17:9A-31. Security fund

A. A qualified bank may create a fund to be held as security for the performance of its obligations in fiduciary capacities for which security shall be required, except those for which other security is given or for which a will or other fiduciary instrument specifies that other security be given. Such fund shall consist of investments in which a fiduciary, whose duty it may be to loan or invest money held in a fiduciary capacity, may, by law, without special order of any court, invest such money, or any part thereof. Such fund shall have a value at least equal to twenty per centum (20%) of the aggregate value on the books of the qualified bank of all the assets administered by such bank in all such fiduciary capacities, except that, when the value of such assets is in excess of one million dollars ($1,000,000.00) but not in excess of five million dollars ($5,000,000.00), the value of the fund need not exceed two hundred thousand dollars ($200,000.00) plus seven and one-half per centum (7 1/2 %) of the excess over one million dollars ($1,000,000.00); and, when the value of such assets exceeds five million dollars ($5,000,000.00), the value of the fund need not exceed five hundred thousand dollars ($500,000.00). For the purposes of this section, the investments included in the fund shall be valued at market value or at the value at which they are carried on the books of the qualified bank, whichever is lower. If an investment included in the fund shall have ceased to be an investment of the kind specified in this subsection, it shall be withdrawn from the fund by the qualified bank within sixty days from the date it ceased to be such an investment, unless the time for such withdrawal is extended by order of the Superior Court.

B. The investments comprising the fund created pursuant to this section shall be deposited by the qualified bank on order of the Superior Court with the Federal Reserve bank of the district in which the qualified bank is located, or with another qualified bank which the commissioner shall have approved as a depositary for the purposes of this section, and shall be held by the depositary thereof subject to the order of the Superior Court. Except as otherwise provided by subsection C of this section, withdrawals of and substitutions for the investments included in such fund may be made in accordance with an order of the Superior Court; provided, that the provisions of this section shall at all times be complied with. The fund may, on order of the Superior Court, be withdrawn in its entirety upon proof that all obligations secured thereby have been satisfied. Application for the withdrawal or substitution of investments may be made to the Superior Court without notice to the depositary of the fund, and the order or judgment of the Superior Court, certified by the Clerk of the Superior Court to be a true copy, shall be sufficient warrant to the depositary to permit such withdrawal or substitution.

C. The depositing bank may, from time to time, without application to or order of the Superior Court, substitute for United States Treasury bonds included in such fund, other United States Treasury bonds in like principal amount, and the depositary shall permit such substitution at the request of the depositing bank. Within five days after such substitution, the depositary bank shall file a verified report thereof in the office of the Clerk of the Superior Court, which shall list the United States Treasury bonds, and the amount thereof, withdrawn from such fund, and the United States Treasury bonds, and the amount thereof, substituted therefor.

D. Investments deposited as provided in this section, if not transferable by delivery, shall be assigned to "The Clerk of the Superior Court, State of New Jersey" by separate instruments of assignment which shall be deposited with the investments. Until recourse is had to the fund as specified in section thirty-two, the depositing bank shall be entitled to all income from the fund, and the Clerk of the Superior Court shall execute such instruments as shall be necessary for that purpose.

E. The commissioner shall report to the Superior Court any violations of this section which come to his notice as a result of the examination of a qualified bank or otherwise, and the Superior Court shall thereupon make such order as it shall deem necessary for the protection of those for whose benefit the fund has been deposited.

L.1948, c. 67, p. 220, s. 31. Amended by L.1950, c. 130, p. 245, s. 1; L.1953, c. 17, p. 161, s. 16.