N.Y. Estates, Powers & Trusts Law § 11-2.2: Power to invest

§ 11-2.2 Power to invest

(a) Investment of trust funds

(1) A fiduciary holding funds for investment may invest the same in

such securities as would be acquired by prudent men of discretion and

intelligence in such matters who are seeking a reasonable income and

preservation of their capital, provided, however, that nothing in this

subparagraph shall limit the effect of any will, agreement, court order

or other instrument creating or defining the investment powers of a

fiduciary, or shall restrict the authority of a court of proper

jurisdiction to instruct the fiduciary in the interpretation or

administration of the express terms of any will, agreement or other

instrument or in the administration of the property under the

fiduciary's care. This paragraph shall apply to any investment, made on

or after May first, nineteen hundred seventy, of funds held for

investment by a fiduciary, and to all estates and trusts now in

existence or which may hereafter come into existence.

A bank, trust company or paid professional investment advisor (whether

or not registered under any federal securities or investment law) which

serves as a fiduciary, and any other fiduciary representing that it has

special investment skills shall exercise such diligence in investing the

funds for which the fiduciary is responsible, as would customarily be

exercised by prudent men of discretion and intelligence having special

investment skills. This paragraph shall apply to any investment, made on

or after January first, nineteen hundred eighty-six, of the funds held

for investment by such a fiduciary and to all estates and trusts now in

existence or which may hereafter come into existence.

This subparagraph shall not apply to any investment, made on or after

January first, nineteen hundred ninety-five, of funds held for

investment by a fiduciary, and to all estates and trusts in existence or

which may come into existence on or after January first, nineteen

hundred ninety-five.

(2) A trustee or other person holding trust funds may require such

personal bonds or guaranties of payment of principal or interest or

both, or such other bonds or guaranties, to accompany investments as may

seem prudent, and may from time to time adjust, reduce, modify, postpone

or compound the same, or any terms and conditions thereof, including the

rate of interest, or any installments thereof, and may at any time

release the same, and all premiums paid on such guaranties or fees for

servicing mortgages may be charged to or paid out of income, provided

that such charge or payment is not more than at the rate of one-half of

one per centum per annum on the par value of such investments. But no

trustee shall purchase securities hereunder from himself.

(3) Whenever a trustee or other person holding trust funds has

heretofore lawfully invested or shall hereafter lawfully invest any

trust funds in a share or part of a bond and mortgage or any part

interest therein or shall hold any such share, part or part interest by

apportionment, transfer, representation or otherwise, if the property

subject to such mortgage is purchased pursuant to foreclosure sale or

acquired by voluntary conveyance by or in behalf of such trustee or

other person holding trust funds and another person, including another

such trustee, owning another such share, part or part interest in such

bond and mortgage, such trustee or other person holding trust funds or a

person purchasing or acquiring title in behalf of such trustee may

convey the undivided interest in such real property so purchased or

acquired to a corporation, formed for the purpose of acquiring such

property, in exchange for a proportionate part of the capital stock and

the bonds, if any, of such corporation; provided that the other person,

by or in whose behalf such property has been purchased or acquired,

shall exchange his undivided interest in such property for a

proportionate part of the capital stock and the bonds, if any, of such

corporation, issued in exchange for such real property.

(4) The corporation formed, as provided in subparagraph (3), for the

acquisition of such real property shall be a business corporation, and

shall have all the powers of such a corporation, and its stockholders

shall have the same power to vote to authorize or confirm any sale,

mortgage, lease, option or other disposition of any or all of its

property that is ordinarily possessed by shareholders of a business

corporation; provided, however, that the certificate of incorporation

shall prohibit it from investing in any stocks, bonds or other

securities, which are not under the laws of this state a proper subject

for the investment of trust funds, and shall provide that upon the sale

of the real property acquired by the corporation such corporation shall

be dissolved. Such dissolution shall be effectuated by proceedings under

article 10 of the business corporation law to be taken promptly after

such sale; provided, however, that if any such corporation shall sell

real property held by it for a consideration consisting in whole or in

part of evidences of indebtedness secured by mortgage upon such real

property or shall reacquire such property upon foreclosure of such

mortgage, in either of such events, such dissolution proceedings shall

not be required to be taken until final liquidation in cash by the

corporation of its entire interest in or lien upon such real property.

