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ARIZONA HOUSE OF REPRESENTATIVESFifty-seventh Legislature First Regular Session |
Senate: FIN DP 4-3-0-0 | 3rd Read 17-12-1-0 |
SB 1096: bullion depository; establishment
Sponsor: Senator Hoffman, LD 15
Committee on Regulatory Oversight
Overview
Establishes the Arizona Bullion Depository under the Department of Insurance and Financial Institutions (DIFI) and outlines procedures for the exchange of bullion, specie and transactional currency.
History
DIFI was established to safeguard the public welfare by protecting the financial assets of the citizens of Arizona and is charged with licensing, supervising and regulating state-chartered financial institutions and enterprises. DIFI ensures that financial institutions in this state are in compliance with federal, state and local laws related to insurance, banking and other enterprises under DIFI's jurisdiction (A.R.S. 20-141 et seq.).
A similar bill was introduced in the 56th Legislature, 2nd Regular Session and was held in the House (SB 1633 bullion depository; establishment).
Provisions
Establishing the Arizona Bullion Depository
1. Establishes the Arizona Bullion Depository (Depository) under the administration of DIFI. (Sec. 1)
2. Designates the Depository as the custodian, guardian and administrator of certain bullion and specie that may be transferred to or acquired by the state or an agency, political subdivision or another instrumentality of the state. (Sec. 1)
3. Allows DIFI to contract with a third party to administer the daily operations of the Depository. (Sec. 1)
4. Permits the State Treasurer to deposit a portion of state monies in the Depository in the form of bullion and specifies that the deposit is considered part of this state's financial reserves. (Sec. 1)
Depository Administrator
5. Directs the DIFI Director (Director) to hire a Depository administrator (Administrator) who serves at the discretion of the Director. (Sec. 1)
6. Authorizes the Administrator to:
a) manage, supervise and direct the operations and affairs of the Depository and its agents;
b) liaise with DIFI to ensure that each transaction with the Depository is planned, administered and executed in a manner compliant with the Depository's statutes; and
c) ensure the Depository has current and efficient safety protocols to prevent theft of or unauthorized access to bullion. (Sec. 1)
7. Allows the Administrator to appoint or employ, subject to the Director's approval, a deputy administrator or subordinate officers or employees as necessary to effectuate the administration and security of the Depository. (Sec. 1)
Deposits and Depository Accounts, Standards, Audits, Conflicts of Interest
8. Permits the Depository to receive a deposit of bullion or specie, or both, in accordance with rules adopted by the Director as appropriate to ensure compliance with the law and to protect the interests of the Depository, its account holders, the public, this state and the state's agencies, political subdivisions and instrumentalities. (Sec. 1)
9. Requires the Depository to:
a) record the amount of precious metals a person deposits in units of pure troy ounces, regardless of the form in which the deposit was made, and specify the type and quantity of each precious metal deposited; and
b) adjust each Depository account balance to reflect deposits, or withdrawals or deliveries from, the Depository account. (Sec. 1)
10. Directs DIFI to contract with an independent third party to conduct audits at least biannually to:
a) verify the amount and value of the bullion or specie, or both, stored in the Depository; and
b) inspect the security measures and safety protocols in place. (Sec. 1)
11. Specifies that the third party with which DIFI contracts must be an established provider with a proven record of providing auditing services to depository institutions. (Sec. 1)
12. Allows the public to request, at a minimum, a summary of totals of previous precious metal amounts and any discrepancies found during an audit of the Depository. (Sec. 1)
13. Exempts from public disclosure items that would jeopardize confidential Depository information or the Depository's security protocols. (Sec. 1)
14. Asserts that the Administrator and any employee, official or third party associated with the oversight or operation of the Depository:
a) may not have any financial interests in companies or entities that produce, manage or sell bullion; and
b) must disclose any potential conflict of interest to DIFI immediately on discovery. (Sec. 1)
15. Specifies that any violation of the requirements relating to financial interests or conflicts of interest may result in termination, fines or other legal penalties as determined by DIFI. (Sec. 1)
16. Requires the Administrator to provide quarterly reports to DIFI detailing the operations, transactions and financial status of the Depository. (Sec. 1)
17. Directs DIFI to submit an annual report to specified state officials. (Sec. 1)
Administration of Transactional Currency
18. Requires the Director to issue specie and establish a transactional currency as determined to be practicable. (Sec. 1)
19. Allows the Director to contract with a private vendor to establish the transactional currency or perform other duties related to the administration of transactional currency. (Sec. 1)
