Agent Minimum Capitalization Requirements Go Into Effect July 3

Recently adopted minimum capitalization requirements will become effective this Thursday, July 3, 2014. However, most agents will not be required to have their minimum capitalization compliance method in place until November 1, 2014.

An important date to look at is whether or not your agency was licensed before or after September 1, 2010. If your agency was licensed before September 1, 2010, the first amount of unencumbered assets must be in place by November 1, 2014. Each subsequent increase must be in place on November 1 of each year until 100% of the required capitalization is reached. (S.1, II. A.)

If your agency was licensed after September 1, 2010, you must attain 100% capitalization by July 3, unless you establish what the rule defines as a "Solvency Account", in which case your first installment is due November 1, 2014.

Another common misunderstanding under these new rules is that if the cash or cash equivalent option is selected as a means of compliance (S.1, I. B.), the money must be held in a separate account. This is not the case. If you maintain an operating account that's always above the required minimum capitalization amount, then you already meet the requirements and do not need a separate account.

TLTA has a comprehensive website here and a specific guide here to help you understand the minimum capitalization requirements. Please contact Aaron Day at 512.810.8800 or aaron@tlta.com if you have any questions.

Is Your Basic Manual Up to Date?
If you have a hard copy of the Basic Manual, you need to make sure it is up to date with these new rules. Here's how to check: Section VI - Administrative Rules should include Rules S.1 through S.7. If your Basic Manual does not include these rules and you're already subscribed to TLTA's Basic Manual Online, login here, and then download and print Section VI. If you are not subscribed, you can sign up for the remainder of the year for just $33 here.

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