HB 297 – AS INTRODUCED
2013 SESSION
08/04
HOUSE BILL 297
AN ACT relative to the management of trust funds and capital reserve funds.
SPONSORS: Rep. F. Rice, Rock 21; Rep. Roberts, Ches 4; Rep. Hagan, Rock 4; Rep. Emerick, Rock 21; Sen. Stiles, Dist 24; Sen. Boutin, Dist 16
COMMITTEE: Municipal and County Government
This bill makes general changes to the management of trust funds and capital reserve funds.
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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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
13-0556 08/04
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Thirteen
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 in 2 locations, one of which shall be offsite pursuant to RSA 91-A:4.
2 Trust Funds; Reports. Amend RSA 31:38 to read as follows:
31:38 Reports. A copy of the reports required of the town and city trustees and of the auditor thereof shall be filed annually with the attorney general and with the governing body of the town or city.
3 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.
4 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 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 or investment advisor to facilitate transfers for such securities. Trust fund records maintained by any bank or brokerage firm or investment advisor [must] 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.
5 New Section; Capital Gains. Amend RSA 31 by inserting after section 38-a the following new section:
31:38-b 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 trust funds as principal.
6 Capital Reserve Funds for Cities. Amend RSA 34:5 to read as follows:
34:5 Investment. The moneys in such fund shall be kept in a separate account and not intermingled with the other funds of the city. 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 or in bonds or notes of this state, or in such stocks and bonds as are legal for investment by New Hampshire savings banks, or in participation units in the public deposit investment pool established pursuant to RSA 383:22, or in obligations with principal and interest fully guaranteed by the United States government. The obligations may be held directly or in the form of securities of or other interests in any open-end or closed-end management-type investment company or investment trust registered under 15 U.S.C. section 80a-1 et seq., if the portfolio of the investment company or investment trust is limited to such obligations and repurchase agreements fully collateralized by such obligations. When so invested in good faith the trustees hereinafter named shall not be liable for the loss of such moneys. Any interest earned or capital gains realized on the moneys so invested shall accrue to and become a part of the fund. Deposits in banks shall be made in the name of the city, and it shall appear upon the book thereof that the same is a capital reserve fund. Any person who directly or indirectly receives any such funds or moneys 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 city. Only securities defined by the bank commissioner in rules adopted pursuant to RSA 386:57 shall be eligible to be pledged as collateral. 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 in conformance with the provisions of applicable statutes. The trustees shall review and confirm the investment policy at least annually. A copy of the investment policy shall be filed with the attorney general.
7 Capital Reserve Funds of Counties, Towns, Districts, and Water Departments. Amend RSA?35:9-10 to read as follows:
35:9 Investment. Each capital reserve fund shall be maintained separately on the books of the town. The assets of such funds may be pooled in order to invest in a broader range of investments to maximize growth and mitigate risk. Said capital reserve 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 bonds or notes of this state, or in such stocks and bonds as are legal for investment by 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, or in obligations with principal and interest fully guaranteed by the United States government. The obligations may be held directly or in the form of securities of or other interests in any open-end or closed-end management-type investment company or investment trust registered under 15 U.S.C. section 80a-1 et seq., if the portfolio of the investment company or investment trust is limited to such obligations and repurchase agreements fully collateralized by such obligations. 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 individual funds on a pro rata basis. 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. 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 in conformance with the provisions of applicable statutes. The trustees shall review and confirm the investment policy at least annually. A copy of the investment policy shall be filed with the attorney general.
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.
8 New Sections; Capital Reserve Funds of Counties, Towns, Districts, and Water Departments. 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 any federally or state-chartered depository bank or association authorized to engage in a banking 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.(a) Any expenses incurred pursuant to paragraph II of this section by a trustee or trustees of trust funds authorized by this chapter may be charged against the annual income of the capital reserve funds involved provided:
(1) The capital reserve funds are held by qualified custodians pursuant to Securities and Exchange Commission rule 206(4)-2, as amended;
(2) The expenses are computed and invoiced in accordance with the investment management contract approved by the trustees;
(3) The trustees receive a voucher from the investment advisor acknowledging payment of the expenses charged;
(4) The trustees receive at least quarterly statements directly from the qualified
custodians; and
(5) The trustees review the capital reserve funds custodian statements at least quarterly.
(b) The expenses shaft 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.
9 Capital Reserve Funds for Cities; Professional Banking or Brokerage Assistance; Capital Gains. 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.
10 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 any federally or state-chartered depository bank or association authorized to engage in a banking 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.(a) Any expenses incurred pursuant to paragraph II of this section by a trustee or trustees of trust funds authorized by this chapter may be charged against the annual income of the capital reserve funds involved provided:
(1) The capital reserve funds are held by qualified custodians pursuant to Securities and Exchange Commission rule 206(4)-2, as amended;
(2) The expenses are computed and invoiced in accordance with the investment management contract approved by the trustees;
(3) The trustees receive a voucher from the investment advisor acknowledging payment of the expenses charged;
(4) The trustees receive at least quarterly statements directly from the qualified custodians; and
(5) The trustees review the capital reserve funds custodian statements at least
quarterly.
(b) The expenses 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.
11 Appropriation. Amend RSA 35:12 to read as follows:
35:12 Appropriation. Whenever the vote of the town is to appropriate any sum for the capital reserve fund, the same duties shall devolve upon the town clerk, selectmen, and town treasurer, as specified in RSA 35:11, except that the order must be drawn, and the sum transferred on or before December [31] 15 following the vote, or, in the case of an optional fiscal year town, after July 1, but no later than June [30] 15, of the fiscal year for which the sum was appropriated.
12 Effective Date. This act shall take effect 60 days after its passage.