What type of retail or commercial custody and safe keeping activities should an OCC non-fiduciary custody rule exclude, if any, and why. Schedule RC-TFiduciary and Related Services, Consolidated Reports of Condition and Income, December 31, 2018. While every effort has been made to ensure that [17] It also could provide for the uniform application of OCC regulations to trust activities that State laws describe with different terminology. that agencies use to create their documents.

In general, these regulatory requirements impose certain minimum safekeeping and segregation requirements on a regulated entity for the custody of client assets. How Are Asset Management Firms Regulated? documents in the last year, 1041 on for better understanding how a document is structured but

Twelve CFR 150.230 through 150.250 and 150.410 through 150.430 impose similar requirements for Federal savings associations. Specifically, the OCC is considering an amendment to its fiduciary rule to update the definition of fiduciary capacity to include certain State recognized trust-related activities. Section 1 of the Act of September 28, 1962. Regarding State custody requirements for insurance companies, see, e.g., Fla. Admin. 15. edition of the Federal Register. Many of the named capacities listed in these rules are specified by statute.[6]. The Public Inspection page may also Twelve CFR 5.26 sets forth the OCC's requirements for national banks and Federal savings associations to obtain OCC approval to engage in fiduciary activities. The Office of the Comptroller of the Currency, Department of the Treasury. By clicking Accept All Cookies, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. (b) Separation of fiduciary assets. on The OCC will invite public comment on a detailed proposal before adopting any final rule.

Furthermore, the OCC invites commenters to identify any specific State statutes, uniform laws, or terminology that the OCC should consider when assessing whether an activity or appointment is a fiduciary capacity. The OCC also invites comments on other ways to amend this definition so that it encompasses evolving trust capacities, including trust capacities recognized or permitted under State law. (3) disclosure in custodial contracts and agreements of the custodian's duties and responsibilities; and (4) effective policies, procedures, and internal controls. A national bank shall place assets of fiduciary accounts in the joint custody or control of not fewer than two of the fiduciary officers or employees designated for that purpose by the board of directors. the material on FederalRegister.gov is accurately displayed, consistent with The OCC also invites comment from clients of national bank and Federal savings association custodians on the appropriateness of these suggested provisions and whether the OCC should consider additional provisions to safeguard custody assets. The banks' policies must also establish methods to prevent self-dealing and conflicts of interest. documents in the last year, 264 For example, bank or savings association custodians that are not members of a central securities depository often engage financial institutions that are members as their agents or sub-custodians. Comments must be received by June 28, 2019. documents in the last year, 802 This ANPR refers to activities based on the authority an institution has with respect to a trust as trust adviser activities.. Investopedia requires writers to use primary sources to support their work.

Document page views are updated periodically throughout the day and are cumulative counts for this document. [5], Twelve CFR parts 9 and 150 apply to national banks and Federal savings associations, respectively, that act in a fiduciary capacity. Section 9.2(e) defines fiduciary capacity to mean trustee, executor, administrator, registrar of stocks and bonds, transfer agent, guardian, assignee, receiver, or custodian under a uniform gifts to minors act; investment adviser, if the bank receives a fee for its investment advice; any capacity in which the bank possesses investment discretion on behalf of another; or any other similar capacity that the OCC authorizes pursuant to 12 U.S.C. Office of the Comptrollerof the Currency. 101) (to be codified at the Uniform Trust Code N.M. Stat. In addition, foreign jurisdictions, including the United Start Printed Page 17970Kingdom and the European Union, have adopted specific regulatory requirements covering custody activities, many of which were strengthened in the wake of the 2008 financial crisis. This repetition of headings to form internal navigation links What Does the Community Reinvestment Act (CRA) Do? 92a; 12 U.S.C. Register (ACFR) issues a regulation granting it official legal status. The OCC plans to issue a proposed rulemaking at a later date that would integrate its national bank and Federal savings association fiduciary activities rules so that only one rule applies to both national banks and Federal savings associations, taking into account consistency with the underlying statutes that apply to each type of institution. 07/21/2022, 249

07/21/2022, 165 on This table of contents is a navigational tool, processed from the

documents in the last year, 476 This PDF is These tools are designed to help you understand the official document [14]

10.

