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4000 - Advisory Opinions
Whether Independent Trust Company Which Conducts Activities On
Behalf of Affiliated Bank Must Register as Deposit Broker
FDIC--93--47
July 21, 1993
Valerie J. Best, Counsel
Your letter dated May 10, 1993 has been referred to me for a
response. The *** (the "Trust Company") is an independent trust
company chartered in the state of *** for the purpose of acting in a
fiduciary capacity for a number of clients and accounts. Some of the
types of fiduciary accounts you handle are estate settlement,
conservatorships, investment management accounts, custodial accounts
and "normal" trust accounts, both testamentary and inter vivos.
The Trust Company is a subsidiary of a bank holding company. You
contend that the Trust Company serves the same function as a trust
department of a bank and conducts its activities on behalf of its
affiliated bank.
``Traditional'' Trust Activities
You note that FDIC regulations implementing the brokered deposit
statute generally exclude trust departments from the definition of
"deposit broker." More specifically, the regulation excludes any
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.
12 C.F.R. 337.6(a)(5)(i)(C).
You ask whether a trust company would be similarly excluded so long
as the primary purpose test is satisfied.
A trust company affiliated with a bank and serving essentially the
same function as a trust department for that bank would be excluded
from the definition of deposit broker pursuant to 12 C.F.R.
337.6(a)(5)(i)(I), so long as the trust or other fiduciary relationship
in question has not been established for the primary purpose of placing
funds with insured depository institutions.
{{4-29-94 p.4785}}
Attached for your review is a letter dated August 3, 1992 discussing
the exclusion for trust departments in more detail. As noted therein,
we anticipate that trust departments administering
"traditional" 1
types of trusts will not be "deposit brokers," as that term is
defined in the statute and implementing regulations. Likewise, a trust
company limited to administering traditional types of trusts would not
be considered a deposit broker. For example, a trust company would not
be considered a deposit broker by virtue of the fact that it is acting
as an executor, administrator, guardian, or conservator.
It may also be helpful to remember that some types of trusts are
excluded from the definition of "deposit broker," regardless of
the trust's "primary purpose." 2
The Custodial Agreement
In addition to "traditional" types of trusts administered by
the Trust Company, you offer "non-discretionary custodial
accounts." The Trust Company invests the customer's funds in the
vehicle designated by the customer, whether it be mutual funds,
certificates of deposit, stocks, bonds, etc. The "Custodial
Agreement" included with your letter states that the Trust Company
shall not render investment advice or investment counseling regarding
the assets in the Custodial Account agreement. You ask whether such
funds would be considered brokered deposits if a customer opts to
invest all or part of their funds in certificates of deposit.
FDIC staff previously considered this issue and determined that such
funds would be brokered deposits. Attached for your review is a letter
dated December 9, 1992 that discusses a similar agreement in more
detail. Consistent with that earlier opinion, the Trust Company is
required to register as a deposit broker when it invests customer funds
in certificates of deposit pursuant to the Custodial Agreement. The
registration requirements are outlined in the enclosed financial
institutions letter.
Please call me at (202) 898-3812 or write to me at the above address
if you have any additional
questions.
1Examples of "traditional" types of trust are family
trusts created for estate planning purposes, charitable trusts, and
testamentary trusts. Go Back to Text
2The trustee of a pension or other employee benefit plan (with
respect to funds of the plan) and the trustee of a testamentary
account, are not "deposit brokers" regardless of the primary
purpose of the trust. 12 U.S.C. 1831f(g)(2)(D), (F). Likewise, the
primary purpose test is not applied to the trustee of a pension or
profit sharing plan qualified under section 401(d) (plans benefiting
owner-employees) or 403(a) (qualified annuity plans) of the Internal
Revenue Code of 1986. Such trustees are not deposit brokers. 12 U.S.C.
1831f(g)(2)(H). Go Back to Text
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