, good research is the foundation of effective learning. Read on to understand the meaning, importance and examples of research objectives.

Why Do We Need Research?

What are the objectives of research, what goes into a research plan.

Research is a careful and detailed study of a particular problem or concern, using scientific methods. An in-depth analysis of information creates space for generating new questions, concepts and understandings. The main objective of research is to explore the unknown and unlock new possibilities. It’s an essential component of success.

Over the years, businesses have started emphasizing the need for research. You’ve probably noticed organizations hiring research managers and analysts. The primary purpose of business research is to determine the goals and opportunities of an organization. It’s critical in making business decisions and appropriately allocating available resources.

Here are a few benefits of research that’ll explain why it is a vital aspect of our professional lives:

Expands Your Knowledge Base

One of the greatest benefits of research is to learn and gain a deeper understanding. The deeper you dig into a topic, the more well-versed you are. Furthermore, research has the power to help you build on any personal experience you have on the subject.

Keeps You Up To Date

Research encourages you to discover the most recent information available. Updated information prevents you from falling behind and helps you present accurate information. You’re better equipped to develop ideas or talk about a topic when you’re armed with the latest inputs.

Builds Your Credibility

Research provides you with a good foundation upon which you can develop your thoughts and ideas. People take you more seriously when your suggestions are backed by research. You can speak with greater confidence because you know that the information is accurate.

Sparks Connections

Take any leading nonprofit organization, you’ll see how they have a strong research arm supported by real-life stories. Research also becomes the base upon which real-life connections and impact can be made. It even helps you communicate better with others and conveys why you’re pursuing something.

Encourages Curiosity

As we’ve already established, research is mostly about using existing information to create new ideas and opinions. In the process, it sparks curiosity as you’re encouraged to explore and gain deeper insights into a subject. Curiosity leads to higher levels of positivity and lower levels of anxiety.

Well-defined objectives of research are an essential component of successful research engagement. If you want to drive all aspects of your research methodology such as data collection, design, analysis and recommendation, you need to lay down the objectives of research methodology. In other words, the objectives of research should address the underlying purpose of investigation and analysis. It should outline the steps you’d take to achieve desirable outcomes. Research objectives help you stay focused and adjust your expectations as you progress.

The objectives of research should be closely related to the problem statement, giving way to specific and achievable goals. Here are the four types of research objectives for you to explore:

General Objective

Also known as secondary objectives, general objectives provide a detailed view of the aim of a study. In other words, you get a general overview of what you want to achieve by the end of your study. For example, if you want to study an organization’s contribution to environmental sustainability, your general objective could be: a study of sustainable practices and the use of renewable energy by the organization.

Specific Objectives

Specific objectives define the primary aim of the study. Typically, general objectives provide the foundation for identifying specific objectives. In other words, when general objectives are broken down into smaller and logically connected objectives, they’re known as specific objectives. They help define the who, what, why, when and how aspects of your project. Once you identify the main objective of research, it’s easier to develop and pursue a plan of action.

Let’s take the example of ‘a study of an organization’s contribution to environmental sustainability’ again. The specific objectives will look like this:

To determine through history how the organization has changed its practices and adopted new solutions

To assess how the new practices, technology and strategies will contribute to the overall effectiveness

Once you’ve identified the objectives of research, it’s time to organize your thoughts and streamline your research goals. Here are a few effective tips to develop a powerful research plan and improve your business performance.

Set SMART Goals

Your research objectives should be SMART—Specific, Measurable, Achievable, Realistic and Time-constrained. When you focus on utilizing available resources and setting realistic timeframes and milestones, it’s easier to prioritize objectives. Continuously track your progress and check whether you need to revise your expectations or targets. This way, you’re in greater control over the process.

Create A Plan

Create a plan that’ll help you select appropriate methods to collect accurate information. A well-structured plan allows you to use logical and creative approaches towards problem-solving. The complexity of information and your skills are bound to influence your plan, which is why you need to make room for flexibility. The availability of resources will also play a big role in influencing your decisions.

Collect And Collate

After you’ve created a plan for the research process, make a list of the data you’re going to collect and the methods you’ll use. Not only will it help make sense of your insights but also keep track of your approach. The information you collect should be:

Logical, rigorous and objective

Can be reproduced by other people working on the same subject

Free of errors and highlighting necessary details

Current and updated

Includes everything required to support your argument/suggestions

Analyze And Keep Ready

Data analysis is the most crucial part of the process and there are many ways in which the information can be utilized. Four types of data analysis are often seen in a professional environment. While they may be divided into separate categories, they’re linked to each other.

Descriptive Analysis:

The most commonly used data analysis, descriptive analysis simply summarizes past data. For example, Key Performance Indicators (KPIs) use descriptive analysis. It establishes certain benchmarks after studying how someone has been performing in the past.

Diagnostic Analysis:

The next step is to identify why something happened. Diagnostic analysis uses the information gathered through descriptive analysis and helps find the underlying causes of an outcome. For example, if a marketing initiative was successful, you deep-dive into the strategies that worked.

Predictive Analysis:

It attempts to answer ‘what’s likely to happen’. Predictive analysis makes use of past data to predict future outcomes. However, the accuracy of predictions depends on the quality of the data provided. Risk assessment is an ideal example of using predictive analysis.

Prescriptive Analysis: 

The most sought-after type of data analysis, prescriptive analysis combines the insights of all of the previous analyses. It’s a huge organizational commitment as it requires plenty of effort and resources. A great example of prescriptive analysis is Artificial Intelligence (AI), which consumes large amounts of data. You need to be prepared to commit to this type of analysis.

Review And Interpret

Once you’ve collected and collated your data, it’s time to review it and draw accurate conclusions. Here are a few ways to improve the review process:

Identify the fundamental issues, opportunities and problems and make note of recurring trends if any

Make a list of your insights and check which is the most or the least common. In short, keep track of the frequency of each insight

Conduct a SWOT analysis and identify the strengths, weaknesses, opportunities and threats

Write down your conclusions and recommendations of the research

When we think about research, we often associate it with academicians and students. but the truth is research is for everybody who is willing to learn and enhance their knowledge. If you want to master the art of strategically upgrading your knowledge, Harappa Education’s Learning Expertly course has all the answers. Not only will it help you look at things from a fresh perspective but also show you how to acquire new information with greater efficiency. The Growth Mindset framework will teach you how to believe in your abilities to grow and improve. The Learning Transfer framework will help you apply your learnings from one context to another. Begin the journey of tactful learning and self-improvement today!

Explore Harappa Diaries to learn more about topics related to the THINK Habit such as  Learning From Experience ,  Critical Thinking  & What is  Brainstorming  to think clearly and rationally.

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• Knowledge Base
• Starting the research process
• Research Objectives | Definition & Examples

Research Objectives | Definition & Examples

Published on July 12, 2022 by Eoghan Ryan . Revised on November 20, 2023.

Research objectives describe what your research is trying to achieve and explain why you are pursuing it. They summarize the approach and purpose of your project and help to focus your research.

Your objectives should appear in the introduction of your research paper , at the end of your problem statement . They should:

• Establish the scope and depth of your project
• Contribute to your research design
• Indicate how your project will contribute to existing knowledge

Table of contents

What is a research objective, why are research objectives important, how to write research aims and objectives, smart research objectives, other interesting articles, frequently asked questions about research objectives.

Research objectives describe what your research project intends to accomplish. They should guide every step of the research process , including how you collect data , build your argument , and develop your conclusions .

Your research objectives may evolve slightly as your research progresses, but they should always line up with the research carried out and the actual content of your paper.

Research aims

A distinction is often made between research objectives and research aims.

A research aim typically refers to a broad statement indicating the general purpose of your research project. It should appear at the end of your problem statement, before your research objectives.

Your research objectives are more specific than your research aim and indicate the particular focus and approach of your project. Though you will only have one research aim, you will likely have several research objectives.

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Research objectives are important because they:

• Establish the scope and depth of your project: This helps you avoid unnecessary research. It also means that your research methods and conclusions can easily be evaluated .
• Contribute to your research design: When you know what your objectives are, you have a clearer idea of what methods are most appropriate for your research.
• Indicate how your project will contribute to extant research: They allow you to display your knowledge of up-to-date research, employ or build on current research methods, and attempt to contribute to recent debates.

Once you’ve established a research problem you want to address, you need to decide how you will address it. This is where your research aim and objectives come in.

Step 1: Decide on a general aim

Your research aim should reflect your research problem and should be relatively broad.

Step 2: Decide on specific objectives

Break down your aim into a limited number of steps that will help you resolve your research problem. What specific aspects of the problem do you want to examine or understand?

Step 3: Formulate your aims and objectives

Once you’ve established your research aim and objectives, you need to explain them clearly and concisely to the reader.

You’ll lay out your aims and objectives at the end of your problem statement, which appears in your introduction. Frame them as clear declarative statements, and use appropriate verbs to accurately characterize the work that you will carry out.

