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X-1431 REGULATION F Series of 1919. TRUST PO'-RS OF NATIONAL BANKS. I - . S t a t u t o r y Provisions, The Federal Reserve Act as amended by the Act of.September 26,1918, provides in p a r t : (QUOTE) I I . Applications.. A' n a t i o n a l bank d e s i r i n g to e x e r c i s e any or a l l of the powers aut h o r i z e d by Section 11, Subjection (k), of t h e Federal Reserve Act, as amended by t h e Act of September 26,1918, s h a l l make a p p l i c a t i o n to the Federal Reserve Board, on a form approved by said Board, f o r a s p e c i a l permit a u t h o r i z i n g i t t o e x e r c i s e such powers. In t h e case of an o r i g i n a l a p p l i c a t i o n , t h a t i s , where t h e applying bank has never been granted the r i g h t t o e x e r c i s e any of t h e powers authorized by Section 1 1 , ( k ) , t h e a p p l i c a t i o n should be made on Form 61-A." In the case of a supplemental a p p l i c a t i o n , t h a t i s , where the applying bank has already been granted the r i g h t to e x e r c i s e one or more of the powers authorized by Section 11 (k), the a p p l i c a t i o n should be made on Form 61-b, Both forms are made a p a r t of t h i s r e g u l a t i o n . Ill- Separate Departments. Every n a t i o n a l bank permitted to act under t h i s s e c t i o n s h a l l e s t a b l i s h a separate t r u s t department* and s h a l l place such department under the management cf an o f f i c e r or o f f i c e r s , whose d u t i e s s h a l l be prescribed by the board of d i r e c t o r s of the bank. IV. Custody of Trust S e c u r i t i e s and Investments, The s e c u r i t i e s and investments held in each t r u s t s h a l l be kept s e p a r a t e and d i s t i n c t from t h e general funds and s e c u r i t i e s of the bank and s e p a r a t e and d i s t i n c t one from another. Trust s e c u r i t i e s and i n v e s t ments s h a l l be placed in the j o i n t custody of two or more o f f i c e r s or other employees designated by t h e board of d i r e c t o r s of the bank and a l l such o f f i c e r s and employees s h a l l be bonded. V. Deposit of Funds Awaiting Investment or D i s t r i b u t i o n . Funds received or held in the t r u s t department of a n a t i o n a l bank awaiting investment or d i s t r i b u t i o n may be deposited in t h e commercial department of the bank to t h e c r e d i t of the t r u s t department, provided, t h a t the bank f i r s t d e l i v e r s t o the t r u s t department United S t a t e s bonds, or o t h e r s e c u r i t i e s owned by the bank, of t h e kinds e l i g i b l e f o r investment by the t r u s t department, in an amount equal to the amount of t h e funds http://fraser.stlouisfed.org/ so deposited. Federal Reserve Bank of St. Louis X1431 VI. A. Investment of Trust Funds, Private Trusts: Funds held in t r u s t must be invested in s t r i c t accordance w i t h the terms of the w i l l , deed,or other instrument c r e a t i n g the t r u s t * Where the instrument c r e a t i n g the t r u s t contains provisions a u t h o r i z i n g the bank, i t s o f f i c e r s , or i t s d i r e c t o r s to exercise an u n r e s t r i c t e d d i s c r e t i o n in the matter' of investments, funds h e l d in t r u s t may be invested only in those c l a s s e s of s e c u r i t i e s which a r e approved by t h e d i r e c t o r s of the bank. Where the instrument c r e a t i n g the t r u s t does not s p e c i f y t h e c h a r a c t e r or c l a s s of investments to be made and does not expressly v e s t in the b a n k , i t s o f f i c e r s , or i t s d i r e c t o r s an u n r e s t r i c t e d d i s c r e t i o n in the matter of investments, funds held in t r u s t s h a l l be invested in any s e c u r i t i e s * in which corporate f i d u c i a r i e s in the S t a t e in which the bank i s l o c a t e d a r e authorized to invest under the laws of t h a t S t a t e or under the decisions of i t s c o u r t s . If the laws of the State do not s p e c i f y or describe the investments t h a t may be made of funds held in t r u s t by corporate f i d u c i a r i e s , and if t h e r e i s no decision of the courts of t h a t State describing such investments, such funds may be invested in those c l a s s e s of s e c u r i t i e s which are approved by the d i r e c t o r s of the bank. The Federal Reserve Board reserves the r i g h t in any case, however, to require a n a t i o n a l bank a c t i n g in any f i d u c i a r y capacity to .dispose of any t r u s t fund investments, other than those made in accordance with the terms of the instrument c r e a t i n g the t r u s t , which/d$es not b e l i e v e to be compatible with the best i n t e r e s t s of the b e n e f i c i a r i e s under the trust. B. Court T r u s t s : Except as h e r e i n a f t e r provided, a n a t i o n a l bank a c t i n g as executor, a d m i n i s t r a t o r , or in any other f i d u c i a r y capacity, under appointment by a court of competent j u r i s d i c t i o n , s h a l l make a l l investments under an order of t h a t court and copies of a l l such orders should be f i l e d and preserved with the records of the t r u s t department of t h e bank* If the court by general order v e s t s an u n q u a l i f i e d d i s c r e t i o n in the n a t i o n a l bank to inv e s t and r e - i n v e s t funds held in t r u s t , or, if under the laws of the State in which the bank i s located corporate f i d u c i a r i e s appointed by the court are permitted t o e x e r c i s e such u n q u a l i f i e d d i s c r e t i o n , n a t i o n a l banks so appointed may i n v e s t in those c l a s s e s of s e c u r i t i e s which a r e approved by the d i r e c t o r s of the bank» VII• Books and Accounts. All books and records of the Trust Department s h a l l be kept seperate . and d i s t i n c t from o t h e r books and records of the bank, All accounts opened should be so kept a s to enable the n a t i o n a l bank a t any time to f u r n i s h information or r e p o r t s required by t h e State a u t h o r i t i e s , and such books and records s h a l l be open to the inspection of such S t a t e a u t h o r i t i e s . 145 * - 3 - #» VIII, X-1431 Examinations. Examiners appointed by the Comptroller of the Currency or designated by the Federal Reserve Board w i l l be i n s t r u c t e d t o make thorough and complete a u d i t s of the cash, s e c u r i t i e s , accounts, and investments of the t r u s t department of t h e bank a t the same time t h a t examination i s made of the banking department. IX. Conformity with State Laws* Nothing in t h e s e r e g u l a t i o n s s h a l l be construed to n a t i o n a l bank e x e r c i s i n g the powers permitted under the of Section 11 (k) of the Federal Reserve Act as amended or p r i v i l e g e s in contravention of the laws of t h e S t a t e the bank i s lovated within the meaning of t h a t Act. X. give a provisions any r i g h t s in which Revocation of Permits. The Federal Reserve Board reserves the r i g h t t o revoke permits granted under the provisions of Section 11 (k), as amended, i n any case where in the opinion of the Board a bank has w i l l f u l l y v i o l a t e d the provisions of the Federal Reserve Act or of t h e s e r e g u l a t i o n s or the laws of any S t a t e r e l a t i n g to the operations of such bank when a c t i n g in any of the c a p a c i t i e s permitted under the provisions of Section 11 (k) as amended. XI. Changes in Rules, These r e g u l a t i o n s a r e subject to change by the Federal Reserve Board; provided, however, t h a t no such change s h a l l p r e j u d i c e any o b l i g a t i o n undertaken in good f a i t h under r e g u l a t i o n s in e f f e c t a t the time the o b l i g a t i o n was assumed* March 20, 1919. 146
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