34792 Federal Register / Vol. 66, No. 127 / Monday, July 2, 2001 / Rules and Regulations

1OCC Interpretive Letter No. 872 (Oct. 28, 1999)

reprinted in [1999–2000 Transfer Binder] Fed.

Banking L. Rep. (CCH) ¶81–366 (IL 872); OCC

Interpretive Letter No. 866 (Oct. 8, 1999) reprinted

in (1999–2000 Transfer Binder] Fed. Banking L.

Rep. (CCH) ¶81–360 (IL 866); and OCC Interpretive

Letter No. 695 (Dec. 8, 1995), reprinted in [1995–

1996 Transfer Binder] Fed. Banking L. Rep. (CCH)

¶ 81–010 (IL 695).

§ 7.4006 Applicability of State law to

national bank operating subsidiaries.

Unless otherwise provided by Federal

law or OCC regulation, State laws apply

to national bank operating subsidiaries

to the same extent that those laws apply

to the parent national bank.

PART 23—LEASING

9. The authority citation for part 23

continues to read as follows:

Authority: 12 U.S.C. 1 et seq., 24(Seventh),

24(Tenth), and 93a.

10. In § 23.21, paragraph (a)(2) is

revised to read as follows:

§ 23.21 Estimated residual value.

* * * * *

(a) * * *

(2) Any unguaranteed amount must

not exceed 25 percent of the original

cost of the property to the bank or the

percentage for a particular type of

property specified in published OCC

guidance.

* * * * *

Dated: June 21, 2001.

John D. Hawke, Jr.,

Comptroller of the Currency.

[FR Doc. 01–16328 Filed 6–29–01; 8:45 am]

BILLING CODE 4810–33–P

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the

Currency

12 CFR Parts 5 and 9

[Docket No. 01–14]

RIN 1557–AB79

Fiduciary Activities of National Banks

AGENCY: Office of the Comptroller of the

Currency, Treasury.

ACTION: Final rule.

SUMMARY: The Office of the Comptroller

of the Currency (OCC) is publishing its

final rule regarding the authority and

standards for national banks to conduct

multi-state trust operations. The

purpose of these changes is to provide

enhanced guidance to national banks

engaging in fiduciary activities.

EFFECTIVE DATE: August 1, 2001.

FOR FURTHER INFORMATION CONTACT: Lisa

Lintecum, Director, or Joel Miller,

Senior Advisor, Asset Management,

(202) 874–4447; Richard Cleva, Senior

Counsel, Bank Activities and Structure

Division, (202) 874–5300; Andra

Shuster, Counsel, Legislative and

Regulatory Activities Division, (202)

874–5090; or William Dehnke, Assistant

Director, Securities and Corporate

Practices Division, (202) 874–5210.

SUPPLEMENTARY INFORMATION: On

December 5, 2000, the OCC published a

notice of proposed rulemaking (NPRM)

in the Federal Register (65 FR 75872) to

amend 12 CFR part 9 to add provisions

addressing the application of 12 U.S.C.

92a in the context of a national bank

engaging in fiduciary activities in more

than one state. The purpose of the

rulemaking was to provide clarity and

certainty for national banks’ multi-state

fiduciary activities. The standards

contained in the NPRM reflected

positions taken in three earlier OCC

Interpretive Letters.1 Interpretive Letter

No. 695 found that a national bank

authorized to engage in fiduciary

activities may act in a fiduciary capacity

in any state that permits its own in-state

fiduciaries to act in that capacity,

including at trust offices. Interpretive

Letters Nos. 866 and 872 clarified that

a national bank that acts in a fiduciary

capacity in one state may market its

fiduciary services to customers in other

states, solicit business from them, and

act as fiduciary for customers located in

other states. The NPRM and the final

rule are based upon the detailed

analysis contained in these Interpretive

Letters.

Along with the NPRM, we also

published an advance notice of

proposed rulemaking (ANPR) inviting

comments on whether the OCC should

establish uniform national standards for

the conduct of fiduciary activities by

national banks. The ANPR invited

comments on whether uniform

standards of care generally applicable to

national bank trustees’ administration of

private trusts and investment of private

trust property should be established.

We received comments on both the

NPRM and the ANPR. As discussed

further below, comments on the NPRM

predominantly were favorable.

Comments on the ANPR were more

mixed, raising a significant number of

issues that will require additional

analysis before any determination is

made concerning how to proceed.

Rather than delay addressing the issues

covered by the OCC interpretations, we

are issuing this final rule, which covers

only the matters included in the NPRM,

and are reserving a decision whether to

proceed with a proposal to establish

uniform fiduciary standards pending

completion of our analysis of the issues

raised by the commenters.

The OCC received 25 comments on

the NPRM. These comments included 4

from state bank supervisors’ offices, 1

from a state bank supervisors’

organization, 6 from banking trade

associations, 13 from banks and bank

holding companies, and 1 from a law

firm. Most of the commenters supported

the proposed changes, although several

offered additional suggestions for

changes. The state bank supervisors

disagreed with the proposal and

expressed concern about the effect the

rule would have on the application of

state laws to national banks engaged in

fiduciary activities.

For the reasons discussed below, we

have adopted the provisions of the

NPRM substantially as proposed, but

have made a number of changes in

response to the comments received to

clarify certain provisions.

Description of Proposal, Comments

Received, and Final Rule

Definitions (Revised § 9.2)

Proposed § 9.2 defined ‘‘trust office’’

and ‘‘trust representative office’’ in

§§ 9.2(j) and (k), respectively. A ‘‘trust

office’’ was defined as an office of a

national bank, other than a main office

or a branch, at which the bank acts in

a fiduciary capacity. A ‘‘trust

representative office’’ was defined as an

office of a national bank, other than a

main office, branch, or trust office, at

which the bank performs activities

ancillary to its fiduciary business, but

does not act in a fiduciary capacity.

