South Carolina General Assembly
117th Session, 2007-2008

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A231, R271, S642

STATUS INFORMATION

General Bill
Sponsors: Senators Thomas and Anderson
Document Path: l:\council\bills\bbm\9956htc07.doc
Companion/Similar bill(s): 3870

Introduced in the Senate on April 5, 2007
Introduced in the House on June 5, 2007
Last Amended on April 23, 2008
Passed by the General Assembly on May 7, 2008
Became law without Governor's signature, May 22, 2008

Summary: Uninsured funds on deposit

HISTORY OF LEGISLATIVE ACTIONS

     Date      Body   Action Description with journal page number
-------------------------------------------------------------------------------
    4/5/2007  Senate  Introduced and read first time SJ-4
    4/5/2007  Senate  Referred to Committee on Finance SJ-4
   5/30/2007  Senate  Committee report: Favorable Finance SJ-8
   5/31/2007  Senate  Read second time SJ-22
    6/5/2007  Senate  Read third time and sent to House SJ-36
    6/5/2007  House   Introduced and read first time HJ-79
    6/5/2007  House   Referred to Committee on Labor, Commerce and Industry 
                        HJ-80
   4/16/2008  House   Committee report: Favorable with amendment Labor, 
                        Commerce and Industry HJ-2
   4/17/2008  House   Amended HJ-55
   4/17/2008  House   Read second time HJ-59
   4/17/2008  House   Unanimous consent for third reading on next legislative 
                        day HJ-59
   4/18/2008  House   Read third time and returned to Senate with amendments 
                        HJ-2
   4/23/2008  Senate  House amendment amended SJ-150
   4/23/2008  Senate  Returned to House with amendments SJ-150
   4/24/2008          Scrivener's error corrected
   4/29/2008  House   Debate adjourned on Senate amendments until Tuesday, May 
                        6, 2008 HJ-45
    5/7/2008  House   Concurred in Senate amendment and enrolled HJ-16
   5/15/2008          Ratified R 271
   5/22/2008          Became law without Governor's signature
    6/2/2008          Copies available
    6/2/2008          Effective date See Act for Effective Date
    6/4/2008          Act No. 231

View the latest legislative information at the LPITS web site

VERSIONS OF THIS BILL

4/5/2007
5/30/2007
4/16/2008
4/17/2008
4/23/2008
4/24/2008


(Text matches printed bills. Document has been reformatted to meet World Wide Web specifications.)

(A231, R271, S642)

AN ACT TO AMEND SECTION 6-5-10, AS AMENDED, AND SECTION 6-5-15, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO AUTHORIZED INVESTMENTS BY POLITICAL SUBDIVISIONS AND THE COLLATERAL REQUIRED TO SECURE THE UNINSURED FUNDS ON DEPOSIT OF A LOCAL GOVERNMENT ENTITY, SO AS TO DEFINE A FINANCIAL INSTITUTION IN WHICH THESE FUNDS ARE DEPOSITED AS A QUALIFIED PUBLIC DEPOSITORY, TO ALLOW SUCH A DEPOSITORY TO SECURE THESE FUNDS USING THE DEDICATED METHOD OR, UNDER THE DIRECTION AND MONITORING OF THE STATE TREASURER, THE POOLING METHOD, TO PROVIDE THAT THE LOCAL GOVERNMENT ENTITY MAY REQUIRE SUCH A DEPOSITORY TO USE THE DEDICATED METHOD, AND TO PROVIDE FOR AND DEFINE TERMS RELATING TO THE TREATMENT OF DEFEASED OBLIGATIONS; AND TO AMEND SECTION 11-13-60, AS AMENDED, AND SECTION 11-14-110, RELATING TO THE COLLATERAL REQUIRED TO SECURE THE UNINSURED FUNDS ON DEPOSIT OF THE STATE AND THE DEFEASANCE OF OUTSTANDING OBLIGATIONS OF THE STATE AND POLITICAL SUBDIVISIONS, SO AS TO DEFINE A FINANCIAL INSTITUTION IN WHICH THESE FUNDS ARE DEPOSITED AS A QUALIFIED PUBLIC DEPOSITORY, TO ALLOW SUCH A DEPOSITORY TO SECURE THESE FUNDS USING THE DEDICATED METHOD OR, UNDER THE DIRECTION AND MONITORING OF THE STATE TREASURER, THE POOLING METHOD, TO PROVIDE THAT THE STATE TREASURER MAY REQUIRE SUCH A DEPOSITORY TO USE THE DEDICATED METHOD, TO PROVIDE THAT THE STATE TREASURER MAY ASSESS AND RETAIN A FEE AGAINST FUNDS INVESTED BY THE STATE TREASURER TO DEFRAY MANAGEMENT COSTS, AND TO PROVIDE FOR THOSE OBLIGATIONS WHICH MAY CONSTITUTE THE TRUST FUND FOR DEFEASED OBLIGATIONS.

