31A-2-206 - Receipt and handling of deposits. - Utah Statutes

31A-2-206. Receipt and handling of deposits.
(1) As used in this chapter:
(a) "Custodian institution" means a financial institution in this state as defined underSection 7-1-103 that:
(i) has authority under Title 7, Chapter 5, Trust Business, to engage in a trust business;and
(ii) is approved by the commissioner to have custody of deposited securities, whetherphysically, through the Federal Reserve book-entry system, or through a clearing corporation asdefined under Subsection 70A-8-101(1).
(b) "Federal Reserve book-entry system" means the computerized system sponsored bythe United States Department of the Treasury and certain other agencies and instrumentalities ofthe United States for holding and transferring securities of the United States government andother agencies and instrumentalities.
(2) Subject to the commissioner's approval and to the requirements of this section, thestate treasurer shall accept, and a custodian institution qualified under Subsection (1)(a) mayaccept:
(a) deposits required or permitted under this title or rules adopted under this title;
(b) deposits of domestic insurers or of alien insurers domiciled in this state if required bythe laws of other states as a prerequisite to authority to do an insurance business in other states;and
(c) deposits resulting from application of any retaliatory provisions of this title.
(3) Deposits authorized under Subsection (2) shall be of securities described inSubsection (7).
(4) Unless otherwise provided by the law requiring or permitting the deposit, eachdeposit shall be held in trust:
(a) first, for administrative costs under Subsection 31A-27a-701(2)(a);
(b) second, for the claimants under Subsection 31A-27a-701(2)(c);
(c) third, for the claimants under Subsection 31A-27a-701(2)(d); and
(d) fourth, for all other creditors in the order of priority established under Section31A-27a-701.
(5) A claim may be made against the deposit of an alien insurer only if it arises out of atransaction in the United States.
(6) Deposits may be made by:
(a) delivering physical custody and control of the deposited security to the state treasureror a custodian institution, accompanied by a statement signed by the depositor indicating that thedeposit shall be held in trust under the terms of this section and subject to the commissioner'sexclusive direction until control is released by the commissioner; or
(b) delivering to the commissioner, on a form adopted by rule, a signed certificate of acustodian institution, describing securities qualifying for deposit under Subsection (7) that are ondeposit with a clearing corporation or held in the Federal Reserve book-entry system in the nameof the custodian institution, in trust for the purposes stated under this section, and that thesesecurities are subject to the exclusive direction of the commissioner and may not be withdrawn ortransferred by any person, including the insurer owning the securities, without thecommissioner's written approval.
(7) (a) Deposits may consist of any securities authorized in Subsection (7)(b) for which

there is a ready market if they:
(i) are expressly approved by the commissioner;
(ii) are subject to disposition by the state treasurer or custodian institution only with theconcurrence of the commissioner; and
(iii) are not available to any other person except as expressly provided by law.
(b) The authorized securities are:
(i) deposits or certificates of deposit insured by the Federal Deposit InsuranceCorporation;
(ii) bonds or other evidences of indebtedness that are guaranteed as to principal andinterest by the United States;
(iii) tax anticipation bonds or notes, general obligation bonds, or revenue bonds of thisstate or of any county, incorporated city or town, school district, or other political subdivision ofthis state, if the bonds or notes are rated AAA by Standard and Poor's or an equivalent nationallyrecognized rating agency;
(iv) bonds or other evidences of indebtedness issued or guaranteed by an agency orinstrumentality of the United States; and
(v) any other security approved by the commissioner that the commissioner considers anequivalent grade investment to those enumerated under Subsections (7)(b)(i) through (iv) basedon tests of the safety of principal and liquidity.
(8) Securities held on deposit shall be valued under Section 31A-17-401 as thoseinvestments are valued for life insurers, or at market, whichever is lower. The securities shall berevalued whenever the commissioner requests to ensure continued compliance with therequirements of this title.
(9) (a) The state treasurer or custodian institution shall:
(i) deliver to the depositor a receipt for all securities deposited or held;
(ii) issue a duplicate copy of the receipt to the commissioner; and
(iii) permit the depositor to inspect its physically held securities at any reasonable time.
(b) On application of the depositor or when required by the law of any state or country orby the order of any court of competent jurisdiction, the state treasurer or custodian institutionshall certify that the deposit was made and what is on deposit.
(c) Depositors, the state treasurer, any custodian institution, and the commissioner shalleach keep a permanent record of securities deposited or held under this section and of anysubstitutions or withdrawals. They shall compare records at least annually.
(10) A transfer of a deposited security, whether voluntary or by operation of law, is validonly if approved in writing by the commissioner and countersigned by the state treasurer orcustodian institution.
(11) Neither a judgment creditor nor other person may levy upon any deposit held underthis section.
(12) A depositor that has complied with all provisions of this title intended to preserve itsfinancial solidity is, while solvent and complying with the laws of this state, entitled to:
(a) receive interest and cash dividends accruing on the securities held for its account; and
(b) substitute for deposited securities other eligible securities, as expressly approved bythe commissioner.
(13) Within 45 days after the commissioner gives notice to a depositor that a deposit isnot an acceptable deposit under Subsection (7), the depositor shall substitute other eligible

securities expressly approved by the commissioner and allowed under Subsection (7).
(14) A depositor may voluntarily deposit or transfer control of eligible securities inexcess of requirements to absorb fluctuations in value and to facilitate substitution of securities.
(15) Upon the depositor's request and upon approval of the commissioner, any deposit orpart of a deposit shall be released to, or on order of, the depositor to the extent not needed tosatisfy requirements of this title. On the order of a court of competent jurisdiction, the deposit orappropriate part of the deposit shall be released to the person for whom it is held.
(16) Each depositor shall pay the cost of custody of securities by a custodian institutionor by the state treasurer.
(17) The commissioner shall adopt rules to implement this section.

Amended by Chapter 309, 2007 General Session