Safety and Soundness Overview
The Safety and Soundness of National Advisors Trust Company FSB (“NATC”) and its client assets are of primary concern to the NATC board of directors and the management staff of the Trust Company. Accordingly, NATC conducts its daily activities with vigilance and risk awareness of the economic, administrative, and operational issues that could potentially expose NATC to financial loss or otherwise negatively impact its reputation.
Control of risk begins with a periodic analysis by management and the board of directors of the state of the economy generally, competitive environment, business opportunities available to NATC, personnel expertise and operational systems capabilities, and application of the NATC business model against these business opportunities. The analysis by the board results in the creation of Key Objectives for NATC management and staff, which considers execution risks against the expertise and controls available. Progress toward Key Objectives is reported to the board frequently, and adjustments are made if conditions materially change.
Control of risk is a matter of process. NATC maintains a very experienced and educated management staff that is responsible for risk recognition and control. Control begins with the creation of policies covering all aspects of the business, including account acceptance, supervisory responsibilities, operational controls, audit policies, IT support, and delegation of duties to specific staff. Staff members are responsible, subject to managerial approval, for the creation of comprehensive procedures applicable to their position and risk control. NATC uses several committees to assure proper communications, vetting of opportunities and risks associated with new accounts or ongoing administrative issues. Finally, risk control is a matter of ongoing training, with all staff members personally accountable for ongoing educational goals relevant to their positions at NATC.
Risk control is also a matter of monitoring. NATC is certified to the International Standards Organization (“ISO”) 9000 standard for maintaining a formal process for recording and measurement of quality control and having a recognized process of continuous quality improvement. Annual ISO audits are required. NATC is one of only a few financial institutions certified to the ISO standard.
As a chartered Federal Savings Bank, NATC is subject to regulation and examination by both the Office of the Comptroller of the Currency (“OCC”), a division of the U.S. Treasury, and the F.D.I.C. NATC provides quarterly financial reports to both entities and is interviewed by an OCC examiner quarterly regarding any changes in our business activities or financial status disclosed in our reports. Every eighteen months, or more frequently if ordered, NATC undergoes a full Safety and Soundness examination by the OCC. The examination addresses Management, Financial Safety, Compliance, Operational Controls, and related issues.
To independently verify the effectiveness of management controls and procedures, the board of directors annually authorizes CBIZ-Mayer Hoffman McCann PC. to produce: (1) audited financial reports for NATC and its Holding Company, (2) a Directors Exam testing account administration and operational controls, (3) a SAEE 16 report on systems and control effectiveness, (4) Bank Secrecy Act compliance, (5) an information technology systems audit with periodic intrusion testing. The Compliance Officer reports to the Audit Committee of the board quarterly on the results of internal compliance activity and training.
As not every event can be foreseen or tested, NATC maintains a “layered” series of insurance policies and bonding to protect client accounts. NATC maintains a $10 million blanket fidelity bond on Trust Company activities against loss due to dishonestly or the decisions of the board of directors, management, and staff. The fidelity bond is underwritten by National Union Fire Insurance Company of Pittsburgh. In addition, NATC maintains an “errors and omissions” policy in the amount of $5 million issued by American International Specialty Lines Insurance Company. The E&O coverage is applicable to any losses that occur in the ordinary course of business.
NATC clients benefit from additional insurance coverage provided by NATC’s sub custodian institutions. Our sub custodians at Fidelity and Bank of New York provide separate insurance on the custody of our client account assets under their control. Our securities position at Fidelity is insured by the Securities Investor Protection Corporation (“SIPC”) to the maximum SIPC limits, plus additional Fidelity’s aggregate excess SIPC insurance of $1 billion provided by Lloyds of London, which is rated “A” by insurance rating firm A.M. Best. Cash awaiting investment insurance is limited to $1.9 million per client account. This is the maximum excess SIPC insurance protection currently available in the brokerage industry.
UMB Bank of Kansas City serves as NATC’s cash custodian. Cash positions pending investment or distribution are protected by UMB’s capital, the F.D.I.C. and substantial additional insurance on our deposit accounts.
NATC maintains its core capital at levels beyond the requirements of the regulators. However, should our regulators ever determine that National Advisors is operating in an unsafe manner or should we maintain insufficient capital; the F.D.I. C. would quickly seize control of the institution, including our client assets and account records. As these assets and records are already segregated from our corporate accounts, the client assets would be quickly transferred to a successor bank, usually within days. All clients would be free to continue services with the successor, or could transfer accounts to other institution of their choice.
To summarize, the safety and soundness of National Advisors Trust and its client accounts are of the foremost concern to the board of directors, management, and staff of the Trust Company. Our policies and activities are continually assessed for possible risk and control of risk. Nevertheless, in the event of an incident, NATC and its sub custodians maintain a range of insurance and bonding to protect against client account loss wherever possible.
If you have questions about this information, please contact Client Services at email@example.com or 877-527-3476 for further details.