§ 218.721 Defined terms relating to the trust and fiduciary activities exception from the definition of “broker.” ( a ) *Defined terms for chiefly compensated test.* For purposes of this part and section 3(a)(4)(B)(ii) of the Act (15 U.S.C. 78c(a)(4)(B)(ii)), the following terms shall have the meaning provided: ( 1 ) *Chiefly compensated—account-by-account test. Chiefly compensated* shall mean the *relationship-total compensation percentage* for each *trust or fiduciary account* of the bank is greater than 50 percent.
( 2 ) The *relationship-total compensation percentage* for a *trust or fiduciary account* shall be the mean of the *yearly compensation percentage* for the account for the immediately preceding year and the *yearly compensation percentage* for the account for the year immediately preceding that year.
( 3 ) The *yearly compensation percentage* for a *trust or fiduciary account* shall be ( i ) Equal to the relationship compensation attributable to the *trust or fiduciary account* during the year divided by the total compensation attributable to the *trust or fiduciary account* during that year, with the quotient expressed as a percentage; and
( ii ) Calculated within 60 days of the end of the year.
( 4 ) *Relationship compensation* means any compensation a bank receives attributable to a trust or fiduciary account that consists of: ( i ) An administration fee, including, without limitation, a fee paid— ( A ) For personal services, tax preparation, or real estate settlement services;
( B ) For disbursing funds from, or for recording receipt of payments to, a trust or fiduciary account;
( C ) In connection with securities lending or borrowing transactions;
( D ) For custody services; or
( E ) In connection with an investment in shares of an investment company for personal service, the maintenance of shareholder accounts or any service described in paragraph (a)(4)(iii)(C) of this section;
( ii ) An annual fee (payable on a monthly, quarterly or other basis), including, without limitation, a fee paid for assessing investment performance or for reviewing compliance with applicable investment guidelines or restrictions;
( iii ) A fee based on a percentage of assets under management, including, without limitation, a fee paid ( A ) Pursuant to a plan under § 270.12b-1;
( B ) In connection with an investment in shares of an investment company for personal service or the maintenance of shareholder accounts;
( C ) Based on a percentage of assets under management for any of the following services— ( 1 ) Providing transfer agent or sub-transfer agent services for beneficial owners of investment company shares;
( 2 ) Aggregating and processing purchase and redemption orders for investment company shares;
( 3 ) Providing beneficial owners with account statements showing their purchases, sales, and positions in the investment company;
( 4 ) Processing dividend payments for the investment company;
( 5 ) Providing sub-accounting services to the investment company for shares held beneficially;
( 6 ) Forwarding communications from the investment company to the beneficial owners, including proxies, shareholder reports, dividend and tax notices, and updated prospectuses; or
( 7 ) Receiving, tabulating, and transmitting proxies executed by beneficial owners of investment company shares;
( D ) Based on the financial performance of the assets in an account; or
( E ) For the types of services described in paragraph (a)(4)(i)(C) or (D) of this section if paid based on a percentage of assets under management;
( iv ) A flat or capped per order processing fee, paid by or on behalf of a customer or beneficiary, that is equal to not more than the cost incurred by the bank in connection with executing securities transactions for trust or fiduciary accounts; or
( v ) Any combination of such fees.
( 5 ) *Trust or fiduciary account* means an account for which the bank acts in a trustee or fiduciary capacity as defined in section 3(a)(4)(D) of the Act (15 U.S.C. 78c(a)(4)(D)).
( 6 ) *Year* means a calendar year, or fiscal year consistently used by the bank for recordkeeping and reporting purposes.
( b ) *Revenues derived from transactions conducted under other exceptions or exemptions.* For purposes of calculating the *yearly compensation percentage* for a *trust or fiduciary account*, a bank may at its election exclude the compensation associated with any securities transaction conducted in accordance with the exceptions in section 3(a)(4)(B)(i) or sections 3(a)(4)(B)(iii)-(xi) of the Act (15 U.S.C. 78c(a)(4)(B)(i) or 78c(a)(4)(B)(iii)-(xi)) and the rules issued thereunder, including any exemption related to such exceptions jointly adopted by the Commission and the Board, *provided that* if the bank elects to exclude such compensation, the bank must exclude the compensation from both the relationship compensation (if applicable) and total compensation for the account.
( c ) *Advertising restrictions* — ( 1 ) *In general.* A bank complies with the advertising restriction in section 3(a)(4)(B)(ii)(II) of the Act (15 U.S.C. 78c(a)(4)(B)(ii)(II)) if advertisements by or on behalf of the bank do not advertise— ( i ) That the bank provides securities brokerage services for trust or fiduciary accounts except as part of advertising the bank's broader trust or fiduciary services; and
( ii ) The securities brokerage services provided by the bank to trust or fiduciary accounts more prominently than the other aspects of the trust or fiduciary services provided to such accounts.
( 2 ) *Advertisement.* For purposes of this section, the term *advertisement* has the same meaning as in § 218.760(h)(2).
[Reg. R, 72 FR 56554, Oct. 3, 2007, as amended at 73 FR 20780, Apr. 17, 2008]