Subject 80-13-1 TRUST COMPANIES
|(1)||As used in Chapters 80-13-1, the terms that are defined in O.C.G.A. § 7-1-4 shall have the identical meaning.|
|(2)|| As used in
Chapters 80-13-1, the below terms shall be defined as follows unless the term
is otherwise defined in a specific rule:
|(1)||Pursuant to O.C.G.A. § 7-1-317, a trust company must maintain, at a minimum, $3 million in capital. The Department will evaluate the factors set forth in O.C.G.A. § 7-1-317 in analyzing a trust company's capital adequacy and may determine that the capital required is greater than $3 million.|
|(2)|| The amount of the initial capital
requirement maintained by a trust company shall be established by the
Department in writing prior to the trust company beginning business. Further,
any revision to the capital requirement maintained by a trust company shall be
established in writing by the Department prior to the trust company
implementing the revised capital ratio. It shall be in the Commissioner's sole
discretion to determine the capital ratio required to be maintained by each
|(1)||Every trust company shall have an opinion audit of its books and records performed at least annually by a licensed external auditor in accordance with generally accepted auditing standards and procedures. The audit must be of sufficient scope to enable the auditor to render an opinion on the financial statements of the trust company, consolidated holding company, or parent company. Such audit shall include a review of the trust company's internal controls, fiduciary activities (pursuant to agreed-upon procedures), fiduciary accounts, affirmative verifications of investments and deposits made by the trust company, adequate testing and review of the trust company's information technology activities, and such other tests and reviews of trust company records as deemed appropriate by the external auditor. The extent of the audit work should be clearly defined in engagement letters. Such letters should discuss the scope of the audit, the objectives, resource requirements, audit timeframe, and resulting reports. External auditors must make their audit work papers, policies, and procedures available to Department examiners for review upon request.|
|(2)||The external auditor should be generally familiar with the statutes, rules, and regulations under which the trust company being audited operates, and with its charter and bylaw provisions. The annual audit should incorporate the necessary procedures to satisfy the auditor that there is compliance with the applicable requirements that might materially affect the trust company's financial position or operation.|
|(3)||Audit reports in which the auditor expresses an unqualified opinion shall be provided to the Department upon request. Audit reports in which the auditor expresses anything other than an unqualified opinion, including, but not limited to, a qualified opinion, an adverse opinion, or a disclaimer of opinion, shall be provided to the Department within fifteen (15) days following receipt by the financial institution. Audit reports submitted to the Department shall be accompanied by the Letter to Management, if applicable, detailing any reportable conditions discovered during the audit engagement. Failure to obtain the required opinion audit, or the auditor's report thereof, shall be reported to the Department within fifteen (15) days of discovery.|
|(1)|| Internal Audit System. An institution
should have an internal audit system that is appropriate to the size of the
institution and the nature and scope of its activities. The internal audit
system should consist of qualified persons. The internal audit system shall
|(2)||The Board of Directors of every trust company shall name an internal auditor. If the trust company names an employee as the internal auditor, then the internal auditor must not audit his/her department.|
|(3)|| The internal auditor shall:
|(4)||A trust company can designate an external auditor as its internal auditor. In the event an external auditor is designated as the internal auditor, then the Board of Directors or the audit committee must appoint an internal liaison among the officers of the trust company that will be responsible for coordinating the internal audit function with the external auditor and overseeing compliance with the internal audit requirements.|
A trust company shall have an audit committee. The audit committee must consist of a committee of the trust company's directors or directors of an affiliate of the trust company. However, in either case, the committee:
|(a)||Must not include any officers of the trust company or an affiliate who participate significantly in the administration of the trust company's fiduciary activities; and|
|(b)||Must consist of a majority of members who are not also members of any committee to which the board of directors has delegated power to manage and control the fiduciary activities of the trust company.|
|(1)|| Every stand-alone trust company chartered
by the Department shall obtain the following:
