Trust Company and Trust Facility Frequently Asked Questions
Questions and Answers:
1. Who is authorized to engage in trust business in California?
A trust department of a commercial bank, a California chartered independent trust company, and an industrial bank authorized to engage in trust business. A trust department of a commercial bank can include a national bank, California chartered bank, and foreign (other state) bank authorized to conduct trust business. Refer to Financial Code Sections 1100 and 1550. Also, a natural person may be permitted as provided under Financial Code Section 1553.
2. Can a foreign (other state) bank with a trust department conduct trust activities in California?
Yes. A foreign (other state) bank with a trust department may establish a branch office in California and can conduct trust business.
3. Can a national banking association operate trust business in California?
Yes. A national banking association that (a) maintains its main office or branch in California, (b) is authorized to transact trust business, and (c) has complied with Financial Code Section 1570 can operate trust business.
4. Are there any penalties associated with operating a trust business in California without authorization?
Yes. Any person who violates Financial Code Section 1550 may be subject to civil money penalties of $1,000 per day under Financial Code Section 329 and/or civil prosecution under Financial Code Section 566. Additionally, the California Attorney General may institute a lawsuit pursuant to Business and Professions Code Sections 17200, 17205, and 17206, which can result in the imposition of penalties up to $2,500 for each violation.
5. What are the requirements for chartering an independent trust company in California?
Chartering information for an independent trust company in California can be obtained from the California Code of Regulations, Title 10, Chapter 1, Subchapter 10, Article 4, Subarticle 2. from https://dfpi.ca.gov/trust-services-division/. Additional information can be obtained from California Financial Code Section 1020 – 1027.
6. What is the minimum capital required to establish an independent trust company?
Minimum capital is determined on a case-by-case based principally on business plan. Refer to Financial Code Section 1150.
7. What is required to file an application for an independent trust company in California?
The application should include DFPI Form 10 or other cover page, DFPI Form 379 for all proposed Board members and executive management, all information detailed under California Code of Regulations Sections 10.3154(c), address statutory factors under Financial Code Sections 1022-1023 and provide application fee of $5,000 pursuant to Financial Code Section 1020. DFPI Forms are available at https://dfpi.ca.gov/commercial-banks/ and application information is available at https://dfpi.ca.gov/trust-services-division/.
8. What does an independent trust company application process in California entail?
The application process includes pre-file meeting(s), application review for completeness upon filing, followed by comprehensive reviews by a Senior Financial Institutions Examiner and Financial Institutions Manager, and concluded with final decision review by the Commissioner. Pre-file meetings are held for purposes of introduction of organizers, proposals and understanding the proposed business plan. Application review includes background reviews conducted on proposed Board of Directors and Executive Management.
9. What is the timetable for obtaining a license for an independent trust company in California?
The timetable for obtaining approval for an independent trust company can vary depending on factors such as; completeness of application, complexity of proposed business model, adequacy of underlying business plan, and reasonable promise of success for the proposed entity. Application process can take about 90 days or more depending on factors described above.
10. Can an independent trust company in California engage in commercial banking activities, including accepting deposits?
No. A California-chartered trust company is a non-depository institution and is not authorized to provide commercial banking services. A California-chartered trust company is allowed to engage in the trust business, which has the meaning set forth in Financial Code Section 115.
11. Can a foreign (other state) trust company establish a branch office in California?
No. California law does not permit interstate trust activity.
12. What types of activities can a foreign (other state) trust company engage in California?
A foreign (other state) trust company can be permitted to establish a facility office at which location noncore trust activity can be performed, including the marketing of trust services and providing back office administrative support. An application is required to establish a facility. Refer to Financial Code Section 1713.
13. What are the permissible activities for a trust facility?
Trust facilities are authorized to conduct noncore banking business as defined in Section 1670 (d) of the Financial Code.
14. What is required to file an application for a trust facility office in California?
A trust facility application can be in the form of a letter that addresses all statutory factors under subdivision (b) of Section 1713 of the Financial Code and includes the application fee of $250 pursuant to Financial Code 1674.
15. What are the pledging requirements for conducting trust business in California?
Under Financial Code Section 1570, every institution engaging in trust business in California is required to deposit with the State Treasurer money or securities described in Section 1572 as security for its court and private trusts.
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