You asked us to research the laws of the six states in Region VIII as those laws concern
                  a representative payee's responsibilities for the conservation and investment of benefit
                  payments.
               
               The regulations provide that, after a representative has used benefit payments for
                  the current maintenance of the beneficiary, any remaining amounts are to be conserved
                  or invested on the beneficiary's behalf. See 20 C.F.R. § 404.2045. Any such "[c]onserved funds should be invested in accordance
                  with the rules followed by trustees." Id . We look to state law to determine how trustees should invest funds. See POMS § GN
                     
                     00603.040A.
               You have asked that we examine the laws of the states in our region to determine:
               (1) What are the rules followed by trustees regarding the investment of funds with
                  which they are entrusted;
               
               (2) What investments are considered appropriate under the "prudent man" rule; and
               (3) Under State law, are parent payees permitted to invest the funds belonging to
                  their minor children differently than other types of payees? 1_/
               
               Our answers for each state in Region VIII are set out below.
               South Dakota 
               1. What are the rules followed by trustees regarding  the investment of funds with
                     which they are entrusted?
               South Dakota applies the prudent investor rule, which provides that
               “[t]he trustee shall invest and manage trust assets  as a prudent investor would, by
                  considering the purposes, terms,  distribution requirements, and other circumstances
                  of the trust.  This standard requires the exercise of reasonable care, skill, and
                  caution and shall be applied to investments not in isolation, but  in the context
                  of the trust portfolio as a whole and as a part of  an overall investment strategy
                  that should incorporate risk and  return objectives reasonably suitable to the trust.”
               
               S.D. Codified Laws § 55-5-6. The prudent investor rule is a test of conduct and not
                  of resulting performance. Id. § 55-5-7. Trustees should diversify unless it is in the best interest of the beneficiary
                  not to diversify. They should review the funds reasonably soon after taking over.
                  They should have a strategy and consider the fund as a whole. They must be impartial
                  with no conflict of interest. They may delegate their investment decisions, as long
                  as they do it with care. Id. §§ 55-5-8-16.
               
               2. Which types of investments are considered appropriate  under the “prudent man” rule?
               No specific types of investments are required or restricted. No specific investment
                  or course of action is, taken alone, prudent or imprudent. The trustee may invest
                  in every kind of property and type of investment, subject to the prudent investor
                  rule. Id. §§ 55-5-8-7. The “prudent man” rule generally does not authorize trust investments in commodities since commodity
                  trading is speculative in nature. See In  re Hadleigh D. Hyde Trust, 458 NW.2d 802, 805 (S.D. 1990).
               
               3. Under State law, are parent payees permitted to invest  the funds belonging to
                     their minor children differently than other  types of payees?
               South Dakota law is silent on this issue. However, there is an assumption that the
                  prudent investor be impartial and have no conflict of interest. To the extent that
                  a family relationship may be a barrier to such impartiality and may create a conflict
                  of interest, one may need to scrutinize these funds more carefully. The standard,
                  however, appears to be identical.
               
               CONCLUSION
               Two of our six states, Colorado and Wyoming, have incorporated the Uniform Prudent
                  Investor Act within their laws. The other four states have incorporated most of the
                  theory behind the Uniform Prudent Investor Act. We believe that a fair reading of
                  the laws in each of these states would require that a representative payee use reasonable
                  care, skill and caution with the interest of the beneficiary as the key element. We
                  believe that the facts and circumstances of each case determine whether the representative
                  payee has acted with the required care, skill and caution and that the test is a test
                  of conduct and not of results.
               
               1_/ We have reordered the questions presented in your May 24, 2001, memorandum.