(5) Nothing contained in this section, however, shall affect any

lawful investments in shares, parts or part interests in bonds and

mortgages heretofore made by any trustee or other person holding trust

funds for investment, nor affect any action heretofore taken in

accordance with law with respect to such bonds and mortgages or shares,

parts or part interests in such bonds and mortgages. Such trustee or

other person holding trust funds for investment shall have all the

powers heretofore possessed under this section or any other provision of

law with respect to part interests in bonds and mortgages for the

protection and preservation of the trust property. It is the intention

of this section to prohibit any future investments in part interests in

bonds, or notes, and mortgages for any estate or fund, for which such

trustee or other person may hold funds for investment.

(6) A fiduciary holding funds for investment who is directed or

authorized by an instrument creating the fiduciary relationship to

retain the stock of a bank or trust company that is a member of a bank

holding company currently fully registered under an act of Congress

entitled "Bank Holding Company Act of l956", as the same may be amended

from time to time, shall be considered as being directed or authorized

to retain the stock of such bank holding company. Notwithstanding any

contrary provision in this section, this subdivision shall apply to any

fiduciary relationship now in existence or which may hereafter come into

existence and to all investments now held or which may hereafter be

acquired in such relationship.

(7) No fiduciary holding funds for investment shall be liable for any

loss incurred with respect to any investment not eligible by law for the

investment of trust funds, if such ineligible investment was received by

such fiduciary pursuant to a decree of court or the terms of the will,

deed, or other instrument creating the fiduciary relationship, or if

such ineligible investment was eligible when received or when the

investment was made by the fiduciary; provided such fiduciary exercises

due care and prudence in the disposition or retention of any such

ineligible investment.

(8) Investment by a fiduciary in a limited partnership or investment

trust, as defined in 9-1.5 of this chapter, shall not be deemed to be an

improper delegation of investment authority.

(9) As used in this paragraph, the phrase "person holding trust funds"

and the terms "fiduciary" and "trustee" include a personal

representative, trustee, guardian, a donee of a power during minority,

committee of the property of an incompetent person, and conservator of

the property of a conservatee.

(b) Rights of fiduciaries to invest in securities of investment

companies.

(1) A fiduciary holding funds for investment may invest the same in

securities of any management type investment company or trust registered

pursuant to the federal investment company act of nineteen hundred

forty, as amended, in any case in which a court order, the will,

agreement or other instrument creating or defining the investment powers

of the fiduciary authorizes the investment of such funds in either of

the following: (A) Such investments as the fiduciary may, in his

discretion, select. (B) Generally in investments other than those in

which fiduciaries are by law authorized to invest trust funds,

notwithstanding that the fiduciary or an affiliate of the fiduciary acts

as investment advisor, custodian, transfer agent, registrar, sponsor,

distributor, manager or provides other services to the investment

company or trust. Unless the will, lifetime trust or order appointing

the fiduciary provides otherwise, the fiduciary shall elect annually

either (i) to receive or have its affiliate receive compensation for

providing such services to such investment company or trust for the

portion of the trust invested in such investment company or trust or

(ii) to take annual corporate trustees' commissions with respect to such

portion.

This subparagraph shall not apply to any investment, made on or after

January first, nineteen hundred ninety-five, of funds held for

investment by a fiduciary, and to all estates and trusts in existence or

which may come into existence on or after January first, nineteen

hundred ninety-five.

(1-a) In any case in which a court order, will, agreement or other

instrument creating or defining the investment powers of the fiduciary

directs, requires or authorizes that the funds held for investment be

invested in United States government obligations, the fiduciary may

invest such funds in securities of, or other interests in, any open-end

or closed-end management type investment company or investment trust

registered pursuant to the federal investment company act of nineteen

hundred forty, as amended, provided that the portfolio of such

investment company or investment trust is limited to United States

government obligations or to repurchase agreements fully collateralized

by such obligations and provided further that such investment company or

investment trust shall take delivery of such collateral, either directly

or through an authorized custodian.

(2) As used in this paragraph, the term "fiduciary" includes a

personal representative, trustee, guardian, committee of the property of

an incompetent and conservator of the property of a conservatee.