Code of Virginia

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Code of Virginia
Title 6.2. Financial Institutions and Services
Chapter 10. Entities Conducting Trust Business
1/19/2022

Article 3. Trust Subsidiaries.

§ 6.2-1047. Definitions.

As used in this article, unless the context requires a different meaning:

"Affiliate bank" with respect to a trust subsidiary means (i) a bank of which more than 50 percent of the shares are owned directly or indirectly through a subsidiary by the same Virginia bank holding company that owns directly or indirectly through a subsidiary all the shares, except directors' qualifying shares, of a trust subsidiary or a subsidiary bank or (ii) a bank that owns some or all of the shares of a trust subsidiary or a subsidiary bank.

"Bank" has the meaning assigned to it in § 6.2-800.

"Bank holding company" has the meaning assigned to it in § 6.2-800.

"Bank under common ownership" means a bank of which 80 percent or more of its common stock is owned, directly or indirectly through a subsidiary, by the same Virginia bank holding company as owns, directly or indirectly through a subsidiary, at least 80 percent of the stock of the subsidiary bank substituted as fiduciary.

"Fiduciary capacity" means every capacity in which a trust institution is granted the right to act pursuant to § 6.2-1002 and every other capacity in which a bank acts, or may act, through its trust department, including, without limitation, trusteeship with respect to common trust funds.

"Main office" is the place designated in the articles of incorporation or articles of association as the main office of the bank or trust subsidiary at which the principal functions of the bank or trust subsidiary are to be conducted.

"Owning bank" means a bank owning 10 percent or more of the shares of a trust subsidiary.

"Subsidiary bank" means a bank authorized to exercise trust powers, at least 80 percent of the outstanding shares of which are owned directly or indirectly through a subsidiary by a Virginia bank holding company.

"Trust office" means, with regard to a trust subsidiary or a bank having trust powers, an office for trust purposes only, at which the trust subsidiary or bank holds itself out as dealing with the public in the solicitation and conduct of its trust business.

"Trust subsidiary under common ownership" means a trust subsidiary at least 80 percent or more of which is owned, directly or indirectly through a subsidiary, by the same Virginia bank holding company as owns, directly or indirectly through a subsidiary, at least 80 percent of the stock of the subsidiary bank substituted as fiduciary.

"Virginia bank holding company" means a bank holding company that, directly or indirectly through a subsidiary, owns or controls a bank the main office of which is located in the Commonwealth.

1974, c. 286, § 6.1-32.2; 1991, c. 282; 2010, c. 794; 2020, c. 239.

§ 6.2-1048. Organization of subsidiary trust companies.

A. A subsidiary trust company may be incorporated and organized under Article 3 (§ 13.1-618 et seq.) of Chapter 9 of Title 13.1 or under federal laws relating to national banking associations for the purpose of conducting a trust business and other activities and business incidental thereto in which a trust subsidiary is permitted to engage as provided in § 6.2-1049.

B. All the outstanding voting shares of a subsidiary trust company, other than directors' qualifying shares, shall be owned directly or indirectly through a subsidiary by (i) one or more Virginia bank holding companies, (ii) one or more banks authorized to have a main or parent office in Virginia, or (iii) both.

C. A trust subsidiary shall be subject to regular examination and supervision by the Commission or by the Comptroller of the Currency of the United States.

D. If incorporated under Title 13.1, a trust subsidiary shall pay such examination fees as may be from time to time imposed upon trust departments of banks that are subject to examination by the Commission.

1974, c. 286, § 6.1-32.3; 1991, c. 282; 2004, c. 781; 2010, c. 794.

§ 6.2-1049. Permissible business.

A trust subsidiary shall be permitted to engage in trust business and activities that may be engaged in by a bank pursuant to § 6.2-1002, and business incidental thereto. A trust subsidiary shall not accept deposits or conduct any other business except as may be incidental to the trust business being conducted by it.

1974, c. 286, § 6.1-32.5; 1997, c. 801; 2010, c. 794.

§ 6.2-1050. Directors.

The affairs of every trust subsidiary incorporated under the laws of the Commonwealth shall be managed by a board of directors. The board shall consist of not fewer than five individuals. A majority of the directors shall be citizens of the Commonwealth. Directors need not be stockholders of the trust subsidiary unless the articles of incorporation so require.

1974, c. 286, § 6.1-32.4; 2010, c. 794.

§ 6.2-1051. Report to Commission of election of director.

