Senate Bill sb1670

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    Florida Senate - 2001                                  SB 1670

    By Senator Constantine





    9-750-01

  1                      A bill to be entitled

  2         An act relating to security for public

  3         deposits; revising the Florida Security for

  4         Public Deposits Act; amending s. 280.02, F.S.;

  5         defining terms; amending s. 280.04, F.S.;

  6         revising general provisions relating to

  7         collateral for public deposits; amending s.

  8         280.041, F.S.; prescribing requirements for

  9         collateral arrangements; prescribing

10         requirements for Federal Reserve Bank

11         agreements; allowing the use of letters of

12         credit under certain conditions; revising the

13         description of triggering events that result in

14         the Treasurer's requiring certain deposits or

15         transfers for the purpose of properly

16         maintaining collateral; amending s. 280.05,

17         F.S.; revising the powers and duties of the

18         Treasurer; amending s. 280.051, F.S.;

19         specifying the grounds for suspending or

20         disqualifying a qualified public depository;

21         amending s. 280.054, F.S.; describing acts for

22         which a qualified public depository is subject

23         to an administrative penalty; amending s.

24         280.055, F.S.; revising grounds for the

25         issuance of cease and desist orders and

26         corrective orders; amending s. 280.07, F.S.;

27         providing for contingent liability of a

28         qualified public depository; creating s.

29         280.071, F.S.; creating the Qualified Public

30         Depository Oversight Board; providing the

31         purpose of the board; providing for identifying

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  1         representative qualified public depositories;

  2         providing for member selection and

  3         responsibilities; providing for rulemaking by

  4         the Treasurer; amending s. 280.08, F.S.;

  5         prescribing the procedure for payment of losses

  6         after a default or insolvency has occurred;

  7         conforming a cross-reference; amending s.

  8         280.09, F.S.; providing for deposit into the

  9         Public Deposits Trust Fund of the draw on

10         letters of credit held as collateral;

11         conforming a cross-reference; amending s.

12         280.10, F.S.; providing for the effect of

13         consolidations of a qualified public depository

14         with an institution that is not such a

15         depository; providing for rulemaking; amending

16         s. 280.11, F.S.; conforming a cross-reference;

17         amending s. 280.13, F.S.; providing collateral

18         requirements for letters of credit issued by a

19         Federal Home Loan Bank; amending other

20         collateral requirements; providing for

21         rulemaking; amending s. 280.16, F.S.;

22         eliminating a date that is no longer relevant;

23         prescribing requirements of qualified public

24         depositories, including confidentiality

25         requirements; providing an effective date.

26

27  Be It Enacted by the Legislature of the State of Florida:

28

29         Section 1.  Section 280.02, Florida Statutes, is

30  amended to read:

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  1         280.02  Definitions.--As used in this chapter, the

  2  term:

  3         (1)  "Affiliate" means an entity that is related

  4  through a parent corporation's controlling interest. The term

  5  also includes any financial institution holding company or any

  6  subsidiary or service corporation of such holding company.

  7         (2)  "Alternative participation agreement" means an

  8  agreement to restrictions which a qualified public depository

  9  must complete as an alternative to withdrawing immediately

10  from the public deposits program due to the public

11  depository's financial condition.

12         (3)(2)  "Average daily balance" means the average daily

13  balance of public deposits held during the reported month. The

14  average daily balance must be determined by totaling, by

15  account, the daily balances held by the depositor and then

16  dividing the total by the number of calendar days in the

17  month. Deposit insurance is then deducted from each account

18  balance and the resulting amounts are totaled to obtain the

19  average daily balance.

20         (4)(3)  "Average monthly balance" means the average

21  monthly balance of public deposits held, before deducting

22  deposit insurance, by the depository during any 12 calendar

23  months.  The average monthly balance of the previous 12

24  calendar months must be determined by adding the average daily

25  balance before deducting deposit insurance for the reported

26  month and the average daily balances before deducting deposit

27  insurance for the 11 months preceding that month and dividing

28  the total by 12.

29         (5)(4)  "Book-entry form" means that securities are not

30  represented by a paper certificate but represented by an

31  account entry on the records of a depository trust clearing

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  1  system or, in the case of United States Government securities,

  2  a Federal Reserve Bank.

  3         (6)(5)  "Capital account" means total equity capital,

  4  as defined on the balance-sheet portion of the Consolidated

  5  Reports of Condition and Income (call report) or the Thrift

  6  Financial Report, less intangible assets, as submitted to the

  7  regulatory banking authority.

  8         (7)(6)  "Collateral-pledging level," for qualified

  9  public depositories, means the percentage of collateral

10  required to be pledged as provided in s. 280.04 by a financial

11  institution.

12         (8)(7)  "Current month" means the month immediately

13  following the month for which the monthly report is due from

14  qualified public depositories.

15         (9)(8)  "Custodian" means the Treasurer or any bank,

16  savings association, or trust company that:

17         (a)  Is organized and existing under the laws of this

18  state, any other state, or the United States;

19         (b)  Has executed all forms required under this chapter

20  or any rule adopted hereunder;

21         (c)  Agrees to be subject to the jurisdiction of the

22  courts of this state, or of courts of the United States which

23  are located within this state, for the purpose of any

24  litigation arising out of this chapter; and

25         (d)  Has been approved by the Treasurer to act as a

26  custodian.

27         (10)(9)  "Default or insolvency" includes, without

28  limitation, the failure or refusal of a qualified public

29  depository to pay any check or warrant drawn upon sufficient

30  and collected funds by any public depositor or to return any

31  deposit on demand or at maturity together with interest as

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  1  agreed; the issuance of an order by any supervisory authority

  2  restraining such depository from making payments of deposit

  3  liabilities; or the appointment of a receiver for such

  4  depository.

  5         (11)(10)  "Effective date of notice of withdrawal or

  6  order of discontinuance" pursuant to s. 280.11(3) means that

  7  date which is set out as such in any notice of withdrawal or

  8  order of discontinuance from the Treasurer.

  9         (12)(11)  "Eligible collateral" means securities,

10  Federal Home Loan Bank letters of credit, and cash, as

11  designated in s. 280.13.

12         (13)(12)  "Financial institution" means, including, but

13  not limited to, an association, bank, brokerage firm, credit

14  union, industrial savings bank, savings and loan association,

15  trust company, or other type of financial institution

16  organized under the laws of this state or any other state of

17  the United States and doing business in this state or any

18  other state, in the general nature of the business conducted

19  by banks and savings associations.

20         (14)(13)  "Governmental unit" means the state or any

21  county, school district, community college district, special

22  district, metropolitan government, or municipality, including

23  any agency, board, bureau, commission, and institution of any

24  of such entities, or any court.

25         (15)(14)  "Loss to public depositors" means loss of all

26  principal and all interest or other earnings on the principal

27  accrued or accruing as of the date the qualified public

28  depository was declared in default or insolvent.

29         (16)  "Market value" means the value of collateral

30  calculated pursuant to s. 280.04.

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  1         (17)(15)  "Operating subsidiary" means the qualified

  2  public depository's 100-percent owned corporation that has

  3  ownership of pledged collateral. The operating subsidiary may

  4  have no powers beyond those that its parent qualified public

  5  depository may itself exercise. The use of an operating

  6  subsidiary is at the discretion of the qualified public

  7  depository and must meet the Treasurer's requirements.

  8         (18)  "Oversight board" means the Qualified Public

  9  Depository Oversight Board created under s. 280.071 for the

10  purpose of safeguarding the integrity of the public deposits

11  program and preventing the realization of loss assessments

12  through standards, policies, and recommendations for action

13  made to the Treasurer.

14         (19)(16)  "Pledged collateral" means securities or cash

15  held separately and distinctly by an eligible custodian for

16  the benefit of the Treasurer to be used as security for

17  Florida public deposits. This includes maturity and call

18  proceeds.

19         (20)(17)  "Pledgor" means the qualified public

20  depository and, if one is used, operating subsidiary.

21         (21)(18)  "Pool figure" means the total average monthly

22  balances of public deposits held by all qualified public

23  depositories during the immediately preceding 12-month period.

24         (22)(19)  "Previous month" means the month or months

25  immediately preceding the month for which a monthly report is

26  due from qualified public depositories.

27         (23)(20)  "Public deposit" means the moneys of the

28  state or of any county, school district, community college

29  district, special district, metropolitan government, or

30  municipality, including agencies, boards, bureaus,

31  commissions, and institutions of any of the foregoing, or of

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  1  any court, and includes the moneys of all county officers,

  2  including constitutional officers, that are placed on deposit

  3  in a bank, savings bank, or savings association and for which

  4  the bank, savings bank, or savings association is required to

  5  maintain reserves. This includes, but is not limited to, time

  6  deposit accounts, demand deposit accounts, and nonnegotiable

  7  certificates of deposit. Moneys in deposit notes and in other

  8  nondeposit accounts such as repurchase or reverse repurchase

  9  operations are not public deposits. Securities, mutual funds,

10  and similar types of investments are not considered public

11  deposits and shall not be subject to the provisions of this

12  chapter.

