53630-53686
GOVERNMENT CODE
SECTION 53630-53686
53630. As used in this article:
(a) "Local agency" means county, city, city and county, including
a chartered city or county, a community college district, or other
public agency or corporation in this state.
(b) "Treasurer" means treasurer of the local agency.
(c) "Depository" means a state or national bank, savings
association or federal association, a state or federal credit union,
or a federally insured industrial loan company, in this state in
which the moneys of a local agency are deposited.
(d) "Agent of depository" means a trust company or trust
department of a state or national bank located in this state,
including the trust department of a depository where authorized, and
the Federal Home Loan Bank of San Francisco, which is authorized to
act as an agent of depository for the purposes of this article
pursuant to Section 53657.
(e) "Security" means any of the eligible securities or obligations
listed in Section 53651.
(f) "Pooled securities" means eligible securities held by an agent
of depository for a depository and securing deposits of one or more
local agencies.
(g) "Administrator" means the Administrator of Local Agency
Security of the State of California.
(h) "Savings association or federal association" means a savings
association, savings and loan association, or savings bank as defined
by Section 5102 of the Financial Code.
(i) "Federally insured industrial loan company" means an
industrial loan company licensed under Division 7 (commencing with
Section 18000) of the Financial Code, the investment certificates of
which are insured by the Federal Deposit Insurance Corporation.
(j) "Corporation" includes a limited liability company.
53630.1. The Legislature hereby finds that the solvency and
creditworthiness of each individual local agency can impact the
solvency and creditworthiness of the state and other local agencies
within the state. Therefore, to protect the solvency and
creditworthiness of the state and all of its political subdivisions,
the Legislature hereby declares that the deposit and investment of
public funds by local officials and local agencies is an issue of
statewide concern.
53630.5. (a) The definitions in Section 1700 of, and Chapter 1
(commencing with Section 99) of Division 1 of, the Financial Code
apply to this section.
(b) In this article, for purposes of being a depository of moneys
belonging to or being in the custody of a local agency, the phrases
"state or national bank located in this state," "state or national
bank," "state or national bank in this state," and "state or national
banks in the state" include, without limitation, any of the
following:
(1) Any California branch office of a foreign (other state) state
bank that the bank is authorized to maintain under the law of its
domicile and federal law.
(2) Any California branch office of a foreign (other state)
national bank that the bank is authorized to maintain under federal
law.
(3) Any California branch office of a foreign (other nation) bank
that the bank is licensed to maintain under Article 3 (commencing
with Section 1750) of Chapter 13.5 of Division 1 of the Financial
Code.
(4) Any California federal branch of a foreign (other nation) bank
that the bank is authorized to maintain under federal law.
53631. Under those conditions as the treasurer of a local agency
fixes with the approval of the legislative body, he or she may
establish accounts at banks within or without the state and deposit
money in those accounts to the extent necessary to pay the principal
and interest of bonds to pay any warrant that has been presented for
payment, or to fund any electronic disbursement of funds from the
treasury of the local agency. This article does not apply to deposits
for those purposes.
53632. There are three classes of deposits:
(a) Inactive deposits.
(b) Active deposits.
(c) Interest-bearing active deposits.
53632.5. There are three classes of security for deposits:
(a) Securities described in subdivision (m) of Section 53651.
(b) Securities described in subdivision (p) of Section 53651.
(c) Securities enumerated in Section 53651, except for those
described in subdivisions (m) and (p) of that section.
53633. The treasurer shall determine the amounts of money to be
deposited as inactive, active, and interest-bearing active deposits,
except as otherwise provided in Section 53679.
53634. The treasurer may call in money from inactive deposits and
place it in active deposits as current demands require. When there is
money in his possession for which there is no demand as inactive
deposits, he may place it as active deposits.
53635. (a) This section shall apply to a local agency that is a
county, a city and county, or other local agency that pools money in
deposits or investments with other local agencies, including local
agencies that have the same governing body. However, Section 53601
shall apply to all local agencies that pool money in deposits or
investments exclusively with local agencies that have the same
governing body.
This section shall be interpreted in a manner that recognizes the
distinct characteristics of investment pools and the distinct
administrative burdens on managing and investing funds on a pooled
basis pursuant to Article 6 (commencing with Section 27130) of
Chapter 5 of Division 2 of Title 3.
A local agency that is a county, a city and county, or other local
agency that pools money in deposits or investments with other
agencies may invest in commercial paper pursuant to subdivision (h)
of Section 53601, except that the local agency shall be subject to
the following concentration limits:
(1) No more than 40 percent of the local agency's money may be
invested in eligible commercial paper.
(2) No more than 10 percent of the total assets of the investments
held by a local agency may be invested in any one issuer's
commercial paper.
(b) Notwithstanding Section 53601, the City of Los Angeles shall
be subject to the concentration limits of this section for counties
and for cities and counties with regard to the investment of money in
eligible commercial paper.
53635.2. As far as possible, all money belonging to, or in the
custody of, a local agency, including money paid to the treasurer or
other official to pay the principal, interest, or penalties of bonds,
shall be deposited for safekeeping in state or national banks,
savings associations, federal associations, credit unions, or
federally insured industrial loan companies in this state selected by
the treasurer or other official having legal custody of the money;
or may be invested in the investments set forth in Section 53601. To
be eligible to receive local agency money, a bank, savings
association, federal association, or federally insured industrial
loan company shall have received an overall rating of not less than
"satisfactory" in its most recent evaluation by the appropriate
federal financial supervisory agency of its record of meeting the
credit needs of California's communities, including low- and
moderate-income neighborhoods, pursuant to Section 2906 of Title 12
of the United States Code. Sections 53601.5 and 53601.6 shall apply
to all investments that are acquired pursuant to this section.
53635.7. In making any decision that involves borrowing in the
amount of one hundred thousand dollars ($100,000) or more, the
legislative body of the local agency shall discuss, consider, and
deliberate each decision as a separate item of business on the agenda
of its meeting as prescribed in Chapter 9 (commencing with Section
54950). As used in this section, "borrowing" does not include bank
overdrafts or security lending.
