Chapter 22. Trust Company Regulations
10VAC5-22-10. Definitions.
The following words and terms, when used in this chapter,
shall have the following meanings unless the context clearly indicates
otherwise:
"Affiliate" means generally a person that directly
or indirectly controls, is controlled by, or is under common control with
another person. In addition, for purposes of Article 1 (§ 6.2-1000 et seq.) and Article 2 (§
6.2-1013 et seq.) of Chapter 10 of Title 6.2
of the Code of Virginia, a broker-dealer, investment advisor, or investment
company is an affiliate of a trust company if a trust company holding company
controls the trust company and owns, directly or indirectly, 5.0% or more of
any class of the capital stock of the broker-dealer, investment advisor, or
investment company.
"Affiliated trust company" means a trust company
that is controlled by a trust company holding company. For purposes of Articles 1 and 2 of Chapter 10 of Title 6.2 of the Code of Virginia,
a trust company holding company or other person has control of a trust company
or other legal entity if the person owns 25% or more of the voting stock of the
trust company or entity; if, pursuant to the definition of control in the Bank
Holding Company Act of 1956 (12 USC § 1841 et seq.), the person would be
presumed to control the trust company or entity; or if the commission
determines that the person exercises a controlling influence over the
management and policies of the trust company or entity.
"Broker-dealer" means any person selling any type of
security other than an interest or unit in a condominium as defined in
subdivision (c) of § 55-79.2 of the Code of Virginia or cooperative housing
corporation for the account of others or for his own account otherwise than
with or through a broker-dealer or agent, but does not include a bank, a trust
subsidiary formed under Article 3 (§ 6.2-1047
et seq.) of Chapter 10 of Title 6.2 of the
Code of Virginia, an issuer or an agent.
"Bureau" means the Bureau of Financial Institutions
of the State Corporation Commission.
"Commission" means the State Corporation Commission.
"Trust company" means a corporation, including an
affiliated trust company, authorized to engage in the trust business under Article 1 (§ 6.2-1000 et seq.) and Article 2 (§
6.2-1013 et seq.) of Chapter 10 of Title 6.2
of the Code of Virginia with powers expressly restricted to the conduct of
general trust business.
"Trust company holding company" means a corporation
which owns, directly or indirectly, 5.0% or more of any class of capital stock
of a broker-dealer, investment advisor, or investment company and which also
controls a trust company.
Statutory Authority
§§ 6.2-1034 and 12.1-13 of the Code of Virginia.
Historical Notes
Derived from VR225-01-0205 § 1, eff. April 20, 1995; amended,
Virginia Register Volume 28, Issue 1, eff. September 1, 2011.
10VAC5-22-20. Preliminary statement; responsibility of the board
of directors; meetings of the board.
The board of directors of a trust company shall be composed of
individuals who are qualified by character and business experience to direct the
affairs of a corporate fiduciary. The board shall be responsible for directing
the affairs of the company in accordance with general principles of law
relating to trusts and fiduciaries, Virginia statutory and common law, and
other applicable laws and regulations.
The board of directors shall hold a meeting at least once in
each calendar month, unless at the request of a trust company the commission
allows, for cause, less frequent meetings. A majority of the board must be
present for the lawful transaction of business. However, the stockholders may
fix, by bylaw, a number not less than five as a quorum.
Statutory Authority
§ 6.2-1034 of the Code of Virginia.
Historical Notes
Derived from VR225-01-0205 § 2, eff. April 20, 1995.
10VAC5-22-30. Composition of affiliated trust company board;
prohibitions on dual service.
A majority of the board of directors of an affiliated trust
company shall consist of members who are neither directors nor officers of any
other single affiliate of the trust company.
A director, officer, or employee of a trust company holding
company or any affiliate of an affiliated trust company may not serve at the
same time as an officer, director, or employee of the trust company, if such
individual's employment responsibilities at an affiliate of the trust company
include (i) the solicitation, sale or trading of securities; (ii) the selection
of portfolio managers; (iii) the performing of investment advisory services;
(iv) responsibilities that are functionally equivalent to those listed in (i),
(ii), or (iii); or (v) supervision of one or more persons having such
responsibilities.