20. Requires the Director to establish, for transactional currency, a means to ensure:
a) a person or this state that holds the transactional currency may use that currency as legal tender to pay a debt or assign it to another person or this state; and
b) the electronic means of the transfer of transactional currency to another person or this state is expedient. (Sec. 1)
21. Requires the Director, with regard to specie, to:
a) authorize the Depository as this state's exclusive issuer;
b) ensure the holder of the specie may use the specie as legal tender to pay a debt; and
c) ensure the expedient transfer of transactional currency to another person or this state and that specie is readily transferable. (Sec. 1)
Bullion Depository Account
22. Enables the Director, who serves as trustee, or the Director's designee, to:
a) hold in trust on behalf of the transactional currency holders all specie and bullion owned or purchased for transactional purposes;
b) maintain enough specie or bullion to provide for the redemption of all units of the transactional currency issued but not redeemed; and
c) establish a pooled depository account as outlined in the bill. (Sec. 1)
Fees for Purchase and Issuance of Transactional Currency
23. Authorizes the Administrator to issue the transactional currency to a person or this state on payment:
a) to the Depository to purchase specie or bullion, or both, and on payment of an applicable fee; and
b) to designate specie or bullion, or both, held on account and on payment of an applicable fee. (Sec. 1)
24. Instructs the Director, on receipt of payment, to:
a) buy specie or bullion, or both, using the money received, in the number of troy ounces of precious metal equal to the number of units in the transactional currency and issue that transactional currency to the purchaser;
b) deposit such specie or bullion into the pooled Depository account for the purchaser; and
c) issue to the purchaser a Depository account with, or add to an existing account, the number of units of the transactional currency equal to the amount of specie or bullion that the purchase monies would buy at the market price on that date as published by the Depository. (Sec. 1)
25. Directs DIFI to establish the fee charged for the purchase of bullion or specie. (Sec. 1)
Transactional Currency for U.S. Dollars
26. Allows a person to present to the Administrator any number of units of transactional currency to redeem for U.S. Dollars. (Sec. 1)
27. Requires the Administrator, on receipt of a person's request for redemption, to:
a) sell from the specie or bullion held in the pooled Depository account the number of troy ounces of specie or bullion equal to the number of U.S. Dollars of the transactional currency that is being redeemed; and
b) provide to the person the amount of U.S. Dollars equal to the amount received from the sale of specie or bullion, minus a fee charged. (Sec. 1)
28. Directs DIFI to establish a fee for the redemption of transactional currency for U.S. Dollars. (Sec. 1)
Transactional Currency for Specie or Bullion
29. Allows a Depository account holder to present to the Administrator any number of units of the transactional currency to redeem for an equal number of troy ounces of specie or bullion from the pooled Depository account. (Sec. 1)
30. Requires the Administrator, on receipt of a person's request for redemption, to:
a) withdraw the equivalent number of troy ounces of specie or bullion from the pooled depository account; and
b) deliver the specie or bullion as requested on receipt of the fee. (Sec. 1)
31. Directs DIFI to establish a fee for the redemption of transactional currency for specie or bullion. (Sec. 1)
Value of Transactional Currency
32. Requires the Director, at the time of each transaction that issues or redeems transactional currency, to determine the value of a unit of the transactional currency as published by the Depository. (Sec. 1)
33. Requires the value of a unit of transactional currency, at the time of each transaction, to be equal to the value of the appropriate fraction of a troy ounce of precious metal as published by the Depository. (Sec. 1)
Monies and Deposits in the Pooled Depository Account
34. Clarifies that specie or bullion purchased and deposited in the pooled Depository account and monies received from the sale of specie or bullion in the pooled Depository account, in response to a request for redemption, are both:
a) held by the Director as trustee on behalf of the persons who hold the transactional currency; and
b) not available for legislative appropriation. (Sec. 1)
Miscellaneous
35. Prohibits foreign nations and enemies of the U.S. from using any service provided by the Depository. (Sec. 1)
36. Allows the Director to adopt rules as necessary. (Sec. 1)
37. Allows DIFI to charge a standard industry merchant fee. (Sec. 1)
38. Authorizes no more than 10% of the fees established by DIFI to be used to administer the Depository. (Sec. 1)
39. Directs the Director to deposit the net fee proceeds, after administrative costs, into the state General Fund. (Sec. 1)
40. Defines pertinent terms. (Sec. 1)
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44. SB 1096
45. Initials DC/GG Page 0 Regulatory Oversight
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