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                          June 28, 1968

Honorable Marie Winters        Opinion No. M-252
Firemen's Pension Commissioner
Sam Houston Building           Re: Whether the making of in-
Austin, Texas                       vestments in the name of
                                    a nominee and the payment
                                    of custodial fees are
                                    deemed to be within the
                                    provisions of Article
pear Mrs. Winters:                  6243e. V.C.S.
          You have requested the opinion of this office
regarding the above question. In this connection you have
provided certain facts, which are quoted in part as follows:
           "The Firemen's Pension Board of Amarillo
      has entered into a contract with a local bank
      for the 'custody, safekeeping, and handling of
      the funds and securities held by the Board of
      Trustees for the Firemen's Fund'. This contract
      permits the funds of the Firemen's Relief and
      Retirement Fund to be invested in the name of
      the bank's Nominee, . . . and further provides
      a custodial fee to be paid to the bank in the
      amount of $3,000.00 for the year 1968.
           "There is no provision in Section 3 of the
      Law for investments or funds to be held in any
      name other than the name of the Firemen's Relief
      and Retirement Fund Trustees. No other Pension
      Board has ever invested otherwise nor have they
      questioned the advice of this office that funds
      could not be invested in the name of the Pension
      Board Trustees.
           "It is also the opinion of this office that
      the fee of $3,000.00 to the bank for custody and    _
      safekeeping is not permitted by the Law. I have
      contacted other Boards with large sums of money
      to invest and no bank has charged them for the
      custody or handling of the funds."
          Section 3 of Article 6243e, Vernon's Civil Statutes,
sets forth the powers and duties of a Board of Firemen's Re-
lief and Retirement Fund Trustees. Included in these duties
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Hon. Marie Winters,   page 2 (M-252)


are the receipt, handling and control, management and dis-
bursement of the Firemen's Relief and Retirement Fund for the
respective city or town. The city treasurer or chief financial
officer is made a member of the Board of Trustees and treasurer
thereof; that official's signature is one of those necessary to
any disbursement made from the Fund; and he is made the custodian
of the Firemen's Relief and Retirement Fund.

          Sections 23 and 23A of Article 6243e provide for the
investment of Fund monies over and above the amounts needed
for current demands. These sections identify the types of in-
vestments that may be considered for the Fund, and in Section
23A(c), the following is stated:
          "In making each and all of such invest-
     ments the Board shall exercise the judgment
     and care under the circumstances then prevail-
     ing 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."
          Section 23B of Article 6243e authorizes the employ-
ment of professional investment counselors to assist the Board
of Trustees in making investment decisions.
          The contract which you have submitted appears to be
a departure from ordinary pension fund practice in this State.
This contract is one of agency , whereby the contracting bank
is to act as custodian for all the investment funds and securi-
ties of the Firemen's Relief and Retirement Fund. The bank
executes buy and sell orders made by the Board of Trustees,
purchasing securities in the name of a nominee. The books
of the bank reflect at all times the interests actually owned
by the Fund. For its administrative services, the bank makes
a charge, and it is this charge which has occasioned this
opinion request, because of doubt as to whether assets or in-
come of the Fund may be used in making payment.

          A Firemen's Relief and Retirement Fund is a trust
under the Texas Trust Act. See Article 7425d. Vernon's Civil
Statutes; Bolen v. Board of Firemen, Policemen and Fire Alarm
                        an Antonio,  308 S.W.2d 904 (Tex.Civ.
                          ye1 v. Board of Firemen, Policemen
and Fire Operators' Trustees.345    .W.2d 456 (Tex.Civ.App.,
1961, error ref. n.r.e.1.  Since  Article 6243e, in establishing
the various Firemen's Relief and Retirement Funds, did not
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Hon. Marie Winters, page 3 (M-252)


clearly set out all the terms and conditions for the mechanical
operation of the Funds, we must look to the general law for
guidance, which in this case is the Texas Trust Act.
          Under Article 7425b-16, Vernon's Civil Statutes, a
trustee (or board of trustees) may hold assets in the name of
a nominee, subject to certain conditions. For our purposes
here, we assume that these conditions have been met. Also,
under Article 7425b-36, the costs of trust administration are
properly payable out of the income of the trust estate. Under
Article 7425b-25H, trustees are empowered to hire agents rea-
sonably necessary in the administration of the trust.
          While the Board of Trustees concerned here may seem
to have involved themselves in quite elaborate investment pro-
cedures, it is our view that these procedures are generally with-
in the scope of their authority in administering and investing
the trust funds under their control. However, in connection
with the cost of the bank service involved here, the attention
of the trustees is particularly directed to Section 23A(c),
quoted supra. In answer to your specific question, you are ad-
vised that it is the opinion of this office that the Board of
Trustees involved may properly permit Fund investments to be
made in the name of a nominee, and may pay the cost of an
agency contract of the type described from the income of the
Firemen's Relief and Pension Fund.
                         SUMMARY
          Under the facts submitted a Board of Trustees
     of a Firemen's Relief and Retirement Fund may permit
     Fund investments to be made in the name of a nominee,
     and has the authority to use trust fund income to
     pay the costs of administering the investments of
     the trust.




Prepared by Malcolm L. Quick
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Hawthorne Phillips, Chairman
Kerns Taylor, Co-Chairman
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Hon. Marie Winters, page 4 (M-252)


W. 0. Shultz
Tom Fortescue
Harold Kennedy
Rex White
A. J. CARUBBI, JR.
Executive Assistant




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