How Does Mission Protect My Assets?
Customers may wonder how their assets held in trust departments are safeguarded. Here is a brief explanation of how extensive regulation, examination, and sound practices protect a trust company customer’s interests.
Who supervises Mission Management & Trust Co.?
Trust companies often act as both custodian and investment manager of client assets. Institutions that offer these services are subject to rigorous and frequent examination, as well as extensive regulation. Mission is reviewed and regulated annually by the Arizona Department of Insurance and Financial Institutions.
How are my managed assets protected?
Assets held in client accounts are neither assets nor liabilities of Mission. By law, assets held in these accounts must be segregated from all other assets of Mission. Likewise, the books and records of these accounts must also be kept separate from the books and records of our other activities.
The ownership of these assets remains vested in the individuals or entities for whose benefit Mission is acting as investment manager and/or custodian. In addition, Mission uses third-party entities, such as US Bank who, in turn, uses Federal Reserve banks or the Depository Trust & Clearing Corporation, to hold these assets. In all of these instances, the assets are not subject to the claims of Mission’s creditors nor the creditors of these other entities.
All assets held in certificates of deposit are entitled to FDIC insurance. Mission never exceeds the FDIC insurance limit in value per client per bank. Thus, all clients’ CDs are fully insured by the FDIC.
How is Mission’s trust department regulated?
Mission is extensively regulated not only to protect the interests of its customers, but also to ensure the safety and soundness of our company for the public good. With respect to custodial and investment management services, state regulations address various aspects of these activities, including the fiduciary obligations of the trust company, potential conflicts of interest, and the company’s management of transactional, strategic, compliance, and reputational risks.
Segregation of Duties
Trust companies must segregate the duties of their employees who work in the custody and investment management operations. Under such a regime, no one individual is able to authorize, execute, and review the processing of client assets, including securities, cash and income payments. These dual control procedures ensure that one person, acting alone, cannot complete all phases of a transaction or transfer client assets.
Recordkeeping Requirements
In addition to records for tax and accounting purposes, custodians and investment managers must maintain detailed records to document and confirm securities transactions. The records must include the account name, description of the securities, amount purchased or sold, trade date, and name of the broker/dealer purchaser or seller. A separate order ticket for each securities transaction, whether executed or canceled, must also be maintained. The order ticket includes such details as the time the trade was placed or received by the trust company and the type of order used such as market order, limit order or an order subject to special instructions.
Internal Audits
In addition to imposing rigorous record-keeping obligations, trust companies must perform annual or continuous audits of all significant fiduciary activities conducted by an audit committee. The audit committee’s adoption of a thorough audit program allows the trust company’s board to identify practices that contravene policies or violate fiduciary laws and regulations. The audit committee may not contain any officer who participates significantly in the administration of the bank’s fiduciary activities. Mission’s audit committee consists entirely of outside board members. There are no Mission affiliates or staff on the committee.
External Audits
State law requires a trust company to be audited each year by an independent public accountant (IPA), who is licensed to practice and in good standing under state law.
IPAs must audit and report on the company’s internal controls on financial reporting directly to the trust company’s board of directors. The audit report must also be submitted to the Arizona Department of Insurance and Financial Institutions.
How is Mission examined for compliance with banking laws and regulations?
State regulators routinely examine trust companies for compliance with laws and regulations, as well as the company’s management of various risks. These thorough onsite examinations occur annually for Arizona trust companies. Mission has been examined annually since inception.
During an examination, examiners review Mission’s documentation regarding reconciliation of account assets, internal controls, and recordkeeping of securities transactions, conflicts of interest and management information systems, among others. Examiners review selected client files to determine if they contain all the appropriate documentation and that they are in compliance with all the relevant laws and regulations. In short, the examination is designed to reveal any weaknesses in Mission’s controls and procedures.
Where can I find more information about Mission?
The Arizona Department of Insurance and Financial Institutions maintains a website at https://difi.az.gov. There you can find a list of Arizona regulated financial institutions, including trust companies. The section under “Actions and Order” contains information about regulatory actions taken against a financial institution. Finally, you can contact the department directly at:
Arizona Department of Insurance and Financial Institutions
2910 N. 44th St., Suite 310
Phoenix, AZ 85018
(602) 255-4421
(800) 544-0708
By Susan Ernsky, President
