National Banks See Snag in Rule Covering Investment Advice

By Domis, Olaf de Senerpont | American Banker, January 6, 1997 | Go to article overview

National Banks See Snag in Rule Covering Investment Advice


Domis, Olaf de Senerpont, American Banker


Washington -- A new rule streamlining the requirements that govern national bank trust departments contains a potential landmine.

In a final rule issued Dec. 30, the Office of the Comptroller of the Currency included in its definition of fiduciary business any activity in which the bank receives a fee for its investment advice."

Industry representatives are concerned that the rule, which revamps Part 9 of the OCC rulebook, could bring several bank services under cumbersome new requirements. Banks that engage in fiduciary activities are subject to special exams and additional bookkeeping and audit requirements.

In addition, trust customer protections are quite strict. For example, trust banks are faced with stringent conflict of interest restrictions and prudent investor rules.

"In the midst of this deregulatory package, you have a real potential for some increased regulatory burden in an area that no one expected to see any," said Charles M. Horn, a partner with the Washington law firm Mayer, Brown & Platt.

Investment advice is an important service banks offer their corporate customers. For example, many national banks earn fee income by giving investment advice to municipalities.

In addition, corporations often pay banks for merger and acquisition advice.

Both of these services could fall under the OCC's expanded definition of fiduciary activities, according to Sarah A. Miller, a senior government relations counsel at the American Bankers Association.

OCC Chief Counsel Julie L. …

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National Banks See Snag in Rule Covering Investment Advice
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