PROPOSED RULES
FINANCIAL INSTITUTIONS
Continuance of WSR 04-19-157.
Preproposal statement of inquiry was filed as WSR 03-23-121.
Title of Rule and Other Identifying Information: Escrow Agent Registration Act, chapter 18.44 RCW. Examination and investigation fees and expenses -- Authority to retain specialists. WAC 208-680G-050 to implement RCW 18.44.121.
Hearing Location(s): Department of Financial Institutions, 150 Israel Road S.W., Room 319, Olympia, WA 98501, on December 8, 2004, at 9:30 a.m.
Date of Intended Adoption: December 9, 2004.
Submit Written Comments to: Andrew Ledbetter, Securities Division, P.O. Box 9033, Olympia, WA 98507-9033, e-mail aledbetter@dfi.wa.gov, fax (360) 704-6970, by December 2, 2004.
Assistance for Persons with Disabilities: Contact Darlene Christianson by October 21, 2004, TTY (360) 664-8126 or (360) 902-8760.
Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: Amend WAC 208-680G-050 to implement RCW 18.44.121(5), which states that director "shall charge...an hourly audit fee." The amendment would clarify that both in-state and out-of-state escrow agents may be charged for examinations and investigations and provides detail of examination and investigation expenses. Upon adoption of this amendment, Department of Financial Institutions (DFI) plans to begin charging an hourly fee for its examinations.
The legislature intended that chapter 18.44 RCW be interpreted and administered to protect escrow agent clients. "When read in its entirety, the Act reflects a legislative intent to protect clients of escrow agents." Estate of Jordan v. Hartford Accident & Indem. Co., 120 Wn.2d 490, 497 (1993). To that end, pursuant to RCW 18.44.410, the director "has the power and broad administrative discretion to administer and interpret this chapter to facilitate the delivery of services to citizens of this state by escrow agents." The director believes adoption of this amendment is consistent with that intent and within the power and discretion granted to her.
Purpose and Summary: WAC 208-680G-050, as adopted in 2001, provides in subsection (1) that the director may retain attorneys, CPAs, and other professionals as examiners or investigators at the expense of the person that is the subject of the examination or investigation. The current language in subsection (2) specifically provides that the expenses for required travel and services associated with an examination or investigation outside the state are to be borne by the person examined and investigated.
The current language is potentially misleading. Subsection (1) clearly authorizes reimbursement to DFI if it hires outside professionals and specialists, but is less clear when it comes to reimbursement of the costs of examinations by DFI examiners. Similarly, subsection (2) specifically allows the reimbursement of travel related expenses for out-of-state examinations, but is silent as to in-state examinations. The proposed amendments will clarify these possible ambiguities.
Subsection (2) would be amended to clearly state that examination and investigation related expenses are to be borne by the person examined or investigated, regardless of where that person is located. New subsection (3) provides examples of the expenses for which reimbursement may be owed. Such expenses include staff time and travel expenses. The subsection requires DFI to provide an invoice detailing such expenses at a reasonable time following the investigation or examination. Payment of the invoiced amount is due within thirty days of the invoice date.
Reasons Supporting Proposal: RCW 18.44.121 states:
The director shall charge and collect the following fees as established by rule....
(5) An hourly audit fee....
In establishing these fees, the director shall set the fees at a sufficient level to defray the costs of administering this chapter.
Examination fees have not been charged to date and the other Escrow Agent Registration Act ("act") fees collected by DFI fall far short of defraying the costs of administering the act. DFI took over administration of the act on July 1, 1997. Since that date (though [through] February 29, 2004), act-related disbursements have exceeded escrow-related revenues by over $1.3 million. Clearly, the current fee structure does not satisfy the legislative mandate to make the escrow program self-supporting.
Anticipated Effects: Amending WAC 208-680G-050 will give DFI clear authority to implement RCW 18.44.121(5) by clarifying the expenses for which DFI can seek reimbursement. Upon adoption of this rule, DFI plans to begin charging an hourly examination fee. The anticipated fee is $62.50 per hour. As detailed in the small business economic impact statement, DFI initially plans to charge only for time spent on-site at the office of an escrow agent, which generally averages about three days, and will not charge for the substantial off-site time relating to preparation, debriefing, or writing up examination findings, which generally averages about two days. Assuming DFI is able to perform sixty-six examinations per year and that it will collect $1,500 for each exam, this rule would result in approximately $100,000 in additional revenue for the year following adoption of the rule. (It is likely that DFI will collect less revenue as some exams may take less than three days on-site.) This revenue will help defray the costs of running the escrow program, but is not sufficient to make the program self-supporting. Additional fees and/or fee increases will be necessary in the future.
Statutory Authority for Adoption: RCW 18.44.121, [18.44].410.
Statute Being Implemented: RCW 18.44.121.
Rule is not necessitated by federal law, federal or state court decision.
Name of Proponent: Department of Financial Institutions, Securities Division, governmental.
Name of Agency Personnel Responsible for Drafting: Andrew Ledbetter, 150 Israel Road S.W., Olympia, WA 98501, (360) 902-8760; Implementation: Helen P. Howell, 150 Israel Road S.W., Olympia, WA 98501, (360) 902-8760; and Enforcement: Martin Cordell, 150 Israel Road S.W., Olympia, WA 98501, (360) 902-8760.
A small business economic impact statement has been prepared under chapter 19.85 RCW.
A copy of the statement may be obtained by contacting Kelli Skeels, Department of Financial Institutions, Securities Division, P.O. Box 9033, Olympia, WA 98507-9033, phone (360) 902-8774, fax (360) 704-6974, e-mail kskeels@dfi.wa.gov. A copy is also available at http://www.dfi.wa.gov/sd/rulechanges.htm.
A cost-benefit analysis is not required under RCW 34.05.328. DFI is not one of the agencies listed in RCW 34.05.328.
November 1, 2004
Helen P. Howell
Director