Code of Virginia

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Code of Virginia
Title 6.2. Financial Institutions and Services
Chapter 10. Entities Conducting Trust Business
1/24/2022

Article 6. Trust Powers of Savings Institutions.

§ 6.2-1081. Definitions.

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

"Affiliate" means, with respect to an association, a bank holding company, as defined in 12 U.S.C. § 1841, or savings and loan holding company of which the association is a subsidiary, a corporation that is also a subsidiary of a bank holding company or savings and loan holding company of which the association is a subsidiary, a corporation with respect to which the association owns 25 percent or more of the outstanding voting shares of such corporation, or any other corporation that the Commissioner determines is, in fact, controlled by the association.

"Association" has the meaning assigned to it in § 6.2-1100.

"Common trust funds" means common trust funds that are described under § 584 of the Internal Revenue Code of 1954, as well as any other type of collective investment fund that is exempt from federal income taxation under any other provision of the Internal Revenue Code or regulations issued pursuant thereto.

"Fiduciary" means the status resulting from an association's undertaking to act alone, through an affiliate, or jointly with others, primarily for the benefit of another, and includes an association's acting as trustee, executor, administrator, committee, guardian, conservator, receiver, managing agent, registrar of stocks and bonds, escrow, transfer, or paying agent, trustee of employee pension, welfare and profit sharing trusts, and in any other similar capacity.

"Fiduciary records" means all matters which are written, transcribed, recorded, received, or otherwise come into the possession of an association and are necessary to preserve information concerning the actions and events relevant to the fiduciary activities of an association.

"Governing instrument" means the written document or documents pursuant to which an association undertakes to act in a fiduciary capacity, and includes a will, codicil, deed of trust, trust deed, and other similar instruments.

"Investment authority" means the responsibility conferred by action of law or a provision of a governing instrument to make, select, or change investments, review investment decisions made by others, or to provide investment advice or counsel to others.

"Managing agent" means the fiduciary relationship assumed by an association upon the creation of an account that names the association as agent and confers investment authority upon the association.

"Savings institution holding company" has the meaning assigned to it in § 6.2-1100.

"Trust account" means the account established pursuant to a trust, estate, or other fiduciary relationship that has been established with an association.

"Trust department" means that group or groups of officers and employees of an association, or of an affiliate of an association, to whom are assigned the performance of fiduciary services by the association.

"Uniform Transfers to Minors Act" means Chapter 19 (§ 64.2-1900 et seq.) of Title 64.2 or any comparable act in effect in any other state.

1984, c. 303, § 6.1-195.78; 1997, c. 801; 2010, c. 794.

§ 6.2-1082. Applications for permission to offer trust services.

A. An association desiring to exercise fiduciary powers, either through a trust department or through an affiliate, shall file with the Commission an application indicating which trust services it wishes to offer and providing the information necessary to make the determinations required under subsection B.

B. In addition to assessing any other facts or circumstances deemed proper, the Commission, in passing upon an application to exercise trust powers, shall not grant such application unless the Commission finds that:

1. The association's capital structure is sufficiently strong to support such additional undertaking;

2. The personnel who will direct the proposed trust department have adequate experience and training, and will devote sufficient time to its affairs to ensure compliance with the law and to protect the association against surcharge;

3. The granting of trust powers to the association will be in the public interest; and

4. The association has available legal counsel to advise and pass upon fiduciary matters wherever necessary.

1984, c. 303, § 6.1-195.79; 2010, c. 794.

§ 6.2-1083. Commission to issue certificate; powers of associations authorized to offer trust services.

