1997 Regular Session
To: Banks and Banking
By: Representative Guice
House Bill 1462
AN ACT TO AMEND SECTIONS 81-5-33, 91-9-107, 91-13-3, 91-13-6, MISSISSIPPI CODE OF 1972, TO PROVIDE THAT A BANK, SAVINGS AND LOAN ASSOCIATION OR SAVINGS BANK ACTING AS A TRUSTEE MAY NOT INVEST FUNDS OF THE TRUST IN ANY INVESTMENT ISSUED BY THE BANK, SAVINGS AND LOAN ASSOCIATION OR SAVINGS BANK ITSELF WITHOUT THE EXPRESS WRITTEN CONSENT OF THE BENEFICIARY OR BENEFICIARIES OF THE TRUST; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. Section 81-5-33, Mississippi Code of 1972, is amended as follows:
81-5-33. Banks may accept and execute all such trusts and perform such duties of every description as may be committed to them by any person or corporation or that may be committed or transferred to them by order of any court of record. They may receive money in trust, take and accept by grant, assignment, transfer, devise or bequest, and hold any real or personal estate or trusts created according to the laws of this or any other state, or of the United States, and execute such legal trusts in regard to the same, on such terms as may be directed or agreed upon thereto. They may act as agent for the investment of money or the management of property for other persons, and as agent for persons and corporations for the purpose of issuing, registering, transferring or countersigning the certificates of stock, bonds or other evidences of debt of any corporation, association, municipality, state, county or public authority on such terms as may be agreed upon. They also may act as guardian for any minor or insane person under the appointment of any court of record having jurisdiction of the person or estate of such minor or insane person and may act as administrator or executor of the estate of any deceased person. They may act as agent or attorney in fact and as commissioner for the sale of property, both real and personal, and may act as assignee or receiver, or as trustee in mortgages or bond issues, or in any other fiduciary capacity authorized by law. They may accept trust funds or other property upon specially agreed terms and pay or deliver the same to the owners, beneficiaries or others, as the case may be, when and as the same should be paid or delivered according to the terms of the trust agreement under which it is held. Whenever under the laws of this or any other state, or under the rule or order of any court, the execution of a bond for the protection of a private or court trust shall be required, a trust company shall be authorized to execute such bond for the protection of any trust or trust estate being administered by it.
Banking corporations created, organized and doing business under the laws of the State of Mississippi may exercise, without amendment of their charters, and, under their charter authority to engage in the general business of banking, all or any of the foregoing powers, but before any bank, whose charter merely authorizes the exercise of general banking functions, shall exercise such powers the previous written consent of the Commissioner of Banking and Consumer Finance shall be obtained.
Banks exercising any or all of such powers shall segregate all assets held in any fiduciary capacity from the general assets of the bank and shall keep a separate set of books and records showing in proper detail all transactions engaged in under the authority of this section, or under the authority heretofore granted to them in their charter or otherwise. Such books and records shall be inspected and examined by the state bank examiners at each and every examination of the bank.
No bank shall receive in its trust department deposits of current funds subject to check or the deposit of checks, drafts, bills of exchange or other items for collection or exchange purposes. Funds deposited or held in trust by the bank awaiting investment or distribution shall be carried in a separate account and shall not be used by the bank in the conduct of its business, unless it shall first set aside in the trust department United States bonds or bonds of the State of Mississippi, or any subdivision thereof, the market value of which shall at all times be not less than ten percent (10%) in excess of the total funds so held, exclusive of the portion of funds insured by the Federal Deposit Insurance Corporation.
In the event of the failure or liquidation of such bank, the owners of the funds held in trust for investment or distribution shall have a prior lien on the bonds or other securities so set apart in addition to their claim against the assets of the bank.
In any case in which the laws of this state require that one acting as trustee, executor, administrator or in any fiduciary capacity, shall take an oath or make an affidavit, the president, vice-president, cashier or trust officer of a bank may take the necessary oath or execute the necessary affidavit.
