SB440: Bill Text

LRB-4193/3

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1995 - 1996 LEGISLATURE

1995 Senate BILL 440

November 22, 1995 - Introduced by Senators Darling, Breske, Panzer, Schultz, Rosenzweig and Petak, cosponsored by Representatives Hoven, La Fave, Klusman, Powers and Walker. Referred to Committee on Education and Financial Institutions.

SB440,1,7 An Act to repeal 881.01 (3) and (4); to renumber and amend 221.04 (6a); to amend 223.10, 223.105 (6), 223.12 (1) (b) (intro.), 223.12 (2), 223.12 (4) (a) 1., 223.12 (4) (b), 223.12 (4) (c) and 223.12 (4) (e); to repeal and recreate 223.105 (6) and 223.12; to create 221.04 (6a) (a), 881.015 and 881.016 of the statutes; and to affect 1995 Wisconsin Act 27, section 6202 and 1995 Wisconsin Act 27, section 9459 (7); relating to: banks and trust companies investing trust funds and foreign trust companies acting as executors or trustees in this state.

Analysis by the Legislative Reference Bureau

Foreign corporation acting as executor or trustee

The bill establishes requirements for a foreign corporation to act in this state as a trustee, executor, administrator, guardian or other fiduciary capacity. The bill provides that the foreign corporation can so act without complying with the laws of this state relating to the qualification of a corporation organized under the laws of this state to conduct a trust business, or with other laws relating to the qualification of foreign corporations. In order qualify for this exemption, the foreign corporation must be authorized under the laws of the state of its organization to act as a fiduciary in that state and the foreign corporation must be organized under the laws of a state that permits certain in-state entities to act in a fiduciary capacity in that state upon conditions and qualifications that the office of the commissioner of banking finds are not unduly burdensome.

Before the foreign corporation may act as a fiduciary pursuant to this exemption, the foreign corporation must apply to the commissioner of banking for a certificate of authority with reference to the fiduciary capacity and must comply with requirements for the establishment of an indemnity fund currently applicable to in-state trust companies. The foreign corporation making application for a certificate of authority must pay reasonable fees to the office of commissioner of banking as determined by the commissioner. The commissioner of banking must issue a certificate of authority upon a finding that the foreign corporation meets these requirements for the exemption. If a foreign corporation transacts business in this state pursuant to this exemption, the foreign corporation may not establish or maintain in this state a place of business or branch office, but may establish and maintain in this state one or more representative offices if those offices do not act as a fiduciary. Any foreign corporation that is eligible to act in this state in a fiduciary capacity, duly acting and qualified as executor or trustee has the same rights and authority as to real estate within this state as any natural person acting as foreign executor or trustee.

Any foreign corporation acting in the state in a fiduciary capacity is considered to have appointed the commissioner of banking to be its attorney for service of process with respect to any matter in which the foreign corporation has acted or is acting in a fiduciary capacity in this state. Service of process on the commissioner of banking is sufficient if notice of the service and a copy of the process are, within 10 days after delivery to the commissioner of banking, sent by registered mail by the plaintiff to the defendant at its principal office. The court in which the action is pending may order such continuances as may be necessary to afford the defendant reasonable opportunity to defend the action.

Pooled-investment vehicles

Under current law, a bank or trust company may invest in the securities of an open-end or closed-end registered management investment company or of a registered investment trust, notwithstanding that the bank or trust company, or an affiliate of the bank or trust company, provides investment services to the investment company or investment trust if the bank or trust company waives its fee as fiduciary for the assets that it invests in these securities or if the bank, trust company or affiliate waives its fees for providing investment services to the investment company or investment trust. The bill repeals this provision and instead allows a bank or trust company acting as fiduciary to invest and reinvest in the securities of federally registered investment companies, investment trusts or certain other bank collective investment vehicles, so long as the portfolio of the investment company, investment trust or collective investment vehicle consists of investments not prohibited by the governing instrument. The bank or trust company may invest or reinvest these funds in an investment company, investment trust or collective investment vehicle, notwithstanding the fact that the bank, the trust company or an affiliate of the bank or trust company provides services for, and receives compensation from, the investment company, investment trust or collective investment vehicle, if certain disclosures are made regarding the basis upon which this compensation is calculated. The disclosures may be made by prospectus, account statement or otherwise and must be delivered to all persons to whom statements of account for the invested or reinvested funds are provided.

Under current law, subject to limitations in the instrument governing a trust, if the instrument directs or permits investment in obligations of the federal government or of an agency of the federal government, the trustee may invest in and hold those obligations either directly or in the form of interests in certain pooled-investment vehicles, if the portfolio of that vehicle is limited to obligations of the federal government or of an agency of the federal government and to repurchase agreements fully collateralized by those obligations. This bill amends this provision to provide that it applies in the absence of an express provision to the contrary in the governing instrument and to provide that the portfolio of the pooled-investment vehicle need only consist "substantially" of obligations of the federal government or of an agency of the federal government or repurchase agreements fully collateralized by those obligations.