Be it enacted by the General Assembly of the State of South Carolina:

Qualified public depository, local funds, collateral required

SECTION    1.    Section 6-5-15 of the 1976 Code, as added by Act 270 of 2004, is amended to read:

"Section 6-5-15.    (A)    As used in this section, 'local entity' means the governing body of a municipality, county, school district, other local government unit or political subdivision, or a county treasurer.

(B)    A qualified public depository, as defined in subsection (G) of this section, upon the deposit of funds by a local entity, must secure these deposits by deposit insurance, surety bonds, investment securities, or letters of credit to protect the local entity against loss in the event of insolvency or liquidation of the institution or for any other cause.

(C)    To the extent that these deposits exceed the amount of insurance coverage provided by the Federal Deposit Insurance Corporation, the qualified public depository at the time of deposit must:

(1)    furnish an indemnity bond in a responsible surety company authorized to do business in this State; or

(2)    pledge as collateral:

(a)    obligations of the United States;

(b)    obligations fully guaranteed both as to principal and interest by the United States;

(c)    general obligations of this State or any political subdivision of this State; or

(d)    obligations of the Federal National Mortgage Association, the Federal Home Loan Bank, Federal Farm Credit Bank, or the Federal Home Loan Mortgage Corporation; or

(3)    provide an irrevocable letter of credit issued by the Federal National Mortgage Association, the Federal Home Loan Bank, Federal Farm Credit Bank, or the Federal Home Loan Mortgage Corporation, in which the local entity is named as beneficiary and the letter of credit otherwise meets the criteria established and prescribed by the local entity.

(D)    The local entity must exercise prudence in accepting collateral securities or other forms of deposit security.

(E)(1)    A qualified public depository has the following options:

(a)    To secure all or a portion of uninsured funds under the Dedicated Method where all or a portion of the uninsured funds are secured separately. The qualified public depository shall maintain a record of all securities pledged, with the record being an official record of the qualified public depository and made available to examiners or representatives of all regulatory agencies. The local entity shall maintain a record of the securities pledged for monitoring purposes.

(b)    To secure all or the remainder of uninsured funds under the Pooling Method where a pool of collateral is established by the qualified public depository under the direction of the State Treasurer for the benefit of local entities. The depository shall obtain written approval from each entity before pooling an entity's collateral. The depository shall maintain a record of all securities pledged, with the record being an official record of the qualified public depository and made available to examiners or representatives of all regulatory agencies. The State Treasurer shall determine the requirements and operating procedures for this pool. The State Treasurer is responsible for monitoring and ensuring a depository's compliance and providing monthly reports to each local entity in the pool.

(2)    Notwithstanding the provisions of item (1) of this subsection, the local entity, when other federal or state law applies, may require a qualified public depository to secure all uninsured funds separately under the Dedicated Method.

(F)    A qualified public depository shall not accept or retain any funds that are required to be secured unless it has deposited eligible collateral equal to its required collateral with some proper depository pursuant to this chapter.

(G)    'Qualified public depository' means any national banking association, state banking association, federal savings and loan association, or federal savings bank located in this State and any bank, trust company, or savings institution organized under the law of this State that receives or holds funds that are secured pursuant to this chapter."

Qualified public depository, state funds, collateral required

SECTION    2.    Section 11-13-60 of the 1976 Code, as last amended by Act 211 of 2002, is further amended to read:

"Section 11-13-60.    (A)    A qualified public depository, as defined in subsection (E) of this section, upon the deposit of state funds by the State Treasurer, must secure these deposits by deposit insurance, surety bonds, investment securities, or letters of credit to protect the State against loss in the event of insolvency or liquidation of the institution or for any other cause. To the extent that these deposits exceed the amount of insurance coverage provided by the Federal Deposit Insurance Corporation, the qualified public depository, at the time of deposit, shall:

(1)    furnish an indemnity bond in a responsible surety company authorized to do business in this State; or

(2)    pledge as collateral:

(a)    obligations of the United States;

(b)    obligations fully guaranteed both as to principal and interest by the United States;

(c)    general obligations of this State or any political subdivision of this State; or

(d)    obligations of the Federal National Mortgage Association, the Federal Home Loan Bank, Federal Farm Credit Bank, or the Federal Home Loan Mortgage Corporation; or

(3)    provide an irrevocable letter of credit issued by the Federal National Mortgage Association, the Federal Home Loan Bank, Federal Farm Credit Bank, or the Federal Home Loan Mortgage Corporation, in which the State Treasurer is named as beneficiary and the letter of credit otherwise meets the criteria established and prescribed by the State Treasurer. The State Treasurer shall exercise prudence in accepting collateral securities or other forms of deposit security.

