Opinion No. (2000)

BILL LOCKYER Attorney General GREGORY L. GONOT Deputy Attorney General THE DEPARTMENT OF FINANCIAL INSTITUTIONS has requested an opinion on the following question: Is a bank required to pledge securities for deposits consisting of funds held in trust for employees of a local government as compensation deferred from income taxation pursuant to the terms of Internal Revenue Code section 457? CONCLUSION A bank is required to pledge securities for deposits consisting of funds held in trust for employees of a local government as compensation deferred from income taxation pursuant to the terms of Internal Revenue Code section 457. ANALYSIS Funds owned or held by a local government are subject to numerous statutory restrictions and conditions designed to safeguard the funds. ( 79 Ops.Cal.Atty.Gen. 1 , 3-6 (1996); 57 Ops.Cal.Atty.Gen. 534 , 535-536 (1974).) Among the requirements is that a bank must pledge collateral for deposited funds. (Gov. Code, §§ 53635 , 53652 .) 1 We are asked whether the pledged collateral requirement applies to deferred compensation funds held in trust on behalf of employees of a local government. We conclude that the requirement is applicable to such…