MISSISSIPPI LEGISLATURE
2006 Regular Session
To: Judiciary A
By: Representative Denny
AN ACT TO CREATE THE UNIFORM PRUDENT INVESTOR ACT; TO ENACT THE PRUDENT INVESTOR RULE; TO SPECIFY THE STANDARD OF CARE; TO ENCOURAGE DIVERSIFICATION IN INVESTMENTS; TO PRESCRIBE TRUSTEE DUTIES; TO PROHIBIT UNREASONABLE INVESTMENT COSTS; TO SPECIFY STANDARDS FOR COMPLIANCE; TO PRESCRIBE WHEN DELEGATION IS APPROPRIATE; TO AMEND SECTIONS 25-11-121, 25-11-145, 37-155-115, 91-9-9, 91-9-103 AND 91-9-107, MISSISSIPPI CODE OF 1972, IN CONFORMITY; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. Prudent investor rule. (a) Except as otherwise provided in subsection (b), a trustee who invests and manages trust assets owes a duty to the beneficiaries of the trust to comply with the prudent investor rule set forth in this act.
(b) The prudent investor rule, a default rule, may be expanded, restricted, eliminated, or otherwise altered by the provisions of a trust. A trustee is not liable to a beneficiary to the extent that the trustee acted in reasonable reliance on the provisions of the trust.
SECTION 2. Standard of care; portfolio strategy; risk and return. (a) A trustee shall invest and manage trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.
(b) A trustee's investment and management decisions respecting individual assets must be evaluated not in isolation but in the context of the trust portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the trust.
(c) Among circumstances that a trustee shall consider in investing and managing trust assets are such of the following as are relevant to the trust or its beneficiaries:
(1) General economic conditions;
(2) The possible effect of inflation or deflation;
(3) The expected tax consequences of investment decisions or strategies;
(4) The role that each investment or course of action plays within the overall trust portfolio, which may include financial assets, interests in closely held enterprises, tangible and intangible personal property, and real property;
(5) The expected total return from income and the appreciation of capital;
(6) Other resources of the beneficiaries;
(7) Needs for liquidity, regularity of income, and preservation or appreciation of capital; and
(8) An asset's special relationship or special value, if any, to the purposes of the trust or to one or more of the beneficiaries.
(d) A trustee shall make a reasonable effort to verify facts relevant to the investment and management of trust assets.
(e) A trustee may invest in any kind of property or type of investment consistent with the standards of this act.
(f) A trustee who has special skills or expertise, or is named trustee in reliance upon the trustee's representation that the trustee has special skills or expertise, has a duty to use those special skills or expertise.
SECTION 3. Diversification. A trustee shall diversify the investments of the trust unless the trustee reasonably determines that, because of special circumstances, the purposes of the trust are better served without diversifying.
SECTION 4. Duties at inception of trusteeship. Within a reasonable time after accepting a trusteeship or receiving trust assets, a trustee shall review the trust assets and make and implement decisions concerning the retention and disposition of assets, in order to bring the trust portfolio into compliance with the purposes, terms, distribution requirements, and other circumstances of the trust, and with the requirements of this act.
SECTION 5. Loyalty. A trustee shall invest and manage the trust assets solely in the interest of the beneficiaries.
SECTION 6. Impartiality. If a trust has two (2) or more beneficiaries, the trustee shall act impartially in investing and managing the trust assets, taking into account any differing interests of the beneficiaries.
SECTION 7. Investment costs. In investing and managing trust assets, a trustee may only incur costs that are appropriate and reasonable in relation to the assets, the purposes of the trust, and the skills of the trustee.
SECTION 8. Reviewing compliance. Compliance with the prudent investor rule is determined in light of the facts and circumstances existing at the time of a trustee's decision or action and not by hindsight.
SECTION 9. Delegation of investment and management functions. (a) A trustee may delegate investment and management functions that a prudent trustee of comparable skills could properly delegate under the circumstances. The trustee shall exercise reasonable care, skill, and caution in:
(1) Selecting an agent;
(2) Establishing the scope and terms of the delegation, consistent with the purposes and terms of the trust; and
(3) Periodically reviewing the agent's actions in order to monitor the agent's performance and compliance with the terms of the delegation.
