JOHN P. BURKE – ‘Unsafe’ institution
The Connecticut Department of Banking has sold a second piece of Darien-based Circle Trust Co., which was placed into receivership last month when Banking Commissioner John P. Burke declared the institution “unsafe and unsound.”
The department earlier this week announced that MG Colorado Holdings has agreed to acquire assets relating to Circle Trust’s third-party administrator business. MG Colorado Holdings will acquire all third-party administrator custodial and trust businesses through assignments of all applicable custodial and trust agreements from the third-party administrators. The agreement must still be approved by the Connecticut Superior Court.
Burke filed a petition with the court in September to put Circle Trust Co. into regulatory receivership because the institution’s capital had fallen below the $2 million minimum required by Connecticut law. The bank had been under scrutiny since 2003. It made efforts to recapitalize, but could not recover.
Earlier this year, the Department of Banking concluded an investigation of the institution’s former president and chairman and their handling of mutual funds. Questions arose concerning former President and Chief Operating Officer Michelle Montano’s and former Chairman and Chief Executive Officer Louis P. Celentano’s facilitation of market timing of mutual funds. According to the documents, “Mutual funds are meant to be long-term investments; however, traders try to trade in and out of funds in order to take advantage of inefficiencies in the way the funds set their net asset values. This practice is known as market timing and, if done effectively, it captures an arbitrage profit.”
The two were given an order to cease and desist, a notice of intent to fine and a notice of right to a hearing.
The acquisition of the bank’s third-party administrator business, as well as an earlier appointment that gave up management of Circle Trust’s Trust Advisors Stable Value Plus Fund, leaves several pieces up for grabs. The Department of Banking is still seeking companies to acquire the institution’s bank trust services and wealth management services, according to department spokesman James Heckman.
“The department is pleased that MGCH moved quickly in completing its due diligence and agreeing to acquire these assets,” Heckman said in a prepared statement. “We are confident that MGCH will successfully manage the TPA business of the CTC.”
All of the third-party administrator accounts must be acquired by Nov. 30.
“We look forward to a speedy and orderly assignment of this business,” said Cliff D’Amato, chief executive officer of MSCH, in a prepared statement.
Shortly before the bank was placed into regulatory receivership, Circle Trust appointed Fiduciary Counselors of Washington, D.C., an independent fiduciary, to manage the Trust Advisors Stable Value Plus Fund, a fund previously managed by Circle Trust. According to the Department of Banking’s Web site, Fiduciary Counselors has filed a voluntary petition for the fund under Chapter 11 of the U.S. Bankruptcy Code. According to the fiduciary, the bankruptcy proceeding provides the best vehicle for protecting the interests of the investors in and creditors of the fund through an orderly and equitable process for resolving outstanding issues.