53635.8. Notwithstanding Section 53601 or any other provision of
this code, a local agency that has the authority under law to invest
funds, at its discretion, may invest a portion of its surplus funds
in certificates of deposit at a commercial bank, savings bank,
savings and loan association, or credit union that uses a private
sector entity that assists in the placement of certificates of
deposit, provided that the purchases of certificates of deposit
pursuant to this section, Section 53601.8, and subdivision (i) of
Section 53601 do not, in total, exceed 30 percent of the agency's
funds that may be invested for this purpose. The following conditions
shall apply:
(a) The local agency shall choose a nationally or state-chartered
commercial bank, savings bank, savings and loan association, or
credit union in this state to invest the funds, which shall be known
as the "selected" depository institution.
(b) The selected depository institution may submit the funds to a
private sector entity that assists in the placement of certificates
of deposit with one or more commercial banks, savings banks, savings
and loan associations, or credit unions that are located in the
United States, for the local agency's account.
(c) The full amount of the principal and the interest that may be
accrued during the maximum term of each certificate of deposit shall
at all times be insured by the Federal Deposit Insurance Corporation
or the National Credit Union Administration.
(d) The selected depository institution shall serve as a custodian
for each certificate of deposit that is issued with the placement
service for the local agency's account.
(e) At the same time the local agency's funds are deposited and
the certificates of deposit are issued, the selected depository
institution shall receive an amount of deposits from other commercial
banks, savings banks, savings and loan associations, or credit
unions that, in total, are equal to, or greater than, the full amount
of the principal that the local agency initially deposited through
the selected depository institution for investment.
(f) Notwithstanding subdivisions (a) to (e), inclusive, no credit
union may act as a selected depository institution under this section
or Section 53601.8 unless both of the following conditions are
satisfied:
(1) The credit union offers federal depository insurance through
the National Credit Union Administration.
(2) The credit union is in possession of written guidance or other
written communication from the National Credit Union Administration
authorizing participation of federally insured credit unions in one
or more certificate of deposit placement services and affirming that
the moneys held by those credit unions while participating in a
deposit placement service will at all times be insured by the federal
government.
(g) It is the intent of the Legislature that nothing in this
section shall restrict competition among private sector entities that
provide placement services pursuant to this section.
53636. Money so deposited is deemed to be in the treasury of the
local agency.
53637. The money shall be deposited in any bank, savings
association or federal association, state or federal credit union, or
federally insured industrial loan company with the objective of
realizing maximum return, consistent with prudent financial
management, except that money shall not be deposited in any state or
federal credit union if a member of the legislative body of a local
agency, or any person with investment decisionmaking authority of the
administrative office, manager's office, budget office,
auditor-controller's office, or treasurer's office of the local
agency, also serves on the board of directors, or any committee
appointed by the board of directors, or the credit committee or
supervisory committee, of the state or federal credit union.
53638. (a) The deposit shall not exceed the shareholder's equity of
any depository bank. For the purposes of this subdivision,
shareholder's equity shall be determined in accordance with Section
118 of the Financial Code, but shall be deemed to include capital
notes and debentures.
(b) The deposit shall not exceed the total of the net worth of any
depository savings association or federal association, except that
deposits not exceeding a total of five hundred thousand dollars
($500,000) may be made to a savings association or federal
association without regard to the net worth of that depository, if
such deposits are insured or secured as required by law.
(c) The deposit to the share accounts of any regularly chartered
credit union shall not exceed the total of the unimpaired capital and
surplus of the credit union, as defined by rule of the Commissioner
of Financial Institutions, except that the deposit to any credit
union share account in an amount not exceeding five hundred thousand
dollars ($500,000) may be made if the share accounts of that credit
union are insured or guaranteed pursuant to Section 14858 of the
Financial Code or are secured as required by law.
(d) The deposit in investment certificates of a federally insured
industrial loan company shall not exceed the total of the unimpaired
capital and surplus of the insured industrial loan company.
53639. Except as otherwise provided in Section 53682, the
depository shall bear the expenses of transportation of money to and
from the depository.
53640. Except as otherwise provided in Section 53682, the
depository shall handle, collect, and pay all checks, drafts, and
other exchange without cost to the local agency.
53641. When money is deposited in a depository, the treasurer or
other authorized official shall take and preserve a receipt,
certificate of deposit, or other evidence of the deposit as he or she
requires.
53642. The money deposited may be drawn out by check or order of
the treasurer or other official authorized to make such deposit.
53643. The treasurer may deposit any part of the money as agreed
upon between the treasurer and the depository.
53644. If an agreement is not made:
(a) Active deposits and interest thereon are subject to withdrawal
upon the demand of the treasurer or other authorized official,
subject to any penalties which may be prescribed by federal law or
regulation.
(b) Inactive deposits are subject to notice of at least thirty
days before withdrawal.
53645. Interest shall be computed and paid by the depository, as
follows:
(a) For active deposits upon which interest is payable, interest
shall be computed on the average daily balance for the calendar
quarter, and shall be paid quarterly.
(b) For inactive deposits, interest shall be computed on a 360-day
basis, and shall be paid quarterly.
53646. (a) (1) In the case of county government, the treasurer may
annually render to the board of supervisors and any oversight
committee a statement of investment policy, which the board shall
review and approve at a public meeting. Any change in the policy
shall also be reviewed and approved by the board at a public meeting.
(2) In the case of any other local agency, the treasurer or chief
fiscal officer of the local agency may annually render to the
legislative body of that local agency and any oversight committee of
that local agency a statement of investment policy, which the
legislative body of the local agency shall consider at a public
meeting. Any change in the policy shall also be considered by the
legislative body of the local agency at a public meeting.
(b) (1) The treasurer or chief fiscal officer may render a
quarterly report to the chief executive officer, the internal
auditor, and the legislative body of the local agency. The quarterly
report shall be so submitted within 30 days following the end of the
quarter covered by the report. Except as provided in subdivisions (e)
and (f), this report shall include the type of investment, issuer,
date of maturity, par and dollar amount invested on all securities,
investments and moneys held by the local agency, and shall
additionally include a description of any of the local agency's
funds, investments, or programs, that are under the management of
contracted parties, including lending programs. With respect to all
securities held by the local agency, and under management of any
outside party that is not also a local agency or the State of
California Local Agency Investment Fund, the report shall also
include a current market value as of the date of the report, and
shall include the source of this same valuation.
