This section is from the book "Canadian Banking Practice", by John T. P. Knight.
Question 589. - (1) Is it legal for a person holding shares in a bank to transfer them to his own name in trust, and vice versa?
(2) Can a firm transfer stock to one of the parties composing it and vice versa?
(3) Can an attorney transfer stock to himself?
(4) Can the same person act as attorney in making a transfer and also as attorney for the transferee in accepting the same transfer?
(5) Can a shareholder transfer stock to any person, and accept it for the latter under power of attorney?
Answer. - (1) The first is quite in order. The party can transfer to himself in trust simply, or to himself in trust for some named person or fund.
The converse case, of transferring trust shares to himself, might be legal, but the bank might be responsible to the cestui que trust if the transfer were wrongfully made. We think, notwithstanding the protection given by the Act as to trusts, banks cannot altogether avoid responsibility when they permit trustees to convert assets which are clearly trust property to their own use.
(2) If all the members of the firm join, a transfer to one of the partners is quite in order, but there is the same objection to one partner transferring partnership shares to himself, as there is to a trustee transferring to himself personally.
There is no objection to the converse procedure. One partner holding stock can certainly transfer it to his firm.
(3) This is no doubt legal, but it is open to the same difficulties as are involved in the transfer of trust stock to the trustee personally. The practice should not be permitted, unless the power of attorney expressly authorizes it by the use of such a phrase as "to transfer to himself or any other person." Brokers in Toronto generally have some such phrase in their forms.
(4) There is no objection to this.
(5) This also seems to us quite proper.
The only point we think that needs to be carefully remembered in dealing with these matters is that an agent, attorney, trustee, or other person standing in a fiduciary capacity, has no right to use this power for his own benefit without the express sanction of the parties concerned, and that if a bank lends itself to any act contrary to this principle, those who suffer may be able to fix responsibility upon it.