Bill Text - SB243 (2012)

Relative to the management of trust funds and capital reserve funds.


Revision: May 21, 2012, midnight

SB 243 – AS AMENDED BY THE HOUSE

03/07/12 0804s

16May2012… 2071h

2012 SESSION

12-2912

04/03

SENATE BILL 243

AN ACT relative to the management of trust funds and capital reserve funds.

SPONSORS: Sen. Stiles, Dist 24; Sen. Lambert, Dist 13; Sen. Boutin, Dist 16; Rep. Nevins, Rock 15; Rep. Waddell, Rock 15; Rep. Pilotte, Hills 16

COMMITTEE: Public and Municipal Affairs

ANALYSIS

This bill amends the statutes relating to the management and investment of trust funds and capital reserve funds of cities and towns.

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Explanation: Matter added to current law appears in bold italics.

Matter removed from current law appears [in brackets and struckthrough.]

Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

03/07/12 0804s

16May2012… 2071h

12-2912

04/03

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Twelve

AN ACT relative to the management of trust funds and capital reserve funds.

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

1 Trust Funds; Records. Amend RSA 31:34 to read as follows:

31:34 Records. The trustees shall keep a record of all trusts in a record book[,] or maintained in electronic format which shall be open to the inspection of all persons in their town. Such records shall be maintained and retained pursuant to RSA 91-A:4.

2 Trust Funds; Professional Banking and Brokerage Assistance. Amend RSA 31:38-a, II-c to read as follows:

II-c. “Investment advisor” in this section means a qualified investment advisory firm registered with the appropriate regulatory authorities and licensed pursuant to RSA 421-B:7. Such firm may or may not be associated with a brokerage firm as defined in paragraph II-a.

3 Trust Funds; Professional Banking and Brokerage Assistance. Amend RSA 31:38-a, III to read as follows:

III. Any trustee or trustees of trust funds authorized by this chapter may hire or employ the trust department or departments of a bank or banks or a brokerage firm or an investment advisor to assist in the management and investment of trust fund resources or to provide bookkeeping services in connection therewith or to do both. [They may also place securities in the nominee name of a trust department or departments or a brokerage firm to facilitate transfers for such securities.] Trust fund records maintained by any bank or brokerage firm [must] or investment advisor shall be available at all times for examination by local auditors, by independent accountants or auditors retained by a municipality, or by the auditors of the department of revenue administration; and such records shall be municipal records and property. In employing such trust departments, portfolio management departments, or investment advisors, the trustees may enter into contracts or agreements delegating the management of such trust funds to those departments subject to investment guidelines adopted by the trustees under applicable statutes and subject to at least quarterly review and approval of such management by the trustees.

4 Capital Reserve Funds of Counties; Trustees of Funds. Amend RSA 35:10 to read as follows:

35:10 Trustees of Funds. The trustees of trust funds of a town or city shall have custody of any capital reserve of a town, district or water departments therein, the trustees of trust funds as provided in RSA 35:2 shall have custody of such capital reserve of a school district, and the county treasurer of a county shall have custody of any capital reserve of his county. Said trustees or treasurer shall give bond in such amount and in such form as the commissioner of revenue administration shall prescribe, and any such trustee or treasurer who shall make any payment of income or principal from any such capital reserve fund before the approval of his bond in writing by the commissioner of revenue administration shall be personally liable to the town, district, department or county for any loss resulting from such payment, to be recovered for the town, district, department or county at the suit of any citizen. The expenses of said trustees or treasurer in said capacity and the expense of their bonds shall be charged as incidental town, district, department or county charges, except that investment management expenses may be charged as provided in RSA 35:19.

5 New Sections; Capital Reserve Funds of Counties, Towns, Districts, and Water Departments; Professional Banking or Brokerage Assistance. Amend RSA 35 by inserting after section 18 the following new sections:

35:19 Professional Banking or Brokerage Assistance.

I. In this section:

(a) “Bank” means a savings bank, national bank or trust company in this state, any building and loan association or cooperative bank, incorporated and doing business under the laws of this state, or any federal savings and loan association located and doing business in this state.

(b) “Brokerage firm” means a firm registered under the securities law effecting transactions in securities for the accounts of others.

(c) “Portfolio management department” means the department of a brokerage firm responsible for investment management of client accounts.

(d) “Investment advisor” means a qualified investment advisory firm registered with the appropriate regulatory authorities and licensed pursuant to RSA 421-B:7. Such firm may or may not be associated with a brokerage firm.

