Compact Funds Financing

Editor’s note: Chapter 5, with subchapters I through VI, of this title were enacted by PL 5-121. Chapters 1 through 4 were reserved. Title 58 itself was not given a title by PL 5-121, but the chapter title designated reflects the name of the Act.

General Provisions


§ 511. Short title.
§ 512. Definitions.
§ 513. Purpose; Bonds; Costs of issuance.
§ 514. Accounts and records.

§ 511. Short title.

This chapter shall be known as the “Compact Funds Financing Act.”

Source: PL 5-121 § 2.

Editor’s note: Section 1 of PL 5-121 created subchapter I entitled “General”. This has been revised to “General Provisions” for consistency and clarity, and is not meant to effect any substantive change to this subchapter.

§ 512. Definitions.

As used in this chapter, these terms shall have the following meanings, unless otherwise required by context:

(1) “Bond” or “bonds” means any bond, note or other evidence of indebtedness issued under this chapter including any indebtedness for borrowed money to any commercial bank or similar financial institution and any reimbursement obligation to a provider of Credit Enhancement;

(2) “Bond Fund” means the fund created pursuant to section 523 of this chapter;

(3) “Committee” means the committee referred to in section 524 of this chapter;

(4) “Compact of Free Association” means the Compact of Free Association between the Federated States of Micronesia and the United States of America;

(5) “Credit Enhancement” means bond insurance, letters of credit, or similar credit enhancement instruments;

(6) “Federated Development Authority” means the FSM instrumentality of that name;

(7) “FSM” means the Federated States of Micronesia;

(8) “FSM Fiscal Agent” means any fiscal agent selected and acting pursuant to subchapter V of this chapter;

(9) “Indenture” means any indenture, agreement or other instrument pursuant to which the Bonds shall be issued, as approved by the resolution;

(10) “Pledged Compact Funds” means the amounts payable under the Compact of Free Association which the President of the Federated States of Micronesia is authorized to pledge to the payment of the Bonds following legislative action by the FSM and its constituent States;

(11) “Pledged Funds” means the Pledged Compact Funds and/or other pledged moneys, and investment earnings thereon;

(12) “Resolution” means the resolution or resolutions of the committee authorizing the issuance and sale of the Bonds in one or more series, on the terms and conditions, and substantially in the form, approved therein or pursuant to procedures provided therein;

(13) “Secretary” means the Secretary of Finance of the Federated States of Micronesia;

(14) “State” means any constituent State of the Federated States of Micronesia;

(15) “Swap instruments” has the meaning set forth in section 531(1)(q) of this chapter; and

(16) “Trustee” means the FSM Fiscal Agent appointed as such in the Indenture and any successors or assigns, who will act as such for the benefit of the holders of the Bonds.

Source: PL 5-121 § 3; amended by PL 5-136 § 1.

§ 513. Purpose; Bonds; Costs of issuance.

(1) The purpose of this chapter is to authorize borrowing by the FSM for the benefit of itself and/or any one or more of its constituent States in anticipation of receipt from the United States of America of grant funds under the Compact of Free Association. Any such borrowing may be from any commercially reasonable source whatsoever, and may be accomplished through the issuance of Bonds in any commercially reasonable manner, including, without limitation, Bonds publicly offered in the United States of America or elsewhere, Bonds or other evidences of indebtedness issued in private placements, bank borrowings, and other types of financings, so long as the procedures set forth herein are followed. It is necessary and appropriate that the FSM, in cooperation with the State governments of the FSM, use all practical means to enhance the benefits derived from moneys payable to the FSM and the State governments pursuant to the Compact of Free Association by participating in a financing secured by all or a portion of such payments due from the United States of America. This method of financing is in the public interest and serves a public purpose.

(2) The securities evidencing this indebtedness may be general or limited obligations of the FSM, entitled “Federated States of Micronesia Compact Financing Bonds,” may bear additional designations indicating the purpose of the financing as the committee may determine, may be issued in one or more series (including refundings), and may be secured by the full faith and credit of the FSM, a pledge of grant funds under the Compact of Free Association, Credit Enhancement, or other moneys, all as specified in the resolution.

(3) The costs of issuance of such Bonds, including printing, filing fees with regulatory agencies, such as the United States Securities and Exchange Commission, legal, rating agency, financing advisors’, placement agent’s, underwriters’, Trustee’s and similar fees and expenses, and fees or premiums for Credit Enhancement, may also be paid from the proceeds of sales of the Bonds. The costs of issuance may also include prior expenditures incurred in connection with such issuance.

(4) In the event Bonds that are obligations of the FSM are issued in a financing in which the FSM and/or any State does not participate in the proceeds therefrom, the participating State or States or the FSM, if participating, shall provide assurance satisfactory to the Secretary that the non-participating States or the FSM, if not participating, will be protected from any loss arising in connection with such Bonds before such Bonds may be issued.

Source: PL 5-121 § 4; amended by PL 5-136 § 2; PL 6-32 § 1.

§ 514. Accounts and records.

The Secretary and the committee shall keep full and particular accounts and records of all their proceedings under this chapter and they shall transmit to the President an abstract of all such proceedings in any calendar year, with a report, to be transmitted by the President to the Speaker of the Congress, the Governor of each State, and the Speaker of the legislature of each State annually on or before the 30th day of April of each year. All books and papers pertaining to the matters provided for in this chapter shall at all times be open to the inspection of authorized representatives of the National or any State government, any citizen of the FSM, or any other interested party.

Source: PL 5-121 § 5.

Cross-reference: The statutory provisions on the President and the Executive are found in title 2 of this code. The statutory provisions on the Congress of the Federated States of Micronesia are found in title 3 of this code.

The website of the FSM National Government contains announcements, press releases, news, forms, and other information on the National Government at http://fsmgov.org.

The official website of the Congress of the Federated States of Micronesia contains the public laws enacted by the Congress, sessions, committee hearings, rules, and other Congressional information at http://www.fsmcongress.fm/.