Legislature(2001 - 2002)

03/28/2001 03:25 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 157-TRUST COMPANIES & FIDUCIARIES                                                                                          
                                                                                                                                
Number 0035                                                                                                                     
                                                                                                                                
[Contains  discussion  of  HB  106  relating  to  confidentiality                                                               
provisions.]                                                                                                                    
                                                                                                                                
CHAIR  MURKOWSKI announced  that the  committee would  hear 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."                                                                                
                                                                                                                                
CHAIR MURKOWSKI,  speaking as  the sponsor  of HB  157, explained                                                               
that she has been working on  this bill for three years, and said                                                               
proposed amendments and suggestions are still being received.                                                                   
                                                                                                                                
CHAIR  MURKOWSKI directed  the  committee to  the bill  sectional                                                               
analysis  entitled  "Overview  of   HB  157,"  submitted  by  the                                                               
Division of Banking, Securities  and Corporations, which she said                                                               
was helpful.   She explained that  she didn't sit down  and write                                                               
this  legislation herself;  division personnel  had asked  her to                                                               
work with them to update the  Trust Company Act, which dates back                                                               
to the late 1940s.                                                                                                              
                                                                                                                                
CHAIR  MURKOWSKI  stated  that  several  years  back  there  were                                                               
substantial changes in  the trust world through  the Alaska Trust                                                               
Act, and since [Alaska] is going  to have a trust industry, there                                                               
needs  to be  regulation of  it like  what is  being done  in the                                                               
banking industry.                                                                                                               
                                                                                                                                
Number 0281                                                                                                                     
                                                                                                                                
TERRY  LUTZ, Supervisor,  Banking Section,  Division of  Banking,                                                               
Securities,  and   Corporations,  Department  of   Community  and                                                               
Economic Development (DCED), remarked  that the current Act dates                                                               
back to  1949, with few  changes over the  years.  In  writing HB                                                               
157,  he said,  [the division]  worked with  the trust  industry,                                                               
attorneys  both  inside  and  outside  the  trust  industry,  and                                                               
Representative Murkowski.   He prefaced  his testimony  by saying                                                               
that he would go over the areas lacking in the law.                                                                             
                                                                                                                                
MR.  LUTZ  commented that  in  putting  the bill  together,  [the                                                               
division]  reviewed  trust  Acts   from  several  states.    [The                                                               
division]  chose from  [examples  provided by]  other states  and                                                               
from the model  Act from the Conference of  State Bank Supervisor                                                               
(CSBS).  Mr.  Lutz pointed out that committee members  had a copy                                                               
of the letter of requested amendments dated March 15 [2001].                                                                    
                                                                                                                                
Number 0433                                                                                                                     
                                                                                                                                
MR. LUTZ  said a  new Act  is needed because  the current  one is                                                               
lacking in  the following areas:   it  lacks direction as  to who                                                               
should be chartered;  it gives limited guidance  on the formation                                                               
process  of  trust  companies;  it  provides  no  provisions  for                                                               
branching  either  intrastate  or   interstate;  it  provides  no                                                               
provisions  for   liquidations,  mergers,   or  sales   of  trust                                                               
companies;  and  it  is  limited  regarding  the  powers  of  the                                                               
department.   Mr. Lutz  explained that  [the current  Act] merely                                                               
says  that  [the  division]  has the  power  to  supervise  trust                                                               
companies.                                                                                                                      
                                                                                                                                
MR. LUTZ, referring to Section 2,  AS 06.26.010, pages 1 and 2 of                                                               
the bill, explained that this  section states who can undertake a                                                               
trust  business  in  the  state,  including:    a  trust  company                                                               
chartered  by   [the  division];  state   financial  institutions                                                               
(indisc.)  for  which  [the  division]  has  asked  and  received                                                               
authority to [create] a trust  business; national banks with home                                                               
offices  in Alaska;  interstate national  banks with  branches in                                                               
[Alaska]; national  trust companies; interstate-state  banks with                                                               
trust powers; and interstate trust companies.                                                                                   
                                                                                                                                
