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X-9675 Reg. F-5 INTERPRETATION OF LAft OK REGULATION (Copies to be sent to all Federal Reserve banks) August 4, 1936. Mr. W. B. Geery, Federal Reserve Agent, Federal Reserve Bank of Minneapolis, Minneapolis, Minnesota. Dear Mr. Geery: Receipt is acknowledged of your letter of June 18, 1956, requesting advice as to whether section 9(b) of the Board's Regulation F requires the collateral specified therein to be pledged with the trust department of a national bank if agency, escrow, receivership and custodianship funds are deposited in its commercial department. Section 9(b) of Regulation F requires funds received or held by a national bank in a fiduciary capacity to be protected by a pledge of collateral to the trust department if such funds are used by the bank in the conduct of its business; and the question whether particular deposits made by the trust department in the commercial or savings department should be so protected depends upon whether or not the funds involved are received or held in a fiduciary capacity. The Board feels that in any case the question whether or not the funds are held in a fiduciary capacity is a question which must be determined on the basis of all the facts and circumstances involved. In this connection, your attention is in- vited to the Board's rulings published in the Federal Reserve Bulletins for December 1921 (p. 1455), and May 1922 (p. 572). Generally — 2 ~ X-9675 Reg. F-5 speaking, if it is evident that no fiduciary relationship exists, section 9(b) of Regulation F does not require collateral to be pledged with the trust department if funds received or held by such department are used by the bank in the conduct of its business; but where doubt exists as to the status of any such funds and the funds are used in the commercial or savings department of the bank, such funds should be protected by collateral in the manner required by the regulation, the presumption being that an account handled through the trust department involves a fiduciary relationship. Hence, if such protection is not afforded under the circumstances to which you have referred, it should be clearly shown that a fiduciary relationship does not exist. As indicated above, the Board has not deemed it desirable to attempt to lay down any general rule as to what funds are or are not held in a fiduciary capacity, but if a member bank desires a ruling in any case in connection with funds held by it and full information is furnished as to the facts involved the Board, of course, will be glad to advise as to its views regarding such funds. If any such case is submitted to the Board, it will be appreciated if it is accompanied by a copy of an opinion of the counsel for your bank on the question involved. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Assistant Secretary.
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