The acronym “SMART” is commonly used in relation to research objectives. It states that your objectives should be:

• Specific: Make sure your objectives aren’t overly vague. Your research needs to be clearly defined in order to get useful results.
• Measurable: Know how you’ll measure whether your objectives have been achieved.
• Achievable: Your objectives may be challenging, but they should be feasible. Make sure that relevant groundwork has been done on your topic or that relevant primary or secondary sources exist. Also ensure that you have access to relevant research facilities (labs, library resources , research databases , etc.).
• Relevant: Make sure that they directly address the research problem you want to work on and that they contribute to the current state of research in your field.
• Time-based: Set clear deadlines for objectives to ensure that the project stays on track.

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If you want to know more about the research process , methodology , research bias , or statistics , make sure to check out some of our other articles with explanations and examples.

Methodology

• Sampling methods
• Simple random sampling
• Stratified sampling
• Cluster sampling
• Likert scales
• Reproducibility

 Statistics

• Null hypothesis
• Statistical power
• Probability distribution
• Effect size
• Poisson distribution

Research bias

• Optimism bias
• Cognitive bias
• Implicit bias
• Hawthorne effect
• Anchoring bias
• Explicit bias

Research objectives describe what you intend your research project to accomplish.

They summarize the approach and purpose of the project and help to focus your research.

Your objectives should appear in the introduction of your research paper , at the end of your problem statement .

Your research objectives indicate how you’ll try to address your research problem and should be specific:

Once you’ve decided on your research objectives , you need to explain them in your paper, at the end of your problem statement .

Keep your research objectives clear and concise, and use appropriate verbs to accurately convey the work that you will carry out for each one.

I will compare …

A research aim is a broad statement indicating the general purpose of your research project. It should appear in your introduction at the end of your problem statement , before your research objectives.

Research objectives are more specific than your research aim. They indicate the specific ways you’ll address the overarching aim.

Scope of research is determined at the beginning of your research process , prior to the data collection stage. Sometimes called “scope of study,” your scope delineates what will and will not be covered in your project. It helps you focus your work and your time, ensuring that you’ll be able to achieve your goals and outcomes.

Defining a scope can be very useful in any research project, from a research proposal to a thesis or dissertation . A scope is needed for all types of research: quantitative , qualitative , and mixed methods .

To define your scope of research, consider the following:

• Budget constraints or any specifics of grant funding
• Your proposed timeline and duration
• Specifics about your population of study, your proposed sample size , and the research methodology you’ll pursue
• Any inclusion and exclusion criteria
• Any anticipated control , extraneous , or confounding variables that could bias your research if not accounted for properly.

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• A Research Guide
• Research Paper Guide

How to Write Research Objectives

• What are research objectives
• Step-by-step writing guide
• Helpful tips
• Research objectives examples

What are research objectives, and why are they important?

Step-by-step research objectives writing guide, step 1: provide the major background of your research, step 2: mention several objectives from the most to least important aspects, step 3: follow your resources and do not promise too much, step 4: keep your objectives and limitations mentioned, step 5: provide action verbs and tone, helpful tips for writing research objectives.

• Keep your content specific! It is necessary to narrow things down and leave no space for double meanings or confusion. If some idea cannot be supported with a piece of evidence, it’s better to avoid it in your objectives.
• Objectives must be measurable! It is crucial to make it possible to replicate your work in further research. Creating an outline as you strive for your goals and set the purpose is necessary.
• Keeping things relevant! Your research objectives should be related to your thesis statement and the subject that you have chosen to work with. It will help to avoid introducing ideas that are not related to your work.
• Temporal factor! Set deadlines to track your progress and provide a setting for your research if it is relevant. It will help your target audience to see your limitations and specifics.

Research objectives example

Research objective 1: The study aims to explore the origins and evolution of the youth movements in the Flemish provinces in Belgium, namely Chiro and KSA. This research evaluates the major differences during the post-WW2 period and the social factors that created differences between the movements. 

Research objective 2: This paper implements surveys and personal interviews to determine first-hand feedback from the youth members and the team leaders. 

Research objective 3: Aiming to compare and contrast, this study determines the positive outcomes of the unity project work between the branches of the youth movement in Belgium, aiming for statistical data to support it. 

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Organizing Academic Research Papers: 4. The Introduction

• Purpose of Guide
• Design Flaws to Avoid
• Glossary of Research Terms
• Narrowing a Topic Idea
• Broadening a Topic Idea
• Extending the Timeliness of a Topic Idea
• Academic Writing Style
• Choosing a Title
• Making an Outline
• Paragraph Development
• Executive Summary
• Background Information
• The Research Problem/Question
• Theoretical Framework
• Citation Tracking
• Content Alert Services
• Evaluating Sources
• Primary Sources
• Secondary Sources
• Tertiary Sources
• What Is Scholarly vs. Popular?
• Qualitative Methods
• Quantitative Methods
• Using Non-Textual Elements
• Limitations of the Study
• Common Grammar Mistakes
• Avoiding Plagiarism
• Footnotes or Endnotes?
• Further Readings
• Annotated Bibliography
• Dealing with Nervousness
• Using Visual Aids
• Grading Someone Else's Paper
• How to Manage Group Projects
• Multiple Book Review Essay
• Reviewing Collected Essays
• About Informed Consent
• Writing Field Notes
• Writing a Policy Memo
• Writing a Research Proposal
• Acknowledgements

The introduction serves the purpose of leading the reader from a general subject area to a particular field of research. It establishes the context of the research being conducted by summarizing current understanding and background information about the topic, stating the purpose of the work in the form of the hypothesis, question, or research problem, briefly explaining your rationale, methodological approach, highlighting the potential outcomes your study can reveal, and describing the remaining structure of the paper.

Key Elements of the Research Proposal. Prepared under the direction of the Superintendent and by the 2010 Curriculum Design and Writing Team. Baltimore County Public Schools.

Importance of a Good Introduction

Think of the introduction as a mental road map that must answer for the reader these four questions:

• What was I studying?
• Why was this topic important to investigate?
• What did we know about this topic before I did this study?
• How will this study advance our knowledge?

A well-written introduction is important because, quite simply, you never get a second chance to make a good first impression. The opening paragraph of your paper will provide your readers with their initial impressions about the logic of your argument, your writing style, the overall quality of your research, and, ultimately, the validity of your findings and conclusions. A vague, disorganized, or error-filled introduction will create a negative impression, whereas, a concise, engaging, and well-written introduction will start your readers off thinking highly of your analytical skills, your writing style, and your research approach.

Introductions . The Writing Center. University of North Carolina.

Structure and Writing Style

I. Structure and Approach

The introduction is the broad beginning of the paper that answers three important questions for the reader:

• What is this?
• Why am I reading it?
• What do you want me to think about / consider doing / react to?

Think of the structure of the introduction as an inverted triangle of information. Organize the information so as to present the more general aspects of the topic early in the introduction, then narrow toward the more specific topical information that provides context, finally arriving at your statement of purpose and rationale and, whenever possible, the potential outcomes your study can reveal.

These are general phases associated with writing an introduction:

• Highlighting the importance of the topic, and/or
• Making general statements about the topic, and/or
• Presenting an overview on current research on the subject.
• Opposing an existing assumption, and/or
• Revealing a gap in existing research, and/or
• Formulating a research question or problem, and/or
• Continuing a disciplinary tradition.
• Stating the intent of your study,
• Outlining the key characteristics of your study,
• Describing important results, and
• Giving a brief overview of the structure of the paper.

NOTE: Even though the introduction is the first main section of a research paper, it is often useful to finish the introduction very late in the writing process because the structure of the paper, the reporting and analysis of results, and the conclusion will have been completed and it ensures that your introduction matches the overall structure of your paper.

II.  Delimitations of the Study

Delimitations refer to those characteristics that limit the scope and define the conceptual boundaries of your study . This is determined by the conscious exclusionary and inclusionary decisions you make about how to investigate the research problem. In other words, not only should you tell the reader what it is you are studying and why, but you must also acknowledge why you rejected alternative approaches that could have been used to examine the research problem.

Obviously, the first limiting step was the choice of research problem itself. However, implicit are other, related problems that could have been chosen but were rejected. These should be noted in the conclusion of your introduction.

Examples of delimitating choices would be:

• The key aims and objectives of your study,
• The research questions that you address,
• The variables of interest [i.e., the various factors and features of the phenomenon being studied],
• The method(s) of investigation, and
• Any relevant alternative theoretical frameworks that could have been adopted.

Review each of these decisions. You need to not only clearly establish what you intend to accomplish, but to also include a declaration of what the study does not intend to cover. In the latter case, your exclusionary decisions should be based upon criteria stated as, "not interesting"; "not directly relevant"; “too problematic because..."; "not feasible," and the like. Make this reasoning explicit!

NOTE: Delimitations refer to the initial choices made about the broader, overall design of your study and should not be confused with documenting the limitations of your study discovered after the research has been completed.

