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 grant
letters of guardianship, to appoint a trustee, guardian, receiver, or
committee of the estate of any person, to appoint a committee or
trustee or a receiver in insolvency or bankruptcy proceedings, or in
any other proceeding or action, under state or federal law, or to make
any other fiduciary appointment contemplated and provided for in
IC 28-1-11, may appoint any bank or trust company qualified under
subsection (b) as such fiduciary. However, the bank or trust company
is not required to accept the appointment.
(b) A bank or trust company is qualified to act as a fiduciary
under 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 bank
either:
(A) has its principal place of business in Indiana; or
(B) has its principal place of business in a state or territory
of the United States, including the District of Columbia, that
grants authority to serve in similar fiduciary capacities to
banks and trust companies organized and doing business
under the laws of Indiana; or
(3) organized and doing trust company business under the laws
of a state or territory described in subdivision (2)(B).
(c) This section shall be construed to permit a bank or trust
company that is organized and doing business under the laws of any
state, territory, or district other than Indiana, including a national
bank or national trust company doing business in any other state, to
establish in Indiana, subject to the approval of the department, a
place of business or agency for the conduct of business as a fiduciary
if the law of the state, territory, or district in which the bank or trust
company is located would allow an Indiana bank or trust company to
establish a place of business or agency in that state, territory, or
district 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 times
to the orders, judgments, and decrees of the court from which it shall
have accepted any such trust, appointment, or commission, as to such
trust or other fiduciary relationship, and shall render to such court
such itemized and verified accounts, statements, and reports as may
be required by law, or as such court shall determine, in relation to
such 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 of
investment companies or trusts having business ties with fiduciary
Sec. 3. (a) Every bank or trust company exercising trust powers
or any powers as a fiduciary shall establish and maintain in its office
a trust department in which it shall keep, separate and apart from its
other business, separate books and accounts, and shall keep all
securities and property, other than money, which is held by its trust
department, at all times segregated from and unmingled with its own
securities and property.
(b) Notwithstanding any other law, any bank or trust company
holding securities as a fiduciary, custodian or managing agent, and
any bank or trust company holding securities as custodian for a
fiduciary is authorized to deposit or arrange for the deposit of such
securities in a clearing corporation (as defined in
IC 26-1-8.1-102(a)(5)). When such securities are deposited in a
clearing corporation, certificates representing securities of the same
class of the same issuer may be merged and held in bulk in the name
of the nominee of the clearing corporation by any person regardless
of the ownership of the securities; and certificates of small
denomination may be merged into one (1) or more certificates of
larger denomination. The records of the fiduciary and the records of
the bank or trust company acting as custodian, managing agent, or
custodian for a fiduciary shall at all times show the name of the party
for whose account the securities are deposited.
(c) This section applies to any bank or trust company holding
securities as a fiduciary, custodian, managing agent or custodian for
a fiduciary, regardless of whether it owns capital stock of the
clearing corporation.
(d) Title to the securities held by the clearing corporation may be
transferred by bookkeeping entry on the books of the clearing
corporation without physical delivery of certificates representing
such securities.
(e) A bank or trust company acting as custodian for a fiduciary,
shall, upon demand by the fiduciary, certify in writing to the
fiduciary the securities deposited by such fiduciary in such clearing
corporation for its account as fiduciary.
(f) Notwithstanding any other law, any bank or trust company
holding United States government securities as a fiduciary, custodian
or managing agent, and any bank or trust company holding United
States government securities as custodian for a fiduciary may use the
Federal Reserve Book-Entry procedure for the United States
government securities. The records of such fiduciary and the records
of such bank or trust company acting as custodian, managing agent,
or custodian for a fiduciary shall at all times show the name of the
party for whose account the United States government securities are
deposited.
(g) Title to the United States government securities registered by
Book-Entry under subsection (f) may be transferred by bookkeeping
entry on the books of the Federal Reserve without physical delivery
of 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 the
fiduciary the securities registered in the Federal Reserve for the
account of the fiduciary.
(i) Notwithstanding any other law, a bank or trust company, to the
extent that it exercises investment discretion as a fiduciary,
custodian, managing agent, or otherwise with respect to the
investment and reinvestment of assets that it maintains in its trust
department, may invest and reinvest the assets, subject to the
standard contained in IC 30-4-3-3(c), in the securities of any
open-end or closed-end management investment company or
investment trust registered under the Investment Company Act of
1940, 15 U.S.C. 80a1-64, as amended. The fact that the bank or trust
company, or any affiliate of the bank or trust company, is providing
services 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 not
preclude the bank or trust company from investing in the securities
of 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 legal
rate upon a loan or advancement, shall be taken or received by any
bank or trust company or corporate fiduciary, directly or indirectly,
out of any sale or purchase to or from any estate, guardianship, or
trust of any kind of which it is the fiduciary, unless specifically
authorized by agreement with the creator of the trust, or the court
having jurisdiction thereof; and upon violation of this section such
bank or trust company or corporate fiduciary shall be surcharged any
profit so taken or received, and an amount equal thereto, in addition,
and may be summarily removed as such fiduciary by the court having
jurisdiction.
(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 or
corporate fiduciary while it is acting as guardian, trustee, receiver,
administrator, executor, commissioner, or assignee for the benefit of
creditors the person or persons beneficially entitled to receive
property or proceeds thereof held by it, or any successor fiduciary
that may be appointed, shall have preference and priority in all assets
of such bank or trust company or corporate fiduciary over its general
creditors, for all uninvested money held by such bank or trust
company or corporate fiduciary in the fiduciary capacities above
named, to the extent that such money is commingled with its general
assets or is not duly accounted for.