It shall be unlawful for any bank acting as a trustee to invest funds of the trust in any instrument issued by the bank itself without the express written consent of the beneficiary or beneficiaries of the trust. In making investments of trust funds it shall be unlawful for any bank to purchase securities from itself, or to purchase securities in which it may be interested, directly or indirectly. However, any bank, including a national bank, authorized to do business in this state in a fiduciary capacity may, unless prohibited or otherwise limited by the instrument governing the fiduciary relationship, in the exercise of its investment discretion or at the direction of another person authorized to direct the investment of funds held by the bank as fiduciary, invest and reinvest in the securities of, or other interests in, any open-end or closed-end management type investment company or investment trust registered under the Investment Company Act of 1940, 15 U.S.C. Section 80a-1, et seq., as amended, notwithstanding that such banking institution or affiliate of such banking institution provides services to the investment company or investment trust, such as that of an investment advisor, custodian, transfer agent, registrar, sponsor, distributor, manager or otherwise, and receives reasonable remuneration for those services, so long as the total compensation paid by the trust or custodial estate as trustee's fees and mutual fund fees is reasonable, taking into account the nature and extent of the trustee's duties, the nature and extent of the services provided to the investment company or investment trust, and the total compensation, costs and fees that would otherwise be paid, directly or indirectly, by the trust or custodial estate if the investment were made in an investment company or investment trust for which the bank or its affiliates provided no services. With respect to any funds so invested, such banking institution shall make available by statement, prospectus or otherwise to all current income beneficiaries of an account the basis, expressed as a percentage of asset value or otherwise, upon which the remuneration is calculated. No bank shall lend to any officer, director or employee thereof any funds held in trust by it, and any officer, director or employee making such loan, or to whom such loan is made, shall be guilty of a felony and upon conviction may be fined not more than Five Thousand Dollars ($5,000.00) or imprisoned in the State Penitentiary for not more than five (5) years, or by both such fine and imprisonment, in the discretion of the court.
SECTION 2. Section 91-9-107, Mississippi Code of 1972, is amended as follows:
91-9-107. (1) From time of creation of the trust until final distribution of the assets of the trust, a trustee has the power to perform, without court authorization, every act which a prudent man would perform for the purposes of the trust, including but not limited to the powers specified in subsection (3) of this section, and those powers, rights and remedies set forth in Section 91-9-9.
(2) In the exercise of his powers, including the powers granted by this article, a trustee has a duty to act with due regard to his obligation as a fiduciary.
(3) A trustee has the power, subject to subsections (1) and (2):
(a) To collect, hold and retain trust assets received from a trustor until, in the judgment of the trustee, disposition of the assets should be made; and the assets may be retained even though they include an asset in which the trustee is personally interested;
(b) To receive additions to the assets of the trust;
(c) To continue or participate in the operation of any business or other enterprise, and to effect incorporation, dissolution or other change in the form of the organization of the business or enterprise;
(d) To acquire an undivided interest in a trust asset in which the trustee, in any trust capacity, holds an undivided interest;
(e) To invest and reinvest trust assets in accordance with the provisions of the trust or as provided by law; however, a bank, savings and loan association or savings bank acting as a trustee may not invest funds of the trust in any investment issued by the bank, savings and loan association or savings bank itself without the express written consent of the beneficiary or beneficiaries of the trust;
(f) To deposit trust funds in a bank, including a bank operated by the trustee; however, a bank, savings and loan association or savings bank acting as a trustee may not invest funds of the trust in any investment issued by the bank, savings and loan association or savings bank itself without the express written consent of the beneficiary or beneficiaries of the trust;
(g) To acquire or dispose of an asset, for cash or on credit, at public or private sale; and to manage, develop, improve, exchange, partition, change the character of, or abandon a trust asset or any interest therein; and to encumber, mortgage or pledge a trust asset for a term within or extending beyond the term of the trust, in connection with the exercise of any power vested in the trustee;
(h) To make ordinary or extraordinary repairs or alterations in buildings, improvements or other structures; to demolish any improvements; to raze existing or erect new party walls, buildings or improvements;
(i) To subdivide, develop or dedicate land to public use; or to make or obtain the vacation of plats and adjust boundaries; or to adjust differences in valuation on exchange or partition by giving or receiving consideration; or to dedicate easements to public use without consideration;
(j) To enter for any purpose into a lease as lessor or lessee with or without option to purchase or renew for a term within or extending beyond the term of the trust;
(k) To enter into a lease or arrangement for exploration and removal of minerals or other natural resources, or enter into a pooling or unitization agreement;
(l) To grant an option involving disposition of a trust asset, or to take an option for the acquisition of any asset;
(m) To vote a security, in person or by general or limited proxy;
(n) To pay calls, assessments and any other sums chargeable or accruing against or on account of securities;
(o) To sell or exercise stock subscription or conversion rights; to consent, directly or through a committee or other agent, to the reorganization, consolidation, merger, dissolution or liquidation of a corporation or other business enterprise;
