AGO 87-4.

Case Date:June 29, 1987
Colorado Attorney General Opinions 1987. AGO 87-4. June 29, 1987Department of Law Attorney General Opinion FORMAL OPINION of DUANE WOODARD Attorney General Opinion No. 87-4 AG Alpha No. LE AU AGAQC Robert R. Ridl, C.P.A. Director of Local Governments Audits Office of State Auditor 200 East 14th Avenue Denver, CO 80203 RE: Local government participation in government investment trustsDear Mr. Ridl: This letter is in response to your request for an opinion concerning the legality of the investment of funds by certain Colorado local governments (fn1) in government investment trusts which are currently being marketed by various financial institutions as investment vehicles for governmental entities. QUESTION PRESENTED AND CONCLUSION May Colorado local governments lawfully invest in government investment trusts? Colorado local governmental units may pool funds for investment only in accordance with sections 24-75-701 and 24-75-702, C.R.S. (1986 Supp.). ANALYSIS You have submitted for my review several government investment trusts which have been marketed to various Colorado units of local government. This office has considered the legality of local government investments on several occasions in the past, and has consistently opined that section 24-75-601, C.R.S. (1982 & 1986 Supp.) permits only direct investments by local governments in authorized securities. See Op. Att'y Gen., Alpha Nos. LE AU AGBEK, LE AU AGAGG, LE AU AGAHD, issued November 23, 1979, October 23, 1981, and May 17, 1982, regarding investments in Merrill Lynch Government Fund, Inc., bank repurchase agreements, and bank repurchase agreements which provide for assignment of specific obligations to the United States Government. In the first of those opinions, this office stated that Colorado local governments could not invest in traditional mutual funds, in which shares of a private investment company rather than shares in the underlying trust assets are acquired; such action would not involve direct investments in authorized securities. You have inquired here about investments in trusts known as "Massachusetts business trusts." According to the information which you have supplied, such trusts differ from traditional mutual funds with respect to the interests of the investors in the underlying trust answers: investors in "Massachusetts business trusts"...

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