July 10, 1991
TO: INSTITUTIONAL FUNDS COMMITTEE NO. 4-91
RE: FURTHER UPDATE TO SURVEY OF STATE FIDUCIARY INVESTMENT LAWS
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Attached is a revised copy of our survey of state fiduciary
investment laws, reflecting legislation recently enacted in
Missouri, Nevada and South Carolina that permits a fiduciary to
invest trust assets in securities of a registered investment
company notwithstanding that the fiduciary or its affiliate
provides other services, such as investment advisory, custodian
or transfer agency services, to the investment company and
receives compensation for those services. The effective dates
for these provisions are as follows: Missouri - 8/28/91;
Nevada - 10/1/91 and South Carolina - 6/12/91. The enclosed
survey should replace all prior versions.
On a related matter, legislation recently became effective
in Alabama regarding the timely investment of idle funds in a
fiduciary account. The new law provides, among other things,
that absent specific instructions in a governing document, a bank
or trust company acting as fiduciary may invest idle fiduciary
funds in a money market mutual fund "or any other generally
accepted investment vehicle for the investment of idle funds."
The legislation states that the investment vehicle may be a
mutual fund provided by a third party vendor, even if the
fiduciary or an affiliate receives separate compensation from the
vendor, or may be a mutual fund provided by the fiduciary or its
affiliate for which the fiduciary or affiliate receives
compensation as the mutual fund's investment advisor,
administrator, trustee, transfer agent or other similar capacity.
The fiduciary may net compensation for the investment of idle
funds from the yield of the investment, but must disclose this
compensation to the current income beneficiary by mailing a
separate notice to the beneficiary's last known address.
If you have any questions about the survey, please contact
me at 202/955-3514. We will keep you informed of further
developments.
Frances M. Stadler
Assistant General Counsel
Attachment