Section 41-14A-9 Procedures for payment of losses.
Section 41-14A-9
Procedures for payment of losses.
(a) When the State Treasurer becomes aware that a default or insolvency has occurred, the State Treasurer shall provide notice as required in subsection (b) and implement the following procedures:
(1) The State Treasurer shall obtain information from the Superintendent of Banks of the State Banking Department or the receiver of the qualified public depository in default in order to ascertain the amount of funds of each public depositor on deposit at such depository and the amount of deposit insurance applicable to such deposits.
(2) The potential loss to public depositors shall be calculated by compiling claims received from public depositors. The State Treasurer shall validate claims of public depositors who filed claims under subsection (b) and which have been confirmed under subdivision (1).
(3) The loss to public depositors shall be satisfied, insofar as possible, first through any applicable deposit insurance and then through the sale of securities pledged by the defaulting depository. If the loss to public depositors is not covered by insurance or the proceeds of the sale, coverage of the remaining loss shall be provided by assessment against the other qualified public depositories following the expiration of the 120-day period for the filing of claims by public depositors. However, if the sale of securities cannot be accomplished within seven days following the expiration of the 120-day period for the filing of claims by public depositors, the State Treasurer may proceed with the assessment for qualified public depositories. The assessment for each qualified public depository shall be determined by multiplying the total amount of any remaining loss to all public depositors by a percentage which represents the average monthly balance of public deposits held by each qualified public depository during the previous 12 months or, in the event a qualified public depository shall have participated in the program for less than 12 months, the qualified public depository's average monthly balance for the month or months during which the qualified public depository shall have held any public deposits, divided by the total average monthly balances of public deposits held by all qualified public depositories, excluding those of the defaulting or insolvent depository, during the same period.
(4) Each qualified public depository shall pay its assessment to the State Treasurer for deposit to the Loss Payment Fund within seven business days after it receives notice of the assessment. If a depository fails to pay its assessment when due, the State Treasurer shall satisfy the assessment by selling securities pledged by that depository.
(5) The State Treasurer shall distribute the funds to the public depositors of the qualified public depository in default according to their validated claims. At the discretion of the State Treasurer, the State Treasurer may make partial payments to public depositors that have experienced a loss of public funds which is critical to the immediate operations of the public entity.
(6) Public depositors receiving payment under the provisions of this section shall assign to the Loss Payment Fund any interest they may have in funds that may subsequently be made available to the qualified public depository in default. If the qualified public depository in default or its receiver provides the funds to the State Treasurer for the account of the Loss Payment Fund, the State Treasurer shall distribute the funds, plus all accrued interest which has accumulated from the investment of the funds, if any, to the depositories which paid assessments on the same pro rata basis as the assessments were paid. If the board of directors deems it prudent to do so, the board of directors may authorize the State Treasurer to enforce any or all claims, or take any other action, against a defaulting or insolvent qualified public depository or third party to recover all or part of any losses to any public depositor or assessments against any other qualified public depositories. Action or inaction by the board of directors or the State Treasurer will not impair the rights that any public depositor or qualified public depository may have against a defaulting or insolvent qualified public depository or any third party.
(7) Expenses incurred by the board of directors, the State Treasurer, or their agents in connection with a default or insolvency that is not normally incurred in the administration of the SAFE Program shall be paid out of the proceeds from the sale of the pledged collateral.
(b) Upon determining the default or insolvency of a qualified public depository, the State Treasurer shall provide notice of such default or insolvency to all public depositors of such qualified public depository the identity of which is reflected in the board's or the qualified public depository's records, "known public depositors," which notice, the "first notice," shall be provided by certified or registered mail to the last address for each such public depositor reflected in the qualified public depository's records and shall specify that public depositors having claims or demands against the funds occasioned by the default or insolvency must file their claims with the State Treasurer within 120 days after the date of the notice. In the case of any known public depositor which has not filed a claim with the State Treasurer within 45 days after the date of the first notice, the State Treasurer shall mail a second notice, the "second notice," by certified or registered mail to the last address for such known public depositor reflected in the qualified public depository's records, which second notice shall specify the date by which claims must be filed with the State Treasurer. The second notice shall be mailed by the State Treasurer not more than 55 days after the date of the first notice. Contemporaneously with the mailing of the first notice and the second notice, the State Treasurer shall provide to the judge of probate of each county of the state and publish in a newspaper of general circulation a notice, which notice shall identify the defaulted or insolvent qualified public depository, the date before which public depositors must file claims with the State Treasurer under this chapter, and requesting that the judge of probate provide copies of such notice to each covered public entity within the judge of probate's county. The judge of probate of the various counties of this state shall promptly endeavor to provide copies of said notices to each covered public entity in the judge of probate's county which is known to the judge of probate, but in no event shall the judge of probate be liable for the failure of any covered public entity to receive copies of said notices.
(c) No claim against the Loss Payment Fund is binding on the State Treasurer or the Loss Payment Fund unless presented within 120 days after the date of the first notice.
(d) Nothing contained in this chapter shall affect any proceeding to:
(1) Enforce any real property mortgage, chattel mortgage, security interest, or other lien on property of a qualified public depository that is in default or insolvency.
(2) Establish liability of a qualified public depository that is in default or insolvency to the limits of any federal or other casualty insurance protection.
(Act 2000-748, p. 1669, §1.)