AGO 2009-036.

Case Date:September 23, 2009
Court:Ohio
 
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Ohio Attorney General Opinions 2009. AGO 2009-036. September 23, 2009The Honorable Mary Taylor, CPA Auditor of State 88 E. Broad St. Columbus, Ohio 43215SYLLABUS: 2009-036 1. Federal law addresses the question of when a subdivision, as defined in R.C. 135.181(A)(3) and which has a security interest in a pool of securities pledged under R.C. 135.181(B) by an institution designated as a public depository to secure the repayment of all public moneys deposited in the institution and not otherwise secured by law, may present a claim to the Federal Deposit Insurance Corporation for securities in the pool. Pursuant to 12 U.S.C.... § 1821(d)(9), 12 U.S.C.... § 1821(e)(12), and 12 U.S.C.... § 1823(e)(1), such a subdivision may present such a claim for securities in the pool when the Federal Deposit Insurance Corporation, as receiver, is liquidating or winding up the affairs of the institution, provided that the subdivision's security interest in the securities meets the following two criteria: (1) it is legally enforceable and perfected; and (2) it is set forth in a written agreement that has been approved by, and recorded in the minutes of, the board of directors or loan committee of the institution and has been maintained continuously, from the time of its execution, as an official record of the institution. 2. Subject to the caveat that the questions addressed in this opinion are ultimately subject to determination by either the Federal Deposit Insurance Corporation or a court of law as matters of federal law under 12 U.S.C.... § 1821(e)(12), a reading of Ohio law standing alone indicates that the security interest of a subdivision in a pool of securities pledged under R.C. 135.181(B) by an institution designated as a public depository to secure the repayment of all public moneys deposited in the institution and not otherwise secured by law is "legally enforceable" when the conditions set forth in R.C. 1309.203(B) are satisfied. 3. Subject to the caveat that the questions addressed in this opinion are ultimately subject to determination by either the Federal Deposit Insurance Corporation or a court of law as matters of federal law under 12 U.S.C....§ 1821(e)(12), a reading of Ohio law standing alone indicates that, pursuant to R.C. 1309.308(A), a subdivision that has a security interest in a pool of securities pledged under R.C. 135.181(B) by an institution designated as a public depository to secure the repayment of all public moneys deposited in the institution and not otherwise secured by law has a "perfected security interest" in securities in the pool when the subdivision's security interest in the securities attaches and all of the applicable requirements for perfection in R.C. 1309.310-.316 have been satisfied. 4. Subject to the caveat that the questions addressed in this opinion are ultimately subject to determination by either the Federal Deposit Insurance Corporation or a court of law as matters of federal law under 12 U.S.C.... § 1821(e)(12), a reading of Ohio law standing alone indicates that the security interest of a subdivision in a pool of uncertificated securities deposited with a qualified trustee in accordance with R.C. 135.181(E) is (1) "legally enforceable" when the conditions set forth in R.C. 1309.203(B) are satisfied and (2) "perfected" by establishing "control" as defined in R.C. 1308.24. September 23, 2009OPINION NO. 2009-036The Honorable Mary Taylor, CPA Auditor of State 88 E. Broad St. Columbus, Ohio 43215Dear Auditor Taylor: You have requested an opinion concerning the protection afforded by the Federal Deposit Insurance Corporation (FDIC) to a subdivision that has public moneys on deposit with a financial institution that is placed in receivership. In your letter, you explain that the
[FDIC] serves as the receiver when a financial institution fails. To be treated as a secured creditor, the FDIC requires government investors to have a perfected security interest in the collateral pledged to protect their deposits. Do you think that [subdivisions] in Ohio whose deposits are protected by pooled collateral pursuant to [R.C. 135.181] have a perfected security interest in the collateral under Ohio law? Your opinion will dictate whether [the subdivisions] are recognized as secured or general creditors by [the] FDIC if an Ohio bank were to fail.