A. Upon granting the application of an association to exercise trust powers, the Commission shall issue a certificate authorizing the association or affiliate to exercise trust powers and offer fiduciary services. Unless such certificate otherwise provides, such association shall have the following rights, powers, and privileges, and shall be subject to the following regulations and restrictions:

1. To act as agent for any person, including any locality or state, for the collection or disbursement of interest, or income or principal of securities;

2. To act as the fiscal or transfer agent of any state, locality, or other body public or corporate, and in such capacity to receive and disburse money, to transfer, register and countersign certificates of stock, bonds, or other evidences of indebtedness;

3. To act as agent of any corporation, foreign or domestic, for any lawful purpose;

4. To act as trustee under any deed of trust, mortgage, or bond issued by an individual, municipality, or body politic or corporate, and to accept and execute any other municipal or corporate trust not inconsistent with the laws of the Commonwealth;

5. To act as a guardian, conservator, as a custodian under the Uniform Transfers to Minors Act (§ 64.2-1900 et seq.), and as depository of any money paid into court, whether for the benefit of a person under a disability or other person;

6. To take, accept, and execute any and all trusts and powers, of whatever nature and description, as may be conferred upon or entrusted or committed to it by any person, or any body politic or corporate, or by other authority, by grant, assignment, transfer, devise, bequest, or otherwise or as may be entrusted or committed or transferred to it or vested in it by order of any circuit court, judge, or clerk; to receive and hold any property or estate, real or personal, which may be the subject of any such trust; and to be accountable to all parties in interest for the faithful discharge of every such trust, duty, or power which it may so accept; and

7. To act as executor under the last will and testament, or administrator of the estate, of any deceased person, under appointment of any circuit court, judge, or clerk thereof, having jurisdiction of the estate of such deceased person.

B. Nothing in this chapter shall be construed as authorizing the creation of a trust not lawful as between individuals, nor to prohibit the deposit of funds by courts and fiduciaries in savings and loan associations and savings banks.

C. All rights, powers, and privileges, and all regulations, restrictions, and limitations, granted to or made applicable to associations by the provisions of this chapter shall likewise apply to any affiliate of an association which is authorized by the Commission to exercise trust powers. Any such affiliate shall be organized and operated solely for the purpose of offering trust services pursuant to the provisions of this chapter.

D. All federal savings and loan associations and federal savings banks, that have been, or hereafter may be, permitted by law to act in any fiduciary capacity, shall have the rights, powers, privileges, and immunities conferred by this chapter to the extent permitted by federal law.

1984, c. 303, § 6.1-195.80; 1997, c. 801; 2010, c. 794.

§ 6.2-1084. Continuation of trust powers in the event of consolidation or merger of two or more associations.

If an association consolidates or merges with another association or a bank and the association has, prior to such consolidation or merger, exercised trust powers under a certificate issued by the Commission, which certificate is in effect at the time of the consolidation or merger, the rights existing under such certificate shall pass to the resulting corporation. The resulting corporation may exercise such trust powers in the same manner and to the same extent as the association to which such certificate was originally issued. No new application to continue to exercise such powers is necessary. If the name of the resulting corporation differs from that of the association to which the right to exercise trust powers was originally granted, the Commission shall issue a certificate showing the right of such resulting corporation to exercise the trust powers theretofore granted to any of the associations participating in the consolidation or merger.

1984, c. 303, § 6.1-195.81; 2010, c. 794.

§ 6.2-1085. When security not required.

No association with a minimum combined unimpaired capital and surplus of $50,000 or more shall be required by any officer or court of the Commonwealth to give security upon appointment to or acceptance of any fiduciary office which it may, by law, be authorized to execute, or to give security upon any bond given pursuant to § 19.2-386.6 or similar statute. No association shall qualify on an estate having a value in excess of its combined unimpaired capital and surplus without giving security for such excess on its bond, unless the giving of such security is waived under the terms of the governing instrument or by court order.

1984, c. 303, § 6.1-195.82; 1993, c. 866; 2010, c. 794; 2012, cc. 283, 756.

§ 6.2-1086. Association's operation and supervision of trust department.

A. The board of directors of an association is responsible for the proper exercise of fiduciary powers by the association. All matters pertinent thereto, including the determination of policies, the investment and disposition of property held in a fiduciary capacity, and the direction and review of the actions of all officers, employees, and committees utilized by the association in the exercise of its fiduciary powers, are the responsibility of the board. In discharging this responsibility, the board of directors may assign, by action duly entered in the minutes, the administration of such of the association's trust powers as it may consider proper to assign to such directors, officers, employees, or committees as it may designate.

