I need help with disclosures for a new CD on which the rate increases with changes in prime; however, the CD rate only increases at 50% of the increase in prime. Since the margin will change over the life of this CD, can we just explain how the rate changes and when without disclosing a margin? Thanks.

Are you saying that the interest rate moves in a 50% proportional ratio to the prime rate (for example, a 50 basis-point move in prime, or .5%, will reuslt in a .25% change in the interest rate)?

If so, how about something like:

The interest rate and corresponding annual percentage yield on your account are dependent on the Prime Rate as published in the Wall Street Journal. Your interest rate will change in direct proportion to 1/2 of any rate change in the corresponding index. We may change the rate on your account every time the Prime Rate as published by the Wall Street Journal changes.

You would have to also include any limits or caps on rate changes, including any ceiling or floors.

Yes, that is how it works. There is no cap (it's a short-term product) and rates can only go up. We have another CD that reprices, up and down, the same as any changes in prime (also has a cap), and we disclose the rates as prime minus a specified margin. I was concerned in that we cannot disclose a set margin on this newer CD to meet the requirement for describing how the rate changed. I think that just describing it should suffice.