The final rule modifies the definition

of trust office to clarify that it includes

all offices where the bank engages in

one or more of the key fiduciary

activities specified in § 9.7(d)—i.e.,

accepting the fiduciary appointment,

executing the documents that create the

fiduciary relationship, or making

discretionary decisions regarding the

investment or distribution of fiduciary

assets. The definition in the proposal

focused on where the bank acted in a

fiduciary capacity (where the key

fiduciary activities were performed) and

implicitly assumed that all of the key

fiduciary activities would be performed

in one state for each fiduciary

relationship (so that ‘‘acting in a

fiduciary capacity’’ and performing the

key activities were the same). However,

as discussed in detail below in

connection with § 9.7(d), in some

instances, the key activities may be

performed at offices in different states

for some fiduciary relationships. In

those instances, as provided in § 9.7(d)

Federal Register / Vol. 66, No. 127 / Monday, July 2, 2001 / Rules and Regulations 34793

2Classifying activities as ‘‘ancillary’’ in §§ 9.2(j)

and (k) is meant only to assist in the determination

of the state in which the bank is acting in a

fiduciary capacity for section 92a purposes. Only

the key fiduciary activities in § 9.7(d) are relevant

for determining that state: all other activities are

‘‘ancillary’’ for this purpose. This classification

does not affect the importance of such activities or

change in any way a bank’s fiduciary duty with

respect to such activities.

3This is consistent with the Office of Thrift

Supervision’s (OTS) position under its parallel

statute. See OTS Chief Counsel Opinion (August 8,

1996), reprinted in [1996–1997 Transfer Binder]

Fed. Banking L. Rep. (CCH) ¶83–102 (OTS August

1996 Opinion) (holding title to real property as

trustee in a state would not cause a federal savings

association to be located in that state because the

activity is incidental and not discretionary).

4This final rule is consistent with the limitation,

found in 12 U.S.C. 93a, which states that the

general rulemaking authority vested in the OCC by

that section ‘‘does not apply to section 36 of [Title

12 of the United States Code].’’ This limitation

simply makes clear that section 93a does not

expand whatever authority the OCC has pursuant

to other statutes to adopt regulations affecting

national bank branching. Congress clearly

contemplated that the OCC would implement

section 36, as is evidenced by the repeated

references to obtaining the OCC’s approval

throughout that section (see, e.g., paragraphs (b)(1),

(b)(2), (c), (g), and (i) of section 36). It would be

illogical to conclude that the OCC, in implementing

the provisions requiring national banks to obtain

the OCC’s prior approval under the sections cited,

cannot interpret what the terms of the statute mean

or that the interpretation must be made on a caseby-case basis. This rulemaking simply clarifies a

situation that falls outside the branching

restrictions imposed by section 36.

5See also Bank One, Utah v. Guttau, 190 F. 3d

844 (8th Cir. 1999) (ATMs are excluded from the

definition of ‘‘branch’’).

a bank must determine one state in

which it acts in a fiduciary capacity for

purposes of 12 U.S.C. 92a. That means

that there will remain other offices in

other states in which the bank performs

key fiduciary activities that, under the

definition in the proposal, would not

have been considered to be trust offices.

However, our intention was that

because each of these key activities is

significant standing alone, all offices in

which a bank engages in any of the key

fiduciary activities should be

considered to be trust offices. Therefore,

the final rule clarifies the definition of

‘‘trust office’’ to be an office of a

national bank, other than a main office

or a branch, at which the national bank

engages in one or more of the activities

specified in § 9.7(d). A corresponding

change has been made to § 9.2(k). A

‘‘trust representative office’’ is defined

as an office of a national bank, other

than a main office, branch, or trust

office, at which the bank performs

activities ancillary to its fiduciary

business, but does not engage in any of

the activities specified in § 9.7(d).

Section 9.2(k) of the proposal listed

the following examples of ancillary

activities: advertising, marketing, and

soliciting for fiduciary business;

contacting existing or potential

customers, answering questions, and

providing information about matters

related to their accounts; acting as a

liaison between the trust office and the

customer (e.g., forwarding requests for

distribution or changes in investment

objectives, or forwarding forms and

funds received from the customer); or

simply inspecting or maintaining

custody of fiduciary assets.

A number of commenters suggested

that various activities be added to the

list of examples of ancillary activities.

The list of ancillary activities set forth

in § 9.2(k) is illustrative only, however,

and not all-inclusive. While the OCC

considers many of the suggested

activities to be ancillary activities, we

have not included most of them in the

text of the final rule because the list set

out in the definition is not intended to

be comprehensive. A national bank may

therefore identify additional activities as

ancillary without seeking the express

concurrence of the OCC. To make this

clear, we have added to the text of the

final rule an express statement that the

items on the list are illustrative and that

other activities may also be ‘‘ancillary’’

for the purposes of the definition.2

Two commenters urged that holding

title to real property in any state be

added to the list of ancillary activities

in § 9.2(k), because some state laws

attempt to prohibit out-of-state entities

from taking title to real property without

a state license or other authorization.

Because this appears to be a specific

issue warranting clarification, we have

added holding title to real estate to the

list of ancillary activities in § 9.2(k). The

statutory authority for national banks to

exercise fiduciary powers, 12 U.S.C.

92a, does not subject the exercise of a

national bank’s fiduciary powers to

restrictions or preconditions, such as

licensing requirements, under state law.

State laws prohibiting out-of-state

national banks from taking title to real

property have such an effect. For these

reasons, and because we believe that

this activity is consistent with national

banks’ exercise of their fiduciary

powers, we have added holding title to

real property to the list of ancillary

activities in the final rule.3 Consistent

with this change, we also have added

language to § 9.7(b) to clarify that while

acting in a fiduciary capacity in one

state, a bank may act as fiduciary for

relationships that include property

located in other states.

