Fla. Stat. § 280.041 — Florida Code / Title XIX / Chapter 280 / Section 280.041
280.041 Collateral arrangements; agreements, provisions, and triggering events.
Status: in_force

(1) Eligible collateral listed in s. 280.13 may be pledged, deposited, or issued using the following collateral arrangements as approved by the Chief Financial Officer for a qualified public depository or operating subsidiary, if one is used, to meet required collateral: (a) Regular custody arrangement for collateral pledged to the Chief Financial Officer pursuant to subsection (2). (b) Federal Reserve Bank custody arrangement for collateral pledged to the Chief Financial Officer pursuant to subsection (3). (c) Chief Financial Officer’s custody arrangement for collateral deposited in the Chief Financial Officer’s name pursuant to subsection (4). (d) Federal Home Loan Bank letter of credit arrangement for collateral issued with the Chief Financial Officer as beneficiary pursuant to subsection (5). (e) Cash arrangement for collateral held by the Chief Financial Officer or a custodian.

(2) With the approval of the Chief Financial Officer, a qualified public depository or operating subsidiary, as pledgor, may deposit eligible collateral with a custodian. A qualified public depository shall not act as its own custodian. Except in the case of using a Federal Reserve Bank as custodian, the following are necessary for the Chief Financial Officer’s approval: (a) A completed collateral agreement in a form prescribed by the Chief Financial Officer in which the pledgor agrees to the following provisions: 1. The pledgor shall own the pledged collateral and acknowledge that the Chief Financial Officer has a perfected security interest. The pledged collateral shall be eligible collateral and shall be at least equal to the amount of required collateral. 2. The pledgor shall grant to the Chief Financial Officer an interest in pledged collateral for the purposes of this section. The pledgor shall not enter into or execute any other agreement related to the pledged collateral that would create an interest in or lien on that collateral in any manner in favor of any third party without the written consent of the Chief Financial Officer. 3. The pledgor shall not grant the custodian any lien that attaches to the collateral in favor of the custodian that is superior or equal to the security interest of the Chief Financial Officer. 4. The pledgor shall agree that the Chief Financial Officer may, without notice to or consent by the pledgor, require the custodian to comply with and perform any and all requests and orders directly from the Chief Financial Officer. These include, but are not limited to, liquidating all collateral and submitting the proceeds directly to the Chief Financial Officer in the name of the Chief Financial Officer only or transferring all collateral into an account designated solely by the Chief Financial Officer. 5. The pledgor shall acknowledge that the Chief Financial Officer may, without notice to or consent by the pledgor, require the custodian to hold principal payments and income for the benefit of the Chief Financial Officer. 6. The pledgor shall initiate collateral transactions on forms prescribed by the Chief Financial Officer in the following manner: a. A deposit transaction of eligible collateral may be made without prior approval from the Chief Financial Officer provided: security types that have restrictions have been approved in advance of the transaction by the Chief Financial Officer and simultaneous notification is given to the Chief Financial Officer; and the custodian has not received notice from the Chief Financial Officer prohibiting deposits without prior approval. b. A substitution transaction of eligible collateral may be made without prior approval from the Chief Financial Officer provided: security types that have restrictions have been approved in advance of the transaction by the Chief Financial Officer; the market value of the securities to be substituted is at least equal to the amount withdrawn; simultaneous notification is given to the Chief Financial Officer; and the custodian has not received notice from the Chief Financial Officer prohibiting substitution. c. A transfer of collateral between accounts at a custodian requires the Chief Financial Officer’s prior approval. The collateral shall be released subject to redeposit in the new account with a pledge to the Chief Financial Officer intact. d. A transfer of collateral from a custodian to another custodian requires the Chief Financial Officer’s prior approval and a valid collateral agreement with the new custodian. The collateral shall be released subject to redeposit at the new custodian with a pledge to the Chief Financial Officer intact. e. A withdrawal transaction requires the Chief Financial Officer’s prior approval. The market value of eligible collateral remaining after the withdrawal shall be at least equal to the amount of required collateral. A withdrawal transaction shall be executed for any release of collateral including maturity or call proceeds. f. Written notice shall be sent to the Chief Financial Officer to remove from the inventory of pledged collateral a pay-down security that has paid out with zero principal remaining. 