(b) The investment agent shall comply with the scope and terms of the delegation and shall exercise the delegated function with reasonable care, skill and caution and shall be liable to the trust for failure to do so. An investment agent who represents that he has special investment skills shall exercise those skills.
(c) A trustee who complies with the requirements of subsection (a) is not liable to the beneficiaries or to the trust for the decisions or actions of the agent to whom the function was delegated.
(d) By accepting the delegation of a trust function from the trustee of a trust that is subject to the law of this state, an agent submits to the jurisdiction of the courts of this state.
(e) A cofiduciary may delegate investment and management functions to another cofiduciary if the delegating cofiduciary reasonably believes that the other cofiduciary has greater investment skills than the delegating cofiduciary with respect to those functions. The delegating cofiduciary shall not be responsible for the investment decisions or actions of the other cofiduciary to which the investment functions are delegated if the delegating cofiduciary exercises reasonable care, skill and caution in establishing the scope and specific terms of the delegation and in reviewing periodically the other cofiduciary's actions in order to monitor the cofiduciary's performance and compliance with the scope and specific terms of the delegation.
(f) Investment in a mutual fund is not a delegation of investment function, and neither the mutual fund nor its advisor is an investment agent.
SECTION 10. Language invoking standard of act. The following terms or comparable language in the provisions of a trust, unless otherwise limited or modified, authorizes any investment or strategy permitted under this act: "Investments permissible by law for investment of trust funds," "legal investments," "authorized investments," "using the judgment and care under the circumstances then prevailing that persons 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," "prudent man rule," "prudent trustee rule," "prudent person rule," and "prudent investor rule."
SECTION 11. Application to existing trusts. This act applies to trusts existing on and created after its effective date. As applied to trusts existing on its effective date, this act governs only decisions or actions occurring after that date.
SECTION 12. Uniformity of application and construction. This act shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this act among the states enacting it.
SECTION 13. Short title. Sections 1 through 14 of this act may be cited as the "Mississippi Uniform Prudent Investor Act."
SECTION 14. Severability. If any provision of this act or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this act which can be given effect without the invalid provision or application, and to this end the provisions of this act are severable.
SECTION 15. Section 25-11-121, Mississippi Code of 1972, is amended as follows:
25-11-121. (1) The board shall, from time to time, determine the current requirements for benefit payments and administrative expense which shall be maintained as a cash working balance, except that such cash working balance shall not exceed at any time an amount necessary to meet the current obligations of the system for a period of ninety (90) days. Any amounts in excess of such cash working balance shall be invested, as follows, at such periodic intervals as the board may determine; however, all purchases shall be made from competitive offerings except short-term obligations referred to in Section 25-11-121(d):
(a) Bonds, notes, certificates and other valid general obligations of the State of Mississippi, or of any county, or of any city, or of any supervisors district of any county of the State of Mississippi, or of any school district bonds of the State of Mississippi; notes or certificates of indebtedness issued by the Veterans' Home Purchase Board of Mississippi, provided such notes or certificates of indebtedness are secured by the pledge of collateral equal to two hundred percent (200%) of the amount of the loan, which collateral is also guaranteed at least for fifty percent (50%) of the face value by the United States government, and provided that not more than five percent (5%) of the total investment holdings of the system shall be in Veterans' Home Purchase Board notes or certificates at any time; real estate mortgage loans one hundred percent (100%) insured by the Federal Housing Administration on single family homes located in the State of Mississippi, where monthly collections and all servicing matters are handled by Federal Housing Administration approved mortgagees authorized to make such loans in the State of Mississippi;
(b) State of Mississippi highway bonds;
(c) Funds may be deposited in any institution insured by the Federal Deposit Insurance Corporation that maintains a facility that takes deposits in the State of Mississippi or a custodial bank;
(d) Corporate bonds and taxable municipal bonds of investment grade as rated by Standard and Poor's or by Moody's Investment Service; or corporate short-term obligations of corporations or of wholly-owned subsidiaries of corporations, whose short-term obligations are rated A-3 or better by Standard and Poor's or rated P-3 or better by Moody's Investment Service;
