§ 914

Investments in affiliated investments; transactions with affiliates. (a) As used in this Section: (1) "Affiliate" means any corporation or other entity that directly or indirectly is controlled by a financial institution acting in a fiduciary capacity, or is related to the financial institution by shareholding or other means of common ownership and control. (2) "Affiliated investment" means an investment for which the fiduciary or an affiliate of the fiduciary acts as advisor, administrator, distributor, placement agent, underwriter, broker, or in any other capacity for which the fiduciary or an affiliate of the fiduciary receives or has received compensation from the investment. (3) "Fiduciary capacity" includes an agent with investment discretion to determine what securities or other assets to purchase or sell on behalf of a fiduciary account. (b) A financial institution acting in any fiduciary capacity may purchase any affiliated investment, including, but not limited to, insurance, equity derivatives, or securities underwritten or otherwise distributed by the financial institution or by an affiliate, through or directly from the financial institution or an affiliate or from a syndicate or selling group that includes the financial institution or an affiliate, if the purchase is otherwise prudent under the applicable fiduciary investment standard. (c) The compensation paid to a financial institution acting in any fiduciary capacity or an affiliate of the financial institution for any affiliated investment under this Section must be reasonable and may not be prohibited by the instrument governing the fiduciary relationship. The compensation for the affiliated investment may be in addition to the compensation that the financial institution is otherwise entitled to receive from the fiduciary account. (d) A financial institution shall disclose, at least annually: (1) any purchase of an affiliated investment authorized by this Section, including all compensation paid or to be paid by the fiduciary account or to be received by an affiliate arising from the affiliated investment; (2) the capacities in which the financial institution or an affiliate acts for the issuer of the securities or the provider of the products or services; and (3) that the financial institution or an affiliate may have an interest in the affiliated investment. (e) The disclosure shall be given, in writing or electronically by any document prepared for an affiliated investment under federal or state securities laws or in a written summary that includes all compensation received or to be received by the financial institution or any affiliate and an explanation of the manner in which the compensation is calculated (either as a percentage of the assets invested or by some other formula or method), to each principal in an agency relationship and to all persons entitled to receive account statements of any other fiduciary account. (f) This Section applies to the purchase of securities made at the time of the initial offering of the securities or at any time thereafter. (g) A financial institution that has complied with the terms of this Section has full authority to administer an affiliated investment, including the authority to vote proxies on the affiliated investment.

Legislative History

(Source: P.A. 101-48, eff. 1-1-20 .)