1-1     By:  Marchant, Grusendorf (Senate Sponsor - Sibley)   H.B. No. 1870

 1-2           (In the Senate - Received from the House April 18, 1997;

 1-3     April 22, 1997, read first time and referred to Committee on

 1-4     Economic Development; May 6, 1997, reported adversely, with

 1-5     favorable Committee Substitute by the following vote:  Yeas 8, Nays

 1-6     0; May 6, 1997, sent to printer.)

 1-7     COMMITTEE SUBSTITUTE FOR H.B. No. 1870                  By:  Sibley

 1-8                            A BILL TO BE ENTITLED

 1-9                                   AN ACT

1-10     relating to the regulation of trust companies; providing

1-11     administrative and criminal penalties.

1-12           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

1-13           SECTION 1.  The Texas Trust Company Act is enacted to read as

1-14     follows:

1-15                       CHAPTER 1.  GENERAL PROVISIONS

1-16     Sec. 1.001.  SHORT TITLE

1-17     Sec. 1.002.  DEFINITIONS

1-18     Sec. 1.003.  TRUST COMPANY RULES

1-19                       CHAPTER 1.  GENERAL PROVISIONS

1-20           Sec. 1.001.  SHORT TITLE.  This Act may be cited as the Texas

1-21     Trust Company Act.

1-22           Sec. 1.002.  DEFINITIONS.  (a)  In this Act:

1-23                 (1)  "Account" means the client relationship

1-24     established with a trust company involving the transfer of funds or

1-25     property to the trust company, including a relationship in which

1-26     the trust company acts as trustee, executor, administrator,

1-27     guardian, custodian, conservator, receiver, registrar, or agent.

1-28                 (2)  "Affiliate" means a company that directly or

1-29     indirectly controls, is controlled by, or is under common control

1-30     with a state trust company or other company.

1-31                 (3)  "Bank" means a state or national bank.

1-32                 (4)  "Banking commissioner" means the banking

1-33     commissioner of Texas or a person designated by the banking

1-34     commissioner and acting under the banking commissioner's direction

1-35     and authority.

1-36                 (5)  "Board" means the board of directors, managers, or

1-37     managing participants of, or a person or group of persons acting in

1-38     a comparable capacity for, a state trust company or other entity.

1-39                 (6)  "Branch" means a location of a state trust

1-40     company, other than the trust company's home office, at which the

1-41     state trust company engages in the trust business.

1-42                 (7)  "Capital" means:

1-43                       (A)  the sum of:

1-44                             (i)  the par value of all shares or

1-45     participation shares of a state trust company having a par value

1-46     that have been issued;

1-47                             (ii)  the consideration fixed by the board

1-48     in the manner provided by the Texas Business Corporation Act for

1-49     all shares or participation shares of the state trust company

1-50     without par value that have been issued, except a part of that

1-51     consideration that:

1-52                                            (a)  has been actually

1-53     received;

1-54                                            (b)  is less than all of

1-55     that consideration; and

1-56                                            (c)  the board, by

1-57     resolution adopted not later than the 60th day after the date of

1-58     issuance of those shares, has allocated to surplus with the prior

1-59     approval of the banking commissioner; and

1-60                             (iii)  an amount not included in

1-61     Subparagraphs (i) and (ii) of this paragraph that has been

1-62     transferred to capital of the state trust company, on the payment

1-63     of a share dividend or on adoption by the board of a resolution

1-64     directing that all or part of surplus be transferred to capital,

 2-1     minus each reduction made as permitted by law; less

 2-2                       (B)  all amounts otherwise included in Paragraphs

 2-3     (A)(i) and (ii) of this subdivision that are attributable to the

 2-4     issuance of securities by the state trust company and that the

 2-5     banking commissioner determines, after notice and an opportunity

 2-6     for hearing, should be classified as debt rather than equity

 2-7     securities.

 2-8                 (8)  "Certified surplus" means the part of surplus

 2-9     designated by a vote of the board of a state trust company under

2-10     Section 3.105 of this Act and recorded in the board minutes as

2-11     certified.

2-12                 (9)  "Charter" means a corporate charter issued under

2-13     this Act to engage in a trust business.

2-14                 (10)  "Client" means a person to whom a trust company

2-15     owes a duty or obligation under a trust or other account

2-16     administered by the trust company, regardless of whether the trust

2-17     company owes a fiduciary duty to the person.  The term includes a

2-18     beneficiary of a trust for whom the trust company acts as trustee

2-19     and a person for whom the trust company acts as agent, custodian,

2-20     or bailee.

2-21                 (11)  "Company" includes a bank, trust company,

2-22     corporation, partnership, association, business trust, or another

2-23     trust.

2-24                 (12)  "Conservator" means the banking commissioner or

2-25     an agent of the banking commissioner exercising the powers and

2-26     duties provided by Subchapter B, Chapter 6, of this Act.