13         (24)(21)  "Public depositor" means the Treasurer or

14  other chief financial officer or designee responsible for

15  handling public deposits.

16         (25)(22)  "Public deposits program" means the Florida

17  Security for Public Deposits Act set forth in administration

18  of this chapter and any rules adopted under this chapter by or

19  on behalf of the Treasurer.

20         (26)(23)  "Qualified public depository" means any bank,

21  savings bank, or savings association that:

22         (a)  Is organized and exists under the laws of the

23  United States, the laws of this state or any other state or

24  territory of the United States.

25         (b)  Has its principal place of business in this state

26  or has a branch office in this state which is authorized under

27  the laws of this state or of the United States to receive

28  deposits in this state.

29         (c)  Has deposit insurance under the provision of the

30  Federal Deposit Insurance Act, as amended, 12 U.S.C. ss. 1811

31  et seq.

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  1         (d)  Has procedures and practices for accurate

  2  identification, classification, reporting, and

  3  collateralization of public deposits.

  4         (e)  Meets all the requirements of this chapter.

  5         (f)  Has been designated by the Treasurer as a

  6  qualified public depository.

  7         (27)(24)  "Reported month" means the month for which a

  8  monthly report is due from qualified public depositories.

  9         (28)(25)  "Required collateral" of a qualified public

10  depository means eligible collateral having a market value

11  equal to or in excess of the amount required to be pledged

12  pursuant to s. 280.04 as computed and reported monthly or when

13  requested by the Treasurer.

14         (29)(26)  "Treasurer" means the Treasurer of the State

15  of Florida.

16         (30)(27)  "Treasurer's custody" means is a collateral

17  arrangement governed by a contract between a designated

18  Treasurer's custodian and the Treasurer. This arrangement

19  requires collateral to be in the Treasurer's name in order to

20  perfect the security interest.

21         (31)(28)  "Triggering events" are events set out in

22  section 280.041 subsection 280.041(4) which give the

23  Treasurer, as pledgee, the right to:

24         (a)  Instruct the custodian to transfer securities

25  pledged, interest payments, and other proceeds of pledged

26  collateral not previously credited to the pledgor; and.

27         (b)  Demand payment under letters of credit.

28         Section 2.  Section 280.04, Florida Statutes, is

29  amended to read:

30         280.04  Collateral for public deposits; general

31  provisions.--

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  1         (1)  The Treasurer shall determine the collateral

  2  requirements and collateral pledging level for each qualified

  3  public depository following procedures established by rule.

  4  These procedures shall include numerical parameters for

  5  25-percent, 50-percent, 125-percent, and 200-percent pledge

  6  levels based on nationally recognized financial rating

  7  services information and established financial performance

  8  guidelines.

  9         (2)  A qualified public depository may not accept or

10  retain any public deposit which is required to be secured

11  unless it has deposited with the Treasurer eligible collateral

12  at least equal to the greater of:

13         (a)  The average daily balance of public deposits that

14  does not exceed the lesser of its capital account or 20

15  percent of the pool figure multiplied by the depository's

16  collateral-pledging level, plus the greater of:

17         1.  One hundred twenty-five percent of the average

18  daily balance of public deposits in excess of capital

19  accounts; or

20         2.  One hundred twenty-five percent of the average

21  daily balance of public deposits in excess of 20 percent of

22  the pool figure.

23         (b)  Twenty-five percent of the average monthly balance

24  of public deposits.

25         (c)  One hundred twenty-five percent of the average

26  daily balance of public deposits if the qualified public

27  depository:

28         1.  Has been established for less than 3 years;

29         2.  Has experienced material decreases in its capital

30  accounts; or

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  1         3.  Has an overall financial condition that is

  2  materially deteriorating.

  3         (d)  Two hundred percent of an established maximum

  4  amount of public deposits that has been mutually agreed upon

  5  by and between the Treasurer and the qualified public

  6  depository.

  7         (e)  Minimum required collateral of $100,000.

  8         (f)  As required in special instructions from the

  9  Treasurer.

10         (3)  Each qualified public depository shall report its

11  required collateral on the monthly report required under s.

12  280.16 and shall simultaneously pledge, deposit, or issue

13  eligible collateral as needed.

14         (4)(3)  Additional collateral is required within 2

15  business days 48 hours if public deposits are accepted that

16  would increase the qualified public depository's average daily

17  balance for the current month by 25 percent over the average

18  daily balance of the previously reported month.

19         (5)(4)  Additional collateral of 20 percent of required

20  collateral is necessary if a valuation date other than the

21  close of business as described below has been approved for the

22  qualified public depository and the required collateral is

23  found to be insufficient based on the Treasurer's valuation.

24         (6)(5)  Each qualified public depository shall value

25  its collateral in the following manner; it must:

26         (a)  Use a nationally recognized source.

27         (b)  Use market price, quality ratings, and pay-down

28  factors as of the close of business on the last banking day in

29  the reported month, or as of a date approved by the Treasurer.

30

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  1         (c)  Report any material decline in value that occurs

  2  before the date of mailing the monthly report required under

  3  s. 280.16 to the Treasurer.

  4         (d)  Use 100 percent of the maximum amount available

  5  under Federal Home Loan Bank letters of credit as market

  6  value.

  7         (7)  A qualified public depository shall pledge,

  8  deposit, or issue additional eligible collateral between

  9  filing periods of the monthly report required under s. 280.16

10  when notified by the Treasurer that the current market value

11  of collateral does not meet the collateral requirements. The

12  pledge, deposit, or issuance of this additional collateral

13  must be made within 2 business days after the Treasurer's

14  notification.

15         (8)  A qualified public depository may be required to

16  return public deposits to governmental units and may be

17  suspended or disqualified or subjected to administrative

18  penalty as provided in ss. 280.051 and 280.054 for failure to

19  meet the collateral requirements.

20         (9)  The Treasurer shall adopt rules for the

21  establishment of collateral requirements, collateral pledging

22  levels, required collateral calculations, and market value,

23  and rules that clarify related terms.

24         Section 3.  Section 280.041, Florida Statutes, is

25  amended to read:

26         280.041  Collateral arrangements; agreements,

27  provisions, and triggering events.--

28         (1)  Eligible collateral listed in s. 280.13 may be

29  pledged, deposited, or issued using the following collateral

30  arrangements as approved by the Treasurer for a qualified

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  1  public depository or an operating subsidiary, if one is used,

  2  to meet collateral requirements:

  3         (a)  Regular custody arrangement. Collateral is to be

  4  pledged to the Treasurer pursuant to subsection (2).

  5         (b)  Federal Reserve Bank custody arrangement.

  6  Collateral is to be pledged to the Treasurer pursuant to

  7  subsection (3).

  8         (c)  Treasurer's custody arrangement. Collateral is to

  9  be deposited in the Treasurer's name pursuant to subsection

10  (4).

11         (d)  Federal Home Loan Bank letter of credit

12  arrangement. Collateral is to be issued with the Treasurer as

13  beneficiary pursuant to subsection (5).

14         (e)  Cash arrangement. Collateral is to be held by the

15  Treasurer or a custodian.

16         (2)(1)  With the approval of the Treasurer, a qualified

17  public depository or operating subsidiary, as pledgor, may

18  deposit eligible collateral with a custodian. A qualified

19  public depository may not act as its own custodian. Except in

20  the case of using a Federal Reserve Bank as custodian, which

21  may require other collateral agreement provisions, the

22  following are necessary for the Treasurer's approval:

23         (a)  A completed collateral agreement in a form

24  prescribed by the Treasurer in which the pledgor agrees to the

25  following provisions:

26         1.  The pledgor shall own the pledged collateral. The

27  pledged collateral shall be eligible collateral and shall be

28  at least equal to the amount of required collateral.

29         2.  The pledgor shall grant to the Treasurer an

30  interest in pledged collateral for the purposes of this

31  section. The pledgor shall not enter into or execute any other

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  1  agreement related to the pledged collateral that would create

  2  an interest in or lien on that collateral in any manner in

  3  favor of any third party without the written consent of the

  4  Treasurer.

  5         3.  The pledgor shall not grant the custodian any lien

  6  that attaches to the collateral in favor of the custodian that

  7  is superior or equal to the security interest of the

  8  Treasurer.

  9         4.  The pledgor shall agree that the Treasurer may,

10  without notice to or consent by the pledgor, require the

11  custodian to comply with and perform any and all requests and

12  orders directly from the Treasurer. These include, but are not

13  limited to, liquidating all collateral and submitting the

14  proceeds directly to the Treasurer in the name of the

15  Treasurer only or transferring all collateral into an account

16  designated solely by the Treasurer.

17         5.  The pledgor shall acknowledge that the Treasurer

18  may, without notice to or consent by the pledgor, require the

19  custodian to hold principal payments and income for the

20  benefit of the Treasurer.

21         6.  The pledgor shall initiate collateral transactions

22  on forms prescribed by the Treasurer in the following manner:

23         a.  A deposit transaction of eligible collateral may be

24  made without prior approval from the Treasurer provided:

25  security types that have restrictions have been approved in

26  advance of the transaction by the Treasurer and simultaneous

27  notification is given to the Treasurer; and the custodian has

28  not received notice from the Treasurer prohibiting deposits

29  without prior approval.

