2018 Arkansas Code
Title 23 - Public Utilities and Regulated Industries
Subtitle 2 - Financial Institutions and Securities
Chapter 51 - Arkansas Trust Institutions Act
§ 23-51-102. Certain definitions
(a) For the purposes of this chapter:
(1) "Account" means the client relationship established with a trust company involving the transfer of funds or property to the trust company, including a relationship in which the trust company acts as trustee, executor, administrator, guardian, custodian, conservator, bailee, receiver, registrar, or agent, but excluding a relationship in which the trust company acts solely in an advisory capacity;.
(2) "Act as a fiduciary" or "acting as a fiduciary" means to:
(A) Accept or execute trusts, including to:
(i) Act as trustee under a written agreement;
(ii) Receive money or other property in its capacity as trustee for investment in real or personal property;
(iii) Act as trustee and perform the fiduciary duties committed or transferred to it by order of a court of competent jurisdiction;
(iv) Act as trustee of the estate of a deceased person; or
(v) Act as trustee for a minor or incapacitated person;
(B) Administer in any other fiduciary capacity real or tangible personal property; or
(C) Act pursuant to an order of a court of competent jurisdiction as executor or administrator of the estate of a deceased person or as a guardian or conservator for a minor or incapacitated person;
(3) "Administer" with respect to real or tangible personal property means, as an agent or in another representative capacity, to possess, purchase, sell, lease or insure, safekeep or otherwise manage the property;
(4) "Affiliate" means a company that directly or indirectly controls, is controlled by, or is under common control with a trust institution or other company;
(5) "Authorized trust institutions" means any state trust company, subsidiary trust company, or trust office of a trust institution located in Arkansas;
(6) "Bank" means a state bank, national bank, any bank chartered by any state of the United States or any foreign bank organized under the laws of a territory of the United States, the Commonwealth of Puerto Rico, Guam, American Samoa or the United States Virgin Islands, the deposits of which are insured by the Federal Deposit Insurance Corporation;
(7) "Bank supervisory agency" means:
(A) Any agency of another state with primary responsibility for chartering and supervising a trust institution; and
(B) The Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, the Office of Thrift Supervision [abolished] and any successor to these agencies;
(8) "Branch" with respect to a depository institution has the meaning set forth in § 23-48-702;
(9) "Capital" means:
(A) The sum of:
(i) The par value of all shares of the state trust company having a par value that have been issued;
(ii) The consideration fixed by the board in the manner provided by the Arkansas Business Corporation Act, § 4-27-101 et seq., for all shares of the state trust company without par value that have been issued, except a part of that consideration that:
(a) Has been actually received;
(b) Is less than all of that consideration; and
(c) The board, by resolution adopted not later than sixty (60) days after the date of issuance of those shares, has allocated to surplus with the prior approval of the commissioner; and
(iii) An amount not included in subdivisions (a)(9)(A)(i) and (ii) of this section that has been transferred to capital of the state trust company, on the payment of a share dividend or on adoption by the board of a resolution directing that all or part of surplus be transferred to capital, minus each reduction made as permitted by law; less
(B) All amounts otherwise included in subdivisions (a)(9)(A)(i) and (ii) of this section that are attributable to the issuance of securities by the state trust company and that the commissioner determines, after notice and an opportunity for hearing, should be classified as debt rather than equity securities;
(10) "Capital base" means the sum of capital, surplus, and undivided profits, plus any additions and less any subtractions which the commissioner may by regulation prescribe;
(11) "Charter" means a charter, license or other authority issued by the commissioner or a bank supervisory agency authorizing a trust institution to act as a fiduciary in its home state;
(12) "Client" means a person to whom a trust institution owes a duty or obligation under a trust or other account administered by the trust institution or as an advisor or agent, regardless of whether the trust institution owes a fiduciary duty to the person. The term includes the non-contingent beneficiaries of an account;
(13) "Commissioner" means the Bank Commissioner then in office and, where appropriate, all of his or her successors and predecessors in office;
(14) "Company" includes a bank, trust company, subsidiary trust company, corporation, limited liability company, partnership, association, business trust, or another trust;
(15) "Control" means:
(A) The ownership of or ability or power to vote, directly, acting through one or more other persons, or otherwise indirectly, more than twenty-five percent (25%) of the outstanding shares of a class of voting securities of a state trust company or other company;
(B) The ability to control the election of a majority of the board of a state trust company or other company; and
(C) The power to exercise, directly or indirectly, a controlling influence over the management or policies of the state trust company or other company as determined by the commissioner after notice and an opportunity for hearing;
(16) "Department" means the State Bank Department;
(17) "Depository institution" means any company chartered to act as a fiduciary and included for any purpose within any of the definitions of "insured depository institution" as set forth in 12 U.S.C. §§ 1813(c)(2) and (3);
(18) "Equity capital" means the amount by which the total assets of a state trust company exceed the total liabilities of the state trust company;
(19) "Equity security" means:
(A) Stock, other than adjustable rate preferred stock and money market (auction rate) preferred stock;
