(a) Subject to Finance Code, §184.101(f), and this section, a trust company may invest for its own account in a mutual fund as defined in Finance Code, §181.002(a)(31), unless the mutual fund portfolio contains an investment that the trust company could not make directly.

(b) Notwithstanding the limits stated in Finance Code, §184.101(c), a trust company may invest in a mutual fund not more than an amount equal to 15% of the trust company's restricted capital unless a larger investment is permitted under subsection (c) of this section. Pursuant to Finance Code, §184.101(c), the banking commissioner may authorize investments in excess of this limitation on written application if the banking commissioner concludes that:

(1) the excess investment is not prohibited by other applicable law; and

(2) the safety and soundness of the requesting trust company is not adversely affected.

(c) Notwithstanding the limits stated in Finance Code, §184.101(c), and subsection (b) of this section, a trust company may invest in a mutual fund without limit if:

(1) the mutual fund's stated investment objective is to invest solely in securities that the trust company could invest in directly for its own account without limit under Finance Code, §184.101(d); and

(2) the mutual fund's portfolio in fact consists wholly of investments in which the trust company could invest directly without limitation under Finance Code, §184.101(d).

(d) A trust company that invests in a mutual fund as permitted by subsection (b) of this section shall periodically determine that its pro rata share of any security in the portfolio of the mutual fund is not in excess of applicable investment and lending limits by reason of being combined with the trust company's pro rata share of that security held by all other mutual funds in which the trust company has invested and with the trust company's own direct investment and loan holdings. Documentation of periodic reviews must be maintained by the trust company for examination purposes.

(e) A trust company's investment in a mutual fund made prior to September 1, 1997, is subject to §19.21 of this title (relating to Grandfathered Investments). Pursuant to §19.21, without the written approval of the banking commissioner, a trust company may not increase its grandfathered investment in a mutual fund on or after September 1, 1997, including by means of an election to reinvest dividends, unless subsection (c) of this section applies.

Source Note: The provisions of this §19.22 adopted to be effective March 12, 1998, 23 TexReg 2289.; amended to be effective July 11, 2002, 27 TexReg 5962