Alert April 05, 2011

OCC Issues Bulletin on Risk Management of Outsourcing of Management of Collective Investment Funds

The OCC issued a bulletin (the “Bulletin,” OCC 2011-11) that provides guidance on risk management to national banks that delegate responsibility for investment management of collective investment funds (“CIFs”) to a third party such as a registered investment adviser.  The Bulletin stresses that a bank must continue to oversee the administration of the CIF and that the bank’s delegation of CIF management to a third party “does not, in any way, relieve the bank of its responsibility as fiduciary.”  In addition, the Bulletin provides guidance to banks that delegate CIF management to third parties regarding OCC supervisory expectations as to the bank’s risk assessment of, due diligence with respect to, written contracts with, and continuing oversight of, the applicable third party vendor.