172A.4 - PROOF OF FINANCIAL RESPONSIBILITY REQUIRED.
172A.4 PROOF OF FINANCIAL RESPONSIBILITY REQUIRED.
1. A license shall not be issued by the secretary to a dealer or
broker until the applicant has furnished proof of financial
responsibility as provided in this section. The proof may be in the
following forms:
a. (1) A bond of a surety company authorized to do business
in the state of Iowa in the form prescribed by and to the
satisfaction of the secretary, conditioned for the payment of a
judgment against the applicant furnishing the bond because of
nonpayment of obligations in connection with the purchase of animals.
(a) The amount of bond for an established dealer or broker who
does not maintain a business location in this state shall be not less
than the nearest multiple of five thousand dollars above twice the
average daily value of purchases of livestock originating in this
state, handled by such applicant during the preceding twelve months
or such parts thereof as the applicant was purchasing livestock. The
bond of a person who does not maintain a business location in this
state shall be conditioned for the payment only of those claims which
arise from purchases of livestock originating in this state.
(b) The amount of bond for an established dealer or broker who
maintains one or more business locations in this state shall be not
less than the nearest multiple of five thousand dollars above twice
the average daily value of purchases of livestock originating in this
state handled by the applicant during the preceding twelve months or
such parts thereof as the applicant was purchasing livestock. The
bond of a person who maintains one or more business locations in this
state shall be conditioned for the payment only of those claims which
arise from purchases of livestock originating in this state.
(c) If a new dealer or broker not previously covered by this
chapter applies for a license, the amount of bond shall be based on
twice the estimated average daily value of purchases of livestock
originating in this state.
(d) For the purpose of computing average daily value, two hundred
sixty is deemed the number of business days in a year.
(e) Whenever a dealer or broker's weekly purchases exceed one
hundred fifty percent of the dealer's or broker's average weekly
volume, the department shall require additional bond in an amount
determined by the department.
(2) The licensee and surety of the bond shall be held and firmly
bound unto the secretary as trustee for all persons who may be
damaged because of nonpayment of obligations in connection with the
purchase of animals originating in this state. Any person damaged
because of such nonpayment may maintain suit in the person's own
behalf to recover on the bond, even though not named as a party to
the bond.
(3) For purposes of this paragraph "a", "purchases of
livestock originating in this state" shall not include purchases by
dealers or brokers from their subsidiaries.
b. A bond equivalent may be filed in lieu of a bond. The
bond equivalent shall be in the form of a trust agreement and the
fund of the trust shall be in the form of fully negotiable
obligations of the United States or certificates of deposit insured
by the federal deposit insurance corporation or the federal savings
and loan insurance corporation.
(1) The trust agreement shall be in the form prescribed by the
secretary and executed to the satisfaction of the secretary. The
trustee of the trust agreement shall be an institution located in
this state in which the funds are invested or deposited.
(2) The trust agreement shall provide as beneficiary, the
secretary for the benefit of those persons damaged because of
nonpayment of obligations in connection with the purchase of animals
originating in this state. The fund in trust shall be an amount
calculated in the exact manner as provided in paragraph "a". The
fund in trust shall not be subject to attachment for any other claim,
or to levy of execution upon a judgment based on any other claim.
c. A person who is not a resident of this state and who
either maintains no business location in this state or maintains one
or more business locations in this state, and a person who is a
resident of this state and who maintains more than one business
location in this state, may submit a consolidated proof of financial
responsibility. The consolidated proof of financial responsibility
shall consist of a bond or a trust agreement meeting all of the
requirements of this section, except that the calculation of the
amount of the bond or the amount of the trust fund shall be based on
the average daily value of all purchases of livestock originating in
this state. A person who submits consolidated proof of financial
responsibility shall maintain separate records for each business
location, and shall maintain such other records respecting purchases
of livestock as the secretary by rule shall prescribe.
2. a. Any person damaged by nonpayment of obligations or by
any misrepresentation or fraud on the part of a broker or dealer may
maintain an action against the broker or dealer, and the sureties on
the bonds or the trustee of a trust fund. The aggregate liability of
the sureties or the trust for all such damage shall not exceed the
amount of the bond or trust. In the event that the aggregate claims
exceed the total amount of the bond or trust, the amount payable on
account of any claim shall be in the same proportion to the amount of
the bond or trust as the individual claim bears to the aggregate
claims.
b. Unless the person damaged files claim with the dealer or
broker, and with the sureties or trustee, and with the department
within ninety days after the date of the transaction on which the
claim is based, the claimant shall be barred from maintaining an
action on the bond or trust and from receiving any proceeds from the
bond or trust.
3. Whenever the secretary determines that the business volume of
the applicant or licensee is such as to render the bond or trust
inadequate, the amount of the bond or trust shall be, upon notice,
adjusted.
4. All bonds and trust agreements shall contain a provision
requiring that at least thirty days' prior notice in writing be given
to the secretary by the party terminating the bond or trust agreement
as a condition precedent to termination.
5. a. Whenever a bond or a trust agreement is to be
terminated by a cancellation by the surety or trustee, the secretary
shall cause to be published notices of the proposed cancellation not
less than ten days prior to the date the cancellation is effective.
The notices shall be published as follows:
(1) In the Iowa administrative code.
(2) In a newspaper of general circulation in the county in which
the licensee maintains a business location, or if the licensee
maintains no business location in this state, then in the county
where the licensee transacts a substantial part of the licensee's
business.
(3) By general news release to all news media. Failure by the
secretary to cause the publication of notice as required by this
subparagraph shall not be deemed to prevent or delay the
cancellation.
b. The termination of a bond or a trust agreement shall not
release the parties from any liability arising out of the facts or
transactions occurring prior to the termination date.
c. Trust funds shall not be withdrawn from trust by a
licensee until the expiration of ninety days after the date of
termination of the trust, and then only if no claims secured by the
agreement have been filed with the secretary. If any claims have
been filed with the secretary, the withdrawal of funds by the
licensee shall not be permitted until the claims have been satisfied
or released and evidence of the satisfaction or release filed with
the secretary. Section History: Early Form
[C73, 75, 77, 79, 81, § 172A.4] Section History: Recent Form
2009 Acts, ch 41, §65