SB 0085

CHAPTER 54

SB 85 - FINAL VERSION

AN ACT relative to collateralization of municipal trust funds.

SPONSORS: Sen. Gordon, Dist 2; Rep. Patten, Carr 9

This bill grants trustees of municipal trust funds the option to collateralize the trust funds. This bill also clarifies the types of financial institutions which are required to provide a collateralization option.

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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

AN ACT relative to collateralization of municipal trust funds.

Be it Enacted by the Senate and House of Representatives in General Court convened:

54:1 Town Trust Funds; Custody; Investments. RSA 31:25 is repealed and reenacted to read as follows:

31:25 Custody; Investment. The trustees shall have the custody of all trust funds held by their town. The funds shall be invested only in deposits in any federally or state-chartered bank or association authorized to engage in a banking business in this state, or in deposits in any credit union in this state, or in bonds, notes or other obligations of the United States government, or in state, county, town, city, school district, water and sewer district bonds and the notes of towns or cities in this state; and such stocks and bonds as are legal for investment by any bank or association chartered by this state to engage in a banking business; and in participation units in the public deposit investment pool established pursuant to RSA 383:22. Deposits in a federally or state-chartered bank or association or credit union shall be made in the name of the town which holds the same as a trust, and it shall appear upon the books thereof as a trust fund. Any person who directly or indirectly receives any such trust funds for deposit or for investment in securities of any kind shall, prior to acceptance of such funds, make available at the time of such deposit or investment an option to have such funds secured by collateral having value at least equal to the amount of such funds. Such collateral shall be segregated for the exclusive benefit of the town depositing or investing such funds. Only securities defined by the bank commissioner, as provided by rules adopted pursuant to RSA 386:57, shall be eligible to be pledged as collateral. Shares of open ended mutual funds are also permitted if they are registered with the Securities and Exchange Commission, qualified for sale in the state of New Hampshire in accordance with the New Hampshire uniform securities act of the New Hampshire secretary of state's office, and which have in their prospectus a stated investment policy which is consistent with the investment policy adopted by the trustees of trust funds in accordance with RSA 35:9, and when so invested, the trustees shall not be liable for the loss thereof. The trustees may retain investments as received from donors, until the maturity thereof. The trustees shall formally adopt an investment policy for all investments made by them or by their agents for any trust funds in their custody. Such investment policy shall be reviewed and confirmed at least annually.

31:25-a Retention of Nonlegal Securities. Any security which at the time of its purchase under RSA 31:25 constituted a legal investment for [~~New Hampshire savings banks~~] any bank or association chartered by this state to engage in a banking business or for trustees of trust funds under the laws and conditions then existing may be retained notwithstanding the fact that, because of changes in the law relating to legal investments or because of conditions arising subsequent to the purchase of such security, its purchase might not then be legal; provided, however, that no such security that is not a prudent investment under the circumstances existing at the time of its retention and thereafter may be retained by the trustees; and provided further, that the aggregate total of the market value of all securities retained under this section shall not exceed 20 percent of the total market value of all the investments held by the trustees.

31:26 Investments by Single Trustee. In towns which have chosen a single trustee of trust funds such funds shall be invested only by deposit in [some savings bank or in the savings department of a national bank or trust company in this state, or in shares of any building and loan association or co-operative bank incorporated and doing business under the laws of this state, or in the shares of any federal savings and loan association located and doing business in this state] any federally or state-chartered bank or association authorized to engage in a banking business in this state, or in bonds, notes or other obligations of the United States government, or in state, county, town, city, school district, water and sewer district bonds and the notes of towns or cities in this state and when so invested the trustee shall not be liable for the loss thereof; and in any common trust fund established by the New Hampshire Charitable Foundation in accordance with RSA 292:23. Deposits in a federally or state-chartered bank or association shall be made in the name of the town which holds the same as a trust, and it shall appear upon the books thereof as a trust fund. Any person who directly or indirectly receives any such trust funds for deposit or for investment in securities of any kind shall, prior to acceptance of such funds, make available at the time of such deposit or investment an option to have such funds secured by collateral having value at least equal to the amount of such funds. Such collateral shall be segregated for the exclusive benefit of the town depositing or investing such funds. Only securities defined by the bank commissioner as provided by rules adopted pursuant to RSA 386:57 shall be eligible to be pledged as collateral. The trustee may retain investments as received from donors until the maturity thereof.

