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Introduced Version House Bill 4692 History

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Key: Green = existing Code. Red = new code to be enacted
H. B. 4692


(By Delegates White and Kominar)
[Introduced February 18, 2008; referred to the
Committee on Finance.]




A BILL to amend and reenact §7-6-2 of the Code of West Virginia, 1931, as amended; to amend and reenact §8-13-22a of said code; to amend and reenact §12-1-4 and §12-1-5 of said code; and to amend said code by adding thereto a new section, designated §12-1-4a, all relating to permitting depositories of state, county, municipal and other public moneys to pool securities in lieu of other bonding and pledging requirements for public depositories; giving depositories of state moneys the same authority as depositories of municipal and county moneys to place such deposits in certificates of deposit which meet certain requirements, in lieu of providing a bond or security in lieu of bond; and permitting depositories of state, county, municipal and other public moneys to insure such deposits in excess of the amount insured by an agency of the federal government with a deposit guaranty bond issued by a bankers surety company.

Be it enacted by the Legislature of West Virginia:
That §7-6-2 of the Code of West Virginia, 1931, as amended, be amended and reenacted; that §8-13-22a be amended and reenacted; that §12-1-4 and §12-1-5 be amended and reenacted; and that said code be amended by adding thereto a new section, designated §12-1-4a, all to read as follows:
CHAPTER 7. COUNTY COMMISSIONS AND OFFICERS.

ARTICLE 6. COUNTY DEPOSITORIES.
§7-6-2. Bond of depositories.
No designation is binding on any county, nor shall any public money be deposited thereunder, until the banking institution designated executes a bond with good and sufficient sureties, to be accepted and approved by the county commission, payable to the State of West Virginia, in a sum as the county commission shall direct, and which may not be less than the maximum sum that is deposited in the depository at any one time. The bond shall be executed by at least four resident freeholders as sureties owning in the aggregate unencumbered real estate having an assessed valuation thereon equal to the penalty of the bond, or by a fidelity or indemnity company authorized to do business within the state, satisfactory to, and acceptable by the county commission, and having not less than six hundred thousand dollars capital; and the bond shall be conditioned for the receipt, safekeeping and payment over of all money which may be deposited in or come under the custody of the banking institution designated a county depository under the provisions hereof, together with the interest thereon at the rate specified by this article; and the bond shall be further conditioned for the faithful performance, by the banking institution so designated, of all the duties imposed by this article upon a depository of public moneys: Provided, That the clerk of the county commission shall keep a record of each surety on all personal bonds given as hereinbefore provided and the clerk shall notify the county commission of every recorded conveyance of real estate made by any surety on said personal bond.
An action shall lie on the bond at the instance of the county commission, or the sheriff, for the recovery of any money deposited in the depository, upon failure or default of the depository to fully and faithfully account for and pay over any and all public moneys deposited by the sheriff and of all interests earned and accrued thereon as required by this article. A bond may not be accepted by the county commission until it has been submitted to the prosecuting attorney, and certified by him or her to be in due and legal form, and conformable to the provisions of this article, which certificate shall be endorsed thereon: Provided, That the county commission may, in lieu of the bond provided hereinbefore, accept as security for money deposited as aforesaid, interest-bearing securities of the United States, or of a state, county, district or municipal corporation, or of the federal land banks, or endorsed county and district warrants of the county in which the depository is located, or letters of credit of the federal land banks, or federal home loan banks, or any other letters of credit approved by the treasurer; the face value of which securities may not be less than the sum hereinbefore specified as the amount to be named in the bond in lieu of which the securities are accepted; or the county commission may accept the securities as partial security to the extent of their face value for the money so deposited, and require bond for the remainder of the full amount hereinbefore specified, to be named in the bond, and in the bond so required, the acceptance of securities as partial security, and the extent thereof, shall be set forth: Provided, however, That a banking institution is not required to provide a bond or security in lieu of bond if the banking institution complies with section four-a, article one, chapter twelve of this code or the deposits accepted are placed in certificates of deposit meeting the following requirements: (1) The funds are invested through a designated state depository selected by the county; (2) the selected depository arranges for the deposit of the funds in certificates of deposit in one or more banks or savings and loan associations wherever located in the United States, for the account of the county; (3) the full amount of principal and accrued interest of each certificate of deposit is insured by the Federal Deposit Insurance Corporation; (4) the selected depository acts as custodian for the county with respect to such certificates of deposit issued for the county's account; and (5) at the same time that the county's funds are deposited and the certificates of deposit are issued, the selected depository receives an amount of deposits from customers of other financial institutions wherever located in the United States equal to or greater than the amount of the funds invested by the county through the selected depository. The hypothecation of the securities shall be by proper legal transfer as collateral security to protect and indemnify by trust any and all loss in case of any default on the part of the banking institution in its capacity as depository as aforesaid. All the securities shall be delivered to or deposited for the account of the county commission, and withdrawal or substitution thereof may be permitted from time to time upon approval by the county commission by order of record, but the collateral security shall be released only by order of record of the county commission when satisfied that full and faithful accounting and payment of all the moneys has been made under the provisions hereof. In the event actual possession of the hypothecated securities are delivered to the county commission, it shall make ample provision for the safekeeping thereof and the interest thereon when paid shall be turned over to the banking institution, so long as it is not in default as aforesaid. The county commission may permit the deposit under proper receipt of the securities with one or more banking institutions within or without the State of West Virginia and may contract with any institution for safekeeping and exchange of any hypothecated securities, and may prescribe the rules for handling and protecting the same.
CHAPTER 8. MUNICIPAL CORPORATIONS.