(e) Bonds of the Tennessee Valley Authority;
(f) Bonds, notes, certificates and other valid obligations of the United States, and other valid obligations of any federal instrumentality that issues securities under authority of an act of Congress and are exempt from registration with the Securities and Exchange Commission;
(g) Bonds, notes, debentures and other securities issued by any federal instrumentality and fully guaranteed by the United States;
(h) Interest-bearing bonds or notes which are general obligations of any other state in the United States or of any city or county therein, provided such city or county had a population as shown by the federal census next preceding such investment of not less than twenty-five thousand (25,000) inhabitants and provided that such state, city or county has not defaulted for a period longer than thirty (30) days in the payment of principal or interest on any of its general obligation indebtedness during a period of ten (10) calendar years immediately preceding such investment;
(i) Shares of stocks, common and/or preferred, of corporations created by or existing under the laws of the United States or any state, district or territory thereof; provided
(i) The maximum investments in stocks shall not exceed fifty percent (50%) of the book value of the total investment fund of the system;
(ii) The stock of such corporation shall:
A. Be listed on a national stock exchange; or
B. Be traded in the over-the-counter market, provided price quotations for such over-the-counter stocks are quoted by the National Association of Securities Dealers Automated Quotation System (NASDAQ);
(iii) The outstanding shares of such corporation shall have a total market value of not less than Fifty Million Dollars ($50,000,000.00);
(iv) The amount of investment in any one (1) corporation shall not exceed three percent (3%) of the book value of the assets of the system; and
(v) The shares of any one (1) corporation owned by the system shall not exceed five percent (5%) of that corporation's outstanding stock;
(j) Bonds rated Single A or better, stocks and convertible securities of established non-United States companies, which companies are listed on only primary national stock exchanges of foreign nations; and in foreign government securities rated Single A or better by a recognized rating agency; provided that the total book value of investments under this paragraph shall at no time exceed thirty percent (30%) of the total book value of all investments of the system. The board may take requisite action to effectuate or hedge such transactions through foreign banks, including the purchase and sale, transfer, exchange, or otherwise disposal of, and generally deal in foreign exchange through the use of foreign currency, interbank forward contracts, futures contracts, options contracts, swaps and other related derivative instruments, notwithstanding any other provisions of this article to the contrary;
(k) Covered call and put options on securities traded on one or more of the regulated exchanges;
(l) Pooled or commingled funds managed by a corporate trustee or by a Securities and Exchange Commission registered investment advisory firm retained as an investment manager by the board of trustees, and shares of investment companies and unit investment trusts registered under the Investment Company Act of 1940, where such pooled or commingled funds or shares are comprised of common or preferred stocks, bonds, money market instruments or other investments authorized under this section. Such investment in commingled funds or shares shall be held in trust; provided that the total book value of investments under this paragraph shall at no time exceed five percent (5%) of the total book value of all investments of the system. Any investment manager approved by the board of trustees shall invest such commingled funds or shares as a fiduciary;
(m) Pooled or commingled real estate funds or real estate securities managed by a corporate trustee or by a Securities and Exchange Commission registered investment advisory firm retained as an investment manager by the board of trustees. Such investment in commingled funds or shares shall be held in trust; provided that the total book value of investments under this paragraph shall at no time exceed ten percent (10%) of the total book value of all investments of the system. Any investment manager approved by the board of trustees shall invest such commingled funds or shares as a fiduciary. The ten percent (10%) limitation in this subsection shall not be subject to the five percent (5%) limitation in paragraph (l) of this subsection;
(n) Types of investments not specifically authorized by this subsection if the investments are in the form of a limited partnership, commingled fund or separate account managed by a Securities and Exchange Commission registered investment advisory firm retained as an investment manager by the board; provided that the total book value of investments under this paragraph shall at no time exceed ten percent (10%) of the total book value of all investments of the system.
(2) All investments shall be acquired by the board at prices not exceeding the prevailing market values for such securities.
