NORTH CAROLINA GENERAL ASSEMBLY

1961 SESSION

 

 

CHAPTER 964

SENATE BILL 251

 

 

AN ACT CONCERNING THE FORMATION AND OPERATION OF MUTUAL TRUST INVESTMENT COMPANIES UNDER THE SUPERVISION OF THE COMMISSIONER OF BANKS AND INVESTMENT BY CORPORATE FIDUCIARIES OF NORTH CAROLINA IN SHARES OF SUCH COMPANIES.

 

The General Assembly of North Carolina do enact:

Section 1.  (Definition) As used in this Act, the term "mutual trust investment company" means a corporation which is:

(1)        An investment company as defined by an Act of Congress entitled "Investment Company Act of 1940" approved August 22, 1940, as amended.

(2)        Incorporated in compliance with the provisions of this Act to constitute a medium for the common investment of trust funds held in a fiduciary capacity, either alone or with one or more co-fiduciaries, by state banks with trust powers, trust companies and national banks with trust powers which are located in this State.

Sec. 2.  (Authority to Incorporate) Any five or more state banks with trust powers, trust companies and national banks with trust powers located in this State, are authorized, subject to the approval of the Commissioner of Banks and subject to such regulations as he may from time to time prescribe, to cause a mutual trust investment company to be organized and incorporated.

Sec. 3.  (Application of General Corporation Law: Articles of Incorporation) Such a mutual trust investment company shall be incorporated under and be subject to the general corporation laws of this State except as herein otherwise provided. The incorporators subscribing and acknowledging the articles of incorporation shall consist of five or more persons who are officers or directors of the banks and trust companies causing such mutual trust investment company to be incorporated, and the articles of incorporation shall set forth, in addition to the facts specified in the general corporation laws, the name of each bank and trust company causing such corporation to be incorporated and the amount of stock subscribed for by each.

Sec. 4.  (Corporate Requirements and Restrictions)

(1)        The stock of a mutual trust investment company shall be owned only by state banks with trust powers, trust companies and national banks with trust powers located in this State, acting as fiduciaries, and their individual co‑fiduciaries, if any, but may be registered in the name of their nominee or nominees.

(2)        A mutual trust investment company shall have not less than five directors. Such directors need not be stockholders but shall be officers or directors of banks or trust companies which are stockholders.

(3)        A mutual trust investment company shall make no investment of its assets in:

(a)        Shares of stock of any one corporation which would cause the total number of such shares held by the mutual trust investment company to exceed 10% of the number of such shares outstanding.

(b)        Stock of any bank or trust company authorized to do business in North Carolina.

(4)        A mutual trust investment company may acquire, purchase or redeem its own stock and may, by means of contract, or of its bylaws, bind itself to acquire, purchase or redeem its own stock, but it shall not vote shares of its own stock held by it in any manner.

(5)        A mutual trust investment company shall not be responsible for ascertaining the investment powers of any fiduciary who may purchase its stock and shall not be liable for accepting funds from a fiduciary in violation of the restrictions of the will, trust indenture or other instrument under which such fiduciary is acting in the absence of actual knowledge of such violation, and shall be accountable only to the Commissioner of Banks and the fiduciaries who are the owners of its stock.

(6)        Nothing in this Act shall be construed or operate so as to relieve any fiduciary from his responsibility under the will, trust indenture or other instrument under which such fiduciary is acting or from any obligation, responsibility or liability imposed by law upon such fiduciary.

(7)        Investment policy of a mutual trust investment company shall be fixed by its board of directors. The board of directors shall be responsible for the execution of policies fixed by it, but shall have the power to employ managers, officers and other personnel necessary for the orderly and efficient operation of the company. No investment shall be made except by vote of a majority of the directors at a meeting at which a majority of the directors are present and voting.

