Common interest developments: funds: insurance.

Existing law, the Davis-Stirling Common Interest Development Act, regulates common interest developments and requires a managing agent, at the written request of the board of directors of the association, to deposit funds the managing agent receives on behalf of the association into a bank, savings association, or credit union in the state if specified requirements are met, including, among other things, that the funds are covered by insurance provided by the federal government. This bill would require the bank, savings association, or credit union to be insured by the Federal Deposit Insurance Corporation, National Credit Union Administration Insurance Fund, or a guaranty corporation, as specified, and would make conforming changes. The bill would also impose certain limits on the use of funds deposited on behalf of an association, including prohibiting funds from being invested in stocks or high-risk investment options. Existing law prohibits transfers of greater than $10,000 or 5% of an association's total combined reserve and operating account deposits, whichever is lower, without written approval from the board. This bill would instead prohibit transfers of funds out of the association's reserve or operating accounts unless the amount of the transfer is the lesser of five thousand dollars $5,000 or 5% of the estimated income in the annual operating budget, for associations with 50 or less separate interests, or the lesser of $10,000 or 5% of the estimated income in the annual operating budget, for associations with 51 or more separate interests without prior written approval from the board. Existing law prohibits the managing agent from commingling the funds of the association with the managing agent's own money or with the money of others that the managing agent receives or accepts, unless specified requirements are met. This bill would remove the specified requirements and, without qualification, prohibit the managing agent from commingling the funds of the association with the managing agent's own money or with the money of others that the managing agent receives or accepts. Existing law requires the association to maintain fidelity bond coverage for its directors, officers, and employees, and requires the fidelity bond coverage to also include computer fraud and funds transfer fraud and, if the association uses a managing agent or management company, coverage for dishonest acts by that person or entity and its employees. This bill would specifically require the association to maintain crime insurance, employee dishonesty coverage, fidelity bond coverage, or their equivalent, for the association and the association's managing agent or management company and would require the protection against computer and funds transfer fraud to be in an equal amount. The bill would specify that self-insurance does not meet the requirements of these provisions.