Details of an advance notice of proposed rulemaking regarding potential revisions to fiduciary regulations for banks and federal savings associations (FSAs) are pulled out as highlights in a bulletin issued Monday by the Office of the Comptroller of the Currency (OCC).
The ANPR, published in the Federal Register Monday and out for comment until June 28, seeks input on whether the OCC should update the regulatory definition of “fiduciary capacity” to make it more consistent with recent developments under state laws. The ANPR also requests comment on the potential addition of 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, which are not currently addressed by specific OCC rules.
As detailed in Bulletin 2019-21, the OCC ANPR solicits comments on two possible rule revisions:
- Updating 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.
- Codifying OCC guidance related to non-fiduciary custody activities. A proposed rule could be based on the following core elements of sound risk management, which are similar to those required in the current rules for fiduciary custody activities:
- Separation and safeguarding of custodial assets.
- Due diligence in selection and ongoing oversight of sub-custodians.
- Disclosure in custodial contracts and agreements of the custodian’s duties and responsibilities.
- Effective policies, procedures, and internal controls.
The bulletin notes that the OCC believes that a non-fiduciary custody rule could eliminate confusion over a bank’s obligations with respect to custody arrangements; impose minimal new responsibilities on well-managed banks, as the OCC would be codifying the OCC’s guidance on custody service activities for banks; and complement regulations related to the custody of client assets issued by the Securities and Exchange Commission, Commodity Futures Trading Commission, Internal Revenue Service, various states, the United Kingdom, and the European Union.