S T A T E   O F   N E W   Y O R K
       ________________________________________________________________________
                                         4055
                              2015-2016 Regular Sessions
                                   I N  S E N A T E
                                   February 26, 2015
                                      ___________
       Introduced  by  Sen. SAMPSON -- read twice and ordered printed, and when
         printed to be committed to the Committee on Judiciary
       AN ACT to amend the real property law and  the  state  finance  law,  in
         relation to brokers fiduciary funds
         THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
       BLY, DO ENACT AS FOLLOWS:
    1    Section 1. The real property law is amended by adding  a  new  section
    2  443-b to read as follows:
    3    S  443-B.  BROKERS  FIDUCIARY  FUNDS; INTEREST-BEARING ACCOUNTS. 1. AS
    4  USED IN THIS SECTION:
    5    (A) "INTEREST ON BROKER  ACCOUNT"  OR  "IOBA"  MEANS  AN  UNSEGREGATED
    6  INTEREST-BEARING  DEPOSIT  ACCOUNT  WITH  A  BANKING INSTITUTION FOR THE
    7  DEPOSIT BY A BROKER OF QUALIFIED FUNDS.
    8    (B) "QUALIFIED FUNDS" MEANS MONEYS RECEIVED BY A BROKER IN A FIDUCIARY
    9  CAPACITY FROM A CLIENT OR BENEFICIAL OWNER AND WHICH ARE NOT  PLACED  IN
   10  AN INTEREST-BEARING ACCOUNT AT THE REQUEST OF AND FOR THE BENEFIT OF THE
   11  CLIENT OR BENEFICIAL OWNER.
   12    (C) "FUNDS RECEIVED IN A FIDUCIARY CAPACITY" MEANS FUNDS RECEIVED BY A
   13  BROKER  FROM  A  CLIENT  OR  BENEFICIAL OWNER IN THE COURSE OF BUSINESS,
   14  INCLUDING BUT NOT LIMITED TO, FUNDS RECEIVED IN AN ESCROW CAPACITY.
   15    (D) "BANKING INSTITUTION" MEANS A BANK, TRUST COMPANY,  SAVINGS  BANK,
   16  SAVINGS  AND  LOAN  ASSOCIATION,  CREDIT UNION OR FOREIGN BANKING CORPO-
   17  RATION WHETHER INCORPORATED, CHARTERED, ORGANIZED OR LICENSED UNDER  THE
   18  LAWS  OF  THIS  STATE  OR  THE UNITED STATES, PROVIDED THAT SUCH BANKING
   19  INSTITUTION CONDUCTS ITS PRINCIPAL BANKING BUSINESS IN THIS STATE.
   20    2. (A) UNLESS A  CLIENT  OR  BENEFICIAL  OWNER  SPECIFICALLY  REQUESTS
   21  OTHERWISE,  OR  A  CONTRACT  PROVIDES  OTHERWISE,  A BROKER WHO RECEIVES
   22  MONIES IN A FIDUCIARY CAPACITY SHALL DEPOSIT SUCH MONIES IN AN IOBA IN A
   23  BANKING INSTITUTION OF HIS OR HER CHOICE OFFERING SUCH ACCOUNTS.
        EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                             [ ] is old law to be omitted.