MR.  LUTZ,  referring to  Section  2,  AS 06.26.020.  Exemptions,                                                               
pages 3  and 4 of the  bill, pointed out that  this section lists                                                               
many exempt trust activities, a  few of which include:  attorneys                                                               
with limitations, broker-dealers,  investment advisers, insurance                                                               
companies,  cemetery associations,  certified public  accountants                                                               
(CPAs), family  members, homeowner  associations, court-appointed                                                               
conservators, representatives, and business partners.                                                                           
                                                                                                                                
Number 0606                                                                                                                     
                                                                                                                                
MR. LUTZ, referring  to Section 2, AS 06.26.050.  Powers of Trust                                                               
Companies,  pages  5 and  6  of  the  bill, explained  that  this                                                               
expands trust powers  for trust companies, including:   acting as                                                               
a trustee under  written agreement; receiving money  as a trustee                                                               
for investment  in real estate  property; acting as a  trustee by                                                               
court appointment; acting  as an executor for  an estate; [acting                                                               
as a] custodian for minors  and incapacitated persons; [ensuring]                                                               
safekeeping  for any  type  of personal  property;  acting as  an                                                               
investment  adviser   in  an  agreed-upon  activity;   and  other                                                               
incidental powers  that are reasonable and  necessary to exercise                                                               
powers exclusively conferred.                                                                                                   
                                                                                                                                
Number 0658                                                                                                                     
                                                                                                                                
MR. LUTZ, referring to Section  2, AS 06.26.060. Organizers, page                                                               
7 of the bill, said it gives  details of how to obtain a charter.                                                               
He  then referred  to Section  2, AS  06.26.120, page  10 of  the                                                               
bill, which addresses the minimum  capital requirements for trust                                                               
companies.   It has been  increased in the  bill to a  minimum of                                                               
$400,000  plus  [maintaining]  20   percent  of  that  amount  in                                                               
surplus.   [The division] looked  at what other  states required,                                                               
he said,  and [Alaska] is probably  at the low end  because other                                                               
states require millions of dollars  for capitalization of a trust                                                               
company.   [The  division] met  with Jonathan  Blattmachr, Alaska                                                               
Trust  Company,  who  was  comfortable with  that  number.    The                                                               
current provision in  law [indicates] a minimum  of $100,000, but                                                               
is [at the discretion] of the director.                                                                                         
                                                                                                                                
MR. LUTZ, referring to Section 10,  page 63 of the bill, remarked                                                               
that  it  has a  grandfathering  transition  period for  existing                                                               
trust companies,  giving them  until 2007  to obtain  the minimum                                                               
capital.                                                                                                                        
                                                                                                                                
Number 0795                                                                                                                     
                                                                                                                                
MR.  LUTZ,  referring  to  Section 2,  Article  3,  Operation  of                                                               
Offices, AS 06.26.150, Trust Company  Home Office, page 12 of the                                                               
bill,  said  this  section  requires a  state  trust  company  to                                                               
maintain  its  home  office  and  records  in  Alaska,  and  each                                                               
executive  officer is  an agent  for service  of process  for the                                                               
trust  company.    It  provides  for  interstate  and  intrastate                                                               
branching,  he  explained, and  details  the  processes with  the                                                               
authority to branch.                                                                                                            
                                                                                                                                
MR. LUTZ,  referring to Section 2,  AS 06.26.400, page 22  of the                                                               
bill, said it  requires trust companies to  disclose conflicts of                                                               
interest.                                                                                                                       
                                                                                                                                
Number 0823                                                                                                                     
                                                                                                                                
CHAIR MURKOWSKI  directed Mr. Lutz to  page 13 of the  bill where                                                               
it discusses branch and representative  offices.  She asked about                                                               
the distinction between the two.                                                                                                
                                                                                                                                
MR. LUTZ  referred back to  AS 06.26.990,  Definitions, paragraph                                                               
(26), page 59  of the bill, which  read: "'representative office'                                                               
means  an  office that  provides  support  services for  a  trust                                                               
company,  but  at  which  the  trust  company  does  not  provide                                                               
fuduciary  services".    So  a  branch  could  provide  fuduciary                                                               
services, he explained, but the  representative office could not.                                                               
Mr.  Lutz further  explained that  a representative  office would                                                               
probably be a small office set  up with someone who isn't a trust                                                               
expert to solicit business.  If  an actual trust were going to be                                                               
set up,  it would  need to  be sent  to a  branch or  home office                                                               
where the expertise lies.                                                                                                       
                                                                                                                                
