Chap. 369.—An ACT to authorize the establishment and maintenance by banks of
separate trust funds for the collective investment of funds held in a fiduciary
capacity; to be known as “Common Trust Funds’, and to provide how such
funds shall be established and administered. [S 40]

Approved March 31, 1944

Be it enacted by the General Assembly of Virginia, as follows:

1. Section 1. As used in this act, the term “bank” shall be construed
to mean any bank, trust company or bank and trust company, whether
State or National, authorized by law to exercise trust powers and to take,
accept and execute trusts of a fiduciary character.

Section 2. Any bank may establish and maintain one or more com-
mon trust funds for the collective investment of funds held by it in any
fiduciary capacity, other than merely as agent. Such bank may invest
the funds held by it in such capacity in one or more such common trust
funds, whether it be acting as sole fiduciary or with others as cofiduciaries,
provided: (1) that such investment in interests in such common trust
funds is not prohibited by the instrument, judgment, decree or order
creating the fiduciary relationship; (2) that in the case of cofiduciaries,
such bank procures the written consent of its cofiduciary or cofiduciaries
to such investment, which consent such cofiduciary or cofiduciaries are
hereby authorized to grant; (3) that at the time of making an investment
in any such common trust fund there shall not be held in the fund any
asset which, because of the nature of such asset, the bank might not then
lawfully purchase as an investment for the fiduciary account for which
the investment in the common trust fund is made; and (4) that the bank
has no interest in any of the assets of the common trust fund other than
in a fiduciary capacity.

Section 3. Each common trust fund shall be established and main-
tained in accordance with a written plan, approved by resolution of the
board of directors of the bank. and approved in writing by competent
legal counsel. A copy of such plan shall be available at the principal office
of the bank for inspection during all regular business hours by any person
having a beneficial interest in a fiduciary account participating in the
common trust fund, and a copv of such plan shall be furnished to any
such person upon request. Such plan may be amended. altered or modi-
fied from time to time by the bank, provided. that such amendment, altera-
tion or modification is approved in the manner provided herein for the
approval of the original plan. Such plan shall contain full and detailed
provisions, not inconsistent with the provisions of this act, as to (1) the
manner in which the fund is to be operated; (2) the bank’s investment
powers with respect to the assets of the fund; (3) the allocation and ap-
portionment of income, profits and losses; (4) the terms governing the
admission and withdrawal of participations in the fund; (5) the auditing
of accounts of the bank with respect to the common trust fund; (6) the
basis and method of valuing assets in the common trust fund; (7) the
basis upon which the fund may be terminated; (8) the sale or segrega-
tion for liquidation, prior to the next valuation date, of any asset which
no longer qualifies as an original investment of the common trust fund:
and (9) such other matters as may be necessary to define clearly the
rights of participants in the common trust fund. Such plan may provide
for the issuance of certificates of participation in the common trust fund.
The plan shall not require amortization of premiums upon bonds or other
obligations purchased for the common trust fund. The provisions of the
plan shall control all participation in the fund and the rights and benefits
of all persons interested in such participations as beneficiaries, or other-
wise.

Section 4. Not less frequently than once during each period of three
months, the bank administering a common trust fund shall determine
the value of the assets in such fund. A copy of such appraisal shall be
filed with the Commissioner of Banking. No participations shall be ad-
mitted to or withdrawn from the common trust fund except on the basis
of such valuation. When participations are withdrawn from a common
trust fund, distribution may be in cash or ratably in kind, or partly in
cash and partly ratably in kind, provided, however, that all such distribu-
tions as of any one valuation date shall be made on the same basis. V alua-
tions made in good faith in accordance with the provisions of this act
shall be conclusive and binding upon all parties in any way interested in
the fund.

Section 5. The bank shall have the exclusive management and con-
trol of each common trust fund administered by it, and the sole right
at any time to sell, exchange, transfer or otherwise change or dispose ot
assets comprising the same, provided, however, that no asset shall be
purchased which is not a proper investment for each fiduciary account
participating in said fund, and that at no time shall the bank purchase any
asset in which it has any interest. The bank shall not invest any of its
own funds in a common trust fund administered by it, and 1f the bank.
hecause of a creditor relationship or for any other reason, acquires an
interest in a participating fiduciary account, such participation shall be
withdrawn on the first date on which such withdrawal can be eftected.
The legal title to all of the assets of the common trust fund shall be
solely in the bank as fiduciary, and shall be considered as assets held by
it as fiduciary. The bank may hold any of the assets of a common trust
fund in the name of a nominee, provided the records of such common
trust fund clearly show the ownership of the asset to be in the bank as
trustee of the common trust fund. The participating accounts owning or
holding participations in the common trust fund shall be deemed to have
only a proportionate undivided interest in the common trust fund. No
fees, commissions or compensation whatsoever shall be paid out of any
common trust fund for the management of said fund; provided, that a
bank shall not be prohibited from reimbursing itself out of a common
trust fund for such reasonable expenses incurred by it in the administra-
tion thereof as would have been chargeable to the respective participating
fiduciary accounts if incurred in the separate administration of such
participating fiduciary accounts.

Section 6. A bank administering a common trust fund shall, at least
once during each period of twelve months, cause a complete audit to be
made of the common trust fund either by auditors responsible only to the
board of directors of the bank or by independent public accountants. If
an independent public accountant is used the expense shall be charged
to the common trust fund, either against principal or income or appor-
tioned between both as may be provided by the plan. A condensed state-
ment of such audit shall be available, without charge, to any person who
is receiving income from any of the trusts participating in the common
trust fund and such complete audit shall be available at the principal
office of the bank for examination and inspection, during all regular
business hours, by any person having an interest in a fiduciary account
participating in the common trust fund.

Section 7. Whenever ordered by a court of competent jurisdiction, a
bank administering a common trust fund shall render to such court an
accounting of such fund; and upon application of a bank to a court of
competent jurisdiction, it may obtain a settlement of its common trust
fund accounts on such conditions as the court may specify.

Section 8. Fiduciary accounts in existence at the time this act takes
effect, or thereafter established, may be invested in a common trust fund
under the provisions of thts act.