New Mexico § 46-3A-414 - Derivatives and options

§ 46-3A-414. Derivatives and options

(a) As used in this section, “ derivative ” means a contract or financial instrument or a combination of contracts and financial

instruments which gives a trust the right or obligation to participate in some or

all changes in the price of a tangible or intangible asset or group of assets, or

changes in a rate, an index of prices or rates, or other market indicator for an asset

or a group of assets. (b) To the extent that a trustee does not account under Section 403 for transactions

in derivatives, the trustee shall allocate to principal receipts from and disbursements

made in connection with those transactions. (c) If a trustee grants an option to buy property from the trust, whether or not the

trust owns the property when the option is granted, grants an option that permits

another person to sell property to the trust or acquires an option to buy property

for the trust or an option to sell an asset owned by the trust, and the trustee or

other owner of the asset is required to deliver the asset if the option is exercised,

an amount received for granting the option must be allocated to principal. An amount paid to acquire the option must be paid from principal. A gain or loss realized upon the exercise of an option, including an option granted

to a settlor of the trust for services rendered, must be allocated to principal.