Limited Purpose Trust Company
Contents
Unlocking the Potential of Limited Purpose Trust Companies
Understanding Limited Purpose Trust Companies
A limited purpose trust company, as the name suggests, is a trust company that operates under a specific set of functions authorized by the state. These functions typically revolve around trust-related activities such as holding securities or mortgages. One example is the Participants Trust Company, which specializes in mortgage depositor trust services.
Exploring Limited Purpose Trust Companies in Detail
The Depository Trust Company (DTC) in New York exemplifies the concept of a limited purpose trust company. Established in 1973, the DTC plays a crucial role in the financial industry by safeguarding securities for banks and investment firms. With custody of over 1.3 million active securities issues valued at $54.2 trillion, the DTC facilitates efficient book-entry settlements and enhances the clearing and settlement of securities transactions worldwide.
Examining the Powers of Limited Purpose Trust Companies
The powers granted to limited purpose trust companies can vary depending on the state of charter. In New York, for instance, these entities may not have the authority to make loans or accept deposits by default. However, exceptions may apply under certain circumstances where such actions are necessary to fulfill fiduciary duties. Any restrictions on their operations are outlined in their organization certificate, which dictates the scope of permissible business activities.
Limited Purpose Trust Companies: A Regulatory Perspective
In jurisdictions like New York, limited purpose trust charters are increasingly utilized by fintech companies as a regulatory workaround. For instance, companies like Gemini and itBit have obtained limited purpose trust company charters to navigate regulatory requirements related to virtual currency exchanges. While this approach helps them bypass certain licensing obligations, it comes with limitations, particularly regarding interstate operations.