|(2)||The required insurance coverage or its equivalent shall contain a provision that coverage will not be canceled, or not renewed, or allowed to lapse for any reason until at least sixty (60) days prior written notice has been given by the insurer to the Department or contain substantially similar protections approved in writing by the Department. A certificate of insurance or similar documentation showing such insurance coverage or its equivalent to be in force shall be provided to the Department prior to the trust company engaging in any fiduciary activities. The insurance coverage or its equivalent shall be obtained from an insurance company licensed to do business in Georgia that continuously maintains an A.M. Best Company rating of at least A: VII or an equivalent rating from an insurance rating agency approved in advance by the department in writing. Such insurance coverage or its equivalent shall continuously remain in full force and effect subject to Department approved revisions to the amount of coverage.|
|(3)||The amount of the initial insurance coverage or its equivalent obtained by the trust company, as well as any subsequent reductions to the amount, shall be approved by the Department in writing prior to the trust company obtaining the insurance coverage or taking action to reduce the amount of coverage. It shall be in the Commissioner's sole discretion to determine the amount of required insurance coverage or its equivalent.|
order for the Department to make the determination in Paragraph 3 of this Rule
related to the appropriate amount of insurance coverage or its equivalent, a
trust company, upon request by the Department, shall provide the Department
with a written justification setting forth the trust company's rationale for
the appropriate and necessary amount of insurance coverage. Such justification
for the different required insurance coverage shall set forth in detail the
|(1)||Before accepting a fiduciary account, a trust company shall review the prospective account to determine whether it can properly administer the account.|
|(2)||Upon the acceptance of a fiduciary account for which a trust company has investment discretion, the trust company shall conduct a prompt review of all assets of the account to evaluate whether they are appropriate for the account.|
|(3)||At least once during every calendar year, a trust company shall conduct a review of all assets of each fiduciary account for which the bank has investment discretion to evaluate whether they are appropriate, individually and collectively, for the account.|
|(1)||A trust company shall place assets of fiduciary accounts in the joint custody or control of not fewer than two of the fiduciary officers or employees designated for that purpose by the Board of Directors. A trust company may maintain the investments of a fiduciary account off-premise, if consistent with applicable law and if the trust company maintains adequate safeguards and controls.|
|(2)||A trust company shall keep the assets of fiduciary accounts separate from the assets of the trust company. A trust company shall keep the assets of each fiduciary account separate from all other accounts or shall identify the investments as the property of a particular account, except as provided in 12 CFR § 9.18 for collective investment funds.|
If the Department is appointed receiver of a trust company or appoints a receiver of a trust company, the receiver shall promptly close or transfer to a substitute fiduciary all fiduciary accounts in accordance with Department instructions or the orders of the court having jurisdiction.
A trust company administering a collective investment fund authorized under O.C.G.A. § 7-1-313 shall comply with the following requirements:
|(1)|| The trust company shall develop, and the
Board of Directors must approve, a collective investment fund plan that must
contain appropriate provisions, not inconsistent with this part, regarding the
manner in which the trust company will operate the fund, including provisions
|(2)||A trust company administering a collective investment fund shall have exclusive management thereof, except as a prudent person might delegate responsibilities to others.|
|(2.1)||Each participating account in a collective investment fund must have a proportionate interest in all the fund's assets.|
|(5)|| A trust company administering a
collective investment fund may charge a reasonable fund management fee only if:
|(6)||A trust company administering a collective investment fund may charge reasonable expenses incurred in operating the collective investment fund, to the extent not prohibited by applicable law in the state in which the trust company maintains the fund. However, a trust company shall absorb the expenses of establishing or reorganizing a collective investment fund.|
|(7)||The Department will not deem a trust company's mistake made in good faith and in the exercise of due care in connection with the administration of a collective investment fund to be a violation of this rule if, promptly after the discovery of the mistake, the trust company takes whatever action is practicable under the circumstances to remedy the mistake.|
Subject to such further restrictions and approvals as its board of directors may set forth in its investment policy, a trust company may purchase, sell, and hold securities, for its own behalf, the following:
|(1)|| Debt Obligations.
|(2)|| Equity Securities.
