September 1, 1976


Dear Mr. ___________ :

We regret the delay in following up on our telephone conversation of July 23, 1976, regarding _________________.

As we understand the situation, the Company receives dividends on securities for distribution to the broker-dealers and banks which have placed such securities with the Company. A substantial amount of unclaimed dividends has accumulated, and the Company has been investing such unclaimed dividends for its own account. At the last examination of the Company, the examiner in charge, Mr. Harland R. Ross, criticized the Company’s practice of investing unclaimed dividends for its own account.

In our opinion, the Company, as an independent trust company which is not authorized to engage in commercial banking business, may not receive dividends for distribution and invest such dividends for its own account pending such distribution: for receiving funds for distribution and using such funds for one’s own purposes pending such distribution constitutes the business of accepting deposits, and only a commercial bank, not a trust company, may engage in such business. We had occasion to set forth at some length the reasons for this opinion a few years ago when we considered a proposal to organize as a trust company a corporation which would have, among other things, received funds from corporations for distribution to the shareholders of such corporations as dividends and would have used such funds for its own account pending such distribution, thus capturing the “float” for its own purposes. We are enclosing for your information and review a copy of our letter regarding the proposal. As you will note, we have sanitized the letter, eliminating references to the identities of the parties involved.

If, after considering the enclosed letter, you have any questions or comments regarding our opinion, please feel free to contact us. It should be pointed out that, since the proponent of the proposal discussed in the enclosed letter failed to respond to our invitation to submit additional points and authorities, the opinion which was expressed in the enclosed letter as tentative became final. Of course, if the opinion were demonstrated to be in error, we would reverse it, and we are prepared to consider any points and authorities which you may wish to offer regarding the opinion and its applicability to the case at hand.

We look forward to hearing from you.

Very truly yours,

Superintendent of Banks





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