As we stated in the NPRM, neither a

trust office nor a trust representative

office is a branch for purposes of the

McFadden Act, 12 U.S.C. 36, which

governs the location of national bank

branches. In order to be considered a

branch under the McFadden Act, a bank

facility must perform at least one of the

core branching functions of receiving

deposits, paying checks, or lending

money. 12 U.S.C. 36(j). The locational

limitations of 12 U.S.C. 36 are not

intended to reach all activities in which

national banks are authorized to engage,

but only core branching functions. See

Clarke v. Securities Industry

Association, 479 U.S. 388 (1987)

(considering securities brokerage

powers) (Clarke). Proposed §§ 9.2(j) and

(k) therefore stated that a trust office or

a trust representative office is not a

branch unless it is also an office at

which deposits are received, or checks

paid, or money lent.4

Several state bank supervisors

disagreed with the OCC’s conclusion

that fiduciary activities are not core

branching functions and stated their

belief that trust offices should be

considered to be branches. They assert

that the Clarke case held only that

discount brokerage activities are not

core branching functions and should not

be read to conclude that any other

activities are not core branching

functions.

The OCC has carefully considered

these comments, but remains of the

view that fiduciary activities under

section 92a do not constitute core

branching functions and that a national

bank office that provides only fiduciary

services would not be subject to the

McFadden Act. In Clarke, the Supreme

Court held that the McFadden Act’s

locational limits do not reach all

activities in which national banks

engage. This conclusion in the Clarke

case is reinforced by the recent decision

in First National Bank of McCook,

Nebraska v. Fulkerson, et al., Civil

Action No. 98–D–1024, slip op. (D.C.

Co. March 7, 2000), where the court

held that the combination of a deposit

production office, a loan production

office, and an ATM do not constitute a

branch because no core branching

functions are performed.5

Finally, the second sentence in

current § 9.2(g) provides that the extent

of fiduciary powers is the same for outof-state national banks as in-state

national banks. We proposed to remove

this sentence as unnecessary in light of

new § 9.7, which sets forth the rules

concerning multi-state fiduciary

operations. We received no comments

on this proposed change, and have

adopted it as proposed.

34794 Federal Register / Vol. 66, No. 127 / Monday, July 2, 2001 / Rules and Regulations

6The last phrase in paragraph (a) of section 92a

refers to the state in which the national bank is

‘‘located.’’ The primary reference to a state is in the

Contravention Clause regarding the right to act in

fiduciary capacities (the language emphasized

above). That language was in the statute originally,

before the phrase using the term ‘‘located’’ was

added. Thus, we believe that the reference to the

state in which a bank is located refers to the state

in which the bank is acting in a fiduciary capacity.

We note that the OTS construes its parallel statute

in a similar way. The OTS concludes that a federal

savings association may exercise fiduciary powers

permitted for state fiduciaries in the states in which

it is located, but it is ‘‘located’’ for this purpose in

the state in which it performs key fiduciary

functions. See, e.g., OTS August 1996 Opinion.

Approval Requirements (revised § 9.3)

Current § 9.3(a) provides that ‘‘[a]

national bank may not exercise

fiduciary powers unless it obtains prior

approval from the OCC to the extent

required under 12 CFR 5.26.’’ Section

5.26(e)(5) currently provides that a

national bank that has obtained the

OCC’s approval to exercise fiduciary

powers does not need to obtain further

approval to ‘‘commence fiduciary

activities’’ in a state in addition to the

state(s) described in the application for

which it received OCC approval to

exercise fiduciary powers. Instead, the

bank is required only to provide written

notice to the OCC within ten days after

commencing fiduciary activities in a

new state.

Under the proposal, a bank that has

received OCC approval to exercise

fiduciary powers does not need prior

OCC approval each time it seeks to act

in a fiduciary capacity in a new state or

to conduct activities in a new state that

are ancillary to its fiduciary business.

Proposed paragraph (b) also directs the

bank to follow the notice procedures in

§ 5.26(e)(5) (discussed below) in order to

emphasize that revised § 9.3(b) is

consistent with § 5.26(e)(5) and is not

intended to impose any additional or

different procedures on national banks.

Current paragraph (b), which addresses

the procedures for organizing a limited

purpose trust bank, would be

redesignated as paragraph (c).

We received one comment on this

proposed change, suggesting that we

clarify in § 9.3(b) that marketing and

soliciting fiduciary business are

included in ancillary activities. Because

this is made clear in § 9.2(k), it is

unnecessary to repeat it in this

provision. The final rule has, however,

been changed to reflect the modified

definition of ‘‘trust office’’ in § 9.2(j).

Consistent with § 5.26(e)(5) of the final

rule, this provision now states that a

national bank granted fiduciary powers

by the OCC is not required to obtain the

OCC’s prior approval to engage in any

of the activities specified in § 9.7(d) in

a new state or to conduct ancillary

fiduciary activities in a new state.

Multi-State Fiduciary Operations (New

§ 9.7)

The statutory authority for national

banks to exercise fiduciary powers is

contained in 12 U.S.C. 92a(a) and (b). In

IL 872, IL 866, and IL 695, the OCC

considered how the language of section

92a would be applied in an interstate

context.

Under section 92a, national banks

may exercise fiduciary powers with

OCC approval. Section 92a(a) states:

The Comptroller of the Currency shall be

authorized and empowered to grant by

special permit to national banks applying

therefor, when not in contravention of State

or local law, the right to act as trustee,

executor, administrator, registrar of stocks

and bonds, guardian of estates, assignee,

receiver, committee of estates of lunatics, or

in any other fiduciary capacity in which

State banks, trust companies, or other

corporations which come into competition

with national banks are permitted to act

under the laws of the State in which the

national bank is located. (Emphasis added).

