§ 45a-203 — (Formerly Sec. 45-88). Investment of funds.

Connecticut § 45a-203

• Jurisdiction: Connecticut
• Title 45a: Probate Courts and Procedure
• Ch. 802: Fiduciaries

Text

(a) Investments permitted. Trust funds, received or held by trustees, unless otherwise provided in the instrument creating the trust, and funds received or held by guardians or conservators, (1) may be invested in such real estate mortgages as the savings banks in this state may be authorized by law to invest in, or (2) may be deposited in savings banks incorporated by this state or in time or savings deposits in state banks and trust companies and national banking associations located in this state, or (3) may be paid into accounts of savings and loan associations located in this state insured by the Federal Savings and Loan Insurance Corporation, its successors or assigns, or (4) may be invested or reinvested in any bonds, stocks, specifically including but not by way of limitation, shares of any open-end or closed-end management-type investment company or investment trust registered under the Federal Investment Company Act of 1940, as amended, other securities, or other kinds of property or types of investments, selected by the trustee, guardian or conservator with the care of a prudent investor in accordance with the standards established by the Connecticut Uniform Prudent Investor Act, sections 45a-541 to 45a-541 l inclusive. Any bonds purchased by a trustee, guardian or conservator under authority of this section may, in the discretion of such fiduciary, be in coupon form. (b) Custody of securities. Transfer of title. In the absence of an express provision to the contrary in the instrument, judgment, decree or order creating a trust or other fiduciary relationship or appointing a fiduciary, such fiduciary may entrust the custody of any bonds, stocks or other securities of the fiduciary estate to any national banking association, state bank, trust company or state bank and trust company in the state of New York or in the commonwealth of Massachusetts or Pennsylvania, which is a member of the Federal Reserve System and whose capital, surplus and undivided profits in the aggregate are not less than fifty million dollars. Any such fiduciary may transfer title to any such bonds, stocks or other securities without any court order to do so. (c) Investments in securities underwritten by a banking institution. In the absence of an express provision to the contrary in the instrument, judgment, decree or order creating a trust or other fiduciary relationship or appointing a fiduciary, any banking institution acting as such a fiduciary may purchase for the fiduciary estate, in addition to investments otherwise permitted, bonds or other securities issued by the state of Connecticut, or by its agencies or instrumentalities, or by towns, cities, boroughs or legally established districts in Connecticut, which bonds or securities are underwritten by such banking institution or by any syndicate which includes such banking institution or an affiliate thereof, provided (1) that such bonds or securities are rated within the top four rating categories recognized by the Banking Commissioner, (2) that as a result of such purchase the total amount invested by the banking institution as a fiduciary in any one such bond issue or security issue would not aggregate during the existence of any underwriting or selling syndication in excess of ten per cent of the total amount of such issue outstanding, (3) that the banking institution discloses, at least annually, to the beneficiaries of its fiduciary accounts the fact that the banking institution or an affiliate may have an interest in the underwriting of such bond or security, and (4) that such purchase is made with the care of a prudent investor. The provisions of this subsection shall apply to purchases of bonds or other securities made at the time of the initial underwriting. For purposes of this subsection, a “banking institution” includes any state or federally chartered bank, savings bank or savings and loan association authorized to exercise trust powers and do business in this state. See Sec. 32-19 re insured mortgages as legal investments. See Sec. 45a-199 for definition of “fiduciary”. See Sec. 45a-595 re investment of funds in insurance and annuity contracts by conservator or guardian of estate.

Legislative History

(1949 Rev., S. 6893; 1953, 1955, S. 2910d; 1957, P.A. 241; 486; 1963, P.A. 218; February, 1965, P.A. 155, S. 1; 1967, P.A. 323; 461, S. 9; P.A. 78-121, S. 75, 113; P.A. 80-476, S. 186; P.A. 88-104, S. 1, 2; 88-364, S. 101, 123; P.A. 98-58, S. 2, 3; P.A. 03-84, S. 31.) History: 1963 act specifically authorized investment in “shares of any open-end or closed-end management-type investment company or investment trust registered under the Federal Investment Company Act of 1940”; 1965 act added provision re fiduciary's power to “entrust the custody of any bonds, stocks or other securities of the fiduciary estate” to specified banking institutions; 1967 acts deleted reference to share accounts of building or savings and loan associations, authorized deposits in time deposits, adding reference in that provision to national banking associations, and deleted reference to savings “departments” of state banks and trust companies; P.A. 78-121 referred to savings and loan associations rather than to “building or” savings and loan associations; P.A. 80-476 divided section into Subsecs. and referred simply to fiduciaries, deleting listing of specific types of fiduciaries, i.e. trustees, executors, administrators, guardians and conservators; P.A. 88-104 added a new Subsec. (c) re investments in securities by a banking institution acting as a fiduciary; P.A. 88-364 amended Subsec. (c)(2) by adding the words “during the existence of any underwriting or selling syndication” and made a technical change; Sec. 45-88 transferred to Sec. 45a-203 in 1991; P.A. 98-58 amended Subsec. (a) by adding references to other kinds of property or types of investments and to standards established by the Connecticut Uniform Prudent Investor Act, effective May 18, 1998; P.A. 03-84 changed “Commissioner of Banking” to “Banking Commissioner” in Subsec. (c)(1), effective June 3, 2003. Annotations to former section 45-88: Statute not mandatory. 61 C. 88. Mortgage loans in other states prima facie improper investment. 67 C. 194. Trustee cannot invest in shares of a trading company. 80 C. 402. If he makes improper investments, court can order them replaced. 73 C. 442. He should not use funds to trade in stocks on margin. 89 C. 229. Trustees may not ordinarily invest funds in permanent improvement of real estate unless authorized to do so in the trust instrument. 109 C. 194. Bank-fiduciary acting in good faith may deposit trust funds in its own savings department. 115 C. 24. A trustee, in investing trust fund or part thereof in note or mortgage, should not take it in his own name, but the papers should bear on their face sufficient indication that they are held by him as trustee; participation mortgages discussed. 121 C. 558. Cited. 122 C. 386; 125 C. 352. Superior Court held to have power to modify a provision imposed by legislative act for investment of the funds of a charitable trust. 133 C. 89. “Sound securities”, as used in will, are securities authorized for investment by trustees by section. 149 C. 350. Cited. 178 C. 52. When court will allow a trustee to deviate from terms of trust re investment of trust funds. 21 CS 23. Cited. 22 CS 162. Law on investments by trustee reviewed; trust instrument can enlarge trustee's investment power. 25 CS 23.