7. If pledged collateral includes definitive (physical) securities in registered form which are in the name of the pledgor or a nominee, the pledgor shall deliver the following documents when requested by the Chief Financial Officer: a. A separate certified power of attorney in a form prescribed by the Chief Financial Officer for each issue of securities. b. Separate bond assignment forms as required by the bond agent or trustee. c. Certified copies of resolutions adopted by the pledgor’s governing body authorizing execution of these documents. 8. The pledgor shall be responsible for all costs necessary to the functioning of the collateral agreement or associated with confirmation of pledged collateral to the Chief Financial Officer and acknowledges that these costs shall not be a charge against the Chief Financial Officer or his or her interests in the pledged collateral. 9. The pledgor, if notified by the Chief Financial Officer, shall not be allowed to use a custodian if that custodian fails to complete the collateral agreement, releases pledged collateral without the Chief Financial Officer’s approval, fails to properly complete confirmations of pledged collateral, fails to honor a request for examination of definitive pledged collateral and records of book-entry securities, or fails to provide requested documents on definitive securities. The period for disallowing the use of a custodian shall be 1 year. 10. The pledgor shall be subject to the jurisdiction of the courts of the State of Florida, or of courts of the United States located within the State of Florida, for the purpose of any litigation arising out of the act. 11. The pledgor is responsible and liable to the Chief Financial Officer for any action of agents the pledgor uses to execute collateral transactions or submit reports to the Chief Financial Officer. 12. The pledgor shall agree that any information, forms, or reports electronically transmitted to the Chief Financial Officer shall have the same enforceability as a signed writing. 13. The pledgor shall submit proof that authorized individuals executed the collateral agreement on behalf of the pledgor. 14. The pledgor shall agree by resolution of the board of directors that collateral agreements entered into for purposes of this section have been formally accepted and constitute official records of the pledgor. 15. The pledgor shall be bound by any other provisions found necessary for a perfected security interest in collateral under the Uniform Commercial Code. (b) A completed collateral agreement in a form prescribed by the Chief Financial Officer in which the custodian agrees to the following provisions: 1. The custodian shall have no responsibility to ascertain whether the pledged securities are at least equal to the amount of required collateral nor whether the pledged securities are eligible collateral. 2. The custodian shall hold pledged collateral in a custody account for the Chief Financial Officer for purposes of this section. The custodian shall not enter into or execute any other agreement related to the collateral that would create an interest in or lien on that collateral in any manner in favor of any third party without the written consent of the Chief Financial Officer. 3. The custodian shall agree that any lien that attaches to the collateral in favor of the custodian shall not be superior or equal to the security interest of the Chief Financial Officer. 4. The custodian shall, without notice to or consent by the pledgor, comply with and perform any and all requests and orders directly from the Chief Financial Officer. These include, but are not limited to, liquidating all collateral and submitting the proceeds directly to the Chief Financial Officer in the name of the Chief Financial Officer only or transferring all collateral into an account designated solely by the Chief Financial Officer. 