2-27                 (13)  "Control" means:

2-28                       (A)  the ownership of or ability or power to

2-29     vote, directly, acting through one or more other persons, or

2-30     otherwise indirectly, 25 percent or more of the outstanding shares

2-31     of a class of voting securities of a state trust company or other

2-32     company;

2-33                       (B)  the ability to control the election of a

2-34     majority of the board of the state trust company or other company;

2-35                       (C)  the power to exercise, directly or

2-36     indirectly, a controlling influence over the management or policies

2-37     of the state trust company or other company as determined by the

2-38     banking commissioner after notice and an opportunity for hearing;

2-39     or

2-40                       (D)  the conditioning of the transfer of 25

2-41     percent or more of the outstanding shares or participation shares

2-42     of a class of voting securities of the state trust company or other

2-43     company on the transfer of 25 percent or more of the outstanding

2-44     shares of a class of voting securities of another state trust

2-45     company or other company.

2-46                 (14)  "Department" means the Texas Department of

2-47     Banking.

2-48                 (15)  "Depository institution" means an entity with the

2-49     power to accept deposits under applicable law.

2-50                 (16)  "Equity capital" means the amount by which the

2-51     total assets of a state trust company exceed the total  liabilities

2-52     of the state trust company.

2-53                 (17)  "Equity security" means:

2-54                       (A)  stock or a similar security, any security

2-55     convertible, with or without consideration, into such a security, a

2-56     warrant or right to subscribe to or purchase such a security, or a

2-57     security carrying such a warrant or right;

2-58                       (B)  a certificate of interest or participation

2-59     in a profit-sharing agreement, collateral-trust certificate,

2-60     preorganization certificate or subscription, transferable share or

2-61     participation share, investment contract, voting-trust certificate,

2-62     or partnership interest; and

2-63                       (C)  a certificate of interest or participation

2-64     in, temporary or interim certificate for, or receipt for a security

2-65     described by this subdivision that evidences an existing or

2-66     contingent equity ownership interest.

2-67                 (18)  "Fiduciary record" means a matter written,

2-68     transcribed, recorded, received, or otherwise in the possession of

2-69     a trust company that is necessary to preserve information

 3-1     concerning an act or event relevant to an account of a trust

 3-2     company.

 3-3                 (19)  "Finance commission" means the Finance Commission

 3-4     of Texas.

 3-5                 (20)  "Foreign corporation" means a company

 3-6     incorporated or organized under the laws of a jurisdiction other

 3-7     than this state.  The  term does not include a depository

 3-8     institution incorporated or organized under the laws of the United

 3-9     States and domiciled in this state.

3-10                 (21)  "Full liability participant" means a participant

3-11     that agrees under the terms of a participation agreement to be

3-12     liable under a judgment, decree, or order of court for the entire

3-13     amount of all debts, obligations, or liabilities of a limited trust

3-14     association.

3-15                 (22)  "Hazardous condition" means:

3-16                       (A)  a refusal by the trust company or an

3-17     affiliate of the trust company to permit an examination of its

3-18     books, papers, accounts, records, or affairs by the banking

3-19     commissioner as provided by Section 2.002 of this Act;

3-20                       (B)  violation by a trust company of a condition

3-21     of its chartering or an agreement entered into between the trust

3-22     company and the banking commissioner or the department; or

3-23                       (C)  a circumstance or condition in which an

3-24     unreasonable risk of loss is threatened to clients or creditors of

3-25     a trust company, excluding risk of loss to a client that arises as

3-26     a result of the client's decisions or actions, but including a

3-27     circumstance or condition in which a trust company:

3-28                             (i)  is unable or lacks the means to meet

3-29     its current obligations as they come due in the regular and

3-30     ordinary course of business, even if the book or fair market value

3-31     of its assets exceeds its liabilities;

3-32                             (ii)  has equity capital less than the

3-33     amount of restricted capital the trust company is required to

3-34     maintain under Section 3.007 of this Act, or has equity capital the

3-35     adequacy of which is threatened, as determined under regulatory

3-36     accounting principles;

3-37                             (iii)  has concentrated an excessive or

3-38     unreasonable portion of its assets in a particular type or

3-39     character of investment;

3-40                             (iv)  violates or refuses to comply with

3-41     this Act, another statute or regulation applicable to trust

3-42     companies, or a final and enforceable order of the banking

3-43     commissioner;

3-44                             (v)  is in a condition that renders the

3-45     continuation of a particular business practice hazardous to its

3-46     clients and creditors; or

3-47                             (vi)  conducts business in an unsafe or

3-48     unsound manner, including conducting business with:

3-49                                            (a)  inexperienced or

3-50     inattentive management;

3-51                                            (b)  weak or potentially

3-52     dangerous operating practices;

3-53                                            (c)  infrequent or

3-54     inadequate audits;

3-55                                            (d)  administration of

3-56     assets that is notably deficient in relation to the volume and

3-57     character of or responsibility for asset holdings;

3-58                                            (e)  unsound administrative

3-59     practices;

3-60                                            (f)  frequent and

3-61     uncorrected material occurrences of violations of law, including

3-62     rules, or terms of the governing instruments; or

3-63                                            (g)  a notable degree of

3-64     conflicts of interest and engaging in self-dealing.

