Regulator Panel FIRMA 25 th Annual Risk Management Training Conference

1. Regulator PanelFIRMA 25th Annual Risk Management Training Conference April 19, 2011

2. Regulatory Consolidation

3. OCC/OTS Consolidation – July 21, 2011 Fiduciary Powers – Thrifts vs. National Banks OCC - about 30% of national banks have fiduciary powers. OTS - about 10% of thrifts act as fiduciaries. OTS Fiduciary Regulations: In general, OTS regulations track OCC’s 12 CFR 9 One notable exception - certain fiduciary activities performed by a thrift do not require fiduciary powers. Examples: Acting as trustee of certain EB plans, or acting as an IRA trustee. OTS Fiduciary Activities & Regulations

4. Where are all those Assets Invested?

5. Asset Management Statistics Fiduciary and Related Assets - All Banks 12/31/2010 • EB and retirement related accounts make up 50% of the fiduciary assets administered by banks. Source: Preliminary 12/31/2010 Call Report data. Includes all national and state-chartered commercial banks and national trust banks.

6. Asset Management Statistics Total Market Value of Collective Investment & Common Trust Funds Continues to Increase from 2008 lows. Source: Preliminary 12/31/2010 Call Report data. Includes all national and state-chartered commercial banks and national trust banks.

7. Asset Management Statistics Managed Assets held in Fiduciary Accounts - All Banks 12/31/2010 • Nearly one third ($1.2 trillion) of total managed assets held in fiduciary accounts ($4.1 trillion) are invested in bank CIFs and CTFs. • Another $585 billion or 14% of managed assets are invested in mutual funds; $224 billion of that $585 billion is invested in proprietary mutual funds. • Chart does not include investments in real estate, real estate mortgages and deposits since these represented 1% or less of total managed assets • Source: Preliminary 12/31/2010 Call Report data. Includes all national and state-chartered commercial banks and national trust banks.

8. Asset Management Statistics Collective Investment Fund Assets All Banks 12/31/2010 • 57% or $1.3 trillion of total collective investment fund assets ($2.37 trillion) in 2010 were invested in domestic and international equities. This is up from the 55% of collective investment fund assets that were invested in domestic and international equities in 2009. Source: Preliminary 12/31/2010 Call Report data. Includes all national and state-chartered commercial banks and national trust banks.

9. Regulatory Focus

10. Volcker Rule – organizing and offering hedge funds and private equity funds will face limits. Other D-F provisions that are likely to impact AM world: Money Market Funds/Shadow Banking Use of rating agencies in regulations Temporary FDIC insurance – transaction accounts New FDIC assessment rules/custody banks SEC “fiduciary standard” RIA Custodian Information Requests – SEC Study on RIA Custody Derivatives CFTC rules Dodd-Frank and Related Issues

11. Recent Guidance • Asset Management Operations and Controls Handbook (January 2011) • Provides a single, comprehensive source for OCC Asset Management operations issues, as well as procedures to assist examiners as well as the industry determine where the risks are.

12. Rent-A-Trustee Concerns • OCC Bulletin #2011-11 “Collective Investment Funds and Outsourced Arrangements” requires banks to: • Perform due diligence on and periodically monitor your fund’s vendors • Ensure only eligible participants are admitted to bank funds • Include in any contract with a third party a requirement that the vendor will prominently identify the bank that sponsors the fund in any advertising and other materials.

13. Rent-A-Trustee Concerns • OCC Bulletin #2011-11 • Principally applies to unaffiliated vendors such as RIAs • Does not expressly apply to affiliates as we assume banks and their affiliated RIAs have a common interest not to unnecessarily assume reputation, compliance, strategic or transaction (operational) risks • Continues to allow outsourcing of certain CIF functions to vendors, subject to longstanding OCC CIF and vendor management guidance.

14. Recent AM Group Guidance • OCC Bulletin 2010-37: “Self-Deposit of fiduciary funds” • “Awaiting investment or distribution” – 12 CFR 9.10 • Authorized unless prohibited by applicable law • Rate must be consistent with applicable law • Sufficient qualifying collateral must be pledged at all times • Collateral must be controlled by two fiduciary employees • “Permanent investments” - 12 CFR 9.12 • Not permitted unless authorized by applicable law • Pledge not permitted – heightens concern about credit risk

15. OCC Supervision Issues

16. Asset Management Exam Issues • Conflicts of Interest Issues • OCC Bulletin 2008-5 (Divestiture of Certain Asset Management Businesses) • Fee Arrangements • Affiliated/proprietary investments • Annual Review of Fiduciary Accounts • OCC Bulletin 2008-10 (12 CFR 9.6(c))

17. Risk Considerations • Investment Issues • Investment Objectives • Third Party Investment Managers • Unique Investment Products or Strategies • Investment Performance • Fixed Income Strategies

18. Risk Considerations • Other Supervision Issues • Impact of earnings pressure on internal controls • Staffing • Compliance/Risk Management functions • Audit Coverage • Regulation R • Recordkeeping regulations • Compensation and bonus plans

19. Comments and Questions

20. OCC Asset Management Handbooks • Asset Management • ***Asset Mgt. Operations & Controls*** • Collective Investment Funds • Conflicts of Interest • Custody Services • Insurance Activities • Investment Management Services • Personal Fiduciary Services • Retail Non-deposit Investment Products • Retirement Plan Services Handbooks and Bulletins are available at www.occ.gov

21. Contact information: Joel Miller Asset Management Group Leader Phone: (202) 874-4493