(1) SECURITY REQUIRED. (a) A grain warehouse keeper shall file security with the department, and maintain that security until the department releases it under sub. (8), if all of the following apply when the department first licenses the grain warehouse keeper under s. 126.26 (1): 1. The grain warehouse keeper operates grain warehouses with a combined capacity of more than 300,000 bushels. 2. The grain warehouse keeper’s annual financial statement under s. 126.28 (1) (a) shows negative equity. (b) 1. In this paragraph, “estimated default exposure” means 20 percent of the current local market value of grain that the grain warehouse keeper holds in this state for others. 2. A grain warehouse keeper shall file security with the department, and maintain that security until the department releases it under sub. (8) (am), if the grain warehouse keeper files an annual financial statement under s. 126.28 (1) that shows negative equity, a current ratio of less than 1.25 to 1.0, or a debt to equity ratio of more than 4.0 to 1.0 and the grain warehouse keeper’s estimated default exposure is greater than $20,000,000. (3) AMOUNT OF SECURITY. (a) Except as provided in par. (b), a grain warehouse keeper who is required to file or maintain security under this section shall at all times maintain security equal to at least 20 percent of the current local market value of grain that the grain warehouse keeper holds in this state for others. (b) A grain warehouse keeper who is required to file or maintain security only under sub. (1) (b) shall at all times maintain security equal to the grain warehouse keeper’s estimated default exposure, as defined in sub. (1) (b) 1., less $20,000,000. (4) FORM OF SECURITY. The department shall review, and determine whether to approve, security filed or maintained under this section. The department may approve only the following types of security: (a) Currency. (b) A commercial surety bond if all of the following apply: 1. The surety bond is made payable to the department for the benefit of depositors. 2. The surety bond is issued by a person authorized to operate a surety business in this state. 3. The surety bond is issued as a continuous term bond that may be canceled only with the department’s written agreement, or upon 90 days’ prior written notice served on the department in person or by certified mail. 4. The surety bond is issued in a form, and subject to any terms and conditions, that the department considers appropriate. (c) A certificate of deposit or money market certificate, if all of the following apply: 1. The certificate is issued or endorsed to the department for the benefit of depositors. 2. The certificate may not be canceled or redeemed without the department’s written permission. 3. No person may transfer or withdraw funds represented by the certificate without the department’s written permission. 4. The certificate renews automatically without any action by the department. 5. The certificate is issued in a form, and subject to any terms and conditions, that the department considers appropriate. (d) An irrevocable bank letter of credit if all of the following apply: 1. The letter of credit is payable to the department for the benefit of depositors. 2. The letter of credit is issued on bank letterhead. 3. The letter of credit is issued for an initial period of at least one year. 4. The letter of credit renews automatically unless at least 90 days before the scheduled renewal date the issuing bank gives the department written notice, in person or by certified mail, that the letter of credit will not be renewed. 5. The letter of credit is issued in a form, and subject to any terms and conditions, that the department considers appropriate. (5) DEPARTMENT CUSTODY OF SECURITY. The department shall hold, in its custody, all security filed and maintained under this section. The department shall hold the security for the benefit of depositors. (6) ADDITIONAL SECURITY. (a) The department may, at any time during a license year, demand additional security from a grain warehouse keeper if any of the following applies: 1. The grain warehouse keeper’s existing security falls below the amount required under sub. (3) for any reason, including depreciation in the value of the security, increased obligations to depositors, or the cancellation of any security filed with the department. 2. The grain warehouse keeper fails to provide required information that is relevant to a determination of security requirements. (b) The department shall issue a demand under par. (a) in writing. The department shall indicate why additional security is required, the amount of security required, and the deadline date for filing security. The department may not specify a deadline for filing security that is more than 30 days after the date on which the department issues its demand for security. (c) A grain warehouse keeper may request a hearing, under ch. 227, on a demand for security under par. (b). A request for hearing does not automatically stay a security demand. (d) If a grain warehouse keeper fails to comply with the department’s demand for security under this subsection, the grain warehouse keeper shall give written notice of that fact to all depositors. If the grain warehouse keeper fails to give accurate notice under this paragraph within 5 days after the deadline for filing security under par. (b) has passed, the department shall promptly notify depositors by publishing a class 3 notice under ch. 985. The department may also give individual notice to depositors of whom the department is aware. (e) If a grain warehouse keeper fails to comply with the department’s demand for security under this subsection, the department may do any of the following: 1. Issue an appropriate summary order under s. 126.85 (2). 2. Suspend or revoke the grain warehouse keeper’s license. (7) MONTHLY REPORTS. A grain warehouse keeper who is required to file or maintain security under this section shall file monthly reports with the department. The grain warehouse keeper shall file the report by the 10th day of each month, in a form specified by the department. In a monthly report, the grain warehouse keeper shall provide information reasonably required by the department, including the amount of each type of grain stored in each grain warehouse on the last day of the preceding month. (8) RELEASING SECURITY. (a) The department may release security filed under sub. (1) (a) if any of the following applies: 1. The grain warehouse keeper reports grain warehouse capacity under s. 126.26 (2) (e) of less than 300,000 bushels for at least 2 consecutive license years and the grain warehouse keeper pays the quarterly fund assessment that would have been required of the grain warehouse keeper if the grain warehouse keeper had been a contributing grain warehouse keeper on the most recent quarterly installment date under s. 126.30 (6). 2. The grain warehouse keeper’s annual financial statement under s. 126.28 shows positive equity for at least 2 consecutive years and the grain warehouse keeper pays the quarterly fund assessment that would have been required of the grain warehouse keeper if the grain warehouse keeper had been a contributing grain warehouse keeper on the most recent quarterly installment date under s. 126.30 (6). (am) The department may release security filed under sub. (1) (b), except for any amount of security that the grain warehouse keeper is required to file because sub. (1) (a) applies to the grain warehouse keeper, if the grain warehouse keeper files 2 consecutive annual financial statements under s. 126.28 showing that the grain warehouse keeper no longer has negative equity, a current ratio of less than 1.25 to 1.0, or a debt to equity ratio of more than 4.0 to 1.0. (c) The department may release security to the extent that the security exceeds the amount required under sub. (3). (d) The department may release security if the grain warehouse keeper files alternative security, of equivalent value, that the department approves. (e) The department shall release security if the grain warehouse keeper has gone out of business and has fulfilled all grain obligations to depositors.
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