(p) To hold a security in the name of a nominee or in other form without disclosure of the trust, so that title to the security may pass by delivery, but the trustee is liable for any act of the nominee in connection with the stock so held;
(q) To insure the assets of the trust against damage or loss, and the trustee against liability with respect to third persons;
(r) To borrow money to be repaid from trust assets or otherwise; to advance money for the protection of the trust and for all expenses, losses and liability sustained in the administration of the trust or because of the holding or ownership of any trust assets, for which advances with any interest the trustee has a lien on the trust assets as against the beneficiary;
(s) To pay or contest any claim; to settle a claim by or against the trust by compromise, arbitration or otherwise; and to release, in whole or in part, any claim belonging to the trust to the extent that the claim is uncollectible;
(t) To pay taxes, assessments, compensation of the trustee, and other expenses incurred in the collection, care, administration and protection of the trust;
(u) To allocate items of income or expense to either trust income or principal, as provided by law, including creation of reserves out of income for depreciation, obsolescence or amortization, or for depletion in mineral or timber properties;
(v) To pay any sum distributable to a beneficiary under legal disability, without liability to the trustee, by paying the sum to the beneficiary or by using same for his benefit or by paying the sum for the use of the beneficiary either to a legal representative appointed by the court, or if none, to a relative or to an adult person with whom beneficiary is residing, who is believed to be reliable by trustee;
(w) To effect distribution of property and money in divided or undivided interests and to adjust resulting differences in valuation;
(x) To employ persons, including attorneys, auditors, investment advisors or agents, even if they are associated with the trustee, to advise or assist the trustee in the performance of his administrative duties; to act without independent investigation upon their recommendations; and instead of acting personally, to employ one or more agents to perform any act of administration, whether or not discretionary;
(y) To prosecute or defend actions, claims or proceedings for the protection of trust assets and of the trustee in the performance of his duties;
(z) To execute and deliver all instruments which will accomplish or facilitate the exercise of the powers vested in the trustee.
(4) If a trustee has determined that either (a) the market value of a trust is less than Twenty-five Thousand Dollars ($25,000.00) and that, in relation to the costs of administration of the trust, the continuance of the trust pursuant to its existing terms will defeat or substantially impair the accomplishment of the purposes of the trust; or (b) the trust no longer has a legitimate purpose or that its purpose is being thwarted with respect to any trust in any amount; then the trustee may seek court approval to terminate the trust and the court, in its discretion, may approve such termination. In such a case, the court may provide for the distribution of trust property, including principal and undistributed income, to the beneficiaries in a manner which conforms as nearly as possible to the intention of the settlor and the court shall make appropriate provisions for the appointment of a guardian in the case of a minor beneficiary.
SECTION 3. Section 91-13-3, Mississippi Code of 1972, is amended as follows:
91-13-3. In acquiring, investing, reinvesting, exchanging, retaining, selling, and managing property held in fiduciary capacity, the fiduciary shall exercise the judgment and care under the circumstances then prevailing which men of prudence, discretion, and intelligence exercise in the management of their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of their capital.
Within the limitations of the foregoing standard, a fiduciary is authorized to acquire and retain every kind of property, real, personal, or mixed, and every kind of investment, specifically including, but not by way of limitation, shares or interests in common trust funds, securities of any open-end or closed-end management type investment company or investment trust registered under the Federal Investment Company Act of 1940, as from time to time amended and, in addition, bonds, preferred stocks, or common stocks listed on a national securities exchange registered with the Securities and Exchange Commission, which men of prudence, discretion, and intelligence acquire or retain for their own account. However, a bank, savings and loan association or savings bank acting as a trustee may not invest funds of the trust in any instrument issued by the bank, saving and loan association or savings bank itself without the express written consent of the beneficiary or beneficiaries of the trust. Within the limitations of the foregoing standard, a fiduciary may retain property properly acquired, without limitation as to time and without regard to its suitability for original purchase.
SECTION 4. Section 91-13-6, Mississippi Code of 1972, is amended as follows:
91-13-6. (1) All trustees, guardians, administrators, executors and other fiduciaries may, without court order, if not prohibited by the instrument, judgment, decree or order establishing the fiduciary relationship, invest or deposit funds held in a fiduciary capacity in time certificates of deposit, savings accounts or other interest-bearing accounts of (a) any state or national bank (including itself, if such fiduciary be a bank, subject to subsection (2) of this section) whose main office is located in the state and the deposits of which are insured by the Federal Deposit Insurance Corporation, or (b) any state or federal savings and loan association (including itself, if such fiduciary be a savings and loan association, subject to subsection (2) of this section) whose main office is located in the state and the deposits of which are insured by the Federal Deposit Insurance Corporation.
(2) A bank, savings and loan association or savings bank acting as a trustee may not invest funds of the trust in any instrument issued by the bank, savings and loan association or savings bank itself without the express written consent of the beneficiary or beneficiaries of the trust.
SECTION 5. This act shall take effect and be in force from and after July 1, 1997 .