REDLINED RULE

TC17 Deposit of Securities [Section 11-109-104(1)(a), C.R.S.]

A. Purpose.

The purpose of this Rule is to protect the Division of Banking against any expense it may incur in liquidating a Non-depository trust company when the assets of such trust company available to the Division of Banking for this purpose are insufficient.

B. Definitions:

For the purpose of this Rule:

1. “Non-depository trust company” shall mean a Colorado trust company that is not authorized to accept or hold savings deposits, time deposits or certificates of deposit pursuant to Section 11-109-201(1)(d), C.R.S., of the Colorado Banking Code.
2. “Eligible Securities” shall mean any U.S. Government or U.S. Government agency security that is unconditionally guaranteed by the U.S. Government. This includes a deposit that is insured or otherwise unconditionally guaranteed by the FDIC.
3. “Custodian” shall mean any commercial bank, trust company, depository trust company, or other entity approved by the Division of Banking, other than the trust company, for which the eligible securities are being held, approved by the State Bank Commissioner to hold in custody eligible securities. “Pledged Securities” shall mean Eligible Securities pledged to the Division of Banking for the purposes of Banking Board Rule TC17.
4. “Custodian” shall mean any commercial bank, trust company, depository trust company, other than the Non-depository trust company, approved by the Division of Banking to hold in custody pledged securities.

C. Approval of Custodian

1. Any entity meeting the definition of Custodian in TC17(B)(4) must agree, in writing, on a form provided by the Division of Banking, to comply with the following: A. Banking Board Rule TC17 in its entirety; and, B. Each Non-depository trust company and Custodian shall agree to and provide a written deposit or pledge agreement, or other agreement prescribed by the Division of Banking, for the safekeeping of Pledged Securities. The agreement must include the following: i. The Custodian shall make available to the Division of Banking the Pledged Securities and any books, records, and papers pertaining thereto for the administration of Banking Board Rule TC17, and; 1. A non-depository trust company shall deposit with one or more custodians eligible securities having a market value of not less than $250,000. Eligible securities, even if commingled with other assets of the trust company, shall be deemed by operation of law to be held in trust for the benefit of the Division of Banking in the event of the involuntary liquidation of the trust company. Upon deposit, the trust company shall notify the Division of Banking in writing of the name, address, and telephone number of each custodian and the identity and value of each of the eligible securities deposited with the custodian(s). 2. The Custodial Agreement between a non-depository trust company and a custodian holding the eligible securities shall include the following: “Upon receiving an Order issued by the Colorado State Banking Board that it is taking possession of the Non-depository trust company and seizing the Pledged Securities hereunder, the Custodian shall immediately surrender title and possession of such Pledged Securities to the State Bank Commissioner. The custodian(s) shall not be liable for any such relinquishment of the eligible securities undertaken in good faith and upon notice that appears valid on its face.” 3. A non-depository trust company shall include with each quarterly Consolidated Report of Condition and Income filed with the Division of Banking a list of the eligible securities on deposit with its custodian(s), together with the market value of the eligible securities as of the end of such quarter. 4. A non-depository trust company may, from time to time, substitute other eligible securities for eligible securities on deposit with its custodian(s) provided that: a. The market value of the substitute eligible securities will, when added to the value of the remaining eligible securities, equal or exceed the amount of the required deposit; b. The Division of Banking is given not less than seven (7) days prior written notice identifying the eligible securities and the market value of the eligible securities to be withdrawn from the custodian(s), and listing the eligible securities and the market value of the eligible securities to be substituted therefore; and c. A copy of the notice sent to the Division of Banking is sent to the custodian(s).

D. Priority of Division of Banking.

ii. In the event of the involuntary liquidation of a non-depository trust company, as provided in Sections 11-109-702 and 11-109-704, C.R.S., the custodian(s) shall immediately surrender the eligible securities to the Banking Board; and the Division of Banking shall have a first and prior claim against the Pledged Securities to satisfy the obligations incurred by the Division of Banking in carrying out its duties and responsibilities under Sections 11-109-702 and 11-109-704, C.R.S. iii. The Banking Board's safekeeping procedures for the handling and documentation of Pledged Securities: a. Pledged Securities shall be held in a segregated account and pledged to the Colorado Division of Banking. b. Each Non-depository trust company and Custodian shall utilize the Division of Banking’s Pledged Securities Form for the pledging, releasing, and/or substitution of Eligible Securities. c. Any and all pledges, releases and/or substitutions must be approved, in writing, using the Division of Banking’s Pledged Securities Form, by an authorized Division of Banking employee as provided in an authorized signer list. d. The Custodian will verify both the Non-depository trust company and Division of Banking’s signatures on the Pledged Securities Form to the respective authorized signer lists. If an authorized signer does not match, the Custodian will notify both the Non-depository trust company and Division of Banking and will not process the request until proper authorization is received. e. For Pledged Securities that are securities: i. The Custodian will provide an electronic receipt (or access to a report portal) that includes but not limited to: Custodian name, Non-depository trust company name, pledgee name, CUSIP, description, maturity date, and market value must be provided to the Division of Banking after each pledge and release. f. For Pledged Securities that are deposit accounts: i. The Custodian must be an approved Eligible Public Depository under the Public Deposit Protection Act, Title 11, Article 10.5 of the Colorado Revised Statutes; ii. The account titling shall include "for the benefit of the Colorado Division of Banking" and withdrawals shall be restricted; and, iii. The Custodian must provide a copy of the deposit account signature card, and system confirmation of the account restriction and public funds coding. g. The Custodian shall provide a monthly report to the Division of Banking containing all Pledged Securities.

1. An approved Custodian that fails to or no longer meets the requirements set forth in Banking Board Rule TC17 or Custodian Agreement may be removed as an approved Custodian by the Division of Banking with seven (7) calendar days’ written notice to the Custodian, with a copy to applicable Non-depository trust companies.
2. An approved Custodian may terminate its approved status with the prior, written approval of the Division of Banking. The Custodian must provide the Division of Banking and applicable Non-depository trust companies with thirty (30) calendar days’ notice of its intent to terminate its approved status. The Division of Banking’s approval will be contingent upon the Custodian having met its obligations under Banking Board Rule TC17 and the Custodian Agreement, including the transfer of all Pledged Securities to another approved Custodian.

D. Deposit/Pledge Amount Requirement

A Non-depository trust company shall deposit with one or more Custodians, Eligible Securities having a market value, at all times, of not less than $250,000, or other amount as specified by the Colorado State Banking Board. The Non-depository trust company is responsible for monitoring market values at least monthly and maintaining compliance with this Rule by depositing additional Eligible Securities if and when necessary.

E. Substitution of Pledged Securities

A Non-depository trust company may, from time to time, substitute other Eligible Securities for Pledged Securities on deposit with its Custodian(s) provided that:

1. The market value of the substitute Eligible Securities will, and if added to the market value of the remaining Eligible Securities, equal or exceed the amount of the required deposit.
2. The Non-depository trust company is responsible for reviewing market values and maintaining compliance with Banking Board Rule TC17(D).

F. Report of Pledged Securities

A Non-depository trust company shall include with each quarterly Consolidated Report of Condition and Income filed with the Division of Banking the list of Pledged Securities held by or on deposit with its Custodian(s) including the following as of applicable quarter-end:

1. CUSIP or Account Number
2. Description
3. Maturity Date (if applicable)
4. Book Value
5. Market Value
6. Custodian Name and Address
7. Grand Total of Book Value and Market Value