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4000 - Advisory Opinions


Mislabelling of Fiduciary Accounts Under New Insurance Regulation

FDIC-90-44

August 22, 1990

Roger A. Hood, Assistant General Counsel

This is in response to your recent letter, which was sent on behalf of your client, the *** (the ***) concerning the policies that the FDIC would follow in making insurance determinations, upon the failure of an FDIC-insured institution, under the new uniform deposit insurance regulations (to be codified at 12 C.F.R. Part 330).

First, you are correct in your understanding that if a depositor directs an insured institution to use particular language in setting up a deposit account on the institution's deposit account records (as defined in 12 C.F.R. §330. ) and the institution fails to use that particular language, the FDIC would treat as done that which should have been done. You cite the following example of this principle, with which I concur:

if a depositor demonstrated to the satisfaction of the FDIC that a depository institution was directed to identify the depositor as the trustee for a trust but failed to do so, in determining the availability of separate additional insurance for beneficiaries of the trust, the FDIC would treat the deposit account records of the insured institution as having indicated the existence of the trust.

Second, your letter correctly states our position concerning mislabelled fiduciary accounts. If the deposit account records of an insured institution indicate that an account is held in a fiduciary capacity but mischaracterizes the nature of that fiduciary relationship (e.g., the records indicate the funds are being held by a custodian when they are really being held by a trustee), the FDIC would permit the depositor to present evidence of the actual nature of the fiduciary relationship and insure the account on that basis (e.g., as a trust rather than a custodial account in the above example). Any documentation presented as evidence of the actual fiduciary relationship would, of course, need to be maintained in good faith and in the regular course of business.

Third, you ask us to confirm that if a securities depository or clearing agency (hereinafter "clearing agency") deposits funds in an insured institution and the deposit account records of that institution indicate that, in holding the deposit, the clearing agency is acting as an agent for its participants who are acting for themselves and as fiduciaries for others, the FDIC would look to the records of the clearing agency's participants, maintained in good faith and the regular course of business, to determine the existence of any additional fiduciary relationships upon which claims for additional deposit insurance may be based. You further indicate that the clearing agency's records would not contain any indication that the participants were acting pursuant to fiduciary relationships.

Since, in the scenario you present, the deposit account records would indicate that the participants are acting for themselves and in fiduciary capacities for others, the FDIC would look to the records maintained by the participants, in good faith and in the regular course of business, to determine the fiduciary capacities in which they are acting. It appears that the recordkeeping requirements of 12 C.F.R. §330.4(b) would be satisfied notwithstanding the fact that the clearing agency's records would not contain any indication that the participants were acting pursuant to fiduciary relationships. Of course, we would have to review the actual designation on the deposit account records after an insured institution fails to determine whether that designation satisfied our recordkeeping requirements.

The opinions expressed herein represent the current thinking of the FDIC Legal Division staff. Like all staff opinions, the opinions expressed herein are not binding on the FDIC or its Board of Directors. These opinions are simply advisory in nature. Actual claims determinations are made only after an insured institution fails.

If you have any further questions, please do not hesitate to contact me or Mr. Claude A. Rollin of my staff.


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