ARIZONA STATE SENATE
RESEARCH STAFF
TO: MEMBERS OF THE SENATE
FINANCE COMMITTEE
DATE: February 6, 2025
SUBJECT: Strike everything amendment to S.B. 1206, relating to banks; special deposits;
requirements
Purpose
Adopts the Uniform Special Deposits Act (Act), which governs bank deposits made under
an account agreement that designates at least one beneficiary who may receive payments from the
deposit, subject to a contingency. Outlines bank requirements and responsibilities and special
deposit permissible purposes and termination requirements.
Background
Statute defines a bank as a corporation that holds a banking permit issued by the
Department of Insurance and Financial Institutions. A bank may maintain all types of deposit
accounts, prescribe the terms and conditions relating to the accounts and seek out insurance on its
deposits by the Federal Deposit Insurance Corporation (A.R.S ยงยง 6-101 and 6-231).
The Uniform Law Commission is an organization that provides states with non-partisan
legislation which brings clarity and stability to critical areas of state statutory law. The Uniform
Special Deposits Act was drafted in 2023 and has been adopted in Colorado, Delaware, Oklahoma
and Washington (ULC).
There is no anticipated fiscal impact to the state General Fund associated with this
legislation.
Provisions
Special Deposits and Account Agreements
1. Specifies that a deposit is a special deposit if:
a) the deposit of funds was made under an account agreement;
b) the deposit is for the benefit of at least two beneficiaries, of which one or more may be a
depositor;
c) the deposit is denominated in a medium of exchange currently authorized or adopted by a
domestic or foreign government;
d) the deposit is for a permissible purpose as stated in the account agreement; and
e) the deposit is subject to a contingency.
2. Specifies that a depositor or a beneficiary does not have a property interest in a special deposit.
3. Stipulates that, if a bank is obligated to pay a beneficiary, a property interest in the special
deposit is limited to a right to receive payment and not in the special deposit itself.
ANASTASIA LOBO
LEGISLATIVE RESEARCH INTERN
MOLLY GRAVER
LEGISLATIVE RESEARCH ANALYST
FINANCE COMMITTEE
Telephone: (602) 926-3171 STRIKER MEMO
S.B. 1206
Page 2
4. Defines account agreement as an agreement that complies with all the following:
a) is in a record between a bank and one or more depositors;
b) may have one or more beneficiaries as additional parties; and
c) states the intention of the parties to establish a special deposit.
5. Deems a provision within an account agreement as insufficient for the purpose of excusing
liability or limiting a remedy for the failure to perform an administrative special deposit
obligation.
6. Allows a bank and depositor to amend an account agreement without the consent of the
beneficiary if:
a) the beneficiary is a party to the agreement and the agreement expressly permits an
amendment;
b) the beneficiary is not a party to the account agreement and the bank and depositor know
that the beneficiary has knowledge of the agreement's terms and the amendment does not
adversely and materially affect the beneficiary's right to receive payment; or
c) the beneficiary is not a party to the account agreement and the bank and depositor do not
know whether the beneficiary has knowledge of the account agreement's terms and the
amendment is made in good faith.
7. Requires a special deposit to serve at least one permissible purpose in the account agreement
until the special deposit terminates.
8. Defines permissible purpose as a governmental, regulatory, commercial, charitable or
testamentary objective of the parties in the account agreement and any of the following
associated duties:
a) to hold monies:
i. in escrow, including for a purchase and sale, lease, buyback or other transaction;
ii. as a security deposit of a tenant;
iii. for distribution as remuneration, retirement or other benefit, compensation under a
judgment, consent decree, court order or other decision of a tribunal; or
iv. for distribution to a defined class of persons after identification of the class members
and their interest in the funds;
b) to provide assurance when an obligation is created by a contract, such as earnest money to
ensure a transaction closes;
c) to settle an obligation that arises in the operation of a payment system, securities settlement
system or other financial market infrastructure;
d) to provide assurance when an obligation arises in the operation of a payment system,
securities settlement system or other financial market infrastructure; or
e) to hold margin, other cash collateral or monies that support the orderly function of a
financial market infrastructure or the performance of an obligation within the financial
market infrastructure.
Obligations, Rights and Duties of a Bank
9. Requires a bank to pay a beneficiary if there are sufficient actually and finally collected monies
in the balance of the special deposit unless the account agreement states otherwise. STRIKER MEMO
S.B. 1206
Page 3
10. Deems the bank's obligation to pay a beneficiary as immediately due and payable unless the
account agreement states otherwise.
11. Immunizes a bank from the obligation to pay a beneficiary if the monies available in a special
deposit are insufficient to cover a payment, except a beneficiary may elect:
a) to be paid the available monies; or
b) to receive a pro rata share of the available monies, if there is more than one beneficiary.
12. Specifies that a payment made in accordance with the beneficiary's election as outlined
discharges the obligation of the bank to pay a beneficiary and does not constitute an accord
and satisfaction regarding another person's obligation to the beneficiary.