Section 92a(b) clarifies that, whenever

state law permits state banks, trust

companies, or other corporations that

compete with national banks (State

Fiduciaries) to exercise any of the

fiduciary powers in section 92a(a), a

national bank’s exercise of those powers

is deemed not to be in contravention of

State or local law under section 92a.

Thus, ‘‘when not in contravention of

State or local law’’ (the Contravention

Clause), a national bank may act in any

of the fiduciary capacities specified in

section 92a(a). This statutory grant of

authority does not limit where a

national bank may act in a fiduciary

capacity. Nor does it require that the

customers for whom the bank may act

or the property involved in the fiduciary

relationship be located in the same state

as the bank. A bank is free to act in a

fiduciary capacity in more than one

state.

The Contravention Clause in section

92a(a) requires that a national bank look

to the laws of the state in which it acts,

or proposes to act, in a fiduciary

capacity to determine what fiduciary

capacities are permissible.6 The state in

which the bank acts in a fiduciary

capacity for each existing or proposed

fiduciary relationship is the state in

which the bank performs the key

fiduciary activities of accepting

fiduciary appointments, executing

documents that create the fiduciary

relationship, or making decisions

regarding the investment or distribution

of fiduciary assets. This state is also the

state referred to in other provisions in

section 92a that refer to state law

(subsections 92a(b), (c), (f), (g) and (i))

(the Section 92a State).

Section 9.7 of the proposed rule

reflected this interpretation of section

92a. In paragraph (a) of proposed § 9.7,

we stated that a national bank may act

in a fiduciary capacity in any state.

Proposed § 9.7(a) went on to state that

if a national bank acts, or proposes to

act, in a fiduciary capacity in a

particular state, the bank may act in any

of the eight fiduciary capacities

expressly listed in section 92a(a) unless

the state affirmatively prohibits that

capacity for its own State Fiduciaries as

well as any other capacity a state

permits for its own State Fiduciaries.

This authority exists even if the state

purports to restrict it for national banks.

If state law is silent with respect to one

(or more) of the eight capacities listed in

section 92a(a), then that capacity is not

in contravention of state law and a

national bank may act in that capacity.

These conclusions, along with a more

complete explanation of their

underlying reasons, were stated in IL

695 and IL 872. As previously noted, the

proposal intended to reflect the

conclusions reached in those letters and

is based on the reasoning stated therein.

Most of the comments on proposed

§ 9.7(a) supported its adoption. Of these,

several requested that we clarify that the

question of where a national bank is

located for purposes of section 92a is a

question of federal law. Comments from

several state bank supervisors objected

to proposed § 9.7(a), on the grounds that

it would permit national banks a

competitive advantage by being able to

expand their fiduciary activities into

states notwithstanding state limits on

who may act as fiduciary. These

commenters maintained that section 92a

preserves for each state the right to

establish such limits. They also

suggested that the determination of

which state’s laws govern the

permissible capacities should be

resolved by whether a national bank has

its main office or a branch located in

that state.

As set out above, we believe that

section 92a imposes no limitations on

where a bank may act in a fiduciary

capacity. Under the Contravention

Clause, a state may not prohibit or

restrict national banks (including out-ofstate national banks) from acting in a

fiduciary capacity in the state in any

manner, unless it also limits its own

State Fiduciaries.

Moreover, we disagree that ‘‘location’’

for purposes of section 92a is

appropriately determined by the

presence of a main office or bank

branch. As previously discussed, the

Contravention Clause of section 92a

Federal Register / Vol. 66, No. 127 / Monday, July 2, 2001 / Rules and Regulations 34795

7See, e.g., Barnett Bank of Marion County v.

Nelson, 517 U.S. 25 (1996).

8The OTS has reached the same conclusions

under its parallel statute. See, e.g., OTS August

1996 Opinion (federal savings association will not

be deemed located in a state where its only trustrelated activities are marketing its trust services and

performing incidental duties pursuant to its

appointment as testamentary trustee or trustee

holding real estate; and federal law would preempt

state laws that prohibit or restrict an out-of-state

federal thrift from engaging in these activities in the

state); OTS Chief Counsel Opinion No. 94/CC–13

(June 13, 1994), reprinted in [1994 Transfer Binder]

Fed. Banking L. Rep. (CCH) ¶ 82,814 (trust

marketing and referral activities at affiliate’s offices

does not make federal savings association located

at those offices; state laws that prohibit or restrict

an out-of-state federal thrift from engaging in these

activities in the state are preempted).

requires that a bank look to the laws of

the state in which it acts in one or more

fiduciary capacities in order to

determine the limits on those capacities.

For the reasons discussed above, we

have adopted proposed § 9.7(a) as

proposed, making only stylistic changes

to improve the readability of this

provision.

Once the state in which a national

bank is acting in a fiduciary capacity is

identified, the fiduciary services may be

offered regardless of where the fiduciary

customers reside or where property that

is being administered is located. This

point was incorporated in proposed

§ 9.7(b), which provided that a national

bank may market its services to

customers in other states and solicit

business from them. It also may

establish and use a trust representative

office for these purposes. Accordingly, a

state may not prohibit or restrict out-ofstate national banks from marketing to,

or performing fiduciary functions for,

customers in that state. Such state laws

are not within the powers reserved to

the states by section 92a, and so they

cannot prohibit or restrict a national

bank’s exercise of its federally granted

powers.7 These conclusions are

consistent with the conclusions set out

in IL 866 and IL 872.8

A few commenters asked that we

clarify that § 9.7(b) does not require a

national bank to establish a trust

representative office in order to market

its fiduciary services to, or act as a

fiduciary for, customers in any state. We

agree that a bank need not establish a

trust representative office; the reference

to trust representative offices was

intended solely to illustrate one option

available to national banks who seek to

market their fiduciary services. The

final rule, like the proposal, states that

a national bank ‘‘may’’ use a trust

representative office to market its

fiduciary services to and act as a

fiduciary for customers in any state,

indicating that use of a trust

representative office is discretionary. As

noted earlier, we also have added

language to § 9.7(b) to clarify that while

acting in a fiduciary capacity in one

state, a bank may act as fiduciary for

relationships that include property

located in other states.