                                                                  LBD09117-02-5
       S. 4055                             2
    1    (B) A BROKER WHO  RECEIVES  QUALIFIED  FUNDS  SHALL  DISCLOSE  TO  ALL
    2  PARTIES THE BANK IN WHICH THE FUNDS WILL BE DEPOSITED DURING THE TERM OF
    3  THE ESCROW. NO FURTHER DISCLOSURE SHALL BE REQUIRED OF SUCH BROKER.
    4    (C)  A  BROKER  WHO DEPOSITS MONEY IN AN IOBA PURSUANT TO THIS SECTION
    5  SHALL NOT BE DEEMED IN VIOLATION OF THE SECRETARY OF STATE'S  RULES  AND
    6  REGULATIONS CONCERNING THE MAINTAINING OF ESCROW ACCOUNTS.
    7    (D)  NOTWITHSTANDING  THE DEPOSIT REQUIREMENTS OF THIS SUBDIVISION, NO
    8  BROKER SHALL BE LIABLE IN DAMAGES NOR HELD TO ANSWER  FOR  A  CHARGE  OF
    9  PROFESSIONAL  MISCONDUCT  FOR  FAILURE  TO DEPOSIT QUALIFIED FUNDS IN AN
   10  IOBA.
   11    3. NO BROKER SHALL BE LIABLE IN DAMAGES  NOR  HELD  TO  ANSWER  FOR  A
   12  CHARGE  OF  PROFESSIONAL MISCONDUCT BECAUSE OF A DEPOSIT OF MONEYS TO AN
   13  IOBA PURSUANT TO A JUDGMENT IN GOOD FAITH THAT SUCH MONEYS  WERE  QUALI-
   14  FIED FUNDS.
   15    (A) A BROKER WHICH RECEIVES QUALIFIED FUNDS IN THE COURSE OF ITS BUSI-
   16  NESS  AND ESTABLISHES AND MAINTAINS AN IOBA SHALL DO SO BY (I) DESIGNAT-
   17  ING THE ACCOUNT AS (NAME OF BROKER IOBA) WITH THE APPROVAL OF THE  BANK-
   18  ING  INSTITUTION;  AND  (II)  NOTIFYING  THE NEW YORK INTEREST ON LAWYER
   19  ACCOUNT FUND WITHIN THIRTY DAYS OF ESTABLISHING THE IOBA OF THE  ACCOUNT
   20  NUMBER AND NAME AND ADDRESS OF THE BANKING INSTITUTION WHERE THE ACCOUNT
   21  IS DEPOSITED.
   22    (B)  THE  RATE  OF INTEREST PAYABLE ON ANY IOBA SHALL BE NOT LESS THAN
   23  THE RATE PAID BY THE BANKING INSTITUTION ON SIMILAR ACCOUNTS  MAINTAINED
   24  AT  THAT  INSTITUTION,  AND  THE BANKING INSTITUTION SHALL NOT IMPOSE ON
   25  SUCH ACCOUNTS ANY CHARGES OR FEES GREATER THAN  IT  IMPOSED  ON  SIMILAR
   26  ACCOUNTS MAINTAINED AT THAT INSTITUTION.
   27    (C) WITH RESPECT TO IOBA'S, THE BANKING INSTITUTION SHALL:
