Current through Register Vol. 63, No. 9, September 1, 2024
(1) This
rule is adopted pursuant to the rulemaking authority in ORS
731.244 and
732.245 for the purpose of
implementing 732.245.
(2) As used
in this rule:
(a) "Agent" means:
(A) A national bank;
(B) A state bank; or
(C) A trust company with an account in a
clearing corporation or a member of the Federal Reserve System.
(b) "Bank" has the meaning given
that term in ORS 706.008;
(c) "Clearing corporation" means a
corporation as defined in Article 8 of the Uniform Commercial Code (published
by the American Law Institute and the National Conference of Commissioners on
Uniform State Laws, 2003), that is organized for the purpose of effecting
transactions in securities by computerized book-entry, except those securities
issued under the laws of a foreign country;
(d) "Custodian" means a bank or trust company
licensed by the United States or by any state thereof and regularly examined by
its licensing authority;
(e)
"National bank" has the meaning given that term in ORS
706.008;
(f) "Securities" has the meaning given
"security" in ORS 59.015;
(g) "Securities depository" means a company
that provides securities clearance or settlement services for member banks and
other member institutions and that is regulated by the Securities and Exchange
Commission, a Federal Reserve Bank and the appropriate banking authorities in
its state of domicile;
(h) "State
bank" has the meaning given that term in ORS
706.008; and
(i) "Trust company" means a trust company as
that term is defined in ORS
706.008 or a company that is
authorized under the laws of a state other than Oregon to transact trust
business, and includes the trust department of a bank.
(3) A domestic insurer may enter into a
custodial or safekeeping arrangement with a custodian for the purpose of
holding securities owned by the insurer, either in or outside this state, as
provided in this section and section (4) of this rule. Such an arrangement must
be made by written agreement between the domestic insurer and the custodian,
must meet the requirements and standards of section (4) of this rule and must
provide that the securities be held by the custodian or its agent.
(4) A custodial or safekeeping arrangement to
which section (3) of this rule applies must account for and safeguard the
securities of the domestic insurer, must facilitate examination of the insurer
and the records of the insurer's custody account maintained by the custodian
and must be in accordance with the following standards established in the
Examiners Handbook, published by the National Association of Insurance
Commissioners:
(a) The custodian must agree to
indemnify the insurer for any loss of the insurer's securities as a result of
the negligence or dishonesty of the officers or employees of the custodian, or
burglary, robbery, holdup, theft or mysterious disappearance, including loss by
damage or destruction;
(b) The
custodian must agree that, in the event of a loss of the insurer's securities
for which the custodian is obligated to indemnify the insurer, the custodian
shall promptly replace the securities or the value of any loss of rights or
privileges resulting from the loss of the securities;
(c) The insurer's securities or a certified
listing of the insurer's securities through a securities depository or a
Federal Reserve book entry system shall be subject to inquiry and examination
by the Director of the Department of Consumer and Business Services, either at
the custodian's premises or elsewhere, as provided by ORS
731.296 and
731.308;
(d) The national bank, state bank or trust
company as custodian shall not be liable for any failure to take any action
required to be taken under this rule in the event and to the extent that the
taking of such action is prevented or delayed by war (whether declared or not
and including a war in progress), revolution, insurrection, riot, civil
commotion, act of God, accident, fire, explosions, stoppage of labor, strikes
or other differences with employees, laws, regulations, orders or other acts of
any governmental authority, or any other cause whatever beyond its reasonable
control;
(e) In the event that the
custodian gains entry in a clearing corporation through an agent, there shall
be a written agreement between the custodian and the agent that the agent shall
be subjected to the same liability for loss of securities as the custodian. If
the agent is governed by laws that differ from laws regulating the custodian,
the Director may accept a standard of liability applicable to the agent that is
different from the standard liability;
(f) The custodian must agree to provide
written notification to the Director, within three business days of receipt by
the custodian of the insurer's written notice of termination or withdrawal, if
the custodial agreement has been terminated or if 100 percent of the account
assets in any one custody account have been withdrawn;
(g) The custodian must agree that during
regular business hours, and upon reasonable notice, an officer or employee of
the insurer, an independent accountant selected by the insurer or a
representative of an appropriate regulatory body, or any combination thereof,
shall be entitled to examine, on the premises of the custodian, its records
relating to securities, if the custodian is given written instructions to that
effect from an authorized officer of the insurer;
(h) The custodian and its agents, upon
reasonable request, must agree to send all reports that they receive from a
clearing corporation or the Federal Reserve book-entry system that the clearing
corporation or the Federal Reserve permits to be redistributed and reports
prepared by the custodian's outside auditors, to the insurer on the custodian's
or agent's respective systems of internal control;
(i) To the extent that certain information
maintained by the custodian is relied upon by the insurer in preparation of its
annual statement and supporting schedules, the custodian must agree to maintain
records sufficient to determine and verify such information;
(j) The custodian must agree to provide, upon
written request from a regulator or an authorized officer of the insurer, the
appropriate affidavits, with respect to the insurer's securities held by the
custodian;
(k) The custodian must
agree to secure and maintain insurance protection in an adequate amount;
and
(l) The custodian that is a
foreign bank, or a U.S. custodian's foreign agent, or a foreign clearing
corporation must agree to only hold foreign securities or securities required
by the foreign country in order for the insurer to do business in that country.
A U.S. custodian must hold all other securities.
(5) A domestic insurer may enter into a
custodial or safekeeping arrangement directly with a securities depository for
the purpose of holding securities owned by the insurer, either in or outside
this state, as provided in this section. Such an arrangement must be made by
written agreement between the domestic insurer and the securities depository
and must provide that the securities be held by the securities
depository.
(6) A domestic insurer
must obtain the approval of the Director for any material change to a custodial
or safekeeping arrangement established under ORS
732.245. A change is material
for purposes of this section:
(a) When the
arrangement is with a custodian, if the purpose or effect of the change is to
revise or omit any standard set forth in section (4) of this rule;
(b) When the arrangement is with a securities
depository, if the purpose or effect of the change is to reduce the safety of
the securities.