III. The Narrative Flow

Issues to keep in mind that will help the narrative flow in your introduction :

• Your introduction should clearly identify the subject area of interest . A simple strategy to follow is to use key words from your title in the first few sentences of the introduction. This will help focus the introduction on the topic at the appropriate level and ensures that you get to the primary subject matter quickly without losing focus, or discussing information that is too general.
• Establish context by providing a brief and balanced review of the pertinent published literature that is available on the subject. The key is to summarize for the reader what is known about the specific research problem before you did your analysis. This part of your introduction should not represent a comprehensive literature review but consists of a general review of the important, foundational research literature (with citations) that lays a foundation for understanding key elements of the research problem. See the drop-down tab for "Background Information" for types of contexts.
• Clearly state the hypothesis that you investigated . When you are first learning to write in this format it is okay, and actually preferable, to use a past statement like, "The purpose of this study was to...." or "We investigated three possible mechanisms to explain the...."
• Why did you choose this kind of research study or design? Provide a clear statement of the rationale for your approach to the problem studied. This will usually follow your statement of purpose in the last paragraph of the introduction.

IV. Engaging the Reader

The overarching goal of your introduction is to make your readers want to read your paper. The introduction should grab your reader's attention. Strategies for doing this can be to:

• Open with a compelling story,
• Include a strong quotation or a vivid, perhaps unexpected anecdote,
• Pose a provocative or thought-provoking question,
• Describe a puzzling scenario or incongruity, or
• Cite a stirring example or case study that illustrates why the research problem is important.

NOTE:   Only choose one strategy for engaging your readers; avoid giving an impression that your paper is more flash than substance.

Freedman, Leora  and Jerry Plotnick. Introductions and Conclusions . University College Writing Centre. University of Toronto; Introduction . The Structure, Format, Content, and Style of a Journal-Style Scientific Paper. Department of Biology. Bates College; Introductions . The Writing Center. University of North Carolina; Introductions . The Writer’s Handbook. Writing Center. University of Wisconsin, Madison; Introductions, Body Paragraphs, and Conclusions for an Argument Paper. The Writing Lab and The OWL. Purdue University; Resources for Writers: Introduction Strategies . Program in Writing and Humanistic Studies. Massachusetts Institute of Technology; Sharpling, Gerald. Writing an Introduction . Centre for Applied Linguistics, University of Warwick; Writing Your Introduction. Department of English Writing Guide. George Mason University.

Writing Tip

Avoid the "Dictionary" Introduction

Giving the dictionary definition of words related to the research problem may appear appropriate because it is important to define specific words or phrases with which readers may be unfamiliar. However, anyone can look a word up in the dictionary and a general dictionary is not a particularly authoritative source. It doesn't take into account the context of your topic and doesn't offer particularly detailed information. Also, placed in the context of a particular discipline, a term may have a different meaning than what is found in a general dictionary. If you feel that you must seek out an authoritative definition, try to find one that is from subject specific dictionaries or encyclopedias [e.g., if you are a sociology student, search for dictionaries of sociology].

Saba, Robert. The College Research Paper . Florida International University; Introductions . The Writing Center. University of North Carolina.

Another Writing Tip

When Do I Begin?

A common question asked at the start of any paper is, "where should I begin?" An equally important question to ask yourself is, "When do I begin?" Research problems in the social sciences rarely rest in isolation from the history of the issue being investigated. It is, therefore, important to lay a foundation for understanding the historical context underpinning the research problem. However, this information should be brief and succinct and begin at a point in time that best informs the reader of study's overall importance. For example, a study about coffee cultivation and export in West Africa as a key stimulus for local economic growth needs to describe the beginning of exporting coffee in the region and establishing why economic growth is important. You do not need to give a long historical explanation about coffee exportation in Africa. If a research problem demands a substantial exploration of historical context, do this in the literature review section; note in the introduction as part of your "roadmap" [see below] that you covering this in the literature review.

Yet Another Writing Tip

Always End with a Roadmap

The final paragraph or sentences of your introduction should forecast your main arguments and conclusions and provide a description of the rest of the paper [a "roadmap"] that let's the reader know where you are going and what to expect.

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Writing the Research Objectives: 5 Straightforward Examples

The research objective of a research proposal or scientific article defines the direction or content of a research investigation. Without the research objectives, the proposal or research paper is in disarray. It is like a fisherman riding on a boat without any purpose and with no destination in sight. Therefore, at the beginning of any research venture, the researcher must be clear about what he or she intends to do or achieve in conducting a study.

How do you define the objectives of a study? What are the uses of the research objective? How would a researcher write this essential part of the research? This article aims to provide answers to these questions.

Table of Contents

Definition of a research objective.

A research objective describes, in a few words, the result of the research project after its implementation. It answers the question,

The research objective provides direction to the performance of the study.

What are the Uses of the Research Objective?

The uses of the research objective are enumerated below:

The research design serves as the “blueprint” for the research investigation. The University of Southern California describes the different types of research design extensively. It details the data to be gathered, data collection procedure, data measurement, and statistical tests to use in the analysis.

The variables of the study include those factors that the researcher wants to evaluate in the study. These variables narrow down the research to several manageable components to see differences or correlations between them.

Specifying the data collection procedure ensures data accuracy and integrity . Thus, the probability of error is minimized. Generalizations or conclusions based on valid arguments founded on reliable data strengthens research findings on particular issues and problems.

In data mining activities where large data sets are involved, the research objective plays a crucial role. Without a clear objective to guide the machine learning process, the desired outcomes will not be met.

How is the Research Objective Written?

A research objective must be achievable, i.e., it must be framed keeping in mind the available time, infrastructure required for research, and other resources.

Before forming a research objective, you should read about all the developments in your area of research and find gaps in knowledge that need to be addressed. Readings will help you come up with suitable objectives for your research project.

5 Examples of Research Objectives

The following examples of research objectives based on several published studies on various topics demonstrate how the research objectives are written:

Finally, writing the research objectives requires constant practice, experience, and knowledge about the topic investigated. Clearly written objectives save time, money, and effort.

Evans, K. L., Rodrigues, A. S., Chown, S. L., & Gaston, K. J. (2006). Protected areas and regional avian species richness in South Africa.  Biology letters ,  2 (2), 184-188.

Yeemin, T., Sutthacheep, M., & Pettongma, R. (2006). Coral reef restoration projects in Thailand.  Ocean & Coastal Management ,  49 (9-10), 562-575.

© 2020 March 23 P. A. Regoniel Updated 17 November 2020 | Updated 18 January 2024

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18 species of insects from a ceiling lamp, open access journals and blogs in research, examples for research design development, about the author, patrick regoniel.

Dr. Regoniel, a hobbyist writer, served as consultant to various environmental research and development projects covering issues and concerns on climate change, coral reef resources and management, economic valuation of environmental and natural resources, mining, and waste management and pollution. He has extensive experience on applied statistics, systems modelling and analysis, an avid practitioner of LaTeX, and a multidisciplinary web developer. He leverages pioneering AI-powered content creation tools to produce unique and comprehensive articles in this website.

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What are you doing and how are you doing it? Articulating your aims and objectives.

Mar 6, 2019

Have you checked out  the rest of  The PhD Knowledge Base ? It’s home to hundreds more free resources and guides, written especially for PhD students.

How long does it take the person reading your thesis to understand what you’re doing and how you’re doing it? If the answer is anything other than ’in the opening paragraphs of the thesis’ then keep reading.

If you tell them as early as possible what you’re doing and how you’re doing it – and do so in clear and simple terms – whatever you write after will make much more sense. If you leave them guessing for ten pages, everything they read in those ten pages has no coherence. You’ll know where it is all leading, but they won’t.

Unless you tell them.

If you tell the reader what you’re doing as early as possible in clear and simple terms, whatever you write after will make much more sense. 

What are aims & objectives?

If you build a house without foundations, it’s pretty obvious what will happen. It’ll collapse.  Your thesis is the same;  fail to build the foundations and your thesis just won’t work .

Your aims and objectives are those foundations. That’s why we’ve put them right at the top of our PhD Writing Template (if you haven’t already downloaded it, join the thousands who have by clicking   here ).

If you write your aims and objectives clearly then you’ll make your reader’s life easier.

A lot of students fail to clearly articulate their aims and objectives because they aren’t sure themselves what they actually are.

Picture this: if there’s one thing that every PhD student hates it’s being asked by a stranger what their research is on.

Your PhD thesis. All on one page.

Use our free PhD structure template to quickly visualise every element of your thesis. 

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Research aims

Your research aims are the answer to the question,   ‘What are you doing?’ 

1. You need to clearly describe what your intentions are and what you hope to achieve. These are your aims.

2. Your aims may be to test theory in a new empirical setting, derive new theory entirely, construct a new data-set, replicate an existing study, question existing orthodoxy, and so on. Whatever they are, clearly articulate them and do so early. Definitely include them in your introduction and, if you’re smart, you’ll  write them in your abstract .