30         b.  A substitution transaction of eligible collateral

31  may be made without prior approval from the Treasurer

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  1  provided: security types that have restrictions have been

  2  approved in advance of the transaction by the Treasurer; the

  3  market value of the securities to be substituted is at least

  4  equal to the amount withdrawn; simultaneous notification is

  5  given to the Treasurer; and the custodian has not received

  6  notice from the Treasurer prohibiting substitution.

  7         c.  A transfer of collateral between accounts at a

  8  custodian requires the Treasurer's prior approval. The

  9  collateral shall be released subject to redeposit in the new

10  account with a pledge to the Treasurer intact.

11         d.  A transfer of collateral from a custodian to

12  another custodian requires the Treasurer's prior approval and

13  a valid collateral agreement with the new custodian. The

14  collateral shall be released subject to redeposit at the new

15  custodian with a pledge to the Treasurer intact.

16         e.  A withdrawal transaction requires the Treasurer's

17  prior approval. The market value of eligible collateral

18  remaining after the withdrawal shall be at least equal to the

19  amount of required collateral. A withdrawal transaction shall

20  be executed for any release of collateral including maturity

21  or call proceeds.

22         f.  Written notice shall be sent to the Treasurer to

23  remove from the inventory of pledged collateral a pay-down

24  security that has paid out with zero principal remaining.

25         7.  If pledged collateral includes definitive

26  (physical) securities in registered form which are in the name

27  of the pledgor or a nominee, the pledgor shall deliver the

28  following documents when requested by the Treasurer:

29         a.  A separate certified power of attorney in a form

30  prescribed by the Treasurer for each issue of securities.

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  1         b.  Separate bond assignment forms as required by the

  2  bond agent or trustee.

  3         c.  Certified copies of resolutions adopted by the

  4  pledgor's governing body authorizing execution of these

  5  documents.

  6         8.  The pledgor shall be responsible for all costs

  7  necessary to the functioning of the collateral agreement or

  8  associated with confirmation of pledged collateral to the

  9  Treasurer and acknowledges that these costs shall not be a

10  charge against the Treasurer or his or her interests in the

11  pledged collateral.

12         9.  The pledgor, if notified by the Treasurer, shall

13  not be allowed to use a custodian if that custodian fails to

14  complete the collateral agreement, releases pledged collateral

15  without the Treasurer's approval, fails to properly complete

16  confirmations of pledged collateral, fails to honor a request

17  for examination of definitive pledged collateral and records

18  of book-entry securities, or fails to provide requested

19  documents on definitive securities. The period for disallowing

20  the use of a custodian is 1 year.

21         10.  The pledgor shall be subject to the jurisdiction

22  of the courts of the State of Florida, or of courts of the

23  United States located within the State of Florida, for the

24  purpose of any litigation arising out of the act.

25         11.  The pledgor is responsible and liable to the

26  Treasurer for any action of agents the pledgor uses to execute

27  collateral transactions or submit reports to the Treasurer.

28         12.  The pledgor shall agree that any information,

29  forms, or reports electronically transmitted to the Treasurer

30  shall have the same enforceability as a signed writing.

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  1         13.  The pledgor shall submit proof that authorized

  2  individuals executed the collateral agreement on behalf of the

  3  pledgor.

  4         14.  The pledgor shall agree by resolution of the board

  5  of directors that collateral agreements entered into for

  6  purposes of this section have been formally accepted and

  7  constitute official records of the pledgor.

  8         15.  The pledgor shall be bound by any other provisions

  9  found necessary for a perfected security interest in

10  collateral under the Uniform Commercial Code.

11         (b)  A completed collateral agreement in a form

12  prescribed by the Treasurer in which the custodian agrees to

13  the following provisions:

14         1.  The custodian shall have no responsibility to

15  ascertain whether the pledged securities are at least equal to

16  the amount of required collateral nor whether the pledged

17  securities are eligible collateral.

18         2.  The custodian shall hold pledged collateral in a

19  custody account for the Treasurer for purposes of this

20  section. The custodian shall not enter into or execute any

21  other agreement related to the collateral that would create an

22  interest in or lien on that collateral in any manner in favor

23  of any third party without the written consent of the

24  Treasurer.

25         3.  The custodian shall agree that any lien that

26  attaches to the collateral in favor of the custodian shall not

27  be superior or equal to the security interest of the

28  Treasurer.

29         4.  The custodian shall, without notice to or consent

30  by the pledgor, comply with and perform any and all requests

31  and orders directly from the Treasurer. These include, but are

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  1  not limited to, liquidating all collateral and submitting the

  2  proceeds directly to the Treasurer in the name of the

  3  Treasurer only or transferring all collateral into an account

  4  designated solely by the Treasurer.

  5         5.  The custodian shall consider principal payments on

  6  pay-down securities and income paid on pledged collateral as

  7  the property of the pledgor and shall pay thereto provided the

  8  custodian has not received written notice from the Treasurer

  9  to hold such principal payments and income for the benefit of

10  the Treasurer.

11         6.  The custodian shall process collateral transactions

12  on forms prescribed by the Treasurer in the following manner:

13         a.  A deposit transaction of eligible collateral may be

14  made without prior approval from the Treasurer unless the

15  custodian has received notice from the Treasurer requiring the

16  Treasurer's prior approval.

17         b.  A substitution transaction of eligible collateral

18  may be made without prior approval from the Treasurer provided

19  the pledgor certifies the market value of the securities to be

20  substituted is at least equal to the market value amount of

21  the securities to be withdrawn and the custodian has not

22  received notice from the Treasurer prohibiting substitution.

23         c.  A transfer of collateral between accounts at a

24  custodian requires the Treasurer's prior approval. The

25  collateral shall be released subject to redeposit in the new

26  account with a pledge to the Treasurer intact. Confirmation

27  from the custodian to the Treasurer must be received within 5

28  business days of the redeposit.

29         d.  A transfer of collateral from a custodian to

30  another custodian requires the Treasurer's prior approval. The

31  collateral shall be released subject to redeposit at the new

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  1  custodian with a pledge to the Treasurer intact. Confirmation

  2  from the new custodian to the Treasurer must be received

  3  within 5 business days of the redeposit.

  4         e.  A withdrawal transaction requires the Treasurer's

  5  prior approval. A withdrawal transaction shall be executed for

  6  the release of any pledged collateral including maturity or

  7  call proceeds.

  8         7.  If pledged collateral includes definitive

  9  (physical) securities in registered form, which are in the

10  name of the custodian or a nominee, the custodian shall

11  deliver the following documents when requested by the

12  Treasurer:

13         a.  A separate certified power of attorney in a form

14  prescribed by the Treasurer for each issue of securities.

15         b.  Separate bond assignment forms as required by the

16  bond agent or trustee.

17         c.  Certified copies of resolutions adopted by the

18  custodian's governing body authorizing execution of these

19  documents.

20         8.  The custodian shall acknowledge that the pledgor is

21  responsible for all costs necessary to the functioning of the

22  collateral agreement or associated with confirmation of

23  securities pledged to the Treasurer and that these costs shall

24  not be a charge against the Treasurer or his or her interests

25  in the pledged collateral.

26         9.  The custodian shall agree to provide confirmation

27  of pledged collateral upon request from the Treasurer. This

28  confirmation shall be provided within 15 working days after

29  the request, in a format prescribed by the Treasurer, and

30  shall require no identification other than the pledgor name

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  1  and location, unless the special identification is provided in

  2  the collateral agreement.

  3         10.  The custodian shall be subject to the jurisdiction

  4  of the courts of the State of Florida, or of courts of the

  5  United States located within the State of Florida, for the

  6  purpose of any litigation arising out of the act.

  7         11.  The custodian shall be responsible and liable to

  8  the Treasurer for any action of agents the custodian uses to

  9  hold and service collateral pledged to the Treasurer.

10         12.  The custodian shall agree that any information,

11  forms, or reports electronically transmitted to the Treasurer

12  shall have the same enforceability as a signed writing.

13         13.  The Treasurer shall have the right to examine

14  definitive pledged collateral and records of book-entry

15  securities during the regular business hours of the custodian

16  without cost to the Treasurer.

17         14.  The responsibilities of the custodian for the

18  safekeeping of the pledged collateral shall be limited to the

19  diligence and care usually exercised by a banking or trust

20  institution toward its own property.

21         15.  The custodian shall be bound by any other

22  provisions found necessary for the Treasurer to have a

23  perfected security interest in collateral under the Uniform

24  Commercial Code.

25         (3)(2)  With the approval of the Treasurer, a pledgor

26  may deposit eligible collateral pursuant to an agreement with

27  a Federal Reserve Bank. The Federal Reserve Bank agreement

28  may:

29         (a)  Require terms not consistent with subsection

30  (2)(1).

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  1         (b)  Not subject the Treasurer to any costs or

  2  indemnification requirements.