Although your question thus frames the matter purely as one involving Ohio law, it is immediately clear from the broader context that the issues you pose involve mixed or joint questions of federal and state law where the two are explicitly intertwined. For example, as will be seen later in this opinion, your specific question relates to the ability of a subdivision to present a valid claim to the FDIC for assets of a financial institution that is placed in receivership, which implicates the provisions of various federal banking laws, namely 12 U.S.C.... § 1821(d)(9), 12 U.S.C.... § 1821(e)(12), and 12 U.S.C.... § 1823(e)(1). We will therefore consider your question in the broader context of whether a subdivision that has a security interest in a pool of securities pledged under R.C. 135.181(B) by an institution designated as a public depository to secure the repayment of all public moneys deposited in the institution and not otherwise secured by law may present a claim to the FDIC for securities in the pool when the FDIC, as receiver, is liquidating or winding up the affairs of the institution.(fn1) Because the matters you present implicate federal law, and are ultimately subject to determination by either the FDIC or a court of law as matters of federal law under 12 U.S.C.... § 1821(e)(12), we are unable to answer them definitively by means of an opinion rendered solely on matters of state law. See 1999 Op. Att'y Gen. No. 99-007 at 2-55 (the Attorney General is not empowered to provide authoritative interpretations of federal law). Consequently, we will suggest later that you pursue further clarification and guidance by seeking a formal opinion from the FDIC on these same issues. Nonetheless, since your efforts to pursue that route may predictably be met by a response from the FDIC that it finds itself hindered in rendering authoritative guidance by the fact that the matter depends in part on state law, we will proceed as a practical matter to set out our best judgments about the matters implicated here under Ohio law. We do so in an effort to help you clarify and narrow the issues involved in what both of us acknowledge to be a difficult area of the law, which involves construing intricate legal provisions that are intended to govern very complex financial operations. Deposits of Public Moneys in Public Depositories Before turning to your specific question, it is helpful to review the relevant provisions of R.C. Chapter 135 (Uniform Depository Act) governing the deposit of public moneys in public depositories by subdivisions and counties.(fn2) R.C. 135.01-.21 authorize subdivisions(fn3) to deposit their public moneys in public depositories. For purposes of these statutes, any institution mentioned in R.C. 135.03(fn4) is eligible to become a public depository of the active, inactive, and interim deposits of public moneys of a subdivision. R.C. 135.04(D)-(E). Similar provisions governing the deposit of public moneys by counties in public depositories appear in R.C. 135.31-.40. Under these provisions, "[a]ny eligible institution described in [R.C. 135.32(A)(fn5)] that has an office located within the territorial limits of the county is eligible to become a public depository of the [public moneys that constitute the] active moneys of the county." R.C. 135.33(B). Also, a county investing authority may deposit public moneys that constitute the inactive moneys of a county in the securities and obligations described in R.C. 135.35. Included among those securities and obligations are "[t]ime certificates of deposit or savings or deposit accounts, including, but not limited to, passbook accounts, in any eligible institution mentioned in [R.C. 135.32(fn6)]." R.C. 135.35(A)(3). An institution listed in R.C. 135.03 or R.C. 135.32 may not acquire a deposit of public moneys from a subdivision or county under R.C. 135.04, R.C. 135.33, or R.C. 135.35 unless the institution has pledged security for the repayment of all public moneys deposited in the institution. See R.C. 135.18; R.C. 135.181; R.C. 135.37. See generally 1937 Op. Att'y Gen. No. 995, vol. II, p. 1738 (syllabus, paragraph two) ("[a] treasurer is required a to require of a designated depository that it pledge and deposit with him eligible securities as security for the public moneys therein deposited"). Although requiring a specific pledge of collateral from the institution is likely to be the most secure approach to collateralization in instances where it can be achieved, see R.C. 135.18 (specifying pledge of "eligible securities of aggregate market value equal to or in excess of the amount of public moneys to be at the time so deposited); R.C. 135.37 (same), another permissible method by which an institution may satisfy the pledging requirement is the "pooling" method set forth in R.C. 135.181. This statute states, in relevant part:
(B) In lieu of the pledging requirements prescribed in [R.C. 135.18] and [R.C. 135.37], an institution designated as a public depository at its option may pledge a single pool of eligible securities to secure the repayment of all public moneys deposited in the
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