§12602. Nondepository trust companies

Link to law: http://legislature.vermont.gov/statutes/section/08/202/12602
Published: 2015

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The Vermont Statutes Online



Title

08

:
Banking and Insurance






Chapter

202

:
ORGANIZATION AND MANAGEMENT OF INVESTOR-OWNED FINANCIAL INSTITUTIONS






Subchapter

006
:
SPECIAL PURPOSE FINANCIAL INSTITUTIONS










 

§

12602. Nondepository trust companies

(a) A

nondepository trust company has all the powers, duties, and obligations of a

financial institution under this title, except as provided in this section. In

the exercise of its powers and the conduct of its business, the nondepository

trust company shall be subject to all the same fiduciary duties and obligations

as a financial institution operating a trust department under subchapter 4 of

chapter 204 of this title.

(b) A

nondepository trust company shall not have the power to solicit, receive, or

accept money or its equivalent on deposit as a regular business within the

meaning of subdivision 11101(11) of this title; shall not be required to obtain

federal deposit insurance; shall not have the power to lend money, except in

transactions reasonably related to and deriving from its service as fiduciary

or its conduct of trust business; and shall not conduct any other business

except that which is incidental to its trust business and which is otherwise

consistent with the exercise of its fiduciary duties.

(c) No

nondepository trust company, other than a national trust company authorized to

engage in a trust business in this State, shall engage in a trust business in

this State without first obtaining a certificate of authority from the

Commissioner pursuant to this section and sections 11703, 12103, and 14403 of

this title.

(d)

Notwithstanding section 15101 of this title, without the prior approval of the

Commissioner, a nondepository trust company that is authorized to do business

in this State may open and occupy a trust office at any one or more locations

in this State at which its financial institution holding company parent or any

affiliate financial institution has an office, whether a main office or a branch

office.

(e) Any other

trust office of a nondepository trust company organized as a Vermont financial

institution shall be established in this State only with the prior approval of

the Commissioner as provided in subsection 11701(c) of this title.

(f) The establishment

of trust offices by a nondepository trust company organized as a national trust

company shall be governed by applicable federal law.

(g) The

organizational documents of a nondepository trust company organized as a

Vermont financial institution that are filed with the Secretary of State shall

contain the following statement: "This organization is subject to the

Vermont law on nondepository trust companies, section 12602 of this title, and

does not have the power to solicit, receive, or accept money or its equivalent

on deposit or to lend money except for lending reasonably related to and

deriving from its service as fiduciary or its conduct of trust business."

This statement in the organizational documents of a nondepository trust company

may not be amended.

(h) All of the

outstanding equity interests of a nondepository trust company shall be owned

directly, or indirectly through one or more subsidiaries, by a financial

institution holding company.

(i) A

nondepository trust company organized as a Vermont financial institution shall

maintain minimum capital in accordance with this chapter and section 14104 of

this title, except the Commissioner may by order or rule apply standards for

the minimum capital required for a nondepository trust company that are

different from those requirements for a universal financial institution

organized under this title, based on the nature of the business.

(j) Funds

received or held by a nondepository trust company organized as a Vermont

financial institution while awaiting investment or distribution shall not be

used by the nondepository trust company or any affiliate financial institution

in the conduct of its business or deposited in such financial institution,

except to the same extent, and subject to the same conditions and limitations,

as would be otherwise permitted under this title if the nondepository trust

company and affiliated financial institution were one and the same corporate

entity. The account shall be held either in the name of the trust to which the

cash belongs or in the name of the nondepository trust company and shall be

composed entirely of cash belonging to trust accounts, the respective

contributions of which are reflected in the books and records of the

nondepository trust company.

(k) A nondepository

trust company organized as a Vermont financial institution shall include as a

part of its name the word "trust" unless otherwise approved by the

Commissioner for good cause shown.

( l ) A

nondepository trust company organized as a Vermont financial institution shall

be subject to regular examination and supervision by the Commissioner to the

same extent as any other financial institution chartered under Vermont law.

(m) A

nondepository trust company organized as a Vermont financial institution may

convert to any other type of investor-owned financial institution pursuant to

chapter 206 of this title.

(n)(1) At any

time or times following the grant to a nondepository trust company of

permission to engage in the trust business by the Commissioner, or in the case

of a national trust company by its federal supervisory agency, the

nondepository trust company may file a petition in the Probate Division of the

Superior Court of the Probate District in which its main office is located

requesting that it be substituted, except as may be specifically excluded in

such petition, in every fiduciary capacity for any one or more of its affiliate

financial institutions specified in the petition. The petition may be made ex

parte and need not list the fiduciary capacities in which substitution is made.

