Limited Purpose Trust Company

What is a Limited Purpose Trust Company

A limited purpose trust company is a trust company that has been chartered by the state to perform specific trust capabilities. These capabilities can incorporate going about as a depositor or safekeeper for securities or mortgages. The Participants Trust Company is an illustration of a mortgage depositor trust.

BREAKING DOWN Limited Purpose Trust Company

The Depository Trust Company (DTC) in New York is one more illustration of a limited purpose trust company. It was laid out in 1973 to hold securities in safekeeping for banks and investment firms. This permits them to make book-entry settlements on their trades, as well as diminishing costs associated with trading, and taking into account more efficient clearing and settlement of securities transactions. The DTC holds custody of more than 1.3 million active securities issues, which were worth $54.2 trillion as of July 2017, and which are situated in excess of 131 domains and countries, including the U.S.

Powers of a Limited Purpose Trust Company

The powers conceded to a limited purpose trust company might change relying upon the state where the trust company is chartered. In New York, limited purpose trust companies don't have the power to set aside loans or acknowledge installments, for instance; in any case, there might be a few limited conditions under which a limited purpose trust company would have this power, on the off chance that the loan or deposit were fundamental for the trust to exercise its other fiduciary powers.

Any limitations forced on the operation of a specific limited purpose trust company will be determined in its organization certificate. An organization certificate doesn't determine the types of business where the limited purpose trust might connect with, yet the trust company must consent to stick to a specific type of business to be conceded its charter. The character of this business must be stated in the organization's application to be chartered as a limited purpose trust company, and it can't be changed without permission from the state's Superintendent of Financial Services.

Limited Purpose Trust Companies as a Regulatory Solution

In states like New York, some fintech companies are utilizing the limited purpose trust charter as a method for getting around regulatory requirements. For instance, the virtual currency exchange companies Gemini and itBit have gotten limited purpose trust company charters in New York, to keep away from the need to get licensed as money transmitters, and to keep up with the higher capital requirements of such a license. Be that as it may, such a solution doesn't permit the companies to operate out of the state in which they are chartered without further licensing or charters.