Within 60 days following the election or reelection of any person as a director of a trust subsidiary, the trust subsidiary shall furnish such information to the Commission relative to his personal character, integrity, financial condition, and personal and business background as the Commission shall from time to time prescribe. Such report, under oath, shall be signed by the director as well as a designated officer of the trust subsidiary. Any person knowingly making a false statement in such a report is guilty of perjury.

1968, c. 606, § 6.1-48.1; 1974, c. 665, § 6.1-51.1; 1992, c. 552; 1994, c. 105; 2010, c. 794.

§ 6.2-1052. Removal of director or officer; appeals; penalty.

A. Whenever any director or officer of a trust subsidiary doing business in the Commonwealth, shall have continued to violate any law relating to such trust subsidiary or shall have continued unsafe or unsound practices in conducting the business of such trust subsidiary, after the director or officer, and the board of directors of the trust subsidiary of which he is a director or officer, have been warned in writing by the Commissioner to discontinue such violation of law or such unsafe or unsound practices, the Commissioner shall certify the facts to the Commission. The Commission shall thereupon enter an order requiring such director or officer to appear before the Commission, within not less than 10 days, to show cause why he should not be removed from office and thereafter restrained from participating in any manner in the management of such trust subsidiary. Such order shall contain a brief statement of the facts certified to the Commission by the Commissioner. A copy of such order shall be served upon such director or officer, and a copy thereof shall be sent by registered mail to each director of the trust subsidiary affected.

B. If, after granting the accused director or officer a reasonable opportunity to be heard, the Commission shall find that he has continued to violate any law relating to such trust subsidiary, or has continued unsafe or unsound practices in conducting the business of such trust subsidiary, after he and the board of directors of the trust subsidiary of which he is a director or officer have been warned in writing by the Commissioner to discontinue such violation of law or unsafe or unsound practices, the Commission shall enter an order removing such director or officer from office and restraining such director or officer from thereafter participating in any manner in the management of such trust subsidiary. A copy of such order shall be served upon such director or officer. A copy of such order shall also be served upon the trust subsidiary of which he is a director or officer. Upon such removal the director or officer shall cease to be a director or officer of such trust subsidiary and thereafter cease to participate in any manner in the management of such trust subsidiary.

C. Any director or officer aggrieved by (i) any order of the Commission entered under subsection B or (ii) an order refusing to remove another director or officer from office or to restrain him from participating in the management of the trust subsidiary, shall have, of right, an appeal to the Supreme Court of Virginia within 60 days from the date of the order.

D. Any director or officer removed or restrained under the provisions of subsection B from participating in any manner in the management of any trust subsidiary of which he is a director or officer, and who thereafter participates in any manner in the management of such trust subsidiary except as a stockholder therein, is guilty of a Class 6 felony.

Code 1950, §§ 6-40, 6-41, 6-42; 1966, c. 584, §§ 6.1-49, 6.1-50, 6.1-51; 1974, c. 665, § 6.1-51.1; 1979, c. 58; 1992, c. 136; 2010, c. 794.

§ 6.2-1053. Bonds required of officers and employees; blanket bond.

A. The board of directors of every trust subsidiary shall require bonds from all of the active officials and employees of such corporation. In lieu of such bonds, the board may obtain one or more blanket bonds. The surety on every bond shall be a bonding or surety company authorized to transact business in Virginia, and the penalty of any such bond shall be increased whenever in the opinion of the Commission it is necessary for the protection of the public interest.

B. If a trust subsidiary is unable to obtain the bond required by this section, it shall immediately notify the Commission, which may then direct the trust subsidiary to have an audit performed at its expense by an independent certified public accounting firm. The trust subsidiary shall obtain blanket bond coverage as soon as such coverage is available. Failure to obtain blanket bond coverage may be cause for action by the Commission as provided by § 6.2-906.

Code 1950, § 6-46; 1966, c. 584, § 6.1-54; 1974, c. 665; 1979, c. 52; 1992, c. 365; 2010, c. 794.

§ 6.2-1054. Certificate required.

No trust subsidiary, other than a wholly owned subsidiary of a national banking association, shall engage in trust business without first obtaining a certificate of authority from the Commission, or the Comptroller of the Currency if it is organized as a national banking association. The Commission shall not grant such certificate unless:

1. The capital and surplus of the trust subsidiary equal or exceed $200,000; and

2. The Commission is satisfied that (i) the trust subsidiary is capable of complying with the provisions of this chapter and (ii) the officers and directors have the moral fitness and business qualifications necessary to manage the trust subsidiary.

1974, c. 286, § 6.1-32.5; 1997, c. 801; 2010, c. 794.

