Illinois General Assembly - Illinois Compiled Statutes

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205 ILCS 620/2-8

(205 ILCS 620/2-8) (from Ch. 17, par. 1552-8)

Sec. 2-8.

Collateralizing fiduciary assets.

(a) A corporate fiduciary shall not be required and shall not have the power
to collateralize or secure fiduciary funds except as provided in this Section.

(b) All funds, both principal and income, deposited with or held in a
fiduciary capacity by any corporate fiduciary awaiting investment or
distribution, and not otherwise subject to direction regarding investment or
non-investment, shall to the extent reasonable under existing circumstances, be
prudently invested for the beneficiaries at a rate of return commensurate with
that available on trust quality investments.

(c) Funds, both principal and income awaiting investment or distribution,
may be deposited in deposit accounts or other investment vehicles of the
corporate fiduciary, or of any affiliate of the corporate fiduciary; and funds,
both principal and income awaiting investment or distribution which need not be
invested hereunder for the beneficiaries may be commingled with the corporate
fiduciary's own funds and used by the corporate fiduciary in the conduct of its
business, provided that in either case the following apply:

(1) The corporate fiduciary or, in the case of the

deposit in an affiliate, such affiliate shall set aside in the corporate fiduciary or affiliate, as the case may be, as collateral, securities of the classes in which corporate fiduciaries are authorized to invest trust funds under  the laws of the State of Illinois.

(2) The market value of the collateral may not be

less than 100% of the amount commingled or deposited.

(3) No collateral shall be required or authorized if

the deposit is made solely at the direction and determination of the settlor, beneficiary or other person, other than the corporate fiduciary, having the right to direct investment of funds.

(4) No collateral shall be required or authorized

with respect to any part of such deposit which is insured by the Federal Deposit Insurance Corporation.

(d) Funds shall not be held commingled and uninvested or undistributed for
an account any longer than is reasonable under existing circumstances for the
proper management of the account.

(e) The collateralization required in this Section is not required or
authorized if the corporate fiduciary or affiliate has in force a surety bond
meeting the requirements of this Section if it is in a form approved by the
Commissioner and if it indemnifies the owners, settlors, or beneficiaries of
funds held in a fiduciary capacity against loss due to the failure of the
corporate fiduciary or affiliate and is issued by a licensed insurance company
authorized to transact business in the State that has been approved by the
Commissioner for the purpose of issuing surety bonds under this Section.  A
corporate fiduciary or affiliate may also satisfy the requirements of this
Section by a combination of a surety bond and collateralization as provided in
this Section.

(f) In the event of the failure of the corporate fiduciary or affiliate in
which the corporate fiduciary has made a deposit or commingled funds, the
owners
of the fiduciary funds shall have a first lien, to the extent of their
interest in such funds, on the cash and securities used as collateral hereunder
or the surety bond in addition to their claim against the estate of the
corporate fiduciary.

(Source: P.A. 88-636, eff. 9-9-94; P.A. 88-662, eff. 9-16-94; 89-364, eff.
8-18-95.)