(B) A certificate of interest or participation in a profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share or participation share, investment contract, voting-trust certificate, or partnership interest;
(C) A security immediately convertible at the option of the holder without payment of significant additional consideration into a security described by this subdivision (a)(19);
(D) A security carrying a warrant or right to subscribe to or purchase a security described by this subdivision (a)(19); and
(E) A certificate of interest or participation in, temporary or interim certificate for, or receipt for a security described by this subdivision (a)(19) that evidences an existing or contingent equity ownership interest;
(20) "Fiduciary record" means a matter written, transcribed, recorded, received or otherwise in the possession or control of a trust company, whether in physical or electromagnetic form, that is necessary to preserve information concerning an act or event relevant to an account or a client of a trust company;
(21) "Hazardous condition" with respect to a trust company means:
(A) A refusal by the trust company to permit examination of its books, papers, accounts, records, or affairs by the commissioner;
(B) Violation by a trust company of a condition of its chartering or an agreement entered into between the trust company and the commissioner; or
(C) A circumstance or condition in which an unreasonable risk of loss is threatened to clients or creditors of a trust company, excluding risk of loss to a client that arises as a result of the client's decisions or actions, but including a circumstance or condition in which a trust company:
(i) Is unable or lacks the means to meet its current obligations as they come due in the regular and ordinary course of business, even though the book or fair market value of its assets may exceed its liabilities;
(ii) Has equity capital less than the amount of capital the trust company is required to maintain under § 23-51-110, or the adequacy of its equity capital is threatened, as determined under regulatory accounting principles;
(iii) Has concentrated an excessive or unreasonable portion of its assets in a particular type or character of investment;
(iv) Violates or refuses to comply with this chapter, another statute or regulation applicable to trust companies, or any final and enforceable order of the commissioner;
(v) Is in a condition that renders the continuation of a particular business practice hazardous to its clients and creditors; or
(vi) Conducts business in an unsafe or unsound manner, which includes, but is not limited to conducting business with:
(a) Inexperienced or inattentive management;
(b) Potentially dangerous operating practices;
(c) Infrequent or inadequate audits;
(d) Administration of assets that is notably deficient in relation to the volume and character or responsibility for asset holdings;
(e) Failure to adhere to sound administrative practices;
(f) Frequent occurrences of violations of laws, regulations or terms of the governing instruments; or
(g) Engaging in self-dealing or evidencing a notable degree of potential or actual conflicts of interest;
(22) "Insider" means:
(A) Each director, officer or principal shareholder of the trust company;
(B) Any company controlled by a person described by subdivision (a)(22)(A) of this section; or
(C) Any person who participates or has authority to participate, other than in the capacity of a director, in major policy-making functions of the state trust company, whether or not the person has an official title or the officer is serving without salary or compensation;
(23) "Insolvent" means a circumstance or condition in which a state trust company:
(A) Is unable or lacks the means to meet its current obligations as they come due in the regular and ordinary course of business, even if the value of its assets exceeds its liabilities;
(B) Has equity capital less than one million dollars ($1,000,000), as determined under regulatory accounting principles;
(C) Fails to maintain deposit insurance with the Federal Deposit Insurance Corporation or its successor if the commissioner determines that deposit insurance is necessary for the safe and sound operation of the state trust company, or maintains adequate security for its deposits in accordance with § 23-51-130;
(D) Sells or attempts to sell substantially all of its assets or merges or attempts to merge substantially all of its assets or business with another entity other than as provided by §§ 23-51-150 -- 23-51-155; or
(E) Attempts to dissolve or liquidate other than as provided by §§ 23-51-156 -- 23-51-161;
(24) "Investment security" means a marketable obligation evidencing indebtedness of a person in the form of a bond, note, debenture, or other debt instrument not otherwise classified as a loan or extension of credit;
(25) "License" means the authority granted by the commissioner pursuant to this chapter to establish, acquire or maintain a trust office;
(26) "Loans and extensions of credit" means direct or indirect advances of funds by a state trust company to a person that are conditioned on the obligation of the person to repay the funds or that are repayable from specific property pledged by or on behalf of the person;
(27) "New trust office" means a trust office located in a host state which:
(A) Is originally established by the trust institution as a trust office; and
(B) Does not become a trust office of the trust institution as a result of:
(i) The acquisition of another trust institution or trust office of another trust institution; or
(ii) A merger, consolidation, or conversion involving any such trust institution or trust office;
(28) "Office" with respect to a trust institution means the principal office, a trust office or a representative trust office, but not a branch;
(29) "Officer" means the presiding officer of the board, the principal executive officer, or another officer appointed by the board of a state trust company or other company, or a person or group of persons acting in a comparable capacity for the state trust company or other company;
(30) "Operating subsidiary" means a company for which a state trust company has the ownership, ability, or power to vote, directly, acting through one or more other persons, or otherwise indirectly, more than fifty percent (50%) of the outstanding shares of each class of voting securities or its equivalent of the company;
