Answer:
Interesting question. The issue of 12b1 fees comes into play if the bank is using the investments it controls in managing trust funds. Some states do not allow banks to accept 12b1 fees if they are in the position of influence over what investments are purchased. Two things you should do:
Get a Reasoned Legal Opinion The bank should obtain a reasoned opinion of counsel that addresses the conflict of interest inherent in the receipt of fees or other forms of compensation from investment fund providers in connection with the investment of fiduciary assets. The opinion should address the permissibility of the investment and compensation under applicable state or federal laws, trust instrument, or court order as well as any applicable disclosure requirements or "reasonableness" standards for fees set forth in the law.
Establish Policies and Procedures The bank should establish written policies and procedures governing the acceptance of fees or other compensation from investment providers. The policies must be reviewed and approved by the bank's board of directors or its designated committee. Policies and procedures should, at a minimum, address the following issues: (1) designation of a decisionmaking authority; (2) analysis and documentation of investment decisions; (3) compliance with applicable laws, regulations, and sound fiduciary principles including any disclosure requirements or "reasonableness" standards for fees; and (4) staff training and methods for monitoring compliance with policies and procedures by internal or external audit staff.
If anyone else can add to this, jump in.
First published on BankersOnline.com 01/19/04
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