II. Any trustee or trustees of capital reserve funds authorized by this chapter may hire or employ the trust department or departments of a bank or banks or a brokerage firm or investment advisor to assist in the management and investment of capital reserve fund resources or to provide bookkeeping services in connection therewith or to do both. [They may also place securities in the nominee name of a trust department or departments or a brokerage firm or investment advisor to facilitate transfers for such securities.] Capital reserve fund records maintained by any bank or brokerage firm or investment advisor shall be available at all times for examination by local auditors, by independent accountants or auditors retained by a municipality, or by the auditors of the department of revenue administration; and such records shall be municipal records and property. In employing such trust departments, portfolio management departments, or investment advisors, the trustees may enter into contracts or agreements delegating the management of such capital reserve funds to those departments subject to investment guidelines adopted by the trustees under applicable statutes and subject to at least quarterly review and approval of such management by the trustees.

III. Any expenses incurred pursuant to paragraph II of this section by a trustee or trustees of trust funds authorized by this chapter may, with the annual approval of the governing body, be charged against the income of the capital reserve funds involved and shall be identified and reported in the annual report of the trustee or trustees as expenditures out of capital reserve funds made pursuant to paragraph II.

35:20 Capital Gains. Notwithstanding any statute or rule to the contrary, trustees of trust funds in towns, school districts, and village districts shall treat realized capital gains and capital gain distributions earned on principal balances and income balances in capital reserve funds as principal.

6 Capital Reserve Funds for Cities; Trustees of Funds. Amend RSA 34:6 to read as follows:

34:6 Trustees of Funds. The trustees of trust funds of the city shall have custody of all capital reserves. Said trustees shall give bond in such amount and in such form as the city council or board of aldermen shall prescribe, and any trustee who shall make payment of income or principal from any such capital reserve fund before the approval of his or her bond in writing by the city council or board of aldermen shall be personally liable to the city for any loss resulting from such payment, to be recovered by the city at the suit of any citizen. The expenses of said trustees in said capacity and the expense of their bonds shall be charged as incidental city charges except that investment management expenses may be charged as provided in RSA 34:16.

7 New Sections; Capital Reserve Funds for Cities; Professional Banking or Brokerage Assistance; Capital Gains. Amend RSA 34 by inserting after section 15 the following new sections:

34:16 Professional Banking or Brokerage Assistance.

I. In this section:

(a) “Bank” means a savings bank, national bank or trust company in this state, any building and loan association or cooperative bank, incorporated and doing business under the laws of this state, or any federal savings and loan association located and doing business in this state.

(b) “Brokerage firm” means a firm registered under the securities law effecting transactions in securities for the accounts of others.

(c) “Portfolio management department” means the department of a brokerage firm responsible for investment management of client accounts.

(d) “Investment advisor” means a qualified investment advisory firm registered with the appropriate regulatory authorities and licensed pursuant to RSA 421-B:7. Such firm may or may not be associated with a brokerage firm.

II. Any trustee or trustees of capital reserve funds authorized by this chapter may hire or employ the trust department or departments of a bank or banks or a brokerage firm or investment advisor to assist in the management and investment of capital reserve fund resources or to provide bookkeeping services in connection therewith or to do both. [They may also place securities in the nominee name of a trust department or departments or a brokerage firm or investment advisor to facilitate transfers for such securities.] Capital reserve fund records maintained by any bank or brokerage firm or investment advisor shall be available at all times for examination by local auditors, by independent accountants or auditors retained by a municipality, or by the auditors of the department of revenue administration; and such records shall be municipal records and property. In employing such trust departments, portfolio management departments, or investment advisors, the trustees may enter into contracts or agreements delegating the management of such capital reserve funds to those departments subject to investment guidelines adopted by the trustees under applicable statutes and subject to at least quarterly review and approval of such management by the trustees.

III. Any expenses incurred pursuant to paragraph II of this section by a trustee or trustees of trust funds authorized by this chapter may, with the annual approval of the governing body, be charged against the income of the capital reserve funds involved and shall be identified and reported in the annual report of the trustee or trustees as expenditures out of capital reserve funds made pursuant to paragraph II.

34:17 Capital Gains. Notwithstanding any statute or rule to the contrary, trustees of trust funds in cities shall treat realized capital gains and capital gain distributions earned on principal balances and income balances in capital reserve funds as principal.

8 Effective Date. This act shall take effect 60 days after its passage.

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