CHAPTER 12. REGULATION OF BANK AND TRUST COMPANY FIDUCIARIES
IC 28-1-12
Chapter 12. Regulation of Bank and Trust Company Fiduciaries
IC 28-1-12-1
Authority to serve as fiduciary
Sec. 1. (a) Any court or officer thereof having jurisdiction to grantletters of guardianship, to appoint a trustee, guardian, receiver, orcommittee of the estate of any person, to appoint a committee ortrustee or a receiver in insolvency or bankruptcy proceedings, or inany other proceeding or action, under state or federal law, or to makeany other fiduciary appointment contemplated and provided for inIC 28-1-11, may appoint any bank or trust company qualified undersubsection (b) as such fiduciary. However, the bank or trust companyis not required to accept the appointment.
(b) A bank or trust company is qualified to act as a fiduciaryunder subsection (a) if the bank or trust company is:
(1) organized under the provisions of IC 28;
(2) a national bank authorized to act as a fiduciary and that bankeither:
(A) has its principal place of business in Indiana; or
(B) has its principal place of business in a state or territoryof the United States, including the District of Columbia, thatgrants authority to serve in similar fiduciary capacities tobanks and trust companies organized and doing businessunder the laws of Indiana; or
(3) organized and doing trust company business under the lawsof a state or territory described in subdivision (2)(B).
(c) This section shall be construed to permit a bank or trustcompany that is organized and doing business under the laws of anystate, territory, or district other than Indiana, including a nationalbank or national trust company doing business in any other state, toestablish in Indiana, subject to the approval of the department, aplace of business or agency for the conduct of business as a fiduciaryif the law of the state, territory, or district in which the bank or trustcompany is located would allow an Indiana bank or trust company toestablish a place of business or agency in that state, territory, ordistrict for the conduct of business as a fiduciary.
(Formerly: Acts 1933, c.40, s.183.) As amended by Acts 1980,P.L.175, SEC.1; P.L.42-1993, SEC.29; P.L.122-1994, SEC.79.
IC 28-1-12-2
Control by court; accounts, statements, and reports
Sec. 2. Every bank or trust company appointed as a fiduciary,pursuant to the provisions of this article, shall be subject at all timesto the orders, judgments, and decrees of the court from which it shallhave accepted any such trust, appointment, or commission, as to suchtrust or other fiduciary relationship, and shall render to such courtsuch itemized and verified accounts, statements, and reports as maybe required by law, or as such court shall determine, in relation tosuch particular trust or other fiduciary appointment.(Formerly: Acts 1933, c.40, s.184.) As amended by P.L.263-1985,SEC.63.
IC 28-1-12-3
Fiduciary powers and obligations; trusts; holding of securities;segregation; records; transfers; investments in securities ofinvestment companies or trusts having business ties with fiduciary
Sec. 3. (a) Every bank or trust company exercising trust powersor any powers as a fiduciary shall establish and maintain in its officea trust department in which it shall keep, separate and apart from itsother business, separate books and accounts, and shall keep allsecurities and property, other than money, which is held by its trustdepartment, at all times segregated from and unmingled with its ownsecurities and property.
(b) Notwithstanding any other law, any bank or trust companyholding securities as a fiduciary, custodian or managing agent, andany bank or trust company holding securities as custodian for afiduciary is authorized to deposit or arrange for the deposit of suchsecurities in a clearing corporation (as defined inIC 26-1-8.1-102(a)(5)). When such securities are deposited in aclearing corporation, certificates representing securities of the sameclass of the same issuer may be merged and held in bulk in the nameof the nominee of the clearing corporation by any person regardlessof the ownership of the securities; and certificates of smalldenomination may be merged into one (1) or more certificates oflarger denomination. The records of the fiduciary and the records ofthe bank or trust company acting as custodian, managing agent, orcustodian for a fiduciary shall at all times show the name of the partyfor whose account the securities are deposited.
(c) This section applies to any bank or trust company holdingsecurities as a fiduciary, custodian, managing agent or custodian fora fiduciary, regardless of whether it owns capital stock of theclearing corporation.
(d) Title to the securities held by the clearing corporation may betransferred by bookkeeping entry on the books of the clearingcorporation without physical delivery of certificates representingsuch securities.
(e) A bank or trust company acting as custodian for a fiduciary,shall, upon demand by the fiduciary, certify in writing to thefiduciary the securities deposited by such fiduciary in such clearingcorporation for its account as fiduciary.
(f) Notwithstanding any other law, any bank or trust companyholding United States government securities as a fiduciary, custodianor managing agent, and any bank or trust company holding UnitedStates government securities as custodian for a fiduciary may use theFederal Reserve Book-Entry procedure for the United Statesgovernment securities. The records of such fiduciary and the recordsof such bank or trust company acting as custodian, managing agent,or custodian for a fiduciary shall at all times show the name of theparty for whose account the United States government securities are
deposited.