Delegation of a fiduciary's duties and employment of affiliated persons

Under the bill, unless prohibited by the terms of the instrument governing a fiduciary relationship, a fiduciary may employ attorneys, accountants, investment advisers, agents or other persons, even if they are associated with the fiduciary, to advise or assist the fiduciary in the performance of the fiduciary's duties. The fiduciary may act without independent investigation upon their recommendations or, instead of acting directly, employ one or more agents to perform any act of administration, whether or not discretionary. If the terms of the governing instrument do not address the authority of the fiduciary to delegate the fiduciary's duties, the fiduciary may delegate some, but not all, of the fiduciary's duties to an agent. The employment of an agent by the fiduciary does not relieve the fiduciary of liability for acts of the agent that, if done by the fiduciary, would result in the liability of the fiduciary, nor does it relieve the fiduciary of the fiduciary's duty to use reasonable care in selecting and retaining the agent.

Other

The bill further provides that a bank may deposit uninvested trust funds in an account at the bank or in any other bank, including an affiliated bank, that is a member of the Federal Deposit Insurance Corporation.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

SB440, s. 1 Section 1. 221.04 (6a) of the statutes is renumbered 221.04 (6a) (b) and amended to read:

SB440,4,7 221.04 (6a) (b) Every such bank exercising trust powers shall keep its trust accounts in books separate from its other books of account. All funds and property held by it in a trust capacity shall, at all times, be kept separate from the other funds and property of the bank, except that uninvested trust funds may be deposited in an account in such the bank or in any other bank, provided any such bank including an affiliated bank, that is a member of the Federal Deposit Insurance Corporation. All such deposits of uninvested trust funds shall be deposited as trust funds to its credit as trustee and not otherwise. All bank accounts comprising trust funds so deposited shall, in the event of insolvency or liquidation of any bank in which such accounts are maintained, have preference and priority in all assets of such bank over its general creditors without the necessity of tracing or identifying such trust funds.

SB440, s. 2 Section 2. 221.04 (6a) (a) of the statutes is created to read:

SB440,4,12 221.04 (6a) (a) In this subsection, "affiliated bank" means, with respect to a bank exercising trust powers, any bank that directly or indirectly controls, or is directly or indirectly controlled by, or is under common control with, the bank exercising trust powers.

SB440, s. 3 Section 3. 223.10 of the statutes is amended to read:

SB440,4,22 223.10 Organizations as fiduciaries. Except as provided in s. 880.35, no court or probate registrar in this state may appoint or issue letters to any corporation, limited liability company, association, partnership or business trust as trustee, personal representative, guardian, conservator, assignee, receiver, or in any other fiduciary capacity unless such corporation, limited liability company, association, partnership or business trust is subject to regulation and examination under s. 223.105, or is a national bank, state or federal savings and loan association, state or federal savings bank or federal credit union with authority to exercise such powers, or is a foreign corporation operating under s. 223.12.

SB440, s. 4 Section 4. 223.105 (6) of the statutes is amended to read:

SB440,5,5 223.105 (6) Sunset. Except for an organization regulated by the office of the commissioner of credit unions or the commissioner of savings and loan or an organization authorized by the commissioner of banking to operate as a bank or trust company bank under ch. 221 or this chapter, an organization may not begin activity as a fiduciary operation under this section after May 12, 1992. An organization engaged in fiduciary operations under this section on May 12, 1992, may continue to engage in fiduciary operations after that date.

SB440, s. 5 Section 5. 223.105 (6) of the statutes, as affected by 1995 Wisconsin Acts 27 and .... (this act), is repealed and recreated to read:

SB440,5,14 223.105 (6) Sunset. Except for an organization regulated by the office of credit unions or the division of savings and loan or an organization authorized by the division of banking to operate as a bank or trust company under ch. 221 or this chapter, an organization may not begin activity as a fiduciary operation under this section after May 12, 1992. An organization engaged in fiduciary operations under this section on May 12, 1992, may continue to engage in fiduciary operations after that date.

SB440, s. 6 Section 6. 223.12 of the statutes is repealed and recreated to read:

SB440,5,23 223.12 Foreign trust company as executor or trustee in this state. (1) Exception from qualification to do business. Any foreign corporation may act in this state as trustee, executor, administrator, guardian, or in any other like fiduciary capacity, whether the appointment is by will, deed, court order or otherwise, without complying with any laws of this state relating to the qualification of corporations organized under the laws of this state to conduct a trust business or laws relating to the qualification of foreign corporations other than this section, only if the foreign corporation meets all of the following requirements:

SB440,5,25 (a) The foreign corporation is authorized by the laws of the state of its organization to act as a fiduciary in that state.