CHAIR MURKOWSKI asked  if it is something  that [Alaska] actually                                                               
does.   She  said  she didn't  understand why  there  would be  a                                                               
representative  office if  it couldn't  do any  of the  fiduciary                                                               
things  that a  trust company  does.   She asked  for a  specific                                                               
example of how this would work in a "real-world setting."                                                                       
                                                                                                                                
Number 0914                                                                                                                     
                                                                                                                                
MR. LUTZ replied  that he didn't know if there  would ever be any                                                               
representative offices  in Alaska, but he  pictured credit unions                                                               
having similar offices,  not in Alaska, but in  many states where                                                               
customers are solicited.   The model Act is used  by the CSBS and                                                               
in   other   states,   and  in   almost   every   instance,   has                                                               
representative offices.  Upon being  asked whether [this language                                                               
is in  the bill] in  case people want  to avail themselves  of it                                                               
although  it  isn't  something that  is  currently  happening  in                                                               
Alaska, Mr. Lutz responded affirmatively.                                                                                       
                                                                                                                                
REPRESENTATIVE  CRAWFORD asked  Mr.  Lutz  to explain  cumulative                                                               
voting from Section 2, AS 06.26.140, page 12 of the bill.                                                                       
                                                                                                                                
Number 1031                                                                                                                     
                                                                                                                                
TERRY  ELDER,  Director,  Division  of  Banking,  Securities  and                                                               
Corporations,  Department  of   Community  and  Regional  Affairs                                                               
(DCED),  explained  that  cumulative  voting is  allowed  in  the                                                               
corporations  code, but  is an  option that  companies can  avail                                                               
themselves of;  the purpose is  to allow minority  shareholders a                                                               
better opportunity to obtain representation on  a board.  It is a                                                               
mechanism  and procedure  for  voting so  that,  for example,  if                                                               
there are three  people running for a board and  a person has 100                                                               
shares, that person actually gets  300 votes, not just 100 votes.                                                               
It is  the number of shares  times the number of  people running,                                                               
he explained,  so that a person  could give all 300  votes to one                                                               
person.    It would  afford  a  better opportunity  for  minority                                                               
shareholders to get representation on the board.                                                                                
                                                                                                                                
MR. LUTZ, referring  to Section 2, AS 06.26.450  to AS 06.26.470,                                                               
pages  22  to  24  of  the bill,  stated  that  this  legislation                                                               
provides  for transfer  and ownership  of a  trust company.   The                                                               
department  has  the  right  to  prevent the  sale  in  the  best                                                               
interest of the  public, should a trust company  become for sale.                                                               
Before  someone purchased  it, [the  department]  could deny  the                                                               
purchase for safety and soundness concerns.                                                                                     
                                                                                                                                
Number 1160                                                                                                                     
                                                                                                                                
MR. LUTZ, referring to Section  2, AS 06.26.610, Customer Records                                                               
Confidential,  page  29  of  the   bill,  said  it  provides  for                                                               
confidentiality of customer  records similar to what  is found in                                                               
the  banking code  and  in HB  106.   He  explained  that he  had                                                               
considered taking  it out of this  bill; however, if HB  106 goes                                                               
nowhere,  then  [Alaska]  would be  without  confidentiality  for                                                               
trust companies.                                                                                                                
                                                                                                                                
CHAIR MURKOWSKI asked  if it is similar to what  is being done in                                                               
HB 106 and in compliance  with Gramm-Leach-Bliley Act (GLBA), so,                                                               
if HB 106 should pass, then the two wouldn't conflict.                                                                          
                                                                                                                                
MR.  LUTZ replied  that he  didn't believe  that GLBA  would come                                                               
into play here since [a trust  company] is not a bank; it doesn't                                                               
conflict with  what is  in the banking  code currently  but would                                                               
require an [opportunity to] "opt in," rather than "opt out."                                                                    
                                                                                                                                
CHAIR MURKOWSKI asked  whether the tie-in with HB  106 is because                                                               
of the changes being made to the banking code.                                                                                  
                                                                                                                                
MR. LUTZ  answered affirmatively.   He said  he had  mentioned HB                                                               
106 because  the committee was  probably more familiar  with that                                                               
language.                                                                                                                       
                                                                                                                                
