August 22, 1990
TO: INSTITUTIONAL FUNDS COMMITTEE NO. 4-90
RE: INSTITUTE SUBMITS LETTER TO SEC ON OCC "DOUBLE FEE" PROPOSAL
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As you may recall, one of the items included in the
Comptroller of the Currency's recent proposed amendments to its
regulations of bank common trust funds concerned the ability of a
bank to assess a separate management fee on the assets of its
common trust funds. Currently, OCC regulations permit such a fee
to be assessed only if the portion of that fee charged to each
participant, when added together with any other fees charged to
that participant, would not exceed the total fees assessed such
participant if his or her assets had not been invested in a
common trust fund. The proposed amendments would remove this
restriction and allow banks, in effect, to "double charge" by
collecting a separate fund level fee.
Attached is a copy of a letter that the Institute submitted
to the Chairman of the SEC concerning the OCC's proposal on
management fees. The letter urges the SEC to state, in any
interpretive release it issues on the common trust fund
amendments, that any common trust fund that is assessed a second
fee in the above manner would be required to register under the
Securities Act and the Investment Company Act. (In its comment
letter to the OCC on its proposal, the SEC indicated that it
would require common trust funds that advertised or included non-
fiduciary accounts to register under both Acts. However, it did
not address the fee issue.)
The Institute's letter notes that the SEC has never
considered the effects of a separate management fee on the
exemptions for common trust funds under the federal securities
laws, since such a fee previously has been prohibited by law.
The letter states, however, that since the justification for the
statutory exemptions for common trust funds is that the funds are
simply administrative conveniences for pre-existing trust assets,
the existence of an additional fee would demonstrate that the
funds have gone beyond the scope of the exemptions.
We will keep you informed of developments.
Craig S. Tyle
Associate General Counsel
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