| (a) Subject to Finance Code, §184.101(f), and this section,
a trust company may invest for its own account in a mutual fund as defined
in Finance Code, §181.002(a)(31), unless the mutual fund portfolio contains
an investment that the trust company could not make directly.
(b) Notwithstanding the limits stated in Finance Code, §184.101(c),
a trust company may invest in a mutual fund not more than an amount equal
to 15% of the trust company's restricted capital unless a larger investment
is permitted under subsection (c) of this section. Pursuant to Finance Code, §184.101(c),
the banking commissioner may authorize investments in excess of this limitation
on written application if the banking commissioner concludes that:
(1) the excess investment is not prohibited by other applicable
law; and
(2) the safety and soundness of the requesting trust company
is not adversely affected.
(c) Notwithstanding the limits stated in Finance Code, §184.101(c),
and subsection (b) of this section, a trust company may invest in a mutual
fund without limit if:
(1) the mutual fund's stated investment objective is to invest
solely in securities that the trust company could invest in directly for its
own account without limit under Finance Code, §184.101(d); and
(2) the mutual fund's portfolio in fact consists wholly of
investments in which the trust company could invest directly without limitation
under Finance Code, §184.101(d).
(d) A trust company that invests in a mutual fund as permitted
by subsection (b) of this section shall periodically determine that its pro
rata share of any security in the portfolio of the mutual fund is not in excess
of applicable investment and lending limits by reason of being combined with
the trust company's pro rata share of that security held by all other mutual
funds in which the trust company has invested and with the trust company's
own direct investment and loan holdings. Documentation of periodic reviews
must be maintained by the trust company for examination purposes.
(e) A trust company's investment in a mutual fund made prior
to September 1, 1997, is subject to §19.21 of this title (relating to
Grandfathered Investments). Pursuant to §19.21, without the written approval
of the banking commissioner, a trust company may not increase its grandfathered
investment in a mutual fund on or after September 1, 1997, including by means
of an election to reinvest dividends, unless subsection (c) of this section
applies.
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