B. No fiduciary account shall be accepted without the approval of the directors, officers, or committees to whom the board may have assigned the performance of that responsibility. A written record shall be made of such acceptances and of the relinquishment or closing out of all fiduciary accounts.

C. Upon the establishment of a trust account for which the association has investment authority, a prompt review of the assets of such account shall be made. The board of directors shall also ensure that at least once during every calendar year thereafter, and within 15 months of the last review, all the assets held in or held for each trust account for which the association has investment authority are reviewed to determine the advisability of retaining or disposing of such assets. The board of directors shall act to ensure that all investments have been made in accordance with the terms and purposes of the governing instrument and in accordance with applicable law.

D. The trust department may utilize personnel and facilities of other departments of the association, and other departments of the association may utilize personnel and facilities of the trust department to the extent not otherwise prohibited by the law.

E. Every association exercising trust powers shall adopt written policies and procedures to ensure that the securities laws of the United States and the Commonwealth are complied with in connection with any decision or recommendation to purchase or sell any security. Such policies and procedures, in particular, shall ensure that the association's trust department shall not use material inside information in connection with any decision or recommendation to purchase or sell any security.

F. Every association exercising fiduciary powers shall designate, employ, or retain legal counsel who shall be readily available to pass upon fiduciary matters and to advise the association and its trust department.

1984, c. 303, § 6.1-195.83; 2010, c. 794.

§ 6.2-1087. Books and accounts.

Every association exercising trust powers shall keep its fiduciary records separate and distinct from other records of the association. All fiduciary records shall be so kept and retained for such time as to enable the association to furnish such information or reports with respect thereto as may be required by the Commissioner. The fiduciary records shall contain full information relative to each account. Every association shall also keep an adequate record of all pending litigation to which the association is a party in connection with its exercise of trust powers.

1984, c. 30, § 6.1-195.84; 2010, c. 794.

§ 6.2-1088. Investment of funds and assets held as fiduciary.

Funds and assets held by an association in a fiduciary capacity shall be invested in accordance with the provisions of the governing instrument. When such instrument does not specify the character or class of investments to be made and does not vest in the association, its directors, or its officers absolute and uncontrolled investment discretion in the matter, funds and assets held pursuant to such instrument shall be invested in any investment in which fiduciaries may invest under the provisions of Chapter 15 (§ 64.2-1500 et seq.) of Title 64.2. An association acting as fiduciary under appointment by a court may likewise invest in any investments in which fiduciaries may invest under the provisions of Chapter 15 (§ 64.2-1500 et seq.) of Title 64.2 unless otherwise provided by order of the appointing court. Unless the governing instrument or order establishing the fiduciary relationship provides otherwise, funds and assets held by an association in a fiduciary capacity may also be invested in common trust funds and collective investment funds pursuant to the provisions of § 6.2-1095.

1984, c. 303, § 6.1-195.85; 2010, c. 794.

§ 6.2-1089. Funds awaiting investment or distribution.

A. Funds and assets held in a fiduciary capacity by an association awaiting investment or distribution shall not be held uninvested or undistributed any longer than is reasonable for the proper management of the trust account.

B. Funds and assets held in trust by an association, including managing agency accounts, awaiting investment or distribution, unless prohibited by the governing instrument, may be deposited in other departments of the association, provided that the association shall first set aside under the sole control of the trust department, as collateral security:

1. Direct obligations of the United States, or other obligations fully guaranteed by the United States as to principal and interest;

2. Readily marketable securities of the classes in which fiduciaries are authorized or permitted to invest trust funds, as set forth in § 64.2-1502; or

3. Other readily marketable securities as may be authorized by the Commissioner.

Such collateral securities, or securities substituted therefor as collateral, shall at all times be at least equal in face value to the amount of trust funds so deposited, but such security shall not be required to the extent that the funds so deposited are insured by the Federal Deposit Insurance Corporation or other federal insurance agency. The requirements of this subsection are met when qualifying assets of the association are pledged in such manner as to fully secure all trust account funds deposited by the trust department of the association in another department of the association.

