Stat 2126 Portfolio

[Azalee Freas]

Thiscourse introduces the essentials of financial economics with a focus on the time value of money, investment decisions, the valuing of financial assets, optimal portfolio choice and the capital asset pricing model. PREREQ: STAT 2126 and ECON 1006/1007 (or ECON 1005). (lec 3) cr 3. Students may not retain credit for both ECON 3066 and either ECON 3065 or COMM 2026.

Compliance Dates: Brokers, surety providers, and financial institutions must comply with the provisions regarding immediate suspension, financial failure or insolvency, and enforcement authority on January 16, 2025.

Brokers, surety providers, and financial institutions must comply with the provisions regarding assets readily available and entities eligible to provide trust funds for Form BMC-85 trust fund filings on January 16, 2026.

Petition submittal date: Petitions for reconsideration of this final rule must be submitted to the FMCSA Administrator no later than [INSERT DATE 30 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER].

If the broker or freight forwarder subsequently cures the default, and the surety company or financial institution reinstates the bond or trust or the broker or freight forwarder obtains a new bond or trust, FMCSA will lift the suspension notice and update the FMCSA Register.

As with the immediate suspension provision, FMCSA intends to use the forthcoming URS platform to receive information and carry out its own responsibilities under this provision.

Entities Eligible to Provide Trust Funds for BMC-85 Filings. In this rule, FMCSA removes loan and finance companies from the list of providers eligible to serve as BMC-85 trustees, because this type of institution is not subject to the rigorous Federal regulations applicable to chartered depository institutions or to the state regulations applicable to insurance companies. Loan and finance companies will now be prohibited from offering BMC-85 trusts unless they obtain certification to operate as another type of financial institution that remains on the list of eligible providers in 387.307(c).

Brokers and freight forwarders, surety bond and trust fund providers, and the Federal Government will incur costs for compliance and implementation. The quantified costs of the rule include notification costs related to a drawdown on a surety bond or trust fund, and immediate suspension proceedings, FMCSA costs to hire new personnel, and costs associated with the development and maintenance of the BMC-84/85 Filing and Management Information Technology (IT) System. As shown in Table 1, FMCSA estimates that the 10-year cost of the rule will total $5.5 million on an undiscounted basis, $3.9 million discounted at 7 percent, and $4.7 million discounted at 3 percent (all in 2022 dollars). The annualized cost of the rule will be $559,971 discounted at 7 percent and $556,786 discounted at 3 percent. Ninety-eight percent of the costs will be incurred by the Federal Government.

This rule will result in benefits to motor carriers. FMCSA is aware that some brokers choose to withhold payment to motor carriers for services rendered. Motor carriers can then submit claims to the financial responsibility provider to receive payment. If the financial responsibility provider has received claims against an individual broker that exceed $75,000, the financial responsibility provider will often submit the claims to a court in an interpleader action2 to determine how to allocate the broker bond or trust fund. The interpleader process can be costly and time consuming for motor carriers, and generally results in motor carrier claims being paid pro rata, depending on the number of claims against the broker bond or trust fund. FMCSA believes that most brokers operate with integrity and uphold the contracts made with motor carriers and shippers. However, a minority of brokers with unscrupulous business practices can create unnecessary financial hardship for unsuspecting motor carriers.

In the NPRM, FMCSA proposed a list of prohibited asset types. FMCSA also specified that the ability to liquidate an asset within 7 calendar days of the event that triggers a payment from the trust is necessary for that asset to be considered readily available.

Five commenters, including those who identified as brokers and small business owners, stated that $75,000 is too high and should not be implemented for small businesses. These commenters stated this minimum will make it challenging for them to start a brokerage company or to remain in business. One commenter proposed reducing the required amount to $5,000.

