RÉSUMÉ DIGEST
ACT 376 (HB 284) 2021 Regular Session Illg
Existing law authorizes the treasurer to engage in securities lending and to contract with one
or more financial institutions to act as securities lending agents for the state. New law
defines the term "securities lending" for the purposes of existing and new 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 existing and new law to mean a bank
or a registered securities broker-dealer.
Prior law required a securities lending agent to indemnify the state for any losses resulting
from the default of a borrower. New 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.
Existing 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 existing 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 existing law for investment of monies on deposit in
the state treasury (R.S. 49:327(B)). New law further authorizes investment of cash collateral
in securities authorized for investment under existing law for the La. Education Quality Trust
Fund (R.S. 17:3803) or acceptance as collateral of securities authorized for investment
pursuant to existing law for the La. Education Quality Trust Fund (R.S. 17:3803).
With respect to securities pledged as collateral for a securities lending transaction, existing
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. Prior law also
applied this 102%-of-market-value-plus-accrued-interest requirement to cash collateral for
a securities lending agreement. New law lowers this requirement 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.
New 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.
New 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.
Effective August 1, 2021.
(Amends R.S. 49:321.1)