(3) Any limitations herein set forth shall be applicable only at the time of purchase and shall not require the liquidation of any investment at any time. All investments shall be clearly marked to indicate ownership by the system and to the extent possible shall be registered in the name of the system.
(4) Subject to the above terms, conditions, limitations and restrictions, the board shall have power to sell, assign, transfer and dispose of any of the securities and investments of the system, provided that said sale, assignment or transfer has the majority approval of the entire board. The board may employ or contract with investment managers, evaluation services or other such services as determined by the board to be necessary for the effective and efficient operation of the system.
(5) Except as otherwise provided herein, no trustee and no employee of the board shall have any direct or indirect interest in the income, gains or profits of any investment made by the board, nor shall any such person receive any pay or emolument for his services in connection with any investment made by the board. No trustee or employee of the board shall become an endorser or surety, or in any manner an obligor for money loaned by or borrowed from the system.
(6) All interest derived from investments and any gains from the sale or exchange of investments shall be credited by the board to the account of the system.
(7) The board of trustees annually shall credit regular interest on the mean amount for the preceding year in each of the reserves maintained by the board, with the exception of the expense account. This credit shall be made annually from interest and other earnings on the invested assets of the system. Any additional amount required to meet the regular interest on the funds of the system shall be charged to the employer's accumulation account, and any excess of earnings over such regular interest required shall be credited to the employer's accumulation account. Regular interest shall mean such per centum rate to be compounded annually as shall be determined by the board of trustees on the basis of the interest earnings of the system for the preceding year.
(8) The board of trustees shall be the custodian of the funds of the system. All expense vouchers and retirement allowance payrolls shall be certified by the executive secretary who shall furnish the board a surety bond in a company authorized to do business in Mississippi in such an amount as shall be required by the board, the premium to be paid by the board from the expense account.
(9) For the purpose of meeting disbursements for retirement allowances, annuities and other payments, cash may be kept available, not exceeding the requirements of the system for a period of ninety (90) days, on deposit in one or more banks or trust companies organized under the laws of the State of Mississippi or the laws of the United States, provided that the sum on deposit in any one (1) bank or trust company shall not exceed thirty-five percent (35%) of the paid-up capital and regular surplus of such bank or trust company.
(10) Except as otherwise provided, the monies or properties of the Public Employees' Retirement System of Mississippi deposited in any bank or banks of the United States shall, where possible, be safeguarded and guaranteed by the posting as security by the depository of bonds, notes and other securities purchasable by the system, as provided elsewhere in this section. The bonds, notes and other securities offered as security shall be posted to the credit of the system by the depository with the board or with an unaffiliated bank or trust company domiciled within the United States or the State of Mississippi acceptable to both the board and to the fiscal agent bank. In the event the board and the fiscal agent bank cannot reach an agreement, the bonds, notes and other securities shall be deposited in a bank or trust company designated by the State Commissioner of Banking and Consumer Finance. Provided, however, that bonds or notes of the United States government owned by the system may be deposited for safekeeping in any federal reserve bank.
(11) The board of trustees shall determine the degree of collateralization necessary for both foreign and domestic demand deposit accounts in addition to that which is guaranteed by the Federal Deposit Insurance Corporation or such other federal insurance program as may be in effect.
(12) The board, the executive secretary and employees shall discharge their duties with respect to the investments of the system solely for the interest of the system with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent investor acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, including diversifying the investments of the system so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so.
SECTION 16. Section 25-11-145, Mississippi Code of 1972, is amended as follows:
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25-11-145. (1) This provision of this section shall become effective from and after July 1 of the year in which Section 25-11-143 becomes effective as provided in subsection (1) of Section 25-11-143.
