Section 3501.5  Introduction

 

All companies are hereby required, by resolution of  their Board of Directors or other appropriate action, to conform their internal functions to the minimum standards established in this Part.

 

(Source:  Amended at 43 Ill. Reg. 7245, effective June 13, 2019)

 

Section 3501.7  Definitions

 

"Act" means the Farm Mutual Insurance Company Act of 1986 [215 ILCS 120].

 

"Company" means any company described in Section 1 of the Act.

 

"Department" means the Illinois Department of Insurance.

 

"Director" means the Director of the Illinois Department of Insurance.

 

"Security" has the meaning ascribed in Section 2.1 of the Illinois Securities Law of 1953 [815 ILCS 5].

 

(Source:  Added at 43 Ill. Reg. 7245, effective June 13, 2019)

 

Section 3501.10  Registration of Securities

 

a)         All securities belonging to or in the possession, custody or control of any company shall be registered, issued to, and carried in the name of the company except:

 

1)         Securities pledged or hypothecated with the company as security for indebtedness or obligations to the company;

 

2)         Securities that are only issuable in bearer form, i.e., securities that cannot be issued in registered form;

 

3)         Securities in "custodial" accounts maintained with a bank or trust company, licensed by the United States or any state thereof, that is regularly examined by the licensing authority; provided the custodial accounts shall be the undivided responsibility of the depository and provided further that the custodial account shall be established conformably with and conducted in compliance with Section 3501.20;

 

4)         Securities in vaults or other repositories on the premises of the company, or in safe deposit boxes leased in the name of the company, access to which is controlled as required by Section 3501.20;

 

5)         Securities in street form and in the custody of a registered dealer in securities, for a period not exceeding 30 days as to any security, provided that the registered dealer in securities shall not be an officer, director, agent or employee of the owner of those securities and provided further that accounts with registered dealers shall be established conformably with and conducted in compliance with Section 3501.20;

 

6)         Money shall not be loaned to any officer, director, employee, policyholder of the company or any other individual.

 

(Source:  Amended at 43 Ill. Reg. 7245, effective June 13, 2019)

 

Section 3501.20  Custody Care and Disposition of Securities

 

a)         Transfer, sale, assignment or disposition of any security belonging to any company, other than upon the surrender of the security for payment at maturity or under an option of the maker to prepay the same, shall first have been authorized by the Board of Directors or by a Board committee charged with the duty of supervising investments and loans.

 

b)         Any instrument for the assignment, sale, transfer or disposition of any securities and all checks or other orders for disbursement of funds of the company in connection with the purchase of any securities shall require the signature of at least two officers or employees authorized by the Board of Directors or by a Board committee charged with the duty of supervising investments and loans.

 

c)         Access to any and all vaults or other repositories on the premises of any company containing securities of the company and access to any safe deposit boxes containing those securities shall be limited to officers and employees designated by the Board of Directors. The designation shall require that at least two of the designated persons  be present at the time of entry and during the access to the vault, repository or safe deposit box.

 

d)         All securities and original records of the company shall be kept in fire resistant files or vaults.

 

(Source:  Amended at 43 Ill. Reg. 7245, effective June 13, 2019)

 

Section 3501.30  Signature to Checks-Facsimile Signatures

 

a)         All checks issued for the disbursement of funds belonging to a company shall require the signature of at least two officers or employees of the company who have been authorized by its Board of Directors. All checks shall be numbered and recorded consecutively in an original record of cash disbursements.

 

b)         All collections made by agents or representatives of the company must be turned over to the company at least every three months or more often if the volume of cash warrants.

 

c)         All receipts of the company must be deposited in the bank intact in the name of the company.  Receipts must not be deposited in the name of an officer of the company.

 

d)         Companies must retain a duplicate deposit slip covering all bank deposits and listing all checks in detail, in addition to an original record of all cash receipts.

 

(Source:  Amended at 43 Ill. Reg. 7245, effective June 13, 2019)

 

Section 3501.40  Bank Balance Verification

 

Verification of bank account balances and reconciliation of bank account statements shall be made by an officer or employee not empowered or authorized to approve payment of drafts or to make withdrawals from or charges against such accounts.

 

Section 3501.50  Bond Requirements

 

a)         All companies shall procure and maintain in force the surety bonds required under Section 8(6) of the Act in accordance with the standards provided in 50 Ill. Adm. Code 904.50(a).

 

b)         Surety bonds procured or maintained under this Section shall include all persons handling company funds and all officers, directors and employees for the following perils, which may be covered under separate policies:

 

1)         Dishonesty of persons handling company funds and of officers, directors and employees;

 

2)         Robbery, burglary, larceny, theft, false pretense, holdup, misplacement, mysterious disappearance, and damage or destruction while property is in any bank or any recognized place of safe deposit, or in transit; and

 

3)         Forgery or alteration.

 

(Source:  Amended at 43 Ill. Reg. 7245, effective June 13, 2019)

 

Section 3501.60  Records

 

a)         Each company shall keep its books, records, documents, accounts and vouchers in such manner that its financial condition can be ascertained, its financial statements filed with the Director can be readily verified, and its compliance with the law can be determined.

 

b)         The books of the company must be closed as of December 31.  (See Section 13 of the Act.)

 

c)         Original records may not be destroyed without first securing authority of the Director.  (See 50 Ill. Adm. Code 3502.)

 

d)         A policy register that properly reflects all changes in the policy during its term should be maintained.

 

e)         Original records shall be kept in fire resistant files.

 

f)         A petty cash fund, if maintained, shall be for the payment of small bills or for making change only.  Each disbursement from the fund must be supported by a signed voucher or receipted invoice.  The total of the cash, checks and paid vouchers in the fund shall at all times equal the total of the fund as originally set up.  The petty cash fund should be reimbursed at regular intervals and always on the last business day of each year.

 

(Source:  Amended at 43 Ill. Reg. 7245, effective June 13, 2019)

 

Section 3501.EXHIBIT A   Bond Amounts For Amount of Assets (Repealed)

 

(Source:  Repealed at 43 Ill. Reg. 7245, effective June 13, 2019)