The OCC adopted a final rule that codifies an exception to the withdrawal period for banks that administer a collective investment fund ("CIF") primarily invested in real estate or other non-readily marketable assets.
The rule finalizes an August 2020 interim final rule that established that a bank would be allowed to withdraw from a CIF up to one year after the standard withdrawal period, contingent upon the OCC's approval and subject to certain conditions. The exception is conditioned upon, among other things, a bank's board of directors determining that (i) as a result of "unanticipated" and "severe" market conditions impacting the specific assets held by the CIF, an extension of the withdrawal period is necessary to maintain fund assets' value, and (ii) the extended withdrawal period is in line with, among other laws, Part 9 ("Fiduciary Activities of National Banks") of the OCC Rules. Additionally, as part of the exception, the interim final rule allowed banks to request OCC approval for a maximum of two additional one-year extensions of their withdrawal periods.
In adopting the interim final rule, the OCC clarified that:
- it would not expect state-chartered banks to request OCC approval to extend their withdrawal periods, and the OCC does not have the authority to approve such requests from a state-chartered bank; and
- banks are allowed to submit a single request to the OCC for approval covering any account withdrawal requests received before the bank's submission.
In codifying the exception to the withdrawal period, the OCC made revisions to the condition that a bank's board of directors (or a committee that has been authorized by a bank's board of directors) is required to commit the bank to act upon a withdrawal request "as soon as practicable." To account for compliance concerns by some commenters, the OCC revised the exception's condition so that a bank must act upon any withdrawal request as soon as practicable and "consistent with fiduciary duties."
The final rule will go into effect upon its publication in the Federal Register.
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