[9] This expanding list of terms for trust-related and fiduciary roles under State law that are not explicitly identified as fiduciary capacities under OCC regulations, and that may not involve investment discretion or investment advisory services, may create uncertainty for national banks and Federal savings associations with respect to the activities governed by OCC fiduciary regulations. This site displays a prototype of a Web 2.0 version of the daily R. & Regs. In a traditional trust, the trustor grants the trustee the power to control the investment, management, distribution, and other administration decisions of the trust. Investopedia does not include all offers available in the marketplace. For persons who are deaf or hearing impaired, TTY, (202) 649-5597. set forth the authority for fiduciary activities of national banks[3] The OCC specifically invites comment on what trust adviser activities or other capacities national banks and Federal savings associations are performing in providing services to their customers, and whether the OCC should consider explicitly identifying these activities as fiduciary activities subject to 12 CFR part 9 or 12 CFR part 150, respectively. Do any of the standards mentioned above conflict with any other Federal requirements applicable to national banks and Federal savings associations or regulated entities that use bank custody services? See, e.g., Nat'l Conf. Open for Comment, Committee for Purchase From People Who Are Blind or Severely Disabled, Economic Sanctions & Foreign Assets Control, Endangered and Threatened Wildlife and Plants, National Committee on Foreign Medical Education and Accreditation, Disadvantaged Business and Airport Concession Enterprises, Safety Standard for Debris Penetration Hazards, Bolstering Efforts To Bring Hostages and Wrongfully Detained United States Nationals Home, Establishing an Emergency Board To Investigate Disputes Between Certain Railroads Represented by the National Carriers' Conference Committee of the National Railway Labor Conference and Their Employees Represented by Certain Labor Organizations, Office of the Comptroller of the Currency, https://www.federalregister.gov/d/2019-08505, MODS: Government Publishing Office metadata, http://www.freddiemac.com/cim/pdf/EntireManual.pdf, https://www.fanniemae.com/content/eligibility_information/document-custodians-requirements.pdf, https://www.naic.org/prod_serv_model_laws.htm, https://www.handbook.fca.org.uk/handbook/CASS/6/?view=chapter;, https://eur-lex.europa.eu/eli/dir/2011/61/oj;, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32014L0091. In particular, the OCC invites comment on potential provisions that would implement the core elements of a custody rule. A bank is a financial institution licensed as a receiver of deposits and can also provide other financial services, such as wealth management. documents in the last year, 1445 More information and documentation can be found in our Twelve CFR 9.8 and 9.13 impose general recordkeeping and custody requirements for a national bank that acts as a fiduciary. Indiana Petition for Waiver of Reinstatement Fee, U.S. Code > Title 12 > Chapter 3 > Subchapter I - Definitions, Organization, and General Provisions Affecting System, U.S. Code > Title 12 > Chapter 3 > Subchapter III - Federal Advisory Council, U.S. Code > Title 12 > Chapter 3 > Subchapter IV - Federal Open Market Committee, U.S. Code > Title 12 > Chapter 3 > Subchapter V - Federal Deposit Insurance Corporation, California Codes > Financial Code > Division 1 - Financial Institutions, California Codes > Financial Code > Division 2 > Chapter 10 - Foreign (National) Savings Companies, California Codes > Financial Code > Division 2 > Chapter 8 - Federal Associations, California Codes > Financial Code > Division 2 > Chapter 9 - Fees, California Codes > Government Code > Title 5 > Division 5 - Public Banks, Florida Statutes > Title XXXVIII - Banks and Banking, Illinois Compiled Statutes > 205 ILCS 5 - Illinois Banking Act, Illinois Compiled Statutes > 205 ILCS 610 - Banking Emergencies Act, Illinois Compiled Statutes > 205 ILCS 630 - Promissory Note and Bank Holiday Act. A Proposed Rule by the Comptroller of the Currency on 04/29/2019. should verify the contents of the documents against a final, official This prototype edition of the The objective of these requirements is to safeguard the assets of clients, with bank custodians playing a key role in this process. documents in the last year, by the Transportation Department and the Internal Revenue Service has issued rules applicable to the custody of Individual Retirement Accounts. 2022 LawServer Online, Inc. All rights reserved. Regulation 9 is a federal regulationthat allowsnational banksto open and operate trust departments in-house and function asfiduciaries. [13] Federal Deposit Insurance Association. documents in the last year, 22 What Are Some Examples of Fiduciary Duty? Twelve U.S.C. set forth specific requirements for banks and savings associations that hold government securities in a custodial capacity, Freddie Mac and Fannie Mae impose specific requirements to be included in document custody agreements,[22] Should the OCC limit the types of entities that a national bank or Federal savings association may use as a sub-custodian or limit the type of sub-custodian for specific types of accounts? Comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. The OCC has issued substantial guidance regarding non-fiduciary custody activity. Regarding State custody requirements for investment advisers, see. rendition of the daily Federal Register on FederalRegister.gov does not You may submit comments to the OCC by any of the methods set forth below. daily Federal Register on FederalRegister.gov will remain an unofficial Regulation 9 is the federal rule that prescribes the standardsthat apply to the fiduciary activities of national banks which have received approval to act as fiduciaries by the Office of the Comptrollerof the Currency (OCC). and Federal savings associations, respectively.