3. Be very  explicit . In the opening paragraphs, say, in simple terms, ‘ the aim of this thesis is to …’

4. Think of your aims then as a statement of intent. They are  a promise to the reader  that you are going to do something. You use the next two hundred pages or so to follow through on that promise. If you don’t make the promise, the reader won’t understand your follow-through. Simple as that.

Because they serve as the starting point of the study, there needs to be a flow from your aims through your objectives (more on this below) to your research questions and contribution and then into the study itself. If you have completed your research and found that you answered a different question (not that uncommon), make sure your original aims are still valid. If they aren’t, refine them.

If you struggle to explain in simple terms what your research is about and why it matters, you may need to refine your aims and objectives to make them more concise.

When writing up your aims, there are a number of things to bear in mind.

1. Avoid listing too many. Your PhD isn’t as long as you think it is and you won’t have time or room for more than around two or three.

2. When you write them up, be very specific. Don’t leave things so vague that the reader is left unsure or unclear on what you aim to achieve.

3. Make sure there is a logical flow between each of your aims. They should make sense together and should each be separate components which, when added together, are bigger than the sum of their parts.

Research objectives

Your aims answer the question, ‘What are you doing?’ The   objectives are the answer to the question, ‘How are you doing it?’ 

Research objectives refer to the goals or steps that you will take to achieve your aims.

When you write them,   make sure they are SMART. 

• S pecific: talk in a precise and clear way about what you are going to do.
• M easurable: how will you know when you have achieved your aim?
• A chievable: make sure that you aren’t overly ambitious.
• R ealistic: recognise the time and resource constraints that come with doing a PhD and don’t attempt to do too much.
• T ime constrained: determine when each objective needs to be completed.

You need to be as explicit as possible here.  Leave the reader in no doubt about what you will do to achieve your aims.  Step by step. Leave no ambiguity. At the same time, be careful not to repeat your methods chapter here. Just hint at your methods by presenting the headlines. You’ll have plenty of space in your methods discussion to flesh out the detail. 

Elsewhere in the thesis you will necessarily have to talk in a complex language and juggle complex ideas. Here you don’t. You can write in clear, plain sentences.

What is the difference between research aims and objectives?

The aims of a study describe what you hope to achieve. The objectives detail how you are going to achieve your aims.

Let’s use an example to illustrate.

• To understand the contribution that local governments make to national level energy policy.

Objectives:

• Conduct a survey of local politicians to solicit responses.
• Conduct desk-research of local government websites to create a database of local energy policy.
• Interview national level politicians to understand the impact these local policies have had.
• Data will be coded using a code book derived from dominant theories of governance.

If you’re still struggling, Professor Pat Thompson’s great blog has   a guide   that will help.

Leave the reader in no doubt about what you will do to achieve your aims.  Step by step. Leave no ambiguity.

I can’t articulate them clearly, my research is complicated!

Of course your research is complex. That’s the name of the game. But   the sign of someone being able to   master   complexity is their ability to   summarise   it . Sure, you’re not looking to capture all the richness and detail in a short summary of aims and objectives, but you are looking to tell the reader what you’re doing and how you’re doing it.

If you’re struggling to clearly articulate your aims and objectives, then try the following task. At the top of a Post-it note write the sentence: ‘In this research I will…’. Then keep trying until you can fit an answer onto one single Post-it note. The answer should answer two questions: what are are you doing and how are you doing it?

Remember – whenever you write, make it as clear as possible. Pay attention to the words ‘as possible’ there. That means you should write as clearly as you can given the fact that your subject and research is necessarily complex. Think of it the other way: it’s about not making things more complicated and unclear than they need to be.

In other words, make your reader’s job as easy as you can. They’ll thank you for it.

If you’re still having trouble, get in touch to arrange a one-on-one coaching session and we can work through your aims and objectives together.

Share this:

32 comments.

The write up is quite inspiring.

My topic is setting up a healing gardens in hospitals Need a aim and objectives for a dissertation

Dis is really good and more understandable thanks

Crisp, concise, and easy to understnad. Thank you for posint this. I now know how to write up my report.

Great. Glad you found it useful.

Good piece of work! Very useful

Great. Glad you found it useful!

The write up makes sense

Great. Thanks!

I love this article. Amazing, outstanding and incredible facts.

Glad you found it useful!

Well written and easy to follow

Thank you for the comment, I’m really glad you found it valuable.

I’m currently developing a dissertation proposal for my PhD in organizational leadership. I need guidance in writing my proposal

Hey – have you checked out this guide? https://www.thephdproofreaders.com/writing/how-to-write-a-phd-proposal/

Indeed I’m impressed and gained a lot from this and I hope I can write an acceptable thesis with this your guide. Bello, H.K

Great. Thanks for the kind words. Good luck with the thesis.

Thumbs up! God job, well done. The information is quite concise and straight to the point.

Glad you thought so – good luck with the writing.

Dear Max, thank you so much for your work and efforts!

Your explanation about Aims and Objectives really helped me out. However, I got stuck with other parts of the Aims and Objectives Work Sheet: Scope, Main Argument, and Contribution.

Could you please explain these as well, preferably including some examples?

Thanks for your kind words. Your question is a big one! Without knowing lots about your topics/subject I’m not able to provide tailored advice, but broadly speaking your scope is the aims/objectives, your main argument is the thread running through the thesis (i.e. what your thesis is trying to argue) and the contribution (again, broadly speaking) is that gap you are filling.

I love your website and you’ve been so SO helpful..

DUMB QUESTION ALERT: Is there supposed to be a difference between aims and research question?

I mean, using your own example.. if the aim of my research is: “To understand the contribution that local governments make to national level energy policy” then wouldn’t the research question be: “How do local governments contribute to energy policy at national level”?

I am sorry if this comes out as completely obvious but I am at that stage of confusion where I am starting to question everything I know.

Sorry it’s taken me so long to reply! It’s not a dumb question at all. The aim of the study is what the study as a whole is seeking to achieve. So that might be the gap it is filling/the contribution it is making. The research questions are your means to achieving that aim. Your aim might be to fill a gap in knowledge, and you then may have a small number of questions that help you along that path. Does that make sense?

Thank you Max for this post! So helpful!

Thanks Anna!

Thanks so much this piece. I have written both bachelor’s and master’s thesis but haven’t read this made me feel like I didn’t know anything about research at all. I gained more insight into aims and objectives of academic researches.

Interesting explanation. Thank you.

I’m glad you found it useful.

Hi… I really like the way it is put “What are you going?” (Aims) and “How are you doing it?” (Objectives). Simple and straightforward. Thanks for making aims and objectives easy to understand.

Thank you for the write up it is insightful. if you are ask to discuss your doctoral aims. that means: what you are doing how you are doing it.

I was totally lost and still in the woods to the point of thinking I am dull, but looking at how you are coaching it tells me that i am just a student who needs to understand the lesson. I now believe that with your guidance i will pass my PhD. I am writing on an otherwise obvious subject, Value addition to raw materials, why Africa has failed to add value to raw materials? Difficult question as answers seem to abound, but that is where i differ and i seem to be against the general tide. However with your guidance I believe i will make it. Thanks.

Thanks for your lovely, kind words. So kind.

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Research Blog

How to write a research paper introduction (with examples).

I hope you enjoy reading this blog post.

If you would like to learn more about research, check out this  Research Course .

Welcome to our comprehensive guide on crafting the perfect introduction for your research paper. In this blog, we’ll explore the crucial elements of a strong introduction, highlight common pitfalls to avoid, and provide practical tips to effectively set the stage for your study’s objectives and significance. 

Table of Contents

Lack of a clear thesis statement, lack of clear objectives and scope, failure to establish the research significance, insufficient background information, inadequate literature review, ignoring the research gap, overly technical language, poor organization and flow, neglecting the audience, the importance of a good introduction.

A strong introduction sets the tone for the entire paper, guiding the reader through the research journey. It provides context, establishes relevance, and ensures the reader understands the importance of the study.

Starting a research project is exciting, but getting the introduction right is key. It’s like opening the door to your study and inviting readers in. However, there are some common missteps that can trip you up along the way.

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Common mistakes to avoid.

A thesis statement is the central argument or claim that guides the entire research paper. It is a concise summary of the main point or claim of the paper and is typically found at the end of the introduction. A clear thesis statement helps to focus the research, provide direction, and inform the reader of the paper’s purpose. Expert reviewers may even skip the rest of the introduction (as they are well versed in the topic) and focus only on your thesis statement, so it’s vital to make sure it is perfect!

When a research introduction lacks a clear thesis statement, several issues can arise:

• Ambiguity : Without a clear thesis, the reader may be confused about the paper’s purpose and the main argument. Do not talk in vague terms. Whenever possible, use terminology established in recent literature. Narrow down the key aspects of the association that you are investigating (the study sample, the outcome and predictor measures) as much as possible.
• Lack of Focus : The paper can become unfocused and meander through unrelated topics, making it difficult for the reader to follow the argument. Do not try to have more than 1-2 main aims in a paper. Even if you have done supplementary analysis, it is better to say so in the discussion. As a rule of thumb, try to answer one major question only!
• Weak Argumentation : A well-defined thesis provides a strong foundation for building arguments. Without it, the arguments may appear weak and unsupported.

