Local Rule LCvR 67.1: REGISTRY FUNDS

LCvR 67.1 REGISTRY FUNDS

(a) Court Registry Investment System. In accordance with Internal Revenue Service ("IRS") regulations, the Court has in place a Court Registry Investment System ("CRIS"). In compliance with those regulations, the following Rules govern the deposit, investment, and withdrawal of funds deposited into CRIS.

(b) When Deposits Permitted. No funds shall be submitted to the Clerk of Court for deposit without the depositor first obtaining an order by a judge in the case or proceeding permitting such deposit.

(c) Manner of Making Deposit. When making a deposit or transferring funds to CRIS, the depositor must serve the Clerk of Court and the Court's Financial Section with a copy of the order allowing such deposit.

(d) Duties of the Clerk of Court. Unless otherwise provided in this Rule, the Clerk of Court must, in turn, deposit funds received with the Treasurer of the United States in the name and to the credit of this Court through depositories designed by the Treasury to accept such deposits, all in accordance with 28 U.S.C. § 2041.

(1) Placement in Interest-bearing Accounts or Instruments. When by Court order made in accordance with Fed. R. Civ. P. 67, funds are directed to be placed in an interest-bearing account or invested in a Court-approved, interest-bearing instrument, the Clerk of Court satisfies the order by placing the funds into CRIS, which is administered by the Administrative Office of the United States Courts ("AO"). CRIS is the only investment or interest-bearing account mechanism authorized.

(2) Placement of Interpleader Funds. When deposited in accordance with 28 U.S.C. § 1335, interpleader funds are deemed Disputed Ownership Funds ("DOF") in accordance with the applicable IRS definition. Unless the Court orders otherwise, the Clerk of Court must deposit interpleader funds in the DOF account established within CRIS. Because the AO administers CRIS, the AO is responsible for meeting all DOF tax administration requirements.

(e) Duties of the Administrative Office. The Director of the AO is designated as the Custodian for all CRIS funds, and the Director and/or his or her designee shall perform the duties of Custodian. Funds held in CRIS remain subject to this Court's control and jurisdiction.

(1) Investment of CRIS funds. Funds deposited in CRIS shall be pooled with other CRIS funds on deposit with the Treasury from other courts and in other cases and used to purchase Government Account Series securities through the Bureau of Public Debt. Such securities shall be held by the Treasury in an account in the name and to the credit of the Custodian. Pooled funds shall be invested in accordance with the principles of the CRIS Investment Policy as approved by the Registry Monitoring Group.

(2) Creation of Accounts for Deposited Funds. For each case giving rise to a deposit invested in pooled funds, an account will be established in that case's name. Income generated from the investments of pooled funds shall be distributed to each account based on the ratio of each account's principal and earnings to the aggregate principal and income total in the fund after applying the CRIS fee. Reports showing the interest earned and the principal amounts contributed in each case will be prepared and distributed to each court participating in the CRIS and made available to litigants and/or their counsel.

(3) Creation of Accounts for DOF Funds. For each interpleader case, an account shall be established in the CRIS DOF in that case's name. Income generated from the investment of DOF funds will be distributed to each account after the DOF fee has been applied and tax withholdings have been deducted. Reports showing the interest earned and the principal amounts contributed in each case will be prepared and made available through the FedInvest/CMS application to each court participating in the CRIS and made available to litigants and/or their counsel. On appointment of an Administrator authorized to incur expenses on behalf of the DOF in a case, the case DOF funds should be transferred to another investment account as directed by Court order.

(f) Court Authorization of the Custodian. The Court authorizes the Custodian, as follows:

(1) Deduction of CRIS Fee. For management of the investments in CRIS, the Custodian is authorized and directed to deduct the CRIS fee, which shall be comprised of an annualized ten (10) basis points on assets on deposit for all CRIS funds, excluding the case funds held in the DOF. In accordance with the Miscellaneous Fee Schedule, the CRIS fee is assessed from interest earnings of the pool before a pro rata distribution of earnings is made to court cases.

(2) Deduction of DOF Fee. For management of the investments and tax administration in the DOF funds, the Custodian is authorized and directed to deduct the CRIS fee, which shall be comprised of an annualized ten (10) basis points on assets on deposit for all CRIS funds, excluding the case funds held in the DOF. In accordance with the Miscellaneous Fee Schedule, the CRIS fee is assessed from interest earnings of the pool before a pro rata distribution of earnings is made to court cases. The Custodian is also authorized and directed to withhold and pay federal taxes due on behalf of the DOF.

(g) Additional Provisions. The following additional provisions apply to Registry Funds.

(1) Existing Investments. The Clerk of Court shall deposit all existing investments into the CRIS account. Deposits to the CRIS DOF will not be transferred from any existing CRIS funds. Only new deposits made pursuant to 28 U.S.C. § 1335 on or after April 1, 2017, will be placed in the CRIS DOF.

(2) Opting Out of CRIS. Parties not wishing to have funds placed in the CRIS fund may seek Court approval by filing a motion to have the funds transferred to or deposited with the litigants or their designee; however, all funds on deposit with the Court shall be placed in the proper CRIS fund.

(3) Abrogation of Prior Orders and Rules. This Rule, along with the underlying Order (3:16mc205), abrogates all prior orders of this Court regarding deposit and investment of registry funds.

Advisory Committee Notes Changes to this Rule are consistent with the Court's interim Standing Order applicable to the Western District's Registry Investment System Fund, In re Money Deposited into the Court Registry Fund, 3:16mc205. The substantial revisions to this Rule are in compliance with Internal Revenue Service Regulations, which appear designed to ensure proper tax administration of, among other things, funds management in a Disputed Ownership Fund.