§ 6.2-1055. Trust offices.

A trust subsidiary may have trust offices at locations where branches are permitted under § 6.2-831, upon approval of the Commission.

1974, c. 286, § 6.1-32.6; 1987, c. 352; 2010, c. 794.

§ 6.2-1056. When security not required of trust subsidiaries.

No trust subsidiary with combined unimpaired capital stock and surplus of $200,000 or more shall be required by any officer or court of the Commonwealth to give security upon appointment to or acceptance of any office or trust that it may, by law, be authorized to execute. No trust subsidiary shall qualify in a fiduciary capacity on an estate that has a value in excess of its combined unimpaired capital and surplus, without giving security for such excess, unless:

1. The requirement that the trust subsidiary give security for such excess is waived by the person creating such fiduciary relationship;

2. A Virginia bank holding company or a bank owning, directly or indirectly through a subsidiary bank, 100 percent of the stock, exclusive of directors' qualifying shares, of the trust subsidiary files with the Commission and with the circuit court for the jurisdiction in which the main office of the bank holding company or bank is located an undertaking to be fully responsible for the existing and future fiduciary acts and omissions of its trust subsidiary. If such undertaking is filed, a trust subsidiary may qualify in a fiduciary capacity without giving security if the assets it is to receive in such capacity have a value not greater than the combined and unimpaired capital and surplus of the parent Virginia bank holding company or parent bank that has undertaken to be responsible for the acts of such trust subsidiary. If no such undertaking shall have been filed, and corporate surety is provided, the premium thereof shall be borne by the trust subsidiary and not the fiduciary estate; or

3. If an affiliate bank shall already have qualified in any fiduciary capacity and given bond, without security, and the trust subsidiary or subsidiary bank shall qualify as successor fiduciary, then, if the order of substitution so provides, and the fiduciary for which there is to be substitution consents, the predecessor fiduciary shall remain liable on its bond for the acts of its named successor and no security shall be required of the successor fiduciary, if the bond of the fiduciary for which there is to be substitution is otherwise sufficient.

1974, c. 286, § 6.1-32.7; 2010, c. 794.

§ 6.2-1057. Deposits held or received by trust subsidiaries or subsidiary bank with affiliate banks.

A. Funds received or held by a trust subsidiary or subsidiary bank while awaiting investment or distribution shall not be used by an affiliate bank or owning bank in the conduct of its business or deposited in such bank, unless the bank first delivers to its trust department or to the trust subsidiary or subsidiary bank, as collateral security therefor, securities of any of the classes described in subdivision B 1, B 2, or B 3 of § 6.2-1005, in an amount described in subsection B.

B. The securities deposited as collateral as required by subsection A shall be owned by the bank and shall at all times be at least equal in market value to the amount of trust funds held on deposit by such trust subsidiary or subsidiary bank, less such amount thereof as are insured by the Federal Deposit Insurance Corporation.

C. In the event of the failure or liquidation of such bank, the trust subsidiary or subsidiary bank and the owners of the beneficial interest in such trust funds shall have a lien on the bonds or other securities so set apart, in addition to their claims against the estate of the bank.

1974, c. 286, § 6.1-32.8; 1991, c. 282; 2010, c. 794.

§ 6.2-1058. Substitution of trust subsidiary as fiduciary.

A. Upon obtaining a certificate to engage in the trust business, a trust subsidiary may file an application in the circuit court of the jurisdiction in which its main office is located requesting that it be substituted, except as may be excluded in such application, in every fiduciary capacity for each of its owning banks, or, in the case of a Virginia bank holding company, for any one or more of its affiliate banks specified in the application.

B. Upon finding that (i) the trust subsidiary has obtained a certificate to engage in the trust business by the Commission, or by the Comptroller of the Currency if the trust subsidiary is a national banking association, the main office of which is in the Commonwealth and (ii) the requirements of § 6.2-1056 have been met, the court shall enter an order substituting the trust subsidiary in every fiduciary capacity for each of its specified affiliate banks, or specified owning banks, except as may be otherwise specified in the application.

C. Upon entry of such order, the trust subsidiary shall, without further act, be substituted in every fiduciary capacity. The substitution shall be evidenced by filing a copy of the order with the clerk of any circuit court in the Commonwealth. The order shall be indexed in each index in the records of such court in which substitutions of fiduciaries are otherwise indexed. The application may be made ex parte and need not list the fiduciary capacities in which substitution is made. If the requirements of § 6.2-1056 have been met, the order of substitution shall specify that the trust subsidiary shall be deemed without further act to have given bond with open penalty with respect to each fiduciary capacity in which there is substitution.

