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Each depositor insured to at least $250,000 per insured bank

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4000 - Advisory Opinions


Whether Funds Invested in Investment Company Through Trust Department of Bank Would Be Insured Separately from Beneficial Interests of Other Investment Company Co-Owners When Bank Fails

FDIC 91-42 May 3, 1991 Gerald J. Gervino, Senior Attorney

Our Office of Consumer Affairs has asked us to answer your inquiry concerning the insurance coverage afforded funds that you have invested in a "no-load, diversified, open-end investment company" of which you are a beneficial owner through the trust department of a local bank.

You ask if your beneficial interest in the investment company would be insured up to $100,000 separate from the interests of other investment company owners if the local bank failed. While the local bank may serve as the investment company's investment advisor, transfer agent, and custodian, funds held by the investment company are not deposits of the bank and therefore are not insured.

If the company has invested any of its assets in the local bank's deposit obligations, those funds would be insured up to $100,000 for the investment company as a whole, rather than up to $100,000 for each investment company beneficiary. The claim would be on behalf of the investment company, as depositor, rather than the beneficiaries of the investment company or customers of the trust department of the local bank.

Your interest in the investment company would not be affected by the bank's closing, except to the extent that the investment company might lose funds in connection with the bank's closing. Your trust investments, including investment company shares, would be transferred to a successor trustee.

If we have not completely answered your inquiry or you have any further questions, please write or call us.


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