97-17792. Fiduciary Activities of National Banks

[Federal Register Volume 62, Number 131 (Wednesday, July 9, 1997)]
[Proposed Rules]
[Pages 36746-36747]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-17792]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 9

[Docket No. 97-14]
RIN 1557-AB63


Fiduciary Activities of National Banks

AGENCY: Office of the Comptroller of the Currency, Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) is 
proposing to amend the rules governing national banks' fiduciary 
activities by issuing an interpretive ruling to clarify the types of 
investment advisory activities that come within the scope of these 
rules.

DATES: Comments must be received by September 8, 1997.

ADDRESSES: Comments should be directed to: Communications Division, 
Office of the Comptroller of the Currency, 250 E Street, SW, 
Washington, DC 20219, Attention: Docket No. 97-14. Comments will be 
available for public inspection and photocopying at the same location. 
In addition, comments may be sent by fax to [phone], or by 
electronic mail to [e-mail].

FOR FURTHER INFORMATION CONTACT: Andrew Gutierrez, Attorney, 
Legislative and Regulatory Activities Division, [phone]; Lisa 
Lintecum, Director, Asset Management, [phone]; Dean Miller, 
Special Advisor, Fiduciary Activities, [phone]; Laurie Edlund, 
National Bank Examiner, Fiduciary Activities, [phone]; Donald 
Lamson, Assistant Director, Securities and Corporate Practices 
Division, [phone].

SUPPLEMENTARY INFORMATION:

Background

    On December 30, 1996, the OCC issued a final rule revising 12 CFR 
part 9, effective January 29, 1997 (61 FR 68543). Among other changes, 
the final rule revised the terms that specify the types of activities 
governed by part 9. In particular, the final rule replaced the former 
regulation's terms ``fiduciary'' and ``managing agent'' with the term 
``fiduciary capacity,'' found at Sec. 9.2(e). Under the revised part 9, 
if a national bank acts in a fiduciary capacity while engaging in a 
certain activity, then part 9 governs that activity.
    One of the fiduciary capacities set forth in Sec. 9.2(e) is 
``investment adviser, if the bank receives a fee for its investment 
advice.'' The concept of investment adviser for a fee is new to part 9, 
and the OCC's addition of this term to the list of fiduciary capacities 
raised questions from the banking industry about what activities entail 
providing investment advice for a fee.

Interpretive Letter #769

    In response to these inquiries, the OCC issued Interpretive Letter 
#769 (January 28, 1997). In that interpretive letter, the OCC clarified 
that ``investment adviser'' generally means a national bank that is 
providing advice or recommendations concerning the purchase or sale of 
specific securities, such as a national bank engaged in portfolio 
advisory and management activities (including acting as investment 
adviser to a mutual fund). Moreover, the OCC explained that the 
qualifying phrase ``if the bank receives a fee for its investment 
advice'' excludes from part 9's coverage those activities in which 
investment advice is merely incidental to other services. Generally, if 
a national bank receives a fee for providing certain services, and a 
significant portion of that fee is attributable to the provision of 
investment advice (i.e., advice or recommendations concerning the 
purchase or sale of specific securities), then part 9 governs that 
activity. In effect, the OCC explained, the new term ``fiduciary 
capacity'' generally includes those activities that the former 
regulation covered and does not capture additional lines of business.
    In the interpretive letter, the OCC indicated that it generally 
will consider full-service brokerage services to involve investment 
advice for a fee only if a non-bank broker engaged in that activity is 
considered an investment adviser under the Investment Advisers Act of 
1940 (Advisers Act) (15 U.S.C. 80b-1 et seq.). 1 The 
Advisers Act, at section 202(a)(11)(C) (15 U.S.C. 80b-2(a)(11)(C)), 
excludes from its definition of investment adviser any broker or dealer 
whose performance of investment advisory services is solely incidental 
to the conduct of its business as a broker or dealer and who receives 
no special compensation for providing investment advice.
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    \1\ Banks are excluded from the Advisers Act's definition of 
investment adviser. 15 U.S.C. 80b-2(a)(11)(A).
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    The OCC also addressed in the interpretive letter whether certain 
other activities came within the scope of part 9.

