                          April 9, 1970


Honorable Marie Winters               Opinion No.?+607
Firemen's Pension
  Commissioner                       Re:   Eligiblity of local
Sam Houston Building                       Pension Board to invest
Austin, Texas 78701                        in mutual funds.

Dear Mrs. Winters:

     You have requested the opinion of this office regarding
the above question, and in this connection our attention has
been specifically drawn to the Washington Mutual Investors Fund.

     The extent of the investment authority of a Board of
Trustees for a Firemen's Relief and Retirement Fund is set
forth in Section 23A, Article 6243e, Vernon's Civil Statutes,
as follows:

          "Sec. 23A. (a) This Section applies to the
     Firemen's Relief and Retirement Fund in any city
     having a population of less than 185,000 accord-
     ing to the last preceding Federal Census.

          "(b) Whenever, in the opinion of the Board
     of Trustees, there is on hand in the Firemen's
     Relief and Retirement Fund a surplus over and
     above a reasonably safe amount to take care of
     current demands upon such fund, such surplus, or
     so much thereof as in the judgment of the Board is
     deemed proper, may be invested in bonds or other
     interest-bearing obligations and securities of the




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Hon. Marie Winters, page 2    (M-607)


     United States, the State of Texas, or any county,
     city or other political subdivision of the State
     of Texas: in shares or share accounts of savings and
     loan associations, where such shares or share accounts
     are insured under and by virtue of the Federal Savings
     and Loan Insurance Corporation: in first lien real
     estate mortgage securities insured by the Federal
     Housing Administration under the National Housing Act
     of the United States, as amended from time to time:
     and in such corporation bonds, preferred stocks and
     common stocks as the Board may deem to be proper in-
     vestments for the fund.

          "(c) In making each and all of such investments
     the Board shall exercise the judgment and care under
     the circumstances then prevailing which men of
     ordinary prudence, discretion, and intelligence
     exercise in the management of their own affairs not
     in regard to speculation but in regard to the permanent
     disposition of their funds, considering the probable
     income therefrom as well as the probable safety of
     their capital.

          "(a).....

          "(e) Stocks eligible for purchase shall be
     restricted to stocks of companies incorporated within
     the United States which have paid dividends for ten
     (10) consecutive years or longer immediately prior
     to the date of purchase and which, except for bank
     stocks and insurance stocks, are listed upon an
     exchange registered with the Securities and Exchange
     Commission or its successors."   (Emphasis added.)

     Section 23B, Article 6243e. also bears upon this problem,
and is quoted as follows:

          "Sec. 23B. The Board of Trustees of a full paid
     fire department may engage and employ professional




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Hon. Marie Winters, page 3    (M-607)


     investment counselors to advise and assist the
     board in the investment of the assets of the fund.
     The investment counseling service must be provided
     by a nationally known organization whose business
     functions include rendering continuous investment
     advisory service to public pension and retirement
     funds. The city may pay the entire cost of this
     counseling service: if not paid by the city the cost
     may be paid from the assets of the fund."

      We have been unable to discover any reported case in this
or any other jurisdiction wherein the investment quality of mutual
funds is discussed. Accordingly, we must be guided solely by
the terms of the statute which authorizes the particular invest-
ment.

     The statute above quoted is very specific as to the
character of investments that are authorized for Firemen's
Relief and Retirement Funds.  The enumerated list of investments
does not include mutual funds. We are aware that a mutual fund
by contract with the investor, might set up a program of invest-
ments that will meet the particular investor's criteria.   In
particular, we have examined the prospectus of the Washington
Mutual Investors Fund, which complies with the requirements
for the List of Legal Investments for Trust Funds In The District
of Columbia. A close examination of the prospectus reveals that
the common stock investments of the Washington Mutual Investors
Fund apparently meet or exceed all of the statutory requirements
for common stock investment by a Firemen's Relief and Retirement
Fund. Nevertheless, in the absence of express authority, and
in view of the underscored language of Section 23A(b), supra,
we hold that the Board of Trustees may not delegate to a mutual
fund the discretion or judgment as to what securities shall be
"proper investments for" the Firemen's Relief and Retirement
Funds.

     Accordingly, you are advised that it is the opinion of the
Attorney General that a Firemen's Relief and Retirement Fund
coming withintbe provisions of Section 23A, Article 6243e,
Vernon's Civil Statutes, may only invest its excess funds in
the securities specifically listed in said statute, and mutual
funds are not an authorized investment.




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Hon. Marie Winters, page 4   (M-607)


                             SUMMARY

               Under Section 23A, Article 6243e, V.C.S.,
          The Board of Trustees for a Firemen's Relief and
          Retirement Fund may not invest in mutual funds.




                                  Atto $ey General of Texas
                                      t
Prepared by Malcolm L. Quick
Assistant Attorney General

APPROVED:
OPINION COMMITTEE

Kerns Taylor, Chairman
W. E. Allen, Acting Co-Chairman

Jack Sparks
Linward Shivers
Phil Warner
Bennie Bock

MEADE F. GRIFFIN
Staff Legal Assistant

ALFRED WALKER
Executive Assistant

NOIA WHITE
First Assistant




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