79-7

June 7, 1979
Re: Customer Securities
Dear Mr. ________:
This is in response to your letters of April 17th and May 9, 1979.
As we understand it, you have requested the Department’s opinion as to whether or not a national bank without: trust powers, as a corollary to its dealing with customer’s securities can collect or remit income on stocks and bonds owned by a customer.
As you have correctly pointed out, California Financial Code Section 105 authorizes a commercial bank to buy and sell securities for the account of customers. Crucial to our discussion is the fact that Section 105 deals exclusively with the powers of those banks, as defined by Section 103, which engage merely in a commercial banking business, or that portion of a commercial bank with trust powers which is engaged in commercial banking. When the Financial Code speaks of the trust powers of a commercial bank, it speaks in terms of trust company, as defined by Section 107. Thus, a commercial bank without trust powers may, pursuant to Section 105, sell securities for the accounts of its customers.
It is presently the Department’s position that the collecting and remitting of income on stocks and bonds owned by a customer is ancillary to the authority granted by Section 105
to buy and sell securities for the account of customers. Thus, a commercial bank without trust powers may collect and remit income on stock and bonds owed by a customer.
By way of caveat to the above opinion, it should be pointed out that the Department can opine on this matter only with regards to California state-chartered banks. National banking associations doing business in the state of California are, of course, regulated solely by the Regional Administrator of National Banks. Moreover, in this particular area, it would appear that the California Financial Code is not, in fact, applicable to national banks at all. Financial Code Section 100 (b) provides that the California banking law is applicable to national banking associations authorized to transact business in California “to the extent that the provisions of this division are not inconsistent with and do not infringe upon paramount federal laws governing national banking associations”. As you have pointed out in your letter, the authority for national banks to buy and sell securities for the account of their customers is found at 12 U.S.C. Section 24 (7). Thus, in the area of customer securities, the provisions the California Financial Code are preempted by the National Bank Act.
We hope that the above is of some assistance to you. If you have any questions, please do not hesitate to call.
Very truly yours,
MARY ANN GRAVES
Superintendent of Banks
BY
R. BRENT FAYE
Counsel
RBF:jo
cc: Jack L. Taufer, State Banking Department, L.A