Let's be more practical:

1- In this paper, I will discuss climate change.

• Problem: This statement is too broad and vague. It does not provide a clear direction or specific argument.

2- This paper argues that climate change, measured by global average temperature change, is primarily driven by human activities, such as deforestation and the burning of fossil fuels, and proposes policy measures to mitigate its impact.(1)

• Strengths: – Specificity : It clearly states that the paper will focus on human activities as the main drivers of climate change. – Argument : It presents a specific claim that the paper will argue. – Direction : It hints at the structure of the paper by mentioning policy measures.

If you would like to learn more about introductions and other aspects of clinical research, check out the Medical Research Course from the Match Guy here .

Powerful Tips:

• Be Specific : Clearly define the main argument or claim. Avoid vague or broad statements.
• Be Concise : Keep the thesis statement concise, ideally one to two sentences.
• Provide Direction : Indicate the structure of the paper by hinting at the main points that will be discussed.
• Revise as Needed : Be prepared to revise the thesis statement as your research progresses and your understanding deepens.

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A clear statement of objectives and scope is crucial in a research paper introduction because it outlines what the study aims to achieve and defines the boundaries within which the research will be conducted.

Example of Lacking Clear Objectives and Scope: This paper examines the impacts of climate change on agriculture.

• Problem : This statement is too broad and vague. It does not specify what aspects of climate change or agriculture will be studied, nor does it define the geographical or temporal scope.

Example with Clear Objectives and Scope: This study aims to investigate the effects of rising temperatures and changing precipitation patterns on crop yields in the Midwest United States from 2000 to 2010. The objectives are to (1) assess the impact of temperature changes on corn and soybean yields, (2) analyze how variations in precipitation affect crop growth, and (3) identify adaptive strategies employed by farmers in the region.(2)

Powerful tips:

• Be Specific : Clearly state what the study aims to achieve and avoid vague or broad statements.
• Identify Key Areas : Outline the main areas or aspects that the research will focus on.
• Set Boundaries : Define the geographical, temporal, and conceptual boundaries of the research.
• List Objectives : Clearly articulate specific research objectives or questions that the study will address.
• Stay Realistic : Ensure that the objectives and scope are achievable within the constraints of the research project.
• Make it flow : Make sure you are not repeating the same concepts as the thesis statement, as these two sections are often presented back-to-back in the final paragraph of the introduction! Remember: the thesis statement is your hypothesis or question, and your objectives are ‘how’ you are going to test your thesis.

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This mistake can result in the research appearing trivial or irrelevant, diminishing its potential impact. When the significance of the research is not well-established, readers may struggle to understand the value of the study and why they should care about it.

Example of Failure to Establish Research Significance: This study investigates the effects of social media usage on sleep patterns among teenagers.

• Problem : The significance of studying social media’s impact on sleep patterns is not explained. The reader may wonder why this research is important or what implications it has.

Example with Established Research Significance: This study investigates the effects of social media usage on sleep patterns among teenagers. Understanding this relationship is crucial because insufficient sleep is linked to numerous health issues, including decreased academic performance, heightened stress levels, and increased risk of mental health problems. With the pervasive use of social media among adolescents, identifying how it impacts sleep can inform strategies for promoting healthier habits and improving overall well-being in this vulnerable age group.(3)

• Link to Broader Issues : Connect the research topic to broader issues or trends that highlight its relevance and importance.
• Explain Practical Implications : Discuss the potential practical applications or benefits of the research findings.
• Address Gaps in Knowledge : Identify gaps in the existing literature that the research aims to fill.
• Highlight Potential Impact : Emphasize the potential impact of the research on the field, society, or specific populations.
• Use Concrete Examples : Provide concrete examples or scenarios to illustrate the significance of the research.

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Insufficient background information in the introduction of a research paper refers to failing to provide enough context for the reader to understand the research problem and its significance. Background information sets the stage for the research by offering necessary details about the topic, relevant theories, previous studies, and key terms.

This may lead to:

• Reader Confusion : Without adequate context, readers may struggle to understand the research question, its importance, and how it fits into the broader field of study.
• Weak Justification : Insufficient background can undermine the rationale for the research, making it difficult to justify why the study is necessary or valuable.
• Misinterpretation : Lack of context can lead to misinterpretation of the research objectives, methods, and findings.

Example of Insufficient Background Information: In recent years, many researchers have studied the effects of social media on teenagers. This paper explores the relationship between social media use and anxiety among teenagers.

• Problem : This introduction lacks specific details about the previous research, the theoretical framework, and key terms. It does not provide enough context for the reader to understand why the study is important.

Example of Adequate Background Information: Social media platforms have become an integral part of teenagers’ daily lives, with studies showing that 95% of teens have access to a smartphone and 45% are online almost constantly. Previous research has linked excessive social media use to various mental health issues, including anxiety and depression. However, the mechanisms underlying this relationship remain unclear. This paper explores the impact of social media use on anxiety levels among teenagers, focusing on the roles of social comparison and cyberbullying.(4)

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• Review Relevant Literature : Summarize key studies and theories related to your topic.
• Provide Context : Explain the broader context of your research problem.
• Define Key Terms : Ensure that any specialized terms or concepts are clearly defined.
• Identify the Research Gap : Highlight what is not yet known or understood about your topic.
• Be Concise : Provide enough information to set the stage without overwhelming the reader with details.

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This mistake can occur when the literature review is too brief, lacks depth, omits key studies, or fails to critically analyze previous work. An inadequate literature review can undermine the foundation of the research by failing to provide the necessary context and justification for the study.

Inadequate Literature Review: There has been some research on the relationship between exercise and mental health. This paper will investigate this relationship further.

• Problem : This review is too general and does not provide sufficient detail about the existing research or how it informs the current study.

Example with Adequate Literature Review: Research has consistently shown that regular physical activity has positive effects on mental health. For example, a study by Gujral et al. (2019) demonstrated that aerobic exercise can significantly reduce symptoms of depression and anxiety. Similarly, Smith and Lee (2020) found that strength training also contributes to improved mood and reduced stress levels. However, much of the existing research has focused on adult populations, with relatively few studies examining these effects in adolescents. Additionally, the specific types of exercise that are most beneficial for different mental health outcomes have not been thoroughly investigated. This study aims to explore the effects of various types of exercise on the mental health of high school students, thereby addressing these gaps in the literature.(5-6)

• Be Comprehensive : Review a broad range of studies related to the research topic to provide a thorough context.
• Be Specific : Cite specific studies, including their methodologies, findings, and relevance to the current research.
• Be Critical : Analyze and evaluate the existing research, identifying strengths, weaknesses, and gaps.
• Be Structured : Organize the literature review logically, grouping studies by themes or findings to create a coherent narrative.
• Be Relevant : Focus on the most relevant studies that directly relate to the research question and objectives.

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Ignoring the research gap in a research paper introduction means failing to identify and articulate what specific aspect of the topic has not been explored or adequately addressed in existing literature. The research gap is a critical component because it justifies the necessity and originality of the study. Without highlighting this gap, the research may appear redundant or lacking in significance.

How huge is this mistake?

• Lack of Justification : The study may not appear necessary or relevant, diminishing its perceived value.
• Redundancy : The research may seem to duplicate existing studies, offering no new insights or contributions to the field. Even if you are using methodology similar to previous studies, it is important to note why you are doing so e.g., few studies have used that specific methodology, and you would like to validate it in your sample population!
• Reader Disinterest : Readers may lose interest if they do not see the unique contribution or purpose of the research.

Example of Ignoring the Research Gap: Many studies have examined the effects of exercise on mental health. This paper looks at the relationship between physical activity and depression.

• Problem : This introduction does not specify what aspect of the relationship between physical activity and depression has not been studied, failing to highlight the unique contribution of the research.

Example of Identifying the Research Gap: Numerous studies have demonstrated the general benefits of physical activity on mental health, particularly its role in alleviating symptoms of depression. However, there is limited research on how different types of exercise (e.g., aerobic vs. anaerobic) specifically impact depression levels among various age groups. This study investigates the differential effects of aerobic and anaerobic exercise on depression in young adults, aiming to fill this gap in the literature.(6)

• Conduct a Thorough Literature Review : Understand the current state of research in your field to identify what has been studied and where gaps exist.
• Be Specific : Clearly articulate what specific aspect has not been covered in existing studies.
• Link to Your Study : Explain how your research will address this gap and contribute to the field.
• Use Evidence : Support your identification of the gap with references to previous studies.
• Emphasize Significance : Highlight why filling this gap is important for advancing knowledge or practical applications.