ARTICLE 13. TAXATION AND FINANCE.

PART VI. ACCOUNTING PRINCIPLES; FUNDS; DISBURSEMENTS.

§8-13-22a. Investment of municipal funds.
All municipal funds, the investment of which is not governed by other provisions of this code and not required for the payment of current obligations and not otherwise prohibited, may be invested and reinvested in:
(1) Any direct obligation of, or obligation guaranteed as to the payment of both principal and interest by, the United States of America;
(2) Any evidence of indebtedness issued by any United States government agency guaranteed as to the payment of both principal and interest, directly or indirectly, by the United States of America including, but not limited to, the following: Government national mortgage association, federal land banks, federal home loan banks, federal intermediate credit banks, banks for cooperatives, Tennessee Valley Authority, United States postal service, farmers home administration, export-import bank, federal financing bank, federal home loan mortgage corporation, student loan marketing association and federal farm credit banks;
(3) Any evidence of indebtedness issued by the federal National Mortgage Association to the extent such indebtedness is guaranteed by the government National Mortgage Association;
(4) Any evidence of indebtedness that is secured by a first lien deed of trust or mortgage upon real property situate within this state, if the payment thereof is substantially insured or guaranteed by the United States of America or any agency thereof;
(5) Direct and general obligations of this state;
(6) Any undivided interest in a trust, the corpus of which is restricted to mortgages on real property and, unless all of such property is situate within the state and insured, the trust at the time of the acquisition of the undivided interest, is rated in one of the three highest rating grades by an agency which is nationally known in the field of rating pooled mortgage trusts;
(7) Any bond, note, debenture, commercial paper or other evidence of indebtedness of any private corporation or association: Provided, That any such security is, at the time of its acquisition, rated in one of the three highest rating grades by an agency which is nationally known in the field of rating corporate securities: Provided, however, That if any commercial paper or any such security will mature within one year from the date of its issuance, it shall, at the time of its acquisition, be rated in one of the two highest rating grades by any such nationally known agency and commercial paper or other evidence of indebtedness of any private corporation or association shall be purchased only upon the written recommendation from an investment advisor that has over three hundred million dollars in other funds under its management;
(8) Negotiable certificates of deposit issued by any bank, trust company, national banking association or savings institution which mature in less than one year and are fully collateralized;
(9) Interest earning deposits including certificates of deposit, with any duly designated state depository, which deposits are fully secured by a collaterally secured bond as provided in section four, article one, chapter twelve of this code: Provided, That a banking institution is not required to provide this collaterally secured bond, or other security in lieu of bond, if the banking institution complies with section four-a, article one, chapter twelve of this code or the deposits accepted are placed in certificates of deposit meeting the following requirements: (A) The funds are invested through a designated state depository selected by the municipality; (B) the selected depository arranges for the deposit of the funds in certificates of deposit in one or more banks or savings and loan associations wherever located in the United States, for the account of the municipality; (C) the full amount of principal and accrued interest of each certificate of deposit is insured by the Federal Deposit Insurance Corporation; (D) the selected depository acts as custodian for the municipality with respect to such certificates of deposit issued for the municipality's account; and (E) at the same time that the municipality's funds are deposited and the certificates of deposit are issued, the selected depository receives an amount of deposits from customers of other financial institutions wherever located in the United States equal to or greater than the amount of the funds invested by the municipality through the selected depository; and
(10) Mutual funds registered with the Securities and Exchange Commission which have assets in excess of three hundred million dollars.
CHAPTER 12. PUBLIC MONEYS AND SECURITIES.