Number 1234                                                                                                                     
                                                                                                                                
MR.  LUTZ went  on to  explain that  HB 157  provides a  detailed                                                               
process for  mergers and consolidations  of trust  companies, and                                                               
provides a  process for voluntary liquidation  of trust companies                                                               
should they wish to discontinue  business without going through a                                                               
sale  or merger.   It  also  provides a  process for  involuntary                                                               
liquidation; for  example, if [the division]  determines there to                                                               
be safety  and soundness  concerns, or for  other reasons  that a                                                               
trust  company needs  to be  close, it  gives [the  division] the                                                               
authority to close it.                                                                                                          
                                                                                                                                
MR. LUTZ, referring  to Section 2, AS 06.26.9000, pages  51 to 53                                                               
of  the bill,  stated that  it details  a list  of powers  of the                                                               
department   including  the   ability  to:     exercise   general                                                               
supervision  over  trust  companies,  which was  the  only  thing                                                               
covered in the  current trust Act; adopt  regulations; review and                                                               
approve  applications; determine  minimal capital  needs; approve                                                               
transfer  of  ownership  of  trust  companies;  relieve  a  trust                                                               
company of  examination requirements  contained in  AS 06.01.015,                                                               
requiring  annual  examinations;   approve  branch  applications;                                                               
require a trust company to  maintain adequate capital; charge off                                                               
assets not lawfully acquired; write  down assets to market value;                                                               
to record liens;  maintain insurance;  require  directors to hold                                                               
meetings;  [allow] removal  of directors  under AS  06.26.510; to                                                               
take possession of a trust company; and issue orders.                                                                           
                                                                                                                                
Number 1340                                                                                                                     
                                                                                                                                
MR. LUTZ explained  that [the division] hopes all  of the various                                                               
scenarios   have  been   encountered  and   [addressed]  in   the                                                               
exemptions  contained  in  AS 06.26.020,  those  in  the  private                                                               
fiduciary  section, and  those  in AS  06.26.010  where it  talks                                                               
about who can [form] a trust business in this state.                                                                            
                                                                                                                                
CHAIR MURKOWSKI asked for some  idea about the implementation and                                                               
transition  [period],  since  the 2007  date  for  grandfathering                                                               
seemed longer than normal.                                                                                                      
                                                                                                                                
MR. LUTZ stated  that the trust industry felt that  it would need                                                               
this amount  of time to  attain the minimal  capital requirements                                                               
proposed in the  bill.  Part of that transition  period, he said,                                                               
is for  [the companies]  to come up  with a plan  that has  to be                                                               
approved  by [the  division], addressing  how they  are going  to                                                               
meet those requirements.  When asked  whether that plan has to be                                                               
submitted by April 1, 2002,  Mr. Lutz replied affirmatively.  And                                                               
when asked  whether - provided  that the department signs  off on                                                               
the plan  - [trust companies]  then have  until 2007 to  meet the                                                               
capital requirements.  Mr. Lutz responded affirmatively.                                                                        
                                                                                                                                
CHAIR MURKOWSKI asked  Mr. Lutz to speak to the  zero fiscal note                                                               
and the impact to the department in regulating a new area.                                                                      
                                                                                                                                
Number 1486                                                                                                                     
                                                                                                                                
MR. ELDER said  while this bill fleshes out and  gives details on                                                               
how [the  department] will go  about regulating  trust companies,                                                               
[the department] actually regulates  them now, he remarked; there                                                               
are only two  trust companies in Alaska now and  they are already                                                               
examined by  [the department].   [The department] has to  look to                                                               
the banking code for guidance in  terms of when they are examined                                                               
and the process.   This just sets it up  under their own chapter;                                                               
it really doesn't  add anything new.  If there  were a big growth                                                               
of  trust  companies  in  Alaska, more  trained  staff  would  be                                                               
required.   He said training  needs to be increased  and improved                                                               
for the  current examiners  regarding trust  examination, because                                                               
only one examiner was sent to a trust examination school.                                                                       
                                                                                                                                
Number 1597                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG  asked  whether trust  departments  with                                                               
interstate national banks are considered trust companies.                                                                       
                                                                                                                                
