02/07/1996 03:13 PM House L&C

 SB 131 - INVESTMENTS BY FIDUCIARIES                                         
                                                                               
 Number 025                                                                    
                                                                               
 CHAIRMAN PETE KOTT announced the first order of business would be             
 SB 131, "An Act relating to investments by fiduciaries."  He asked            
 if there was anybody present from the Senate Labor and Commerce               
 Committee to present the bill.  Chairman Kott didn't get a response           
 to his question.  He noted there is a sponsor statement in each of            
 the committee member's file.  Chairman Kott asked Mr. Kirkpatrick             
 to come forward and give his perspective on SB 131.                           
                                                                               
 Number 240                                                                    
                                                                               
 WILLIS KIRKPATRICK, Director, Division of Banking, Securities and             
 Corporations, Department of Commerce and Economic Development,                
 explained SB 131 has been considered in prior years and may have              
 been included in the Eighteenth Legislature.  He said the bill                
 would assist trust companies operating in Alaska, specifically the            
 larger trust companies, by giving them a little more latitude to do           
 their business with affiliates outside the state.  It also provides           
 for an investment that is called an investment of the trust                   
 companies called proprietary investment of the press company's                
 parents or affiliates that may be used in a common trust situation.           
 Mr. Kirkpatrick said SB 131 is almost verbatim of a Washington                
 State law.  He informed the committee that over the past couple of            
 years, he has been in contact with Washington's trust company                 
 concerning this type of legislation and how they administer it in             
 that state.  They have informed him they have had no particular               
 problems with this bill.  They very closely examine the trust                 
 company's activities.  He said in Alaska, they examine the only               
 trust company which is Key Trust of Alaska.  It is over two billion           
 in size and is a substantial company.  Mr. Kirkpatrick said he                
 would be happy to answer questions.                                           
                                                                               
 Number 396                                                                    
                                                                               
 CHAIRMAN KOTT asked if the bill would permit trust funds to be                
 invested in mutual funds.  MR. KIRKPATRICK said it would, but it's            
 defined as to what the mutual fund can have as its portfolio which            
 are governments or better.  So a bank's proprietary fund                      
 investment, which may be an investment company registered under the           
 1940 Securities and Exchange Commission Act, which is commonly                
 known as a mutual fund, has as its portfolio specific defined                 
 investments.  In that connotation, under SB 131, those investments            
 of that mutual fund or that investment company would have to meet             
 certain investment criteria.  That is what is generally called                
 governments or better.  The common trust would probably be made up            
 of those things that are extremely liquid and risk free.                      
                                                                               
 REPRESENTATIVE NORMAN ROKEBERG referred to Mr. Kirkpatrick saying             
 that there was only one trust company in Alaska and asked if this             
 would affect the trust departments of national charter banks in the           
 state of Alaska.  MR. KIRKPATRICK clarified there is one trust                
 company in Alaska under his regulation.  He answered in the                   
 affirmative to the question.                                                  
                                                                               
 Number 545                                                                    
                                                                               
 VERN SAYLES, Executive Vice President and Manager Key Trust Company           
 of Alaska, said he was would testify on behalf of the Alaska                  
 Bankers Association via teleconference from Anchorage.  The                   
 following is Mr. Sayles testimony:                                            
                                                                               
 "As Mr. Kirkpatrick has outlined the purpose of the bill is really            
 twofold to provide, in our minds, more investment opportunities for           
 the Alaska consumer.  We feel that these opportunities will include           
 a better opportunity for diversification of the consumer's                    
 portfolios, to provide lower costs, also by doing that it will                
 lower the potential risk of the individual investor, provides for             
 better (indisc.).  We feel the bill addresses this opportunity in             
 two ways.  One is to expand the current state statutes in reference           
 to common funds to include the word `affiliate,' and second, to add           
 specific language for the use of mutual funds.  Most of us, I                 
 believe, are familiar with mutual funds in the concept of basically           
 investing pools of money that have been accepted and created from             
 individuals and institutional investors.  These types of                      
 investments are normally sold across state lines, subject to                  
 federal regulation.                                                           
                                                                               
 "Common funds, on the other hand, are not always available across             
 state lines unless specific reference to affiliates are included.             
 By incorporating that reference, it would be able then to offer to            
 our customers here in the state of Alaska those types of                      
 investments that are now being offered in states such as                      
 Washington, Oregon, specifically Utah and the West.  We feel these            
 changes will definitely enhance the ability of the consumer to                
 receive a good investment product.  At this point in time, I would            
 certainly entertain any question that you may have as well."                  
                                                                               
 Number 689                                                                    
                                                                               
 REPRESENTATIVE ROKEBERG referred to trust departments of banks and            
 said in terms of their investments for their clients, they cannot             
 invest in mutual funds presently.                                             
                                                                               
 MR. SAYLES said there is no specific reference in the state                   
 statutes that allows for it.  It doesn't disallow for it obviously,           
 but they feel it would be a necessary addition to the statute to              
 specifically include that as a reference.                                     
                                                                               
 Number 780                                                                    
                                                                               
 REPRESENTATIVE JERRY SANDERS asked Mr. Sayles if he or any of the             
 banks currently invest in any other instruments, other than mutual            
 funds, that aren't specifically in the statute.  MR. SAYLES                   
 responded that he isn't aware of any.  The statute is fairly                  
 general but it usually refers to individual stocks, bonds, those              
 types of real estate investments.  He noted that most of the                  
 investments in the state that he is familiar with would certainly             
 fall in those categories as do the mutual funds.  It is a matter              
 that those funds are not clearly defined.  The underlying                     
 investments with the pools within the pools would probably meet the           
 state statute requirements.  The statute allows for investment in             
 common stocks, but not specifically the fund approach.                        
 Representative Sanders asked that if this is put into statute, it             
 wouldn't in any way make the state of Alaska responsible for any              
 problems that may occur.  MR. SAYLES said, "Absolutely not."                  
                                                                               
 Number 878                                                                    
                                                                               
 There being no further testimony, REPRESENTATIVE KIM ELTON made a             
 motion to move SB 131 out of committee with the attached zero                 
 fiscal note and individual recommendations.  Hearing no objection,            
 SB 131 moved out of the House Labor and Commerce Committee.