  3         (4)(3)  The Treasurer may require deposit or transfer

  4  of collateral into a custodial account established in the

  5  Treasurer's name at a designated custodian. This requirement

  6  for Treasurer's custody shall have the following

  7  characteristics:

  8         (a)  One or more triggering events must have occurred.

  9         (b)  The custodian used must be a Treasurer's approved

10  custodian that must:

11         1.  Meet the definition of custodian.

12         2.  Not be an affiliate of the qualified public

13  depository.

14         3.  Be bound under a distinct Treasurer's custodial

15  contract.

16         (c)  All deposit transactions require the approval of

17  the Treasurer.

18         (d)  All collateral must be in book-entry form.

19         (e)  The qualified public depository shall be

20  responsible for all costs necessary to the functioning of the

21  contract or associated with the confirmation of securities in

22  the name of the Treasurer and acknowledges that these costs

23  shall not be a charge against the Treasurer and may be

24  deducted from the collateral or income earned if unpaid.

25         (5)  With the approval of the Treasurer, a qualified

26  public depository may use Federal Home Loan Bank letters of

27  credit to meet collateral requirements. A completed agreement

28  that includes the following provisions is necessary for the

29  Treasurer's approval:

30         (a)  The letter of credit must meet the definition of

31  eligible collateral.

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  1         (b)  The qualified public depository must agree that

  2  the Treasurer, as beneficiary, may, without notice to or

  3  consent by the qualified public depository, demand payment

  4  under the letter of credit if any of the triggering events

  5  listed in s. 280.041 occurs.

  6         (c)  The qualified public depository must agree that

  7  funds received by the Treasurer due to the occurrence of one

  8  or more triggering events may be deposited in the Treasury

  9  Cash Deposit Trust Fund for purposes of eligible collateral.

10         (d)  The qualified public depository must arrange for

11  the issuance of letters of credit that meet the requirements

12  of s. 280.13 and for their delivery to the Treasurer. All

13  transactions involving letters of credit require the

14  Treasurer's approval.

15         (e)  The qualified public depository must be

16  responsible for all costs necessary to the use or confirmation

17  of letters of credit issued on behalf of the Treasurer and

18  must acknowledge that these costs will not be a charge against

19  the Treasurer.

20         (f)  The qualified public depository must be subject to

21  the jurisdiction of the courts of this state, or of courts of

22  the United States which are located within this state, for the

23  purpose of any litigation arising out of this act.

24         (g)  The qualified public depository must agree that

25  any information, form, or report that is electronically

26  transmitted to the Treasurer has the same enforceability as a

27  signed writing.

28         (h)  The qualified public depository must submit proof

29  that authorized individuals executed the letters of credit

30  agreement on its behalf.

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  1         (i)  The qualified public depository must agree by

  2  resolution of its board of directors that the letters of

  3  credit agreements entered into for purposes of this section

  4  have been formally accepted and constitute official records of

  5  the qualified public depository.

  6         (6)(4)  The Treasurer may demand payment under a letter

  7  of credit or direct a custodian to deposit or transfer

  8  collateral and proceeds of securities not previously credited

  9  upon the occurrence of one or more triggering events provided

10  that, to the extent not incompatible with the protection of

11  public deposits, as determined in the Treasurer's sole and

12  absolute discretion, the Treasurer shall provide a custodian

13  and the qualified public depository with 48 hours' advance

14  notice before directing such deposit or transfer. These events

15  include:

16         (a)  The Treasurer determines that an immediate danger

17  to the public health, safety, or welfare exists.

18         (b)  The qualified public depository fails to have

19  adequate procedures and practices for the accurate

20  identification, classification, reporting, and

21  collateralization of public deposits.

22         (c)  The custodian fails to provide or allow inspection

23  and verification of documents, reports, records, or other

24  information dealing with the pledged collateral or financial

25  information.

26         (d)  The qualified public depository or its operating

27  subsidiary fails to provide or allow inspection and

28  verification of documents, reports, records, or other

29  information dealing with Florida public deposits, pledged

30  collateral, or financial information.

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  1         (e)  The custodian fails to hold income and principal

  2  payments made on securities held as collateral or fails to

  3  deposit or transfer such payments pursuant to the Treasurer's

  4  instructions.

  5         (f)  The qualified public depository defaults or

  6  becomes insolvent.

  7         (g)  The qualified public depository fails to pay an

  8  assessment.

  9         (h)  The qualified public depository fails to pay an

10  administrative penalty.

11         (i)  The qualified public depository fails to meet

12  financial condition standards.

13         (j)  The qualified public depository charges a

14  withdrawal penalty to public depositors when the qualified

15  public depository is suspended, disqualified, or withdrawn

16  from the public deposits program.

17         (k)  The qualified public depository does not provide,

18  as required, the public depositor with annual confirmation

19  information on all open Florida public deposit accounts.

20         (l)  The qualified public depository pledges, deposits,

21  or has issued insufficient or unacceptable collateral to meet

22  collateral requirements within the prescribed time cover

23  public deposits.

24         (m)  Pledged Collateral, other than a proper

25  substitution, is released without the prior approval of the

26  Treasurer.

27         (n)  The qualified public depository, custodian,

28  operating subsidiary, or agent violates any provision of the

29  act and the Treasurer determines that such violation may be

30  remedied by a move of collateral.

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  1         (o)  The qualified public depository, custodian,

  2  operating subsidiary, or agent fails to timely cooperate in

  3  resolving problems by the date established in written

  4  communication from the Treasurer.

  5         (p)  The custodian fails to provide sufficient

  6  confirmation information.

  7         (q)  The Federal Home Loan Bank or the qualified public

  8  depository gives notification that a letter of credit will not

  9  be extended or renewed, and other eligible collateral equal to

10  required collateral has not been deposited within 30 days

11  after the notice is given or 30 days before the expiration of

12  the letter of credit.

13         (r)  The qualified public depository involved in a

14  merger, acquisition, consolidation, or other organizational

15  change fails to notify the Treasurer or to ensure that

16  required collateral is properly maintained by the depository

17  holding the Florida public deposits.

18         (s)(q)  Events that would bring about an administrative

19  or legal action by the Treasurer.

20         (7)(5)  The Treasurer shall adopt rules to identify

21  forms and establish procedures for collateral agreements and

22  transactions, furnish confirmation requirements, establish

23  procedures for using an operating subsidiary and agents, and

24  clarify terms.

25         Section 4.  Section 280.05, Florida Statutes, is

26  amended to read:

27         280.05  Powers and duties of the Treasurer.--In

28  fulfilling the requirements of this act, the Treasurer has the

29  power to take the following actions, as he or she considers

30  necessary:

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  1         (1)  Identify representative qualified public

  2  depositories and furnish notification for the selection of the

  3  Qualified Public Depository Oversight Board pursuant to s.

  4  280.071.

  5         (1)  Establish criteria, based on the overall financial

  6  condition of the participant and applicants, as may be

  7  necessary, to protect the integrity of the public deposits

  8  program, to:

  9         (a)  Refuse entry into the program by an applicant;

10         (b)  Order discontinuance of participation in the

11  program by a qualified public depository;

12         (c)  Restrict the total amount of public deposits a

13  depository may hold;

14         (d)  Establish collateral-pledging levels based on

15  qualitative and quantitative standards; and

16         (e)  Restrict substitutions of collateral subject to

17  the approval of the Treasurer.

18         (2)  Appoint a six-member advisory committee to review

19  and recommend criteria to be used by the Treasurer for

20  purposes stated in subsection (1) in order to protect public

21  deposits and the depositories in the program.  Each member

22  selected to serve on the advisory committee must be a

23  representative of his or her industry.  Advisory committee

24  members must represent active qualified public depositories,

25  not in the process of withdrawing from the public deposits

26  program, in compliance with all applicable rules, regulations,

27  and reporting requirements of this chapter. Members must

28  possess knowledge, skill, and experience in one or more of the

29  following areas:

30         (a)  Financial analysis;

31         (b)  Trend analysis;

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  1         (c)  Accounting;

  2         (d)  Banking;

  3         (e)  Risk management; or

  4         (f)  Investment management.

  5

  6  Members' terms shall be for 4 years.  Any person appointed to

  7  fill a vacancy on the advisory committee may serve only for

  8  the remainder of the unexpired term. Any member is eligible

  9  for reappointment and shall serve until a successor qualifies.

10  The advisory committee shall elect a chair and vice chair and

11  shall also designate a secretary who need not be a member of

12  the advisory committee. The secretary shall keep a record of

13  the proceedings of the advisory committee and shall be the

14  custodian of all printed materials filed with or by the

15  advisory committee. Notwithstanding the existence of vacancies

16  on the advisory committee, a majority of the members

17  constitutes a quorum. The advisory committee shall not take

18  official action in the absence of a quorum. Each member may

19  name a designee to serve on the advisory committee on behalf

20  of the member. However, any designee so named must meet the

21  qualifications required of the selected member and be approved

22  by the Treasurer. The advisory committee shall convene as

23  needed.