   28    (I)  REMIT  AT  LEAST  QUARTERLY  ANY  INTEREST  EARNED ON THE ACCOUNT
   29  DIRECTLY TO  THE  NEW  YORK  INTEREST  ON  LAWYER  ACCOUNT  FUND,  AFTER
   30  DEDUCTION OF SERVICE CHARGES OR FEES, IF ANY, ARE APPLIED;
   31    (II)  TRANSMIT  TO  THE  NEW YORK INTEREST ON LAWYER ACCOUNT FUND WITH
   32  EACH REMITTANCE A STATEMENT SHOWING AT LEAST THE NAME  OF  THE  ACCOUNT,
   33  SERVICE CHARGES OR FEES DEDUCTED, IF ANY, AND THE AMOUNT OF NET INTEREST
   34  REMITTED FROM SUCH ACCOUNT;
   35    (III)  TRANSMIT  TO  EACH  BROKER  WHICH MAINTAINS AN IOBA A STATEMENT
   36  SHOWING AT LEAST THE NAME  OF  THE  ACCOUNT,  SERVICE  CHARGES  OR  FEES
   37  DEDUCTED, IF ANY, AND THE AMOUNT OF INTEREST REMITTED FROM SUCH ACCOUNT;
   38    (IV)  BE PERMITTED TO IMPOSE REASONABLE SERVICE CHARGES FOR THE PREPA-
   39  RATION AND ISSUANCE OF THE STATEMENT; AND
   40    (V) HAVE NO DUTY TO INQUIRE OR DETERMINE WHETHER DEPOSITS  CONSIST  OF
   41  QUALIFIED FUNDS.
   42    4.  (A)  PAYMENT FROM AN IOBA TO OR UPON THE ORDER OF THE BROKER MAIN-
   43  TAINING SUCH ACCOUNT SHALL BE VALID AND SUFFICIENT RELEASE OF ANY CLAIMS
   44  BY ANY PERSON OR ENTITY AGAINST ANY BANKING INSTITUTION FOR ANY PAYMENTS
   45  SO MADE.
   46    (B) ANY REMITTANCE OF INTEREST TO THE  NEW  YORK  INTEREST  ON  LAWYER
   47  ACCOUNT  FUND BY A BANKING INSTITUTION PURSUANT TO THIS SECTION SHALL BE
   48  A VALID AND SUFFICIENT RELEASE AND DISCHARGE OF ANY CLAIMS BY ANY PERSON
   49  OR ENTITY AGAINST SUCH BANKING INSTITUTION FOR ANY PAYMENT SO MADE,  AND
   50  NO ACTION SHALL BE MAINTAINED AGAINST ANY BANKING INSTITUTION SOLELY FOR
   51  OPENING,  OFFERING,  OR MAINTAINING AN IOBA, FOR ACCEPTING ANY FUNDS FOR
   52  DEPOSIT TO ANY SUCH ACCOUNT OR FOR REMITTING ANY  INTEREST  TO  THE  NEW
   53  YORK INTEREST ON LAWYER ACCOUNT FUND.
   54    5. NOTHING CONTAINED IN THIS SECTION SHALL BE CONSTRUED TO REQUIRE ANY
   55  BANKING INSTITUTION TO OFFER, ACCEPT OR MAINTAIN IOBA'S.
       S. 4055                             3
    1    6.  ALL  PAPERS, RECORDS, DOCUMENTS OR OTHER INFORMATION IDENTIFYING A
    2  BROKER, CLIENT OR BENEFICIAL OWNER OF AN IOBA SHALL BE CONFIDENTIAL  AND
    3  SHALL  NOT BE DISCLOSED BY A BANKING INSTITUTION EXCEPT WITH THE CONSENT
    4  OF THE ATTORNEY MAINTAINING THE ACCOUNT OR  AS  PERMITTED  BY  ANY  LAW,
    5  REGULATION OR ADMINISTRATIVE REQUIREMENT.
    6    7.  A BROKER THAT CAN ESTABLISH THAT COMPLIANCE WITH SUBDIVISION THREE
    7  OF THIS SECTION HAS RESULTED IN ANY  BANKING  SERVICE  CHARGES  OR  FEES
    8  SHALL  BE ENTITLED TO REIMBURSEMENT OF SUCH EXPENSE FROM THE INTEREST ON
    9  LAWYER ACCOUNT FUND BY FILING A CLAIM WITH SUPPORTING DOCUMENTATION WITH
   10  THE FUND.
   11    S 2. Paragraphs d and g of subdivision 3 of section 97-v of the  state
   12  finance law, as added by chapter 659 of the laws of 1983, are amended to
   13  read as follows:
   14    d.  The board shall adopt rules and regulations for the administration
   15  of the IOLA fund to carry  out  the  purposes  and  provisions  of  this
   16  section and of [section] SECTIONS four hundred ninety-seven of the judi-
   17  ciary law AND FOUR HUNDRED FORTY-THREE-B OF THE REAL PROPERTY LAW.  Such
   18  regulations shall be adopted in accordance with article two of the state
   19  administrative procedure act.
   20    g.  Notwithstanding  any  statute  or  rule to the contrary, the board
   21  shall maintain all papers, records, documents or other information iden-
   22  tifying an attorney, BROKER, client  or  beneficial  owner  of  an  IOLA
   23  account  OR  AN INTEREST ON BROKER ACCOUNT on a private and confidential
   24  basis and shall not disclose such information unless such disclosure  is
   25  necessary  to  accomplish  the purposes of this section and section four
   26  hundred ninety-seven of the  judiciary  law,  or  unless  disclosure  is
   27  pursuant to compulsory legal process.
   28    S  3. The closing paragraph of section 98 of the state finance law, as
   29  amended by chapter 317 of the laws  of  1994,  is  amended  to  read  as
   30  follows:
   31    Notwithstanding  the  provisions  of any other general or special law,
   32  the comptroller shall not invest the moneys of any fund in any  security
   33  or  securities  except  as above described, provided, however, that: (a)
   34  the comptroller may, in order to maximize the rate of return on  invest-
   35  ments,  invest  the  moneys belonging to the New York interest on lawyer
   36  account fund in notes, securities and deposits of  banking  institutions
   37  which  accept  IOLA  AND/OR  INTEREST  ON  BROKER  accounts, and (b) the
   38  provisions of this section shall not limit the types of investments that
   39  may be made with moneys belonging to  the  volunteer  ambulance  service
   40  award  fund established by section two hundred nineteen-h of the general
   41  municipal law.
   42    S 4. This act shall take effect immediately; provided,  however,  that
   43  the  provisions  of  section one of this act shall not take effect until
   44  the board of trustees of the IOLA fund established under the  provisions
   45  of section 97-v of the state finance law, as added by chapter 659 of the
   46  laws  of  1983,  shall have certified to the secretary of state that the
   47  commissioner of internal revenue of the United States has ruled interest
   48  earned on an interest on broker account is not includable in  the  gross
   49  income  of either the broker maintaining the account or the gross income
   50  of the beneficial owner; provided further, that the secretary  of  state
   51  shall  notify  the legislative bill drafting commission as to whether or
   52  not the office of the  secretary  of  state  has  timely  received  such
   53  certification  in order that the commission may maintain an accurate and
   54  timely effective data base of the official text of the laws of the state
   55  of New York in furtherance of effectuating the provisions of section  44
   56  of the legislative law and section 70-b of the public officers law.