Senate Bill No. 731
(By Senators Minard, Bailey and Fanning)
____________
[Introduced February 18, 2008; referred to the Committee on
Government Organization; and then 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 of said code be amended and
reenacted; that §12-1-4 and §12-1-5 of said code 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.
§12-1-4a is new; therefore, strike-throughs and underscoring
have been omitted.