SB440,6,4 (b) The foreign corporation is organized under the laws of a state that permits all of the following to act in a fiduciary capacity upon conditions and qualifications that the office of the commissioner of banking finds are not unduly restrictive when compared to the laws of this state:

SB440,6,5 1. A corporation organized under the laws of this state.

SB440,6,7 2. A national banking association having its principal place of business in this state.

SB440,6,9 3. A federal savings association or federal savings bank having its principal place of business in this state and authorized to act as a fiduciary in this state.

SB440,7,5 (2) Service of process. Any foreign corporation acting in this state in a fiduciary capacity is considered to have appointed the commissioner of banking to be its true and lawful attorney upon whom may be served all legal process in any action or proceeding against it relating to or growing out of any trust, estate or matter in respect of which the foreign corporation has acted or is acting in this state in any such fiduciary capacity. Engagement in this state in any acts in a fiduciary capacity signifies agreement that any process against it which is served under this subsection shall be of the same legal force and validity as though served upon it personally. Service of process under this subsection shall be made by delivering to the office of the commissioner of banking a copy of the process, together with any fee for service of process required by the commissioner. Service of process is sufficient if notice of such service and a copy of the process are, within 10 days after delivery to the office of the commissioner of banking, sent by registered mail by the plaintiff to the defendant at its principal office in such other state or territory and the plaintiff's affidavit of compliance with this requirement is appended to the summons. The court in which the action is pending may order such continuances as may be necessary to afford the defendant reasonable opportunity to defend the action. The fee paid by the plaintiff to the commissioner at the time of the service may be recovered as taxable costs by the plaintiff if the plaintiff prevails in the action. The commissioner shall keep a record of all processes served upon the commissioner under this subsection and shall record the time of the service.

SB440,7,9 (3) Restrictions on in-state presence. A foreign corporation acting under sub. (1) may not establish or maintain in this state a place of business or branch office for the conduct of business as a fiduciary, but may establish and maintain in this state one or more representative offices if those offices do not act in a fiduciary capacity.

SB440,7,14 (4) Certificate of authority. (a) Prior to the time that any foreign corporation acts in this state as a testamentary trustee, trustee appointed by any court, trustee under any written agreement, declaration or instrument of trust, executor, administrator, guardian or in any other like fiduciary capacity, the foreign corporation shall do all of the following:

SB440,7,17 1. Apply to the office of the commissioner of banking for a certificate of authority with reference to the fiduciary capacity in which such foreign corporation proposes to act in this state.

SB440,7,18 2. Comply with s. 223.02.

SB440,7,25 (b) The commissioner of banking shall issue a certificate of authority to such corporation upon receiving satisfactory evidence that such foreign corporation meets the requirements of sub. (1). The certificate of authority shall recite and certify that such foreign corporation is eligible to act in this state in such fiduciary capacity pursuant to the provisions of this section. The certificate of authority shall remain in full force and effect until such time as such foreign corporation ceases to be eligible to so act under the provisions of this section.

SB440,8,3 (c) Each foreign corporation making application for a certificate of authority shall pay reasonable fees to the office of the commissioner of banking as determined by the commissioner for the services of that office.

SB440,8,7 (d) Any foreign corporation that is eligible to act in this state in a fiduciary capacity prior to the effective date of this paragraph .... [revisor inserts date], may continue to act in this state in any such fiduciary capacity without applying for a new certificate of authority under this subsection.

SB440,8,11 (e) Any foreign corporation acting in this state under a certificate of authority shall report changes in its name or address to the office of the commissioner of banking and shall notify the commissioner when it is no longer serving as a corporate fiduciary in this state.

SB440,8,19 (5) Rights and authority of foreign corporation. Any foreign corporation that is eligible to act in this state in a fiduciary capacity, duly acting and qualified as executor or trustee under any foreign will, or any declaration, agreement, or other instrument of trust, shall have the same rights and authority under such document as to real estate within this state which any natural person duly acting as such foreign executor or trustee may have under the laws of this state, without the foreign corporation being required to do any act qualifying it to do business within this state that is not required of a natural person acting as such foreign executor or trustee.

SB440, s. 7 Section 7. 223.12 (1) (b) (intro.) of the statutes, as affected by 1995 Wisconsin Act .... (this act), is amended to read:

SB440,8,25 223.12 (1) (b) (intro.) The foreign corporation is organized under the laws of a state that permits all of the following to act in a fiduciary capacity upon conditions and qualifications that the office of the commissioner division of banking finds are not unduly restrictive when compared to the laws of this state:

SB440, s. 8 Section 8. 223.12 (2) of the statutes, as affected by 1995 Wisconsin Act .... (this act), is amended to read: