Van De Kamp, 052384 CAAGO, AGO 83-1205

Docket Nº:AGO 83-1205
Case Date:May 23, 1984
Court:California
 
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JOHN K. VAN DE KAMP Attorney General
ANTHONY S. DA VIGO Deputy Attorney General
AGO 83-1205
No. 83-1205
California Attorney General Opinion
Office of the Attorney General State of California
May 23, 1984
         THE HONORABLE ROBERT J. CAMPBELL, MEMBER OF THE CALIFORNIA STATE ASSEMBLY, has requested an opinion on the following question:          May a California domiciled state or national bank having a trust department which is the trustee under an instrument which either directs or authorizes the investment of the corpus in United States government obligations, invest such corpus in a mutual fund, the portfolio of which is limited to short-term United States Treasury obligations?          CONCLUSION          A California domiciled state or national bank having a trust department which is the trustee under an instrument which directs the investment of the corpus in United States government obligations, may not invest such corpus in a mutual fund, the portfolio of which is limited to short-term United States Treasury obligations.          Whether a California domiciled state or national bank having a trust department which is the trustee under an instrument which authorizes the investment of the corpus in United States government obligations, may invest such corpus in a mutual fund, the portfolio of which is limited to short-term United States Treasury obligations, would depend upon the intent of the trustor respecting the exclusivity of such authorization and the degree of discretion vested in the trustee, as determined upon an examination of the entire instrument.          ANALYSIS          The present inquiry is whether a California domiciled state or national bank having a trust department which is the trustee under an instrument which either "directs" or "authorizes" the investment of the corpus in United States securities may invest such corpus in a mutual fund the portfolio of which is limited to short-term United States securities. The propriety of trust investments of state or national banks is governed by state law. Title 12, Code of Federal Regulations, part 9.11, containing the general regulations promulgated by the Comptroller of the Currency for investment of funds held in a fiduciary capacity by national banks, provides that such funds "shall be invested in accordance with the instrument establishing the fiduciary relationship and local law." (Cf. 12 U.S.C. § 92a.)          A commercial bank (Fin. Code, § 1500.1), including a national banking association (Fin. Code, § 1502), may engage in the trust business under and subject to the provisions of section 1500 et seq. of the Financial Code. Trust funds received by any trust company (including a commercial bank authorized to engage in the trust business (Fin. Code, § 107)) in connection with its trust business "shall be invested as provided in the Civil Code, subject to such provisions as may be contained in any trust instrument." (Fin. Code, § 1561; emphasis added.)          The Civil Code also establishes as the primary criterion of investment the provisions of the trust instrument itself. The following provisions of said code expressly so indicate:
" 2258. "(a) A trustee must fulfill the purpose of the trust, as declared at its creation, and must follow all the directions of the trustor given at that time, except as modified by the consent of all parties interested, in the same manner, and to the same extent, as an employee. " ..................... " (Emphasis added.) " 2261. "(1) In investing, reinvesting, purchasing, acquiring, exchanging, selling and managing property for the benefit of another, a trustee shall exercise the
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