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Overly technical language refers to the excessive use of jargon, complex terms, and highly specialized language that may be difficult for readers, especially those not familiar with the field, to understand. While technical language is sometimes necessary in academic writing, overusing it in the introduction can create several problems:

• Reader Alienation : Readers may find the text intimidating or inaccessible, leading to disengagement.
• Lack of Clarity : The main points and significance of the research can become obscured by complex terminology.
• Reduced Impact : The research may fail to communicate its importance effectively if readers struggle to understand the introduction.

Example of Overly Technical Language: The present study examines the metacognitive strategies employed by individuals in the domain of second language acquisition, specifically focusing on the interaction between declarative and procedural memory systems in the process of syntactic parsing.

• Problem : This sentence is loaded with jargon (“metacognitive strategies,” “second language acquisition,” “declarative and procedural memory systems,” “syntactic parsing”), which can be overwhelming and confusing for readers not familiar with these terms.

Example with Simplified Language: This study looks at the thinking strategies people use when learning a second language. It focuses on how different types of memory, such as the knowledge of facts and the skills for doing things, help in understanding sentence structures.(7)

• Know Your Audience : Tailor the language to the intended audience, ensuring it is accessible to both specialists and non-specialists.
• Define Term s: When technical terms are necessary, provide clear definitions or explanations.
• Use Analogies : Simplify complex concepts using analogies or examples that are easy to understand.
• Avoid Jargon : Limit the use of jargon and specialized terms, especially in the introduction.
• Seek Feedback : Ask peers or non-experts to read the introduction and provide feedback on clarity and accessibility.

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Poor organization and flow in a research paper introduction refer to a lack of logical structure and coherence that makes the introduction difficult to follow. This can occur when ideas are presented in a haphazard manner, transitions between sections are weak or non-existent, and the overall narrative is disjointed. A well-organized introduction should smoothly guide the reader from the general context to the specific objectives of the study.

Example of Poor Organization and Flow: “Climate change affects agriculture in various ways. Many studies have looked at the impact on crop yields. This paper will discuss the economic implications of these changes. Climate models predict increased variability in weather patterns, which will affect water availability. Researchers have found that higher temperatures reduce the growing season for many crops.”

• Problem : The ideas are presented in a scattered manner without clear connections. The mention of economic implications seems out of place, and there are abrupt shifts between topics.

Example with Good Organization and Flow: Climate change poses significant challenges to agriculture by altering weather patterns, impacting crop yields, and affecting water availability. Numerous studies have shown that increased temperatures can shorten the growing season for many crops, leading to reduced yields. Additionally, climate models predict increased variability in weather patterns, which complicates water management for farmers. These changes not only affect food production but also have substantial economic implications for agricultural communities. This paper will examine the economic impacts of climate-induced changes in agriculture, focusing on crop yield variability and water resource management.(1)

• Create an Outline : Before writing, outline the main points you want to cover in the introduction.
• Think in terms of an inverted triangle : Begin broadly to introduce basic concepts related to your topic. As you progress through the introduction, you can introduce more and more specific topics until you have enough information to justify your thesis statement
• Use Transitional Phrases : Employ transitional phrases and sentences to connect ideas and sections smoothly.
• Follow a Logical Sequence : Present information in a logical order, moving from general context to specific objectives.
• Maintain Focus : Stay focused on the main topic and avoid introducing unrelated ideas.
• Revise for Coherence : Review and revise the introduction to ensure that it flows well and that each part contributes to the overall narrative.

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Neglecting the audience refers to failing to consider the background, knowledge level, and interests of the intended readers when writing the introduction of a research paper. This mistake can manifest in several ways, such as using overly technical language for a general audience, providing insufficient background information for readers unfamiliar with the topic, or failing to engage the readers’ interest.

Example of Neglecting the Audience: For experts in genomic sequencing, this study explores the epigenetic modifications resulting from CRISPR-Cas9 interventions, focusing on the methylation patterns and histone modifications observed in gene-edited cells.

• Problem : This introduction assumes a high level of expertise in genomic sequencing and epigenetics, which may alienate readers without this background.

Example with Audience Consideration: CRISPR-Cas9 is a groundbreaking tool in genetic research that allows scientists to edit DNA with precision. However, altering genes can lead to unexpected changes in how genes are expressed, known as epigenetic modifications. This study investigates these changes by looking at specific markers on DNA, such as methylation patterns, and how they affect gene activity in cells that have been edited using CRISPR-Cas9. Our goal is to understand the broader implications of gene editing on cellular functions, which is crucial for advancing medical research and treatments.(8)

• Identify the Audience : Determine who the intended readers are (e.g., experts, students, general public) and tailor the language and content accordingly. Read papers from the journals you are considering for submission. Professional editors curate the language used in these papers and are a great starting point to identify the level of expertise of your audience!
• Simplify Language : Use clear and straightforward language, avoiding jargon and technical terms unless they are necessary and well-explained.
• Provide Background Information : Include sufficient background information to help readers understand the context and significance of the research.
• Engage the Reader : Start with an engaging introduction that highlights the relevance and importance of the research topic.
• Anticipate Questions : Consider what questions or concerns the audience might have and address them in the introduction

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By following these guidelines and avoiding common pitfalls, you can create an introduction that not only grabs the attention of your readers but also sets the stage for a compelling and impactful research paper.

Final Tips:

• Revise and refine your introduction multiple times to ensure clarity and coherence.
• Seek feedback from peers, mentors, or advisors to identify areas for improvement.
• Keep your audience in mind and tailor your language and content to their needs and interests.
• Stay focused on your research objectives and ensure that every part of your introduction contributes to achieving them.
• Be confident in the significance of your research and its potential impact on your field or community.

Let your introduction be more than just words on a page. It’s a doorway to understanding. To help you along, we’ve created a practical course on writing and publishing research projects. It’s 100% risk-free, with a money-back guarantee if you’re not satisfied. Try it out now by clicking here .

Wishing you success on your research journey!

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1. Abbass K, Qasim MZ, Song H, Murshed M, Mahmood H, Younis I. A review of the global climate change impacts, adaptation, and sustainable mitigation measures. Environ Sci Pollut Res. 2022;29(28):42539-42559. doi:10.1007/s11356-022-19718-6

2. Cai X, Wang D, Laurent R. Impact of climate change on crop yield: a case study of rainfed corn in central illinois. Journal of Applied Meteorology and Climatology. 2009;48(9):1868-1881. doi:10.1175/2009JAMC1880.1

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4. Schmitt, M. (2021). Effects of social media and technology on adolescents: What the evidence is showing and what we can do about it. Journal of Family and Consumer Sciences Education, 38(1), 51-59.

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6. Smith PJ, Merwin RM. The role of exercise in management of mental health disorders: an integrative review. Annu Rev Med. 2021;72(1):45-62. doi:10.1146/annurev-med-060619-022943

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Home » Significance of the Study – Examples and Writing Guide

Significance of the Study – Examples and Writing Guide

Table of Contents

Significance of the Study

Definition:

Significance of the study in research refers to the potential importance, relevance, or impact of the research findings. It outlines how the research contributes to the existing body of knowledge, what gaps it fills, or what new understanding it brings to a particular field of study.

In general, the significance of a study can be assessed based on several factors, including:

• Originality : The extent to which the study advances existing knowledge or introduces new ideas and perspectives.
• Practical relevance: The potential implications of the study for real-world situations, such as improving policy or practice.
• Theoretical contribution: The extent to which the study provides new insights or perspectives on theoretical concepts or frameworks.
• Methodological rigor : The extent to which the study employs appropriate and robust methods and techniques to generate reliable and valid data.
• Social or cultural impact : The potential impact of the study on society, culture, or public perception of a particular issue.

Types of Significance of the Study

The significance of the Study can be divided into the following types:

Theoretical Significance

Theoretical significance refers to the contribution that a study makes to the existing body of theories in a specific field. This could be by confirming, refuting, or adding nuance to a currently accepted theory, or by proposing an entirely new theory.

Practical Significance

Practical significance refers to the direct applicability and usefulness of the research findings in real-world contexts. Studies with practical significance often address real-life problems and offer potential solutions or strategies. For example, a study in the field of public health might identify a new intervention that significantly reduces the spread of a certain disease.

Significance for Future Research

This pertains to the potential of a study to inspire further research. A study might open up new areas of investigation, provide new research methodologies, or propose new hypotheses that need to be tested.

How to Write Significance of the Study

Here’s a guide to writing an effective “Significance of the Study” section in research paper, thesis, or dissertation:

• Background : Begin by giving some context about your study. This could include a brief introduction to your subject area, the current state of research in the field, and the specific problem or question your study addresses.
• Identify the Gap : Demonstrate that there’s a gap in the existing literature or knowledge that needs to be filled, which is where your study comes in. The gap could be a lack of research on a particular topic, differing results in existing studies, or a new problem that has arisen and hasn’t yet been studied.
• State the Purpose of Your Study : Clearly state the main objective of your research. You may want to state the purpose as a solution to the problem or gap you’ve previously identified.
• Contributes to the existing body of knowledge.
• Addresses a significant research gap.
• Offers a new or better solution to a problem.
• Impacts policy or practice.
• Leads to improvements in a particular field or sector.
• Identify Beneficiaries : Identify who will benefit from your study. This could include other researchers, practitioners in your field, policy-makers, communities, businesses, or others. Explain how your findings could be used and by whom.
• Future Implications : Discuss the implications of your study for future research. This could involve questions that are left open, new questions that have been raised, or potential future methodologies suggested by your study.