24         (2)(3)  Establish goals and objectives and Provide

25  other data for the Qualified Public Depository Oversight

26  Board's duties, pursuant to s. 280.071, of:

27         (a)  Establishing standards for qualified public

28  depositories and custodians.

29         (b)  Evaluating requests for exceptions to standards

30  and alternative participation agreements.

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  1         (c)  Reviewing and recommending action concerning a

  2  violation committed by a qualified public depository or

  3  custodian. as may be necessary to assist the advisory

  4  committee established under subsection (2) in developing

  5  standards for the program.

  6         (3)(4)  Review, implement, monitor, evaluate, and

  7  modify, as needed, all or any part of the standards, and

  8  policies, or recommendations of the Qualified Public

  9  Depository Oversight Board recommended by an advisory

10  committee.

11         (4)(5)  Perform financial analysis of any qualified

12  public depositories depository as needed.

13         (5)(6)  Require such collateral, or increase the

14  collateral-pledging level, of any qualified public depository

15  as may be necessary to administer the provisions of this

16  chapter and to protect the integrity of the public deposits

17  program.

18         (7)  Establish a minimum amount of required collateral

19  as the Treasurer deems necessary to provide for the contingent

20  liability pool.

21         (6)(8)  Decline to accept, or reduce the reported value

22  of, collateral as circumstances may require in order to ensure

23  the pledging or depositing of sufficient marketable collateral

24  and acceptable letters of credit to meet the purposes of this

25  chapter.

26         (7)(9)  Maintain perpetual inventory of pledged

27  collateral and perform monthly market valuations and quality

28  ratings.

29         (8)(10)  Monitor and confirm collateral with, as often

30  as deemed necessary by the Treasurer, the pledged collateral

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  1  held by third party custodians and issuers of letters of

  2  credit.

  3         (9)(11)  Move collateral Perfect interest in pledged

  4  collateral by having pledged securities moved into an account

  5  established in the Treasurer's name upon the occurrence of one

  6  or more triggering events. This action shall be taken at the

  7  discretion of the Treasurer.

  8         (10)  Issue notice to a qualified public depository

  9  that the use of a custodian will be disallowed if the

10  custodian has failed to follow the terms of a collateral

11  agreement.

12         (11)(12)  Furnish written notice to custodians of

13  collateral to hold interest and principal payments made on

14  securities held as collateral and to deposit or transfer such

15  payments pursuant to the Treasurer's instructions.

16         (12)(13)  Release collateral held in the Treasurer's

17  name, subject to sale and transfer of funds directly from the

18  custodian to public depositors of a withdrawing depository.

19         (13)  Demand payment under letters of credit for any of

20  the triggering events listed in s. 280.041 and deposit the

21  funds into the Public Deposits Trust Fund for purposes of

22  paying losses to public depositors, into the Treasurer's

23  Administrative and Investment Trust Fund for receiving payment

24  of administrative penalties, and into the Treasury Cash

25  Deposit Trust Fund for purposes of eligible collateral.

26         (14)  Sell securities for the purpose of paying losses

27  to public depositors not covered by deposit insurance.

28         (15)  Transfer funds directly from the custodian to

29  public depositors or the receiver in order to facilitate

30  prompt payment of claims.

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  1         (16)  Require the filing of the following reports which

  2  the Treasurer shall process as provided:

  3         (a)  Qualified public depository monthly reports and

  4  schedules. The Treasurer shall review the reports of each

  5  qualified public depository for material changes in capital

  6  accounts or changes in name, address, or type of institution;

  7  record the average daily balances of public deposits held; and

  8  monitor the collateral-pledging levels and required

  9  collateral.

10         (b)  Quarterly regulatory reports from qualified public

11  depositories. The Treasurer shall analyze qualified public

12  depositories ranked in the lowest category based on

13  established financial condition criteria.

14         (c)  Qualified public depository annual reports and

15  public depositor annual reports. The Treasurer shall compare

16  public deposit information reported by qualified public

17  depositories and public depositors.  Such comparison shall be

18  conducted for qualified public depositories which are ranked

19  in the lowest category based on established financial

20  condition criteria of record on September 30. Additional

21  comparison processes may be performed as public deposits

22  program resources permit.

23         (d)  Any related documents, reports, records, or other

24  information deemed necessary by the Treasurer in order to

25  ascertain compliance with this chapter.

26         (17)  Verify the reports of any qualified public

27  depository relating to public deposits it holds when necessary

28  to protect the integrity of the public deposits program.

29         (18)  Confirm public deposits, to the extent possible

30  under current law, when needed.

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  1         (19)  Require at his or her discretion the filing of

  2  any information or forms required under this chapter to be by

  3  electronic data transmission. Such filings of information or

  4  forms shall have the same enforceability as a signed writing.

  5         (20)  Suspend or disqualify or disqualify after

  6  suspension any qualified public depository that has violated

  7  any of the provisions of this chapter or of rules adopted

  8  hereunder.

  9         (a)  Any qualified public depository that is suspended

10  or disqualified pursuant to this subsection is subject to the

11  provisions of s. 280.11(2) governing withdrawal from the

12  public deposits program and return of pledged collateral. Any

13  suspension shall not exceed a period of 6 months.  Any

14  qualified public depository which has been disqualified may

15  not reapply for qualification until after the expiration of 1

16  year from the date of the final order of disqualification or

17  the final disposition of any appeal taken therefrom.

18         (b)  In lieu of suspension or disqualification, impose

19  an administrative penalty upon the qualified public depository

20  as provided in s. 280.054.

21         (c)  If the Treasurer has reason to believe that any

22  qualified public depository or any other financial institution

23  holding public deposits is or has been violating any of the

24  provisions of this chapter or of rules adopted hereunder, he

25  or she may issue to the qualified public depository or other

26  financial institution an order to cease and desist from the

27  violation or to correct the condition giving rise to or

28  resulting from the violation.  If any qualified public

29  depository or other financial institution violates a

30  cease-and-desist or corrective order, the Treasurer may impose

31  an administrative penalty upon the qualified public depository

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  1  or other financial institution as provided in s. 280.054 or s.

  2  280.055.  In addition to the administrative penalty, the

  3  Treasurer may suspend or disqualify any qualified public

  4  depository for violation of any order issued pursuant to this

  5  paragraph.

  6         Section 5.  Subsections (2) and (3) of section 280.051,

  7  Florida Statutes, are amended to read:

  8         280.051  Grounds for suspension or disqualification of

  9  a qualified public depository.--A qualified public depository

10  may be suspended or disqualified or both if the Treasurer

11  determines that the qualified public depository has:

12         (2)  Submitted reports containing inaccurate or

13  incomplete information regarding public deposits or the

14  securities pledged as collateral for such deposits, capital

15  accounts, or the calculation of required collateral.

16         (3)  Failed to maintain required collateral pledge

17  sufficient collateral to cover public deposits.

18         Section 6.  Subsection (3) of section 280.054, Florida

19  Statutes, is amended to read:

20         280.054  Administrative penalty in lieu of suspension

21  or disqualification.--

22         (3)  A qualified public depository that violates s.

23  280.04(5) or a custodian that violates s. 280.04(6) is subject

24  to an administrative penalty in an amount not exceeding the

25  greater of $1,000 or 10 percent of the amount of withdrawal,

26  not exceeding $10,000, if it:.

27         (a)  Fails to provide required collateral using

28  eligible collateral and prescribed collateral agreements; or

29         (b)  Withdraws collateral without the Treasurer's

30  approval.

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  1         Section 7.  Section 280.055, Florida Statutes, is

  2  amended to read:

  3         280.055  Cease and desist order; corrective order;

  4  administrative penalty.--

  5         (1)  The Treasurer may issue a cease and desist order

  6  and a corrective order upon determining that:

  7         (a)  A qualified public depository has requested and

  8  obtained a release of pledged collateral without approval of

  9  the Treasurer;

10         (b)  A bank, savings association, or other financial

11  institution is holding public deposits without a certificate

12  of qualification issued by the Treasurer;

13         (c)  A qualified public depository pledges, deposits,

14  or arranges for the issuance of unacceptable collateral;

15         (d)  A custodian has released pledged collateral

16  without approval of the Treasurer;

17         (e)  A qualified public depository or a custodian has

18  not furnished to the Treasurer, when the Treasurer requested,

19  a power of attorney or bond power or bond assignment form

20  required by the bond agent or bond trustee for each issue of

21  registered certificated securities pledged and registered in

22  the name, or nominee name, of the qualified public depository

23  or custodian; or

24         (f)  A qualified public depository; a bank, savings

25  association, or other financial institution; or a custodian

26  has committed any other violation of this chapter or any rule

27  adopted pursuant to this chapter that the Treasurer determines

28  may be remedied by a cease and desist order or corrective

29  order.

30         (2)  Any qualified public depository or other bank,

31  savings association, or financial institution or custodian

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  1  that violates a cease and desist order or corrective order of

  2  the Treasurer is subject to an administrative penalty not

  3  exceeding $1,000 for each violation of the order.  Each day

  4  the violation of the order continues constitutes a separate

  5  violation.