(2) The quarterly report shall state compliance of the portfolio
to the statement of investment policy, or manner in which the
portfolio is not in compliance.
(3) The quarterly report shall include a statement denoting the
ability of the local agency to meet its pool's expenditure
requirements for the next six months, or provide an explanation as to
why sufficient money shall, or may, not be available.
(4) In the quarterly report, a subsidiary ledger of investments
may be used in accordance with accepted accounting practices.
(c) Pursuant to subdivision (b), the treasurer or chief fiscal
officer shall report whatever additional information or data may be
required by the legislative body of the local agency.
(d) The legislative body of a local agency may elect to require
the report specified in subdivision (b) to be made on a monthly basis
instead of quarterly.
(e) For local agency investments that have been placed in the
Local Agency Investment Fund, created by Section 16429.1, in National
Credit Union Share Insurance Fund-insured accounts in a credit
union, in accounts insured or guaranteed pursuant to Section 14858 of
the Financial Code, or in Federal Deposit Insurance
Corporation-insured accounts in a bank or savings and loan
association, in a county investment pool, or any combination of
these, the treasurer or chief fiscal officer may supply to the
governing body, chief executive officer, and the auditor of the local
agency the most recent statement or statements received by the local
agency from these institutions in lieu of the information required
by paragraph (1) of subdivision (b) regarding investments in these
institutions.
(f) The treasurer or chief fiscal officer shall not be required to
render a quarterly report, as required by subdivision (b), to a
legislative body or any oversight committee of a school district or
county office of education for securities, investments, or moneys
held by the school district or county office of education in
individual accounts that are less than twenty-five thousand dollars
($25,000).
(g) In recognition of the state and local interests served by the
actions made optional in subdivisions (a) and (b), the Legislature
encourages the local agency officials to continue taking the actions
formerly mandated by this section. However, nothing in this
subdivision may be construed to impose any liability on a local
agency that does not continue to take the formerly mandated action.
53647. (a) Interest on all money deposited belongs to, and shall be
paid quarterly into the general fund of, the local agency
represented by the officer making the deposit, unless otherwise
directed by law.
(b) Notwithstanding the provisions of subdivision (a), and except
as otherwise directed by law, if the governing body of the local
agency represented by the officer making the deposit so directs, such
interest shall be paid to the fund which contains the principal on
which the interest accrued.
53647.5. Notwithstanding any other provision of law, interest
earned on any bail money deposited by a court in a bank account
pursuant to Section 1463.1 of the Penal Code and Section 53679 of
this code shall be allocated for the support of that court.
53648. Notwithstanding this article, the treasurer may deposit
moneys in, and enter into contracts with, a state or national bank,
savings association or federal association, federal or state credit
union, or federally insured industrial loan company, pursuant to a
federal law or a rule of a federal department or agency adopted
pursuant to the law if the law or rule conflicts with this article in
regulating the payment of interest on deposits of public moneys by
any of the following:
(a) Banks which are Federal Reserve System members or whose
deposits are insured by the Federal Deposit Insurance Corporation.
(b) Savings associations or federal associations which are federal
home loan bank members or whose deposits are insured by the Federal
Savings and Loan Insurance Corporation.
(c) State or federal credit unions whose accounts are insured by
the National Credit Union Share Insurance Fund or guaranteed by the
California Credit Union Share Guaranty Corporation or insured or
guaranteed pursuant to Section 14858 of the Financial Code, unless a
member of the legislative body of a local agency, or any person with
investment decisionmaking authority of the administrative office,
manager's office, budget office, auditor-controller's office, or
treasurer's office of the local agency, also serves on the board of
directors, or any committee appointed by the board of directors, or
the credit committee or supervisory committee, of the state or
federal credit union.
(d) A federally insured industrial loan company.
53648.5. Upon the removal by federal law of the conflicting federal
law or rule the agreement between the treasurer or other authorized
official and a depository may be terminated by either party.
53649. The treasurer is responsible for the safekeeping of money in
his or her custody and shall enter into any contract with a
depository relating to any deposit which in his or her judgment is to
the public advantage. The depository, and the agent of depository to
the extent the agent of depository has been notified of deposits and
the amount thereof, are responsible for securing moneys deposited
pursuant to such a contract in accordance with Section 53652. One
copy of each contract shall be filed with the auditor, controller,
secretary, or corresponding officer of the local agency. The contract
shall:
(a) Fix the duration of deposits, if appropriate.
(b) Fix the interest rate, if any.
(c) Provide conditions for withdrawal and repayment.
(d) Provide for placement of pooled securities in a named agent of
depository in accordance with Section 53656.
(e) Grant authority for agent of depository to place securities
for safekeeping in accordance with Section 53659.
(f) Set forth in accordance with Section 53665 the conditions upon
which the administrator shall order pooled securities converted into
money for the benefit of the local agency, and the procedure
therefor.
(g) Provide for compliance in all respects with the provisions of
this article and other applicable provisions of law.
(h) Provide, upon notice to the treasurer from the administrator,
that a treasurer may withdraw deposits in the event a depository
fails to pay the assessments, fines, or penalties assessed by the
administrator or may withdraw authorization for the placement of
pooled securities in an agent of depository in the event that the
agent of depository fails to pay the fines or penalties assessed by
the administrator.
53651. Eligible securities are any of the following:
(a) United States Treasury notes, bonds, bills or certificates of
indebtedness, or obligations for which the faith and credit of the
United States are pledged for the payment of principal and interest,
including the guaranteed portions of small business administration
loans, so long as the loans are obligations for which the faith and
credit of the United States are pledged for the payment of principal
and interest.
(b) Notes or bonds or any obligations of a local public agency (as
defined in the United States Housing Act of 1949) or any obligations
of a public housing agency (as defined in the United States Housing
Act of 1937) for which the faith and credit of the United States are
pledged for the payment of principal and interest.
(c) Bonds of this state or of any local agency or district of the
State of California having the power, without limit as to rate or
amount, to levy taxes or assessments to pay the principal and
interest of the bonds upon all property within its boundaries subject
to taxation or assessment by the local agency or district, and in
addition, limited obligation bonds pursuant to Article 4 (commencing
with Section 50665) of Chapter 3 of Division 1, senior obligation
bonds pursuant to Article 5 (commencing with Section 53387) of
Chapter 2.7, and revenue bonds and other obligations payable solely
out of the revenues from a revenue-producing property owned,
controlled or operated by the state, local agency or district or by a
department, board, agency or authority thereof.
