Legislature(2001 - 2002)
04/19/2001 03:25 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 157-TRUST COMPANIES & FIDUCIARIES CHAIR MURKOWSKI announced that the next order of business would be HOUSE BILL NO. 157, "An Act relating to trust companies and providers of fiduciary services; amending Rules 6 and 12, Alaska Rules of Civil Procedure, Rule 40, Alaska Rules of Criminal Procedure, and Rules 204, 403, 502, 602, and 611, Alaska Rules of Appellate Procedure; and providing for an effective date." Number 1254 REPRESENTATIVE HALCRO made a motion to adopt the proposed committee substitute (CS) for HB 157, version 22-LS0139\L, Bannister, 4/19/01, as a work draft. There being no objection, Version L was before the committee. ROBIN PHILLIPS, Staff to Representative Lisa Murkowski, Alaska State Legislature, came forth on behalf of the sponsor to explain the changes made in the proposed CS. She explained that on page 3, under AS 06.26.020, the first change in paragraph (1) states that the department would set the trust numbers, and includes a definition of "law firm". She said the guidelines that the department will follow are under subsection (b) on page 5. The next change is paragraph (4) of the same section, which provides a more precise definition. In both paragraph (4) and (5) the "solely incidental" language was removed. Paragraph (8) was changed to have the numbers set by the department, which falls under subsection (b) on page 5. Also in that paragraph is a definition of "accounting firm". MS. PHILLIPS continued, stating that paragraph (10) under the exemptions originally had two subparagraphs. Subparagraph (B) was deleted, which made (A) unnecessary. In the old version, she said, there was a paragraph (16), which has been deleted completely; therefore, there is a new paragraph (16). The new paragraph (17) sets the number of trusts that an individual can serve in if he or she is not a member of a family. The limit has been set to 20 different settlors, and in this case a husband and wife can create a joint trust and be considered as one settlor. Number 1453 REPRESENTATIVE ROKEBERG asked why the number 20 [was decided upon]. CHAIR MURKOWSKI responded that [the bill] had been all over the board with regard to the number, and essentially a compromise has been reached. REPRESENTATIVE ROKEBERG remarked that he thinks there are some individuals in the Anchorage area who are working on representing people who have received settlement money, and they are endeavoring to skirt any kind of regulatory control under this. He said he is not sure that's the right thing to do, particularly if those people are recipients of the settlement. He added that he is leaning toward the number 10 because of what he has heard. DOUGLAS BLATTMACHR, President and CEO, Alaska Trust Company, testified via teleconference and stated that originally it was set at 10 different settlors. This allows that if one settlor sets 10 trusts, then that individual is only acting as if for one settlor. He said the ideas was to have it so that there could be not just ten trusts, because sometimes one settlor may have ten children and set up a separate trust for each child, and therefore the individual who wanted to be trustee would basically be limited to that one only. Now, that person can act for [20] separate settlors, but there is no limit to the number of trusts they can act for. REPRESENTATIVE ROKEBERG stated that this is, however, an exemption from the regulation. MR. BLATTMACHR responded that he was correct. He explained that in theory after the person was acting as trustee for more than 20 settlors, he or she would have to be deregulated by the division. CHAIR MURKOWSKI asked Mr. Blattmachr whether he could speak to Representative Rokeberg's concern that 20 may be too many. MR. BLATTMACHR responded that it seems like quite a lot to him. Number 1717 VINCE USERA, Senior Securities Examiner, Division of Banking, Securities & Corporations, Department of Community and Economic Development, came forth and suggested reverting back to the provision that would allow the division to set the number by regulation. They could then gain some experience and figure out what the right number is. He stated that trying to change legislation like this every time there's a change of need is terribly difficult. REPRESENTATIVE ROKEBERG stated that he doesn't think that helps the division a lot because it takes as long to get the regulations in place as it does to pass the bill. If there isn't a stipulated amount, then [the division] won't know whom to exempt. MR. USERA responded that [the division] worded it so that it could change the number by either order or regulation. Therefore, in the early stages of this procession, it would have the utmost flexibility. CHAIR MURKOWSKI remarked that there simply is nothing to reference. She remarked that the number shouldn't be too high, because [the division] could experience the exact thing Representative Rokeberg is concerned about, and it shouldn't be too low. REPRESENTATIVE ROKEBERG stated that he thinks he would be more comfortable putting "10" in there. He said it would be unusual to find somebody with more than 10 or 12 settlors who wouldn't be doing it commercially. And a person who is doing it commercially, should be under the regulatory scheme. Number 1856 REPRESENTATIVE ROKEBERG made a motion to adopt conceptual Amendment 1, to change "20" to "10" on page 5, line 2. There being no objection, conceptual Amendment 1 was adopted. MS. PHILLIPS continued, stating that following paragraph (17) [on page 3] there have been three additions: subsections (b), (c), and (d). Subsection (b) sets the policies that will be followed by the regulations under (a)(1) and (a)(8) for establishing the reasonable number of trusts. Subsection (c) allows the department, in addition to the exemptions identified, to grant exemptions if the person [demonstrates] good cause. Subsection (d) says, in addition to all of these requirements, [a person] cannot be offering fiduciary services to the general public. She added that on page 23, the definition of "general public" was also amended. MS. PHILLIPS continued, stating that the next two amendments were added in the realization that federal credit unions can exercise a limited scope of trust powers. The first addition is on page 2, paragraph (11), allowing federal credit unions to act as a fiduciary. The last change is on page 59, paragraph (30), which defines "state financial institutions". REPRESENTATIVE ROKEBERG asked Mr. Lutz from the Division of Banking, Securities & Corporations whether state charter banks' deposits are FDIC (Federal Deposit Insurance Corporation) insured. TERRY LUTZ, Chief Financial Institution Examiner, Division of Banking, Securities & Corporations, Department of Community and Economic Development, came forth and responded that they are required to have insurance. CHAIR MURKOWSKI asked Mr. Lutz whether the proposed CS is acceptable to the division. Number 2102 MR. LUTZ answered that he agrees 100 percent and thinks it is a good, workable product. REPRESENTATIVE ROKEBERG asked whether there are other sets of regulations that need to be adopted. MR. LUTZ responded that [the division] would have to draft some regulations, which is one reason why the bill has a January 1, 2002, effective date. He noted that there is a zero fiscal note. MR. BLATTMACHR remarked that he has no objection to the bill. [The Alaska Trust Company] has talked to the department and has agreed to make some changes to the private fiduciary section through regulations. Number 2240 REPRESENTATIVE HALCRO made a motion to move CSHB 157, version 22-LS0139\L, Bannister, 4/19/01, as amended, from committee with individual recommendations and the attached zero fiscal note. There being no objection, CSHB 157(L&C) moved from the House Labor and Commerce Standing Committee.
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