A person who is an agent, broker-dealer, investment advisor,
or investment advisor representative shall not serve as an officer or director
of a trust company that is not an affiliated trust company.
Statutory Authority
§ 6.2-1034 of the Code of Virginia.
Historical Notes
Derived from VR225-01-0205 § 3, eff. April 20, 1995.
10VAC5-22-40. Reports of condition; annual audits.
Trust companies and trust company holding companies shall
submit to the bureau statements of their financial condition at such times as
the bureau may require. Such statements shall be made in accordance with forms
prescribed by the bureau, certified under oath, and attested by at least three
directors. The bureau shall call upon all such trust companies and trust
company holding companies doing business in Virginia to file these statements.
The bureau may require any trust company or trust company holding company to
prepare and submit such other reports and material as the bureau deems
necessary to protect or promote the public interest.
The board of directors of a trust company shall cause to be
made an annual audit of the trust company. The audit shall be performed by a
qualified, independent auditor. A separate report, containing a management
letter, shall be required and submitted to the bureau in a timely manner.
Statutory Authority
§ 6.2-1034 of the Code of Virginia.
Historical Notes
Derived from VR225-01-0205 § 4, eff. April 20, 1995.
10VAC5-22-50. Insurance required.
In addition to the surety bond required by § 6.2-1016
of the Code of Virginia, a trust company shall maintain insurance coverage
that, in kind and amount, provides adequate protection against the risks of the
business. The coverage may be provided through the holding company of an
affiliated trust company.
Statutory Authority
§§ 6.2-1034 and 12.1-13 of the Code of Virginia.
Historical Notes
Derived from VR225-01-0205 § 5, eff. April 20, 1995; amended,
Virginia Register Volume 28, Issue 1, eff. September 1, 2011.
10VAC5-22-60. Investments.
A trust company may invest its capital funds in the
investments permitted by law for state banks; it shall reasonably diversify the
investment of such funds.
Statutory Authority
§ 6.2-1034 of the Code of Virginia.
Historical Notes
Derived from VR225-01-0205 § 6, eff. April 20, 1995.
10VAC5-22-70. Loans to certain persons prohibited.
A trust company shall not make loans or otherwise extend its
capital funds to an officer, director, or employee of the trust company, its
holding company, and its affiliates.
Statutory Authority
§ 6.2-1034 of the Code of Virginia.
Historical Notes
Derived from VR225-01-0205 § 7, eff. April 20, 1995.
10VAC5-22-80. Delegation of trust functions; confidentiality.
A trust company, as trustee, is responsible to settlors and
beneficiaries of trusts for carrying out the terms of trust agreements. This
responsibility remains with the company regardless of any arrangement that may
place one or more trust functions (e.g., administration, custody, investment
advice, investment management) with a third party. The trust company must
retain sufficient control of trust accounts to be able to meet its
responsibilities.
In instances where investment discretion, i.e., the authority
to determine what securities or other property shall be bought or sold for an
account, is delegated to an affiliate of a trust company, the affiliate must be
named by the settlor in the trust agreement or other controlling document. The
trustee may advise the settlor in selecting such affiliate, and shall review
its performance periodically and advise the settlor whether it is in the best
interest of the trust to continue the delegation of investment discretion to
such affiliate.
A trust company shall preserve the confidentiality of
customers' financial information and shall not disclose such information
without the consent of the customer.
Statutory Authority
§ 6.2-1034 of the Code of Virginia.
Historical Notes
Derived from VR225-01-0205 § 8, eff. April 20, 1995.
10VAC5-22-90. Trust administration as individual, receipt of
income from licensed activities prohibited.
An officer or employee of a trust company may not accept or
administer, as an individual, any trust account, unless the board of directors
approves and monitors the arrangement. While employed by a trust company or
receiving remuneration therefrom, an officer or employee of a trust company may
not engage in a licensed activity and receive commissions, fees, or other
similar income from such activity.
