Article 4. Investments of California Financial Code >> Division 1.1. >> Chapter 16. >> Article 4.

A trust company may invest its contributed capital only in the securities and properties in which a commercial bank is permitted to invest its funds pursuant to Sections 800 to 819, inclusive, and in loans on real property which commercial banks are permitted to make pursuant to Article 3 (commencing with Section 1480) of Chapter 14.

Trust funds received by any trust company in connection with its trust business, if invested, shall be invested as provided in Part 4 (commencing with Section 16000) of Division 9 of the Probate Code.

(a) As used in this section:
  (1) "Fund" means any investment company registered under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.), as amended from time to time.
  (2) "Trust" means any court trust or private trust.
  (3) "Trust Law" means Division 9 (commencing with Section 15000) of the Probate Code.
  (b) Within the standards established by trust law, including, but not limited to, Division 9 (commencing with Section 15000) of the Probate Code, a trust company acting in any capacity under a trust may, in the exercise of its investment discretion unless the trust instrument provides expressly to the contrary, invest and reinvest in the securities of or other interests in any fund to which the trust company or its affiliate is providing services including, but not limited to, services as an investment adviser, sponsor, distributor, custodian, agent, registrar, administrator, servicer, or manager, and for which the trust company or its affiliate receives compensation.
  (c) Before or within 30 days after the initial investment upon the exercise of discretionary powers authorized by subdivision (b), the trust company, acting in any capacity under a trust, shall furnish written notice of the exercise of the discretionary powers and a copy of the prospectus relating to the securities to all persons to whom the trust company is required to render statements of account pursuant to applicable provisions of the Trust Law or to whom the trust company regularly provides a statement of account unless specifically waived in writing.
  (d) With respect to any trust so invested, the trust company shall disclose to all persons identified in subdivision (c), at least annually by prospectus, statement of account, or other written notice, a brief description of the fees or rates charged by the trust company and its affiliates for its services as investment adviser or investment manager to the fund.
  (e) In connection with an investment or reinvestment authorized by subdivision (b), the portion of compensation a trust company receives from the trust reasonably attributable to investment advisory or investment management services to the trust shall be reduced (but not below zero) by an amount equal to compensation that is received by the trust company or its affiliates for providing investment advisory or investment management services to the fund for the portion of the trust invested in the fund.

Any trust company or bank authorized to engage in the trust business holding trust funds awaiting investment or distribution may deposit or leave on deposit such funds with any state or national bank. Such funds shall not, however, be deposited or left with the same corporation or association depositing or leaving on deposit such funds or with any corporation or association holding or owning a majority of the capital stock of the trust company or bank making or leaving such deposit, unless such corporation or association shall first pledge, as security for such deposit, securities eligible for investment by savings banks having a market value of not less than the funds so deposited. No security shall be required with respect to any part of such deposits which is insured under the provisions of any law of the United States.

Any trust company acting in any capacity under a court or private trust or when acting in such capacity with one or more persons as cofiduciary or cofiduciaries, unless the instrument creating such trust contains a provision to the contrary, may, with the consent of such cofiduciary or cofiduciaries cause any stock or other securities held in any such capacity to be registered in the name of a nominee or nominees of such trust company and any trust company when acting as depositary or custodian for the trustee of any other court or private trust, unless the instrument creating the trust contains a provision to the contrary, may, with the consent of the trustee of such other trust, cause any stock or other securities held by it in such capacity to be registered in the name of a nominee or nominees of such trust company. Any such trust company shall be liable for any loss occasioned by the acts of any nominee of such trust company with respect to such stock or other securities so registered. The records of such trust company shall at all times show the ownership of any such stock or other securities and of those held in bearer form. Such stock or other securities and those held in bearer form shall at all times be kept by such trust company separate and apart from its other assets and may be kept by such trust company:
  (a) In a manner such that all certificates representing the stock or other securities from time to time constituting the assets of a particular estate, trust or other fiduciary account are held separate from those of all other estates, trusts or accounts; or
  (b) In a manner such that, without certification as to ownership attached, certificates representing stock or other securities of the same class of the same issuer and from time to time constituting assets of particular estates, trusts or other fiduciary accounts are held in bulk, including, to the extent feasible, the merging of certificates of small denomination into one or more certificates of large denomination, provided that a trust company, when operating under the method of safekeeping security certificates described in this subdivision, shall be subject to such rules and regulations as, in the case of state chartered institutions, the commissioner and, in the case of national bank associations, the Comptroller of the Currency, may from time to time issue. Such trust company shall, on demand by any party to an accounting by such trust company as fiduciary or on demand by the attorney for such party, certify in writing the stock or other securities held by such trust company as such fiduciary for such party. No domestic or foreign corporation or the registrar or transfer agent of any such corporation shall be liable for registering or causing to be registered on the books of such corporation any share or shares or other securities in the name of any nominee of such trust company or for transferring or causing to be transferred on the books of any such corporation any share or shares or other securities theretofore registered by such corporation in the name of any nominee of such trust company as herein provided when the transfer is made upon the authorization of such nominee.