C. Any funds held by an association as fiduciary awaiting investment or distribution and deposited in other departments of the association shall be made productive.

D. In the event of the failure or liquidation of an association, the owners of the funds held in trust and deposited in another department of the association shall have a first lien on the securities set apart as collateral for such funds, in addition to any other claim that such owners may have against the association.

1984, c. 303, § 6.1-195.86; 1990, c. 3; 1992, c. 810; 2010, c. 794.

§ 6.2-1090. Dealings with self or affiliates.

A. Unless authorized by the governing instrument or by court order, funds held by an association as fiduciary shall not be invested in stock or obligations of, or property acquired from, the association or its affiliates or their directors, officers, or employees, or organizations in which the association or its affiliates or their officers, directors, or employees possess such an interest as might affect the exercise of the best judgment of the association in acquiring the stock, obligations, or property.

B. Property held by an association as fiduciary shall not be sold or transferred, by loan or otherwise, to the association or its affiliates or their directors, officers, or employees, or to organizations in which the association or its affiliates or their officers, directors, or employees possess such an interest as might affect the exercise of the best judgment of the association in selling or transferring such property, except:

1. When lawfully authorized by the governing instrument or by court order;

2. In cases in which the association has been advised by its legal counsel in writing that it has incurred, as fiduciary, a contingent or potential liability, and the association desires to relieve itself from such liability, in which case such sale or transfer may be made with the approval of the board of directors and the Commissioner, provided that in all such cases the association, upon the consummation of the sale or transfer, shall make reimbursement in cash at no loss to the trust account;

3. As provided in §§ 6.2-1089 and 6.2-1094; or

4. When required by the Commissioner.

C. If the retention of stock or obligations of the association or its affiliates is authorized by the governing instrument or court order, the association may exercise rights to purchase its own stock or the stock of its affiliates, or securities convertible into such stock, when such rights are offered pro rata to all stockholders of the association or its affiliates, as the case may be. When the exercise of such rights or the receipt of a stock dividend results in fractional shareholdings, additional fractional shares may be purchased to complement the fractional shares so acquired. In elections of directors, shares of an association or its affiliates held by the association as sole fiduciary, whether in its own name as fiduciary or in the name of its nominee, may not be voted by the association or its nominee unless, under the terms of the governing instrument or a court order, the manner in which such shares shall be voted may be directed by a donor or beneficiary of the trust account, and the donor or beneficiary actually directs how the shares will be voted. In addition, where the association is acting as sole fiduciary with respect to a trust account containing voting shares of the association or its affiliates, the association may, in accordance with the provisions of subsection B of § 6.2-1091, petition an appropriate court for appointment of a co-fiduciary for the purpose of voting such shares.

1984, c. 303, § 6.1-195.87; 2010, c. 794.

§ 6.2-1091. Voting of financial institution stock held by association as fiduciary; when association disqualified from voting.

A. When voting shares of a financial institution are held by an association in a trust account, the association may not vote or participate in the voting of any such shares if the securities held in such fiduciary capacity, together with all the other voting securities of such financial institution held in a fiduciary capacity by the association and its affiliates, exceed 25 percent of the outstanding voting securities of such financial institution. If the voting securities of any financial institution held by an association in a trust account, together with all other voting securities of such financial institution held in a fiduciary capacity by the association and its affiliates, exceed five percent of the outstanding voting securities of such financial institution, but less than 25 percent thereof, the association may not vote or participate in the voting of any such voting securities unless there has been a determination by the Commissioner that the right to vote such shares does not constitute control of the particular financial institution in question.

