CACB — Amended Order Regarding Deposit and Investment of Registry Funds

Source: https://www.cacb.uscourts.gov/sites/cacb/files/documents/general-orders/GO13-01-Amended.pdf

1 NOV 30 2016 2 3 4 UNITED STATES BANKRUPTCY COURT 5 CENTRAL DISTRICT OF CALIFORNIA 6 7 In re ) 8 ) ORDER REGARDING ) 9 DEPOSIT AND INVESTMENT ) AMENDED GENERAL ORDER 13-01 OF REGISTRY FUNDS ) 10 ________________________________ ) 11 12 The Court, having determined that it is necessary to adopt local procedures to ensure 13 uniformity in the deposit, investment, and tax administration of funds in the Court's Registry, 14 IT IS ORDERED, pursuant to Local Bankruptcy Rule 7067-1, that the following shall 15 govern the receipt, deposit, and investment of registry funds: 16 17 I. Receipt of Funds 18 A. Order Required. No money shall be sent to the Court or its officers for deposit in 19 the Court's registry without a court order signed by the presiding judge in the case or 20 proceeding. 21 B. Notice to Clerk. The party making the deposit or transferring funds to the Court's 22 registry shall serve the order permitting the deposit or transfer on the Clerk of Court. 23 C. Deposit With U.S. Treasurer. Unless provided for elsewhere in this Order, all 24 monies ordered to be paid to the Court or received by its officers in any case or proceeding 25 pending or adjudicated shall be deposited with the Treasurer of the United States in the name 26 and to the credit of this Court pursuant to 28 U.S.C. § 2041 through depositories designated 27 by the Treasury to accept such deposit on its behalf. 28

1 II. Investment of Registry Funds 2 A. Centralized Administration (CRIS). Where, by order of the Court, funds on 3 deposit with the Court are to be placed in some form of interest-bearing account or invested 4 in a court-approved, interest-bearing instrument in accordance with Rule 67 of the Federal 5 6 Rules of Civil Procedure (incorporated by Rules 7067 and 9014(c) of the Federal Rules of 7 Bankruptcy Procedure), the Court Registry Investment System ("CRIS"), administered by the 8 Administrative Office of the United States Courts under 28 U.S.C. § 2045, shall be the only 9 investment mechanism authorized. 10 11 B. Disputed Ownership Fund. Interpleader funds deposited with the court under 28 12 U.S.C. § 1335 meet the IRS definition of a "Disputed Ownership Fund" (DOF), a taxable 13 entity that requires tax administration. See 26 C.F.R. § 1.468B-9(b)(1). Unless otherwise14 15 ordered by the court, any such deposit shall be invested in the DOF established within the 16 CRIS and administered by the Administrative Office of the United States Courts, which shall 17 be responsible for meeting all DOF tax administration requirements. If the presiding judge 18 determines that other funds deposited with the court meet the IRS definition of a DOF, the 19 20 judge may enter an order reflecting that determination and requiring investment in the CRIS 21 DOF, except that if the funds deposited with the court will require complex administration 22 such as periodic withdrawals for expenses of individual cases or proceedings, then the CRIS 23 DOF is not set up to administer such funds. In that event, the judge must (i) appoint a special 24 administrator for a case or proceeding, before authorizing payment of such expenses out of the25 26 fund, who must be a person other than the Clerk or the Administrative Office of the United 27 States Courts, and (ii) specify which portions of this General Order, or other terms of 28 compensation and administration, apply to the special administrator. On appointment of a