A copy of the petition shall be furnished to the Commissioner prior to filing

with the Probate Division of the Superior Court and the Commissioner shall have

standing to appear and object to the petition. Upon a finding that (A) the

nondepository trust company has been granted permission to engage in the trust

business by the Commissioner, or the federal supervisory agency if the

nondepository trust company is a national trust company, and (B) each of the

affiliate financial institutions for which the nondepository trust company

seeks to be substituted as fiduciary has complied with the notification

requirements in subdivision (2) of this subsection, the Court shall enter an

order substituting the nondepository trust company in every fiduciary capacity

for each of its specified affiliate financial institutions, except as otherwise

specified in the nondepository trust company's petition. If the Court

determines that the Commissioner's objection has merit, the Court shall issue

an appropriate order to address the Commissioner's objection. The petition made

pursuant to this section shall be considered in a summary fashion by the Court,

and the Court shall act on the petition within 30 days of filing. Upon entry of

the Court's substitution order, the nondepository trust company shall, without

further act, be deemed substituted by operation of law in every such fiduciary

capacity, except as may be specifically excluded in such petition. The

substitution shall be evidenced by filing a copy of the order with the Clerk of

the Vermont Probate Division of the Superior Court in each Probate District in

which the affiliate financial institutions served in a fiduciary capacity prior

to the entry of the order. The order shall be accompanied by written

notification to the Court of each fiduciary appointment previously made by the

Court that is affected by the substitution order, and evidence of compliance

with subdivision (5) of this subsection. The order of substitution shall be

indexed in the records of the Courts in the manner in which substitutions of

fiduciaries are indexed.

(2) At least 30

days before the filing of the petition referred to in subdivision (1) of this

subsection, but after regulatory approval under subsection (c) of this section

has been granted, each of the affiliate financial institutions for which the

nondepository trust company seeks to be substituted shall mail written notice

of the proposed substitution to the principals of each trust account affected.

The form of notice required by this subdivision shall be approved by the

Commissioner and shall include a statement that the nondepository trust company

is affiliated with its affiliate financial institutions, but is not a part of

them, and shall include the name, mailing address, and telephone number of one

or more officers, employees, or agents of the affiliate financial institution

available during regular business hours to answer customer questions regarding

the proposed substitution. The affiliate financial institution shall furnish an

affidavit of the mailing of the notice to the Probate Division of the Superior

Court in conjunction with the filing of the nondepository trust company's

petition referred to in subdivision (1) of this subsection, and the affidavit

shall constitute the affiliate financial institution's compliance with this

subdivision. Following the mailing of the notice and prior to the effective

date of the substitution order, each of the affiliate financial institutions

shall furnish a copy of the notice to each prospective trust customer of the

financial institution before the customer and the financial institution enter

into a trust account relationship.

(3) Within 30

days after the entry of the substitution order referred to in subdivision (1)

of this subsection, the nondepository trust company shall mail written notice

of the substitution to the principals of each trust account affected. The

notice shall specify that the nondepository trust company is affiliated with

its affiliate financial institutions, but is not a part of them, and shall

include the name, mailing address, and telephone number of one or more officers

or employees of the nondepository trust company available during regular

business hours to answer customer questions regarding the substitution.

(4) Each

designation in a will, trust, or other instrument executed before or after the

entry of an order of substitution, naming an affiliate financial institution as

fiduciary, shall be deemed by operation of law to be a designation of the nondepository

trust company, substituted pursuant to this section, without further act or

amendment of the will, trust, or other instrument, unless the will, trust, or

other instrument is executed after the date of entry of the order of

substitution and specifically negates application of this section.

(5) If any

affiliate financial institution for which the nondepository trust company has

been substituted pursuant to this section has given bond in any fiduciary

capacity, the nondepository trust company shall be required to furnish to the

Court or authority making the appointment a substitute bond in like amount and

terms before the affiliate financial institution shall be released from

liability on its bond.

(6) Any

affiliate financial institution for which the nondepository trust company has

been substituted pursuant to this section shall account jointly with the

nondepository trust company for the accounting period during which the

effective date of the substitution occurs. Upon substitution pursuant to this

section, the affiliate financial institution shall deliver to the nondepository

trust company all assets addressed in the substitution order held by the

affiliate financial institution as fiduciary and upon the substitution all the

assets shall become the property of the nondepository trust company as

fiduciary without the necessity of any instrument of transfer or conveyance.

(7) Upon

substitution of the nondepository trust company pursuant to subdivision (1) of

this subsection, the nondepository trust company shall pay fair consideration

to each affiliate financial institution for which it has been substituted as

fiduciary for the trust business it has acquired from the affiliate as a result

of the substitution.

( o ) To the

extent not inconsistent with this section or with the limited scope of the

banking powers of a nondepository trust company as contemplated in subsection

(b) of this section, a nondepository trust company organized as a Vermont

financial institution shall be subject to the laws of this State generally

applicable to investor-owned financial institutions organized pursuant to

chapter 202 of this title; provided, however, that the provisions of this

chapter governing substitution of the nondepository trust company as fiduciary

shall be exclusive and chapters 206, 207, and 208 of this title shall not apply

to the substitution.

(p) A depository

institution organized either as a Vermont financial institution or a national

financial institution if authorized by its supervisory agency to exercise trust

powers may be substituted as a fiduciary for any of its affiliate financial

institutions under the same procedures, and the substitution shall be subject

to the same conditions specified in this section, other than the prohibition

against deposit-taking and the provisions of subsection (k) of this section,

with respect to the substitution as fiduciary of a nondepository trust company

for any of its affiliate financial institutions. The substitution procedures

shall be exclusive and chapters 206, 207, and 208 of this title shall not apply

to the substitution. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001;

amended 2001, No. 73 (Adj. Sess.), § 4, eff. Feb. 2, 2002; 2009, No. 154 (Adj.

Sess.), § 238a, eff. Feb. 1, 2011.)
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