Letter to OCC re: 12 CFR Parts 9 and 150

Dear Sir or Madam:

The American Bankers Association (ABA) appreciates this opportunity to comment onthe Office of the Comptroller’s (OCC) Paperwork Reduction Act (PRA) notice covering 12 CFRParts 9 and 150, regulations governing the fiduciary activities of national banks and federalthrifts (collectively, banks). Under the PRA notice, the OCC solicits public comment on“collection of information” requirements found in these regulations, specifically inquiring withregard to: (a) Whether the information collection is necessary for the proper performance of theOCC; (b) The accuracy of the OCC’s burden estimate; (c) Ways to improve the quality, utility,and clarity of the information collected; (d) Ways to minimize the burden of the collection; and(e) Cost estimates for the operation, maintenance, and purchase of services to provideinformation.

The PRA notice identifies a number of specific fiduciary regulations that are within thescope of “collection of information,” including a number in 12 CFR 9.18 that govern theestablishment and administration of bank collective investment funds. This letter addresses onespecific requirement in that section.

12 CFR 9.18(b)(6), Audits and Financial Reports of Collective Investment Funds

Under 9.18(b)(6), a bank administering a collective investment fund must “[a]t least onceduring each 12-month period … prepare a financial report of the fund based on the audit requiredby paragraph (b)(6)(i) of this section.” The OCC Handbook on Collective Investment Fundsfurther states that, “A bank cannot waive the annual audit requirement when it terminates a fund.Unless a fund’s termination occurs as of the audit date of the fund, a separate fund terminationaudit is required to verify all fund assets have been distributed or are otherwise accounted for.”Although the Handbook emphasizes the need for a final audit, we urge the OCC to provide someflexibility as to its timing when the fund is terminated shortly after the 12-month audit periodends.

Given significant fixed costs in conducting audits, the expense of a “stub-period” auditcan be substantial. This cost would usually be borne by the participants remaining in the fund ator near its termination, the number of which typically decrease over time, thereby magnifying theeffect of any accrual for the audit cost. Therefore, as a matter of burden reduction for both thefund participant and the bank, we urge the OCC to amend the requirement to allow a bankterminating a fund within 15 months after the last audit to wait until the fund has terminated tocomplete the final audit.

Sincerely,

Phoebe A. Papageorgiou
Vice President, Trust Policy