D. Any bond, with corporate surety, posted under this section or § 6.2-1056 may be a blanket bond conditioned as otherwise contemplated by law.

E. Each designation in a will or other instrument heretofore or hereafter executed of a bank as fiduciary shall be deemed a designation of the trust subsidiary substituted for such bank pursuant to this section except when the instrument is executed after such substitution and expressly negates the application of this section. No waiver of surety with respect to any fiduciary bond shall be effective except in such case when the bond would be otherwise sufficient as contemplated by § 6.2-1056 or 6.2-1059. Any grant in such an instrument of any discretionary power shall be deemed conferred upon the fiduciary deemed to have been nominated hereunder.

F. A bank shall account jointly with the trust subsidiary that has been substituted as fiduciary for such bank pursuant to this section for the accounting period during which the trust subsidiary is initially so substituted. Upon substitution pursuant to this section, the bank shall deliver to the trust subsidiary all assets held by the bank as fiduciary, except assets held for accounts to which there has been no substitution. Upon such substitution, all such assets shall become the property of the trust subsidiary as fiduciary without the necessity of any instrument of transfer or conveyance.

1974, c. 286, § 6.1-32.9; 1987, c. 352; 1991, c. 282; 2010, c. 794.

§ 6.2-1059. Substitution of subsidiary bank as fiduciary.

A. Upon obtaining permission to engage in the trust business, a subsidiary bank may file an application in the circuit court of the jurisdiction in which its main office is located requesting that it be substituted, except as may be specified in such application, in every fiduciary capacity for a bank under common ownership or a trust subsidiary under common ownership.

B. Upon a finding that (i) the subsidiary bank has been granted such permission to engage in the trust business by the Commission or the Comptroller of the Currency and (ii) the unimpaired capital and surplus of such subsidiary bank is sufficient as prescribed in § 6.2-1003, or bond with corporate surety has been posted for any excess, or has been validly waived, the court shall enter an order substituting the subsidiary bank in every fiduciary capacity for each of the specified banks or trust subsidiaries under common ownership, except as may be otherwise specified in the application.

C. Upon entry of such order, such subsidiary bank shall, without further act, be substituted in every such fiduciary capacity. The substitution shall be evidenced by filing a copy of the order with the clerk of any circuit court in the Commonwealth. The order shall be indexed in each index in the records of such court in which substitutions of fiduciaries are otherwise indexed. The application may be made ex parte and need not list the fiduciary capacities in which substitution is made. If a bank or trust subsidiary under common ownership with the subsidiary bank shall already have qualified in any fiduciary capacity and given bond, without surety, then if the order of substitution shall so provide, which it may provide only if the fiduciary for which there is to be substitution consents, the predecessor fiduciary shall remain liable on its bond for the acts of its named successor, and no security or corporate surety shall be required of the successor fiduciary on its bond.

D. Any bond, with corporate surety, posted under this section or under § 6.2-1056 may be a blanket bond conditioned as otherwise contemplated by law.

E. Each designation in a will or other instrument heretofore or hereafter executed of a bank or trust subsidiary as fiduciary shall be deemed a designation of the subsidiary bank substituted for such bank or trust subsidiary pursuant to this section except when the instrument is executed after such substitution and expressly negates the application of this section. No waiver of surety with respect to any fiduciary bond shall be effective except in such case when the bond would be otherwise sufficient as contemplated by § 6.2-1056 or this section. Any grant in such an instrument of any discretionary power shall be deemed conferred upon the fiduciary deemed to have been nominated hereunder.

F. A bank or trust subsidiary shall account jointly with the subsidiary bank that has been substituted as fiduciary for such bank or trust subsidiary pursuant to this section for the accounting period during which the subsidiary bank is initially so substituted. Upon substitution pursuant to this section, the bank or trust subsidiary shall deliver to the substituted subsidiary bank all assets held by the bank or trust subsidiary as fiduciary, except assets held for accounts to which there has been no substitution. Upon such substitution, all such assets shall become the property of the subsidiary bank as fiduciary without the necessity of any instrument of transfer or conveyance.

1974, c. 286, § 6.1-32.9; 1987, c. 352; 1991, c. 282; 2010, c. 794; 2020, c. 239.

§ 6.2-1060. Trust subsidiaries to have same powers and restrictions as bank trust departments.