MR. ELDER replied  affirmatively.  And he  confirmed that federal                                                               
law regulates them.   He explained that  the [interstate national                                                               
bank's trust  departments] are addressed under  AS 06.26.010, but                                                               
when talking  about the two  [existing] trust companies,  he said                                                               
he is speaking about two Alaska chartered state trust companies.                                                                
                                                                                                                                
REPRESENTATIVE  CRAWFORD asked  if this  is going  to affect  the                                                               
trust company that manages pension funds.                                                                                       
                                                                                                                                
MR. LUTZ said  he didn't believe it would.   He clarified that he                                                               
didn't believe it would be disrupting any current business.                                                                     
                                                                                                                                
Number 1718                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked whether the [Division  of Banking,                                                               
Securities  and  Corporations]  had  a  chance  to  look  at  the                                                               
memorandum  from the  Alaska Trust  Company regarding  Article 4,                                                               
the private fiduciary  section, and asked whether  there had been                                                               
any discussions on it.                                                                                                          
                                                                                                                                
MR.  ELDER   stated  that  [the   division]  just   received  the                                                               
memorandum.   When  asked if  there  was any  conflict there,  he                                                               
replied that this is a work  in progress and that amendments will                                                               
continue to be proposed.  And when  asked if this has been a bone                                                               
of contention, Mr.  Elder responded that he didn't  believe it to                                                               
be; ideas  have been  worked through, he  said, but  there hasn't                                                               
been any disagreement.                                                                                                          
                                                                                                                                
REPRESENTATIVE  ROKEBERG  added  that  it looked  like  a  pretty                                                               
substantial  difference   [between  what   the  two   groups  are                                                               
proposing], because  [the Alaska Trust  Company] wants to  have a                                                               
change in  the definition of  a private fiduciary, which  he said                                                               
might  not be  entirely appropriate.   The  concept of  a private                                                               
trust  company  may  need  to   be  an  addition  rather  than  a                                                               
supplement.  [The  Alaska Trust Company] had  indicated that [the                                                               
two] are the same, although he wasn't sure.                                                                                     
                                                                                                                                
MR. ELDER  said [the  department] didn't  think it  was necessary                                                               
because in  looking at [the  definition of a]  private fiduciary,                                                               
it  could  be  any  person,  which  could  be  a  company  or  an                                                               
individual.    He confirmed  that  [the  Alaska Trust  Company's]                                                               
definition is  different from  what is in  the bill;  however, he                                                               
said a  private fiduciary  could already  be this.   The  key, he                                                               
pointed out, is not to be offering the services to the public.                                                                  
                                                                                                                                
Number 1867                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked if this  bill is what  is referred                                                               
to  as  the  trust  company regulations,  or  whether  there  are                                                               
additional regulations.                                                                                                         
                                                                                                                                
MR. ELDER  responded that he  didn't believe that  [the division]                                                               
was working on trust company regulations.   Mr. Lutz works in the                                                               
section that  has spent a year  or so drafting this;  it has been                                                               
ongoing,  he  remarked.   And  he  verified that  [the  division]                                                               
doesn't have  a regulation  project.  Upon  being asked  if there                                                               
has  been   ongoing  discourse  with  the   trust  attorneys  and                                                               
companies in the state, Mr.  Elder replied affirmatively and said                                                               
he has  worked closely with them  since 1998.  He  said there are                                                               
no  existing  regulations  for  trust  companies  at  this  time;                                                               
however, as  a result of  this Act,  there probably will  be some                                                               
areas  where  [the  division]  will be  required  to  write  some                                                               
regulations.                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG referred  to the new model  trust Act and                                                               
said [Alaska]  doesn't have a  model trust statutory regime.   He                                                               
asked Mr. Lutz, in drafting this,  whether he looked at the whole                                                               
body of law that [Alaska] has passed.                                                                                           
                                                                                                                                
MR.  LUTZ explained  that  this  Act doesn't  affect  all of  the                                                               
legislation that  passed in  the last five  years for  the Alaska                                                               
trust, rules  of perpetuity,  and so forth.   [The  division] has                                                               
not done anything here that would affect any of that, he said.                                                                  
                                                                                                                                