5. The custodian shall consider principal payments on pay-down securities and income paid on pledged collateral as the property of the pledgor and shall pay thereto provided the custodian has not received written notice from the Chief Financial Officer to hold such principal payments and income for the benefit of the Chief Financial Officer. 6. The custodian shall process collateral transactions on forms prescribed by the Chief Financial Officer in the following manner: a. A deposit transaction of eligible collateral may be made without prior approval from the Chief Financial Officer unless the custodian has received notice from the Chief Financial Officer requiring the Chief Financial Officer’s prior approval. b. A substitution transaction of eligible collateral may be made without prior approval from the Chief Financial Officer provided the pledgor certifies the market value of the securities to be substituted is at least equal to the market value amount of the securities to be withdrawn and the custodian has not received notice from the Chief Financial Officer prohibiting substitution. c. A transfer of collateral between accounts at a custodian requires the Chief Financial Officer’s prior approval. The collateral shall be released subject to redeposit in the new account with a pledge to the Chief Financial Officer intact. Confirmation from the custodian to the Chief Financial Officer must be received within 5 business days of the redeposit. d. A transfer of collateral from a custodian to another custodian requires the Chief Financial Officer’s prior approval. The collateral shall be released subject to redeposit at the new custodian with a pledge to the Chief Financial Officer intact. Confirmation from the new custodian to the Chief Financial Officer must be received within 5 business days of the redeposit. e. A withdrawal transaction requires the Chief Financial Officer’s prior approval. A withdrawal transaction shall be executed for the release of any pledged collateral including maturity or call proceeds. 7. If pledged collateral includes definitive (physical) securities in registered form, which are in the name of the custodian or a nominee, the custodian shall deliver the following documents when requested by the Chief Financial Officer: a. A separate certified power of attorney in a form prescribed by the Chief Financial Officer for each issue of securities. b. Separate bond assignment forms as required by the bond agent or trustee. c. Certified copies of resolutions adopted by the custodian’s governing body authorizing execution of these documents. 8. The custodian shall acknowledge that the pledgor is responsible for all costs necessary to the functioning of the collateral agreement or associated with confirmation of securities pledged to the Chief Financial Officer and that these costs shall not be a charge against the Chief Financial Officer or his or her interests in the pledged collateral. 9. The custodian shall agree to provide confirmation of pledged collateral upon request from the Chief Financial Officer. This confirmation shall be provided within 15 working days after the request, in a format prescribed by the Chief Financial Officer, and shall require no identification other than the pledgor name and location, unless the special identification is provided in the collateral agreement. 10. The custodian shall be subject to the jurisdiction of the courts of the State of Florida, or of courts of the United States located within the State of Florida, for the purpose of any litigation arising out of the act. 11. The custodian shall be responsible and liable to the Chief Financial Officer for any action of agents the custodian uses to hold and service collateral pledged to the Chief Financial Officer. 12. The custodian shall agree that any information, forms, or reports electronically transmitted to the Chief Financial Officer shall have the same enforceability as a signed writing. 13. The Chief Financial Officer shall have the right to examine definitive pledged collateral and records of book-entry securities during the regular business hours of the custodian without cost to the Chief Financial Officer. 14. The responsibilities of the custodian for the safekeeping of the pledged collateral shall be limited to the diligence and care usually exercised by a banking or trust institution toward its own property. 15. If there is any change in the Uniform Commercial Code, as adopted by law in this state, which affects the requirements for a perfected security interest in collateral, the Chief Financial Officer shall notify the custodian of such change. The custodian shall have a period of 180 calendar days after such notice to withdraw as custodian if the custodian cannot provide the required custodial services.

