Request By:
Hon. Ballard W. Cassady, Jr., Commissioner
Department of Banking and Securities
911 Leawood Drive
Frankfort, Kentucky 40601-3392
Opinion
Opinion By: David L. Armstrong, Attorney General; By: Penny R. Warren, Assistant Attorney General
You asked whether under Kentucky law a bank acting in its capacity as a trustee may invest the trust assets under management in a mutual fund registered with the Securities and Exchange Commission under the Investment Company Act of 1940. In our opinion the answer is yes so long as such investments are not prohibited by the trust instrument or court order and the investments would be regarded by a prudent businessman as a safe investment.
Kentucky Revised Statutes ["KRS"] § 386.020 provides in part:
"(1) Any fiduciary holding funds for loan or investment may invest them in:
(g) Real estate mortgage notes, bonds and other interest-bearing or dividend-paying securities (including securities of any open-end or closed-end management type investment company or investment trust registered under the Federal Investment Company Act of 1940) which would be regarded by prudent businessmen as a safe investment."
KRS 386.010(1) defines "fiduciary" as follows:
"'Fiduciary' means any trustee, guardian, executor, administrator, conservator or other individual or corporation holding funds or otherwise acting in a fiduciary capacity."
Additionally, KRS 386.805 confers all Chapter 386 powers upon a trustee unless limited in the trust instrument. Included among those powers is the authority to invest and reinvest trust assets in accordance with the trustee's obligations as a fiduciary. KRS 386.810.
We conclude that, with the limitations noted at the outset of this opinion, such investments are authorized as permissible under Kentucky law.