CHAPTER 18 HOUSE BILL No. 2296 An  Act relating to trust companies; concerning contracting trustee; amending K.S.A. 1998
Supp. 9-2107 and repealing the existing section. Be it enacted by the Legislature of the State of Kansas:

      Section  1. K.S.A. 1998 Supp. 9-2107 is hereby amended to read as
follows: 9-2107. (a) As used in this section:

      (1) ``Contracting trustee'' means any trust company, as defined in
K.S.A. 9-701, and amendments thereto, any bank that has been granted
trust authority by the state bank commissioner under K.S.A. 9-1602, and
amendments thereto, or any national bank chartered to do business in
Kansas that has been granted trust authority by the comptroller of the
currency under 12 USC 92a, or any bank that has been granted trust
authority or any trust company, regardless of where such bank or trust
company is located, that has been granted trust authority and which is
controlled, as defined in K.S.A. 9-1612 and amendments thereto by the
same bank holding company as any trust company, state bank or national
bank chartered to do business in Kansas, which accepts or succeeds to
any fiduciary responsibility as provided in this section;

      (2) ``originating trustee'' means any trust company, bank, national
banking association, savings and loan association or savings bank which
has trust powers and its principal place of business is in this state and
which places or transfers any fiduciary responsibility to a contracting trus-
tee as provided in this section;

      (3) ``financial institution'' means any bank, national banking associ-
ation, savings and loan association or savings bank which has its principal
place of business in this state but which does not have trust powers.

      (b) Any contracting trustee and any originating trustee may enter
into an agreement by which the contracting trustee, without any further
authorization of any kind, succeeds to and is substituted for the originating
trustee as to all fiduciary powers, rights, duties, privileges and liabilities
with respect to all accounts for which the originating trustee serves in any
fiduciary capacity, except as may be provided otherwise in the agreement.
Notwithstanding the provisions of this section, no contracting trustee as
defined in K.S.A. 9-2107(a)(1) and amendments thereto, having its home
office outside the state of Kansas shall enter into an agreement except
with an originating trustee which is commonly controlled as defined in
K.S.A. 9-1612 and amendments thereto by the same bank holding com-
pany.

      (c) Unless the agreement expressly provides otherwise, upon the
effective date of the substitution:

      (1) The contracting trustee shall be deemed to be named as the
fiduciary in all writings, including, without limitation, trust agreements,
wills and court orders, which pertain to the affected fiduciary accounts;

      (2) the originating trustee is absolved from all fiduciary duties and
obligations arising under such writings and shall discontinue the exercise
of any fiduciary duties with respect to such writings, except that the orig-
inating trustee is not absolved or discharged from any duty to account
required by K.S.A. 59-1709, and amendments thereto, or any other ap-
plicable statute, rule of law, rules and regulations or court order, nor shall
the originating trustee be absolved from any breach of fiduciary duty or
obligation occurring prior to the effective date of the agreement.

      (d) The agreement may authorize the contracting trustee:

      (1) To establish a trust service desk at any office of the originating
trustee at which the contracting trustee may conduct any trust business
and any business incidental thereto and which the contracting trustee may
otherwise conduct at its principal place of business; and

      (2) to engage the originating trustee as the agent of the contracting
trustee, on a disclosed basis to customers, for the purposes of providing
administrative, advertising and safekeeping services incident to the fidu-
ciary services provided by the contracting trustee.

      (e) Any contracting trustee may enter into an agreement with a fi-
nancial institution providing that the contracting trustee may establish a
trust service desk as authorized by subsection (d) in the offices of such
financial institution and which provides such financial institution, on a
disclosed basis to customers, may act as the agent of contracting trustee
for purposes of providing administrative services and advertising incident
to the fiduciary services to be performed by the contracting trustee.

      (f) No activity authorized by subsections (b) through (e) shall be
conducted by any contracting trustee, originating trustee or financial in-
stitution until an application for such authority has been submitted to and
approved by the commissioner. The application shall be in the form and
contain the information required by the commissioner, which shall at a
minimum include certified copies of the following documents:

      (1) The agreement;

      (2) the written action taken by the board of directors of the origi-
nating trustee or financial institution approving the agreement;

      (3) all other required regulatory approvals;

      (4) an affidavit of publication of notice of intent to file the application
with the commissioner. Publication of the notice shall be on the same day
for two consecutive weeks in the official newspaper of the city or county
where the principal office of the originating trustee or financial institution
is located. The notice shall be in the form prescribed by the commissioner
and shall contain the name of the applicant contracting trustee, the orig-
inating trustee or financial institution, the proposed date of filing of the
application with the commissioner, a solicitation for written comments
concerning the application, and a notice of the public's right to file a
written request for a public hearing for the purpose of presenting oral or
written evidence regarding the proposed agreement. All comments and
requests for public hearing shall be filed with the commissioner on or
before the 30th day after the date the application is filed; and

      (5) a certification by the parties to the agreement that written notice
of the proposed substitution was sent by first-class mail to each cofidu-
ciary, each surviving settlor of a trust, each ward of a guardianship, each
person who has sole or shared power to remove the originating trustee
as fiduciary and each adult beneficiary currently receiving or entitled to
receive a distribution of principle or income from a fiduciary account
affected by the agreement, and that such notice was sent to each such
person's address as shown in the originating trustee's records. An unin-
tentional failure to give such notice shall not impair the validity or effect
of any such agreement, except an intentional failure to give such notice
shall render the agreement null and void as to the party not receiving the
notice of substitution.

