STEP Regulatory Framework & Compliance 3 — Questions and Answers
Question 1: Under the Uniform Trust Code (UTC), what is the general statute of limitations for a beneficiary to bring a claim against a trustee after receiving a full accounting?
- 6 months (Correct answer)
- 1 year
- 2 years
- 4 years
Correct answer: 6 months
UTC Section 1005 provides that a claim against a trustee is barred if not brought within 6 months after the beneficiary receives a final account or report.
Question 2: Which ERISA section imposes fiduciary standards on plan administrators and trustees of employee benefit plans?
- ERISA Section 3
- ERISA Section 404 (Correct answer)
- ERISA Section 502
- ERISA Section 603
Correct answer: ERISA Section 404
ERISA Section 404 establishes the fiduciary duty of prudence, loyalty, and diversification for persons managing employee benefit plan assets.
Question 3: A trust company that holds customer information must comply with which federal law regarding the safeguarding and disposal of consumer financial data?
- Sarbanes-Oxley Act
- Gramm-Leach-Bliley Act (GLBA) (Correct answer)
- Fair Credit Reporting Act
- Electronic Fund Transfer Act
Correct answer: Gramm-Leach-Bliley Act (GLBA)
The GLBA's Safeguards Rule requires financial institutions to implement security programs to protect customer financial information.
Question 4: For U.S. persons with a financial interest in or signature authority over foreign financial accounts exceeding $10,000, compliance requires annual filing of which report?
- Form 8938 (FATCA)
- FinCEN Form 114 (FBAR) (Correct answer)
- Form 3520
- Form 5471
Correct answer: FinCEN Form 114 (FBAR)
FinCEN Form 114, the FBAR, must be filed annually by U.S. persons with qualifying foreign account authority or interest.
Question 5: Under FATCA, a foreign financial institution (FFI) that fails to enter into an agreement with the IRS is subject to what withholding rate on U.S.-source payments?
- 15%
- 20%
- 30% (Correct answer)
- 35%
Correct answer: 30%
FATCA imposes a 30% withholding tax on U.S.-source payments made to non-compliant foreign financial institutions.
Question 6: Which Dodd-Frank Act provision most directly affects trust companies acting as commodity pool operators or advisors by imposing enhanced registration requirements?
- Volcker Rule (Section 619)
- Title IV – Commodity Pool Operators provisions (Correct answer)
- Consumer Financial Protection Bureau (Title X)
- Section 165 enhanced prudential standards
Correct answer: Title IV – Commodity Pool Operators provisions
Title IV of Dodd-Frank strengthened CFTC oversight of commodity pool operators, requiring trust companies in this role to register with the CFTC.
Question 7: A trust company acting as executor sells estate property without court approval in a jurisdiction requiring it. This most likely constitutes which type of breach?
- Breach of the duty of loyalty
- Breach of the duty of prudence
- Breach of the duty to follow trust terms
- A procedural breach of fiduciary authority (Correct answer)
Correct answer: A procedural breach of fiduciary authority
Selling estate assets without required court approval is a procedural breach — the fiduciary exceeded their authority under the applicable probate code.
STEP Regulatory Framework & Compliance 3
Under the Uniform Trust Code (UTC), what is the general statute of limitations for a beneficiary to bring a claim against a trustee after receiving a full accounting?