Trust Updates Archive

Trust Regulatory News Fiduciary Bank Estates A.M. Publishing Bernard Garbo Dean Miller Trust Regulatory News Turns 20

(Nov. 30, 2012 --Chicago, IL) -- An interview with Dean Miller, who served as the OCC's Senior Advisor for Fiduciary Responsibilities, kicked off the inaugural issue of Trust Regulatory News in November 1992.

Much has changed since then, both for the industry and TRN.

Today, the concept of risk management is second nature in financial management and regulation. In 1992, the OCC's trust group was more actively integrating risk management concepts in the trust examination process than was the agency's commercial banking side. Times have changed. Not only is the OCC's focus today on commercial bank risk management, but the agency has substantially de-emphasized its concern for fiduciary issues.

Since Dean Miller, no one with responsibility for trust activities in Washington has held a Deputy Comptroller position. Today, those charged with oversight of trust activities do not even merit acknowledgment in the OCC's organizational chart.

The lack of emphasis on trust activities by bank regulators, according to a former senior American Bankers Association official, resulted in the U.S. Securities and Exchange Commission making substantial inroads into trust oversight. In particular, he notes, the dispute over the so-called push-out or broker-dealer rules could have been avoided if federal bank regulators had paid more attention to the fiduciary banking area.

"For more than two decades," reflects the official, who spoke on condition of anonymity, "bank regulators de-emphasized the trust area. Now they're paying the price."

In addition to changes in risk management and regulatory focus, the legal landscape also has changed.

In 1992, class actions were still a hot button topic; their focus was on the appropriateness of sweep fees. The object of plaintiffs' anger at the time was Mellon Bank. Out of those lawsuits, the first nationwide beneficiaries' support group was born: HEIRS.

HEIRS is still around, but less active. Sweep fees are a fairly settled issue. Beneficiaries' anger today is focused on proprietary mutual funds. For more than a decade, plaintiffs have sought a blueprint for filing successful class action lawsuits against banks that convert their common trust and other collective investment funds to proprietary mutual funds. Plaintiffs allege that the primary motive for converting is bank profits and not their best interests. They also question the prudence of retaining these investments. One such case is pending in California. Their quest is a difficult one.

Federal legislation passed in 1998 relegated securities litigation alleging fraud to federal court, regardless of where it was initially filed. Additionally, for all practical purposes, the legislation required such lawsuits to be filed as individual actions, not as class actions. The cost of filing these cases as individual lawsuits generally makes doing so prohibitive.

Since 1992, the trust industry has grown more profitable, and commercial bankers and bank directors have taken note. Bottom-line improvements are being driven by trust institutions which are more willing to competitively price their services. Industry sources attribute this to trust bankers and bank management becoming ever more aware that the services they provide to grantors and beneficiaries are highly valued.

TRN has also changed since 1992. When TRN was started, its editorial emphasis was on regulation. Regulators and Congress were focused on Glass-Steagall, and there were various attempts to pass legislation and provide regulatory relief. In a time when news was less digital and available on ones phone, it was important to keep trust bankers informed. Today, TRN continues to reflect the industry's focus and concern putting more emphasis on covering litigation risks and SEC activities. TRN also is placing more focus on industry statistics and benchmark, working in combination with its sister publications, Trust Performance Report and Fiduciary Earnings & Expenses.

In 2013, A.M. Publishing, Inc., will begin the process of digitizing and putting online TRN's complete library. This will include making TRN available to subscribers both in hard copy and through a secure e-reader.

The last 20 years have seemingly flown by. The editors and staff of TRN look forward to continuing to be your source for the best updates and insights in the trust industry and wish you the Happiest of Holidays!

As always, your feedback is appreciated.

No statement in this issue is offered as or should be construed as legal opinion or advice or as an indicator of future performance.
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