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FARS

Section 28.203-2: Acceptability of Assets.

(a) The Government will accept only cash, readily marketable assets, or irrevocable letters of credit from a federally insured financial institution from individual sureties to satisfy the underlying bond obligations.

(b) Acceptable assets include -

    (1) Cash, or certificates of deposit, or other cash equivalents with a federally insured financial institution;

    (2) United States Government securities at market value. (An escrow account is not required if an individual surety offers Government securities held in book entry form at a depository institution. In lieu thereof, the individual shall provide evidence that the depository institution has-

      (i) Placed a notation against the individual’s book entry account indicating that the security has been pledged in favor of the respective agency;

      (ii) Agreed to notify the agency prior to maturity of the security; and

      (iii) Agreed to hold the proceeds of the security subject to the pledge in favor of the agency until a substitution of securities is made or the security interest is formally released by the agency.);

    (3) Stocks and bonds actively traded on a national U.S. security exchange with certificates issued in the name of the individual surety. National security exchanges are -

      (i) the New York Stock Exchange;

      (ii) the American Stock Exchange;

      (ii) the Boston Stock Exchange;

      (iv) the Cincinnati Stock Exchange;

      (v) the Midwest Stock Exchange;

      (vi) the Philadelphia Stock Exchange;

      (vii) the Pacific Stock Exchange; and

      (viii) the Spokane Stock Exchange.

      These assets will be accepted at 90 percent of their 52-week low, as reflected at the time of submission of the bond. Stock options and stocks on the over-the-counter (OTC) market or NASDQ Exchanges will not be accepted. Assistance in evaluating the acceptability of securities may be obtained from the -
      Securities and Exchange Commission
      Division of Enforcement
      450 Fifth Street NW
      Washington, DC 20549.

    (4) Real property owned in fee simple by the surety without any form of concurrent ownership, except as provided in paragraph (c)(3)(iii) of this subsection, and located within the United States or its outlying areas. These assets will be accepted at 100 percent of the most current tax assessment value (exclusive of encumbrances) or 75 percent of the properties’ unencumbered market value provided a current appraisal is furnished (see 28.203-3).

    (5) Irrevocable letters of credit (ILC) issued by a federally insured financial institution in the name of the contracting agency and which identify the agency and solicitation or contract number for which the ILC is provided.

(c) Unacceptable assets include but are not limited to -

    (1) Notes or accounts receivable;

    (2) Foreign securities;

    (3) Real property as follows:

      (i) Real property located outside the United States and its outlying areas.

      (ii) Real property which is a principal residence of the surety.

      (iii) Real property owned concurrently regardless of the form of co-tenancy (including joint tenancy, tenancy by the entirety, and tenancy in common) except where all co-tenants agree to act jointly.

      (iv) Life estates, leasehold estates, or future interests in real property.

    (4) Personal property other than that listed in paragraph (b) of this subsection (e.g., jewelry, furs, antiques);

    (5) Stocks and bonds of the individual surety in a controlled, affiliated, or closely held concern of the offeror/contractor;

    (6) Corporate assets (e.g., plant and equipment);

    (7) Speculative assets (e.g., mineral rights);

    (8) Letters of credit, except as provided in 28.203-2(b)(5).




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