(Formerly: Acts 1933, c.40, s.192; Acts 1937, c.33, s.25.) As
amended by P.L.262-1995, SEC.32.
IC 28-1-12-7
Violations
Sec. 7. A person who violates this chapter commits a Class B
infraction. In addition, if the person is an officer of any bank or trust
company, he is subject to removal from office in the manner
prescribed in IC 28-11-4.
(Formerly: Acts 1933, c.40, s.194; Acts 1937, c.33, s.27.) As
amended 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 funds
in conflict of interest transactions; conditions; notice; required
consent
Sec. 8. (a) Unless otherwise provided in an agreement or a trust,
a bank or trust company that holds funds or property as a fiduciary
may use the funds or property to purchase from the bank, the trust
company, or an affiliate of the bank or trust company a product,
service, or security, including an insurance product or security that
is underwritten by the bank, the trust company, an affiliate of the
bank or trust company, or a syndicate or selling group that includes
the bank, the trust company, or an affiliate of the bank or trust
company if the:
(1) purchase price and any ongoing charges and costs are fair,
reasonable, and substantially equivalent to the cost of similar
products and services; and
(2) purchase complies with IC 30-4-3.5.
The compensation for the product, services, or security received by
the bank, trust company, an affiliate of the bank or trust company, or
a syndicate or selling group that includes the bank, the trust
company, or an affiliate of the bank or trust company may be in
addition to the compensation that the bank or trust company is
otherwise entitled to from the fiduciary account.
(b) A bank or trust company that makes a purchase or sale
described in subsection (a) shall disclose, at least annually, to each
person entitled to receive statements of account activity from the
bank or trust company any purchase or sale made by the bank or trust
company during the year. The disclosure must be in writing or an
electronic format and include the following:
(1) Any capacity in which the bank, the trust company, or an
affiliate 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 affiliate
of the bank or trust company has an interest in the subject of the
purchase or sale, if applicable.
(3) The rate and method by which that compensation was
determined.
(4) The name, telephone number, street address, and mailing
address of an officer of the bank or trust company who may be
contacted for further information.
(5) A notice that the bank's or trust company's ability to make
transactions described in subsection (a) ends upon receipt at any
time of a notice of objection by a majority of the persons
entitled 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 the
fiduciary relationship is a trust or an agency, the trustee or agent
shall treat the purchase or sale under subsection (a) as if it were
a conflict of interest transaction under IC 30-4-3-5 and shall
give any notice and obtain any consent that may be required
under IC 30-4-3-5, subject to the following:
(A) IC 30-2-14-16 applies to any notice required to be given
by a trustee or an agent under this subdivision, subject to the
following:
(i) If the fiduciary relationship is a revocable trust with
one (1) or more living grantors, the trustee must give
notice only to the living grantors, who shall be considered
to have all income and principal interests in the trust at the
time the notice is given. If a grantor is incapacitated, the
trustee shall give notice to the grantor's court appointed
guardian, 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 that
seeks the consent. If the representative of the incapacitated
grantor is the bank or trust company that seeks the consent
to a purchase or sale under subsection (a), the trustee shall
obtain consent from the court.
(ii) If the fiduciary relationship is a revocable trust and the
assets of the revocable trust are distributable to one (1) or
more other trusts, notice shall be given to the trustees of
the other trusts. However, if the bank or trust company that
seeks the consent to a purchase or sale under subsection
(a) is the trustee of another trust to which the assets of the
revocable trust are distributable, the bank or trust company
shall give notice to those beneficiaries of the other trust
who are entitled to receive statements of account activity
from the bank or trust company.
(iii) If the fiduciary relationship is an agency, the principal
must consent to the purchase or sale under subsection (a)
in writing in advance of the transaction. The principal
shall be considered to have all income and principal
interests in the account at the time the notice of the
proposed transaction is given. If the principal is
incapacitated, consent must be obtained from the
principal's court appointed guardian, unless the guardian
of the incapacitated principal is the bank or trust company
that seeks the consent. If the guardian of the incapacitated
principal is the bank or trust company that seeks the
consent, consent to a purchase or sale under subsection (a)
must be obtained from the court supervising the principal's
guardianship.
(B) If the fiduciary relationship is a trust, the following
apply with respect to any consent required to be obtained
under IC 30-4-3-5(a)(2):
(i) Notwithstanding the requirement under
IC 30-4-3-5(a)(2)(A) that all interested persons provide
written consent to the proposed action, and subject to
subdivision (2), a trustee, for a proposed purchase or sale
under subsection (a), need only obtain the written consent
of a majority of the persons entitled to notice under
IC 30-2-14-16, as modified by subdivision (1)(A).
However, the trustee must obtain the written consent of at
least one (1) beneficiary who is receiving income under
the trust at the time of the notice and at least one (1)
individual who would receive a distribution of principal if
the trust were terminated at the time notice is given.
(ii) Upon obtaining the written consents required under
item (i), the trustee need not wait until the period to make
written objections under IC 30-2-14-16 ends in order to
take the proposed action.
(2) Any consent granted under subdivision (1)(B)(i) may be
revoked by a writing signed by a majority of the persons
entitled to notice under IC 30-2-14-16, as modified by
subdivision (1)(A). However, the revocation must be signed by:
(A) at least one (1) beneficiary who is receiving income
under the trust at the time the revocation is signed; and
(B) at least one (1) individual who would receive a
distribution of principal if the trust were terminated at the
time the revocation is signed.
(3) The notice and consent otherwise required under
subdivision (1) are not required if the purchase or sale under
subsection (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.