4000 - Advisory Opinions
Reliance on Commonly Accepted Acronyms to Meet the Disclosure of Fiduciary Relationships Requirement Under § 330.4
August 15, 1990
J. William Via, Jr., Counsel
This is in response to your five letters, each dated June 21, 1990, addressed to Claude Rollin, concerning deposit insurance.
You note that under the revised deposit insurance regulation (12 C.F.R., Part 330, effective July 29, 1990), section 330.8, in setting out the requirements for revocable trust accounts, explicitly authorizes the use of ". . . commonly accepted terms such as, but not limited to, in trust for' as trustee for', payable-on-death to', or any acronym therefor. . . ." You ask, in essence, if this explicit authorization of the use of acronyms in 330.8 for "evidencing an intention", to establish a revocable trust account signals that deposition can now confidently rely on the use of abbreviations for meeting the "disclosure of fiduciary relationships" requirements of another provision, specifically section 330.4. The short answer is "no", but some qualifications apply.
Section 330.4(b) states that the deposit account records of an insured institution "must expressly disclose, by way of specific references, the existence of any fiduciary relationship [relied on] . . . [such as] trustee, agent, nominee, guardian, executor or custodian. . . ." The section further provides that "if no fiduciary relationship is evident from the deposit account records", then no claim for insurance coverage based on a fiduciary relationship will be recognized. The section does not authorize the use of abbreviations and, therefore, it must be concluded that a depositor who uses abbreviations hoping to comply with the requirements does so at some risk of failure. If you and an insured institution wish to use abbreviations for certain terms in an effort to comply with the requirements of 330.4, the prudent course would be for the institution to disclose somewhere in its deposit account records the meanings of the abbreviations used. This is essentially the advice given to you respecting compliance with the predecessor to section 330.4(b) in a letter to you, dated May 13, 1988 and signed by Mr. Hood. Of course, if you and the institution use for this purpose the acronyms "ITF" or "ATF", even without their being defined in the institution's deposit account records, then the FDIC would not be likely to question their meaning since the regulation recognizes (albeit in another section) that they represent "commonly accepted terms". Other acronyms and abbreviations (such as "AAF", "ANF", and "AA", for example) that are used ought to be defined in the deposit account records of the institution, if you wish to preclude controversy as to their meaning.
You inquire about meeting the recordkeeping requirements of section 330.4(b)(1), (2) in the case of multi-tiered fiduciary relationships pursuant to the two methods set forth in section 330.4(b)(3)(i), (ii). One method is to expressly indicate on the deposit account records of the insured institution the existence of each and every level of fiduciary relationships and disclose at each level the names and interests of the persons on whose behalf the party at that level is acting. It would be adequate, as you suggest, if First Bank acting as agent for Second Bank, which is the trustee of the John Jones Trust, opened an account entitled, "First Bank as Agent for Second Bank as Trustee." A second method is to: expressly indicate on the deposit account records of the insured institution that the depositor is acting in a fiduciary capacity on behalf of certain persons or entities who may, in turn, be acting in a fiduciary capacity for others; disclose the existence of additional levels of fiduciary relationships in records, maintained in good faith and in the regular course of business, by parties at subsequent levels; and, disclose, at each of the levels, the names and interests of the persons on whose behalf the party at that level is acting. It would be adequate, as you suggest, if First Bank acting as agent for Second Bank, which is the trustee of the John Jones Trust, opened an account entitled, "First Bank as agent for an entity which may be acting in a fiduciary capacity for other entities".
As you say you understand, no person or entity in the chain of parties will be permitted in any case to claim that they are acting in a fiduciary capacity for others unless the possible existence of such a relationship is revealed at some previous level in the chain.
Turning now to some related questions that you raise, if a deposit account is entitled "ABC Bank as Agent" and the account consists of funds belonging to an employee benefit plan the trustee of which has appointed the bank as agent to make and hold the deposit, then the disclosure is deficient in not revealing that the bank as fiduciary (i.e., agent) is acting for another fiduciary, the trustee of the pension plan. A trust acts through its trustee(s), who typically is empowered to appoint agents to act on behalf of the trustee(s) in conducting the affairs of the trust. Similarly, a decedent's estate acts through its executor or administrator, who typically is (are) empowered to appoint agents. In general, an agent or other legal representative can be empowered under the provisions of applicable law to act on behalf of a minor, but the minor has no authority to appoint his or her agents or other legal representatives. Thus, a deposit account entitled "ABC Bank as Agent for John Jones (minor)" represents by its terms that the bank is duly empowered, as by court order, for example, to act as agent for certain purposes for the minor.
Finally, you note that section 330.10(a) provides that funds held by an insured depository institution in "an agency or other fiduciary capacity", whether held in its trust department or another department or deposited as fiduciary in another insured institution, are insured up to $100,000 for each owner or beneficiary and that this insurance is "separate from, and in addition to, the insurance provided for any other deposits of the owner or the beneficiaries." Thus, if an insured institution in its capacity as agent makes a $100,000 deposit for the benefit of John Jones in a second insured institution where John Jones himself holds an individual deposit of $100,000, it follows from the language of section 330.10(a) that the two deposits would be separately insured.