Significance of the Study in Research Paper

The Significance of the Study in a research paper refers to the importance or relevance of the research topic being investigated. It answers the question “Why is this research important?” and highlights the potential contributions and impacts of the study.

The significance of the study can be presented in the introduction or background section of a research paper. It typically includes the following components:

• Importance of the research problem: This describes why the research problem is worth investigating and how it relates to existing knowledge and theories.
• Potential benefits and implications: This explains the potential contributions and impacts of the research on theory, practice, policy, or society.
• Originality and novelty: This highlights how the research adds new insights, approaches, or methods to the existing body of knowledge.
• Scope and limitations: This outlines the boundaries and constraints of the research and clarifies what the study will and will not address.

Suppose a researcher is conducting a study on the “Effects of social media use on the mental health of adolescents”.

The significance of the study may be:

“The present study is significant because it addresses a pressing public health issue of the negative impact of social media use on adolescent mental health. Given the widespread use of social media among this age group, understanding the effects of social media on mental health is critical for developing effective prevention and intervention strategies. This study will contribute to the existing literature by examining the moderating factors that may affect the relationship between social media use and mental health outcomes. It will also shed light on the potential benefits and risks of social media use for adolescents and inform the development of evidence-based guidelines for promoting healthy social media use among this population. The limitations of this study include the use of self-reported measures and the cross-sectional design, which precludes causal inference.”

Significance of the Study In Thesis

The significance of the study in a thesis refers to the importance or relevance of the research topic and the potential impact of the study on the field of study or society as a whole. It explains why the research is worth doing and what contribution it will make to existing knowledge.

For example, the significance of a thesis on “Artificial Intelligence in Healthcare” could be:

• With the increasing availability of healthcare data and the development of advanced machine learning algorithms, AI has the potential to revolutionize the healthcare industry by improving diagnosis, treatment, and patient outcomes. Therefore, this thesis can contribute to the understanding of how AI can be applied in healthcare and how it can benefit patients and healthcare providers.
• AI in healthcare also raises ethical and social issues, such as privacy concerns, bias in algorithms, and the impact on healthcare jobs. By exploring these issues in the thesis, it can provide insights into the potential risks and benefits of AI in healthcare and inform policy decisions.
• Finally, the thesis can also advance the field of computer science by developing new AI algorithms or techniques that can be applied to healthcare data, which can have broader applications in other industries or fields of research.

Significance of the Study in Research Proposal

The significance of a study in a research proposal refers to the importance or relevance of the research question, problem, or objective that the study aims to address. It explains why the research is valuable, relevant, and important to the academic or scientific community, policymakers, or society at large. A strong statement of significance can help to persuade the reviewers or funders of the research proposal that the study is worth funding and conducting.

Here is an example of a significance statement in a research proposal:

Title : The Effects of Gamification on Learning Programming: A Comparative Study

Significance Statement:

This proposed study aims to investigate the effects of gamification on learning programming. With the increasing demand for computer science professionals, programming has become a fundamental skill in the computer field. However, learning programming can be challenging, and students may struggle with motivation and engagement. Gamification has emerged as a promising approach to improve students’ engagement and motivation in learning, but its effects on programming education are not yet fully understood. This study is significant because it can provide valuable insights into the potential benefits of gamification in programming education and inform the development of effective teaching strategies to enhance students’ learning outcomes and interest in programming.

Examples of Significance of the Study

Here are some examples of the significance of a study that indicates how you can write this into your research paper according to your research topic:

Research on an Improved Water Filtration System : This study has the potential to impact millions of people living in water-scarce regions or those with limited access to clean water. A more efficient and affordable water filtration system can reduce water-borne diseases and improve the overall health of communities, enabling them to lead healthier, more productive lives.

Study on the Impact of Remote Work on Employee Productivity : Given the shift towards remote work due to recent events such as the COVID-19 pandemic, this study is of considerable significance. Findings could help organizations better structure their remote work policies and offer insights on how to maximize employee productivity, wellbeing, and job satisfaction.

Investigation into the Use of Solar Power in Developing Countries : With the world increasingly moving towards renewable energy, this study could provide important data on the feasibility and benefits of implementing solar power solutions in developing countries. This could potentially stimulate economic growth, reduce reliance on non-renewable resources, and contribute to global efforts to combat climate change.

Research on New Learning Strategies in Special Education : This study has the potential to greatly impact the field of special education. By understanding the effectiveness of new learning strategies, educators can improve their curriculum to provide better support for students with learning disabilities, fostering their academic growth and social development.

Examination of Mental Health Support in the Workplace : This study could highlight the impact of mental health initiatives on employee wellbeing and productivity. It could influence organizational policies across industries, promoting the implementation of mental health programs in the workplace, ultimately leading to healthier work environments.

Evaluation of a New Cancer Treatment Method : The significance of this study could be lifesaving. The research could lead to the development of more effective cancer treatments, increasing the survival rate and quality of life for patients worldwide.

When to Write Significance of the Study

The Significance of the Study section is an integral part of a research proposal or a thesis. This section is typically written after the introduction and the literature review. In the research process, the structure typically follows this order:

• Title – The name of your research.
• Abstract – A brief summary of the entire research.
• Introduction – A presentation of the problem your research aims to solve.
• Literature Review – A review of existing research on the topic to establish what is already known and where gaps exist.
• Significance of the Study – An explanation of why the research matters and its potential impact.

In the Significance of the Study section, you will discuss why your study is important, who it benefits, and how it adds to existing knowledge or practice in your field. This section is your opportunity to convince readers, and potentially funders or supervisors, that your research is valuable and worth undertaking.

Advantages of Significance of the Study

The Significance of the Study section in a research paper has multiple advantages:

• Establishes Relevance: This section helps to articulate the importance of your research to your field of study, as well as the wider society, by explicitly stating its relevance. This makes it easier for other researchers, funders, and policymakers to understand why your work is necessary and worth supporting.
• Guides the Research: Writing the significance can help you refine your research questions and objectives. This happens as you critically think about why your research is important and how it contributes to your field.
• Attracts Funding: If you are seeking funding or support for your research, having a well-written significance of the study section can be key. It helps to convince potential funders of the value of your work.
• Opens up Further Research: By stating the significance of the study, you’re also indicating what further research could be carried out in the future, based on your work. This helps to pave the way for future studies and demonstrates that your research is a valuable addition to the field.
• Provides Practical Applications: The significance of the study section often outlines how the research can be applied in real-world situations. This can be particularly important in applied sciences, where the practical implications of research are crucial.
• Enhances Understanding: This section can help readers understand how your study fits into the broader context of your field, adding value to the existing literature and contributing new knowledge or insights.

Limitations of Significance of the Study

The Significance of the Study section plays an essential role in any research. However, it is not without potential limitations. Here are some that you should be aware of:

• Subjectivity: The importance and implications of a study can be subjective and may vary from person to person. What one researcher considers significant might be seen as less critical by others. The assessment of significance often depends on personal judgement, biases, and perspectives.
• Predictability of Impact: While you can outline the potential implications of your research in the Significance of the Study section, the actual impact can be unpredictable. Research doesn’t always yield the expected results or have the predicted impact on the field or society.
• Difficulty in Measuring: The significance of a study is often qualitative and can be challenging to measure or quantify. You can explain how you think your research will contribute to your field or society, but measuring these outcomes can be complex.
• Possibility of Overstatement: Researchers may feel pressured to amplify the potential significance of their study to attract funding or interest. This can lead to overstating the potential benefits or implications, which can harm the credibility of the study if these results are not achieved.
• Overshadowing of Limitations: Sometimes, the significance of the study may overshadow the limitations of the research. It is important to balance the potential significance with a thorough discussion of the study’s limitations.
• Dependence on Successful Implementation: The significance of the study relies on the successful implementation of the research. If the research process has flaws or unexpected issues arise, the anticipated significance might not be realized.

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Defining Success: Key Objectives for Your Research Paper

Defining success in your research paper begins with establishing clear and precise objectives. These objectives serve as the roadmap that guides your study, determines your methodology, and ultimately influences your research outcomes. Whether you are a novice researcher or an experienced scholar, understanding how to craft effective objectives is crucial for the success of your research project.

