District Clerk Investments Safe in Uncertain Times

As a result of recent alarming events on Wall Street, the District Clerk’s Trust department has been overwhelmed by calls from individuals concerned about the safety of their funds held in trust, especially on behalf of minors. Fortunately, our conservative investment strategy protects funds we manage on behalf of courts and individuals from the kind of catastrophic losses many stock market investors are now experiencing.

The duty of the District Clerk is to preserve the value of funds deposited over time, not to make money off the investments. By law, the District Clerk is prohibited from investing funds in corporate stock. The value of these stocks and other more speculative, higher-return investments can fluctuate widely from day to day, especially in the current uncertain economic climate.

Most of the District Clerk’s investments, especially the minor trust accounts, are in Certificate of Deposits (CDs) and Treasury Bills (T-Bills). CDs are FDIC-insured and T-Bills are government- backed securities. Both are among the safest types of investments offering a consistently stable return.

Currently, the District Clerk’s trust department manages more than $43 million in funds. Under Section 117 of the Local Government Code, the clerk’s office maintains a registry of these funds deposited in connection with a court proceeding. Those funds include:

• funds of minors or incapacitated persons;
• funds tendered in an interpleader action;
• funds paid in satisfaction of a judgment;
• child support funds held for more than three days;
• cash bonds;
• cash bail bonds;
• funds in an eminent domain proceeding;
• any other funds tendered to the clerk for deposit into the registry of the court.

Almost 75 percent of those funds are kept in interest-bearing accounts maintained in several different types of investment instruments. Under the Local Government Code, investment options are limited to the safest instruments, which include:

• interest-bearing savings accounts insured by the Federal Deposit Insurance Corporation (FDIC);
• United States treasury bills (T-bills);
• a government investment pool that meets the criteria set out by the Texas Government Code;
• a no-load (no fee-for-purchase) money market mutual fund that is regulated by the Securities and Exchange Commission, has a dollar-weighted average stated maturity of 90 days or fewer, and includes in its investment objectives the maintenance of a stable net-asset value of $1 for each share.

Half of the money managed by this office is in minor trust accounts, which are generally held until the minor’s 18^th birthday unless the court has stipulated otherwise. Other funds include bonds and interpleader funds, which are the sums of balances contested by multiple claimants for which the court has been asked to determine the appropriate distribution.

Bonds and interpleader funds are generally invested in interest-bearing savings accounts, also known as money funds. To offer maximum security, our office separates funds greater than $100,000 and places them in different institutions to guarantee that they are FDIC-insured.

Authorized for our use by the Dallas County Commissioners Court this month, our newest investment instrument is TexPool, a government investment pool in which governmental agencies deposit funds from throughout the state.

TexPool is the largest government pool in Texas, is monitored by the State Comptroller, invests only in government-backed securities, and offers unlimited liquidity and a stable return. Because it provides these solid advantages, TexPool will become the preferred option for our largest accounts and largely replace the use of money funds.

In addition to funds already described, the District Clerk maintains at Bank of America approximately $10 million in funds in our registry depository, which is a non-interest bearing account maintained by the Dallas County Treasurer. Funds in this account are not FDIC-insured, but are collateralized with government backed securities at a rate of 102% of the total deposit. This depository is intended for sums of any denomination held on behalf of parties for very short periods of time, usually measured in days or weeks.

Unfortunately, some depositors either misjudged the length of their cases or misunderstood the nature of our investment strategy or liquidity of the deposits. As a result, much of the $10 million placed in registry’s depository has declined significantly in value since it was first deposited because the Dallas County District Clerk must have a signed court order to place funds in an interest-bearing account.

The District Clerk now recommends that all funds be placed in an interest-bearing account. with TexPool, which serves as a more solid repository for even short periods of time while maintaining the necessary liquidity.

We are now contacting depositors to ensure that they are aware of the all investment strategies offered by our department and to assure them that this office is doing everything possible to protect the investments of its customers in the most prudent and responsible way.

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