Supreme Court amends IOTA rule

first_imgSupreme Court amends IOTA rule Mark D. Killian Managing Editor The Florida Supreme Court has amended Bar rules to open the IOTA program to financial institutions other than banks and require those holding the trust accounts to pay interest rates or dividends commensurate with those offered to their non-IOTA depositors.“Not only does this amendment have the unanimous endorsement of the [Bar] Board of Governors, but nearly all of the comments received have been overwhelmingly in favor of the purpose behind the amendments,” the unanimous court said in its June 14 opinion amending Rules 5-1.1(e). Case no. SC01-851.The Florida Bar Foundation sought the amendment as a way to increase IOTA revenues by broadening the types of institutions that may participate in IOTA. Florida Bar Foundation President A. Hamilton Cooke said the new provision has the potential to double the money generated by the IOTA program and includes language that requires any institution that wants to handle IOTA accounts to offer the same market rate of interest or dividends on products available to non-IOTA depositors with comparable balances. “We are extremely pleased by the court’s action,” Cooke said. “Of course, the real beneficiaries are the individuals and families served by IOTA legal aid grantees. The Foundation will work directly with banks and savings and loan associations, which currently hold IOTA accounts, to implement the new rule. July 1, 2001 Managing Editor Regular News Supreme Court amends IOTA rulecenter_img “The Florida Banker’s Association was very helpful in this whole process, and we look forward to working cooperatively with our bank and savings and loan association partners, and to a smooth transition,” he added. “We also expect to meet very shortly with investment companies to familiarize them with the IOTA program and the fact that IOTA programs in several other large states have expressed interest in securing similar rule amendments.”Under the plan, the Foundation, not the lawyer, will be responsible for initiating steps to implement the new rule and for monitoring usage of banks’ and financial services companies’ existing products available to non-IOTA depositors, in order to determine compliance with the IOTA rule.In accordance with the Foundation’s request, the court made the amendment effective July 14.“However, those institutions currently holding IOTA accounts that elect to participate in IOTA under the new rule shall be provided six months to comply with the new eligibility requirements,” the court said. “The Foundation shall be charged with the responsibility of determining the initial and continuing eligibility of banks, savings and loan associations, and investment companies to hold IOTA accounts in accordance with the criteria set forth in the rule.”The old rule permitted only banks or authorized savings and loan associations to participate in IOTA. Under the new amendments, open-end investment companies will be allowed to qualify as eligible institutions in which IOTA accounts may be established. The amendment also allows the use of government money market funds for IOTA funds; however, only money market funds that are registered with the Securities and Exchange Commission, and are comprised solely of United States government securities, are permitted for use in the IOTA program. The court also said only those money market funds with a total asset value of at least $250 million would be eligible to participate.Foundation Executive Director Jane Curran said the rule change means financial services companies such as Morgan Stanley or Merrill Lynch will be able to hold IOTA accounts.Under the current program, Curran said, total IOTA revenue will amount to about $11 million this year, and has been steadily falling since the mid-1990s as interest rates have waned and bank service charges have risen. At its peak, IOTA was generating about $19 million a year for legal aid, administration of justice, and law student assistance programs. Due to the combination of low interest rates and high services changes, the Foundation has been forced to reduce grants by 15 percent over the past two years.The court also said in light of the concerns expressed in the comment of the Florida Bankers Association, the final rule was clarified to reflect the intent that there be interest parity between IOTA accounts and non-IOTA accounts held in the same financial institution.“The Foundation recognizes, however, that the interest rates offered are not based on account balance alone,” the court said.“We adopt the FBA’s suggested revisions to proposed subdivision (e)(5)(A) and add proposed subdivision (B) to the rule,” the court said. “The Foundation has indicated it has no objection to the FBA’s suggested revisions. We thank the FBA for its assistance, cooperation and constructive suggestions.”As part of the plan, the Foundation also said it will independently work with banks and financial services companies to develop appropriate products which are in compliance with the IOTA rule.That would include providing them computer and technical support needed to remit IOTA earnings to the Foundation and conduct the required reporting.More information about how the new IOTA rule will operate can be found on the Bar’s website at A. Hamilton Cooke last_img

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