31:27 Collective Investments. Notwithstanding any statute or rule of law to the contrary, town and city trustees of trust funds may establish, maintain and operate one or more common trust funds, in which may be combined money and property belonging to the various trusts in their care, for the purpose of facilitating investments, providing diversification and obtaining reasonable income; provided however, that said common trust funds shall be limited to the investments authorized in RSA 31:25; provided further, that not more than $10,000, or more than 10 percent of the fund whichever is greater, of any town or city common trust funds shall be invested under RSA 31:25 in the obligations of any one corporation or organization, excepting deposits in [~~savings banks, or in the savings department of a national bank or trust company in this state~~] any federally or state-chartered bank or association authorized to engage in a banking business in this state, in credit unions in this state, [or in shares of any building and loan association or cooperative bank, incorporated and doing business under the laws of this state, or in the shares of any federal savings and loan association located and doing business in this state,] or in obligations of the United States and of the state of New Hampshire and its subdivisions; or in participation units in the public deposit investment pool established pursuant to RSA 383:22, or in shares of open ended mutual funds selected by the trustees for investment under RSA 31:25, and provided further, that the participating contributory interests of said trusts are properly evidenced by appropriate bookkeeping entries showing on an annual basis the capital contribution of and the profits and income allocable to each trust.

31:36 [~~Bank~~] Deposits. Deposits in [~~savings banks~~] any federally or state-chartered bank or association or any credit union shall be made in the name of the town which holds the same in trust, and it shall appear upon the book thereof that the same is a trust fund.

35:9 Investment. The moneys in each such fund shall be kept in a separate account and not intermingled with other funds of said municipality. Said capital reserve fund shall be invested only [by deposit in some savings bank or in the savings department of a national bank or trust company, or in the shares of a cooperative bank, building and loan association, or federal savings and loan association, in this state] in deposits in any federally or state-chartered bank or association authorized to engage in a banking business in this state, or in bonds, notes or other obligations of the United States government, or in bonds or notes of this state, in such stocks and bonds as are legal for investment by [~~New Hampshire savings~~] banks and associations chartered by this state to engage in a banking business, or in participation units in the public deposit investment pool established pursuant to RSA 383:22. When so invested the trustees hereinafter named shall not be liable for the loss thereof. Any interest earned or capital gains realized on the moneys so invested shall accrue to and become a part of the fund. Deposits in federally or state-chartered banks and associations shall be made in the name of the town, district or county which holds the same as a reserve, and it shall appear upon the books thereof that the same is a capital reserve fund. Any person who directly or indirectly receives any such capital reserve funds for deposit or for investment in securities of any kind shall, prior to acceptance of such funds, make available at the time of such deposit or investment an option to have such funds secured by collateral having a value at least equal to the amount of such funds. Such collateral shall be segregated for the exclusive benefit of the town, school district, village district or county depositing or investing such funds. Only securities defined by the bank commissioner as provided by rules adopted pursuant to RSA 386:57 shall be eligible to be pledged as collateral. At least yearly, the governing body of the town, school district, village district, or county shall review and adopt an investment policy for the investment of public funds in conformance with the provisions of applicable statutes.

54:7 Security for Certain Deposits of Public Funds. RSA 386:57, I is repealed and reenacted to read as follows:

I. Any bank or association chartered by this state to engage in a banking business shall have the power to pledge securities to secure deposits of public funds by the state or any of its officers, agencies or instrumentalities, or by any of the political subdivisions of the state or their officers, agencies or instrumentalities. In lieu of such collateralization, such banks and associations are authorized to secure such public deposits by surety bonds and to pledge securities to the surety in connection therewith. Any such deposit of public funds in any such bank or association may be evidenced by an agreement in such form and upon such terms and conditions as may be agreed upon by the depositing public authority and such bank or association. The bank commissioner may by rule limit the aggregate amount of securities which may be pledged by such banks and associations consistent with safe and sound banking, based upon the adequacy of the surplus of such bank or association and other criteria deemed pertinent by the bank commissioner.