(g) Title to the United States government securities registered byBook-Entry under subsection (f) may be transferred by bookkeepingentry on the books of the Federal Reserve without physical deliveryof certificates representing the securities.
(h) A bank or trust company acting as custodian for a fiduciary,shall, upon demand by the fiduciary, certify in writing to thefiduciary the securities registered in the Federal Reserve for theaccount of the fiduciary.
(i) Notwithstanding any other law, a bank or trust company, to theextent that it exercises investment discretion as a fiduciary,custodian, managing agent, or otherwise with respect to theinvestment and reinvestment of assets that it maintains in its trustdepartment, may invest and reinvest the assets, subject to thestandard contained in IC 30-4-3-3(c), in the securities of anyopen-end or closed-end management investment company orinvestment trust registered under the Investment Company Act of1940, 15 U.S.C. 80a1-64, as amended. The fact that the bank or trustcompany, or any affiliate of the bank or trust company, is providingservices to the investment company or trust as investment advisor,sponsor, distributor, custodian, transfer agent, registrar, or otherwise,and receiving reasonable remuneration for the services, does notpreclude the bank or trust company from investing in the securitiesof such investment company or trust.
(Formerly: Acts 1933, c.40, s.185.) As amended by Acts 1977,P.L.290, SEC.1; P.L.257-1989, SEC.1; P.L.247-1995, SEC.25.
IC 28-1-12-4
Profit or commission on sales; necessity of specific authorization;surcharge
Sec. 4. No profit or commission, other than interest at the legalrate upon a loan or advancement, shall be taken or received by anybank or trust company or corporate fiduciary, directly or indirectly,out of any sale or purchase to or from any estate, guardianship, ortrust of any kind of which it is the fiduciary, unless specificallyauthorized by agreement with the creator of the trust, or the courthaving jurisdiction thereof; and upon violation of this section suchbank or trust company or corporate fiduciary shall be surcharged anyprofit so taken or received, and an amount equal thereto, in addition,and may be summarily removed as such fiduciary by the court havingjurisdiction.
(Formerly: Acts 1933, c.40, s.189.) As amended by P.L.262-1995,SEC.31.
IC 28-1-12-5
Repealed
(Repealed by P.L.262-1995, SEC.91.)
IC 28-1-12-6
Liquidation preferences Sec. 6. Upon the liquidation of any bank or trust company orcorporate fiduciary while it is acting as guardian, trustee, receiver,administrator, executor, commissioner, or assignee for the benefit ofcreditors the person or persons beneficially entitled to receiveproperty or proceeds thereof held by it, or any successor fiduciarythat may be appointed, shall have preference and priority in all assetsof such bank or trust company or corporate fiduciary over its generalcreditors, for all uninvested money held by such bank or trustcompany or corporate fiduciary in the fiduciary capacities abovenamed, to the extent that such money is commingled with its generalassets or is not duly accounted for.
(Formerly: Acts 1933, c.40, s.192; Acts 1937, c.33, s.25.) Asamended by P.L.262-1995, SEC.32.
IC 28-1-12-7
Violations
Sec. 7. A person who violates this chapter commits a Class Binfraction. In addition, if the person is an officer of any bank or trustcompany, he is subject to removal from office in the mannerprescribed in IC 28-11-4.
(Formerly: Acts 1933, c.40, s.194; Acts 1937, c.33, s.27.) Asamended by Acts 1978, P.L.2, SEC.2807; P.L.33-1991, SEC.15.
IC 28-1-12-8
Authorization for banks and trust companies to use fiduciary fundsin conflict of interest transactions; conditions; notice; requiredconsent
Sec. 8. (a) Unless otherwise provided in an agreement or a trust,a bank or trust company that holds funds or property as a fiduciarymay use the funds or property to purchase from the bank, the trustcompany, or an affiliate of the bank or trust company a product,service, or security, including an insurance product or security thatis underwritten by the bank, the trust company, an affiliate of thebank or trust company, or a syndicate or selling group that includesthe bank, the trust company, or an affiliate of the bank or trustcompany if the:
(1) purchase price and any ongoing charges and costs are fair,reasonable, and substantially equivalent to the cost of similarproducts and services; and
(2) purchase complies with IC 30-4-3.5.
The compensation for the product, services, or security received bythe bank, trust company, an affiliate of the bank or trust company, ora syndicate or selling group that includes the bank, the trustcompany, or an affiliate of the bank or trust company may be inaddition to the compensation that the bank or trust company isotherwise entitled to from the fiduciary account.