3-65                 (23)  "Home office" means a location registered with

3-66     the banking commissioner as a state trust company's home office at

3-67     which:

3-68                       (A)  the trust company does business;

3-69                       (B)  the trust company keeps its corporate books

 4-1     and records; and

 4-2                       (C)  at least one executive officer of the trust

 4-3     company maintains an office.

 4-4                 (24)  "Insider" means:

 4-5                       (A)  each director, manager, managing

 4-6     participant, officer, and principal shareholder or participant of a

 4-7     state trust company;

 4-8                       (B)  each affiliate of the state trust company

 4-9     and each director, officer, and employee of the affiliate;

4-10                       (C)  any person who participates or has authority

4-11     to participate, other than in the capacity of a director, in major

4-12     policymaking functions of the state trust company, whether or not

4-13     the person has an official title or the officer is serving without

4-14     salary or compensation; or

4-15                       (D)  each company controlled by a person

4-16     described by Paragraph (A), (B), or (C) of this subdivision.

4-17                 (25)  "Insolvent" means a circumstance or condition in

4-18     which a state trust company:

4-19                       (A)  is unable or lacks the means to meet its

4-20     current obligations as they come due in the regular and ordinary

4-21     course of business, even if the value of its assets exceeds its

4-22     liabilities;

4-23                       (B)  has equity capital less than $500,000, as

4-24     determined under regulatory accounting principles;

4-25                       (C)  fails to maintain deposit insurance for its

4-26     deposits with the Federal Deposit Insurance Corporation or its

4-27     successor, or fails to maintain adequate security for its deposits

4-28     as provided by Section 5.401(c) of this Act;

4-29                       (D)  sells or attempts to sell substantially all

4-30     of its assets or merges or attempts to merge substantially all of

4-31     its assets or business with another entity other than as provided

4-32     by Chapter 3 of this Act; or

4-33                       (E)  attempts to dissolve or liquidate other than

4-34     as provided by Chapter 7 of this Act.

4-35                 (26)  "Investment security" means a marketable

4-36     obligation evidencing indebtedness of a person in the form of a

4-37     bond, note, debenture, or other debt instrument not otherwise

4-38     classified as a loan or extension of credit.

4-39                 (27)  "Limited trust association" means a state trust

4-40     company organized as a limited trust association, authorized to

4-41     issue  participation shares, and controlled by its participants.

4-42                 (28)  "Loans and extensions of credit" means direct or

4-43     indirect advances of money by a state trust company to a  person

4-44     that are conditioned on the obligation of the person to repay the

4-45     funds or that are repayable from specific property pledged by or on

4-46     behalf of the person.

4-47                 (29)  "Manager" means a person elected to the board of

4-48     a limited trust association.

4-49                 (30)  "Managing participant" means a participant in a

4-50     limited trust association in which management has been retained by

4-51     the participants.

4-52                 (31)  "Mutual funds" means equity securities of an

4-53     investment company registered under the Investment Company Act of

4-54     1940 (15 U.S.C. Section 80a-1 et seq.) and the Securities Act of

4-55     1933 (15 U.S.C. Section 77a et seq.).  The term does not include

4-56     money market funds.

4-57                 (32)  "Officer" means the presiding officer of the

4-58     board, the principal executive officer, or another officer

4-59     appointed by the board of a state trust company or other company,

4-60     or a person or group of persons acting in a comparable capacity for

4-61     the state trust company or other company.

4-62                 (33)  "Operating subsidiary" means a company for which

4-63     a state trust company has the ownership, ability, or power to vote,

4-64     directly, acting through one or more other persons, or otherwise

4-65     indirectly, more than 50 percent of the outstanding shares of each

4-66     class of voting securities or its equivalent of the company.

4-67                 (34)  "Participant" means an owner of a participation

4-68     share in a limited trust association.

4-69                 (35)  "Participant-transferee" means a transferee of a

 5-1     participation share who has not received the unanimous consent of

 5-2     all participants to be a participant, or who becomes a

 5-3     participant-transferee under Subchapter C, Chapter 4, of this Act.