(31) "Out-of-state bank" means a bank chartered to act as a fiduciary in any state or states other than this state;
(32) "Out-of-state trust company" means either a trust company that is not a state trust company or a savings association whose principal office is not located in this state;
(33) "Out-of-state trust institution" means a trust institution that is not a state trust institution;
(34) "Person" means an individual, a company or any other legal entity;
(35) "Principal office" with respect to:
(A) A state trust company, means a location registered with the commissioner as the state trust company's home office at which:
(i) The state trust company does business;
(ii) The state trust company keeps its corporate books and a set of its material records, including material fiduciary records; and
(iii) At least one executive officer of the state trust company maintains an office; or
(B) A trust institution other than a state trust company, means its principal place of business in the United States;
(36) "Principal shareholder" means a person who owns or has the ability or power to vote, directly, acting through one or more other persons, or otherwise indirectly, ten percent (10%) or more of the outstanding shares of any class of voting securities of a state trust company or other company;
(37) "Private trust company" means a trust company that does not engage in a trust business with the general public;
(38) "Receiver" means the commissioner, an agent of the commissioner or any federal or other governmental agency exercising the powers and duties of a receiver pursuant to § 23-51-164;
(39) "Savings association" means a depository institution that is neither a bank nor a foreign bank;
(40) "Shareholder" means an owner of a share in a state trust company;
(41) "Shares" means the units into which the proprietary interests of a state trust company are divided or subdivided by means of classes, series, relative rights, or preferences;
(42) "State" means any state of the United States, the District of Columbia, any territory of the United States, the Commonwealth of Puerto Rico, Guam, American Samoa, the Trust Territory of the Pacific Islands, the United States Virgin Islands, and the Northern Mariana Islands;.
(43) "State bank" means a bank chartered to act as a fiduciary by this state;
(44) "State trust company" means a corporation organized or reorganized under this chapter;
(45) "State trust institution" means a trust institution having its principal office in this state;
(46) "Subsidiary" means a company that is controlled by another person. The term includes a subsidiary of a subsidiary;
(47) "Subsidiary trust company" means a corporation organized under the Arkansas Business Corporation Act, § 4-27-101 et seq. and authorized by the commissioner pursuant to § 23-47-801 et seq. or the Bank Holding Company Subsidiary Trust Company Formation Act of 1989, § 23-32-1901 et seq. [repealed], to conduct trust business and business incidental to trust business in this state, of which more than fifty percent (50%) of the voting stock is owned, directly or indirectly, by a bank holding company which also owns, directly or indirectly, an affiliated bank, as that term is defined in § 23-47-801 et seq.;
(48) "Surplus" means the amount by which the assets of a state trust company exceeds its liabilities, capital, and undivided profits;
(49) "Trust business" means the holding out by a person to the public by advertising, solicitation or other means that the person is available to perform any service of a fiduciary in this or another state, including but not limited to:
(A) Acting as a fiduciary, or
(B) To the extent not acting as a fiduciary, any of the following:
(i) Receiving for safekeeping personal property of every description;
(ii) Acting as assignee, bailee, conservator, custodian, escrow agent, registrar, receiver or transfer agent; or
(iii) Acting as financial advisor, investment advisor or manager, agent or attorney-in-fact in any agreed upon capacity;
(50) "Trust company" means a state trust company, subsidiary trust company or any other company chartered to act as a fiduciary that is neither a depository institution nor a foreign bank;
(51) "Trust deposits" means the client funds held by a state trust company and authorized to be deposited with itself pending investment, distribution, or payment of debts on behalf of the client;
(52) "Trust institution" means a depository institution, state bank or trust company;
(53) "Trust office" means an office, other than the principal office, at which a trust institution is licensed by the commissioner to act as a fiduciary;
(54) "Unauthorized trust activity" means:
(A) A company, other than one identified in § 23-51-165(a), acting as a fiduciary within this state;
(B) A company engaging in a trust business in this state at any office of the company that is not its principal office, if it is a state trust institution, or that is not a trust office or a representative trust office of the company; or
(C) An out-of-state trust institution engaging in a trust business in this state at any time an order issued by the commissioner pursuant to § 23-51-182 is in effect;
(55) "Undivided profits" means the part of equity capital of a state trust company equal to the balance of its net profits, income, gains, and losses since the date of its formation, minus subsequent distributions to shareholders and transfers to surplus or capital under share dividends or appropriate board resolutions. The term includes amounts allocated to undivided profits as a result of a merger; and
(56) "Voting security" means a share, or other evidence of proprietary interest in a state trust company or other company that has as an attribute the right to vote or participate in the election of the board of the state trust company or other company, regardless of whether the right is limited to the election of fewer than all of the board members. The term includes a security that is convertible or exchangeable into a voting security.
(b) These definitions shall be liberally construed to accomplish the purposes of this chapter. The commissioner by regulation may adopt other definitions to accomplish the purposes of this chapter.
