Happy New Year Everyone!

We continue to have the same discussion on this topic, so I wanted to thrown the question out here. Does Reg O apply to Trust Accounts or Brokerage Accounts. Granted these are non-lending and non-deposit accounts, so my answer is No, they do not apply.

However, what about an investment account involving either of the above, that goes negative due to a margin call or the trust or broker wants to buy an investment and there are not enough funds available leaving the investment account negative until an asset or assets are sold to replenish the account? I believe this is a breach of fiduciary duties for a trust, but what about the brokerage account? I guess there is more than one question here, so please let me know if anyone has insight on this topic. Any thoughts would be appreciated.

Yes - breach of fiduciary duties on Trust accounts.

Brokerage accounts? How can those be through your bank?

Those are not through the bank, they would be managed by a brokerage service. Which brings up a good point, since it's managed by an outside source, does it apply at all? My answer is still no in both cases.

Let me ask this in a different manner:

Is a loan from a broker/investment firm, a margin loan, considered an extension of credit under Reg O?

Only a loan from the bank of which the person is an insider is covered by Regulation O. If I partner with a brokerage firm to offer brokerage service to my customer - what happens in those accounts are the brokerage firm's issue.

Thank you for confirming. Sometimes we all just need a little reassurance from the experts.

HAPPY NEW YEAR!

Perfect timing for this topic. So, if the company offering the brokerage service is an affiliate of the bank, does this change things?

Here's a response received from a consultant:
If the Reg O insider has a beneficial interest in the investment account, they would be covered accounts for insider overdraft monitoring.

In answer to what?

My original post above. Does Reg O apply to Trust Accounts or Brokerage Accounts......

The trust or brokerage account still has to be held by the bank. I thought that was settled???

So did I...LOL. I think there is some miscommunication on what was asked and I cannot get a copy of the question posed to the consultant to confirm. I'll keep you posted.

Finally got a hold of the agreements. The trust dept will open up MMDA as an investment account, the trust department directs the funds for investment at the direction of the the owner. The accounts are a product that is an omnibus internal bank dda account. Basically, the customer cannot transact on the account, the trust does it for them via an agreement and agreed upon investment goals.

Well, all I can say is that if your trust department allows that account to go negative, you have a lot more problems than worrying about whether to treat it as a Reg. O overdraft.

My thoughts exactly!!!

Randy,

Did you have an opinion about this response. https://www.bankersonline.com/qa/mmdas-opened-internal-trust-department

Maybe you should ask Andy - he wrote it

I again go back to the fiduciary duty of the trust department to not let the account go negative. The insider does not own the account - the bank trust department does.

Too funny--I did. Thanks again!!!