1 Va. Admin. Code § 75-20-140
Current through Register Vol. 41, No. 6, November 4, 2024
Section 1VAC75-20-140 - Eligibility criteria and compliance requirements for escrow agents All escrow agent requirements shall be outlined under a "Master Custodial Agreement" to be signed by an authorized officer for the escrow agent and the State Treasurer, acting on behalf of the Treasury Board. A depository may have no more than one escrow agreement for Virginia public deposits in effect at any given time period. The escrow agent is responsible for providing a written notification and executing new agreements upon its name change. An escrow agent selected by a qualified public depository for the purpose of holding collateral pledged to the Treasury Board under the Virginia Security for Public Deposits Act (the Act) must meet the following requirements:
1. To become an escrow agent, the minimum requirements are that an entity: a. Be a bank or trust company organized under federal law, Virginia law, or under the laws of another state.b. Be located in Virginia, meaning it has a main office or branch office in the Commonwealth where deposits are accepted, checks are paid, and money is lent, or where similar services required by an escrow agent under the Security for Public Deposits Act Master Custodial Agreement are offered. Existing escrow agents not located in Virginia are exempt from this requirement.c. Have an Average or above rating from the Treasury Board's designated rating service for the most recent eight calendar quarters.d. Cannot be under a formal federal or state bank regulatory enforcement action that would impair its ability to serve as an escrow agent, to be determined on a case-by-case basis. Banks will be required to disclose to the Treasury Board any such formal enforcement actions currently in force.e. Be an independent entity in the performance of its duties on behalf of the Treasury Board. The escrow agent may not be the depository itself, its holding company, or any affiliate of the depository.2. For continued eligibility, compliance requirements are:a. The escrow agent shall hold in a separate account for the Treasury Board eligible collateral pledged under the provisions of the Act and, if acting as escrow for more than one public depository, a separate account must be opened for each depository. The escrow shall hold the eligible collateral in a section of the institution that is separate from daily activities performed by that institution, such as its trust department, and be held accountable for the regulatory requirements of such department.b. The escrow agent must be able to ascertain whether pledged collateral is eligible collateral in accordance with 1VAC75-20-60.The escrow agent shall distribute all interest, dividends, or other income for the pledged securities to the depository and such income shall be payable thereto provided the escrow agent has not received written notice from the Treasury Board that the depository is in a condition of "default or insolvency" as defined in the Act, in which event the escrow agent shall hold such income subject to the order of the Treasury Board.c. The escrow agent shall price securities held as collateral at a current market value no older than one business day from the date of a substitution of collateral, as of the close of business on the last day of the month for monthly reporting purposes, and as of the close of business Friday for weekly reporting purposes for depositories using the dedicated method.d. The escrow agent shall adhere to the reporting requirements as detailed in the "Master Custodial Agreement" and the "Public Deposit Security Agreement."e. The escrow agent shall allow substitutions in accordance with 1VAC75-20-90.f. The escrow agent shall ensure that withdrawals of collateral will be in accordance with 1VAC75-20-100. The State Treasurer, acting on behalf of the Treasury Board, will determine that an escrow agent is eligible based upon the criteria established under this section prior to executing the "Master Custodial Agreement" and the "Public Deposit Security Agreement." The State Treasurer may request information from an escrow agent to substantiate its ability to meet the aforementioned criteria.
In the event an escrow agent violates the requirements of the "Master Custodial Agreement" or the "Public Deposit Security Agreement," the State Treasurer shall notify the escrow agent and applicable public depositories of the violation and require the escrow agent to comply with all terms of the agreements. The escrow agent must provide the State Treasurer and public depositories a written statement, within 30 days of the notification, outlining how and when the violations will be remedied. This statement must be acceptable to the State Treasurer, who will monitor adherence to it. If the escrow agent fails to provide a statement or adhere to its remediation plan or continues to violate the agreements, the Treasury Board may take disciplinary action, up to and including termination of the "Master Custodial Agreement". Qualified public depositories shall select a new escrow agent after such a disqualification in accordance with Treasury Board instructions.
After "disqualification," an escrow agent may request approval from the Treasury Board to be reinstated as an eligible escrow agent if correction of prior deficiencies is demonstrated.
1 Va. Admin. Code § 75-20-140
Derived from VR640-02 § 14, eff. November 18, 1993; Amended, Virginia Register Volume 39, Issue 18, eff. 7/1/2023.Statutory Authority: § 2.2-4405 of the Code of Virginia.