Fiduciary & Trust Activities #8 Regulatory & Compliance Requirements

Question 1

Bank secrecy act

Answer 1

Also known as the currency and foreign transactions reporting act.

Enacted to enlist banks in federal government law enforcement efforts to combat money, laundering, and criminal use of banks.

Question 2

Currency transaction report

Answer 2

Used to report cash transactions that exceed $10,000.

Used to report any transactions that are in excess of $10,000 in one business day 

Question 3

Two requirements of bank secrecy act

Answer 3

1. Customer identification program.
   USA patriot act amended BSA to include CIP
   Requires banks to verify identity of customers to ensure they are not on terrorist list
2. Customer due diligence.
   FINCEN amended BSA to include new customer due diligence requirements
   FINCEN, financial crimes enforcement network is an agency of US treasury
   Designed to prevent criminals and terrorist from miss using companies to disguise illegal activitiesRequires institutions to identify and verify identity of all beneficial owners who own, control, and profit from legal entity, customers that open accounts

Question 4

CIP program requirements

Answer 4

1. Verify customers, identity, and check against terrorist list.
2. Collect specific identifying information from each customer when opening an account.
3. Respond to circumstances in which customers true identity cannot be verified.
4. Maintain appropriate records during the process.
5. Provide notice to customers.

Question 5

Common trust fund

Answer 5

A common trust fund is an investment vehicle established by a bank in the form of a state law trust to handle the investment and reinvestment of money contribute to it

Question 6

Collective investment fund

Answer 6

Established by the office of comptroller of currency – 0CC under regulation 9.18

A group of pooled accounts held by a bank or trust company

A1 funds assets contributed for investment or reinvestment
A2 funds, assets contributed for retirement, profit, sharing or other entities exempt from federal income tax

The bank must be the exclusive manager of the fund

Pursuant to a written plan approved by the board of Director

Bank can have no interest in collective investment fund

Question 7

Information walls

Answer 7

Set of internal policies and procedures used by entity for the purpose of preventing certain types of information from being communicated to other departments

Insider trading

Often include a monitoring and review components

Question 8

Securities act of 1933

Answer 8

Ensures the availability of adequate, reliable information about securities that are offered for sale to the public

Securities act requires most securities sold or offered to sale to be registered with the securities and exchange commission. Registration is time-consuming and expensive and issuers of securities. Try to avoid it.

Question 9

Underwriters 

Answer 9

Issuer → underwriter → dealers → public

Question 10

Rule 144

Answer 10

Adopted in 1972 by sec determines when securities seller is underwriter

Question 11

Restricted security

Answer 11

Acquired from the issuer in unregistered private sales
sometimes called private placement offerings

Question 12

Control securities

Answer 12

Held by an affiliate of the issuing company such as officer, Director or large shareholder