B. If any person is acting as fiduciary, in addition to the association, for the trust account containing such voting securities, such other fiduciary, if not a director, officer, or employee of the association or its affiliates, may vote such shares. If the association is the sole fiduciary for the trust account, the association may petition an appropriate court for the appointment of a co-fiduciary for the sole purpose of voting such shares. Such appointment and qualification may be ex parte, and no prior notice to the beneficiaries of the trust account shall be required. The court at the time of such qualifications may relieve the co-fiduciary of any obligation for the giving of security on his bond. If the appointment of the co-fiduciary is limited to voting such shares, such order may provide that the co-fiduciary shall not be liable or accountable in the administration of the trust account, except for the breach of any fiduciary duty in voting or failing to vote such shares. No director, officer, or employee of the petitioning association or its affiliates shall be eligible to be named co-fiduciary under the provisions of this section.

C. The provisions of this section shall also apply in the case of voting shares of a bank holding company, as defined in 12 U.S.C. § 1841, or a savings and loan holding company held by an association in a fiduciary capacity.

1984, c. 303, § 6.1-195.88; 2010, c. 794.

§ 6.2-1092. Transactions between trust accounts.

A. An association may sell assets held by it as fiduciary in one trust account to itself as fiduciary in another trust account if the transaction is fair to both accounts and if such transaction is not prohibited by the terms of the governing instruments, court order, or the law of the Commonwealth.

B. An association may make a loan to a trust account from the funds belonging to another such account, when the making of such loan to a designated trust account is authorized by the governing instrument creating the account from which such loans are made, or by court order, and the terms of the transaction are fair to all of the trust accounts involved.

C. An association may make a loan to a trust account and may take as security therefor assets of the account, provided such transaction is fair to such account and is not otherwise prohibited by the governing instrument, by court order, or by the law of the Commonwealth.

1984, c. 303, § 6.1-195.89; 2010, c. 794.

§ 6.2-1093. Custody of assets and investments held in trust.

A. The assets and investments of each trust account shall be kept separate from the assets of the association and shall be placed in the joint custody or control of not fewer than two of the officers or employees of the association designated for that purpose by the board of directors of the association. All such officers and employees shall be adequately bonded.

B. The assets and investments of each trust account shall be either kept separate from those of all other trust accounts, except as provided in § 6.2-1095, or otherwise adequately identified as the property of the relevant account.

1984, c. 303, § 6.1-195.90; 2010, c. 794.

§ 6.2-1094. Establishment of common trust funds and collective investment funds; court accountings.

A. Any association authorized by the Commission to offer fiduciary services may establish and maintain one or more common trust funds for the collective investment of funds held in a fiduciary capacity by it. The association may include, in such common trust fund or funds established and maintained by it, funds held in a fiduciary capacity by any affiliate of the association.

B. An association may invest funds held by it in any fiduciary capacity in one or more common trust funds, provided (i) such investment is not prohibited by the governing instrument or court order creating such fiduciary relationship; (ii) in the case of co-fiduciaries, the written consent of the co-fiduciary is obtained by the association; and (iii) the association has no interest in the assets of the common trust fund other than as a fiduciary.

C. Unless ordered by an appropriate court, an association operating a common trust fund or funds shall not be required to render a court accounting with regard to such fund or funds, but, by application to an appropriate court, such association may secure approval of such an accounting on such conditions as the court may establish. Nothing contained herein shall affect the duties of the fiduciaries of the trust accounts participating in the common trust fund to render accounts of their several trusts.

1984, c. 303, § 6.1-195.91; 2010, c. 794.

§ 6.2-1095. Compensation of association acting as fiduciary.

A. If the amount of the compensation for acting in a fiduciary capacity is not provided for in the governing instrument or otherwise agreed to by the parties, an association acting in such capacity may charge or deduct reasonable compensation for its services. When the association is acting in a fiduciary capacity under appointment by a court, it shall receive such compensation as may be allowed or approved by that court.

B. No association, except with the specific approval of its board of directors, shall permit any of its officers or employees, while serving as such, to retain any compensation for acting as a co-fiduciary with the association in the administration of any trust account undertaken by it.

