SENATE BILL REPORT

SB 5731

BYSenators von Reichbauer and Moore

Allowing investment in government obligations.

Senate Committee on Financial Institutions & Insurance

Senate Hearing Date(s):February 14, 1989

Majority Report:  Do pass.

      Signed by Senators von Reichbauer, Chairman; Johnson, Vice Chairman; McCaslin, McMullen, Rasmussen, Sellar, Smitherman, West.

Senate Staff:Benson Porter (786-7470)

                  March 3, 1989

AS PASSED SENATE, MARCH 2, 1989

BACKGROUND:

A fiduciary of a trust instrument may acquire and retain certain securities, provided the fiduciary follows standards established by law and any express provisions or limitations of a particular trust instrument.

A qualified public depository must maintain collateral of 10 percent of the amount of public deposits in that particular institution.  The following instruments qualify as collateral:  bonds, notes, and other securities which are general obligations of the United States; certain obligations constituting the direct and general obligation of the federal Home Loan Bank or federal Reserve Bank; and certain other general obligation bonds.

State chartered savings and loan associations may invest in mutual fund instruments under the parity provisions granted to federally chartered institutions or, to a limited extent, through a service corporation.

A state chartered mutual savings bank may invest in various bonds and obligations delineated in statute.  Included among these permissible investments are bonds and obligations of the United States.

SUMMARY:

A trustee, mutual savings bank, savings and loan association, and qualified public depository may invest in securities of a management type investment company, or investment trust registered under the federal Investment Company Act of 1940; provided, however, certain prescribed limitations are followed.

The portfolio of the investment trust must invest solely in obligations of the United States and any repurchase agreements collateralized by such obligations.  Also, the investment company may take delivery, either directly or through a custodian, of the collateral of any repurchase agreement.

The Supervisor of Banking and Supervisor of Savings and Loans are granted rule-making authority to limit investment in these investments.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

Senate Committee - Testified: Don Brazier, Federated Investors (pro)