This also applies to organizations and individuals who have interests that could influence the banks judgment. documents in the last year, by the Fish and Wildlife Service The policies in place should cover the banks brokerage placement practices, as well as ways to ensure that the fiduciary officers and employees of the bank do not use insider information in their decision-making or recommendations on the sale or purchase of securities. In particular, the OCC is interested in whether a custody rule would help clarify the role of a national bank or Federal savings association acting as a non-fiduciary custodian; whether the potential elements of such a rule, as outlined in this ANPR, are appropriate; and whether the OCC should consider additional elements. Accessed Jan. 11, 2021. 24. Specifically, these provisions require bank and savings association fiduciaries to provide adequate safeguards and controls over client fiduciary account assets, to keep these fiduciary account assets separate from bank and savings association assets, and to maintain and segregate certain records related to these accounts.Start Printed Page 17969. Code tit. See the Custody Services (Jan. 2002), Asset Management Operations and Controls (Jan. 2011), Unique and Hard-to-Value Assets (August 2012), Retirement Plan Products and Services (Feb. 2014), and Conflicts of Interest (Jan. 2015) booklets of the Comptroller's Handbook, and OCC Bulletin 2013-29, Third-Party RelationshipsRisk Management Guidance (Oct. 30, 2013). Register, and does not replace the official print version or the official See Nat'l Ass'n of Ins. 1. documents in the last year, 80 You may review comments and other related materials that pertain to this rulemaking action by any of the following methods: Patricia Dalton, Technical Expert for Market Risk, Asset Management, (202) 649-6401; David Stankiewicz, Special Counsel, or Asa Chamberlayne, Counsel, (202) 649-7299, or Heidi M. Thomas, Special Counsel, or Chris Rafferty, Attorney, (202) 649-5490, Chief Counsel's Office, Office of the Comptroller of the Currency, 400 7th Street SW, Washington, DC 20219. Undertake effective due diligence by performing an in-depth assessment of a sub-custodian's ability to perform the activity in compliance with all applicable laws and regulations prior to depositing custodial funds with the sub-custodian, and perform ongoing periodic monitoring of the sub-custodian? It is not an official legal edition of the Federal For example, the Internal Revenue Service limits which entities may act as custodians for Individual Retirement Accounts. 46a).

