Ariz. Admin. Code § 20-4-812

Current through Register Vol. 30, No. 25, June 21, 2024

Section R20-4-812 - Self-dealing

A. A trust department or trust company shall not invest trust funds in the following types of property unless expressly authorized by the governing instrument, applicable state or federal law, or court order:

1. Its own securities;

2. Other types of property acquired from the trust department or trust company;

3. Property acquired from the trust department's or trust company's directors, officers, or employees;

4. Property acquired from the trust department's or trust company's affiliates;

5. Property acquired from its affiliates' directors, officers, or employees; or

6. Property acquired from other individuals or organizations with an interest in the trust department or trust company if that interest might affect the trust department's or trust company's exercise of discretion to the detriment of its trust clients.

B. A trust department or trust company may use trust funds to purchase its own securities, or its affiliates' securities:

1. If the trust department or trust company has authority under subsection (A), and

2. If those securities are offered pro rata to all stockholders of the trust department or trust company.

C. A trust department or trust company shall not sell or loan trust property to itself, or to the following types of persons, unless expressly authorized by the governing instrument, applicable state or federal law, or court order:

1. Its directors, officers, or employees;

2. Its affiliates;

3. Its affiliates' directors, officers, or employees; or

4. Other individuals or organizations with an interest in the trust department or trust company if that interest might affect the trust department's or trust company's exercise of discretion to the detriment of its trust clients.

D. However, a trust department or trust company may sell or loan trust property to persons prohibited by subsection (C) if either:

1. Its counsel has advised in writing that, by holding certain property, the trust department or trust company has incurred a contingent or potential liability for breach of fiduciary duty; and

a. The proposed sale or loan avoids the contingent or potential liability;

b. Its board of directors authorizes the sale or loan by an action duly noted in the trust department's or trust company's minutes;

c. Its board of directors' action expressly authorizes reimbursement to the affected account; and

d. The affected account is reimbursed, in cash, at no loss to that account; or

2. The Director requires or approves, in writing, the sale or loan to otherwise prohibited parties.

E. A trust department or trust company may sell trust property held in one account to another of its accounts if:

1. The transaction is fair to both accounts; and

2. The transaction is not prohibited by the governing instruments, applicable state or federal law, or court order.

F. A trust department or trust company may loan trust property held in one account to another of its accounts if:

1. The transaction is fair to both accounts; and

2. The transaction is not prohibited by the governing instruments, applicable state or federal law, or court order.

G. A trust department or trust company may make a loan to a trust account, taking trust assets of the borrowing account as security for repayment, if:

1. The transaction is fair to the borrowing account; and

2. The transaction is not prohibited by the governing instrument, applicable state or federal law, or court order.

Ariz. Admin. Code § R20-4-812

Adopted effective June 30, 1977 (Supp. 77-3). R20-4-812recodified from R4-4-812 (Supp. 95-1). Amended by final rulemaking at 6 A.A.R. 2471, effective June 8, 2000 (Supp. 00-2). Amended by final rulemaking at 8 A.A.R. 2718, effective June 6, 2002 (Supp. 02-2). Amended by final rulemaking at 29 A.A.R. 1952, effective 10/8/2023.