(B)(1)    A qualified public depository has the following options:

(a)    To secure all or a portion of uninsured state funds under the Dedicated Method where all or a portion of the uninsured state funds are secured separately. The qualified public depository shall maintain a record of all securities pledged, with the record being an official record of the qualified public depository and made available to examiners or representatives of all regulatory agencies. The State Treasurer shall maintain a record of the securities pledged for monitoring purposes.

(b)    To secure all or the remainder of uninsured state funds under the Pooling Method where a pool of collateral is established by the qualified public depository under the direction of the State Treasurer for the benefit of the State. The State Treasurer shall determine the requirements and operating procedures for this pool. The depository shall maintain a record of all securities pledged, with the record being an official record of the qualified public depository and made available to examiners or representatives of all regulatory agencies. The State Treasurer shall maintain a record of the securities pledged for monitoring purposes.

(2)    Notwithstanding the provisions of item (1) of this subsection, the State Treasurer, when other federal or state law applies, may require a qualified public depository to secure all uninsured state funds separately under the Dedicated Method.

(C)    A qualified public depository shall not accept or retain any state funds that are required to be secured unless it has deposited eligible collateral equal to its required collateral with some proper depository pursuant to this chapter.

(D)    The State Treasurer may assess a fee against the investment earnings of various state funds managed or invested by the State Treasurer to cover the operation and management costs associated with this section and Section 6-5-15(E)(1)(b). These fees may be retained and expended to provide these services and may not exceed the actual costs associated with providing the services.

(E)    'Qualified public depository' means any national banking association, state banking association, federal savings and loan association, or federal savings bank located in this State, and any bank, trust company, or savings institution organized under the law of this State that receives or holds state funds that are secured pursuant to this chapter."

Legal investments for local funds, defeasance of obligations

SECTION    3.    Section 6-5-10 of the 1976 Code, as last amended by Act 116 of 2007, is further amended by adding a new subsection at the end to read:

"(d)    For purposes of subsection (a), in the case of a defeased obligation, an obligation shall be treated as the obligation of the issuer of the obligation included in the qualifying defeasance escrow for the defeased obligation. A 'defeased obligation' means any obligation the payment of which is secured and payable solely from a qualifying defeasance escrow and the terms of which may not be amended or modified without the consent of each of the holders of the defeased obligation. A 'qualifying defeasance escrow' means a deposit of securities, including defeasance obligations, with a trustee or similar fiduciary under the terms of an agreement that requires the trustee or fiduciary to apply the proceeds of any interest payments or maturity of the defeasance obligation to the payment of the defeased obligation and when the trustee or fiduciary has received verification from a certified public accountant that the payments will be sufficient to pay the defeased obligation timely. A defeasance obligation must not be callable or subject to prepayment by the issuer and it must be a direct general obligation of the United States and its agencies, or an obligation the payment of principal and interest on which is fully and unconditionally guaranteed by the United States."

Defeasance of state and local obligations, trust fund requirements

SECTION    4.    Section 11-14-110 of the 1976 Code is amended to read:

"Section 11-14-110.    The State, acting through the State Budget and Control Board, all agencies and institutions and all counties, municipal corporations, authorities, special purpose districts and other political units may effect the defeasance of any outstanding bonds, notes, or other obligations by depositing in a special irrevocable trust fund, to be held by the State Treasurer or a bank or other financial institution approved by the State Treasurer, obligations provided for in Section 6-5-10(a)(1) and moneys which will provide the sums required to pay when due the principal of, redemption premium, if any, and interest on the bonds sought to be defeased. Upon the establishment and funding in full of such special trust fund, the bonds so defeased shall no longer be deemed outstanding for any purpose."

Time effective

SECTION    5.    Section 1 of this act takes effect January 1, 2009. The remaining provisions of this act take effect upon approval of this act by the Governor.

Ratified the 15th day of May, 2008.

Became law without the signature of the Governor -- 5/22/08.

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