Sec. 3. Establishment of common trust fund.
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/il/chapter-760/act-45/3A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
Sec. 3. Establishment of common trust fund. Any bank or trust company may, at and during such time as it is qualified to act as a fiduciary in this State, establish, maintain, and administer one or more common trust funds for the purpose of furnishing investments to itself as a fiduciary, or to itself and another or others as co-fiduciaries. An investment in a common trust fund does not constitute an investment in the various securities composing the common trust fund, but is an investment in the fund as an entity.
A bank or trust company, in its capacity as a fiduciary or co-fiduciary, whether that fiduciary capacity arose before or is created after this Act takes effect, may invest funds that it holds for investment in that capacity in interests in one or more common trust funds, subject to the following limitations:
(1)In the case of a fiduciary other than an administrator, the investment may be made
in a common trust fund if such an investment is not expressly prohibited by the instrument, judgment, or order creating the fiduciary relationship, or by an amendment thereof, and if, under the instrument, judgment, or order creating the fiduciary relationship, or an amendment thereof, the funds so held for investment might properly be invested in an investment with the overall investment characteristics of the common trust fund, considered as an entity, and if, in the case of co-fiduciaries, the bank or trust company procures the consent of its co-fiduciary or co-fiduciaries to the investment in those interests.
If the instrument creating the fiduciary relationship gives to the bank or trust company the exclusive right to select investments, the consent of the co-fiduciary shall not be required. Any person acting as co-fiduciary with any such bank or trust company is hereby authorized to consent to the investment in those interests.
(2)In the case of an administrator, the investment may be made upon approval by the
court.
(3)A bank or trust company in establishing, maintaining and administering one or more
common trust funds for the purpose of furnishing investments to itself as fiduciary shall have a duty to invest and manage such common trust fund assets as follows:
(A)The bank or trust company has a duty to invest and manage common trust fund
assets as a prudent investor would considering the purposes, terms, distribution requirements, and other circumstances of the common trust fund. This standard requires the exercise of reasonable care, skill, and caution and is to be applied to investments not in isolation, but in the context of the common trust fund portfolio as a whole and as a part of an overall investment strategy that should incorporate risk and return objectives reasonably suitable to the common trust fund.
(B)No specific investment or course of action is, taken alone, prudent or
imprudent. The bank or trust company may invest in every kind of property and type of investment, subject to this Section. The bank or trust company's investment decisions and actions are to be judged in terms of the bank or trust company's reasonable business judgment regarding the anticipated effect on the common trust fund portfolio as a whole under the facts and circumstances prevailing at the time of the decision or action. The standard set forth in this paragraph
(3)is a test of conduct and not of resulting performance.
(C)The circumstances that the bank or trust company may consider in making
investment decisions include, without limitation, the general economic conditions, the possible effect of inflation, the role each investment or course of action plays within the overall portfolio, and the expected total return.
(D)The bank or trust company may invest and reinvest common trust fund assets in
interests in any open-end or closed-end management type investment company or investment trust (hereafter referred to as a "mutual fund") registered under the Investment Company Act of 1940 or may retain, sell, or exchange those interests, provided that the portfolio of the mutual fund, as an entity, is appropriate under the provisions of this Act. The bank or trust company is not prohibited from investing, reinvesting, retaining, or exchanging as common fund assets any interests in any mutual fund for which the bank or trust company or an affiliate acts as advisor or manager solely on the basis that the bank or trust company (or its affiliate) provides services to the mutual fund and receives reasonable remuneration for those services.
A bank or trust company or its affiliate is not required to reduce or waive its compensation for services provided in connection with the administration, investment, and management of the common trust fund or a participant in the common trust fund because the bank or trust company invests, reinvests, or retains common trust fund assets in a mutual fund, if the total compensation paid by a participant to the bank or trust company and its affiliates, directly or indirectly, including any common trust fund fees, mutual fund fees, advisory fees, and management fees, is reasonable.
However, a bank or trust company may receive fees equal to the amount of those fees that would be paid to any other party under Securities and Exchange Commission Rule 12b-1.
(4)A bank or trust company may not delegate the investment functions of a common trust
fund established or operating under Section 584 of the Internal Revenue Code pursuant to Section 807 of the Illinois Trust Code except as authorized by the Bureau of the Comptroller of the Currency of the U. S. Department of the Treasury. A bank or trust company may hire one or more agents to give the trustee advice with respect to investments of a common trust fund and pay reasonable and appropriate compensation to the agent provided that the final investment decisions and the exclusive management of the common trust fund remain with the bank or trust company.
(5)On or after the effective date of this amendatory Act of 1991, this Section applies
to all existing and future common trust funds, but only as to actions or inactions occurring after that effective date.