(2) In managing the funds received for the insurance program established in Section 25-11-143, the board from time to time shall determine the current requirements for payments and administrative expense that will be maintained as a cash working balance, except that the cash working balance shall not exceed at any time an amount necessary to meet the current obligations of the fund for a period of ninety (90) days. Any amounts in excess of the cash working balance shall be invested, as follows, at such periodic intervals as the board may determine:
(a) Funds may be deposited in federally insured institutions;
(b) Corporate and taxable municipal bonds of investment grade as rated by Standard and Poor's or by Moody's Investment Service, with bonds rated BAA/BBB not to exceed five percent (5%) of the book value of the total fixed income investments, or corporate short-term obligations of corporations or of
wholly owned subsidiaries of corporations, whose short-term obligations are rated A-3 or better by Standard and Poor's or rated P-3 or better by Moody's Investment Service;
(c) Bonds of the Tennessee Valley Authority; bonds, notes, certificates and other valid obligations of the United States, and other valid obligations of any federal instrumentality that issues securities under authority of an act of Congress and are exempt from registration with the Securities and Exchange Commission; bonds, notes, debentures and other securities issued by any federal instrumentality and fully guaranteed by the United States;
(d) Interest-bearing bonds or notes that are general obligations of any other state in the United States or of any city or county in that state, provided that the state, city or county has not defaulted for a period longer than thirty (30) days in the payment of principal or interest on any of its general obligation indebtedness during a period of ten (10) calendar years immediately preceding the investment;
(e) Shares of stocks, common and/or preferred, of corporations created by, or existing under, the laws of the United States or any state, district or territory thereof, provided that:
(i) The maximum investments in stocks shall not exceed fifty percent (50%) of the book value of the total investment fund;
(ii) The stock of such corporation shall be listed on a national stock exchange, or be traded in the over-the-counter market;
(iii) The outstanding shares of the corporation shall have a total market value of not less than Fifty Million Dollars ($50,000,000.00);
(iv) The amount of investment in any one (1) corporation shall not exceed three percent (3%) of the book value of the total investment fund; and
(v) The shares of any one (1) corporation owned by the fund shall not exceed five percent (5%) of that corporation's outstanding stock;
(f) Bonds rated Single A or better, stocks and convertible securities of established non-United States companies, and in foreign government securities rated Single A or better by a recognized rating agency, provided that the total book value of investments under this paragraph at no time shall exceed thirty percent (30%) of the total book value of the total investment fund. The board may take requisite action to effectuate or hedge those transactions through foreign or domestic banks, including the purchase and sale, transfer, exchange, or otherwise disposal of, and generally deal in foreign exchange through the use of foreign currency, interbank forward contracts, futures contracts, options contracts, swaps and other related derivative instruments;
(g) Covered call and put options on securities traded on one or more of the regulated exchanges;
(h) Pooled or commingled funds managed by a corporate trustee or by a Securities and Exchange Commission registered investment advisory firm retained as an investment manager by the board of trustees, and shares of investment companies and unit investment trusts registered under the Investment Company Act of 1940, where the pooled or commingled funds or shares are comprised of common or preferred stocks, bonds, money market instruments or other investments authorized under this section. The investment in commingled funds or shares shall be held in trust. Any investment manager approved by the board of trustees shall invest the commingled funds or shares as a fiduciary;
(i) Pooled or commingled real estate funds or real estate securities managed by a corporate trustee or by a Securities and Exchange Commission registered investment advisory firm retained as an investment manager by the board of trustees, provided that the total book value of investments under this paragraph at no time shall exceed five percent (5%) of the total book value of all investments of the total investment fund. The investment in commingled funds or shares shall be held in trust. Any investment manager approved by the board of trustees shall invest the commingled funds or shares as a fiduciary.
(3) All investments shall be acquired at prices not exceeding the prevailing market values for the securities.
(4) Any limitations set forth in this section shall be applicable only at the time of purchase and shall not require the liquidation of any investment at any time. All investments shall be clearly marked to indicate ownership by the fund and to the extent possible shall be registered in the name of the fund.
(5) Subject to the preceding terms, conditions, limitations and restrictions, the board shall have power to sell, assign, transfer and dispose of any of the securities and investments of the fund, provided that the sale, assignment or transfer has the majority approval of the entire board. The board may employ or contract with investment managers, evaluation services or other such services as determined by the board to be necessary for the effective and efficient operation of the fund.