Statutory Authority
§ 6.2-1034 of the Code of Virginia.
Historical Notes
Derived from VR225-01-0205 § 9, eff. April 20, 1995.
10VAC5-22-100. Securities advice prohibited; exception.
An affiliated trust company may not express an opinion as to
the advisability of purchasing any security underwritten by an affiliate, or in
which any affiliate makes a market, unless the affiliated trust company clearly
discloses in writing that the trust company and the underwriting affiliate are
under common ownership, that the affiliate is underwriting or dealing in the
security, and that the affiliate has a financial interest in the sale of the
security, which interest shall be described.
Statutory Authority
§ 6.2-1034 of the Code of Virginia.
Historical Notes
Derived from VR225-01-0205 § 10, eff. April 20, 1995.
10VAC5-22-110. Agency or marketing activity prohibited.
An affiliated trust company may not act as agent for, or
engage in any marketing activity on behalf of, its holding company or any
affiliate of the trust company. An affiliated trust company may not distribute
any prospectus or other sales literature relating to a particular security, and
may not make any such information available at an office of the trust company.
Statutory Authority
§ 6.2-1034 of the Code of Virginia.
Historical Notes
Derived from VR225-01-0205 § 11, eff. April 20, 1995.
10VAC5-22-120. Services by affiliate.
When a service is provided to a trust account by an affiliate
of a trust company, the service must be allowed under the terms of the
governing instrument, by a court or by law, and must be justified by readily
available documents relating to the specific account.
Statutory Authority
§ 6.2-1034 of the Code of Virginia.
Historical Notes
Derived from VR225-01-0205 § 12, eff. April 20, 1995.
10VAC5-22-130. Referral of securities transactions.
An affiliated trust company may not direct to an affiliated
broker-dealer the compensation-producing securities transactions of a trust
account, unless:
1. Such action is authorized by the account settlor, the
beneficiaries, or a court (depending on the circumstances) by specific written
consent or authorization obtained after disclosure of the relationship and the
terms of the arrangement;
2. Use of the affiliated broker-dealer is in the best interest
of the account;
3. In the case of employee benefit trusts, a reasoned opinion
of counsel is obtained to the effect that the proposed use does not violate the
Employee Retirement Income Security Act of 1974 (29 USC § 1001 et seq.); and
4. The trust company has established adequate safeguards
against potential abuses (e.g., "churning").
Statutory Authority
§ 6.2-1034 of the Code of Virginia.
Historical Notes
Derived from VR225-01-0205 § 13, eff. April 20, 1995.
10VAC5-22-140. Purchases from affiliate prohibited; exceptions;
terms.
Section 6.2-1020 of the Code of
Virginia provides that an affiliated trust company may not, during the
underwriting period, purchase from an affiliated broker-dealer any security
that is being underwritten by that broker-dealer.
Outside the scope of § 6.2-1020 of
the Code of Virginia, an affiliated trust company may not purchase any security
or other property from an affiliate, except as authorized by a provision of a
governing trust instrument or other controlling document, by a court, or in
accordance with specific permission given by law (e.g., § 26-44.1 of the Code
of Virginia). Any such purchase from an affiliate shall be made at arm's length
and on terms no less stringent than those that would apply in a transaction
with an unrelated third party.
Statutory Authority
§§ 6.2-1034 and 12.1-13 of the Code of Virginia.
Historical Notes
Derived from VR225-01-0205 § 14, eff. April 20, 1995; amended,
Virginia Register Volume 28, Issue 1, eff. September 1, 2011.
10VAC5-22-150. Separate offices required.
An affiliated trust company shall maintain offices that are
separate and clearly distinguishable from the offices of its holding company
and every other affiliate of the trust company. If the offices of the trust
company are in the same building with those of a broker-dealer affiliate, the
trust company's offices shall be on a different floor from the offices of the
broker-dealer.
Statutory Authority
§ 6.2-1034 of the Code of Virginia.
Historical Notes
Derived from VR225-01-0205 § 15, eff. April 20, 1995.
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