23. These markup elements allow the user to see how the document follows the Specifically, should an agreement: In addition to comments on specific components of an OCC rule, the OCC invites comment on the following issues: Finally, the OCC invites comment on whether any of the possible provisions listed above would be overly burdensome, especially for community institutions, and if so, whether there are approaches that would address the same issues in a less burdensome way. % The OCC invites comment on all aspects of a potential non-fiduciary custody rule. 63 (S.B. 07/21/2022, 328 (Part 3), Texas Finance Code > Title 3 > Subtitle A - Banks. The offers that appear in this table are from partnerships from which Investopedia receives compensation. 26.

Twelve U.S.C. In addition, the Employee Retirement Income Security Act of 1974 (ERISA) defines fiduciary based on function and not only on named capacities.

The OCC notes that an OCC custody rule for national banks and Federal savings associations would complement the applicable regulations of other regulators related to the custody of client assets. r. 690-143.042 (2017) (Custody Agreements; Requirements); Tenn. Comp. the official SGML-based PDF version on govinfo.gov, those relying on it for establishing the XML-based Federal Register as an ACFR-sanctioned See Uniform Directed Trust Act, 2018 N.M Laws, ch. See OCC Bulletin 2013-29, Third-Party RelationshipsRisk Management Guidance (Oct. 30, 2013). He is an adjunct instructor of writing at New York University. Furthermore, the volume of non-fiduciary custody assets held in national banks and Federal savings associations has increased since the OCC updated its fiduciary regulation in 1996, and, as of December 31, 2018, totaled approximately $41.7 trillion, with national banks holding $39.9 trillion and Federal savings associations holding $1.8 trillion. C. 3313(a). Will Kenton is an expert on the economy and investing laws and regulations. In this Issue, Documents documents in the last year, 53 1464(l) and (n)[2] This would provide a single consistent standard for safeguarding client assets and clarify expectations for custody of both fiduciary and non-fiduciary account assets. 3 0 obj OCC regulations implementing the substantive provisions of these statutes are set forth at 12 CFR part 9 for national banks and Federal branches of foreign banks (collectively, national banks) and 12 CFR part 150 for Federal savings associations. Counts are subject to sampling, reprocessing and revision (up or down) throughout the day. 2. publication in the future. Bank and savings association custodians also use sub-custodians known as global custodians to facilitate securities transactions in other countries. 04/26/2019 at 8:45 am. Use the PDF linked in the document sidebar for the official electronic format. documents in the last year, by the Education Department the Federal Register. The President of the United States manages the operations of the Executive branch of Government through Executive orders. 950, 12.205(5) (2014) (Discretion and Custody Requirements); 10 Pa. Code 404.014 (2018) (Custody Requirements for Investment Advisers); Wash. Admin. Electronic Code of Federal Regulations (e-CFR), CHAPTER I - COMPTROLLER OF THE CURRENCY, DEPARTMENT OF THE TREASURY, PART 9 - FIDUCIARY ACTIVITIES OF NATIONAL BANKS. The OCC expects that any custody rule the agency issued would be consistent with its guidance on custody service activities for national bank and Federal savings association custodians[18] 19. See 12 U.S.C. In doing so, these banks and savings associations are not acting in a fiduciary capacity and, therefore, these activities are not subject to the OCC's fiduciary regulations. National banks are permitted to operate in multiple states and serve in fiduciary capacities in any state unless that state prohibits its own local banks from those particular activities. Comm'rs, Model Act on Custodial Agreements and the Use of Clearing Corporations, MDL-295 (2008), https://www.naic.org/prod_serv_model_laws.htm. Regulation 9 was issued by theOffice of the Comptrollerof the Currency (OCC) and only applies to national banks and not regional or local entities. For complete information about, and access to, our official publications C. 3313. [FR Doc. corresponding official PDF file on govinfo.gov. [24] 0780-01-46 (2013) (Regulations on Custodial Agreements and the Use of Clearing Corporations); Wyoming Administration RulesInsurance DepartmentGeneral Agency, Board of Commission Rules, Chapter 57 (2017) (Regulation on Custodial Agreements and the Use of Clearing Corporations). Comptroller's Handbook, supra, note 17. The OCC is contemplating updating the regulatory definition of fiduciary capacity to include any activity based on the authority a national bank or Federal savings association has with respect to a trust, such as the power to make discretionary distributions, override the trustee, or select a new trustee. Various States also have adopted custody requirements for insurance companies and investment advisers operating in their jurisdictions.