(d) Bonds of any public housing agency (as defined in the United
States Housing Act of 1937, as amended) as are secured by a pledge of
annual contributions under an annual contribution contract between
the public housing agency and the Public Housing Administration if
such contract shall contain the covenant by the Public Housing
Administration which is authorized by subsection (b) of Section 22 of
the United States Housing Act of 1937, as amended, and if the
maximum sum and the maximum period specified in the contract pursuant
to that subsection 22(b) shall not be less than the annual amount
and the period for payment which are requisite to provide for the
payment when due of all installments of principal and interest on the
obligations.
(e) Registered warrants of this state.
(f) Bonds, consolidated bonds, collateral trust debentures,
consolidated debentures, or other obligations issued by the United
States Postal Service, federal land banks or federal intermediate
credit banks established under the Federal Farm Loan Act, as amended,
debentures and consolidated debentures issued by the Central Bank
for Cooperatives and banks for cooperatives established under the
Farm Credit Act of 1933, as amended, consolidated obligations of the
federal home loan banks established under the Federal Home Loan Bank
Act, bonds, debentures and other obligations of the Federal National
Mortgage Association or of the Government National Mortgage
Association established under the National Housing Act, as amended,
bonds of any federal home loan bank established under that act,
bonds, debentures and other obligations of the Federal Home Loan
Mortgage Corporation established under the Emergency Home Finance Act
of 1970, and obligations of the Tennessee Valley Authority.
(g) Notes, tax anticipation warrants or other evidence of
indebtedness issued pursuant to Article 7 (commencing with Section
53820), Article 7.5 (commencing with Section 53840) or Article 7.6
(commencing with Section 53850) of this Chapter 4.
(h) State of California notes.
(i) Bonds, notes, certificates of indebtedness, warrants or other
obligations issued by: (1) any state of the United States (except
this state), or the Commonwealth of Puerto Rico, or any local agency
thereof having the power to levy taxes, without limit as to rate or
amount, to pay the principal and interest of such obligations, or (2)
any state of the United States (except this state), or the
Commonwealth of Puerto Rico, or a department, board, agency or
authority thereof except bonds which provide for or are issued
pursuant to a law which may contemplate a subsequent legislative
appropriation as an assurance of the continued operation and solvency
of the department, board, agency or authority but which does not
constitute a valid and binding obligation for which the full faith
and credit of such state or the Commonwealth of Puerto Rico are
pledged, which are payable solely out of the revenues from a
revenue-producing source owned, controlled or operated thereby;
provided the obligations issued by an entity described in (1), above,
are rated in one of the three highest grades, and such obligations
issued by an entity described in (2), above, are rated in one of the
two highest grades by a nationally recognized investment service
organization that has been engaged regularly in rating state and
municipal issues for a period of not less than five years.
(j) Obligations issued, assumed or guaranteed by the International
Bank for Reconstruction and Development, Inter-American Development
Bank, the Government Development Bank of Puerto Rico, the Asian
Development Bank, the International Finance Corporation, or the
African Development Bank.
(k) Participation certificates of the Export-Import Bank of the
United States.
(l) Bonds and notes of the California Housing Finance Agency
issued pursuant to Chapter 7 (commencing with Section 51350) of Part
3 of Division 31 of the Health and Safety Code.
(m) Promissory notes secured by first mortgages and first trust
deeds which comply with Section 53651.2.
(n) Any bonds, notes, warrants, or other evidences of indebtedness
of a nonprofit corporation issued to finance the construction of a
school building or school buildings pursuant to a lease or agreement
with a school district entered into in compliance with the provisions
of Section 39315 or 81345 of the Education Code, and also any bonds,
notes, warrants or other evidences of indebtedness issued to
refinance those bonds, notes, warrants, or other evidences of
indebtedness as specified in Section 39317 of the Education Code.
(o) Any municipal securities, as defined by Section 3(a)(29) of
the Securities Exchange Act of June 6, 1934, (15 U.S.C. Sec. 78, as
amended), which are issued by this state or any local agency thereof.
(p) With the consent of the treasurer, letters of credit issued by
the Federal Home Loan Bank of San Francisco which comply with
Section 53651.6.
53651.2. (a) To be an eligible security under subdivision (m) of
Section 53651, a promissory note placed in a securities pool on or
after January 1, 1987, shall comply with all of the following
provisions:
(1) Each promissory note shall be secured by a first mortgage or
first trust deed on improved 1 to 4 unit residential real property
located in California, shall be fully amortized over the term of the
note, and shall have a term of no more than 30 years. Any first
mortgage or first trust deed which secures a promissory note
providing for negative amortization shall be removed from the
securities pool and replaced with an eligible security under
subdivision (m) of Section 53651 if the loan to value ratio exceeds
85 percent of the original appraised value of the security property
as a consequence of negative amortization.
(2) Each promissory note shall be eligible for sale to the Federal
National Mortgage Association, the Government National Mortgage
Association, or the Federal Home Loan Mortgage Corporation; provided,
however, that up to 25 percent of the total dollar amount of any
promissory note securities pool established pursuant to Section 53658
may consist of promissory notes with loan amounts which exceed the
maximum amounts eligible for purchase by the Federal National
Mortgage Association, the Government National Mortgage Association,
or the Federal Home Loan Mortgage Corporation, but which do not
exceed: (i) five hundred thousand dollars ($500,000) in the case of a
single family dwelling; (ii) one million dollars ($1,000,000) in the
case of a 2, 3, or 4 unit dwelling.
(b) The following shall not constitute eligible securities under
subdivision (m) of Section 53651:
(1) Any promissory note on which any payment is more than 60 days
past due.
(2) Any promissory note secured by a mortgage or deed of trust as
to which there is a lien prior to the mortgage or deed of trust. For
the purposes of this paragraph, no lien specified in Section 766 of
the Financial Code shall be considered a prior encumbrance unless any
installment or payment thereunder (other than a rental or royalty
under a lease) is due and delinquent.
(3) Any promissory note secured by a mortgage or deed of trust as
to which a notice of default has been recorded pursuant to Section
2924 of the Civil Code or an action has been commenced pursuant to
Section 725a of the Code of Civil Procedure.