The total investment in equity and investment of any one issuer, obligor, or maker held by a trust company for its own account shall not exceed an amount equal to 15 percent of the trust company's equity capital, as defined by GAAP.
A trust company for its own account may invest up to fifteen (15) percent of its equity capital, as defined by GAAP, in securities of, or other interests in, any open-end or closed-end management type investment fund or investment trust which is registered under the Investment Company Act of 1940, subject to the following additional conditions.
|(4)|| Asset-Backed Securities.
A trust company may purchase asset-backed securities repayable in both interest and principal which are issued under any of the following:
Interest-Only ("IO") Securities.
|(6)|| Futures, Forwards, Option Contracts and
Interest Rate Swaps.
Futures, forwards, option contracts, interest rate swaps, and direct and indirect investments associated with any security which otherwise constitutes a permissible investment under provisions of this rule may be approved in writing by the department for trust companies demonstrating technical expertise and policies sufficient to promote safe and sound use of such investments as part of prudent investment strategies.
|(7)|| All Other Securities.
A trust company may invest in such other securities or funds as the department may approve, upon a finding that the securities are marketable under ordinary circumstances, with reasonable promptness at a price which corresponds to their fair value, approval shall be in writing and subject to such limitations as the department may specify. This requirement for departmental approval shall not apply where the equity capital, as defined by GAAP, of the purchasing trust company exceeds $ 20,000,000. However, in such instances, such securities may be purchased only in an amount which does not exceed fifteen (15) percent of the trust company's equity capital, as defined by GAAP.
|(8)||In the event a trust company's investment in securities no longer conforms to this rule but conformed when the investment was originally made, the trust company shall provide written notification to the Department regarding the nonconforming investment within 30 days of discovering the nonconforming investment or 120 days of the investment becoming nonconforming, whichever event occurs first. In the event a trust company wishes to hold the nonconforming investment, the trust company must submit a letter form application to the Department describing the efforts the trust company will undertake to bring the nonconforming investment into conformity and the anticipated time it will take to bring the investment into conformity. Upon review of the application, the Department may request additional information if it determines such additional information is necessary in order to fully and completely evaluate the application. After completion of its review, the Department shall either approve, conditionally or otherwise, or deny such application in writing.|
|(9)||A trust company may sell a nonconforming investment without Department authorization but only if it provides the Department with written notice no later than five (5) business days after the sale.|
|(1)||Unless authorized by applicable law, a trust company may not invest funds of a fiduciary account for which a trust company has investment discretion in the stock or obligations of, or in assets acquired from: the trust company or any of its directors, officers, or employees; affiliates of the trust company or any of their directors, officers, or employees; or individuals or organizations with whom there exists an interest that might affect the exercise of the best judgment of the trust company. Notwithstanding the above, a trust company may invest such stock or obligations as part of an index pursuant to an index or model portfolio strategy unless the index was formed or otherwise created or is managed by the trust company.|
|(3)||A trust company may make a loan to a fiduciary account and may hold a security interest in assets of the account if the transaction is fair to the account and is not prohibited by applicable law.|
|(4)||A trust company may sell assets between any of its fiduciary accounts if the transaction is fair to both accounts and is not prohibited by applicable law.|
|(5)||A trust company may make a loan between any of its fiduciary accounts if the transaction is fair to both accounts and is not prohibited by applicable law.|
|(1)|| The Board of
Directors of any trust company may declare and the trust company may pay
dividends on its outstanding capital stock without any requirement to notify
the Department or request the approval of the Department if the aggregate
amount of dividends declared or anticipated to be declared in the calendar year
|(2)||Any proposed dividend to be declared by the Board of Directors of a trust company in excess of the amount authorized by section (1) of this Rules must be approved, in writing, by the Department prior to the payment thereof pursuant to the provisions of Section 7-1-460(a)(3) of the Official Code of Georgia. Requests for approval of dividends shall be on forms prescribed by the Department.|