(6) Except as otherwise provided in this section, no trustee and no employee of the board shall have any direct or indirect interest in the income, gains or profits of any investment made by the board, nor shall any such person receive any pay or emolument for his services in connection with any investment made by the board. No trustee or employee of the board shall become an endorser or surety, or in any manner an obligor for money loaned by or borrowed from the fund.
(7) All interest derived from investments and any gains from the sale or exchange of investments shall be credited by the board to the account of the fund.
(8) The board of trustees shall be the custodian and fiduciary of the fund.
(9) For the purpose of meeting disbursements, cash may be kept available, not exceeding the requirements of the fund for a period of ninety (90) days, on deposit in one or more banks or trust companies organized under the laws of the State of Mississippi or the laws of the United States, provided that the sum on deposit in any one (1) bank or trust company shall not exceed thirty-five percent (35%) of the paid-up capital and regular surplus of the bank or trust company.
(10) The board of trustees shall determine the degree of collateralization necessary for both foreign and domestic demand deposit accounts in addition to that which is guaranteed by the Federal Deposit Insurance Corporation or such other federal insurance program as may be in effect.
(11) The board, the executive director and employees shall discharge their duties with respect to the investments of the system solely for the interest of the fund with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent investor acting in a like capacity and familiar with those matters would use in the conduct of an enterprise of a like character and with like aims, including diversifying the investments of the system so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so.
(12) Investment management fees and costs shall be paid from the fund.
SECTION 17. Section 37-155-115, Mississippi Code of 1972, is amended as follows:
37-155-115. (1) The board has authority to establish a comprehensive investment plan for the purposes of this article, to invest any funds of the MACS Trust Fund in any instrument, obligation, security or property that constitutes legal investments for public funds in the state, and to name and use depositories for its investments and holdings. The comprehensive investment plan shall specify the investment policies to be utilized by the board in its administration of the funds. The board may authorize investments in any investment vehicle authorized for the Mississippi Prepaid Affordable College Tuition (MPACT) Program under Section 37-155-9. However, the restrictions in Section 37-155-9 as to percentages of the total fund that may be invested in any category of authorized investment shall not apply to the MACS Trust Fund. The program account, in its discretion, may invest in obligations of the state or any political subdivision of the state or in any business entity in the state.
Notwithstanding any state law to the contrary, the board shall invest or cause to be invested amounts on deposit in the MACS Trust Fund, including the program account, in a manner reasonable and appropriate to achieve the objectives of the program, exercising the discretion and care of a prudent investor in similar circumstances with similar objectives. The board shall give due consideration to the risk, expected rate of return, term or maturity, diversification of total investments, liquidity and anticipated investments in and withdrawals from the MACS Trust Fund.
(2) All investments shall be acquired by the board at prices not exceeding the prevailing market values for such securities.
(3) Any limitations set forth in this section shall be applicable only at the time of purchase and shall not require the liquidation of any investment at any time. All investments shall be marked clearly to indicate ownership by the system and, to the extent possible, shall be registered in the name of the system.
(4) Subject to the terms, conditions, limitations and restrictions set forth in this section, the board may sell, assign, transfer and dispose of any of the securities and investments of the system if the sale, assignment or transfer has the majority approval of the entire board. The board may employ or contract with investment managers, evaluation services, or other such services as determined by the board to be necessary for the effective and efficient operation of the system.
(5) Except as otherwise provided in this section, no trustee or employee of the board may have any direct or indirect interest in the income, gains or profits of any investment made by the board, and such person may not receive any pay or emolument for his services in connection with any investment made by the board. No trustee or employee of the board may become an endorser or surety or in any manner an obligor for money loaned by or borrowed from the system.
(6) Under the authority granted in Section 37-155-107, the board may establish criteria for investment managers, mutual funds or other such entities to act as contractors or consultants to the board. The board may contract, either directly or through such contractors or consultants, to provide such services as may be a part of the comprehensive investment plan or as may be deemed necessary or proper by the board, including, but not limited to, providing consolidated billing, individual and collective record keeping and accounting, and asset purchase, control and safekeeping.