Wherever there is granted to or imposed upon a bank having and exercising trust powers any further powers in the nature of trust powers or any restriction upon any such powers, whether under this title or otherwise, it is intended that such grant to or restriction upon a bank in its trust powers shall be equally applicable to a trust subsidiary, unless context shall otherwise require or unless this chapter or Chapter 8 (§ 6.2-800 et seq.) specifically covers such situation or provides otherwise.

1974, c. 286, § 6.1-32.10; 2010, c. 794.

§ 6.2-1061. Reports; investigations and examinations; civil penalties.

A. Each trust subsidiary shall file statements of condition and other reports with the Commission in accordance with the requirements established by regulation.

B. The Commission may, by its designated officers and employees, as often as it deems necessary, investigate and examine the affairs, business, premises, and records of any trust subsidiary. Examinations of such trust subsidiaries shall be conducted at least twice in each three-year period.

C. In the course of such investigations and examination, the principals, officers, directors, and employees of such trust subsidiary being investigated or examined shall, upon demand of the person making such investigation or examination, afford full access to all premises, books, records, and information that the person making such investigation or examination deems necessary. For the foregoing purposes, the person making the investigation or examination shall have authority to administer oaths, examine under oath all the aforementioned persons, and compel the production of papers and objects of all kinds.

D. Any trust subsidiary that fails to comply with the provisions of subsection A, for a period of longer than 30 days, after being called upon by the Commission for a statement, or to do such other act as is therein provided, shall be subject to assessment by the Commission of a civil penalty of not less than $100 nor more than $1,000 per day for each day of noncompliance.

E. Any officer of any trust subsidiary being investigated or examined by the Commission who shall refuse to give any examiner the information or refuse to be sworn, as required by subsections B and C, shall be subject to assessment by the Commission of a civil penalty of not less than $25 nor more than $100 per day for each day of noncompliance.

Code 1950, § 6-128; 1966, c. 584, § 6.1-114; 1974, c. 665; 1976, c. 658; 1988, c. 555; 1997, c. 142; 2010, c. 794.

§ 6.2-1062. Offenses by officer, director, agent or employee of trust subsidiary; penalties.

A. Any officer, director, agent, or employee of any trust subsidiary who embezzles, abstracts, or willfully misapplies any of the moneys, funds or credits of, or in the possession or control of the trust subsidiary is guilty of larceny and subject to the penalties provided in § 18.2-95 or 18.2-96.

B. Any officer, director, agent or employee of any trust subsidiary who (i) issues or puts forth any certificate of deposit, (ii) draws any order or bill of exchange, (iii) makes any acceptance, (iv) assigns any note, bond, draft, bill of exchange, mortgage, judgment, decree or other instrument in writing, or (v) makes any false entry in any book, report or statement of such trust subsidiary with intent in any case to injure or defraud the trust subsidiary, or any other individual or entity, or to deceive any officer of the trust subsidiary or the Commission, or any agent or examiner authorized to examine the affairs of the trust subsidiary, and any person, who, with like intent, aids or abets any such officer, director, agent or employee of such trust subsidiary in any act described in clauses (i) through (v), is guilty of a Class 5 felony.

C. Any officer of a trust subsidiary who knowingly makes a false statement of the condition of any trust subsidiary is guilty of a Class 5 felony.

Code 1950, §§ 6-128, 6-138; 1966, c. 584, § 6.1-122; 1974, c. 665; 2010, c. 794.

§ 6.2-1063. Officers, directors, agents and employees violating or causing trust subsidiary to violate laws; civil liability not affected.

Any officer, director, agent, or employee of any trust subsidiary who knowingly violates or who knowingly causes any trust subsidiary to violate any provision of this chapter, or knowingly participates or knowingly acquiesces in any such violation, unless other punishment is provided for the offense of such officer, agent, or employee, is guilty of a Class 1 misdemeanor. The provisions of this section shall not affect the civil liability of any such officer, director, agent or employee.

Code 1950, § 6-139; 1966, c. 584, § 6.1-123; 1974, c. 665; 2010, c. 794.

§ 6.2-1064. Civil penalties for violation of Commission's orders.

A. The Commission may impose, enter judgment for, and enforce by its process, a civil penalty not exceeding $10,000 upon any trust subsidiary or against any of its directors, officers, or employees, who it determines, in proceedings commenced in accordance with the Commission's Rules, has violated any lawful order of the Commission.

B. The Commission may remove from office any director or officer of a trust subsidiary for a second or subsequent violation by him of any such order.

C. In all cases the defendant shall have an opportunity to be heard and to introduce evidence, and the right to appeal as provided by law.

1968, c. 791, § 6.1-125; 1974, c. 665; 1976, c. 658; 2010, c. 794.