(c) The depository may exercise, enforce, or waive any right
granted to it by the promissory note, mortgage, or deed of trust.
(d) For purposes of this article, the market value of a promissory
note which is an eligible security under subdivision (m) of Section
53651, shall be determined in accordance with the regulations adopted
by the Treasurer under paragraph (2) of subdivision (m) of Section
53651, as the regulations and statute were in effect on December 31,
1986. However, if and when regulations on the subject are adopted by
the administrator, the market value shall be determined in accordance
with those regulations of the administrator.
53651.4. (a) A depository that uses eligible securities of the
class described in subdivision (m) of Section 53651 shall, within 90
days after the close of each calendar year or within a longer period
as the administrator may specify, file with the administrator a
report of an independent certified public accountant regarding
compliance with this article and with regulations and orders issued
by the administrator under this article with respect to eligible
securities of that class. The report shall be based upon the audit,
shall contain the information, and shall be in the form the
administrator may prescribe. The depository shall provide a copy of
the report to the treasurer on request.
(b) If a depository that is a state bank files with the
administrator, not less than 90 days before the beginning of the
calendar year, a notice that it elects to be examined by the
administrator instead of filing a report of an independent certified
public accountant under subdivision (a) for that calendar year, the
depository shall be exempt from subdivision (a) for that calendar
year and shall for that calendar year be subject to examination by
the administrator regarding compliance with this article and with
regulations and orders under this article with respect to eligible
securities of the class described in subdivision (m) of Section
53651. The administrator shall provide a report to a treasurer with
deposits in the examined state bank upon request of the treasurer.
(c) A national bank may apply to the administrator to be examined,
and the administrator, in his or her discretion, may examine a
national bank for the purposes of satisfying the requirements of
subdivision (a). The administrator shall provide a report to a
treasurer with deposits in the examined national bank upon request of
the treasurer.
(d) Whenever the administrator examines a depository pursuant to
subdivision (b) or (c), the depository shall pay, within 30 days
after receipt of a statement from the administrator, a fee of
seventy-five dollars ($75) per hour for each examiner engaged in the
examination.
53651.6. (a) To be an eligible security under subdivision (p) of
Section 53651, a letter of credit shall be in such form and shall
contain such provisions as the administrator may prescribe, and shall
include all of the following terms:
(1) The administrator shall be the beneficiary of the letter of
credit.
(2) The letter of credit shall be clean and irrevocable and shall
provide that the administrator may draw upon it up to the total
amount in the event of the failure of the depository savings
association or federal association or if the depository savings
association or federal association refuses to permit the withdrawal
of funds by a treasurer.
53652. To secure active or inactive deposits a depository shall at
all times maintain with the agent of depository eligible securities
in securities pools, pursuant to Sections 53656 and 53658, in the
amounts specified in this section. Uncollected funds shall be
excluded from the amount deposited in the depository when determining
the security requirements for the deposits.
(a) Eligible securities, except eligible securities of the classes
described in subdivisions (m) and (p) of Section 53651, shall have a
market value of at least 10 percent in excess of the total amount of
all deposits of a depository secured by the eligible securities.
(b) Eligible securities of the class described in subdivision (m)
of Section 53651 shall have a market value at least 50 percent in
excess of the total amount of all deposits of a depository secured by
those eligible securities.
(c) Eligible securities of the class described in subdivision (p)
of Section 53651 shall have a market value of at least 5 percent in
excess of the total amount of all deposits of a depository secured by
those eligible securities. For purposes of this article, the market
value of a letter of credit which is an eligible security under
subdivision (p) of Section 53651 shall be the amount of credit stated
in the letter of credit.
53653. When in his or her discretion local conditions so warrant,
the treasurer may waive security for the portion of any deposits as
is insured pursuant to federal law, notwithstanding this article. For
deposits equivalent to and not less than the maximum amount insured
pursuant to federal law for which a treasurer has waived security
under this section, a treasurer at his or her discretion may also
waive security for the interest accrued on the deposits which, when
added to the deposits, would cause the sum of the interest and
deposits to exceed the maximum amount insured pursuant to federal
law, provided that the interest is computed by the depository on the
average daily balance of the deposits, paid monthly and computed on a
360-day basis.
53654. (a) The depository may add securities to the pool or
substitute securities of equal value for those in the pool at any
time, but shall not interchange classes of security, as defined in
Section 53632.5, without prior approval of the treasurer.
(b) Withdrawal of securities from the pool without replacement at
equal value may be ordered only by two duly authorized officers or
employees of the depository who satisfy the requirements as may be
set by the administrator.
(c) The agent of depository is responsible for the safekeeping and
disbursement of securities placed in its custody by a depository. It
shall release securities only upon presentation by the depository of
the most reasonably current statement of the total deposits subject
to this article held by the depository, such statement to be verified
and countersigned by two duly authorized officers, other than those
who ordered the withdrawal of securities. A copy of this statement
shall be forwarded to the administrator concurrently by the agent of
depository.
53655. A placement of securities by a depository with an agent of
depository pursuant to this article shall have the effect of
perfecting a security interest in those securities in the local
agencies having deposits in that depository notwithstanding
provisions of the Uniform Commercial Code to the contrary and
notwithstanding that the agent of depository may be the trust
department of the depository.
53656. (a) At the time the treasurer enters into a contract with
the depository pursuant to Section 53649, he or she shall authorize
the agent of depository designated by the depository, but including
the trust department of the depository only when acceptable to both
the treasurer and the depository, to hold securities of the
depository in accordance with this article to secure the deposit of
the local agency.
(b) Only those trust companies and trust departments, or the
Federal Home Loan Bank of San Francisco, which have been authorized
by the administrator pursuant to Section 53657 shall be authorized by
treasurers to act as agents of depository.
(c) The securities are subject to order of the depository in
accordance with Section 53654 except when the provisions of
subdivision (i) of Section 53661 and Section 53665 are in effect.
(d) An agent of depository shall not release any security held to
secure a local agency deposit in a depository unless the
administrator issues an order authorizing the release where either of
the following occurs:
(1) A state or federal regulatory agency has taken possession of
the depository.
(2) A conservator, receiver, or other legal custodian has been
appointed for the depository.
