Legislature(1995 - 1996)

04/29/1996 03:06 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
 HB 550 - INVESTMENTS BY FIDUCIARIES                                         
                                                                               
 Number 119                                                                    
                                                                               
 CHAIRMAN PETE KOTT announced the committee would address HB 550,              
 "An Act relating to investments by fiduciaries; and providing for             
 an effective date."  He said there is also a Senate version of the            
 bill which has been bogged down in the Senate Finance Committee.              
 The Senate has asked that the House move their version of the bill.           
                                                                               
 Number 196                                                                    
                                                                               
 GEORGE DOZIER, Legislative Assistant to Representative Pete Kott,             
 came before the committee to address HB 550, sponsored by the House           
 Labor and Commerce Committee.  He said the current state of the law           
 is that if a bank assumes a fiduciary responsibility for investing            
 trust funds, banks are accorded leave to invest trust funds in                
 United States securities.  Some states have construed that phrase             
 to mean just simply treasury bills and not permit investment in               
 bonds that are issued by agencies of the United States government.            
 Mr. Dozier explained HB 550 defines that phrase to include United             
 States governmental agencies as opposed to treasury bonds.  It also           
 permits banks to not only make those investments directly with                
 United States governmental agencies, but also to invest in                    
 financial institutions that invest in United States governmental              
 securities.  The protection is accorded to the extent that only               
 those companies that exclusively invest in U.S. governmental                  
 securities are covered.  He stated that is his understanding of the           
 bill.                                                                         
                                                                               
 CHAIRMAN KOTT said that is also his understanding of the bill.  He            
 said,  "So essentially in the second thought, you could invest in             
 a bank - you could invest your funds in an investment company that            
 have portfolios that are restricted to those obligations regarding            
 the U.S. government."                                                         
                                                                               
 MR. DOZIER indicated that is correct.                                         
                                                                               
 CHAIRMAN KOTT explained that the bill basically clarifies statute.            
 As mentioned by Mr. Dozier, under present law, the banks may invest           
 in those obligations of the United States.  Many states have                  
 construed that "yes" as meaning investing in U.S. treasuries.  The            
 bill makes it clear that there are other vehicles out there such as           
 other bonds like U.S. savings bonds.                                          
                                                                               
 Number 403                                                                    
                                                                               
 REPRESENTATIVE KIM ELTON questioned whether it includes municipal             
 bonds.                                                                        
                                                                               
 CHAIRMAN KOTT said he doesn't think municipal bonds are included.             
                                                                               
 REPRESENTATIVE PORTER said, "Agencies or municipalities of the                
 United States."                                                               
                                                                               
 REPRESENTATIVE ELTON said that isn't construed the way we construe            
 a school district.                                                            
                                                                               
 REPRESENTATIVE PORTER said a school district isn't a political                
 subdivision.                                                                  
                                                                               
 Number 481                                                                    
                                                                               
 REPRESENTATIVE PORTER made a motion to move HB 550 out of committee           
 with individual recommendations and a zero attached fiscal note.              
                                                                               
 CHAIRMAN KOTT asked if there was an objection.  Hearing none, HB              
 550 moved out of the House Labor and Commerce Committee.  Chairman            
 Kott indicated if there is anything more to the bill, he would                
 bring it back to committee.                                                   

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