HLS 21RS-625 ORIGINAL
2021 Regular Session
HOUSE BILL NO. 284
BY REPRESENTATIVE ILLG
Prefiled pursuant to Article III, Section 2(A)(4)(b)(i) of the Constitution of Louisiana.
TREASURER: Provides relative to securities lending
1 AN ACT
2To amend and reenact R.S. 49:321.1, relative to securities lending; to provide requirements
3 and prohibitions for securities lending contracts involving securities from state
4 funds; to provide with respect to the authority of the treasurer; and to provide for
5 related matters.
6Be it enacted by the Legislature of Louisiana:
7 Section 1. R.S. 49:321.1 is hereby amended and reenacted to read as follows:
8 ยง321.1. Treasury securities lending
9 A. Notwithstanding any provision of law to the contrary, the treasurer may
10 engage in securities lending and may engage one or more financial institutions to act
11 as securities lending agents for the state. For the purposes of this Section, the term
12 "securities lending" shall mean a contract by which securities are supplied to a
13 securities lending agent for a fee and secured by a pledge of collateral with a value
14 equal to or greater than the securities supplied and the term "securities lending agent"
15 shall mean a bank or a registered securities broker-dealer.
16 B. Each securities lending agent shall indemnify the state for any losses
17 resulting from the insolvency of a borrower. Such indemnification shall be in
18 writing and contained in the securities lending contract.
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HB NO. 284
1 C. In the event of securities lending from any funds administered by the state
2 treasury, all of the If securities from any fund administered by the state treasury are
3 used for securities lending, all of the following requirements shall be met:
4 (1) The collateral for the securities lending contract shall be in the form of
5 either cash or securities.
6 (a) If the borrower provides cash as collateral, the contract between the
7 borrower and the securities lending agent shall require the following:
8 (i) The funds pledged as collateral to be in United States currency.
9 (ii) The borrower to maintain the total value of all pledged collateral at an
10 amount equal to or greater than one hundred percent of the total market value of the
11 securities on loan from the state for the transaction, plus any accrued interest.
12 (b) If the borrower provides securities as collateral, the contract between the
13 borrower and the securities lending agent shall require the following:
14 (i) The total value of the initial collateral pledged for the loan to be at least
15 equal to one hundred and two percent of the total market value of the securities on
16 loan from the state for the transaction.
17 (ii) If after the initial pledge of collateral the total market value of securities
18 pledged as collateral falls below one hundred percent of the total market value of the
19 securities on loan from the state for the transaction, plus accrued interest, the
20 borrower shall transfer additional collateral sufficient to bring the total value of
21 pledged collateral to at least one hundred and two percent of the total market value
22 of the securities on loan from the state for the transaction, plus accrued interest.
23 (iii) Only securities authorized for investment by the treasurer pursuant to
24 R.S. 49:327(B) or R.S. 17:3803(B) may be provided as collateral.
25 (2) The securities lending agent, or the custodian of the collateral securities
26 and the custodian of the securities on loan, shall determine the market value of the
27 collateral securities and the securities on loan each business day and report these
28 market values to the treasurer.
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HB NO. 284
1 D. Cash collateral pledged for a securities lending contract executed pursuant
2 to the provisions of this Section may be invested in any securities authorized for
3 investment by the treasurer pursuant to R.S. 17:3803(B) or R.S. 49:327(B).
4 The borrower shall provide collateral with a value equal to or greater than one
5 hundred two percent of the market value of the securities lent by the state plus any
6 accrued interest.
7 (2) The collateral shall be in the form of either cash, which may be invested
8 in securities under Paragraph (3) of this Subsection, or securities that are authorized
9 investments under R.S. 49:327(B).
10 (3) The collateral received as security for such lending shall be invested as
11 authorized in R.S. 49:327(B) and held for safekeeping by a custodian.
12 C. The securities lending agent shall indemnify the state for any losses
13 resulting from the default of a borrower.
DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part
of the legislative instrument. The keyword, one-liner, abstract, and digest do not constitute
part of the law or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
HB 284 Original 2021 Regular Session Illg
Abstract: Provides requirements and prohibitions on securities lending contracts entered
into by the treasurer.
Present law authorizes the treasurer to engage in securities lending and to engage one or
more financial institutions to act as securities lending agents for the state. Proposed law
retains present law and further defines the term "securities lending" for the purposes of
present and proposed law to mean a contract by which securities are supplied to a securities
lending agent for a fee and secured by a pledge of collateral with a value equal to or greater
than the securities supplied. Defines the term "securities lending agent"for the purposes of
present and proposed law to mean a bank or a registered securities broker-dealer.
Present law requires a securities lending agent to indemnify the state for any losses resulting
from the default of a borrower. Proposed law requires indemnification for losses resulting
from the insolvency of a borrower. Further requires such indemnification to be in writing
and contained in the securities lending contract between the state and the securities lending
agent.
Present law requires the borrower to provide collateral. Authorizes the collateral to be in the
form of cash, which may be invested in securities authorized under present law for the
investment of monies on deposit in the state treasury (R.S. 49:327(B)) or in securities
authorized for investments pursuant to present law for investment of monies on deposit in
the state treasury (R.S. 49:327(B)). Proposed law retains present law and further authorizes
investment of cash collateral in securities authorized for investment under present law for
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HB NO. 284
the La. Education Quality Trust Fund (R.S. 17:3803) or acceptance as collateral of securities
authorized for investment pursuant to present law for the La. Education Quality Trust Fund
(R.S. 17:3803).
Present law requires a borrower to provide collateral with a value equal to or greater than
102% of the market value of the securities lent by the state, plus any accrued interest.
Proposed law retains present law with respect to securities pledged as collateral for a
securities lending transaction. Further lowers the collateral value that must be maintained
for cash collateral from 102% of the total market value of the securities lent, plus accrued
interest to 100% of the total market value of the securities lent, plus accrued interest.
Proposed law further provides that if the market value of any securities pledged as collateral
falls below 100% of the total market value plus accrued interest of the securities on loan, the
borrower must submit additional collateral sufficient to bring the total value of pledged
collateral equal to or greater than 102% percent of the total market value of the securities on
loan plus any accrued interest.
Proposed law requires the securities lending agent, or the custodian of the collateral
securities and the custodian of the securities on loan, to determine the market value of the
collateral securities and the securities on loan each business day and report these market
values to the treasurer.
(Amends R.S. 49:321.1)
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