CHAPTER 463

An Act to amend and reenact §§ 6-570, 6-571, 6-572, 6-578 and 6-574 of
the Code of Virginia, relating to investments, plans, value of assets,
management and control and auditing of common trust funds.

[H 422]
Approved March 31, 1964

Be it enacted by the General Assembly of Virginia:

1. That §§ 6-570, 6-571, 6-572, 6-573 and 6-574 of the Code of Virginia
be amended and reenacted as follows:

§ 6-570. 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, * including agency accounts under which the bank
exercises investment discretion and assumes fiduciary responsibilities.
The collective investment of funds of such agency accounts shall be per-
mitted only in a separate common trust fund composed solely of assets
of agency accounts. Such bank may invest the funds held by it in * any
fiduciary capacity in one or more such common trust funds, whether it

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 con-
sent such cofiduciary or cofiduciaries are hereby authorized to grant;

(8) That at the time of making an investment in any such common
trust fund, * not less than forty per cent of the value of the assets of the
common trust fund shall be composed of cash and readily marketable
investments after effecting the admissions and withdrawals then to be

In determining whether to invest in one or more common trust funds,
the bank and its cofiduciaries, if any, may consider the common trust
fund as a whole and shall not, for example, be prohibited from making
such investment because any particular asset is non-income producing;
provided that in making such investment in the fund as a whole, the
fiduciary or fiduciaries shall conform to the standard of judgment and
care prescribed in § 26-45.1 and the common trust fund shall not contain
any asset which the fiduciary or fiduciaries are expressly prohibited from
purchasing by the terms of the will or other instrument of the particular
fiduciary account whose funds are to be so invested.

(4) That the bank has no interest in any of the assets of the common
trust fund other than in a fiduciary capacity.

§ 6-571. 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, * approved in writing by competent legal
counsel, and a copy thereof filed with the Commissioner of Banking. 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 copy of such plan shall be furnished to any such person
upon request. Such plan may be amended, altered or modified from time
to time by the bank, provided, that such amendment, alteration or modi-
fication 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 chapter, 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 apportionment 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 methods of
valuing assets in the common trust fund; (6-a) the minimum frequency
for valuation of assets of the fund; (7) the basis upon which the fund
may be terminated; * and (9) such other matters as may be necessary to
define clearly the rights of participants in 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 partici-
pations as beneficiaries, or otherwise.

§ 6-572. 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. * No participations shall be admitted
to or withdrawn from the common trust fund except on the basis of such
valuation. No participation shall be admitted or withdrawn from the com-
mon trust fund unless the taking of such action shall have been approved
an such manner as the board of directors shall prescribe and entry thereof
shall have been made on or before the valuation date in the fiduciary
records of the bank. 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. Valua-
tions made in good faith in accordance with the provisions of this chapter
shall be Banolatve and binding upon all parties in any way interested
in the fund.

§ 6-573. 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 of
assets comprising the same; provided, however, that no asset shall be
purchased which is not a proper investment for each fiduciary account
participating in such 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 if the bank,
because 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 effected.
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, com-
missions or compensation whatsoever shall be paid out of any common
trust for the management of such fund except as hereafter provided. The
bank may charge a fee for the management of the common trust fund
provided that the fractional part of such fee proportionate to the interest
of each participant shall not, when added to any other compensations
charged by the bank to the participant, exceed the total amount of com-
pensations which would have been charged to said participant if no assets
of said participant had been invested in participations in the fund. * A
bank shall not be prohibited from reimbursing itself out of a common
trust fund for such reasonable expenses incurred by it * in connection
therewith as would have been chargeable to the respective participating
fiduciary accounts if incurred in the separate administration of such par-
ticipating fiduciary accounts. Further, a bank shall not be prohibited from
paying to servicing agents, including the bank administering the common
trust fund, the reasonable expenses incurred in servicing mortgages held
by the common trust fund and charging such expenses against the income
account of the common trust fund; provided that any charge made by the
bank for servicing mortgages shall not exceed the amount charged by the
bank to other accounts or customers for similar services.

Notwithstanding the foregoing and the provisions of § 6-102, the
bank may purchase for its own account from a common trust fund any
defaulted mortgage held by such fund. If the bank elects so to purchase
the mortgage, it must do so at its market value or at the sum of principal,
interest and penalty charges, whichever is greater.

§ 6-574. <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 apportioned
between both as may be provided by the plan. A condensed statement of
such audit shall be available, without charge, to any person who is receiv-
ing 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. A condensed statement of such audit shall also be
filed with the Commissioner of Banking.