Sec. 5.  (Purchase of Stock by Fiduciaries; Authority and Restrictions)

(1)        State banks with trust powers, trust companies and national banks with trust powers located in this State, acting in a fiduciary capacity either alone or with one or more individual co‑fiduciaries, may, if exercising the care of a prudent investor and with the consent of such individual co-fiduciary or co-fiduciaries, if any, invest and re‑invest funds held in such fiduciary capacity in the shares of stock of a mutual trust investment company complying with the requirements of this Act except where the will, trust indenture or other instrument under which such fiduciary is acting prohibits such investment; provided, however, that no funds or property of any estate, trust or fund shall be invested in the stock of a mutual trust investment company in an amount which would result in such estate, trust or fund having a total investment therein in excess of the lesser of the following:

(a)        The maximum amount or percentage that might be invested by such estate, trust or fund, under regulations of the Federal Reserve Board in effect at the time of such investment, in a common trust fund having total assets equal to the total assets of the mutual trust investment company, as increased by the proposed investment.

(b)        Ten per cent of the assets of the mutual trust investment company as increased by the proposed investment.

(2)        No funds of any estate, trust or fund shall be invested in the stock of a mutual trust investment company in an amount which would result in any bank or trust company having an aggregate holding in excess of twenty‑five per cent of the total issued and outstanding stock of such mutual trust investment company as increased by the amount of the proposed investment. In the event that by reason of reduction of the holdings of stock by other banks or trust companies, mergers of banks or trust companies, or for other reasons the aggregate holding of stock in the mutual trust investment company by any bank or trust company shall become greater than twenty-five per cent of the total issued and outstanding stock, such bank or trust company may retain the stock then "held by it but may not make further investments in such stock until its aggregate holdings have become less than such twenty‑five per cent.

(3)        A mutual trust investment company shall be permitted to rely on the written statement of any bank or trust company purchasing its stock, that the purchase complies with the foregoing requirements.

Sec. 6.  (Powers of the Commissioner of Banks)

(1)        The Commissioner of Banks shall have authority to adopt and issue reasonable and uniform rules and regulations to govern the conduct and management of all mutual trust investment companies formed pursuant to this Act and to prescribe, among other things:

(a)        The records and accounts to be kept by the mutual trust investment company.

(b)        The methods and standards to be employed in establishing the value of the shares of stock in the mutual trust investment company and of its assets.

(c)        The procedure to be followed in the sale and redemption of its stock.

(2)        The Commissioner of Banks shall at least once in each calendar year, and whenever he deems it necessary or expedient, examine every such mutual trust investment company. On every such examination of a mutual trust investment company the Commissioner of Banks shall make inquiry as to its financial condition, the policies of its management, whether it is complying with the laws of this State and such other matters as the Commissioner of Banks may prescribe. The reasonable expenses of each examination of a mutual trust investment company pursuant to this Section shall be borne and paid for by such company.

(3)        In the enforcement of this Act and the fulfillment of his responsibilities hereunder, the Commissioner of Banks shall have the same powers and authorities over and with respect to mutual trust investment companies and their directors, officers and employees, including the power to compel the attendance of witnesses and the production of books, records, documents and testimony, the power to require the submission to him of reports and information in such form and at such times as he may prescribe, the power to direct the discontinuation of any practice which he may consider illegal, unauthorized or unsafe, and all other powers and authorities, whether or not specifically mentioned herein, as are given the Commissioner of Banks by the laws of this State with respect to banks and trust companies, in the same manner and with like effect as if mutual trust investment companies were expressly named therein.

Sec. 7.  (Short Title) This Act may be cited as the "Mutual Trust Investment Company Act."

Sec. 8.  (Severability) If any provision of this Act or the application of such provision to any person, corporation or circumstance shall be held invalid, the remainder of this Act or the application of such provisions to persons, corporations or circumstances other than those as to which it is held invalid, shall not be affected thereby.

Sec. 9.  All laws and clauses of laws in conflict herewith are hereby repealed.

Sec. 10.  This Act shall be in full force and effect from and after its ratification.

In the General Assembly read three times and ratified, this the 17th day of June, 1961.