13. Allows a bank to discharge its obligation to pay a beneficiary by either:
a) crediting another transaction account of the beneficiary; or
b) taking any other action that is either allowed under the account agreement for the bank to
obtain a discharge or that would constitute a discharge under the law.
14. Stipulates that, if a bank that is obligated to pay a beneficiary incurred the obligation to
discharge a person, the person's obligation is discharged if the bank's action constitutes a
discharge.
15. Prohibits a bank from exercising a right of recoupment or setoff against a special deposit,
except that a bank holding a special deposit may exercise a right of recoupment or setoff against
an obligation to pay a beneficiary, even if the bank funds payment from the special deposit.
16. Allows an account agreement to authorize the bank to debit a special deposit:
a) when the bank becomes obligated to pay a beneficiary in an amount that does not exceed
the amount necessary to discharge the obligation;
b) for an overdraft fee;
c) for any costs incurred by the bank that relate directly to a special deposit; or
d) to reverse an earlier credit that was posted by the bank to the balance of the special deposit,
if the reversal is to correct a mistake.
17. Specifies that a bank does not have a fiduciary duty to any person with respect to a special
deposit.
18. Specifies that a debtor-creditor relationship exists between the bank and a beneficiary only
when the bank holding the special deposit becomes obligated to pay the beneficiary.
19. Specifies that a bank that holds a special deposit:
a) has a duty to a beneficiary to comply with the account agreement and the Act;
b) is liable to a depositor or a beneficiary for any damages, except for consequential, special
or punitive damages, that are caused by the bank's noncompliance with the account
agreement or the Act; and
c) may rely on records that comply with an account agreement to determine whether the bank
is obligated to pay a beneficiary. STRIKER MEMO
S.B. 1206
Page 4
20. Stipulates that, if an account agreement requires payment or action by a bank on presentation
of a record, the bank:
a) must determine, within a reasonable time, whether the record is sufficient to require
payment; and
b) is not liable for relying in good faith on the genuineness of the record.
21. Exempts a bank from determining whether a permissible purpose stated in the account
agreement continues to exist unless the account agreement states otherwise.
Enforceability of Creditor Process
22. Prohibits a creditor process from being enforceable against a bank that is holding a special
deposit, unless the creditor process:
a) is served on the bank;
b) provides sufficient information that allows a bank to identify the depositor or the
beneficiary from the bank's books and records; and
c) gives the bank reasonable opportunity to act on the creditor process.
23. Specifies that a creditor process served on a bank before the creditor process is enforceable
does not create a right of the creditor against the bank or a duty of the bank to the creditor.
24. Specifies that other law determines whether the creditor process creates a lien enforceable
against the beneficiary on a contingent interest of a beneficiary, even if not enforceable against
the bank.
Termination of Special Deposits
25. Allows a bank that determines that a special deposit no longer satisfies the permissible purpose
requirement to take action that it believes is necessary under the circumstances, including
terminating the special deposit.
26. Stipulates that, if a bank or court determines that a special deposit does not satisfy the
permissible purpose requirement, the property interest prohibition, creditor process
enforceability and rights to legal relief and against recoupment for a special deposit cease to
apply to any monies in the deposit after the deposit ceases to meet the permissible purpose
requirement.
27. Terminates a special deposit not more than five years after the date that the special deposit was
first funded, unless otherwise provided in an account agreement.
28. Requires a bank to pay the special deposit balance remaining to the depositor, if the bank
cannot identify or locate a beneficiary that is entitled to payment when the special deposit is
terminated, unless otherwise provided in the account agreement.
29. Specifies that a bank that pays the remaining balance of a special deposit to the depositor has
no further obligation to the special deposit. STRIKER MEMO
S.B. 1206
Page 5
Miscellaneous
30. Allows a court to enjoin a bank, or grant similar relief, against paying a depositor or beneficiary
only if the payment would constitute or facilitate material fraud.
31. Applies the Act:
a) to a special deposit under an account agreement that states the intention to establish a
special deposit governed by the Act regardless of whether a party to the account agreement
or a transaction associated with a special deposit has a reasonable relation to the state;
b) to a special deposit made under an account agreement executed on or after the general
effective date; and
c) a deposit made under an agreement executed before the general effective date, if:
i. all parties entitled to amend the agreement agree to make the deposit a special deposit
governed by the Act; and
ii. the special deposit referenced in the amended agreement satisfies the outlined
requirements to establish a special deposit.
32. Allows the parties of an account agreement to choose a forum in Arizona for settling a dispute
regarding a special deposit regardless of whether a party to the account agreement or an
associated transaction has a reasonable relation to the state.
33. Requires a court to consider, in applying and construing the Act, the promotion of uniformity
of the law among enacting jurisdictions.
34. Specifies that the Act does not affect:
a) a right or obligation that relates to a deposit other than a special deposit; or
b) voidability of a deposit or transfer that is fraudulent or voidable under the law.
35. Contains a severability statement.
36. Outlines statutes that supplement the Act, except to the extent of inconsistencies.
37. Designates this legislation as the Uniform Special Deposits Act.
38. Defines terms.
39. Becomes effective on the general effective date.