Key Takeaways

• Clear objectives are essential for guiding the direction and scope of your research.
• Using the SMART criteria can help in formulating specific, measurable, achievable, relevant, and time-bound objectives.
• Aligning your research objectives with your research questions ensures coherence and relevance in your study.
• Continuous assessment and refinement of objectives are necessary to adapt to new insights and maintain focus.
• Effective research objectives have both theoretical and practical implications, influencing the overall success of your research.

Understanding the Role of Objectives in Research Papers

Research is at the center of everything researchers do, and setting clear, well-defined research objectives plays a pivotal role in guiding scholars toward their desired outcomes. Research papers are essential instruments for researchers to effectively communicate their work. Among the many sections that constitute a research paper, the introduction plays a key role in providing a background and setting the context. Research objectives, which define the aims of the study, are usually stated in the introduction.

Formulating Specific and Measurable Objectives

Well-defined research objectives are characterized by the SMART criteria – Specific, Measurable, Achievable, Relevant, and Time-bound. Specific objectives clearly define what you plan to achieve, eliminating any ambiguity. Measurable objectives allow you to track progress and assess the outcome. Achievable objectives are realistic, considering the research sources and time available. Relevant objectives align with the broader goals of your field or research question. Finally, Time-bound objectives ensure that you have a clear timeline for achieving your goals.

Applying the SMART Criteria

The SMART criteria provide a structured approach to formulating research objectives. Specific objectives eliminate ambiguity by clearly defining what you plan to achieve. Measurable objectives allow you to track progress and assess outcomes. Achievable objectives are realistic, considering the research sources and time available. Relevant objectives align with the broader goals of your field or research question. Time-bound objectives ensure that you have a clear timeline for achieving your goals.

Examples of Specific Objectives

When setting specific objectives, it is crucial to focus on clear and concise goals. For instance, instead of stating, "Improve understanding of climate change," a specific objective would be, "Analyze the impact of industrial emissions on local climate patterns over the past decade." This approach eliminates ambiguity and provides a clear direction for your research.

Measuring Success in Research

Measuring success in research involves identifying precise methods for collecting and interpreting data. It is essential to know when you have achieved your objective and how best to measure your success. Attempt to set objectives that you can achieve with the time and resources at your disposal. Try to make your objectives relevant to your area of interest. If your objectives are well-defined, they will help develop the overall research methodology, including data collection, analysis, interpretation, and utilization.

Aligning Objectives with Research Questions

Connecting objectives to research questions.

The harmony between research objectives and research questions is critical. Objectives define what you aim to achieve, while research questions specify what you seek to understand. Ensuring that your research objectives directly align with the broader research questions or hypotheses that guide your study is essential. They should help you address those overarching inquiries.

Ensuring Relevance and Coherence

Objectives should be directly relevant to the research topic and the overall purpose of the study. Avoid including objectives that do not contribute to answering your research questions or testing your hypotheses. This strategic alignment underscores the integrity and relevance of the research. As scholars venture into the vast terrains of knowledge, the clarity and precision of their objectives serve as beacons of light, steering their explorations toward discoveries that advance academic discourse and resonate with the broader societal needs.

Case Studies of Effective Alignment

Consider the following case studies that illustrate effective alignment between research objectives and research questions:

• Case Study 1: A study on the impact of social media on youth mental health had objectives to investigate the frequency of social media use and analyze its correlation with anxiety levels. The research questions focused on understanding how social media usage patterns affect mental health outcomes.
• Case Study 2: Research on renewable energy adoption aimed to examine the factors influencing the adoption of solar energy systems. The objectives included determining the key barriers and facilitators, while the research questions sought to explore the relationship between policy incentives and adoption rates.
• Case Study 3: An investigation into educational technology's role in enhancing learning outcomes had objectives to evaluate the effectiveness of specific tools and methods. The research questions were designed to assess how these technologies impact student engagement and performance.

These examples highlight the importance of aligning your objectives with your research questions to ensure a coherent and focused study.

Challenges in Setting Research Objectives

Common pitfalls to avoid.

When setting research objectives, several common pitfalls can hinder your progress. One major issue is the lack of clarity, which can make it difficult to draw meaningful conclusions or implications. Another common mistake is being too ambitious, leading to unrealistic expectations that are hard to achieve within the constraints of the research project. Additionally, a lack of alignment between your objectives and research questions can derail your study. Ensuring that your objectives are clear, feasible, and aligned with your research questions is crucial for success.

Strategies for Overcoming Challenges

To overcome these challenges, you should start by clearly defining your research objectives. Use the SMART criteria—Specific, Measurable, Achievable, Relevant, and Time-bound—to ensure your objectives are well-structured. Regularly revisiting and refining your objectives can also help you stay on track. Engaging with peers or mentors for feedback can provide new insights and help you refine your objectives further. Exploring limitations and preparing for successful qualitative interviews with clear research objectives can also be beneficial.

Real-World Examples

Consider the case of a researcher who initially set broad and vague objectives. By refining these objectives to be more specific and measurable, the researcher was able to design more effective experiments and achieve more meaningful results. Another example involves a study where the objectives were not aligned with the research questions. By realigning the objectives, the researcher was able to produce more coherent and relevant findings. These examples highlight the importance of continuous assessment and refinement of your research objectives.

Evaluating and Refining Research Objectives

Evaluating and refining your research objectives is a crucial step in ensuring the success of your study. Clear objectives can help determine if experiments or studies successfully achieve their goals. After you set your objectives and begin your research, refer back to them and ensure your work moves towards completion. You can always update your objectives and pursue a new line of inquiry if you encounter potential difficulties in your research or discover new information. Research often involves making adjustments and solving problems, so keep working if your initial objectives lead you to inconclusive results. Continue refining your objectives until you complete your research.

Theoretical and Practical Implications of Research Objectives

Research objectives play a pivotal role in shaping both the theoretical and practical dimensions of your study. By clearly defining your objectives, you not only set the scope of your research but also direct every phase of the research process, from formulating research questions to interpreting research findings. This alignment ensures that your study remains focused and relevant, ultimately contributing valuable knowledge to your field.

Influence on Theoretical Frameworks

The theoretical framework must demonstrate an understanding of theories and concepts that are relevant to the topic of your research paper and that relate to your objectives. By setting clear objectives, you can effectively guide your literature review, enabling you to focus on relevant studies and theoretical frameworks that directly inform your research goals. This approach not only strengthens the theoretical foundation of your study but also enhances its academic rigor.

Practical Applications in Research

Clear research objectives are essential for the practical execution of your study. They provide a roadmap for how you’ll collect and analyze data, ensuring that your methodology is aligned with your research goals. This alignment is crucial for producing reliable and valid results that can be applied in real-world settings. By bridging theory with practical examples, you can illuminate the path to crafting effective research objectives that are both ambitious and attainable.

Balancing Theory and Practice

Balancing theoretical and practical aspects in your research is vital for achieving comprehensive and impactful outcomes. Well-defined objectives help you maintain this balance by ensuring that your study is grounded in theory while also addressing practical implications. This dual focus not only enhances the relevance of your research but also increases its potential for real-world application. By continuously assessing and refining your objectives, you can adapt to new insights and ensure that your research remains both theoretically sound and practically significant.

Understanding the theoretical and practical implications of research objectives is crucial for any academic endeavor. Our comprehensive guides and innovative worksheets at Research Rebels are designed to bridge the gap between theory and practice, ensuring you can apply your knowledge effectively. Don't let thesis anxiety hold you back. Visit our website to explore our step-by-step Thesis Action Plan and claim your special offer now!

In conclusion, defining clear and precise objectives is a fundamental step in the research process. These objectives serve as the guiding framework that shapes the direction and scope of your study, ensuring that your research remains focused and relevant. By adhering to the SMART criteria—Specific, Measurable, Achievable, Relevant, and Time-bound—you can formulate objectives that are both ambitious and attainable. This not only enhances the quality and impact of your research but also provides a clear roadmap for achieving your academic goals. As you embark on your research journey, remember that well-defined objectives are the cornerstone of a successful research paper, enabling you to navigate the complexities of your study with confidence and clarity.

Frequently Asked Questions

What are research objectives.

Research objectives are specific, measurable goals that a research project aims to achieve. They guide the direction of the study and help in focusing on specific areas of interest.

Why are clear objectives important in research papers?

Clear objectives are essential as they provide a roadmap for the research, ensuring that the study remains focused and relevant. They also help in measuring the success of the research.

How can I formulate specific and measurable objectives?

You can use the SMART criteria to formulate objectives. This means making them Specific, Measurable, Achievable, Relevant, and Time-bound.

What is the relationship between research questions and objectives?

Research questions define what the study aims to explore, while objectives outline how the study will achieve this exploration. They should be closely aligned to ensure coherence and relevance.

What are some common pitfalls to avoid when setting research objectives?

Common pitfalls include setting vague or overly broad objectives, not aligning them with research questions, and failing to make them measurable or achievable.

How can I refine my research objectives during the study?

Continuous assessment and adapting to new insights are key. Use tools and feedback to refine objectives, ensuring they remain relevant and achievable throughout the research process.

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