Board supports Foundation plan to amend the IOTA rule


first_imgBoard supports Foundation plan to amend the IOTA rule April 15, 2001 Managing Editor Regular News Board supports Foundation plan to amend the IOTA ruleMark D. Killian Managing Editor The Board of Governors has given its unanimous support to a Florida Bar Foundation plan 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. Foundation President Ham Cooke told the Board of Governors March 30 in Melbourne that the proposed amendments to the IOTA rule which must be approved by the Supreme Court have the potential to double the money generated by the IOTA program. Cooke said low interest rates and high service charges over the past 10 years have reduced IOTA income from about $19 million per year to $11 million, forcing the Foundation to cut its legal aid to the poor grants by 32 percent over the past two years. “Our board has taken that very, very seriously,” Cooke said. “We wanted to do something to be as proactive as we could in trying to increase the return that IOTA is receiving.” To do that, Cooke said, the Foundation will soon petition the court to amend the IOTA rule to allow financial services companies such as Morgan Stanley Dean Witter or Merrill Lynch to hold IOTA accounts. The change also would require any institution that wants to handle IOTA accounts to place IOTA account funds in products paying the same market rate of interest or dividends available to non-IOTA depositors when IOTA accounts meet the same balance and other requirements. Authorized investments would include FDIC insured accounts, daily bank repurchase agreements (REPOs) or money market funds. Currently, IOTA funds can only be held in federally insured checking accounts or REPOs. The IOTA rule amendments being proposed by the Foundation make no change in the current requirement that all nominal or short-term client or third-person trust funds be invested for IOTA’s benefit. But, as always has been the case, attorneys and firms have a responsibility to make large or long-term trust deposits productive for clients whenever practical. Cooke said adopting the change could generate as much as $25 million annually for the Foundation and “allow us to then fund legal services at the level we did 10 years ago.” Bar President-elect Terry Russell urged the board to support the Foundation’s plan, which he said would “enable the Foundation to regain its footing” and provide more complete provision of resources to legal service organizations. Russell noted that since IOTA’s inception, the program has generated more than $156 million for legal aid, administration of justice, and law student assistance programs. In putting the plan together, Cooke said the Foundation worked to put the onus of meeting the new standards on the financial institutions and the Foundation, not the lawyers. Even by requiring that IOTA accounts earn the highest interest rate or dividend available to non-IOTA depositors with comparable balances at the same bank or financial services company, IOTA still is voluntary for institutions, Cooke said. But, by meeting the interest or dividend standard, banks would become eligible to hold IOTA accounts, and lawyers and firms would be required to deposit IOTA funds only in eligible institutions. As part of the plan, the Foundation also will independently work with banks and financial service companies to develop appropriate products which comply with the IOTA rule, Cooke said. That will include providing the banks with computer and technical support needed to remit IOTA earnings to the Foundation and conduct the required reporting. The Foundation, not the lawyer, will be responsible for monitoring usage of banks’ and financial services companies’ existing products available to non-IOTA depositors, with respect to rates being paid on individual attorney and law firm IOTA accounts as reported by the Foundation on IOTA remittance reports, in order to determine compliance with the IOTA rule. The proposal calls for no action to be required of law firms by the proposed amendments to monitor their institution’s compliance, and unless an attorney’s or law firm’s bank becomes ineligible to hold IOTA funds because of its unwillingness to place IOTA account funds in products in compliance with the rule. In that instance, the Foundation would advise the attorney or law firm that their financial institution had become ineligible to hold IOTA funds.last_img

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