Proposal

    The OCC proposes to add a new interpretation to part 9, at 
Sec. 9.101, codifying the clarification contained in Interpretive 
Letter #769. To the extent that particular facts require additional 
clarifications, the OCC will address those situations on a case-by case 
basis as necessary.

Request for Comments

    The OCC invites comments on any aspect of this proposal, including 
suggestions on whether any specific activities should be added to or 
removed from the list of activities that generally do not involve 
investment advice for a fee, found at proposed Sec. 9.101(b)(2).

Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act, the 
OCC certifies that this proposal will not have a significant economic 
impact on a substantial number of small entities in accord with the 
spirit and purposes of the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.). Accordingly, a regulatory flexibility analysis is not required. 
The proposal merely clarifies the scope of the regulation, and does not 
add any new requirements.

Executive Order 12866

    The Office of Management and Budget has concurred with the OCC's 
determination that this proposal is not a significant regulatory action 
under Executive Order 12866.

Unfunded Mandates Reform Act of 1995

    The OCC has determined that this proposal will not result in 
expenditures by state, local, and tribal governments, or by the private 
sector, of $100 million or more in any one year. Accordingly, a 
budgetary impact statement is not required under section 202 of the 
Unfunded Mandates Reform Act of 1995. The proposal merely clarifies the 
scope of the regulation, and does not add any new requirements.

[[Page 36747]]

List of Subjects in 12 CFR Part 9

    Estates, Investments, National banks, Reporting and recordkeeping 
requirements, Trusts and trustees.

Authority and Issuance

    For the reasons set out in the preamble, chapter I of title 12 of 
the Code of Federal Regulations is proposed to be amended as follows:

PART 9--FIDUCIARY ACTIVITIES OF NATIONAL BANKS

    1. The authority citation for part 9 continues to read as follows:

    Authority: 12 U.S.C. 24(Seventh), 92a, and 93a; 15 U.S.C. 78q, 
78q-1, and 78w.

    2. A new Sec. 9.101 is added to read as follows:


Sec. 9.101  Acting as investment adviser for a fee.

    (a) In general. As used in the definition of ``fiduciary capacity'' 
at Sec. 9.2(e), investment adviser generally means a national bank that 
provides advice or recommendations concerning the purchase or sale of 
specific securities, such as a national bank engaged in portfolio 
advisory and management activities (including acting as investment 
adviser to a mutual fund). The qualifying phrase ``if the bank receives 
a fee for its investment advice'' excludes those activities in which 
the investment advice is merely incidental to other services.
    (b) Specific activities--(1) Full-service brokerage. Engaging in 
full-service brokerage may entail providing investment advice for a 
fee, depending upon the commission structure and specific facts. In 
making this determination, the OCC will consider full-service brokerage 
to involve investment advice for a fee if a non-bank broker engaged in 
that activity is considered an investment adviser under the Investment 
Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.).
    (2) Activities not involving investment advice for a fee. The 
following activities generally do not entail providing investment 
advice for a fee:
    (i) Financial advice and counseling, including strategic planning 
of a financial nature, merger and acquisition advisory services, 
advisory and structuring services related to project finance 
transactions, and providing market economic information to customers in 
general;
    (ii) Client-directed investment activities where the fee does not 
depend on the provision of investment advice;
    (iii) Investment advice incidental to acting as a municipal 
securities dealer;
    (iv) Real estate asset management;
    (v) Real estate consulting;
    (vi) Advice concerning bridge loans;
    (vii) Services for homeowners' associations;
    (viii) Tax planning and structuring advice; and
    (ix) Investment advice authorized by the OCC under 12 U.S.C. 
24(Seventh) as an incidental power necessary to carry on the business 
of banking.

    Dated: July 2, 1997.
Eugene A. Ludwig,
Comptroller of the Currency.
[FR Doc. 97-17792 Filed 7-8-97; 8:45 am]
BILLING CODE 4810-33-P