Sec. 218.721 Defined terms relating to the
trust and fiduciary activities exception from
the definition of ‘‘broker.’’
(a) Defined terms for chiefly
compensated test. For purposes of this
part and section 3(a)(4)(B)(ii) of the Act
(15 U.S.C. 78c(a)(4)(B)(ii)), the following
terms shall have the meaning provided:
(1) Chiefly compensated—account-by-account
test. Chiefly compensated shall
mean the relationship-total
compensation percentage for each trust
or fiduciary account of the bank is
greater than 50 percent.
(2) The relationship-total
compensation percentage for a trust or
fiduciary account shall be the mean of
the yearly compensation percentage for
the account for the immediately
preceding year and the yearly
compensation percentage for the
account for the year immediately
preceding that year.
(3) The yearly compensation
percentage for a trust or fiduciary
account shall be
(i) Equal to the relationship
compensation attributable to the trust or
fiduciary account during the year
divided by the total compensation
attributable to the trust or fiduciary
account during that year, with the
quotient expressed as a percentage; and
(ii) Calculated within 60 days of the
end of the year.
(4) Relationship compensation means
any compensation a bank receives
attributable to a trust or fiduciary
account that consists of:
(i) An administration fee, including,
without limitation, a fee paid --
(A) For personal services, tax
preparation, or real estate settlement
services;
(B) For disbursing funds from, or for
recording receipt of payments to, a trust
or fiduciary account;
(C) In connection with securities
lending or borrowing transactions;
(D) For custody services; or
(E) In connection with an investment
in shares of an investment company for
personal service, the maintenance of
shareholder accounts or any service
described in paragraph (a)(4)(iii)(C) of
this section;
(ii) An annual fee (payable on a
monthly, quarterly or other basis),
including, without limitation, a fee paid
for assessing investment performance or
for reviewing compliance with
applicable investment guidelines or
restrictions;
(iii) A fee based on a percentage of
assets under management, including,
without limitation, a fee paid
(A) Pursuant to a plan under
§ 270.12b–1;
(B) In connection with an investment
in shares of an investment company for
personal service or the maintenance of
shareholder accounts;
(C) Based on a percentage of assets
under management for any of the
following services--
(I) Providing transfer agent or subtransfer
agent services for beneficial
owners of investment company shares;
(II) Aggregating and processing
purchase and redemption orders for
investment company shares;
(III) Providing beneficial owners with
account statements showing their
purchases, sales, and positions in the
investment company;
(IV) Processing dividend payments for
the investment company;
(V) Providing sub-accounting services
to the investment company for shares
held beneficially;
(VI) Forwarding communications
from the investment company to the
beneficial owners, including proxies,
shareholder reports, dividend and tax
notices, and updated prospectuses; or
(VII) Receiving, tabulating, and
transmitting proxies executed by
beneficial owners of investment
company shares;
(D) Based on the financial
performance of the assets in an account; or
(E) For the types of services described
in paragraph (a)(4)(i)(C) or (D) of this
section if paid based on a percentage of
assets under management;
(iv) A flat or capped per order
processing fee, paid by or on behalf of
a customer or beneficiary, that is equal
to not more than the cost incurred by
the bank in connection with executing
securities transactions for trust or
fiduciary accounts; or
(v) Any combination of such fees.
(5) Trust or fiduciary account means
an account for which the bank acts in
a trustee or fiduciary capacity as defined
in section 3(a)(4)(D) of the Act (15
U.S.C. 78c(a)(4)(D)).
(6) Year means a calendar year, or
fiscal year consistently used by the bank
for recordkeeping and reporting
purposes.
(b) Revenues derived from
transactions conducted under other
exceptions or exemptions. For purposes
of calculating the yearly compensation
percentage for a trust or fiduciary
account, a bank may at its election
exclude the compensation associated
with any securities transaction
conducted in accordance with the
exceptions in section 3(a)(4)(B)(i) or
sections 3(a)(4)(B)(iii)–(xi) of the Act (15
U.S.C. 78c(a)(4)(B)(i) or 78c(a)(4)(B)(iii)–
(xi)) and the rules issued thereunder,
including any exemption related to such
exceptions jointly adopted by the
Commission and the Board, provided
that if the bank elects to exclude such
compensation, the bank must exclude
the compensation from both the
relationship compensation (if
applicable) and total compensation for
the account.
(c) Advertising restrictions—
(1) In general. A bank complies with
the advertising restriction in section
3(a)(4)(B)(ii)(II) of the Act (15 U.S.C.
78c(a)(4)(B)(ii)(II)) if advertisements by
or on behalf of the bank do not
advertise--
(i) That the bank provides securities
brokerage services for trust or fiduciary
accounts except as part of advertising
the bank’s broader trust or fiduciary
services; and
(ii) The securities brokerage services
provided by the bank to trust or
fiduciary accounts more prominently
than the other aspects of the trust or
fiduciary services provided to such
accounts.
(2) Advertisement. For purposes of
this section, the term advertisement has
the same meaning as in §___.760(h)(2).
Amended effective 4/17/2008, 73 Federal Register 20779
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