C. No association shall permit an officer or employee engaged in the operation of its trust department to accept a devise, bequest, or gift of trust account assets, unless the devise, bequest, or gift is directed or made by a relative of such officer or employee, or is approved by the board of directors of the association.

1984, c. 303, § 6.1-195.92; 2010, c. 794.

§ 6.2-1096. Surrender of trust powers by association.

Any association that has been granted the right to exercise trust powers and that desires to surrender such rights shall file with the Commission a certified copy of the resolution of its board of directors signifying such desire. Upon receipt of such resolution, the Commission shall make an investigation. If the Commission is satisfied that the association has been properly discharged from all fiduciary duties that it has undertaken, the Commission shall issue a certificate to such association certifying that it is no longer authorized to exercise fiduciary powers. Upon issuance of such a certificate by the Commission, an association shall no longer be subject to the provisions of this article and shall not exercise thereafter any of the powers granted by this article without first applying for and obtaining a new authorization to exercise such powers.

1984, c. 303, § 6.1-195.93; 2010, c. 794.

§ 6.2-1097. Effect on trust accounts of appointment of receiver for association or of voluntary dissolution of association.

A. If a receiver is appointed for an association, the receiver shall, pursuant to the orders of the Commission and of any court having jurisdiction, proceed to close such of the association's trust accounts as can be closed promptly and shall promptly transfer all other such accounts to substitute fiduciaries.

B. If an association exercising trust powers commences a voluntary dissolution, the liquidating agent shall proceed at once to liquidate the affairs of the trust department as follows:

1. All trusts and estates over which a court is exercising jurisdiction shall be closed or disposed of as soon as practicable in accordance with the orders or instructions of such court;

2. All other trust accounts which can be closed promptly shall be closed as soon as practicable and final accountings made therefor; and

3. All remaining trust accounts shall be transferred by appropriate legal proceedings to substitute fiduciaries.

1984, c. 303, § 6.1-195.94; 2010, c. 794.

§ 6.2-1098. Revocation of trust powers.

A. If, in the opinion of the Commission, an association is unlawfully or unsoundly exercising, or has unlawfully or unsoundly exercised, or has failed for a period of five consecutive years to exercise, the powers granted by this chapter, or otherwise fails or has failed to comply with the requirements of this chapter, the Commission may issue and serve upon the association a notice of intent to revoke the authority of the association to exercise the powers granted by this chapter. The notice shall contain a statement of the facts constituting the alleged unlawful or unsound exercise of powers, or failure to exercise powers, or failure to comply, and shall fix a time and place at which a hearing will be held before the Commission to determine whether an order revoking authority to exercise such powers should issue against the association.

B. Such hearing shall be conducted in accordance with the Commission's Rules, and shall be fixed for a date not earlier than 30 days and not later than 60 days after the service of such notice, unless an earlier or later date is set by the Commission at the request of the association so served.

C. Unless the association so served shall appear by a duly authorized representative, it shall be deemed to have consented to the issuance of the revocation order. In the event of such consent or if, upon the record made at any such hearing, the Commission shall find that any allegation specified in the notice of charges has been established, the Commission shall issue and serve upon the association an order prohibiting it from accepting any new or additional trust accounts and revoking authority to exercise any and all powers granted by this chapter, except that such order shall permit the association to continue to service all previously accepted trust accounts pending their expeditious divestiture or termination.

D. A revocation order shall become effective not later than the expiration of 30 days after service of such order upon the association and shall remain effective and enforceable, except to such extent as it is stayed, modified, terminated, or set aside by action of the Commission or a reviewing court. In the case of a revocation order issued upon the consent of an association, such order shall become effective at the time specified therein.

1984, c. 303, § 6.1-195.95; 2010, c. 794.

§ 6.2-1099. Trust powers of state savings banks.

State savings banks, and their subsidiaries and affiliates, may exercise fiduciary powers in the same manner as associations pursuant to this article.

1991, c. 230, § 6.1-194.138; 2010, c. 794.