I am a member of my HOA board. Our prior management company had done all of our investments (from our direction) for our reserve funds. FDIC insured CD’s were used as we understood that they were required by California law only to invest our funds in FDIC insured funds. We saw that the interest rate income from FDIC insured funds did not cover inflation increases and considered utilizing a financial firm to assist us to find some other opportunities that better protected our reserve assets using a combination of FDIC and SIPC insured securities. We have had some questioning from homeowners if it legal for us to utilize an SIPC insured fund (versus an FDIC fund). What type of investment opportunities are legal for HOA reserve funds?

Thank you,

C.W., Oceanside

Dear C.W.,

As a fiduciary of the association funds, the board must keep the members’ money secure and not subject to reduction. In the world of financial fiduciaries, if the fund shrinks, the fiduciary could be “surcharged,” meaning held personally liable for the reduction in the fund due to loss of funds. Loss of funds is not a risk with deposits in banking institutions insured by the Federal Deposit Insurance Corporation (FDIC), so long as no more than $250,000 is in any one institution. Many associations spread their reserve funds across multiple banks to keep their funds all insured within the limit. The Securities Investor Protection Corporation (SIPC, protects against a stock brokerage becoming insolvent or taking a client’s funds – but it expressly does not protect against declining investments. Associations are often tempted to place their reserve funds in stocks or stock funds, hoping for the possible increase in value.  However, stocks are not guaranteed and can be quite volatile, and directors do not realize that if the stock market drops, their liability rises.

Stay safe- and in banks,

HI Kelly,

I am currently on the board of my building. We need to bring up our reserves. I would prefer a special assessment over monthly dues increases. Do you have any suggestions and any resources I can bring to the board for this issue?

Thank you for any help!

A.G., Long Beach

Dear A.G.,

A major special assessment (more than 5% of the annual budget) normally will require a membership vote to approve, while the board can increase regular assessments up to 20% per year (Civil Code 5605), so long as its Annual Budget Report was published on time. Consider a town hall meeting or otherwise ask for member input to guide the board before it considers pursuing a member vote.

Best regards,


Our association has been operating under the premise that two signatures (president & treasurer) on all checks complies with the statute regarding reserve withdrawals. We have one resident insisting this does not comply with the statute. I read your column and so am reaching out to you for your opinion.


R.S., Del Mar

Dear R.S.,

Civil 5510 is clear – Two directors, or a non-director officer and one director, must sign any withdrawal of reserve funds. Also, under Civil 5502, if that withdrawal is more than the lesser of $10,000 or 5% of the association’s combined deposits, written board approval is required.



Kelly G. Richardson Esq., CCAL, is a Fellow of the College of Community Association Lawyers and a Partner of Richardson | Ober | DeNichilo LLP, a California law firm known for community association advice. Submit questions to Past columns at All rights reserved®.


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