FMCSA Response: After considering all the comments on this issue, FMCSA has determined that a bond or trust fund should be considered to have fallen below $75,000 when either an actual drawdown occurs, or when the surety provider or financial institution receives legitimate claims that have not been adequately addressed by the broker and will inevitably result in the bond or trust fund falling below that amount. Expanding the criteria in this manner will allay concerns from surety providers and financial institutions about their ability to quickly notify FMCSA of brokers warranting suspension while still adhering to the 60-day period for public advertisement and subsequent 30-day period for paying claims specified in 49 U.S.C. 13906(b)(6). This is because surety providers and financial institutions will not be required to actually make a payment from the bond or trust fund before notifying FMCSA that the assets have fallen below $75,000, and will thus be able to continue aggregating claims throughout the statutory claims period.

FMCSA did not include the language requested by Avalon, TIA, and PFA that would consider available financial security to fall below the minimum required amount when the broker or freight forwarder fails to adhere to the terms of its contract with the surety or financial institution, as it could potentially create due process concerns. FMCSA does not have authority to adjudicate such contract disputes, which may occur for reasons having nothing to do with the required financial security.

Comments: An anonymous commenter raised concerns regarding the proposed 7-day timeframe for immediate suspension and suggested allowing adequate time to respond to a claim but did not provide any suggestions. Another commenter suggested 24 hours. OOIDA proposed a timeframe of 5 to 10 calendar days and ATA-MSC suggested a timeframe of 2 weeks. The latter explained this timeline would provide enough time for internal investigations to take place and prevent disruptions from occurring in the supply chain.

FMCSA Response: In the final rule, FMCSA is adopting a timeframe for brokers and freight forwarders to respond to a claim. After considering the suggestions proposed by the various commenters, FMCSA determined that 7 business days is appropriate. This timeframe provides an adequate interval for a broker or freight forwarder to respond. In response to ATA-MSC's concern that an internal investigation may take up to 10 business days, FMCSA notes that this provision sets the timeframe for a broker or freight forwarder to submit an initial response when notified of a claim. It does not prescribe a timeframe for the surety provider or financial institution to investigate and make a determination on the validity of the claim. However, if the surety provider or financial institution ultimately determines that the claim is valid and will be paid, it must then comply with the 2-business day reporting timeline described above.

On the other hand, FMCSA received a request from the Surety & Fidelity Association of America (SFAA) to refine the language by clarifying that claimants would only be entitled to payment until the investigation period has elapsed.

An individual owner-operator who experienced an instance of inadequate payment from a broker suggested suspension of brokers for 30 days and decreasing their credit rating. Another commenter suggested imprisoning brokers who fail to pay.

Comments: Many trade organizations pointed to some inconsistencies in the broader scope of the immediate suspension provision and raised concerns that it relies on the broker to self-disclose bankruptcy or insolvency as evidence of financial failure.

FMCSA Response: FMCSA recognizes that relying only on filings made pursuant to Title 11, United States Code or an equivalent state insolvency proceeding as evidence of financial failure or insolvency could prevent surety companies and financial institutions from reporting in a timely manner when a broker or freight forwarder is accumulating claims. The changes FMCSA made in the final rule to the reporting requirements for immediate suspensions, as discussed above, and to the definition of financial failure or insolvency, discussed below, will ensure that surety providers and financial institutions can initiate the immediate suspension process more quickly once certain conditions are met. This will help reduce the risk that brokers and freight forwarders can continue accumulating claims for an extended period. These changes also ensure that surety providers and financial institutions can continue to utilize the payment provisions of either 49 U.S.C. 13906(b)(2) or (6), as applicable.

Brokers who file bankruptcy proceedings are also covered by the anti-discrimination provisions in 11 U.S.C. 525. Accordingly, FMCSA made changes in the final rule to specify that the immediate suspension procedures do not apply when a broker or freight forwarder has filed a proceeding pursuant to Title 11, United States Code, in addition to changes in the definition of financial failure or insolvency, as discussed below. FMCSA believes these changes remove the potential for conflicts between the Bankruptcy Code and the regulatory requirements.

Commenters were also concerned that the use of a bankruptcy proceeding as evidence of financial failure or insolvency would violate the anti-discrimination provisions of 11 U.S.C. 525, which provides that a governmental unit may not, among other actions, deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to a person solely because the person has been a debtor under Title 11 or a bankrupt or debtor under the Bankruptcy Act.

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