MR.  ELDER added  that the  Department of  Law had  also reviewed                                                               
this [legislation].  He pointed out  that this is a trust company                                                               
Act,  not a  trust  Act.   This  is just  how  the companies  are                                                               
regulated as providers  of service and doesn't  really affect the                                                               
provisions in a trust.                                                                                                          
                                                                                                                                
MR.  ELDER explained  that the  letter from  the division  [dated                                                               
March  15,  2001]  addresses four  suggested  amendments  to  the                                                               
exemptions at  Section 2, AS  06.26.010.   In the bill,  there is                                                               
language that  says that this  kind of person, whether  a broker-                                                               
dealer,  attorney,  or  whatever,  is  exempted  when  the  trust                                                               
activity is solely incidental to  their business.  [The division]                                                               
was trying  to say that such  are not people really  in the trust                                                               
business,  so [the  division] doesn't  want to  regulate them  as                                                               
trust  companies.   The idea  for using  the "solely  incidental"                                                               
[language] was taken from the  securities Act because it provides                                                               
that one  doesn't have  to register as  an investment  adviser if                                                               
the  advice is  solely  incidental  to one's  work  as a  broker-                                                               
dealer.   However,  as [the  division] looked  at it  further, it                                                               
became apparent that  it would be better to be  more precise now,                                                               
because there would  always be the question of  the definition of                                                               
"solely  incidental."    So  [these  suggested  amendments]  were                                                               
offered as a way to be more  precise.  The language here is based                                                               
on the language in the CSBS model Act for those sections.  These                                                                
amendments proposed in the division's letter read:                                                                              
                                                                                                                                
     1.  (Section 2, page  3, lines 3-5) Replace language in                                                                  
     lines   3-5  (AS   06.26.020(1))  with   the  following                                                                  
     language:                                                                                                                
                                                                                                                                
     is licensed  to practice law  in this state,  is acting                                                                    
     within  the  scope  of the  license,  and  neither  the                                                                    
     attorney,  or the  attorney's law  firm, is  trustee of                                                                    
     more than 50 trusts;                                                                                                       
                                                                                                                                
     2.  (Section  2, page 3, lines  10-14) Replace language                                                                  
     in  lines 10-14  (AS 06.26.020(4))  with the  following                                                                  
     language:                                                                                                                
                                                                                                                                
     engages  in a  securities  transaction  or provides  an                                                                    
     investment   advisory  service   as   a  licensed   and                                                                    
     registered  broker-dealer,  agent of  a  broker-dealer,                                                                    
     state    investment    adviser,   investment    adviser                                                                    
     representative,  or  noticed  federal  covered  adviser                                                                    
     provided the person  is acting within the  scope of the                                                                    
     notice filed or the  license conferred and the activity                                                                    
     is  regulated  by  the   Department  of  Community  and                                                                    
     Economic  Development under  AS  45.55 or  by the  U.S.                                                                    
     Securities and Exchange Commission;                                                                                        
                                                                                                                                
      3.   (Section  2,  page 3,  lines  15-18) Replace  the                                                                  
     language  in lines  15-18  (AS  06.26.020(5)) with  the                                                                  
     following language:                                                                                                      
                                                                                                                                
     engages in the sale  and administration of an insurance                                                                    
     product as  an insurance  company licensed under  AS 21                                                                    
     or an insurance producer licensed under AS 21;                                                                             
                                                                                                                                
     4.    (Section 2,  page  3,  lines 22-25)  Replace  the                                                                  
     language  in lines  22-25  (AS  06.26.020(8)) with  the                                                                  
     following language:                                                                                                      
                                                                                                                                
     renders services  customarily performed by  a certified                                                                    
     public  accountant licensed  under  AS 08  in a  manner                                                                    
     authorized  by law,  and neither  the certified  public                                                                    
     accountant  or the  certified public  accountant's firm                                                                    
     is trustee of more than 50 trusts;                                                                                         
                                                                                                                                
Number 2155                                                                                                                     
                                                                                                                                
CHAIR  MURKOWSKI  turned  the committee's  attention  to  another                                                               
subject.   She said she would  like to see if  [the division] and                                                               
[the Alaska  Trust Company]  could look at  the points  that have                                                               
come  up   and  give  feedback   about  private   fiduciaries  in                                                               
preparation  for  a committee  substitute  (CS).   She  said  Mr.                                                               
Blattmachr  and  Mr.  Greer have  been  instrumental  in  working                                                               
through this process, but she  thought it might alleviate some of                                                               
the questions  if the  two groups got  together and  talked about                                                               
what could be done.                                                                                                             
                                                                                                                                