(3) With the approval of the Chief Financial Officer, a pledgor may deposit eligible collateral pursuant to an agreement with a Federal Reserve Bank. The Federal Reserve Bank agreement may require terms not consistent with subsection (2) but may not subject the Chief Financial Officer to any costs or indemnification requirements.

(4) The Chief Financial Officer may require deposit or transfer of collateral into a custodial account established in the Chief Financial Officer’s name at a designated custodian. This requirement for Chief Financial Officer’s custody shall have the following characteristics: (a) One or more triggering events must have occurred. (b) The custodian used must be a Chief Financial Officer’s approved custodian that must: 1. Meet the definition of custodian. 2. Not be an affiliate of the qualified public depository. 3. Be bound under a distinct Chief Financial Officer’s custodial contract. (c) All deposit transactions require the approval of the Chief Financial Officer. (d) All collateral must be in book-entry form. (e) The qualified public depository shall be responsible for all costs necessary to the functioning of the contract or associated with the confirmation of securities in the name of the Chief Financial Officer and acknowledges that these costs shall not be a charge against the Chief Financial Officer and may be deducted from the collateral or income earned if unpaid.

(5) With the approval of the Chief Financial Officer, a qualified public depository may use Federal Home Loan Bank letters of credit to meet collateral requirements. A completed agreement that includes the following provisions is necessary for the Chief Financial Officer’s approval: (a) The letter of credit shall meet the definition of eligible collateral. (b) The qualified public depository shall agree that the Chief Financial Officer, as beneficiary, may, without notice to or consent by the qualified public depository, demand payment under the letter of credit if any of the triggering events listed in this section occur. (c) The qualified public depository shall agree that funds received by the Chief Financial Officer due to the occurrence of one or more triggering events may be deposited in the Treasury Cash Deposit Trust Fund for purposes of eligible collateral. (d) The qualified public depository shall arrange for the issue of letters of credit which meet the requirements of s. 280.13 and delivery to the Chief Financial Officer. All transactions involving letters of credit require the Chief Financial Officer’s approval. (e) The qualified public depository shall be responsible for all costs necessary in the use or confirmation of letters of credit issued on behalf of the Chief Financial Officer and acknowledges that these costs shall not be a charge against the Chief Financial Officer. (f) The qualified public depository shall be subject to the jurisdiction of the courts of this state, or of courts of the United States which are located within this state, for the purpose of any litigation arising out of the act. (g) The qualified public depository shall agree that any information, form, or report electronically transmitted to the Chief Financial Officer shall have the same enforceability as a signed writing. (h) The qualified public depository shall submit proof that authorized individuals executed the letters of credit agreement on its behalf. (i) The qualified public depository shall agree by resolution of the board of directors that the letters of credit agreements entered into for purposes of this section have been formally accepted and constitute official records of the qualified public depository.

(6) The Chief Financial Officer may demand payment under a letter of credit or direct a custodian to deposit or transfer collateral and proceeds of securities not previously credited upon the occurrence of one or more triggering events provided that, to the extent not incompatible with the protection of public deposits, as determined in the Chief Financial Officer’s sole and absolute discretion, the Chief Financial Officer shall provide a custodian and the qualified public depository with 48 hours’ advance notice before directing such deposit or transfer. These events include: (a) The Chief Financial Officer determines that an immediate danger to the public health, safety, or welfare exists. (b) The qualified public depository fails to have adequate procedures and practices for the accurate identification, classification, reporting, and collateralization of public deposits. (c) The custodian fails to provide or allow inspection and verification of documents, reports, records, or other information dealing with the pledged collateral or financial information. (d) The qualified public depository or its operating subsidiary fails to provide or allow inspection and verification of documents, reports, records, or other information dealing with Florida public deposits, pledged collateral, or financial information. (e) The custodian fails to hold income and principal payments made on securities held as collateral or fails to deposit or transfer such payments pursuant to the Chief Financial Officer’s instructions. (f) The qualified public depository defaults or becomes insolvent. (g) The qualified public depository fails to pay an assessment. (h) The qualified public depository fails to pay an administrative penalty. (i) The qualified public depository fails to meet financial condition standards. (j) The qualified public depository charges a withdrawal penalty to public depositors when the qualified public depository is suspended, disqualified, or withdrawn from the public deposits program. (k) The qualified public depository does not provide, as required, the public depositor with annual confirmation information on all open Florida public deposit accounts. (l) The qualified public depository pledges, deposits, or has issued insufficient or unacceptable collateral to meet required collateral within the required time. (m) Collateral, other than a proper substitution, is released without the prior approval of the Chief Financial Officer. (n) The qualified public depository, custodian, operating subsidiary, or agent violates any provision of the act and the Chief Financial Officer determines that such violation may be remedied by a move of collateral. (o) The qualified public depository, custodian, operating subsidiary, or agent fails to timely cooperate in resolving problems by the date established in written communication from the Chief Financial Officer. (p) The custodian fails to provide sufficient confirmation information. (q) The Federal Home Loan Bank or the qualified public depository gives notification that a letter of credit will not be extended or renewed and other eligible collateral equal to required collateral has not been deposited within 30 days after the notice or 30 days before expiration of the letter of credit. (r) The qualified public depository, if involved in a merger, acquisition, consolidation, or other organizational change, fails to notify the Chief Financial Officer or ensure that required collateral is properly maintained by the depository holding the Florida public deposits. (s) Events that would bring about an administrative or legal action by the Chief Financial Officer.

(7) The Chief Financial Officer shall adopt rules to identify forms and establish procedures for collateral agreements and transactions, furnish confirmation requirements, establish procedures for using an operating subsidiary and agents, and clarify terms.

History: s. 3, ch. 2000-352; s. 3, ch. 2001-230; s. 288, ch. 2003-261.