As previously discussed, section 92a

imposes no geographic limit on where a

bank may act in a fiduciary capacity.

Similarly, there is no geographic limit

on where a bank may offer services that

are incidental to acting in a fiduciary

capacity. Accordingly, proposed § 9.7(c)

reflected the conclusions stated in the

Interpretive Letters that a national bank

with fiduciary powers may establish a

trust office or trust representative office

in any state. We received no comments

on proposed § 9.7(c) as such, and we

have adopted it as proposed.

Proposed § 9.7(d) clarified how

national banks may determine the state

in which they are acting in a fiduciary

capacity. In IL 866 and IL 872, we

concluded that a national bank is

deemed to be ‘‘acting in a fiduciary

capacity’’ for purposes of section 92a in

the state in which the bank performs the

key fiduciary functions of executing the

documents that create the fiduciary

relationship, accepting the fiduciary

appointment, and making decisions

regarding the investment or distribution

of fiduciary assets. As proposed, § 9.7(d)

incorporated this position and further

provided that, if with respect to a

particular fiduciary relationship these

key fiduciary activities take place in

more than one state, then the state in

which the bank acts in a fiduciary

capacity will be the state that the bank

and customer designate from among

those states. We specifically invited

comment on ways to simplify the

determination of where a bank with

multi-state operations is acting in a

fiduciary capacity.

We received several comments

relating to the determination of where a

bank acts in a fiduciary capacity when

the key fiduciary activities take place in

more than one state. One commenter

asked us to clarify whether it was our

intent to have the choice of law clause

in the trust’s governing instrument be

used to designate where the bank acted

in a fiduciary capacity. Similarly, two

commenters suggested that we look to

the governing instrument to make the

determination. A few commenters

suggested that, where the designation

could not be made by the governing

instrument or the customer has not or

cannot otherwise make the designation,

the bank be permitted to do so alone. A

few commenters also noted the

importance of the meaning of the term

‘‘customer,’’ noting that if defined too

broadly, it could be quite burdensome

for a bank to consult with customers to

make the designation.

We agree with those commenters who

pointed out the potential problems, in

situations where a bank performs the

key fiduciary activities in more than one

state, of requiring a bank to obtain

customer agreement concerning the

state in which the bank will be deemed

to be acting in a fiduciary capacity. For

instance, a bank could be forced to

obtain the agreement of many different

people residing in several different

locations. To avoid these problems, we

have revised § 9.7(d) to provide that a

bank performing the key fiduciary

activities in more than one state for any

particular fiduciary relationship may

designate from among these states

which state’s laws are made applicable

by operation of section 92a for that

relationship. We have also made some

minor changes intended to improve the

readability of § 9.7(d), including a

change in its heading.

Many of the commenters indicated

some confusion over the significance of

the determination of the Section 92a

State. Section 92a directs the

application of state law for purposes of

determining a national bank’s

permissible fiduciary capacities

(referred to in sections 92a(a) and (b));

for purposes of setting certain

operational requirements for national

banks as corporate fiduciaries (referred

to in sections 92a(f), (g) & (i)); and for

purposes of granting state banking

authorities limited access to OCC

examination reports relating to national

bank trust departments (referred to in

section 92a(c)). Proposed § 9.7(d)

provided a means to identify which

state’s laws apply for purposes of

section 92a when a bank is conducting

multi-state fiduciary activities. As

discussed more fully below, this

determination is separate from the

selection of the substantive law that

governs matters affecting the exercise of

the fiduciary appointment, such as

standards of care.

Proposed § 9.7(e) provided a direct

statement of how state law applies to a

national bank engaging in fiduciary

activities. As set out in the proposal, the

state laws that apply to a national bank’s

fiduciary activities by operation of

section 92a are the laws of the state in

which the bank acts in a fiduciary

capacity.

Two commenters suggested that we

clarify that state laws may not impose

operational requirements on national

banks that engage only in limited trust

operations. In both IL 866 and IL 872 we

stated that section 92a does not

‘‘condition the exercise of fiduciary

34796 Federal Register / Vol. 66, No. 127 / Monday, July 2, 2001 / Rules and Regulations

9See IL 866 p. 9; IL 872 p. 10.

powers on compliance with state laws

that purport to impose licensing or

operating requirements on national

banks.’’ 9 This point is incorporated in

§ 9.7(e)(2) of the final rule, which

provides that, with the exception of

those state laws specifically referenced

in section 92a, national banks’ exercise

of fiduciary powers is not subject to

restrictions or preconditions under state

law. Such restrictions and preconditions

include, but are not limited to, state

licensing requirements. This principle

applies to the fiduciary activities of full

service national banks as well as

national banks that engage only in

limited trust operations.

Section 9.7(e) does not affect the

applicability of state substantive laws

that govern the fiduciary relationship,

such as the standard of care to be

exercised by the fiduciary, or ability of

a grantor to designate which state’s laws

govern the trust itself. A grantor is free

to designate which state laws apply for

all other purposes or to have the

applicable law determined by choice-oflaw rules. For example, if the bank

acting in a fiduciary capacity in State A

is trustee for a trust whose grantor and

beneficiaries are located in State B and

the trust, by its terms, is governed by the

laws of State C, then the laws of State

C will govern the administration of the

trust. The choice of law clause in a trust

instrument does not, however,

determine where a bank is acting in a

fiduciary capacity or the laws that apply

by operation of section 92a. That

determination is a matter of federal law

pursuant to section 92a. It cannot be

altered by agreement of the parties.

