SECTION 735:20-1-5. Pledging and Releasing Collateral Instruments

  These procedures shall be used when providing collateral instruments as security for public entity deposits. Permissible transactions under the rules are providing, releasing and substituting collateral instruments for collateral instruments or for collateral securities. When substituting collateral securities for collateral instruments, follow the procedures outlined in 735:20-1-6.

(1)   When providing collateral instruments:

(A)   The financial institution (or "pledgor bank") shall:

(i)   Complete original collateral instrument Pledge Form (OST Form 2001-6) in Appendix N of this Chapter, in the lines dealing with the description of the Instrument:

(I)   Instrument description

(II)   Issuer

(III)   Issue date

(IV)   Original face amount

(ii)   Attach the Certificate of Insurance or Bank Deposit Guaranty Bond (for surety bonds) or Letter of Credit (for federal agency/instrumentality letters of credit) to the Pledge Form. For a Letter of Credit (LOC) from the Federal Home Loan Bank of Topeka (FHLB), the FHLB will deliver the LOC directly to the public entity treasurer, and a copy of the LOC should be attached to the Pledge Form.

(iii)   Obtain the signature of the Duly Authorized Officers of the Pledgor Bank on the Collateral Instruments Pledge Form, and fill in the date of signing.

(iv)   Forward Pledge Form and attached instruments to the public entity treasurer.

(B)   The public entity treasurer shall:

(i)   Review the documents, and if approved, execute Pledge Form and attach a copy of the collateral instrument, and

(ii)   Retain original Pledge Form and collateral instrument. Forward one (1) copy of the Pledge Form to the pledgor bank.

(C)   The federal agency/instrumentality or insurance company issuing the collateral instrument shall provide the public entity treasurer and OST with a quarterly listing of other institutions covered by collateral instruments by the issuer or provider of that instrument.

(2)   Releasing collateral instruments. The pledgor bank will only be allowed to release collateral instruments when there are no longer any of the public entity's funds on deposit or when the amount of the remaining collateral instruments and the fair market value of the remaining collateral securities is equal to or greater than the required amounts established in 735:20-1-3. When releasing collateral instruments:

(A)   The pledgor bank shall complete the release portion on a copy of the original Pledge Form for the collateral instrument to be released and forward it to the public entity treasurer.

(B)   The public entity treasurer shall:

(i)   Review document, and if approved, execute the release portion of the Pledge Form by signing and dating.

(ii)   Return one (1) copy of the Pledge Form to the pledgor bank.

(3)   Substituting collateral instruments. A pledgor bank will only be allowed to substitute one collateral instrument for another collateral instrument or for collateral securities, when the amount of the substitute collateral instrument and the amount of the remaining collateral is equal to or greater than the required amounts established in 735:20-1-3. This process will require a release and new pledge/substitution.

(A)   The pledgor bank shall:

(i)   Complete the release part on a copy of the original Pledge Form for the collateral instrument or collateral securities to be released.

(ii)   Complete an original collateral instrument Pledge Form, (OST Form 2001-6) in Appendix N of this Chapter, for the collateral instrument being substituted, including the substitution portion listing the public entity treasurer's original pledge number, if assigned by the local public entity treasurer, for the collateral instrument or collateral securities being released.

(iii)   Attach the Certificate of Insurance or Bank Deposit Guaranty Bond (for surety bonds) or Letter of Credit (for federal agency/instrumentality letters of credit) to the Pledge Form. For a Letter of Credit (LOC) from the Federal Home Loan Bank of Topeka (FHLB), the FHLB will deliver the LOC directly to the public entity treasurer, and a copy of the LOC should be attached to the Pledge Form.

(iv)   Forward the copy of the original Pledge Form with the completed release(s), along with an original Pledge Form and the collateral instrument to be substituted, to the public entity treasurer.

(B)   The public entity treasurer shall:

(i)   Review the documents, and if approved, execute the release portion of the Pledge Form for the released collateral instrument or collateral securities and execute a new Pledge Form for the substituted collateral instrument.

(ii)   Return one (1) copy of the release form and one (1) copy of the new Pledge Form to the pledgor bank.

(iii)   For collateral securities held by a safekeeping bank other than the Federal Reserve Bank, return one (1) copy of the completed release form along with the custody receipt to the safekeeping bank.

(iv)   For collateral securities pledged through the Federal Reserve Bank, return the "Request to Release Pledged Securities" form to the Federal Reserve Bank.

(v)   Retain substituted collateral instrument and new Pledge Form.

(C)   The federal agency/instrumentality or insurance company issuing the collateral instrument shall provide the public entity treasurer and OST with a quarterly listing of other institutions covered by collateral instruments by the issuer or provider of that instrument.

(4)   The public entity treasurer, safekeeping bank and pledgor bank may send or receive pledge forms by mail or transmit by facsimile. Notices may be made by means of electronic transmission (fax, internet transmission) including E-mail or other technological means of communication acceptable to all parties. However, a hard copy of all such notices shall be maintained by the public entity treasurer, safekeeping bank and the pledgor bank consistent with their recordkeeping requirements set by statute or regulation.

[Source: Added at 16 Ok Reg 1275, eff 5-13-99; Amended at 18 Ok Reg 2857, eff 7-1-01]