  6         Section 8.  Section 280.07, Florida Statutes, is

  7  amended to read:

  8         280.07  Mutual responsibility and contingent

  9  liability.--Any bank or savings association that is designated

10  as a qualified public depository and that is not insolvent

11  shall guarantee public depositors against loss caused by the

12  default or insolvency of other qualified public depositories.

13  Each qualified public depository shall execute a form

14  prescribed by the Treasurer for such guarantee which shall be

15  approved by the board of directors and shall become an

16  official record of the institution.

17         Section 9.  Section 280.071, Florida Statutes, is

18  created to read:

19         280.071  Qualified Public Depository Oversight Board;

20  purpose; identifying representative qualified public

21  depositories; member selection and responsibilities.--There is

22  created a Qualified Public Depository Oversight Board,

23  consisting of six members and six alternate members who

24  represent the interests of all qualified public depositories

25  in safeguarding the integrity of the public deposits program

26  and preventing the realization of loss assessments.

27         (1)  On July 31 of each year and as vacancies occur,

28  the Treasurer, in order to initiate the selection of oversight

29  board representation, shall:

30         (a)  Categorize eligible qualified public depositories

31  into three groups according to average asset size. Eligible

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  1  qualified public depositories must be in compliance with all

  2  requirements and cannot be suspended, disqualified, or

  3  withdrawn from, or under an alternative participation

  4  agreement in, the public deposits program.

  5         (b)  Identify the two qualified public depositories in

  6  each of the three groups which have the greatest shares of

  7  contingent liability based on the average monthly balances of

  8  public deposits reported pursuant to s. 280.16.

  9         (c)  Send notification to the six qualified public

10  depositories that have been identified.

11         (2)  Each of the six representative qualified public

12  depositories shall select a member and an alternate member of

13  the oversight board and shall give the Treasurer written

14  information concerning the selections within 30 calendar days

15  after the Treasurer's notice.

16         (3)  If an identified qualified public depository

17  declines to select a member, does not respond within 30

18  calendar days, or becomes ineligible, the Treasurer shall

19  furnish notice to the Florida Bankers Association, which

20  shall, within 30 calendar days, select a member and an

21  alternate member to represent that average-asset category.

22         (4)  Each member and alternate member must:

23         (a)  Have resources available for review of qualified

24  public depository issues.

25         (b)  Possess knowledge, skill, and experience in one or

26  more of the following areas:

27         1.  Financial analysis;

28         2.  Trend analysis;

29         3.  Accounting;

30         4.  Banking;

31         5.  Risk management; or

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  1         6.  Investment management.

  2         (5)  The oversight board members and alternate members

  3  are subject to approval by the Treasurer.

  4         (6)  The alternate member must act on the member's

  5  behalf if the member is unable to perform oversight board

  6  functions, and has the same rights, duties, and

  7  responsibilities as the member.

  8         (7)  Each member shall serve until a successor is

  9  selected.

10         (8)  Expenses incurred by a member in carrying out

11  duties of the oversight board shall be paid by his or her

12  representative qualified public depository.

13         (9)  The oversight board shall organize, communicate,

14  and conduct meetings as follows:

15         (a)  Elect a chair and vice-chair.

16         (b)  Designate a secretary, who need not be a member of

17  the oversight board. The secretary shall:

18         1.  Keep a record of communications and meeting

19  proceedings.

20         2.  Act as custodian of all printed materials filed

21  with or by the oversight board.

22         (c)  Communicate through electronic means and express

23  delivery services whenever possible.

24         (d)  Meet upon call of the chairman or any three

25  members.

26         (e)  Take no official action in the absence of a

27  quorum.

28         1.  A quorum consists of the majority of voting members

29  of the oversight board.

30         2.  Each member has one vote.

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  1         3.  A member may not vote on issues directly related to

  2  the qualified public depository that he or she represents.

  3         4.  The Treasurer or his or her representative shall

  4  vote as a member of the oversight board in the absence of a

  5  quorum.

  6         (10)  The oversight board has the power and

  7  responsibility to safeguard the integrity of the public

  8  deposits program and prevent the realization of loss

  9  assessments by:

10         (a)  Establishing standards in the following areas:

11         1.  Financial institution entry requirements;

12         2.  Qualified public depository reporting requirements;

13         3.  Qualitative and quantitative financial condition

14  requirements;

15         4.  Custodian characteristic requirements and adherence

16  to collateral agreement terms;

17         5.  Collateral-pledging levels and adequacy of required

18  collateral;

19         6.  Collateral eligibility and restrictions;

20         7.  Operating subsidiary and agent requirements;

21         8.  Merger, acquisition, and name change requirements;

22         9.  Participation restrictions;

23         10.  Participation status and conditions for

24  suspension, disqualification, and mandatory withdrawal;

25         11.  Penalties and fines; and

26         12.  Corrective actions and administrative orders.

27         (b)  Recommending to the Treasurer the approval or

28  rejection of requests for exceptions that do not meet

29  established standards. These requests for exceptions may be:

30         1.  Referred by the Treasurer; or

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  1         2.  Submitted directly by the qualified public

  2  depository that is seeking the exception.

  3         (c)  Issuing approvals or rejections for alternative

  4  participation agreements referred by the Treasurer.

  5         (d)  Reviewing program violations and recommending that

  6  the Treasurer impose penalties and fines or issue corrective

  7  actions and administrative orders.

  8         (e)  Studying public deposit program areas referred by

  9  the Treasurer.

10         (f)  Assessing qualified public depositories to pay for

11  the implementation of standards established by the oversight

12  board which exceed the resources of the public deposits

13  program.

14         (11)  Official actions of the oversight board regarding

15  the establishment of standards, decisions concerning

16  exceptions and alternate participation agreements, and

17  recommendations concerning violations must be:

18         (a)  Communicated to the Treasurer in writing.

19         (b)  Subject to the approval of the Treasurer.

20         (c)  Implemented as public deposits program resources

21  or payment described in subsection (10) permit.

22         (12)  Members and alternate members are subject to the

23  confidentiality requirement of s. 280.16 in the same manner as

24  the Treasurer.

25         (13)  The Treasurer may adopt rules establishing

26  procedures and forms for the selection of members and

27  alternate members of the oversight board and governing

28  functions of the oversight board.

29         Section 10.  Section 280.08, Florida Statutes, is

30  amended to read:

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  1         280.08  Procedure for payment of losses.--When the

  2  Treasurer determines that a default or insolvency has

  3  occurred, he or she shall provide notice as required in s.

  4  280.085 s. 280.085(1) and implement the following procedures:

  5         (1)  The Treasurer, in cooperation with the Department

  6  of Banking and Finance or the receiver of the qualified public

  7  depository in default, shall ascertain the amount of funds of

  8  each public depositor on deposit at such depository and the

  9  amount of deposit insurance applicable to such deposits.

10         (2)  The potential loss to public depositors shall be

11  calculated by compiling claims received from such depositors.

12  The Treasurer shall validate claims on public deposit accounts

13  which meet the requirements of s. 280.17 and are confirmed as

14  provided in subsection (1).

15         (3)(a)  The loss to public depositors shall be

16  satisfied, insofar as possible, first through any applicable

17  deposit insurance and then through demanding payment under

18  letters of credit or the sale of collateral securities pledged

19  or deposited by the defaulting depository. The Treasurer may

20  assess qualified public depositories as provided in paragraph

21  (b) for the total loss if the demand for payment or sale of

22  collateral securities cannot be accomplished within 7 business

23  days.

24         (b)  The Treasurer shall provide coverage of any

25  remaining loss by assessment against the other qualified

26  public depositories.  The Treasurer shall determine such

27  assessment for each qualified public depository by multiplying

28  the total amount of any remaining loss to all public

29  depositors by a percentage which represents the average

30  monthly balance of public deposits held by each qualified

31  public depository during the previous 12 months divided by the

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  1  total average monthly balances of public deposits held by all

  2  qualified public depositories, excluding the defaulting

  3  depository, during the same period. The assessment calculation

  4  shall be computed to six decimal places.

  5         (4)  Each qualified public depository shall pay its

  6  assessment to the Treasurer within 7 business days after it

  7  receives notice of the assessment.  If a depository fails to

  8  pay its assessment when due, the Treasurer shall satisfy the

  9  assessment by demanding payment under letters of credit or

10  selling collateral securities pledged or deposited by that

11  depository.

12         (5)  The Treasurer shall distribute the funds to the

13  public depositors of the qualified public depository in

14  default according to their validated claims. The Treasurer, at

15  his or her discretion, may make partial payments to public

16  depositors that have experienced a loss of public funds which

17  payments are critical to the immediate operations of the

18  public entity. The public depositor requesting partial payment

19  of a claim shall provide the Treasurer with written

20  documentation justifying the need for partial payment.

21         (6)  Public depositors receiving payment under the

22  provisions of this section shall assign to the Treasurer any

23  interest they may have in funds that may subsequently be made

24  available to the qualified public depository in default.  If

25  the qualified public depository in default or its receiver

26  provides the funds to the Treasurer, the Treasurer shall

27  distribute the funds, plus all accrued interest which has

28  accumulated from the investment of the funds, if any, to the

29  depositories which paid assessments on the same pro rata basis

30  as the assessments were paid.

