1. (a) Approved securities shall be only those securities which meet the following:

   1. (1) Securities are corporate or Federal, State or municipal government bonds or notes in book entry form, having a rating of AA or better by Standard and Poor's Rating Service or a rating of Aa or better by Moody's Investors Service Guide or a rating of AA or better by Fitch Investors Service Guide;

      Exception 1. Securities issued by the State of California shall have a rating of B or better.

      Exception 2. Securities in registered, physical form that meet all requirements of this section are acceptable until January 1, 1997 for posting by a self insurer. After that date, all securities shall be in book entry form.

   2. (2) Securities shall be delivered in the name of the “Treasurer, State of California in trust for (insert the legal name of the self insurer)” or similar legible abbreviation to a custodian account designated by the State Treasurer.*
   3. (3) Securities previously accepted and registered in the name of “Treasurer State of California” or “Treasurer of State of California in trust for [legal name of self insurer(s)] liabilities pursuant to Labor Code Sections 3700 and 3701” shall not have to be reregistered, but will be held until maturity or released by order of the Manager or Director.
   4. (4) Mortgage backed securities shall not be acceptable and zero-coupon securities shall not be accepted.
   5. (5) Securities issued by the self insurer or its subsidiaries, or its affiliated companies or parent companies, shall not be accepted for that particular self insurer's security deposit.

2. (b) Any private self insurer desiring to post or have released approved securities shall provide the Manager with a complete description of the security or securities, including the following:

   1. (1) Whether the security is registered or book entry type;
   2. (2) Complete name of security;
   3. (3) Interest rate of security;
   4. (4) Original issue date of security;
   5. (5) Date of maturity of security;
   6. (6) Par value of security;
   7. (7) Current market value of security;

   8. (8) Name of delivery agent and the telephone number of delivery agent who will actually deliver the security to the State on behalf of the self insured employer.

      [Note: This is usually a bank or brokerage firm.]; and

   9. (9) The name and address where interest checks are to be sent for registered securities or a bank name and bank account number for wire transfer of interest payments for book entry securities.
   10. (10) The self insurer's Federal Taxpayer Identification Number for interest payments on the securities.

3. (c) Approval by the Manager or Director, or other person authorized in writing by the Director, to the State Treasurer shall be required on all securities to be posted or released and the Manager shall transmit the approval order to the State Treasurer.

   Note: The current model letter to request approval of securities is contained in Plate G of the Appendix following the last Article in these Subchapter 2 regulations.

4. (d) The Manager shall value approved securities at par value or market value, whichever is less, when computing the security deposit represented by the securities for any private self insurer. Each self insurer posting securities shall provide a statement of the current market value of the security or securities annually to the Manager on their Self Insurer's Annual Report as required by Section 15251(b)(6).
5. (e) No approved security shall be accepted for deposit at above its par value. Additional deposits of approved securities shall be required at any time when the market value of an approved security falls below its par value.
6. (f) The Manager may order called or matured securities to be redeemed by the State Treasurer and the resulting cash returned to or deposited in trust on behalf of the self-insured.

7. (g) Any self insurer with securities on deposit may request the release of the securities upon the posting of replacement security or upon the determination of the Manager that the securities represent surplus deposit above that required by Labor Code Section 3701 and these regulations.

   *Note: The usual practice of the State Treasurer is to contact the delivery agent for the specific wire instructions for processing the securities transaction into or out of the State Treasurer's custodian account.

Note: Authority cited: Sections 54, 55 and 3702.10, Labor Code. Reference: Sections 59, 3700, 3701, 3701.5, 3702, 3702.6, 3702.10, 3703, 3705 and 3740-3745, Labor Code.

History

1. Editorial correction to Form Nos. A4-30 and A4-31 (Register 74, No. 47).

2. Repealer and new section filed 12-22-92; operative 1-21-93 (Register 93, No. 2).

3. Amendment of subsections (a)(1) and (a)(2), repealer and new subsection (a)(3), and addition of footnote to subsection (a)(2) filed 12-23-96; operative 1-1-97 pursuant to Government Code section 11343.4(d) (Register 96, No. 52).