ARTICLE 1. STATE DEPOSITORIES.

§12-1-4. Bonds to be given by depositories.

Before allowing any money to be deposited with any eligible depository in excess of the amount insured by an agency of the federal government or insured by a deposit guaranty bond issued by a valid bankers surety company acceptable to the treasurer, the State Treasurer shall require the depository to give a collaterally secured bond, in the amount of not less than ten thousand dollars, payable to the State of West Virginia, conditioned upon the prompt payment, whenever lawfully required, of any state money, or part thereof, that may be deposited with that depository, or of any accrued interest on deposits. The bond shall be a continuous bond but may be increased or decreased in amount or replaced by a new bond with the approval of the State Treasurer. The collateral security for the bond shall consist of bonds of the United States, or bonds or letters of credit of the federal land banks, of the federal home loan banks, or bonds of the State of West Virginia or of any county, district or municipality of this state, or other bonds, letters of credit, or securities approved by the treasurer. All bonds so secured are here designated as collaterally secured bonds. Withdrawal or substitution of any collateral pledged as security for the performance of the conditions of the bond may be permitted with the approval in writing of the treasurer. All depository bonds shall be recorded by the treasurer in a book kept in his or her office for the purpose, and a copy of the record, certified by the treasurer, shall be prima facie evidence of the execution and contents of the bond in any suit or legal proceeding. All collateral securities shall be delivered to or deposited for the account of the treasurer of the State of West Virginia and in the event said securities are delivered to the treasurer, he or she shall furnish a receipt therefor to the owner thereof. The treasurer and his or her bondsmen shall be liable to any person for any loss by reason of the embezzlement or misapplication of the securities by the treasurer or any of his or her employees, and for the loss thereof due to his or her negligence or the negligence of his or her employees; and the securities shall be delivered to the owner thereof when liability under the bond which they are pledged to secure has terminated. The treasurer may permit the deposit under proper receipt of the securities with one or more banking institutions within or outside the State of West Virginia and may contract with any institution for safekeeping and exchange of any collateral securities and may prescribe the rules for handling and protecting the collateral securities.
A banking institution is not required to provide a bond or security in lieu of bond if: (1) The banking institution complies with section four-a, article one, chapter twelve of this code; or (2) the deposits accepted are placed in certificates of deposit meeting the following requirements: (A) The funds are invested through a designated state depository selected by the treasurer; (B) the selected depository arranges for the deposit of the funds in certificates of deposit in one or more banks or savings and loan associations wherever located in the United States, for the account of the state; (C) the full amount of principal and accrued interest of each certificate of deposit is insured by the Federal Deposit Insurance Corporation; the selected depository acts as custodian for the state with respect to such certificates of deposit issued for the state's account; and (D) at the same time that the state's funds are deposited and the certificates of deposit are issued, the selected depository receives an amount of deposits from customers of other financial institutions wherever located in the United States equal to or greater than the amount of the funds invested by the state through the selected depository.
§12-1-4a. Optional pledging requirements.
(a) As used in this section:
(1) "Public depository" means an institution which receives or holds any public deposits;
(2) "Public deposits" means public moneys deposited in a public depository pursuant to section one, article six, chapter seven through section nine, article six, chapter seven of this code, subdivision nine of section twenty-two-a, article thirteen, chapter eight of this code or section one, article one, chapter twelve through section thirteen, article one, chapter twelve of this code;