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  1         (7)  Expenses incurred by the Treasurer in connection

  2  with a default or insolvency which are not normally incurred

  3  by the Treasurer in the administration of this act must be

  4  paid out of the amount paid under letters of credit or

  5  proceeds from the sale of pledged collateral.

  6         Section 11.  Section 280.09, Florida Statutes, is

  7  amended to read:

  8         280.09  Public Deposits Trust Fund.--

  9         (1)  In order to facilitate the administration of this

10  chapter, there is created the Public Deposits Trust Fund,

11  hereafter in this section designated "the fund."  The proceeds

12  from the sale of securities or draw on letters of credit held

13  pledged as collateral or from any assessment pursuant to s.

14  280.08 shall be deposited into the fund.  Any administrative

15  penalty collected pursuant to this chapter shall be deposited

16  into the Treasurer's Administrative and Investment Trust Fund.

17         (2)  The Treasurer is authorized to pay any losses to

18  public depositors from the fund, and there are hereby

19  appropriated from the fund such sums as may be necessary from

20  time to time to pay the losses. The term "losses," for

21  purposes of this chapter, shall also include losses of

22  interest or other accumulations to the public depositor as a

23  result of penalties for early withdrawal required by

24  Depository Institution Deregulatory Commission Regulations or

25  applicable successor federal laws or regulations because of

26  suspension or disqualification of a qualified public

27  depository by the Treasurer pursuant to s. 280.05 s.

28  280.05(20) or because of withdrawal from the public deposits

29  program pursuant to s. 280.11.  In that event, the Treasurer

30  is authorized to assess against the suspended, disqualified,

31  or withdrawing public depository, in addition to any amount

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  1  authorized by any other provision of this chapter, an

  2  administrative penalty equal to the amount of the early

  3  withdrawal penalty and to pay that amount over to the public

  4  depositor as reimbursement for such loss.  Any money in the

  5  fund estimated not to be needed for immediate cash

  6  requirements shall be invested pursuant to s. 18.125.

  7         Section 12.  Section 280.10, Florida Statutes, is

  8  amended to read:

  9         280.10  Effect of merger, or acquisition, or

10  consolidation; change of name or address.--

11         (1)  When In the event a qualified public depository is

12  merged into, acquired by, or consolidated with a bank, savings

13  bank, or savings association that is not a qualified public

14  depository:,

15         (a)  The resulting institution automatically becomes

16  shall become a qualified public depository subject to the

17  requirements of the public depository program., and

18         (b)  The contingent liability of the former institution

19  shall be a liability of the resulting institution.

20         (c)  The public deposits and associated collateral of

21  the former institution shall be public deposits and collateral

22  of the resulting institution.

23         (d)  The resulting institution shall, within 90

24  calendar 30 days after the effective date of the merger,

25  acquisition, or consolidation, the resulting institution shall

26  execute in its own name and deliver to the Treasurer:

27         1.  the contingent liability agreement required by s.

28  280.07, and all information and Documentation in its name as

29  may be required for participation in the public deposits

30  program; or

31

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  1         2.  Written notice of intent to withdraw. If the

  2  resulting institution chooses not to remain a qualified public

  3  depository, or does not meet the requirements to become a

  4  qualified public depository, such institution shall comply

  5  with the procedures for withdrawal from the program as

  6  provided in s. 280.11 and a proposed effective date of

  7  withdrawal which must be within 180 days after the effective

  8  date of the acquisition by, merger into, or consolidation with

  9  the former institution.

10         (e)  If the resulting institution does not meet the

11  requirements for becoming a qualified public depository or

12  does not submit the required documentation within 90 calendar

13  days after the effective date of the merger, acquisition, or

14  consolidation, the Treasurer shall initiate mandatory

15  withdrawal actions as provided in s. 280.11 and shall set an

16  effective date of withdrawal that is within 180 days after the

17  effective date of the acquisition by, merger into, or

18  consolidation with the former institution.

19         (2)  When a qualified public depository which sells or

20  disposes of any of its Florida public deposits or collateral

21  securing such deposits in a manner not covered under

22  subsection (1):

23         (a)  The qualified public depository that originally

24  held the public deposits its branches to an institution that

25  is not a qualified public depository, and such branches

26  continue to hold public deposits, shall be responsible for:

27         1.  Ensuring that the institution that receives such

28  public deposits becomes a qualified public depository and

29  meets collateral requirements with the Treasurer as part of

30  the transaction.

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  1         2.  Notifying the Treasurer within 30 calendar days

  2  after the final approval by the appropriate regulator.

  3         (b)  A qualified public depository that fails to meet

  4  those responsibilities shall and continue to collateralize and

  5  report such public deposits until the receiving purchasing

  6  institution becomes a qualified public depository and

  7  collateralizes the deposits or the deposits are returned to

  8  the governmental public unit.  The qualified public depository

  9  shall notify the Treasurer of any acquisition of its branches

10  on its next monthly report after the final approval by the

11  appropriate regulator if the acquisition includes public

12  deposits.

13         (3)  The qualified public depository shall notify the

14  Treasurer of any acquisition or merger within 30 calendar days

15  on its next monthly report after the final approval of the

16  acquisition or merger by its appropriate regulator.

17         (4)  Collateral subject to a collateral depository

18  pledge agreement may not be released by the Treasurer or the

19  custodian until the assumed liability is evidenced by the

20  deposit of collateral pursuant to the collateral depository

21  pledge agreement of the successor entity.  The reporting

22  requirement and pledge of collateral will remain in force

23  until the Treasurer determines that the liability no longer

24  exists.  The surviving or new qualified public depository

25  shall be responsible and liable for all of the liabilities and

26  obligations of each qualified public depository merged with or

27  acquired by it.

28         (5)  Each qualified public depository shall report any

29  change of name and address to the Treasurer on a form provided

30  by the Treasurer regardless of whether the name change is a

31  result of an acquisition, or merger, or consolidation.

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  1  Notification of such change must be made within 30 calendar

  2  days after the effective date of the change on its next

  3  monthly report.

  4         (6)  The Treasurer shall adopt rules establishing

  5  procedures for mergers, acquisitions, consolidations, and

  6  changes in name and address, for providing forms, and for

  7  clarifying terms.

  8         Section 13.  Subsection (1) of section 280.11, Florida

  9  Statutes, is amended to read:

10         280.11  Withdrawal from public deposits program; return

11  of pledged collateral.--

12         (1)  A qualified public depository may withdraw from

13  the public deposits program by giving written notice to the

14  Treasurer.  The contingent liability, required collateral, and

15  reporting requirements of the depository withdrawing from the

16  program shall continue for a period of 12 months after the

17  effective date of the withdrawal, except that the filing of

18  reports may no longer be required when the average monthly

19  balance of public deposits is equal to zero.  Notice of

20  withdrawal shall be mailed or delivered in sufficient time to

21  be received by the Treasurer at least 30 days before the

22  effective date of withdrawal. The Treasurer shall timely

23  publish the withdrawal notice in the Florida Administrative

24  Weekly which shall constitute notice to all depositors.  The

25  withdrawing depository shall not receive or retain public

26  deposits after the effective date of the withdrawal until such

27  time as it again becomes a qualified public depository. The

28  Treasurer shall, upon request, return to the depository that

29  portion of the collateral pledged that is in excess of the

30  required collateral as reported on the current public

31  depository monthly report.  Losses of interest or other

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  1  accumulations, if any, because of withdrawal under this

  2  section shall be assessed and paid as provided in s. 280.09 s.

  3  280.09(2).

  4         Section 14.  Section 280.13, Florida Statutes, is

  5  amended to read:

  6         280.13  Eligible Collateral eligible for pledge by

  7  banks and savings associations.--

  8         (1)  Securities eligible to be pledged as collateral by

  9  banks and savings associations shall be limited to:

10         (a)  Direct obligations of the United States

11  Government.

12         (b)  Obligations of any federal agency that are fully

13  guaranteed as to payment of principal and interest by the

14  United States Government.

15         (c)  Obligations of the following federal agencies:

16         1.  Farm credit banks.

17         2.  Federal land banks.

18         3.  The Federal Home Loan Bank and its district banks.

19         4.  Federal intermediate credit banks.

20         5.  The Federal Home Loan Mortgage Corporation.

21         6.  The Federal National Mortgage Association.

22         7.  Obligations guaranteed by the Government National

23  Mortgage Association.

24         (d)  General obligations of a state of the United

25  States, or of Puerto Rico, or of a political subdivision or

26  municipality thereof.

27         (e)  Obligations issued by the Florida State Board of

28  Education under authority of the State Constitution or

29  applicable statutes.

30

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  1         (f)  Tax anticipation certificates or warrants of

  2  counties or municipalities having maturities not exceeding 1

  3  year.

  4         (g)  Public housing authority obligations.

  5         (h)  Revenue bonds or certificates of a state of the

  6  United States or of a political subdivision or municipality

  7  thereof.

  8         (i)  Corporate bonds of any corporation that is not an

  9  affiliate or subsidiary of the qualified public depository.

