oag11-08

  Your second question is whether the statute articulates a presumption for investments on the “legal list” over other investments that SWIB could make—i.e., that SWIB should confine its investments to the “legal list” unless it finds that it would not be prudent to do so. I find no indication of such a preference or presumption in 2007 Wisconsin Act 212.

IS SWIB REQUIRED TO MEET A HIGHER STANDARD

WHEN MAKING INVESTMENTS OTHER THAN THOSE

ON THE “LEGAL LIST”?

  Finally, your third question is whether SWIB must satisfy a higher standard of prudence in cases where it has chosen to make investments other than from those on the “legal list.” Again, I conclude that the answer is “no.” Prior to the passage of 2007 Wisconsin Act 212, SWIB was held to a standard of prudence in making investments. See Wis. Stat. § 25.15(2)(a) (2005-06). The fact that a trustee selected an investment from the “legal list” did not in and of itself constitute prudence; the trustee is required to meet the standard in choosing from among those options. See, e.g. Estate of Collins v. Hughes, 72 Cal. App. 3d 663, 672-73 (Cal. Ct. App. 1977) (trustee’s choice of enumerated investment does not in itself satisfy the standard of care).

  The standard of prudence articulated in Wis. Stat. § 25.15(2), which considers the nature of the resources and circumstances surrounding a trust, implicitly takes into account the trustee’s scope of powers in assessing the duty of prudence. See Welch v. Welch, 235 Wis. 282, 312, 290 N.W. 758 (1940). A trustee’s ability to invest in a wide spectrum of investment options carries with it the duty to wield that power with care, skill, prudence and diligence.

CONCLUSIONS

  I conclude that 2007 Wisconsin Act 212 confers upon SWIB the power to make investments of assets in the Core and Variable Funds that meet the standard of prudence under Wis. Stat. § 25.15(2), even if those investments are not on the “legal list.” SWIB remains subject to Wis. Stat. § 25.17(5), which requires that Variable Fund assets be invested primarily in equity securities. SWIB is not required to determine that investing solely in the “legal list” would not meet the standard of prudence prior to choosing a different investment. The standard of prudence remains the same regardless of whether SWIB’s management choice is one enumerated on the “legal list.” The standard of prudence takes into account, however, SWIB’s expanded power to select among management options for the two Trusts.

            Sincerely,

           

            J.B. Van Hollen

            Attorney General

     

JBVH:CG:lkf

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