Trust Updates Archive

20050808BSA 2005--The Year of the SEC

(Jan. 27, 2006--Chicago, IL)--For the Chinese, 2005 was the year of the Monkey; 2006 is the year of the dog. For fiduciaries, 2005 was the year of the SEC. Unfortunately, there is calendar system that predicts what the primary fiduciary risk will be in 2006.
        If bank fiduciaries had any doubts that the U.S. Securities and Exchange Commission was now one of their primary regulators, they have been dispelled. While some observers feel that the appointment of former congressman Christopher Cox will result in a more business-friendly agency, that observation may be wishful thinking.
        In 2005, the SEC brought and successfully settled a wide range of actions against bank fiduciaries. A surprising number of issues focused on pension transactions, generally the domain of the U.S. Department of Labor. Also high on the list were compliance deficiencies.
        One lesson coming out of 2005 was that cooperation with the SEC goes a long way. Putnam Fiduciary Trust Company’s swift response to financial fraud allegations against six former officers garnered strong SEC praise and avoided civil penalties for the company. The SEC has filed legal charges against the six officers, but no charges were filed against Putnam.
    “Although the conduct alleged was egregious, PFTC’s cooperation in this investigation and the remedial steps taken were extraordinary,” according to Walter G. Ricciardi, SEC District Administrator, Boston. “We hope,” he adds, “the SEC’s actions here will encourage those who become aware of wrongdoing to do the right thing—stop the wrongful conduct—and promptly report it.”
        For bank fiduciaries 2005 looks to be another strong year of income and asset growth. Final figures are not yet in, but current asset and income data suggest that it will be the fourth consecutive year of strong growth, according to Trust Performance Report, a sister publication of TRN. Expectations for 2006 are similarly upbeat based on current growth trends for assets held in higher income-producing account categories, such as investment management agencies and employee benefit trust accounts.
        For more details, see the January issue of Trust Regulatory News. For more information on stories covered in 2005, see TRN’s 2005 Index available at

No statement in this issue is offered as or should be
construed as legal opinion or advice

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