      (g) A contracting trustee making application to the commissioner for
approval of any agreement pursuant to this section shall pay to the com-
missioner a fee, in an amount established by rules and regulations of the
commissioner adopted pursuant to K.S.A. 9-1713 and amendments
thereto, to defray the expenses of the commissioner or designee in the
examination and investigation of the application. The commissioner shall
remit all amounts received under this section to the state treasurer who
shall deposit the same to a separate account in the state treasury for each
application. The money in each such account shall be used to pay the
expenses of the commissioner, or designee in the examination and inves-
tigation of the application to which it relates and any unused balance shall
be transferred to the bank commissioner fee fund.

      (h) Upon the filing of any such application with the commissioner,
the commissioner shall make or cause to be made, a careful examination
and investigation concerning:

      (1) The reasonable probability of usefulness and success of the con-
tracting trustee;

      (2) the financial history and condition of the contracting trustee in-
cluding the character, qualifications and experience of the officers em-
ployed by the contracting trustee; and

      (3) whether the contracting agreement will result in any undue injury
to properly conducted existing banks, national banks and trust companies.

      If the commissioner shall determine any of such matters unfavorably
to the applicants, the application shall be disapproved, but if not, then
the application shall be approved.

      (i) If no written request for public hearing is filed, the commissioner
shall render approval or disapproval of the application within 60 days of
the date upon which the application was filed.

      (j) If a written request for public hearing is filed, the commissioner
shall hold within 30 days of the close of the comment period, a public
hearing in a location determined by the commissioner. Notice of the time,
date and place of such hearing shall be published by the applicant in a
newspaper of general circulation in the county where the originating trus-
tee or financial institution is located, not less than 10 nor more than 30
days prior to the date of the hearing, and an affidavit of publication shall
be filed with the commissioner. At any such hearing, all interested persons
may present written and oral evidence to the commissioner in support of
or in opposition to the application. Upon completion of a transcript of
the testimony given at any such hearing, the transcript shall be filed in
the office of the commissioner. Within 14 days after the public hearing,
the commissioner shall approve or disapprove the application after con-
sideration of the application and evidence gathered during the commis-
sioner's investigation.

      (k) The commissioner may extend the period for approval or disap-
proval if the commissioner determines that any information required by
this section has not been furnished, any material information submitted
is inaccurate or additional investigation is required. The commissioner,
prior to expiration of the application period provided for by this section,
shall give written notice to each party to the agreement of the commis-
sioner's intent to extend the period which shall include a specific date for
expiration of the extension period. If any information remains incomplete
or inaccurate upon the expiration of the extension period the application
shall be disapproved.

      (l) Within 15 days of the date of the commissioner's approval or
denial, the applicant or any individual or corporation who filed a request
for and presented evidence at the public hearing shall have the right to
appeal in writing to the state banking board the commissioner's deter-
mination by filing a notice of appeal with the commissioner. The state
banking board shall fix a date for hearing, which hearing shall be held
within 45 days after such notice of appeal is filed. The board shall conduct
the hearing in accordance with the provisions of the Kansas administrative
procedure act and render its decision affirming or rescinding the deter-
mination of the commissioner. Any action of the board pursuant to this
section is subject to review in accordance with the act for judicial review
and civil enforcement of agency actions. Any party which files an appeal
to the state banking board of the commissioner's determination shall pay
to the commissioner a fee in an amount established by rules and regu-
lations of the commissioner, adopted pursuant to K.S.A. 9-1713 and
amendments thereto, to defray the board's expenses associated with the
conduct of the appeal.

      (m) When the commissioner determines that any contracting trustee
domiciled in this state has entered into a contracting agreement in vio-
lation of the laws governing the operation of such contracting trustee, the
commissioner shall give written notice to the contracting trustee and the
originating trustee or financial institution of such determination. Within
15 days after receipt of such notification, the contracting trustee and
originating trustee or financial institution shall have the right to appeal in
writing to the state banking board the commissioner's determination. The
board shall fix a date for hearing, which shall be held within 45 days after
the date of the appeal and shall be conducted in accordance with the
Kansas administrative procedure act. At such hearing the board shall hear
all matters relevant to the commissioner's determination and shall ap-
prove or disapprove the commissioner's determination. The decision of
the board shall be final and conclusive. If the contracting trustee does
not appeal to the board from the commissioner's determination or if an
appeal is made and the commissioner's determination is upheld by the
board, the commissioner may proceed as provided in K.S.A. 9-1714 and
amendments thereto, until such time as the commissioner determines the
contracting trustee, originating trustee and financial institution are in full
compliance with the laws governing the operation of a contracting trustee
and originating trustee or financial institution.

      (n) Any party entitled to receive a notice under subsection (f)(5) may
file a petition in the court having jurisdiction over the fiduciary relation-
ship, or if none, in the district court in the county where the originating
trustee has its principal office, seeking to remove any contracting trustee
substituted or about to be substituted as fiduciary pursuant to this section.
Unless the contracting trustee files a written consent to its removal or a
written declination to act subsequent to the filing of the petition, the
court, upon notice and hearing, shall determine the best interest of the
petitioner and all other parties concerned and shall fashion such relief as
it deems appropriate in the circumstances, including the awarding of rea-
sonable attorney fees. The right to file a petition under this subsection
shall be in addition to any other rights to remove fiduciary provided by
any other statute or regulation or by the writing creating the fiduciary
relationship. If the removal of the fiduciary is prompted solely as a result
of the contracting agreement, any reasonable cost associated with such
removal and transfer, not to exceed $200 per account, shall be paid by
the originating trustee or financial institution entering into the agreement.

 Sec.  2. K.S.A. 1998 Supp. 9-2107 is hereby repealed.

 Sec.  3. This act shall take effect and be in force from and after its
publication in the statute book.

Approved March 19, 1999.
__________