IOTA rule amendment debated.

Opening the IOTA program to financial institutions other than banks and requiring those holding the trust accounts to pay interest rates or dividends commensurate with those offered to their non-IOTA depositors will go a long way toward providing more legal assistance to Floridians whose legal needs would otherwise go unmet.

That's the message Florida Bar Foundation President A. Hamilton Cooke brought to the Supreme Court June 4 during oral arguments on the Foundation's petition to amend the IOTA rule to allow financial services companies -- such as Morgan Stanley or Merrill Lynch -- to hold IOTA accounts.

Cooke said the change also would require any institution that wants to handle IOTA accounts to offer the same market rate of interest or dividends on products available to non-IOTA depositors with comparable balances. Authorized investments would include FDIC insured accounts, daily bank repurchase agreements (REPOS) or appropriate safeguarded invesment products such as government money market funds. Currently, IOTA funds can only be held in federally insured checking accounts or REPOS.

"We simply want to have the IOTA accounts treated the same parity with non-IOTA accounts," Cooke said.

Under the current program, Cooke said, total IOTA revenue will amount to about $11 million this year, and has been steadily falling since the mid-1990s as interest rates have waned and bank service charges have risen. Cooke said at its peak, IOTA was generating about $19 million a year for legal aid, administration of justice and law student assistance programs.

Cooke said the Foundation sees the rule amendment as the best way to combat a "whipwashed combination" of low interest rates and high services changes that have forced the Foundation to reduce grants by by 15% over the past two years.

Bar President-elect Terry Russell told the court the Bar Board of Governors also supports the the rule change. He said at any one time about $1.5 billion is being held in Florida IOTA accounts, but that money is only generating annual revenues of about $10 to $11 million for the Foundation. That's due in large part to market forces not coming into play to provide competitive investment return on the accounts, he said.

"I think the law firms that create these accounts simply have no motivation to see to it that the returns on these accounts is similar to what it would be in another environment," Russell said. "This has sort of left the financial institutions free to...