The Federal Deposit Insurance Corporation ruled November 21 that effective immediately client funds deposited in IOTA accounts are eligible for unlimited deposit insurance coverage.

All funds in an IOTA account, regardless of size, will now be insured in full by the FDIC as part of the Temporary Liquidity Guarantee Program (TLGP).

The TLGP, which was established in October, fully guarantees funds in noninterest bearing accounts until June 30, 2009.

“We’re gratified that the FDIC recognized the uniqueness of IOTA accounts and that all clients’ funds in IOTA accounts will be fully insured,” said Florida Bar Foundation President Kathleen S. McLeroy of Tampa.

A number of organizations had urged the FDIC to clarify that IOTA accounts were covered by TLGP, including the ABA, The Florida Bar Foundation, the National Legal Aid and Defender Association, and the National Association of IOLTA Programs.

“Had the FDIC failed to expand full coverage for IOLTA, lawyers would have had to consider abandoning IOLTA for fully insured noninterest bearing accounts or moving IOLTA funds from community banks to the larger ‘too big to fail’ banks,” said ABA President H. Thomas Wells, Jr. “Abandoning IOLTA would have been catastrophic for IOLTA programs in all 50 states, which provide funding for legal aid for the poor. Moving the accounts to larger banks would have defeated the FDIC’s purpose in creating the TLGP.”

The FDIC rule may be accessed at www.fdic.gov/news/board/08BODtlgp.PDF.