53657. (a) No person shall act as an agent of depository unless
that person is a trust company located in this state, the trust
department of a bank located in this state, or the Federal Home Loan
Bank of San Francisco, and is authorized by the administrator to act
as an agent of depository.
(b) (1) An application for authorization shall be in such form,
shall contain such information, shall be signed in such manner, and
shall (if the administrator so requires) be verified in such manner,
as the administrator may prescribe.
(2) The fee for filing an application for authorization with the
administrator shall be five hundred dollars ($500).
(3) If the administrator finds, with respect to an application for
authorization, that the applicant is competent to act as an agent of
depository and that it is reasonable to believe the applicant will
comply with all applicable provisions of this article and of any
regulation or order issued under this article, the administrator
shall approve the application. If the administrator finds otherwise,
the administrator shall deny the application.
(4) When an application for authorization has been approved, the
applicant shall file with the administrator an agreement to comply
with all applicable provisions of this article and of any regulation
or order issued under this article. The agreement shall be in such
form, shall contain such provisions, and shall be signed in such
manner as the administrator may prescribe.
(5) When an application for authorization has been approved, the
applicant has complied with paragraph (4), and all conditions
precedent to authorizing the applicant to act as agent of depository
have been fulfilled, the administrator shall authorize the applicant
to act as agent of depository.
53658. An agent of a depository may hold and pool securities to
secure deposits for one or more depositories pursuant to Section
53656, but shall maintain a separate pool for each said depository.
Each local agency shall have an undivided security interest in the
pooled securities in the proportion that the amount of its deposits
bears to the total amount of deposits secured by the pooled
securities.
53659. Whenever an agent of depository accepts securities pursuant
to Section 53656 it may, with the authorization of the depository,
place such securities for safekeeping with a Federal Reserve Bank or
branch thereof or with any bank located in a city designated as a
reserve city by the Board of Governors of the Federal Reserve System
or with the Federal Home Loan Bank of San Francisco or with a trust
company located in this state. Authority for such placement together
with the names of the banks or, including the Federal Home Loan Bank
of San Francisco, trust companies to be so used, shall be contained
in the contract between the treasurer and the depository required in
Section 53649.
53660. When deposits of a local agency are secured by pooled
securities pursuant to Section 53656, the agent of depository shall
make available to the treasurer for review at a mutually agreed upon
time and location all of the following information which may be in
the form of a copy of the report required in subdivision (e) of
Section 53661:
(a) A certification that there are securities in the pool in the
amounts required by Section 53652 to secure deposits.
(b) A certified report of the individual securities then on
deposit in the pool with the location and total market value thereof.
(c) The total amount of deposits then reported by the depository
to be secured by the pool.
53661. (a) The Commissioner of Financial Institutions shall act as
Administrator of Local Agency Security and shall be responsible for
the administration of Sections 53638, 53651, 53651.2, 53651.4,
53651.6, 53652, 53654, 53655, 53656, 53657, 53658, 53659, 53660,
53661, 53663, 53664, 53665, 53666, and 53667.
(b) The administrator shall have the powers necessary or
convenient to administer and enforce the sections specified in
subdivision (a).
(c) (1) The administrator shall issue regulations consistent with
law as the administrator may deem necessary or advisable in executing
the powers, duties, and responsibilities assigned by this article.
The regulations may include regulations prescribing standards for the
valuation, marketability, and liquidity of the eligible securities
of the class described in subdivision (m) of Section 53651,
regulations prescribing procedures and documentation for adding,
withdrawing, substituting, and holding pooled securities, and
regulations prescribing the form, content, and execution of any
application, report, or other document called for in any of the
sections specified in subdivision (a) or in any regulation or order
issued under any of those sections.
(2) The administrator, for good cause, may waive any provision of
any regulation adopted pursuant to paragraph (1) or any order issued
under this article, where the provision is not necessary in the
public interest.
(d) The administrator may enter into any contracts or agreements
as may be necessary, including joint underwriting agreements, to sell
or liquidate eligible securities securing local agency deposits in
the event of the failure of the depository or if the depository fails
to pay all or part of the deposits of a local agency.
(e) The administrator shall require from every depository a report
certified by the agent of depository listing all securities, and the
market value thereof, which are securing local agency deposits
together with the total deposits then secured by the pool, to
determine whether there is compliance with Section 53652. These
reports may be required whenever deemed necessary by the
administrator, but shall be required at least four times each year at
the times designated by the Comptroller of the Currency for reports
from national banking associations. These reports shall be filed in
the office of the administrator by the depository within 20 business
days of the date the administrator calls for the report.
(f) The administrator may have access to reports of examination
made by the Comptroller of the Currency insofar as the reports relate
to national banking association trust department activities which
are subject to this article.
(g) (1) The administrator shall require the immediate substitution
of an eligible security, where the substitution is necessary for
compliance with Section 53652, if (i) the administrator determines
that a security listed in Section 53651 is not qualified to secure
public deposits, or (ii) a treasurer, who has deposits secured by the
securities pool, provides written notice to the administrator and
the administrator confirms that a security in the pool is not
qualified to secure public deposits.
(2) The failure of a depository to substitute securities, where
the administrator has required the substitution, shall be reported by
the administrator promptly to those treasurers having money on
deposit in that depository and, in addition, shall be reported as
follows:
(A) When that depository is a national bank, to the Comptroller of
the Currency of the United States.
(B) When that depository is a state bank, to the Commissioner of
Financial Institutions.
(C) When that depository is a federal association, to the Office
of Thrift Supervision.
(D) When that depository is a savings association, to the
Commissioner of Financial Institutions.
(E) When that depository is a federal credit union, to the
National Credit Union Administration.
(F) When that depository is a state credit union or a federally
insured industrial loan company, to the Commissioner of Financial
Institutions.
(h) The administrator may require from each treasurer a
registration report and at appropriate times a report stating the
amount and location of each deposit together with other information
deemed necessary by the administrator for effective operation of this
article. The facts recited in any report from a treasurer to the
administrator are conclusively presumed to be true for the single
purpose of the administrator fulfilling responsibilities assigned to
him or her by this article and for no other purpose.
