California Code of Regulations
Title 10 - Investment
Chapter 3 - Commissioner of Financial Protection and Innovation
Subchapter 9 - Escrow Agents
Article 4 - Books, Records and Accounts
Section 1737 - Special Accounts

Universal Citation: 10 CA Code of Regs 1737

Current through Register 2024 Notice Reg. No. 38, September 20, 2024

(a) Except as provided in Section 1737.1 of these rules, all money received by an escrow agent as part of an escrow transaction shall on or before the close of the next full working day after such receipt be deposited in a bank, a savings bank, or a savings and loan association in an account designated "trust" or "escrow" account. No funds other than those received as part of an escrow transaction shall be deposited in such account or otherwise commingled with escrow money.

(b) Pursuant to written instructions of the principals or electronic instructions received by an Internet escrow agent from the principals containing at least the provisions required by subsection (c), funds received in any particular escrow transaction and deposited pursuant to subsection (a) may subsequently be deposited into an interest-bearing escrow account established solely for such purpose at a bank, savings bank, savings and loan association or credit union ("financial institution") in the name of the escrow agent as trustee for the principals to the particular escrow identified by escrow number.

(c) The escrow instructions for interest-bearing escrow deposits shall, at a minimum:

(1) authorize the opening of an interest-bearing escrow account in the name of the escrow agent as trustee for the particular escrow identified by escrow number;

(2) specify the type of account to be opened and the amount of the deposit;

(3) identify the name and location of the financial institution with which the interest-bearing account is to be opened;

(4) specify
(A) the disposition of the interest at the close of escrow,

(B) the disposition of the interest in the event that the escrow fails to close, and

(C) the disposition of any accrued interest retained in the interest-bearing escrow account after the close of escrow pursuant to subsection (g);

(5) indicate that the principals have been advised by the escrow agent of possible restrictions and/or penalties for early withdrawal of funds; and

(6) prohibit the escrow agent from withdrawing funds from the interest-bearing account except for redeposit into the "trust" or "escrow" account.

(d) An escrow agent is responsible for establishing and maintaining an interest-bearing account so that the funds are fully insured or guaranteed, to the extent available by law.

(e) An escrow agent is responsible for establishing and maintaining adequate controls over the passbooks and certificates issued by financial institutions in connection with interest-bearing escrow accounts.

(f) An escrow agent depositing escrow funds into interest-bearing escrow accounts shall establish and maintain a control ledger summarizing the deposits in interest-bearing escrow accounts or shall make a memo entry on each individual escrow ledger. The posting of the ledger shall include the escrow number, interest-bearing account number, date of deposit, and amount of deposit.

(g) All funds deposited into an interest-bearing escrow account, including any interest paid thereon, shall be transferred from such account into the "trust" or "escrow" account before the close of escrow, except that a specified portion or all of the interest accrued may be retained in the interest-bearing escrow account until the end of the current calendar quarter if the escrow instructions of the principals so provide.

(h) Disbursements from the "trust" or "escrow" account shall not be made against funds deposited in an interest-bearing escrow account until such funds have been transferred and receipted into the "escrow" or "trust" account with proper posting to the particular escrow.

(i) Electronic fund transfers may be made between the "trust" or "escrow" account and any interest-bearing account.

(j) Interest paid on any interest-bearing escrow account shall be paid over to the principal having deposited the moneys in escrow unless the escrow instructions clearly specify that such interest is to be paid over to a named person other than the escrow agent. Notwithstanding any provision in any escrow instructions, the interest paid or payable on any interest-bearing account shall not be transferred to the account of, accrue to the benefit of, or otherwise be treated as an asset of the escrow agent.

(k) An escrow agent who wishes to transact business as an escrow agent on a basis other than as provided by this section may request in writing a variance to or waiver of any provisions of this section, but may not engage in business in a manner not in compliance with this section without first having received a waiver or variance in writing from the Commissioner.

(1) Any request for a variance or waiver shall include at least:
(A) a statement of the basis upon which the escrow agent's business is proposed to be transacted in connection with a particular named financial institution;

(B) a description of the plan of business and applicable procedures including copies of all agreements or memoranda of understanding between the escrow agent and the financial institution;

(C) a showing that the proposed plan of business and applicable procedures provide for administrative and accounting controls at least as adequate as those provided in this section; and

(D) a statement of the reasons why, under the escrow agent's circumstances, a variance or waiver is requested.

(2) Any variance or waiver granted pursuant to this subsection by the Commissioner shall be in writing and subject to such terms and conditions as may be deemed necessary or advisable by the Commissioner to protect any escrow transactions of such escrow agent, to preserve the trust nature of the escrow relationship, and to insure compliance with the Escrow Law and rules, including the other provisions of this section.

1. Amendment filed 11-24-65; effective thirtieth day thereafter (Register 65, No. 23).
2. Amendment filed 12-31-79 as an emergency; effective upon filing. Certificate of Compliance included (Register 80, No. 1).
3. Editorial correction of NOTE filed 4-6-83 (Register 83, No. 15).
4. Amendment filed 7-23-84 as an emergency; effective upon filing (Register 84 No. 30). A Certificate of Compliance must be transmitted to OAL within 120 days or all emergency language will be repealed on 11-20-84.
5. Editorial correction of subsection (i) (Register 84, No. 46).
6. Certificate of Compliance as to 7-23-84 order transmitted to OAL 10-23-84 and filed 11-26-84 (Register 84, No. 49).
7. Editorial correction of printing errors in subsections (b), (c)(2), and (k)(1)(C) (Register 96, No. 52).
8. Amendment of subsections (a) and (g) filed 12-16-97; operative 1-15-98 (Register 97, No. 51).
9. Amendment of subsections (a)-(b), (i) and (l)(2) and amendment of NOTE filed 7-21-2003; operative 7-21-2003 pursuant to Government Code section 11343.4 (Register 2003, No. 30).

Note: Authority cited: Section 17400, Financial Code. Reference: Sections 17403.5, 17409, 17410 and 17411, Financial Code.

Disclaimer: These regulations may not be the most recent version. California may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.