Several state bank supervisors

objected to the conclusion that a

national bank is not subject to state laws

that restrict the activities of out-of-state

fiduciaries. However, as discussed

above, the Contravention Clause in

section 92a only serves to limit national

banks from engaging in fiduciary

capacities that are not permitted for

State Fiduciaries but does not otherwise

limit a national bank’s ability to exercise

its federal authority in any state. State

laws that are outside the ambit of the

Contravention Clause, and so not

authorized by Congress to apply to

national banks, may not restrict or

interfere with the exercise of

permissible federal power. See, e.g.,

Barnett Bank, supra.

The state supervisors also pointed to

discussion in earlier OCC interpretive

letters, in particular IL 525, that

suggested that all aspects of state law

governing state fiduciary institutions

applied to national banks. However, IL

525 was concerned primarily with the

substantive fiduciary standards that

would apply to national banks in certain

trust contexts. As noted above, the

substantive law governing a trust is a

different matter than the law made

applicable to national banks by

operation of section 92a. Moreover, the

discussion of state law in IL 525 did not

involve an interstate situation and was

focused on the issue of the substantive

fiduciary law governing the fiduciary

appointment. The OCC’s analysis of the

application of section 92a in the

interstate context, including the manner

in which it incorporates state law, is

clearly set forth in ILs 872, 866, and

695, the NPRM, and this final rule. Any

contrary implications in IL 525 do not

represent the position of the agency.

Deposit of Securities with State

Authorities (Revised § 9.14)

Under section 92a(f) and current

§ 9.14 of our regulations, a national bank

must comply with state laws that

require corporations that act in a

fiduciary capacity to deposit securities

with state authorities for the protection

of private or court trusts. The proposal

made a technical amendment to § 9.14

to conform to the terminology used in

proposed § 9.7. The proposal replaced

the phrase ‘‘administers trust assets’’ in

paragraph (b) of that section with the

phrase ‘‘acts in a fiduciary capacity.’’ No

substantive change was intended by this

amendment.

The proposal also added a second

sentence to § 9.14(b) to clarify how a

bank that conducts fiduciary operations

on a multi-state basis pursuant to

proposed § 9.7 should compute the

amount of deposit required by a state

law that requires a deposit of securities

on a basis other than assets (such as an

amount equal to a percentage of capital).

Pursuant to the proposal, in such a state,

the bank may compute the amount of

deposit required on a pro-rated basis,

according to the proportion of fiduciary

assets for which the bank is acting in a

fiduciary capacity at offices located in

that state.

A few commenters requested

clarification of how the rule would

apply to them, suggesting that sample

calculations be included in the

regulation. We believe that specific

questions are better addressed by

consultation with agency staff or in

interpretive letters. Accordingly, we are

adopting the proposal for this section

without change.

Fiduciary Powers (Revised § 5.26)

Consistent with the proposed changes

discussed above, we also proposed an

amendment to 12 CFR 5.26(e) to clarify

that a national bank that plans to act in

a fiduciary capacity in a state in

addition to the state described in the

application for fiduciary powers that the

OCC has approved need only give notice

of commencing to act in a fiduciary

capacity in a new state. The proposal

would revise current § 5.26(e)(5) so that

it reflects the distinction between acting

in a fiduciary capacity and conducting

activities ancillary to the bank’s

fiduciary business. The ten-day, afterthe-fact notice requirement would apply

only to acting in a fiduciary capacity.

The final rule has been changed to

reflect the modified definition of ‘‘trust

office’’ in § 9.2(j). This provision now

states that no application is required

when a national bank with fiduciary

powers plans to engage in any of the

fiduciary activities specified in § 9.7(d)

or conduct ancillary activities in a new

state. The final rule provides that,

instead, the ten-day, after-the-fact notice

to the OCC is required when a bank

begins to engage in any of the key

fiduciary activities specified in § 9.7(d)

in a new state.

We received six comments requesting

that we clarify that there is no need for

prior approval or subsequent notice for

establishing trust representative offices.

As discussed above, a national bank that

has received OCC approval to exercise

fiduciary powers does not need to make

any further application to the OCC

when it plans to engage in any of the

fiduciary activities specified in § 9.7(d)

or conduct ancillary activities in a new

state, but does need to provide notice to

OCC within 10 days after it begins to

engage in any of the fiduciary activities

specified in § 9.7(d) in a new state.

Since engaging in ancillary activities

does not constitute engaging in any of

the key fiduciary activities specified in

§ 9.7(d), and since only ancillary

activities are undertaken at a trust

representative office, a national bank is

not required to get prior approval or

give subsequent notice in order to

establish a trust representative office.

We have added a new sentence to

clarify this point in the final rule.

Regulatory Flexibility Act

Pursuant to section 605(b) of the

Regulatory Flexibility Act, 5 U.S.C.

605(b) (RFA), the regulatory flexibility

analysis otherwise required under

section 604 of the RFA is not required

if the agency certifies that the rule will

not have a significant economic impact

on a substantial number of small entities

and publishes its certification and a

short, explanatory statement in the

Federal Register along with its rule.

Pursuant to section 605(b) of the RFA,

the OCC hereby certifies that this

Federal Register / Vol. 66, No. 127 / Monday, July 2, 2001 / Rules and Regulations 34797

rulemaking will not have a significant

economic impact on a substantial

number of small entities. The final rule

codifies case law and OCC

interpretations, but adds no new

requirements. Accordingly, a regulatory

flexibility analysis is not needed.

