§ 122A-11. Trust funds. - North Carolina Statutes

§ 122A‑11.  Trust funds.

Notwithstanding any otherprovisions of law to the contrary, all moneys received pursuant to theauthority of this Chapter shall be deemed to be trust funds to be held andapplied solely as provided in this Chapter. The resolution authorizing anyobligations or the trust agreement securing the same may provide that any ofsuch moneys may be temporarily invested pending the disbursement thereof andshall provide that any officer with whom, or any bank or trust company withwhich, such moneys shall be deposited shall act as trustee of such moneys andshall hold and apply the same for the purposes hereof, subject to suchregulations as this Chapter and such resolution or trust agreement may provide.

Any moneys received pursuantto the authority of this Chapter and any other moneys available to the Agencyfor investment may be invested:

(1)        As provided in G.S.159‑30, except that for purposes of G.S. 159‑30(b) the Agency maydeposit moneys at interest in banks or trust companies outside as well as inthis State, as long as any moneys at deposit outside this State arecollateralized to the same extent and manner as if at deposit in this State;

(2)        In evidences ofownership of, or fractional undivided interests in, future interest and principalpayments on either direct obligations of the United States government orobligations the principal of and the interest on which are guaranteed by theUnited States government, which obligations are held by a bank or trust companyorganized and existing under the laws of the United States of America or anystate in the capacity of custodian;

(3)        In obligations whichare collateralized by mortgage pass‑through securities guaranteed by theGovernment National Mortgage Association, the Federal Home Loan MortgageCorporation, or Fannie Mae;

(4)        In a trustcertificate or similar instrument evidencing an equity investment in a trust orother similar arrangement which is formed for the purpose of issuingobligations which are collateralized by mortgage pass‑through orparticipation certificates guaranteed by the Government National MortgageAssociation, the Federal Home Loan Mortgage Corporation or Fannie Mae; and

(5)        In repurchaseagreements with respect to (i) direct obligations of the United Statesgovernment, (ii) obligations the principal of and the interest on which areguaranteed by the United States government, or (iii) obligations described inG.S. 159‑30(c)(2), (3), (6), or (7), if all of the following conditionsare met:

a.         The repurchaseagreement is entered into with an institution whose ability to pay itsunsecured long‑term obligations (including, if the institution is aninsurance company, its claims paying ability) is rated in one of the twohighest ratings categories by a nationally recognized securities rating agency.If the term of the repurchase agreement is for a period of one year or less,however, the repurchase agreement may be entered into with an institution thatdoes not have such a long‑term rating if its ability to pay its unsecuredshort‑term obligations is rated in one of the two highest ratingscategories by a nationally recognized securities rating agency. If theinstitution with which the agreement is to be entered does not meet the ratingsrequirement of this subparagraph, the repurchase agreement may nevertheless beentered into with the institution if the obligations of the institution underthe repurchase agreement are fully guaranteed by another institution that doesmeet the ratings requirement of this subparagraph.

b.         The repurchaseagreement provides that it shall be terminated, without penalty, if theinstitution with which the repurchase agreement is entered or by whom theinstitution's obligations are guaranteed fails to maintain (i) in the eventthat the repurchase agreement was entered into in reliance upon the rating ofthe institution's long‑term obligations, a rating of its long‑termobligations in one of the three highest ratings categories by at least onenationally recognized securities rating agency, or (ii) in the event that therepurchase agreement was entered into in reliance upon the rating of theinstitution's short‑term obligations, a rating of its short‑termobligations in one of the two highest ratings categories by at least onenationally recognized securities rating agency. The repurchase agreement doesnot have to be terminated, however, if a new guarantor meeting the ratingrequirement set forth in subparagraph a. as the requirement necessary for theAgency to enter the repurchase agreement agrees to fully guarantee theobligations of the institution under the repurchase agreement.

c.         The obligations thatare subject to the repurchase agreement are delivered (in physical or in bookentry form) to the Agency, or any financial institution serving either as trusteefor obligations issued by the Agency or as fiscal agent for the Agency or theState Treasurer or are supported by a safekeeping receipt issued by adepository satisfactory to the Agency. The repurchase agreement must providethat the value of the underlying obligations shall be maintained at a currentmarket value, calculated at least daily, of not less than one hundred percent(100%) of the repurchase price. The financial institution serving either astrustee or as fiscal agent for the Agency holding the obligations subject tothe repurchase agreement hereunder or the depository issuing the safekeepingreceipt shall not be the provider of the repurchase agreement.

d.         A valid andperfected first security interest in the obligations which are the subject ofthe repurchase agreement has been granted to the Agency or its assignee or bookentry procedures, conforming, to the extent practicable, with federalregulations and satisfactory to the agency have been established for thebenefit of the Agency or its assignee.

e.         The securities arefree and clear of any adverse third‑party claims.

f.          The repurchaseagreement is in a form satisfactory to the Agency. (1969, c. 1235, s. 11; 1973,c. 1296, s. 51; 1985, c. 479, s. 149(b); 1985 (Reg. Sess., 1986), c. 1014, s.185; 1997‑13, s. 2; 2001‑181, s. 1.)