The New Hampshire Bank Commissioner has proposed legislation that addresses important issues for trust companies. House Bill 474, as amended, is sponsored by Representative Luneau, and seeks to clarify how the banking department communicates with New Hampshire-chartered trust companies, among other things.
The department recognizes that many trust companies do not have one principal office in which the executive officers work or functions are performed. Rather, these trust companies may use dual employees who are scattered in different offices or divide functions among a number of locations. Because of this, language in the statute requiring the identification of a principal office doesn’t fit the realities of trust business today.
Consequently, while the original version of HB 474 sought to define principal office, after discussions with representatives of the trust company industry, the Commissioner has proposed an amendment to rely instead on personal contact information with regard to the executive officers and directors. That information will be kept confidential under the department’s policies and procedures. Individuals will have an obligation to keep the information current with the department and may be fined if they don’t. If the department wishes to share information, seek answers or take enforcement action, it will know the contact information of key personnel in the trust companies. This is a sensible solution for the evolving trust company sector of business.
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The Commissioner has also proposed to clarify the eligibility of insurance companies authorized to provide fidelity bond and errors and omissions liability insurance coverage to trust companies. The policies must be issued by (1) an insurer licensed under the laws of New Hampshire; or (2) a foreign surplus lines insurer authorized to sell insurance in this state and licensed by any state, district or territory of the United States. An insurer may also qualify if, under the terms of the policy, the issuer unconditionally assents to (1) the resolution of any claim or dispute involving the policy by a court located in this state; and (2) the personal jurisdiction of the courts located in this state in connection with any matter involving the policy. So long as an insurer is licensed to sell insurance in New Hampshire or agrees to the jurisdiction of the state with respect to any claim or dispute involving the policy, it may provide insurance to state-chartered trust companies.
In addition, the Commissioner has proposed to clarify language relating to a decrease in fidelity bond or insurance coverage by requiring that a notice be given to the Commissioner if it is decreased by 25% within a 12-month period. Also, each policy must contain language that if it is cancelled or non-renewed, a 10-day prior notice be given to the Commissioner. Further, the Commissioner has proposed language to the effect that all deductibles for policies must be reasonable.
Finally, the Commissioner has proposed to refine the reporting requirements for each trust company. Each calendar year, a trust company is required to balance its books at the close of business on the last business day in December and, within 30 calendar days thereafter, shall file with the commissioner an annual report. The annual report must be signed by an authorized officer of the trust company, attesting that the information provided is accurate to the best of his or her knowledge. The report must contain the following information:
- The name and contact information for the trust company and each trust office, including information concerning any trust office which opened, closed, or relocated during the year.
- The name of each person who is a director.
- The name of each person who is an executive officer.
- The name of each subsidiary of the institution.
- The name and contact information for each service entity.
- The name and contact information for any affiliated holding company.
- With respect to any fidelity bond or errors and omissions liability policy maintained to satisfy requirements in banking acts, the legal name and contact information for the insurance company that issued the coverage, the amount of coverage, and the amount of the deductible.
- With respect to any liquidation pledge the trust company maintains, the name and contact information of the person holding the liquidation pledge and the fair market value of the liquidation pledge as of the last business day of the year.
- With respect to any surety bond that a trust company maintains for the benefit of the commissioner, the name and contact information of the person issuing the surety bond, and the amount of the surety.
- With respect to any other funds that a trust company maintains for the benefit of the commissioner, the name and contact information for of the person holding the funds, and the fair market value of the funds as of the last business day of the year.
Also, the Commissioner proposes that quarterly each trust company is required to balance its books at the close of business on the last business day in March, June, September, and December, and, within 30 calendar days after the end of each of those calendar quarters, must file with the Commissioner a quarterly report using the following sections of the “Consolidated Reports of Condition and Income” developed by the Federal Financial Institutions Examination Council:
- Signature page with attestation;
- Contact Information for the Reports of Condition and Income;
- USA PATRIOT Act Section 314(a) Anti-Money Laundering Contact Information;
- Schedule RI-Income Statement;
- Schedule RI- A—Changes in Bank Equity Capital;
- Schedule RI-E—Explanations;
- Schedule RC—Balance Sheet;
- Schedule RC-B—Securities;
- Schedule RC-F—Other Assets;
- Schedule RC-G—Other Liabilities; and
- Schedule RC-T—Fiduciary and Related Services.
The Commissioner would have the power to adopt rules relating to reporting under this article, including any additional reporting requirements, and may by rule waive reporting requirements when the Commissioner determines such information is not relevant to the determination of the true conditions of the trust company.
There are other minor technical changes to the law that have no substantive effect on trust companies.
The bill is currently in the House Commerce and Consumer Affairs Committee and must pass both the House and Senate and be signed by the Governor to become law. The bill has the support of New Hampshire-chartered trust companies. Since the bill originated with the Commissioner and thus far has not faced opposition, it is likely to be enacted. Most of the bill will take effect immediately on passage.
In conclusion, these proposals continue to improve the regulation of trust companies in New Hampshire and make it an attractive place to do business.
To discuss specific issues related to New Hampshire’s new trust laws, please contact John Funk at 603 228-1181. Attorney Funk has extensive experience in the formation and operation of nondepository trust companies.
* John Funk is admitted in New Hampshire, Massachusetts, Vermont and Maine.