informational resource until the Administrative Committee of the Federal See Nat'l Conf. Register documents.

He previously held senior editorial roles at Investopedia and Kapitall Wire and holds a MA in Economics from The New School for Social Research and Doctor of Philosophy in English literature from NYU. The OCC notes that because national banks and Federal savings associations may provide custody services that are not reportable on Schedule RC-T, including custody services offered by banks and savings associations that do not possess fiduciary powers, the amount of non-fiduciary custody assets is likely larger. regulatory information on FederalRegister.gov with the objective of New Mexico recently adopted this uniform law. The OCC is seeking public comment on all aspects of these two Start Printed Page 17968possible actions, discussed in detail below. has no substantive legal effect. The size of the custody services provided by national banks and Federal savings associations is significantly more (in dollar terms) than fiduciary assets ($8.7 trillion)[15] State directed trust statutes often provide that trust advisers are fiduciaries with the same responsibility to exercise the authority or power granted to them as a trustee would have, unless provided otherwise by the trust instrument.[11]. If the OCC were to implement a rule specific to non-fiduciary custodial capacities, the OCC also could consider amending the existing fiduciary custody language in 12 CFR 9.13, 150.230, 150.240, and 150.250 to ensure that the same standards would apply to fiduciary custody accounts. A national bank shall keep the assets of each fiduciary account separate from all other accounts or shall identify the investments as the property of a particular account, except as provided in 9.18. These include white papers, government data, original reporting, and interviews with industry experts.

92a. Twelve CFR 150.30 applies a similar definition with respect to Federal savings associations. Until the ACFR grants it official status, the XML Relevant information about this document from Regulations.gov provides additional context. documents in the last year, 110 Regulation 9 prohibits self-dealing and conflicts of interest. As fiduciaries, national banks may exercise discretion on behalf of third parties with respect to investments and other financial matters, generally through the establishment and operation of trust departments. Should the OCC update the fiduciary standards of. This is to ensure the actions of the bank do not conflict with the best interests of the clients that they serve. Clearly define the custodian's duties and responsibilities, and include a full and accurate disclosure of fees and pricing, as well as provisions detailing the relationship between the client as principal and the custodian as agent?

