Nevada Administrative Code Chapter 356 - Depositories of Public Money and Securities
Overview of NAC Chapter 356: Depositories of Public Money and Securities
Purpose:
NAC Chapter 356 governs the selection, regulation, and oversight of financial institutions designated as depositories for public money and securities held by the State of Nevada and its political subdivisions (counties, cities, school districts, etc.). The rules ensure public funds are safeguarded, properly managed, and accessible while maintaining transparency and accountability.
Key Provisions of NAC Chapter 356
1. Definitions
Depository: A financial institution (bank, savings institution, or credit union) approved to hold public funds.
Public Money: Funds owned or controlled by state or local government entities.
Securities: Bonds, certificates of deposit, or other financial instruments owned or held by government entities.
2. Designation of Depositories
Public entities must select one or more depositories to hold their funds.
The selection process must comply with the competitive bidding and approval procedures established by state law.
Depositories must be federally insured (e.g., FDIC) or backed by adequate collateral to secure public funds.
3. Collateral Requirements
To protect public money beyond federally insured limits, depositories are required to pledge collateral securities.
The amount and type of collateral must meet standards established in the NAC to ensure sufficient security.
The collateral must be held by an independent third party, such as a trust department or custodian bank, to prevent misuse.
4. Reporting and Auditing
Depositories must submit periodic reports on deposits and collateral to the State Treasurer or other appropriate authorities.
Public entities must conduct audits or reviews to verify compliance with NAC requirements.
5. Custody and Safekeeping of Securities
Securities owned by public entities must be held in safekeeping accounts with approved custodians.
Procedures ensure the proper transfer, receipt, and recording of securities to prevent loss or misappropriation.
6. Authority and Responsibilities
The State Treasurer oversees compliance with NAC Chapter 356.
Public entities are responsible for monitoring their depositories and ensuring adherence to the NAC.
Relevant Statutory Framework
NAC Chapter 356 operates under the authority granted by the Nevada Revised Statutes (NRS) Chapter 356, which establishes the legal foundation for managing state and local government funds.
Case Law Related to NAC Chapter 356 and Public Depositories
While case law directly interpreting NAC Chapter 356 is limited, several key Nevada court decisions illustrate principles relevant to public fund depositories and government fiduciary duties:
1. State Treasurer v. Bank of Nevada (Hypothetical Example)
Issue: The State Treasurer brought action against a bank designated as a public depository for failing to maintain adequate collateral as required by NAC Chapter 356.
Holding: The court affirmed that the depository must strictly comply with collateral requirements to protect public funds. Failure to do so constituted a breach of statutory duty.
Reasoning: The court emphasized the fiduciary responsibility of financial institutions holding public funds and upheld the State Treasurer's authority to enforce compliance.
2. City of Reno v. First National Bank (Hypothetical Example)
Issue: The City challenged the depository bank’s failure to properly safeguard securities held on behalf of the city.
Holding: The court ruled that the bank breached its duty to the public entity by not following NAC safekeeping procedures.
Reasoning: The decision underscored the importance of strict adherence to NAC provisions to protect public assets.
3. Principles from Broader Fiduciary Duty Cases
Nevada courts have consistently held that entities managing public funds must act prudently, transparently, and in the public interest. These principles support the rigorous standards in NAC Chapter 356 for depositaries of public money and securities.
Summary of Compliance and Best Practices
Ensure Depositories Are Approved and Insured: Only use banks or financial institutions that are designated as official public depositories and federally insured.
Strictly Enforce Collateral Requirements: Verify that depositories maintain adequate collateral securities according to NAC standards.
Maintain Accurate Records and Reporting: Public entities should demand timely reports and conduct audits.
Safeguard Securities Appropriately: Securities must be held in approved custodial accounts with documented procedures.
Monitor Depository Compliance: Regularly review depository performance and compliance with statutory and administrative requirements.
Promptly Address Non-Compliance: Take legal or administrative action if depositories fail to comply with NAC provisions.
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