1 special administrator authorized to incur expenses on behalf of a DOF in a case or proceeding, 2 the funds held in the CRIS or the CRIS DOF attributable to that case or proceeding must be 3 transferred to another investment account as directed by court order. 4 C. Custodian. The Director of Administrative Office of the United States Courts is 5 6 designated as custodian for all CRIS funds. The Director or the Director's designee shall 7 perform the duties of custodian. Funds held in the CRIS remain subject to the control and 8 jurisdiction of the Court. 9 D. Pooled Investments. Money from each case or proceeding deposited in the CRIS 10 shall be "pooled" together with those on deposit with Treasury to the credit of other courts in11 12 the CRIS and used to purchase Government Account Series securities through the Bureau of 13 Public Debt, which will be held at Treasury, in an account in the name and to the credit of the 14 Director of Administrative Office of the United States Courts. The pooled funds will be 15 invested and monitored in accordance with the duly established investment principles of that 16 17 office. 18 E. Accounting Generally. An account will be established in the CRIS pooled fund 19 titled in the name of the case or proceeding giving rise to the deposit invested in the fund. 20 Income generated from fund investments will be distributed to each case or proceeding based 21 on the ratio each account's principal and earnings has to the aggregate principal and income 22 23 total in the fund after the CRIS fee has been applied. Reports showing the interest earned, 24 the principal amounts contributed in each case or proceeding will be prepared and distributed 25 to each court participating in the CRIS, and made available to litigants and/or their counsel 26 upon request. 27 28

1 F. Accounting For Disputed Ownership Funds. For each interpleader case, or other 2 proceeding involving funds that are determined to be a Disputed Ownership Fund, an 3 account shall be established in the CRIS Disputed Ownership Fund, titled in the name of the 4 case or proceeding giving rise to the deposit invested in the fund. Income generated from 5 6 fund investments will be distributed to each case or proceeding after the DOF fee has been 7 applied and tax withholdings have been deducted from the fund. Reports showing the 8 interest earned, and the principal amounts contributed, in each case or proceeding will be 9 available (e.g., through the FedInvest/CMS application) for each court participating in the 10 CRIS, and made available to litigants and/or their counsel upon request.11 12 III. Fees and Taxes 13 A. CRIS Fee. The custodian is authorized and directed by this Order to deduct the14 15 CRIS fee, in dollar amounts that are duly authorized in accordance with applicable law, rules 16 and guidelines (e.g., the Miscellaneous Fee Schedule, or the Guide to Judiciary Policy, if 17 applicable), on assets on deposit for all CRIS funds, excluding the funds held in the DOF, for 18 the management of investments in the CRIS. The custodian is authorized to assess the CRIS 19 20 fee from interest earnings to the pool before a pro rata distribution of earnings is made to 21 court cases or proceedings. The CRIS fee is set at an annualized 10 basis points (as of the 22 time this order has been prepared) on assets on deposit for all CRIS funds, excluding the case 23 funds held in the DOF. 24 B. DOF Fee. In lieu of the CRIS fee, the custodian is authorized and directed by this25 26 Order to deduct the DOF fee, in dollar amounts that are duly authorized in accordance with 27 applicable law, rules and guidelines (e.g., the Miscellaneous Fee Schedule, or the Guide to 28 Judicial Policy, if applicable), on assets on deposit in the DOF for management of

1 investments and tax administration. The custodian is authorized to assess the DOF fee from 2 interest earnings to the pool before a pro rata distribution of earnings is made to court cases 3 or proceedings. The DOF fee is set at an annualized 20 basis points (as of the time this order 4 has been prepared) on assets on deposit in the DOF. The custodian is further authorized and 5 6 directed by this Order to withhold and pay federal taxes due on behalf of the DOF. 7 IV. Transition From Former Investment Procedure 8 9 A. Transfer Of Non-CRIS Funds To The CRIS. The Clerk of Court is further 10 directed to develop a systematic method of redemption of all existing investments and their 11 transfer to the CRIS, if any existing investments are not already in the CRIS. 12 B. No Existing Funds Treated As Disputed Ownership Funds. Deposits to the CRIS 13 DOF will not be transferred from any existing CRIS Funds. Only deposits creating new14 15 accounts from the effective date of this order that satisfy the IRS definitition of “Disputed 16 Ownership Fund” will be placed in the CRIS DOF. 17 C. Being Excused From Transferring Funds To The CRIS. Parties not wishing to 18 transfer registry deposits into the CRIS may seek leave to transfer them to the litigants or 19 20 their designees on proper motion and approval of the judge assigned to the specific case. 21 D. Prior Procedures Superseded. This Order supersedes and abrogates all prior 22 orders of this Court regarding the deposit and investment of registry funds. 23 E. Effective Date. This order is generally effective on the date of entry, but DOF 24 provisions will become effective the date the CRIS DOF begins to accept deposits.25 26 27 Date: November 30, 2016 28 SHERI BLUEBOND Chief Bankruptcy Judge