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Banks get more flexibility in managing trust funds Comptroller's office issues revised rules


WASHINGTON -- The Office of the Comptroller of the Currency issued a final rule yesterday clarifying how national banks may manage assets held in trust funds.

The revised rules will give banks more flexibility in deciding how to invest trust-fund money and will ease restrictions on who may act as a broker for the bank, and how bank holding company affiliates may assist in managing trust funds.

The OCC said the regulation, known as Part 9, had not been revised in 30 years.

"The revisions are designed to recognize the substantial changes and diversity in how banks conduct fiduciary activities today, and to bring the OCC's standards more in line with modern fiduciary law and practice," said Julie Williams, chief counsel at the agency.

Sarah Miller, a spokeswoman at the American Bankers Association, said 959 national banks held trust funds totaling $4.2 trillion at the end of 1995.

She said the trade group had been advocating the rule change since 1981.

The biggest change, Miller said, will be in the way banks manage "pooled" funds, which combine several trust funds together and invest them as a whole. Under the old rule, no single investor's money could represent more than 10 percent of the pool's assets. The OCC decided that the 10 percent limit was unnecessary because state laws that obligate banks to act "in the best interests of their customers" will "ensure proper investment concentration."

The rule change also allows banks to use the resources of their bank holding company affiliates to manage their trust funds. In most cases, banks must set up affiliates to trade securities.

This new rule allows bank employees working in those affiliates to provide investment advice to the fiduciary section of the bank. Banks can also contract with securities firms to manage their trust funds, the OCC said.

Pub Date: 12/31/96

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