71-5
71-5
March 9, 1971
Dear Mr. _______________:
With reference to Mr. Carrig’s letter to you dated January 14, 1971, we have reviewed your inquiry concerning the authority of Bank to act as depository in accordance with a permit issued by the Commissioner of Corporations for sale of securities in _____________. You have inquired whether you may act as depository in this situation even though ______________ is not licensed to conduct a trust business.
As we understand the facts, subscription funds received by ___________________ will be deposited with your bank, and when the amount of Seven Hundred Thousand Dollars ($700,000) cash has been deposited with your _______________, will apply to the Commissioner of Corporations for permission to have these funds released from the account and you will be requested to give the Commissioner a statement concerning the status of the account. Upon receipt of written approval from the Commissioner of Corporations you will release such funds to ______________ in accordance with the Commissioner’s permit. The bank will have no authority regarding this account other than as set forth above.
It is our opinion that in this situation the bank would be performing an escrow function, rather than conducting a trust business under Financial Code Section 106. Escrow functions may be performed by a bank even though it is not authorized to conduct a trust business. We therefore do not feel this function would be prohibited under Division 1 of the Financial Code. (Financial Code Section 1590, and see Section 102).
We hope this answers your inquiry.
Very truly yours,
DONALD E. PEARSON
Superintendent of Banks
By
LORRAINE A. SMITH
Counsel