(b) A bank or trust company that makes a purchase or saledescribed in subsection (a) shall disclose, at least annually, to eachperson entitled to receive statements of account activity from thebank or trust company any purchase or sale made by the bank or trust
company during the year. The disclosure must be in writing or anelectronic format and include the following:
(1) Any capacity in which the bank, the trust company, or anaffiliate of the bank or trust company acts for:
(A) the issuer of the securities; or
(B) the provider of the products or services;
that is the subject of the purchase or sale.
(2) A statement that the bank, the trust company, or an affiliateof the bank or trust company has an interest in the subject of thepurchase or sale, if applicable.
(3) The rate and method by which that compensation wasdetermined.
(4) The name, telephone number, street address, and mailingaddress of an officer of the bank or trust company who may becontacted for further information.
(5) A notice that the bank's or trust company's ability to maketransactions described in subsection (a) ends upon receipt at anytime of a notice of objection by a majority of the personsentitled to receive statements of account activity.
(c) The following apply to a purchase or sale under subsection (a):
(1) Except as provided in subdivisions (2) and (3), if thefiduciary relationship is a trust or an agency, the trustee or agentshall treat the purchase or sale under subsection (a) as if it werea conflict of interest transaction under IC 30-4-3-5 and shallgive any notice and obtain any consent that may be requiredunder IC 30-4-3-5, subject to the following:
(A) IC 30-2-14-16 applies to any notice required to be givenby a trustee or an agent under this subdivision, subject to thefollowing:
(i) If the fiduciary relationship is a revocable trust withone (1) or more living grantors, the trustee must givenotice only to the living grantors, who shall be consideredto have all income and principal interests in the trust at thetime the notice is given. If a grantor is incapacitated, thetrustee shall give notice to the grantor's court appointedguardian, the principal under a durable power of attorney,or a co-trustee of the revocable trust, unless the guardian,principal, or co-trustee is the bank or trust company thatseeks the consent. If the representative of the incapacitatedgrantor is the bank or trust company that seeks the consentto a purchase or sale under subsection (a), the trustee shallobtain consent from the court.
(ii) If the fiduciary relationship is a revocable trust and theassets of the revocable trust are distributable to one (1) ormore other trusts, notice shall be given to the trustees ofthe other trusts. However, if the bank or trust company thatseeks the consent to a purchase or sale under subsection(a) is the trustee of another trust to which the assets of therevocable trust are distributable, the bank or trust companyshall give notice to those beneficiaries of the other trust
who are entitled to receive statements of account activityfrom the bank or trust company.
(iii) If the fiduciary relationship is an agency, the principalmust consent to the purchase or sale under subsection (a)in writing in advance of the transaction. The principalshall be considered to have all income and principalinterests in the account at the time the notice of theproposed transaction is given. If the principal isincapacitated, consent must be obtained from theprincipal's court appointed guardian, unless the guardianof the incapacitated principal is the bank or trust companythat seeks the consent. If the guardian of the incapacitatedprincipal is the bank or trust company that seeks theconsent, consent to a purchase or sale under subsection (a)must be obtained from the court supervising the principal'sguardianship.
(B) If the fiduciary relationship is a trust, the followingapply with respect to any consent required to be obtainedunder IC 30-4-3-5(a)(2):
(i) Notwithstanding the requirement underIC 30-4-3-5(a)(2)(A) that all interested persons providewritten consent to the proposed action, and subject tosubdivision (2), a trustee, for a proposed purchase or saleunder subsection (a), need only obtain the written consentof a majority of the persons entitled to notice underIC 30-2-14-16, as modified by subdivision (1)(A).However, the trustee must obtain the written consent of atleast one (1) beneficiary who is receiving income underthe trust at the time of the notice and at least one (1)individual who would receive a distribution of principal ifthe trust were terminated at the time notice is given.
(ii) Upon obtaining the written consents required underitem (i), the trustee need not wait until the period to makewritten objections under IC 30-2-14-16 ends in order totake the proposed action.
(2) Any consent granted under subdivision (1)(B)(i) may berevoked by a writing signed by a majority of the personsentitled to notice under IC 30-2-14-16, as modified bysubdivision (1)(A). However, the revocation must be signed by:
(A) at least one (1) beneficiary who is receiving incomeunder the trust at the time the revocation is signed; and
(B) at least one (1) individual who would receive adistribution of principal if the trust were terminated at thetime the revocation is signed.
(3) The notice and consent otherwise required undersubdivision (1) are not required if the purchase or sale undersubsection (a) is specifically authorized:
(A) in the document creating the fiduciary relationship; or
(B) under IC 30-4-3-7.
As added by P.L.202-2007, SEC.1; P.L.226-2007, SEC.5. Amended
by P.L.3-2008, SEC.219.