Executive Order 12866

The OCC has determined that this

final rulemaking is not a significant

regulatory action under Executive Order

12866.

Unfunded Mandates Act of 1995

Section 202 of the Unfunded

Mandates Reform Act of 1995, 2 U.S.C.

1532 (Unfunded Mandates Act),

requires that the agency prepare a

budgetary impact statement before

promulgating any rule likely to result in

a Federal mandate that may result in the

expenditure by State, local, and tribal

governments, in the aggregate or by the

private sector, of $100 million or more

in any one year. If a budgetary impact

statement is required, section 205 of the

Unfunded Mandates Act also requires

the agency to identify and consider a

reasonable number of regulatory

alternatives before promulgating the

rule. For the reasons outlined above, the

OCC has determined that this final rule

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, the OCC

has not prepared a budgetary impact

statement or specifically addressed any

regulatory alternatives.

Executive Order 13132

Executive Order 13132 requires

Federal agencies, including the OCC, to

certify their compliance with that Order

when they transmit to the Office of

Management and Budget any draft final

regulation that has Federalism

implications. Under the Order, a

regulation has Federalism implications

if it has ‘‘substantial direct effects on the

States, on the relationship between the

national government and the States, or

on the distribution of power and

responsibilities among the various

levels of government.’’ In the case of a

regulation that has Federalism

implications and that preempts State

law, the Order imposes certain

consultation requirements with State

and local officials; requires publication

in the preamble of a Federalism

summary impact statement; and

requires the OCC to make available to

the Director of the Office of

Management and Budget any written

communications submitted to us by

State and local officials. By the terms of

the Order, these requirements apply to

the extent that they are practicable and

permitted by law and, to that extent,

must be satisfied before the OCC

promulgates a final regulation.

In our proposal relating to this final

rule, we noted that certain provisions in

the proposal may have Federalism

implications, as that term is used in the

Order, or may be found by a Federal

court to preempt State law. The concern

regarding Federalism was primarily

directed to the advance notice,

according to which the OCC proposed to

establish uniform federal standards

governing fiduciary activities that

would be generally applicable to

national bank trustees’ administration of

private trusts and investment of private

trust property. A discussion of the

Federalism issues arising from any

uniform federal standard of fiduciary

activities will be provided in any

subsequent rulemaking document on

that issue.

This final rule contains provisions

that determine which States’ laws apply

to a national bank for purposes of 12

U.S.C. 92a, a Federal law. The

determination of which State’s rules

apply for purposes of section 92a is

governed, for the reasons set out above,

by a determination of the State in which

a national bank is acting in a fiduciary

capacity. Once that determination is

made, then, by operation of section 92a,

other States’ laws governing the

operation of a national bank’s fiduciary

activities do not apply.

We note that there has been

consultation with State officials on the

issues addressed herein, both through

this rulemaking and through other

documents published in the Federal

Register on which comment was

invited. See 60 FR 66163 (December 21,

1995), 61 FR 68543 (December 30,

1996), 62 FR 19172 (April 18, 1997), and

62 FR 19173 (April 18, 1997). As

discussed in this preamble, we received

and considered a number of comments

from states, and will make them

available to the Director of the OMB.

List of Subjects

12 CFR Part 5

Administrative practice and

procedure, National banks, Reporting

and recordkeeping requirements,

Securities.

12 CFR Part 9

Estates, Investments, National banks,

Reporting and recordkeeping

requirements, Trusts and trustees.

Authority and Issuance

For the reasons set forth in the

preamble, parts 5 and 9 of chapter I of

title 12 of the Code of Federal

Regulations are amended as follows:

PART 5—RULES, POLICIES, AND

PROCEDURES FOR CORPORATE

ACTIVITIES

1. The authority citation for part 5

continues to read as follows:

Authority: 12 U.S.C. 1 et seq., 93a; and

section 5136A of the Revised Statutes (12

U.S.C. 24a).

Subpart B—Initial Activities

2. Paragraph (e)(5) of § 5.26 is revised

to read as follows:

§ 5.26 Fiduciary powers.

* * * * *

(e) * * *

(5) Notice of fiduciary activities in

additional states. No further application

under this section is required when a

national bank with existing OCC

approval to exercise fiduciary powers

plans to engage in any of the activities

specified in § 9.7(d) of this chapter or to

conduct activities ancillary to its

fiduciary business, in a state in addition

to the state described in the application

for fiduciary powers that the OCC has

approved. Instead, unless the bank

provides notice through other means

(such as a merger application), the bank

shall provide written notice to the OCC

no later than ten days after it begins to

engage in any of the activities specified

in § 9.7(d) of this chapter in the new

state. The written notice must identify

the new state or states involved, identify

the fiduciary activities to be conducted,

and describe the extent to which the

activities differ materially from the

fiduciary activities that the bank was

previously authorized to conduct. No

notice is required if the bank is

conducting only activities ancillary to

its fiduciary business through a trust

representative office or otherwise.

* * * * *

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. § 9.2 is amended by removing the

second sentence in paragraph (g) and

adding new paragraphs (j) and (k) as

follows:

§ 9.2 Definitions.

* * * * *

(j) Trust office means an office of a

national bank, other than a main office

or a branch, at which the bank engages

in one or more of the activities specified

34798 Federal Register / Vol. 66, No. 127 / Monday, July 2, 2001 / Rules and Regulations

in § 9.7(d). Pursuant to 12 U.S.C. 36(j),

a trust office is not a ‘‘branch’’ for

purposes of 12 U.S.C. 36, unless it is

also an office at which deposits are

received, or checks paid, or money lent.

