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For an IOLTA Account, can a customer have a repurchase sweep into their IOLTA accounts? As far as paying interest, would that violate the requirement to give the account the best available rate? – IBA Compliance Connection

For an IOLTA Account, can a customer have a repurchase sweep into their IOLTA accounts? As far as paying interest, would that violate the requirement to give the account the best available rate?

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The Illinois Supreme Court rules specifically allow IOLTA accounts to make use of automated investment features, including overnight sweeps and “repurchase agreements fully collateralized by U.S. Government securities.” Illinois Supreme Court Rules, Article VIII, Rule 1.15(f)(3)(b).

Eligible U.S. Government securities are defined to include “U.S. Treasury obligations and obligations issued by or guaranteed as to principal and interest by any AAA-rated United States agency or instrumentality thereof. A daily overnight financial repurchase agreement (‘repo’) may be established only with an institution that is deemed to be ‘well capitalized’ or ‘adequately capitalized’ as defined by applicable federal statutes and regulations.”

As to the requirement to pay the “highest comparable rate” of interest on the account, the rules require only that the bank pay the same interest on the account as would be paid on a comparable non-IOLTA account. Here, the point of comparison would be a non-IOLTA account with a repurchase sweep feature. The bank can require the IOLTA account to “meet or exceed the same minimum balance or other account eligibility guidelines, if any” of its non-IOLTA accounts. See also the Lawyers Trust Fund of Illinois account instructions here