Consigned Items and Other Customer Services

Custody Accounts

Banks may act as custodians for customers’ investments, such as stocks, bonds, or precious metals such as gold or silver. This involves merely holding the investments and recording sales and purchases, and collecting dividend and interest payments. A bank offering custody accounts should use signed agreements that clearly define the functions it will perform, in order to limit its potential liability. If the bank offers any additional service, such as managing the customer’s assets or providing investment advice, it has established a fiduciary relationship, which requires the bank to have the authority to engage in fiduciary activities.

All national banks that hold or safe keep U.S. government securities for customers must comply with 17 CFR 450. These regulations apply when a national bank holds the customers’ securities directly or maintains the customers’ securities through another institution.

The Treasury Department has determined that the rules and standards of the OCC that otherwise apply to government securities held in a fiduciary capacity are adequate to meet the requirements of 17 CFR 450. Thus, a national bank will be exempt from 17 CFR 450 requirements provided two conditions are met. First, the bank must adopt policies and procedures that subject its custodial holdings to all the requirements of 12 CFR 9. Second, the bank’s custodial holdings must be subject to examination by the OCC for compliance with these fiduciary requirements. (See 17 CFR 450.3(a).)For more information on the requirements relating to the custodial holding of government securities, see the section on bank dealer and brokerage activities in the Comptroller’s Handbook.

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