(7) No account owner, contributor, payor or beneficiary may directly or indirectly direct the investment of any account except as may be permitted under Section 529 of the Internal Revenue Code of 1986, as amended.
(8) The board may approve different investment plans and options to be offered to participants to the extent permitted under Section 529 of the Internal Revenue Code of 1986, as amended, and consistent with the objectives of this article and may require the assistance of investment counseling before participation in different options.
(9) Interests or accounts in the MACS Trust Fund and transactions in such interests or accounts shall be exempt from Sections 75-71-113 and 75-71-401.
SECTION 18. Section 91-9-9, Mississippi Code of 1972, is amended as follows:
91-9-9. (1) In addition to powers, remedies and rights which may be set forth in any will, trust agreement or other document which is the source of authority, a trustee, executor, administrator, guardian, or one acting in any other fiduciary capacity, whether an individual, corporation or other entity ("fiduciary") shall have the following powers, rights and remedies whether or not set forth in the will, trust agreement or other document which is the source of authority:
(a) To inspect, investigate or cause to be inspected and investigated, property held by the fiduciary, including interests in sole proprietorships, partnerships, or corporations and any assets owned by any such business enterprise, for the purpose of determining compliance with any environmental law affecting such property and to respond to any actual or potential violation of any environmental law affecting property held by the fiduciary;
(b) To take on behalf of the estate or trust, any action necessary to prevent, abate, or otherwise remedy any actual or potential violation of any environmental law affecting property held by the fiduciary, either before or after the initiation of an enforcement action by any governmental body;
(c) To refuse to accept property in trust if the fiduciary determines that any property to be donated or conveyed to the trust either is contaminated by any hazardous substance, or is being used or has been used for any activity directly or indirectly involving any hazardous substance, which could result in liability to the trust or otherwise impair the value of the assets held therein;
(d) To settle or compromise at any time any and all claims against the trust or estate which may be asserted by any governmental body or private party involving the alleged violation of any environmental law affecting property held in trust or in an estate;
(e) To disclaim any power granted by any document, statute, or rule of law which, in the sole discretion of the fiduciary, may cause the fiduciary to incur personal liability under any environmental law;
(f) To decline to serve as a fiduciary, if the fiduciary reasonably believes that there is or may be a conflict of interest between the fiduciary in its or his fiduciary capacity and in its or his individual capacity, because of potential claims or liabilities which may be asserted against the fiduciary on behalf of the trust or estate due to the type or condition of assets held therein.
(2) An administrator, executor, guardian or conservator is not relieved under this chapter from obtaining court approval for any actions which otherwise are required to be approved by a court.
(3) The fiduciary shall be entitled to charge the cost of any inspection, investigation, review, abatement, response, cleanup, or remedial action authorized herein against the income or principal of the trust or estate. A fiduciary shall not be personally liable to any beneficiary or other party for any decrease in value of assets in trust or in an estate by reason of the fiduciary's compliance or efforts to comply with any environmental law, specifically including any reporting requirement under such law. Neither the acceptance by the fiduciary of property or a failure by the fiduciary to inspect or investigate property shall be deemed to create any inference as to whether there is or may be any liability under any environmental law with respect to such property.
(4) For purposes of this section, "environmental law" means any federal, state, or local law, rule, regulation, or ordinance relating to protection of the environment or human health. For purposes of this section, "hazardous substances" means any substance defined as hazardous or toxic or otherwise regulated by any environmental law.
(5) A fiduciary in its or his individual capacity shall not be considered an owner or operator of any property of the trust or estate for the purposes of any environmental law.
(6) Notwithstanding any other provision of this chapter, the fiduciary is subject at all times to the provisions of the Prudent Investor Standard in all its dealings.
(7) The provisions of this section shall stand repealed from and after July 1, 2008.
