Nevada Administrative Code Chapter 669 - Trust Companies
Overview of NAC Chapter 669 – Trust Companies
Chapter 669 of the Nevada Administrative Code governs trust companies, which are financial institutions that act as fiduciaries for individuals or organizations. They manage trusts, estates, and other fiduciary arrangements. The rules are enforced by the Nevada Division of Financial Institutions (DFI) and are designed to ensure:
Financial stability of trust companies
Proper fiduciary conduct toward clients
Compliance with licensing and operational standards
Protection of beneficiaries and the public from mismanagement
Key areas covered in the code include:
Licensing and formation of trust companies
Capital requirements and financial reporting
Fiduciary duties and prohibited acts
Examinations, audits, and supervision
Procedures for suspension, revocation, or enforcement actions
Case 1: Licensing a New Trust Company in Nevada
Situation
A financial institution wants to open a new trust company in Nevada. This requires approval from the DFI under NAC 669.
Code Requirements
Submit an application with financial statements, business plans, and key officer information
Demonstrate sufficient capitalization according to minimum statutory thresholds
Provide background checks for directors, officers, and major shareholders
Outcome
The DFI reviews the application and may:
Approve the license if all criteria are met
Request additional information or clarification
Deny the application if the applicant is financially unstable or has officers with a history of fiduciary violations
Importance
Licensing ensures that only trustworthy and financially sound institutions operate as fiduciaries in Nevada.
Case 2: Capital Requirement Enforcement
Situation
A licensed Nevada trust company’s financial statements show that its capital has fallen below the minimum required level.
Committee’s Role
Under NAC 669, the DFI monitors the capital adequacy of trust companies. When undercapitalization is detected, the DFI may require:
Submission of a capital restoration plan
Restrictions on new business or asset growth
Regular reporting of progress toward compliance
Outcome
The trust company may raise capital through additional investment or retained earnings. Failure to comply can lead to enforcement actions, including suspension or revocation of the license.
Importance
Maintaining minimum capital ensures the trust company can meet its fiduciary obligations and protects beneficiaries from loss.
Case 3: Prohibited Transactions and Fiduciary Misconduct
Situation
A trust company engages in self-dealing by investing trust assets in a business owned by one of its officers without proper disclosure or approval.
Code Requirements
NAC 669 strictly prohibits:
Self-dealing or conflicts of interest
Misappropriation of trust assets
Acting outside the scope of fiduciary authority
Outcome
The DFI investigates and may:
Issue a cease-and-desist order
Require restitution to beneficiaries
Impose fines on the company or responsible officers
Suspend or revoke the license in severe cases
Importance
These rules protect beneficiaries and maintain public trust in fiduciary institutions.
Case 4: Periodic Examinations
Situation
The DFI conducts a routine audit/examination of a Nevada trust company to ensure compliance with NAC 669.
Examination Focus
Financial condition and capital adequacy
Compliance with fiduciary duties and prohibited transactions
Internal controls and risk management procedures
Accuracy of financial reporting
Outcome
Minor deficiencies may result in a corrective action plan
Major deficiencies can lead to enforcement actions or even removal of officers
Continuous compliance is required to maintain the license
Importance
Examinations ensure ongoing supervision of fiduciary activities and early detection of potential risks.
Case 5: Mergers and Acquisitions of Trust Companies
Situation
Two trust companies plan to merge in Nevada, with one acquiring the other’s trust business.
Code Requirements
File a merger application with the DFI
Demonstrate that the resulting entity will comply with capital and operational requirements
Obtain approval of the DFI before completing the merger
Outcome
Approval is granted if the merged entity is financially sound and all fiduciary obligations are maintained
Denial occurs if the merger would weaken oversight or harm beneficiaries
Importance
These rules prevent mergers from creating undercapitalized or poorly managed trust companies.
Case 6: Enforcement Action for Improper Recordkeeping
Situation
A trust company fails to maintain proper records of client trust accounts, making it difficult to verify fiduciary compliance.
Committee’s Role
NAC 669 requires detailed recordkeeping of all trust transactions. The DFI may:
Order the trust company to improve internal record systems
Conduct follow-up audits
Impose penalties if records are missing, falsified, or misleading
Outcome
Proper recordkeeping is restored, and ongoing compliance is monitored. Persistent violations can lead to suspension or revocation of the trust company’s license.
Key Takeaways
NAC Chapter 669 governs licensing, operations, supervision, and enforcement for trust companies in Nevada.
The DFI ensures compliance through applications, routine audits, examinations, and investigations.
Common cases include:
Licensing new trust companies
Enforcement of capital requirements
Preventing fiduciary misconduct
Conducting examinations
Mergers and acquisitions
Recordkeeping and operational compliance
Enforcement tools include advisory orders, fines, corrective action plans, and license suspension or revocation.
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