(i) (1) If, after notice and opportunity for hearing, the
administrator finds that any depository or agent of depository has
violated or is violating, or that there is reasonable cause to
believe that any depository or agent of depository is about to
violate, any of the sections specified in subdivision (a) or any
regulation or order issued under any of those sections, the
administrator may order the depository or agent of depository to
cease and desist from the violation or may by order suspend or revoke
the authorization of the agent of depository. The order may require
the depository or agent of depository to take affirmative action to
correct any condition resulting from the violation.
(2) (A) If the administrator makes any of the findings set forth
in paragraph (1) with respect to any depository or agent of
depository and, in addition, finds that the violation or the
continuation of the violation is likely to seriously prejudice the
interests of treasurers, the administrator may order the depository
or agent of depository to cease and desist from the violation or may
suspend or revoke the authorization of the agent of depository. The
order may require the depository or agent of depository to take
affirmative action to correct any condition resulting from the
violation.
(B) Within five business days after an order is issued under
subparagraph (A), the depository or agent of depository may file with
the administrator an application for a hearing on the order. The
administrator shall schedule a hearing at least 30 days, but not more
than 40 days, after receipt of an application for a hearing or
within a shorter or longer period of time agreed to by a depository
or an agent of depository. If the administrator fails to schedule the
hearing within the specified or agreed to time period, the order
shall be deemed rescinded. Within 30 days after the hearing, the
administrator shall affirm, modify, or rescind the order; otherwise,
the order shall be deemed rescinded. The right of a depository or
agent of depository to which an order is issued under subparagraph
(A) to petition for judicial review of the order shall not be
affected by the failure of the depository or agent of depository to
apply to the administrator for a hearing on the order pursuant to
this subparagraph.
(3) Whenever the administrator issues a cease and desist order
under paragraph (1) or (2), the administrator may in the order
restrict the right of the depository to withdraw securities from a
security pool; and, in that event, both the depository to which the
order is directed and the agent of depository which holds the
security pool shall comply with the restriction.
(4) In case the administrator issues an order under paragraph (1)
or (2) suspending or revoking the authorization of an agent of
depository, the administrator may order the agent of depository at
its own expense to transfer all pooled securities held by it to such
agent of depository as the administrator may designate in the order.
The agent of depository designated in the order shall accept and hold
the pooled securities in accordance with this article and
regulations and orders issued under this article.
(j) In the discretion of the administrator, whenever it appears to
the administrator that any person has violated or is violating, or
that there is reasonable cause to believe that any person is about to
violate, any of the sections specified in subdivision (a) or any
regulation or order issued thereunder, the administrator may bring an
action in the name of the people of the State of California in the
superior court to enjoin the violation or to enforce compliance with
those sections or any regulation or order issued thereunder. Upon a
proper showing a permanent or preliminary injunction, restraining
order, or writ of mandate shall be granted, and the court may not
require the administrator to post a bond.
(k) In addition to other remedies, the administrator shall have
the power and authority to impose the following sanctions for
noncompliance with the sections specified in subdivision (a) after a
hearing if requested by the party deemed in noncompliance. Any fine
assessed pursuant to this subdivision shall be paid within 30 days
after receipt of the assessment.
(1) Assess against and collect from a depository a fine not to
exceed two hundred fifty dollars ($250) for each day the depository
fails to maintain with the agent of depository securities as required
by Section 53652.
(2) Assess against and collect from a depository a fine not to
exceed one hundred dollars ($100) for each day beyond the time period
specified in subdivision (b) of Section 53663 the depository
negligently or willfully fails to file in the office of the
administrator a written report required by that section.
(3) Assess against and collect from a depository a fine not to
exceed one hundred dollars ($100) for each day beyond the time period
specified in subdivision (e) that a depository negligently or
willfully fails to file in the office of the administrator a written
report required by that subdivision.
(4) Assess and collect from an agent of depository a fine not to
exceed one hundred dollars ($100) for each day the agent of
depository fails to comply with any of the applicable sections
specified in subdivision (a) or any applicable regulation or order
issued thereunder.
(l) (1) In the event that a depository or agent of depository
fails to pay a fine assessed by the administrator pursuant to
subdivision (k) within 30 days of receipt of the assessment, the
administrator may assess and collect an additional penalty of 5
percent of the fine for each month or part thereof that the payment
is delinquent.
(2) If a depository fails to pay the fines or penalties assessed
by the administrator, the administrator may notify local agency
treasurers with deposits in the depository.
(3) If an agent of depository fails to pay the fines or penalties
assessed by the administrator, the administrator may notify local
agency treasurers who have authorized the agent of depository as
provided in Sections 53649 and 53656, and may by order revoke the
authorization of the agent of depository as provided in subdivision
(i).
(m) The amendments to this section enacted by the Legislature
during the 1999-2000 Regular Session shall become operative on
January 1, 2001.
53663. (a) Each agent of depository shall report in writing to the
administrator within two business days after any withdrawal,
substitution or addition of pooled securities and shall state the
name and market value of the securities withdrawn, substituted or
added together with the total deposits then secured by the pool. This
information shall be available from the administrator to the
treasurer upon request.
(b) Each depository shall report in writing to the administrator
weekly, giving the total amount of all deposits held by such
depository pursuant to this article. Such report shall be as of close
of business on Wednesday of each week and shall be delivered to the
office of the administrator or deposited in the United States mail,
postage prepaid, addressed to the office of the administrator, within
five business days. Where there has occurred no change in the
deposits required to be held by the depository pursuant to this
article, the report required by this subdivision need only state that
fact.
53664. The individual reports specified in Sections 53654, 53660,
53661, and 53663 are not public documents and are not open to
inspection by the public.
53665. If a depository fails to pay all or part of the deposits of
a local agency secured by pooled securities in accordance with the
contract provided for in Section 53649, and on demand of its
treasurer or other authorized official and the treasurer files a
report with the administrator, or if the depository fails:
(a) In case the pooled securities consist of securities other than
securities of the class described in subdivision (p) of Section
53651, the administrator shall order the agent of depository holding
the pooled securities to convert into money that portion of the
pooled securities necessary to produce an amount equal to the sum of
(i) the deposits of the local agency, (ii) any accrued interest due
on the deposits, and (iii) the reasonable expenses of the agent of
depository in complying with the order of the administrator and to
pay the sum of items (i) and (ii) to the treasurer in satisfaction of
the deposits. The agent of depository shall be reimbursed out of the
proceeds of the conversion for its reasonable expenses in complying
with the order of the administrator, as approved by the
administrator. Any excess moneys resulting from the conversion shall
be retained by the agent of depository as part of the securities pool
until the depository substitutes for the excess moneys securities
having a market value sufficient to bring the total of pooled
securities up to the amount required by Section 53652.
