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BROKERAGE
ACCOUNTS
Some readers asked if their associations
could use brokerage
accounts. These accounts allow investment brokers, such as the financially unstable
Merrill Lynch (acquired by Bank of America) and investment bank Lehman Brothers
(which filed for bankruptcy), to manage the association's funds for a fee.
Generally, account managers like to invest
their clients' monies in stocks, bonds, and mutual funds--all of
which should be avoided by boards because of the
risk. If boards were to restrict brokerage firm
investments to CDs, T-bills, and Ginnie Mae
securities (mortgage-backed securities with the full faith and credit of the
United States government), then the monies are considered secure. The downsides are (i) the payment of commissions to the brokerage
firm to manage the account, and (ii) its limited protections against loss by the
SIPC.
The Securities Investor Protection Corporation (SIPC) was
created in 1970 as a non-profit, non-government, membership corporation, funded
by member broker-dealers. The SIPC does not protect against market risk. Its primary role is to
return funds to investors if the broker-dealer holding these
assets becomes insolvent.
To maximize convenience while
minimizing risk, associations should consider the CDARS program described below.
HASSEL OF THE
$100,00 FDIC LIMIT
Last week I talked about protecting association monies by keeping deposits to no more than $100,000 per banking
institution. While this protects funds, it creates a hassle for associations
with large reserves. If an association has $650,000 in reserves, that means
spreading the money between seven banks. It also means seven sets of bank
statements that need to be reviewed and seven sets of signature cards that must be signed by the
directors (and then re-signed every time the directors change).
CDARS PROGRAM. There is a program called
Certificate of Deposit Account Registry Service (CDARS) which allows customers deposit their money with a participating bank, and their
funds are dispersed into individual CDs up to $100,000 in member banks across the
country.
SINGLE BANK STATEMENT. This allows
associations to deal with one bank, receive a single statement summarizing all
their CDs, and remain fully insured by the FDIC. According to the CDARS website
(www.cdars.com),
there are no hidden fees, no annual charges, no subscription fees, and no transaction
fees.
Thank you to Jan Hickenbottom, Vice
President of First Bank's Association Services Division for the above
information on the CDARS program. You can find First Bank's contact information in
our
Service Directory.
SUPERVISORS
DATING
SUBORDINATES
 QUESTION:
The manager of our association is having an affair with an employee, how best is
this handled by the board?
ANSWER:
It's deja vu all over again. Last week it was a manager sleeping with a board
member. Whenever you put men and women together, you have sexual attraction. The
risk for employers involves the collision of two legal principals. California has a
constitutional provision protecting privacy, which means romantic relationships between coworkers
should be none
of the association's business. However, this runs headlong into a competing principal
against sexual harassment, i.e., employees should not feel pressured to submit to sexual
advances to preserve their jobs.
Risks. In addition to potential claims
of sexual harassment, associations face other risks. The first is that the manager ceases to be objective about
his/her subordinate's work
performance. This often leads to morale problems with other employees who may
believe that preferential treatment is being given to the sexually active co-worker.
The second is the loss of internal checks and balances if the manager and
subordinate have any control over the
association's monies. Working together, the two can cover a lot
of tracks. A third risk is that a breakup could lead to a revenge-motivated lawsuit
by the subordinate claiming that the relationship was never consensual. Finally,
any disciplinary action against the
subordinate could lead to a retaliatory lawsuit.
Prohibit Dating.
In my opinion, it is never okay for a supervisor
to date a subordinate.
The inequality of the supervisor-subordinate relationship creates an element of
coercion or claimed coercion.
To protect against potential liability, associations should implement workplace rules that prohibit any kind of dating or sexual
contact between supervisors and subordinates, whether on duty or off.
This
avoids the appearance of favoritism, conflicts of interest, and unprofessional or
disruptive conduct in the workplace.
Love Contract. If your association does
not already have rules prohibiting supervisor-subordinate relationships, you
could protect the association by having the manager and staff member sign a consensual
relationship agreement, also known as a "love contract."
The contract requires the manager and
subordinate to (i)
acknowledge that they are aware of
the association's policy against sexual harassment, (ii) affirm that their relationship is mutually
agreeable and not coerced, (iii) consent to guidelines on appropriate office behavior,
such as refraining from displays of affection at work and work-related events, and (iv) agree that the relationship may be ended at any
time by either party without fear of retaliation.
RECOMMENDATION.
Associations with employees should have handbooks, which have been reviewed by legal
counsel, distributed to all employees. One of the policies should
address the issue of co-worker romantic relationships.
Very truly yours,
Adrian Adams, Esq.
Adams Kessler PLC
 THE
CASE OF THE RENTAL
RESTRICTION AMENDMENTS
In a new case published on September 5, 2008,
the California Court of Appeal was asked to decide whether the following two
CC&R amendments were reasonable: 1) Owners could not rent their units for less
than 30 days; and 2) the Association could evict tenants who were in breach of
the governing documents. Additionally, in one of the first cases interpreting
the new election law, the court discussed whether a petition to approve CC&R
amendments should be denied where the Association failed to timely publicize the
CC&R amendment election results in a communication directed to all members.
Find
out how the court ruled by
reading the latest entry in Gary Kessler’s Condo Court blog. |