SECTION 19. Section 91-9-103, Mississippi Code of 1972, is amended as follows:
91-9-103. The following words when used in this article shall have the following meanings:
(a) "Trust" means an express trust created by a trust instrument, including a will, whereby a trustee has the duty to administer a trust asset for the benefit of a named or otherwise described income or principal beneficiary, or both; "trust" does not include a resulting or constructive trust, a business trust which provides for certificates to be issued to the beneficiary, an investment trust, a voting trust, a security instrument, a trust created by the judgment or decree of a court, a liquidation trust, or a trust for the primary purpose of paying dividends, interests, interest coupons, salaries, wages, pensions, profits, or employee benefits of any kind, an instrument wherein a person is nominee or escrowee for another, a trust created in deposits in any financial institution, or other trust the nature of which does not admit of general trust administration.
(b) "Trustee" means an original, added, or successor trustee; and in the case of a corporate trustee, includes its successor by merger or consolidation.
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SECTION 20. 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 investor would perform for the purposes of the trust, including, but not limited to:
(a) The powers specified in subsection (3) of this section, and
(b) Those powers, rights and remedies set forth in Section 91-9-9, related to compliance with environmental laws affecting property held by fiduciaries. The provisions of this paragraph (b) shall stand repealed from and after July 1, 2008.
(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;
(f) To deposit trust funds in a bank, including a bank operated by the trustee;
(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 One Hundred Fifty Thousand Dollars ($150,000.00) 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.
(5) (a) Unless expressly provided to the contrary in the trust instrument, a trustee may consolidate two (2) or more trusts having substantially similar terms into a single trust; divide on a fractional basis a single trust into two (2) or more separate trusts for any reason; and may segregate by allocation to a separate account or trust a specific amount from, a portion of, or a specific asset included in the trust property of any trust to reflect a disclaimer, to reflect or result in differences in federal tax attributes, to satisfy any federal tax requirement, to make federal tax elections, to reduce potential generation-skipping transfer tax liability, or for any other tax planning purposes or other reasons.
(b) A separate trust created by severance or segregation must be treated as a separate trust for all purposes from the effective date in which the severance or segregation is effective. The effective date of the severance or segregation may be retroactive. In managing, investing, administering and distributing the trust property of any separate account or trust and in making applicable tax elections, the trustee may consider the differences in federal tax attributes and all other factors the trustee believes pertinent and may make disproportionate distributions from the separate trusts or accounts created.
(c) A trust or account created by consolidation, severance or segregation under this subsection (5) must be held on terms and conditions that are substantially equivalent to the terms of the trust before consolidation, severance or segregation so that the aggregate interests of each beneficiary are substantially equivalent to the beneficiary's interests in the trust or trusts before consolidation, severance or segregation. In determining whether a beneficiary's aggregate interests are substantially equivalent, the trustee shall consider the economic value of those interests to the extent they can be valued, considering actuarial factors as appropriate. If a beneficiary's interest cannot be valued with any reasonable degree of certainty because of the nature of the trust property, the terms of the trust, or other reasons, the trustee shall base the determination upon such other factors as are reasonable and appropriate under the facts and circumstances applicable to that particular trust, including the purposes of the trust. Provided, however, the terms of any trust before consolidation, severance or segregation which permit qualification of that trust for an applicable federal tax deduction, exclusion, election, exemption, or other special federal tax status must remain identical in the consolidated trust or in each of the separate trusts or accounts created by severance or segregation.
(d) A trustee who acts in good faith is not liable to any person for taking into consideration differences in federal tax attributes and other pertinent factors in administering trust property of any separate account or trust, in making tax elections, and making distributions pursuant to the terms of the separate trust.
(e) Income earned on a consolidated or severed or segregated amount, portion, or specific asset after the consolidation or severance is effective passes with that amount, portion or specific asset.
(f) This subsection (5) applies to all trusts whenever created, whether before, on, or after July 1, 2001, and whether such trusts are inter vivos or testamentary, are created by the same or different instruments, by the same or different persons and regardless of where created or administered.
(g) This subsection (5) does not limit the right of a trustee acting in accordance with the applicable provisions of the governing instrument to divide or consolidate trusts.
(h) Nothing contained in this subsection (5) shall be construed as granting to any trustee a general power of appointment over any trust not otherwise expressly granted in the trust instrument.
SECTION 21. This act shall take effect and be in force from and after July 1, 2006.