(3) "Public moneys" means all moneys as defined in section eight, article six, chapter seven of this code and all moneys in the treasury of the state, any subdivision of the state or any municipality, or moneys coming lawfully into the possession or custody of the State Treasurer, the treasurer of any subdivision of the state or any municipal treasurer; and
(4) "Treasurer", with respect to the state, has the meaning ascribed to such term in subsection (a) of section one, article one-a, chapter twelve of this code, and with respect to any subdivision, county or municipality, means the treasurer, officer or other body exercising the functions of a treasurer, of such subdivision, county or municipality.
(b) In lieu of the bonding or other pledging requirements prescribed by section two, article six, chapter seven of this code, section twenty-two-a, article thirteen, chapter eight of this code and section four, article one, chapter twelve of this code, an institution designated as a public depository may at its option pledge a single pool of eligible securities to secure the repayment of all public moneys deposited in the institution and not otherwise secured pursuant to law, provided that at all times the total market value of the securities so pledged is at least equal to one hundred percent of the total amount of all public deposits to be secured by the pooled securities that are not covered by any federal deposit insurance or deposit guaranty bond issued by a valid bankers surety company acceptable to the treasurer. Each institution shall carry in its accounting records at all times a general ledger of other appropriate account of the total amount of all public deposits to be secured by the pool, as determined at the opening of business each day, and the total market value of securities pledged to secure such deposits.
(c) The securities described in section four, article one, chapter twelve of this code shall be eligible as collateral for the purposes of subsection (b) of this section, provided no such securities pledged as collateral are at any time in default as to either principal or interest.
(d) The state and each subdivision shall have an undivided security interest in the pool of securities pledged by a public depository pursuant to subsection (b) of this section in the proportion that the total amount of the state's or subdivision's public moneys secured by the pool bears to the total amount of public deposits so secured.
(e) The public depository at any time may substitute, exchange, or release eligible securities, provided that such substitution, exchange, or release does not reduce the total market value of the securities to an amount that is less than one hundred percent of the total amount of public deposits as determined pursuant to subsection (b) of this section.
(f) Upon request of a treasurer no more often than four times per year, a public depository shall report the amount of public moneys deposited by the treasurer and secured pursuant to subsection (b) of this section, and the total market value of the pool of securities pledged to secure public moneys held by the depository, including those deposited by the treasurer.
§12-1-5. Limitation on amount of deposits.
The amount of state funds on deposit in any depository in excess of either the amount insured by an agency of the federal government or the amount insured by a deposit guaranty bond issued by a valid bankers surety company acceptable to the treasurer shall not exceed ninety percent of the value of: (1) Collateral pledged on the collaterally secured bond given by the depository; or (2) securities pooled by the depository pursuant to section four-a, article one, chapter twelve of this code. The value of the collateral or pooled securities shall be determined by the treasurer.


NOTE: The purpose of this bill is to make it easier for banking institutions to maintain the collateral levels needed to serve as depositories of public moneys. This bill accomplishes this purpose in three ways: First, depositories for municipal and county deposits already have the ability to place municipal and county deposits in certificates of deposit meeting certain requirements, in lieu of providing a bond or security in lieu of bond and gives depositories of state moneys that same option; Second, this bill permits banking institutions that serve as depositories for public moneys to pool securities in lieu of other bonding and pledging requirements; Finally, this bill permits public depositories to insure public deposits in excess of FDIC limits though a bankers surety bond.

Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.
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