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profit-sharing plan. In 1986, petitioner became a director and
shareholder of RHB and purchased stock representing a 5-percent
share of RHB. In February 1987, petitioner was elected to RHB’s
board of directors.
RHB was formed to provide administrative, management, and
investment services for fiduciaries and others, to the extent
permitted by law. RHB did not have trustee powers, was not a
trust company or bank, and was not registered under the
Investment Advisers Act of 1940. RHB could not be appointed to
serve as a corporate trustee. Instead, individual fiduciaries
associated with RHB were named and served as trustees in their
individual capacities. As the named trustees, the fiduciaries
were the legal owners of trust assets and had sole custody and
authority over the trust assets under their care.
Typically, only RHB’s shareholders and directors served as
named trustees. Before being retained by a client, the
fiduciaries provided the prospective client with a fee schedule,
a fiduciary services statement, and a copy of the RHB trustees’
investment philosophy. If a new client did not like a particular
fiduciary, the client could chose from other fiduciaries at RHB.
There was an attempt amongst the fiduciaries to equalize their
workloads.
The fiduciaries released all trustee’s fees paid to them to
RHB. RHB decided how to allocate those fees for paying expenses
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Last modified: May 25, 2011