(b) In case the pooled securities consist of a security of the
class described in subdivision (p) of Section 53651, the
administrator shall draw on the letter of credit an amount equal to
the sum of (i) the deposits of the local agency, (ii) any accrued
interest on the deposits, and (iii) the reasonable expenses of the
administrator in paying the deposits and pay the sum of items (i) and
(ii) to the treasurer in satisfaction of the deposits.
53666. The only liability that shall attach to the administrator as
the result of the operation of this article is that which would
attach as a result of other laws of this state.
53667. (a) Expenses incurred by the administrator in carrying out
the duties and responsibilities assigned to the administrator by the
sections specified in subdivision (a) of Section 53661, shall be
borne by the Local Agency Deposit Security Fund, which is hereby
created and continuously appropriated to the administrator for the
administration of the sections specified in subdivision (a) of
Section 53661. This fund shall consist of fines levied pursuant to
Section 53661, fees collected pursuant to the sections specified in
subdivision (a) of Section 53661, and assessments levied pursuant to
this section.
(b) Each fiscal year the administrator shall levy an assessment on
a pro rata basis on those depositories which at any time during the
preceding fiscal year held local agency deposits. The total
assessment levied on all of those depositories shall be in an amount
which, when added to the amount of fines and fees that the
administrator estimates will be collected during the fiscal year when
the assessment is levied, is sufficient in the judgment of the
administrator to meet the expenses of the administrator in
administering the sections specified in subdivision (a) of Section
53661 and to provide a reasonable reserve for contingencies. The
basis of the apportionment of the assessment among the depositories
assessed shall be the proportion that the average amount of local
agency deposits held by each of those depositories bears to the
average total amount of local agency deposits held by all of those
depositories as shown by the reports of depositories to the
administrator for the preceding fiscal year, as required in
subdivision (e) of Section 53661; provided, however, that the amount
of the assessment levied on each of those depositories shall be not
less than twenty-five dollars ($25).
(c) The administrator shall notify each depository by mail of the
amount levied against it. The depository shall pay the amount levied
within 20 days after such notice into the Local Agency Deposit
Security Fund for the administration of the sections specified in
subdivision (a) of Section 53661. If payment is not made to the
administrator within such time, the administrator shall assess and
collect, in addition to the annual assessment, a penalty of 5 percent
of the assessment for each month or part thereof that the payment is
delinquent. If a depository fails to pay the assessment or penalties
assessed by the administrator, the administrator may notify local
agency treasurers with deposits in the depository.
53669. The treasurer or other authorized official is not
responsible for money while it is deposited pursuant to this article.
53676. The treasurer is not responsible for securities delivered to
and receipted for by any bank, savings and loan association, credit
union, federally insured industrial loan company, or trust company.
53678. The charges for the handling and safekeeping of any such
securities are not a charge against the treasurer but shall be paid
by the depository owning the securities.
53679. So far as possible, all money belonging to a local agency
under the control of any of its officers or employees other than the
treasurer shall, and money deposited as bail coming into the
possession of a judge or officer of a superior court may, be
deposited as active deposits in the state or national bank, inactive
deposits in the state or national bank or state or federal
association, federal or state credit union, or federally insured
industrial loan company in this state selected by the officer,
employee, or judge of the court. For purposes of this section, an
officer or employee of a local agency and a judge or officer of a
superior court are prohibited from depositing local agency funds or
money coming into their possession into a state or federal credit
union if an officer or employee of the local agency, or a judge or
officer of a superior court, also serves on the board of directors,
or any committee appointed by the board of directors, or the credit
committee or supervisory committee, of the particular state or
federal credit union. That money is subject to this article except:
(a) Deposits in an amount less than that insured pursuant to
federal law are not subject to this article.
For deposits in excess of the amount insured under any federal law
a contract in accordance with Section 53649 is required and the
provisions of this article shall apply.
(b) Interest is not required on money deposited in an active
deposit by a judge or officer of a superior court.
(c) Interest is not required on money deposited in an active
deposit by an officer having control of a revolving fund created
pursuant to Chapter 2 (commencing with Section 29300) of Division 3
of Title 3.
(d) Interest is not required on money deposited in an active
deposit by an officer having control of a special fund established
pursuant to Article 5 (commencing with Section 29400) or Article 6
(commencing with Section 29430) of Chapter 2 of Division 3 of Title
3.
53679.1. Notwithstanding any other provision of law, the accounting
practices of each county utilized prior to the effective date of
this section relating to interest on trust funds shall be deemed
appropriate and to have been made under the direction of the board of
supervisors of that county. This section is declaratory of the law
in existence prior to the enactment of this section.
53680. A tax collector of a local agency shall immediately deposit
with the treasurer all money under his control, unless he deposits
the money in a depositary pursuant to this article under permission
and instructions of the treasurer having authority to make such
deposit.
53681. An officer or employee of a local agency who deposits money
belonging to, or in the custody of, the local agency in any other
manner than that prescribed in this article is subject to forfeiture
of his office or employment.
53682. Notwithstanding any other provision in this article except
Section 53652, the treasurer may deposit moneys in and enter into
contracts with any depository, as defined in subdivision (c) of
Section 53630, for services to be rendered by that depository that in
the treasurer's judgment are to the public advantage. One copy of
each contract entered into under this section shall be filed with the
auditor or corresponding officer of the local agency. The contract
shall:
(a) Fix the duration of compensating deposits, if any.
(b) Fix the interest rate of that compensating deposit, if any.
(c) Specify the services to be rendered by the depository.
(d) Indicate whether the depository shall bear the expenses of
transportation of the money to and from the depository.
(e) Fix the consideration payable by the agency for such services.
(f) Specify who may deposit moneys into the treasurer's active
account and how those persons are to make those deposits.
53683. Notwithstanding any other provision in this article, the
consideration payable by the agency as specified in subdivision (e)
of Section 53682 shall