USE OF PROPRIETARY “IN HOUSE” BANK SPONSORED MUTUAL FUNDS AT INVETMENTS IN TRUST ACCOUNTS WHERE THE BANK IS THE TRUSTEE

Many banks are now using their proprietary, “in house”, mutual funds as investment vehicles where the bank is acting as trustee of a personal trust account. This practice raises various questions. Unless the fund selection is carefully monitored and reviewed by the Trust Investment Committee (and noted in the Commmittee minutes) a potential breach of fiduciary responsibility may exist. In addittion to being in compliance with state trust laws, and O.C.C. Regulation 9, the bank/trustee must avoid “double dipping” on fees, ie receiving a trust administrative fee along with a fee to mnanage the investments in the proprietary mutual fund. Some banks will rebate the investment management fee to the trust account.

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