Eligible Securities – FBO Account Titles
November 3, 2016
Re: Opinion Request
Thank you for your letter dated September 29, 2016, in which _________ requested approval by the Department of Business Oversight to include certain bank accounts as eligible securities pursuant to Financial Code section 2084 of the Money Transmission Act.
You submitted a spreadsheet with a list of the bank accounts that _________ wishes to include as eligible securities. Each account is titled:
AS AGENT AND CUSTODIAN
FOR BENEFIT OF ITS CUSTOMERS
Money Transmission Act
Financial Code section 2081 provides, in relevant part, that a money transmitter must own eligible securities with an aggregate market value that is the same as or more than all its outstanding transmission money received in the United States. This requirement ensures that money transmitters adequately safeguard the funds entrusted to them by their customers. Financial Code section 2084, subdivision (b)(3) allows money transmitters to count as eligible securities transmission money that is held in an account that is specifically named to indicate its custodial purpose. To satisfy Section 2084, an account must be named in a manner that clearly indicates that it is for the benefit of the licensee’s customers. Financial Code section 2084, subdivision (c) provides that the Commissioner shall decide whether subdivision (b)(3) applies.
The bank account titles listed in the spreadsheet indicate that the funds in these accounts are held in _________’s name as agent and custodian for the benefit of its customers (“FBO accounts”). Thus, they meet the custodial and agency requirements set forth in Financial Code section 2084, subdivision (b)(3). Based on a review of the financial statements and other factors submitted by _________, the Department grants the request to include these FBO accounts as eligible securities pursuant to Financial Code section 2084, subdivision (c).
_________ should continue to evaluate the amount, nature, quality, and liquidity of its assets, amount and nature of its liabilities, and compliance with applicable state and federal law. If there is any material deterioration in _________’s status with respect to the requirements in Financial Code section 2084, subdivision (c), _________ risks losing the ability to count these FBO accounts as eligible securities.
This opinion is based solely on the facts as represented in your correspondence. Any change in the facts or circumstances, as we understand them, could lead to a different conclusion. If you have any questions, please feel free to contact me at _________.
Jan Lynn Owen
Department of Business Oversight
Jennifer L.W. Rumberger
cc: Robert Venchiarutti, Department of Business Oversight, San Francisco