A chartered bank is a financial institution in the business of providing monetary transactions, such as safeguarding deposits and making loans. A rule including these core elements would codify safeguards to protect client assets, including imposing risk management standards on banks and savings associations that use sub-custodians. The OCC believes a well-defined regulatory framework for national bank and Federal savings association custody activities would codify the expectations of other regulators that bank custodians safeguard the client assets of the entities that they regulate in a safe and sound manner. of Comm'rs on Uniform State Laws, Uniform Directed Trust Act (2017). Therefore, the OCC believes that such a custody rule would impose minimal new responsibilities on well-managed national banks or Federal savings associations. We also reference original research from other reputable publishers where appropriate. Commenters are encouraged to submit comments through the Federal eRulemaking Portal or email, if possible. By default under the Illinois statute, an investment trust adviser controls investment decisions; a distribution trust adviser controls distribution decisions; and a trust protector may be given various powers by the trust instrument, including the power to remove and appoint a trustee, investment trust adviser, or distribution trust adviser. documents in the last year, 12 legal research should verify their results against an official edition of Because some of these laws use terms other than those specified in 12 CFR 9.2(e) and 150.30 to describe trust-related and fiduciary capacities, they are not explicitly included in the definition of fiduciary capacity in 12 CFR 9.2(e) and 150.30. For example, some States have amended their trust laws to authorize directed trusts. A bank that is deemed a fiduciary based solely on its capacity as investment advisor, as that capacity is defined in 9.101(a), and has no other fiduciary capacity as enumerated in 9.2(e) is not required to serve as custodian when offering those fiduciary services. Only official editions of the refers to such advisers generally as trust directors. Meanwhile, Illinois law refers to such advisers as either investment trust advisers, distribution trust advisers, or trust protectors depending on the discretion exercised. Numerous States have modified their trust laws in recent years to define and set expectations for various trust-related roles, including roles that do not involve investment discretion. A national bank shall keep the assets of fiduciary accounts separate from the assets of the bank. electronic version on GPOs govinfo.gov. and on-balance sheet total assets ($12.1 trillion).[16]. Learn more here. Some of these requirements may directly or indirectly apply to accounts for which a national bank or Federal savings association is custodian. 92a also applies to Federal branches and agencies pursuant to 12 U.S.C. You may submit comments by any of the following methods: Instructions: You must include OCC as the agency name and Docket ID OCC-2018-0018 in your comment. Federal Register provide legal notice to the public and judicial notice Specifically, the Securities and Exchange Commission and the Commodity Futures Trading Commission have issued regulations related to the custody of client assets by their regulated entities,[19] better and aid in comparing the online edition to the print edition. Those sources include the bank itself, its directors, officers, and employees. The OCC also is considering issuing a regulation that would establish certain basic requirements for non-fiduciary custody activities of national banks and Federal savings associations. Code 460-24A-105 to 460-24A-108 (2019) (Custody Requirements for Investment Advisers). At least once every year, banks must conduct an official review of all assets held in fiduciary accounts over which the bank has investment discretion. The OCC also is considering adopting a rule to address non-fiduciary custody activities of national banks and Federal savings associations. Michelle P. Scott is a New York attorney with extensive experiencein tax, corporate, financial, and nonprofit law, and public policy. Non-fiduciary custody activities have become more sophisticated since the OCC issued its fiduciary regulation and may include additional services such as fund accounting, fund administration, securities lending, and global custodial services involving the execution of foreign exchange transactions and the processing of tax reclaims. 2014 OJ (L257), 186-213, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32014L0091. Include adequate disclosures, when applicable, to make clear that the national bank or Federal savings association custodian is not acting in a fiduciary capacity? About the Federal Register If you are using public inspection listings for legal research, you

An effective annual review process ensures: These banks should also retain legal counsel that can advise the bank, its officers, and staff on fiduciary matters. documents in the last year. on FederalRegister.gov on NARA's archives.gov. Maintain custody assets separate from the bank's or savings association's assets, as currently required in, Maintain the custody assets of each account separate from all other accounts or maintain records that identify the custody assets as the property of each particular account, as currently required in. 3102(b), which provides that the operations of Federal branches and agencies shall be conducted with the same rights and privileges accorded national banks. The President of the United States issues other types of documents, including but not limited to; memoranda, notices, determinations, letters, messages, and orders. 12. A global custodian provides custody services for cross-border securities transactions in various markets around the world through either its own office in the local market or the use of agent banks as sub-custodians. 21. [8] documents in the last year, 75 5. documents in the last year, by the Centers for Medicare & Medicaid Services Delaware law similarly refers to such trust advisers generally as advisers or, in the case of advisers with the power to remove and appoint trustees and other advisers, as protectors.[10] The OCC invites comment on whether amending the definition of fiduciary capacity to include these trust advisory functions would be useful and, if so, whether the approach suggested by the OCC is appropriate. of Comm'rs on Uniform State Laws, Uniform Directed Trust Act 8 (2017); 760 ILCS 5/16.3(e); 12 Del. Schedule RC-Balance Sheet, Consolidated Reports of Condition and Income, December 31, 2018.