(k) Trust representative office means

an office of a national bank, other than

a main office, branch, or trust office, at

which the bank performs activities

ancillary to its fiduciary business, but

does not engage in any of the activities

specified in § 9.7(d). Examples of

ancillary activities include advertising,

marketing, and soliciting for fiduciary

business; contacting existing or

potential customers, answering

questions, and providing information

about matters related to their accounts;

acting as a liaison between the trust

office and the customer (e.g., forwarding

requests for distribution or changes in

investment objectives, or forwarding

forms and funds received from the

customer); inspecting or maintaining

custody of fiduciary assets or holding

title to real property. This list is

illustrative and not comprehensive.

Other activities may also be ‘‘ancillary

activities’’ for the purposes of this

definition. Pursuant to 12 U.S.C. 36(j), a

trust representative office is not a

‘‘branch’’ for purposes of 12 U.S.C. 36,

unless it is also an office at which

deposits are received, or checks paid, or

money lent.

3. § 9.3 is amended by revising

paragraph (b) and adding paragraph (c)

to read as follows:

§ 9.3 Approval requirements.

* * * * *

(b) A national bank that has obtained

the OCC s approval to exercise fiduciary

powers is not required to obtain the

OCC s prior approval to engage in any

of the activities specified in § 9.7(d) in

a new state or to conduct, in a new state,

activities that are ancillary to its

fiduciary business. Instead, the national

bank must follow the notice procedures

prescribed by 12 CFR 5.26(e).

(c) A person seeking approval to

organize a special-purpose national

bank limited to fiduciary powers shall

file an application with the OCC

pursuant to 12 CFR 5.20.

4. A new § 9.7 is added to read as

follows:

§ 9.7 Multi-state fiduciary operations.

(a) Acting in a fiduciary capacity in

more than one state. Pursuant to 12

U.S.C. 92a and this section, a national

bank may act in a fiduciary capacity in

any state. If a national bank acts, or

proposes to act, in a fiduciary capacity

in a particular state, the bank may act

in the following specific capacities:

(1) Any of the eight fiduciary

capacities expressly listed in 12 U.S.C.

92a(a), unless the state prohibits its own

state banks, trust companies, and other

corporations that compete with national

banks in that state from acting in that

capacity; and

(2) Any other fiduciary capacity the

state permits for its own state banks,

trust companies, or other corporations

that compete with national banks in that

state.

(b) Serving customers in other states.

While acting in a fiduciary capacity in

one state, a national bank may market

its fiduciary services to, and act as

fiduciary for, customers located in any

state, and it may act as fiduciary for

relationships that include property

located in other states. The bank may

use a trust representative office for this

purpose.

(c) Offices in more than one state. A

national bank with fiduciary powers

may establish trust offices or trust

representative offices in any state.

(d) Determination of the state referred

to in 12 U.S.C. 92a. For each fiduciary

relationship, the state referred to in

section 92a is the state in which the

bank acts in a fiduciary capacity for that

relationship. A national bank acts in a

fiduciary capacity in the state in which

it accepts the fiduciary appointment,

executes the documents that create the

fiduciary relationship, and makes

discretionary decisions regarding the

investment or distribution of fiduciary

assets. If these activities take place in

more than one state, then the state in

which the bank acts in a fiduciary

capacity for section 92a purposes is the

state that the bank designates from

among those states.

(e) Application of state law. (1) State

laws used in section 92a. The state laws

that apply to a national bank’s fiduciary

activities by virtue of 12 U.S.C. 92a are

the laws of the state in which the bank

acts in a fiduciary capacity.

(2) Other state laws. Except for the

state laws made applicable to national

banks by virtue of 12 U.S.C. 92a, state

laws limiting or establishing

preconditions on the exercise of

fiduciary powers are not applicable to

national banks.

5. Section 9.14(b) is revised to read as

follows:

§ 9.14 Deposit of securities with state

authorities

* * * * *

(b) Acting in a fiduciary capacity in

more than one state. If a national bank

acts in a fiduciary capacity in more than

one state, the bank may compute the

amount of securities that are required to

be deposited for each state on the basis

of the amount of assets for which the

bank is acting in a fiduciary capacity at

offices located in that state. If state law

requires a deposit of securities on a

basis other than assets (e.g., a

requirement to deposit a fixed amount

or an amount equal to a percentage of

capital), the bank may compute the

amount of deposit required in that state

on a pro-rated basis, according to the

proportion of fiduciary assets for which

the bank is acting in a fiduciary capacity

at offices located in that state.

Dated: June 21, 2001.

John D. Hawke, Jr.,

Comptroller of the Currency.

[FR Doc. 01–16329 Filed 6–29–01; 8:45 am]

BILLING CODE 4810–33–P

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. 2000–NM–261–AD; Amendment

39–12297; AD 2001–13–16]

RIN 2120–AA64

Airworthiness Directives; Airbus Model

A310 and Model A300 B4–600, A300

B4–600R, and A300 F4–600R

(Collectively Called A300–600) Series

Airplanes

AGENCY: Federal Aviation

Administration, DOT.

ACTION: Final rule.

SUMMARY: This amendment adopts a

new airworthiness directive (AD),

applicable to certain Model A310 and

Model A300 B4–600, A300 B4–600R,

and A300 F4–600R (collectively called

A300–600) series airplanes, that

requires replacement of the ejection jack

on the ram air turbine (RAT). The

actions specified by this AD are

intended to prevent the ejection jack on

the RAT from failing when the RAT is

deployed at high airspeeds, leading to a

loss of ability to properly restrain the

movement of the RAT, possibly

resulting in damage to the RAT itself

and to other airplane components. In

the event of an emergency, failure of the

ejection jack on the RAT could also

result in a reduction of hydraulic

pressure or electrical power on the

airplane. This action is intended to

address the identified unsafe condition.

DATES: Effective August 6, 2001.

The incorporation by reference of

certain publications listed in the

regulations is approved by the Director

of the Federal Register as of August 6,

2001.