CHAIR  MURKOWSKI  asked Mr.  Blattmachr  and  Mr. Greer  if  they                                                               
wanted  to add  testimony.   [Both men  deferred their  testimony                                                               
until a later date.]                                                                                                            
                                                                                                                                
REPRESENTATIVE   ROKEBERG   asked   Mr.  Blattmachr   about   the                                                               
memorandum  he  had submitted  to  the  committee.   He  said  it                                                               
suggested  changing  the definition  of  a  private fiduciary  to                                                               
private trust company.  Representative  Rokeberg asked if that is                                                               
the common  term used in the  industry.  He further  asked if the                                                               
[term]  private  trust   would  be  in  addition   to  a  private                                                               
fiduciary, or whether they are incompatible.                                                                                    
                                                                                                                                
Number 2291                                                                                                                     
                                                                                                                                
DOUGLAS  BLATTMACHR, Alaska  Trust  Company, via  teleconference,                                                               
responded  that  the way  he  read  the exemption  from  offering                                                               
service  to   the  public,   referring  to   AS  06.26.990(a)(24)                                                               
Definitions,  page 58  of the  bill, is  that services  are being                                                               
provided  to the  general public  unless it  says "the  person to                                                               
whom  the fiduciary  services are  provided is  offered (A)  by a                                                               
family  member of  an  individual  who owns  100  percent of  the                                                               
person providing fiduciary services".                                                                                           
                                                                                                                                
MR. BLATTMACHR explained that the  only place where services were                                                               
originally offered  to the general  public was under  the private                                                               
fiduciary section,  also known  as a private  trust company.   It                                                               
seems that one has  to be some form of an entity,  he said, to be                                                               
able to  get this exemption  under this definition.   [The Alaska                                                               
Trust Company]  thought it might  be clearer.   A lot  of wealthy                                                               
families want  to be able  to setup private trust  companies, and                                                               
they are starting to look at  different states that have easy set                                                               
up procedures  for private trust  companies for their  own family                                                               
trust businesses, which was one of  the reasons why "we" put this                                                               
in at a late date.  It is  a real issue now which could produce a                                                               
lot of new  activity in Alaska if [Alaska]  has friendly statutes                                                               
to accommodate what some of the other states have.                                                                              
                                                                                                                                
REPRESENTATIVE  ROKEBERG  asked if  the  term  and concept  of  a                                                               
private fiduciary are common in trust law.                                                                                      
                                                                                                                                
Number 2363                                                                                                                     
                                                                                                                                
MR. BLATTMACHR  said it is  an old  concept, but people  like the                                                               
Rockefeller Trust Company  used it when it started  years ago; it                                                               
was  a private  trust company  just for  them; however,  over the                                                               
years,  it  has  gone  into offering  services  for  the  general                                                               
public.   He thought  the term "private  trust company"  had been                                                               
around for  a long time, but  there has been a  lot more interest                                                               
in recent years.  The actual  term isn't that important, he said,                                                               
but  it could  be limited  to some  extent to  more of  a defined                                                               
activity that constitutes a private fiduciary.                                                                                  
                                                                                                                                
Number 2417                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HALCRO referred  to  Mr. Blattmachr's  memorandum                                                               
dated March  28, 2001.   He said  Mr. Blattmachr points  out that                                                               
the definition  on page 4, subparagraph  (18), lines 27 to  29 of                                                               
the  bill, seems  confusing.   Representative Halcro  pointed out                                                               
the additional  sheet faxed to  the committee by Mr.  Greer dated                                                               
March 27, 2001, amends it.   He asked Mr. Blattmachr if he'd seen                                                               
[the amendment].                                                                                                                
                                                                                                                                
MR. BLATTMACHR said  he hadn't seen it, but he  and Mr. Greer had                                                               
spoken about it today.                                                                                                          
                                                                                                                                
[HB 157 was held over.]                                                                                                         
                                                                                                                                

Document Name Date/Time Subjects