May 17, 1991
TO: INSTITUTIONAL FUNDS COMMITTEE NO. 2-91
RE: OCC INTERPRETATIONS CONCERNING ACCEPTANCE OF BENEFITS BY
BANK FIDUCIARIES
__________________________________________________________
As you may recall, several members of the Institutional
Funds Committee had submitted to the Office of the Comptroller of
the Currency a request that it reconsider several interpretations
it had issued concerning the acceptance of benefits by bank
fiduciaries from mutual fund sponsors. The project was begun
prior to the formation of the Committee. At subsequent meetings
of the Committee, it was decided that the project should not be
pursued, out of concerns that it might conflict with the
Institute's efforts in opposition to the OCC's proposal to permit
the public offering of, and the assessment of management fees
upon, bank common trust funds.
Although it is our understanding that informal requests
were made to the OCC by the group of institutional funds to
"shelve" the project, the OCC did issue a response to the
submission last month. The response, a copy of which is
attached, rejected the proposal contained in the submission that
the transactions in question be permitted if banks established
procedures to review their fairness. However, the OCC's response
did endorse the idea of banks establishing such procedures and
noted that they may be useful in determining whether a certain
transaction was permissible under local law. (The prior OCC
interpretations stated that the transactions in question were
prohibited unless otherwise permitted under local law, court
order, or the governing instrument of the trust.)
At the June 6 meeting of the Committee, we will discuss
whether it would be advisable to reopen the issue of acceptance
of benefits. In this regard, also attached is a memorandum from
counsel to the Committee discussing the potential conflicts
between that project and our common trust fund efforts.
Craig S. Tyle
Associate General Counsel
Attachments