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May 07, 2019 at 11:08 AM
The Office of the Comptroller of the Currency is mulling updating its fiduciary regulations to be consistent with “recent developments under state laws,” as well as a new set of potential provisions on non-fiduciary custody rules for national banks.
In an April 29 advance notice of proposed rulemaking, the OCC is seeking comment on whether to update the regulatory definition of “fiduciary capacity” under OCC regs 12 CFR 9 and 150 to be more consistent with recent developments under state laws.
The OCC plan states that “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 possess the investment discretion traditionally granted to trustees. Because some of these state laws frequently describe these roles by using terms other than those specified in the OCC definition of ‘fiduciary capacity’ … these state fiduciary roles may not explicitly be included in the OCC’s definition. As a result, this expanding list of fiduciary roles under state law may create uncertainty for banks about the activities governed by OCC fiduciary rules.”
The proposal also requests comment on adding new provisions to OCC regulations to establish “certain basic requirements for non-fiduciary custody activities of national banks, federal savings associations, and federal branches and agencies (collectively, banks), which are not currently addressed by specific OCC rules.”
The OCC is taking comments on the proposal until June 28.
George Michael Gerstein, co-chair of Stradley Ronon’s fiduciary governance group, notes in the firm’s Fiduciary Governance Blog that the two possible revisions to the OCC’s regulations would update the definition of “fiduciary capacity” to include certain capacities that are based on the authority a bank has with respect to a trust, e.g., the power to make discretionary contributions, override the trustee, or select a new trustee.
This change could remove ambiguity and confusion for banks because of differences between how OCC regulations and state laws define “fiduciary capacity,” and provide for the uniform application of OCC regulations to trust activities that state laws describe with different terminology, Gerstein writes.
The OCC, as the proposal states, has the statutory authority to permit banks to act in certain fiduciary capacities, including fiduciary capacities that may be permitted for state banks, trust companies, or other corporations that compete with banks in the states in which they are located.
