Section 398.10  Pledging Requirements for Illinois Trust Companies

a)         Pursuant to Section 6-13.5 of the Corporate Fiduciary Act [205 ILCS 620/6-13.5] (the Act), each Illinois trust company holding a certificate of authority under Article II of the Act shall pledge to the Commissioner either a surety bond running to the Commissioner or securities in the amount of $1,000,000.  Such surety bond or pledged securities must be reducible to cash by the Commissioner without regard to any priorities, preferences or adverse claims in order to cover costs associated with a receivership of the Illinois trust company.  The surety bond or pledged securities shall be utilized only to cover costs associated with a receivership of the pledging Illinois trust company.

b)         If the trust company chooses to pledge a surety bond, the surety bond shall be issued by a bonding company authorized to do business in the State of Illinois that has a rating in one of the top three rating categories as determined by a national rating service. The surety bond must clearly show that it runs to the benefit of the Commissioner.  The surety bond must also state that if the trust company is placed in receivership and the Commissioner acts as receiver or appoints a receiver, the Commissioner may reduce the bond to cash in order to pay for any costs associated with the receivership. The trust company may not obtain a surety bond from any entity in which the trust company has a financial interest or of which the trust company is an affiliate.  Any fees associated with obtaining and maintaining a surety bond shall be the responsibility of the trust company.

c)         If the trust company chooses to pledge securities, the securities shall be held at a Federal Reserve Bank or at a depository institution that is a state or national bank, a state or federal savings bank, or a state or federal savings and loan association approved by the Commissioner.  The trust company shall not be an affiliate of, or have a financial interest in, the depository institution.  The securities pledged pursuant to this subsection shall be securities that qualify as authorized investments for public agencies under Section 2 of the Public Funds Investment Act [30 ILCS 235/2].  Securities pledged pursuant to this subsection shall be in addition to any securities required as part of the trust company’s capital.  Any fees associated with holding securities pursuant to this subsection shall be the responsibility of the trust company.  A trust company choosing to pledge securities shall enter into a single deposit agreement with the Commissioner and the Federal Reserve Bank or depository institution that is holding the securities.  Such deposit agreement shall contain provisions requiring the depository institution and the trust company to meet the requirements set forth in subsections (c)(1)-(3):

1)         The depository institution shall segregate on its books and records all accounts of the trust company as assets that the trust company pledges as a part of the assets to be kept by the trust company in Illinois pursuant to the required pledge amount. These accounts shall be held by the depository institution in trust in the name of the Commissioner;

2)         The depository institution shall provide the Commissioner with reports, receipts, confirmation or other documentation that the Commissioner may request of the depository institution to determine the trust company's compliance with the requirements of Section 6-13.5 of the Act and this Section; and

3)         The trust company shall pledge the securities required under Section 6-13.5 of the Act exclusively to the Commissioner.

d)         Each trust company shall be in compliance with the provisions of this Section by January 1, 2004, or, for new trust companies, upon being issued a certificate of authority under Article II of the Act, and continuously thereafter.

e)         For purposes of this Section, a trust company is an "affiliate of" or has a "financial interest" in:

1)         any company that controls the trust company and any other company that is controlled by the company that controls the trust company;

2)         a subsidiary of the trust company; or

3)         any company:

A)        controlled directly or indirectly, by a trust or otherwise, by or for the benefit of shareholders who beneficially or otherwise control, directly or indirectly, by trust or otherwise, the trust company or any company that controls the trust company; or

B)        a majority of the directors or trustees of which constitute a majority of the persons holding any such office with the trust company or any company that controls the trust company.

f)          For purposes of this Section, a company or shareholder has control over another company if:

1)         such company or shareholder, directly or indirectly, or acting through one or more other persons, owns, controls, or has power to vote 25% or more of any class of voting securities of the other company;

2)         such company or shareholder controls in any manner the election of a majority of the directors or trustees of the other company; or

3)         the Commissioner determines, after notice and opportunity for hearing, that such company or shareholder, directly or indirectly, exercises a controlling influence over the management or policies of the other company.