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June 28, 1968

HonorableMarie Winters OpinionNo. M-252 Firemen's Pension Commissioner Sam Houston Building Re: Austin, Texas Whether themaking of investments in the name of a nominee and the payment of custodial fees are deemed to be within the provisions of Article pear Mrs. Winters: 6243e.V.C.S.

You have requested the opinion of this office regarding the above question. In this connectionyou have provided certain facts,which are quoted in part as follows:

"The Firemen's Pension Board of Amarillo has entered into a contractwith a localbank for the 'custody,safekeeping,and handling of the funds and securitiesheld by the Board of Trustees for the Firemen's Fund'. This contract permits the funds of the Firemen's Relief and RetirementFund to be invested in the name of the bank's Nominee,

. . . and furtherprovides a custodial fee to be paid to the bank in the amount of $3,000.00 for the year 1968. "There is no provision in Section 3 of the Law for investmentsor funds to be held in any name other than the name of the Firemen's Relief and RetirementFund Trustees. No other Pension Board has ever invested otherwisenor have they questioned the advice of this office that funds could not be invested in the name of the Pension Board Trustees.
"It is also the opinion of this office that the fee of $3,000.00 to the bank for custody and

_ safekeeping is not permittedby the Law. I have contacted other Boardswith large sums of money to invest and no bank has charged them for the custody or handling of the funds." Section 3 of Article 6243e,Vernon's Civil Statutes, sets forth the powers and duties of a Board of Firemen's Relief and RetirementFund Trustees. Included in these duties -1226-Hon. Marie Winters, page 2 (M-252)

are the receipt, handling and control,management and disbursement of the Firemen's Relief and RetirementFund for the respective city or town. The city treasureror chief financial officer ismade a member of the Board of Trustees and treasurer thereof; that official's signature is one of those necessary to any disbursementmade from the Fund; and he ismade the custodian of the Firemen's Relief and RetirementFund.

Sections 23 and 23A of Article 6243eprovide for the investmentof Fundmonies over and above the amountsneeded for current demands. These sections identify the types of investments thatmay be considered for **the** Fund, and in Section 23A(c), the following is stated:

"Inmaking each and all of such investments the Board shall exercise the judgment and care under the circumstances then prevailingwhich men of ordinary prudence,discretion, and intelligenceexercise in themanagement of their own affairsnot in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income therefromas well as theprobable safety of their capital." Section 23B of Article 6243e authorizes the employment of professional investmentcounselors to assist the Board of Trustees inmaking investmentdecisions.

The contractwhich you have submittedappears to be a departure from ordinarypension fundpractice in this State. This contract is one of agency,whereby the contractingbank is to act as custodian for all the investment funds and securities of the Firemen's Relief and RetirementFund. The bank executes buy and sell ordersmade by the Board of Trustees, purchasing securities in the name of a nominee. The books of the bank reflect at all times the interestsactually owned by the Fund. **For** its administrativeservices, the bank **makes** a charge, and it is this chargewhich has occasioned this opinion request, **because** of doubt as to whether assets or in**come**of the Fund **may**be used inmaking payment.

A Firemen's Relief and RetirementFund is a trust under the Texas Trust Act. See Article 7425d.Vernon's Civil Statutes; Bolenv. Board of Firemen, Policemen and Fire Alarm **an Antonio,**  **308** S.W.2d 904 (Tex.Civ. ye1 v. Board of Firemen, Policemen and Fire Operators'Trustees.345 W2d 456

. . (T

ex.Civ.App., 1961, error ref. n.r.e.1. Since Article 6243e, in establishing the various Firemen's Relief and Retirement Funds, did not -1227-Hon. Marie Winters, page 3 (M-252)

clearly set out all the **terms** and conditions for themechanical operation of the Funds,we must look to the general law for guidance,which in this case is the Texas Trust Act.

Under Article 7425b-16,Vernon's Civil Statutes, a trustee (orboard of trustees) **may**hold assets in the name of a nominee, subject to certain conditions. For our purposes here,we assume that these conditionshave beenmet. Also, under Article 7425b-36, the costs of trust administrationare properly payable out of the income of the trust estate. Under Article 7425b-25H, trustees are empowered to hire agents reasonablynecessary in the administrationof the trust.

While the Board of Trustees concernedhere may seem to have involved themselves in quite elaborate investmentprocedures, it is our view that these procedures are generallywithin the scope of their authority in administeringand investing the trust fundsunder their control. However, in connection with the cost of thebank service involvedhere, the attention of the trustees is particularlydirected to Section 23A(c), quoted supra. In answer to your specificquestion, you are advised that it is the opinion of this office that the Board of Trustees involvedmay properly permit Fund investments to be made in the name of a nominee, andmay pay the cost of an agency contract of the type described from the income of the Firemen's Relief and Pension Fund.
SUMMARY Under the facts submitted a Board of Trustees of a Firemen's Relief and Retirement Fund **may**permit Fund investments to be made in the name of a nominee, and has the authority to use trust fund income to pay the costs of administering the investmentsof the trust.

Prepared by Malcolm L. Quick AssistantAttorney General
APPROVED: OPINION COMMITTEE Hawthorne Phillips, Chairman Kerns Taylor, Co-Chairman -1228-Hon. Marie Winters, page 4 (M-252)

W. 0. Shultz Tom Fortescue Harold Kennedy Rex White
A. J. CARUBBI, JR. ExecutiveAssistant

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