10         (2)  In addition to the securities listed in subsection

11  (1), the Treasurer may, in his or her discretion, allow the

12  pledge of the following types of securities. The Treasurer

13  shall, by rule, define any restrictions, specific criteria, or

14  circumstances for which these instruments will be acceptable.

15         (a)  Securities of, or other interests in, any open-end

16  management investment company registered under the Investment

17  Company Act of 1940, 15 U.S.C. ss. 80a-1 et seq., as amended

18  from time to time, provided the portfolio of such investment

19  company is limited to direct obligations of the United States

20  Government and to repurchase agreements fully collateralized

21  by such direct obligations of the United States Government and

22  provided such investment company takes delivery of such

23  collateral either directly or through an authorized custodian.

24         (b)  Collateralized Mortgage Obligations.

25         (c)  Real Estate Mortgage Investment Conduits.

26         (3)  Except as to obligations issued by or with respect

27  to which payment of interest and principal is guaranteed by

28  the United States Government or obligations of federal

29  agencies listed in subsection (1), the debt obligations

30  mentioned in this section shall be rated in one of the four

31

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  1  highest classifications by an established, nationally

  2  recognized investment rating service.

  3         (4)  To be eligible as collateral under this section,

  4  all debt obligations shall be interest bearing or accruing.

  5         (5)  A letter of credit issued by a Federal Home Loan

  6  Bank is eligible as collateral under this section if:

  7         (a)  The letter of credit has been delivered to the

  8  Treasurer in the standard format approved by the Treasurer.

  9         (b)  The letter of credit meets required conditions of:

10         1.  Being irrevocable.

11         2.  Being clean and unconditional, which includes

12  containing a statement that it is not subject to any

13  agreement, condition, or qualification outside of the letter

14  of credit and providing that a beneficiary need only present

15  the original letter of credit with any amendments and the

16  demand form to promptly obtain funds and that no other

17  document need be presented.

18         3.  Being issued, presentable, and payable at a Federal

19  Home Loan Bank in U.S. dollars. Presentation may be made by

20  the beneficiary's submitting the original letter of credit,

21  including any amendments, and the demand in writing, by

22  overnight delivery.

23         4.  Containing a statement that identifies and defines

24  the Treasurer as beneficiary.

25         5.  Containing an issue date and a date of expiration.

26         6.  Containing a term of at least 1 year and an

27  evergreen clause that provides for at least 60 days' written

28  notice to the beneficiary prior to an expiration date for

29  nonrenewal.

30         7.  Containing a statement that it is subject to and

31  governed by the laws of the State of Florida and that, in the

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  1  event of any conflict with other laws, the laws of the State

  2  of Florida will control.

  3         8.  Containing a statement that the letter of credit is

  4  an obligation of the Federal Home Loan Bank and is in no way

  5  contingent upon reimbursement.

  6         9.  Any other provision found necessary under the

  7  Uniform Commercial Code: Letters of Credit.

  8         (c)  Obligations issued by the Federal Home Loan Bank

  9  remain triple-A rated by a nationally recognized source.

10         (d)  The Federal Home Loan Bank that issues the letter

11  of credit agrees to provide confirmation upon request from the

12  Treasurer. This confirmation must be provided within 15

13  working days after the request is made, in a format prescribed

14  by the Treasurer, and must require no identification other

15  than the name and location of the qualified public depository.

16         (e)  The qualified public depository completes an

17  agreement covering the use of the letter of credit as eligible

18  collateral, as described in s. 280.041(5).

19         (f)  The qualified public depository, if notified by

20  the Treasurer, shall not be allowed to use a letter of credit

21  if the Federal Home Loan Bank fails to pay a draw request as

22  provided for in the letter of credit or fails to properly

23  complete a confirmation of such a letter of credit.

24         (6)  Cash held by the Treasurer in the Treasury Cash

25  Deposit Trust Fund or by a custodian is eligible as collateral

26  under this section. Interest earned on cash deposits which is

27  in excess of required collateral must be paid to the qualified

28  public depository upon request.

29         (7)(5)  The Treasurer may disapprove any security or

30  letter of credit that does not meet the requirements of this

31  section or any rule adopted pursuant to this section or any

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  1  security for which no current market price can be obtained

  2  from a nationally recognized source deemed acceptable to the

  3  Treasurer or which cannot be readily converted to cash.

  4         (8)  The Treasurer shall adopt rules prescribing

  5  restrictions and special requirements for eligible collateral,

  6  and clarifying terms.

  7         Section 15.  Section 280.16, Florida Statutes, is

  8  amended to read:

  9         280.16  Requirements of qualified public depositories;

10  confidentiality.--

11         (1)  In addition to any other requirements specified in

12  this chapter, qualified public depositories shall:

13         (a)  Beginning July 1, 1998, Take the following actions

14  for each public deposit account:

15         1.  Identify the account as a "Florida public deposit"

16  on the deposit account record with the name of the public

17  depositor or provide a unique code for the account for such

18  designation.

19         2.  When the form prescribed by the Treasurer for

20  acknowledgment of receipt of each public deposit account is

21  presented to the qualified public depository by the public

22  depositor opening an account, the qualified public depository

23  shall execute and return the completed form to the public

24  depositor.

25         3.  When the acknowledgment of receipt form is

26  presented to the qualified public depository by the public

27  depositor due to a change of account name, account number, or

28  qualified public depository name on an existing public deposit

29  account, the qualified public depository shall execute and

30  return the completed form to the public depositor within 45

31  calendar days after such presentation.

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  1         4.  When the acknowledgment of receipt form is

  2  presented to the qualified public depository by the public

  3  depositor on an account existing before July 1, 1998, the

  4  qualified public depository shall execute and return the

  5  completed form to the public depositor within 45 calendar days

  6  after such presentation.

  7         (b)  Within 15 days after the end of each calendar

  8  month, or when requested by the Treasurer, submit to the

  9  Treasurer a written report, under oath, indicating the average

10  daily balance of all public deposits held by it during the

11  reported month, required collateral, a detailed schedule of

12  all securities pledged as collateral, selected financial

13  information, and any other information that the Treasurer

14  determines necessary to administer this chapter.

15         (c)  Provide to each public depositor annually, not

16  later than October 30, the following information on all open

17  accounts identified as a "Florida public deposit" for that

18  public depositor as of September 30, to be used for

19  confirmation purposes: the federal employer identification

20  number of the qualified public depository, the name on the

21  deposit account record, the federal employer identification

22  number on the deposit account record, and the account number,

23  account type, and actual account balance on deposit. Any

24  discrepancy found in the confirmation process shall be

25  reconciled before November 30.

26         (d)  Submit to the Treasurer annually, not later than

27  November 30, a report of all public deposits held for the

28  credit of all public depositors at the close of business on

29  September 30. Such annual report shall consist of public

30  deposit information in a report format prescribed by the

31  Treasurer. The manner of required filing may be as a signed

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    Florida Senate - 2001                                  SB 1670
    9-750-01




  1  writing or electronic data transmission, at the discretion of

  2  the Treasurer.

  3         (e)  Submit to the Treasurer not later than the date

  4  required to be filed with the federal agency:

  5         1.  A copy of the quarterly Consolidated Reports of

  6  Condition and Income, and any amended reports, required by the

  7  Federal Deposit Insurance Act, 12 U.S.C. ss. 1811 et seq., if

  8  such depository is a bank; or

  9         2.  A copy of the Thrift Financial Report, and any

10  amended reports, required to be filed with the Office of

11  Thrift Supervision if such depository is a savings and loan

12  association.

13         (2)  The following forms must be made under oath:

14         (a)  The agreement of contingent liability.

15         (b)  Collateral control agreements and letter of credit

16  agreements The public depository pledge agreement.

17         (3)  Any information contained in a report of a

18  qualified public depository required under this chapter or any

19  rule adopted under this chapter, together with any information

20  required of a financial institution that is not a qualified

21  public depository, shall, if made confidential by any law of

22  the United States, or of this state, or of any other state or

23  territory of the United States, be considered confidential and

24  exempt from the provisions of s. 119.07(1) and not subject to

25  dissemination to anyone other than the Treasurer or the

26  Qualified Public Depository Oversight Board under the

27  provisions of this chapter; however, it is the responsibility

28  of each qualified public depository and each financial

29  institution from which information is required to inform the

30  Treasurer of information that is confidential and the law

31  providing for the confidentiality of that information, and the

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    Florida Senate - 2001                                  SB 1670
    9-750-01




  1  Treasurer does not have a duty to inquire into whether

  2  information is confidential.

  3         Section 16.  This act shall take effect upon becoming a

  4  law.

  5

  6            *****************************************

  7                          SENATE SUMMARY

  8    Revises the Florida Security for Public Deposits Act,
      which is set out in ch. 280, F.S. Allows letters of
  9    credit to be security for public deposits, under
      specified conditions, and allows cash to serve as
10    security for public deposits. Creates the Qualified
      Public Depository Oversight Board. Provides for
11    rulemaking by the Treasurer. (See bill for details.)

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