(a) For purposes of this section, two or more trust companies shall be deemed to be affiliated if they are members of the same affiliated group, within the meaning of Section 1504 of the Internal Revenue Code.
  (b) Any trust company may establish and administer common trust funds composed of property permitted by law for the investment of trust funds, for the purpose of furnishing investments to any one or more of the following: (1) itself, as fiduciary; (2) itself and others, as cofiduciaries; (3) any affiliated trust company including, without limitation, any foreign (other state) affiliated trust company, as fiduciary; and (4) any affiliated trust company including, without limitation, any foreign (other state) affiliated trust company and others, as cofiduciaries. Any trust company may as such fiduciary or cofiduciary invest funds which it lawfully holds for investment in interests in common trust funds administered by itself or by any affiliated trust company including, without limitation, any foreign (other state) affiliated trust company, if such investment is not prohibited by the instrument, judgment, decree, order, or statute creating or governing such fiduciary relationship, and if, in the case of cofiduciaries, the trust company procures the consent of its cofiduciaries to such investment.
  (c) Each common trust fund established hereunder shall be treated as an entity separate and distinct from the fiduciary relationships participating therein. No fiduciary in administering a participating fiduciary relationship shall be required to make any apportionment or allocation between the principal and income of this relationship different from that made for the common trust fund. No participating fiduciary relationship, nor any person having an interest in that relationship, shall have or be deemed to have any ownership in any particular property of the common trust fund, but each participating fiduciary relationship shall have a proportionate undivided interest in the fund and its income, and the ownership of all property of the common trust fund shall be in the trustee of the fund.
  (d) This section shall apply to fiduciary relationships now in existence or hereafter established, whether the same be revocable or irrevocable. The commissioner, at his or her direction, may make an examination of any common trust fund established hereunder at the times and to the extent as he or she may deem advisable. The provisions of the Corporate Securities Law shall not apply to the creation, administration, or termination of common trust funds, nor to participation therein.

With regard to any participation certificates heretofore issued by any trust company, secured by a trust deed or mortgage, the full legal title in the deed or mortgage and debt (referred to in this section as "security") shall be held by the trust company issuing the certificates as trustee of an express trust, with all powers necessary to extend, renew, enforce, collect, and liquidate the same, acquire title to the property covered thereby either through foreclosure or by voluntary conveyance; manage, lease, sell (either for cash or upon deferred payments), exchange, or otherwise realize upon the security or property and distribute the net proceeds thereof. All sums so realized shall, as and when received by such trustee, after payment of its compensation and all costs, charges, and expenses, including brokers' commissions and advances for taxes and assessments, incurred or made in connection with the protection, administration, and liquidation of the security or property, be distributed to the trusts or persons who are beneficiaries of the trust, as their interests may appear therein. The rights and interests therein of any such beneficiary failing to contribute on demand its or his pro rata of sums advanced, expended, or required by the trust company in the protection, administration, or liquidation of the trust shall be subject to a lien for all sums, with legal interest thereon advanced, expended, or required for any of such purposes by the trustee or by any other beneficiary of the trust. The trust in such security or property shall continue in the trust company so long as any of the certificates are outstanding, irrespective of any distribution of the certificates from the trust in which the same are held. The purpose of this section is to define and clarify the rights and obligations of trust companies and of all persons and trusts interested in participation certificates issued under any authority of law.