 5-4                 (36)  "Participation agreement" means the instrument

 5-5     stating the agreement among the participants of a limited trust

 5-6     association relating to the rights and duties of the participants

 5-7     and participant-transferees, including allocations of income, loss,

 5-8     deduction, credit, distributions, liquidation rights, redemption

 5-9     rights, liabilities of participants, priority rights of

5-10     participant-transferees to transfer participation shares, rights of

5-11     participants to purchase participation shares of

5-12     participant-transferees, the procedures for elections and voting by

5-13     participants, and any other matter not prohibited by or

5-14     inconsistent with this Act.

5-15                 (37)  "Participation shares" means the units into which

5-16     the proprietary interests of a limited trust association are

5-17     divided or subdivided by means of classes, series, relative rights,

5-18     or preferences.

5-19                 (38)  "Person" means an individual or any other legal

5-20     entity.

5-21                 (39)  "Principal shareholder" means a person who owns

5-22     or has the ability or power to vote, directly, acting through one

5-23     or more other persons, or otherwise indirectly, 10 percent or more

5-24     of the outstanding shares or participation shares of any class of

5-25     voting securities of a state trust company or other company.

5-26                 (40)  "Restricted capital" means the sum of capital and

5-27     certified surplus.

5-28                 (41)  "Regulatory accounting principles" means

5-29     generally accepted accounting principles as modified by rules

5-30     adopted under this Act or an applicable federal statute or

5-31     regulation.

5-32                 (42)  "Secondary capital" means the amount by which the

5-33     assets of a state trust company exceed restricted capital, required

5-34     by Section 3.007 of this Act, and liabilities.

5-35                 (43)  "Shareholder" means an owner of a share in a

5-36     state trust company.

5-37                 (44)  "Shares" means the units into which the

5-38     proprietary interests of a state trust company are divided or

5-39     subdivided by means of classes, series, relative rights, or

5-40     preferences.

5-41                 (45)  "State bank" means a banking association or

5-42     limited banking association organized or reorganized under the

5-43     Texas Banking Act (Article 342-1.001 et seq., Vernon's Texas Civil

5-44     Statutes), including an association organized under the laws of

5-45     this state before September 1, 1997, with the express power to

5-46     receive and accept deposits and possessing other rights and powers

5-47     granted by that Act expressly or by implication.  The term does not

5-48     include a savings association, savings bank, or credit union.

5-49                 (46)  "State trust company" means a trust association

5-50     or limited trust association organized or reorganized under this

5-51     Act, including an association organized under the laws of this

5-52     state before September 1, 1997.

5-53                 (47)  "Subsidiary" means a state trust company or other

5-54     company that is controlled by another person.  The term includes a

5-55     subsidiary of a subsidiary.

5-56                 (48)  "Supervisor" means the banking commissioner or an

5-57     agent of the banking commissioner exercising the powers and duties

5-58     specified in Subchapter B, Chapter 6, of this Act.

5-59                 (49)  "Trust association" means a trust company

5-60     organized as a trust association,  authorized to issue shares of

5-61     stock, and controlled by its shareholders.

5-62                 (50)  "Trust business" means the business of a company

5-63     holding itself out to the public as a fiduciary for hire or

5-64     compensation to  hold or administer accounts.

5-65                 (51)  "Trust deposits" means client funds held by a

5-66     state trust company and authorized to be deposited with itself as a

5-67     permanent investment or pending investment, distribution, or

5-68     payment of debts on behalf of the client.

5-69                 (52)  "Unauthorized trust activity" means an act or

 6-1     practice within this state by a person without a charter, license,

 6-2     permit, registration, or other authority issued or granted by the

 6-3     banking commissioner or other appropriate  regulatory authority for

 6-4     which such a charter, license, permit, registration, or other

 6-5     authority is required to conduct trust business.

 6-6                 (53)  "Undivided profits" means the part of equity

 6-7     capital of a state trust company equal to the balance of its net

 6-8     profits, income, gains, and losses since the date of its formation

 6-9     minus subsequent distributions to shareholders or participants and

6-10     transfers to surplus or capital under share dividends or

6-11     appropriate board resolutions.  The term includes amounts allocated

6-12     to undivided profits as a result of a merger.

6-13                 (54)  "Voting security" means a share, participation

6-14     share, or other evidence of proprietary interest in a state trust

6-15     company or other company that has as an attribute the right to vote

6-16     or participate in the election of the board of the trust company or

6-17     other company, regardless of whether the right is limited to the

6-18     election of fewer than all of the board members.  The term includes

6-19     a security that is convertible or exchangeable into a voting

6-20     security and a nonvoting participation share of a managing

6-21     participant.

6-22           (b)  The definitions shall be liberally construed to

6-23     accomplish the purposes of the Act.

6-24           (c)  The finance commission by rule may adopt other

6-25     definitions to accomplish the purposes of this Act.

6-26           Sec. 1.003.  TRUST COMPANY RULES.  (a)  The finance

6-27     commission may adopt rules to accomplish the purposes of this Act,

6-28     including rules necessary or reasonable to:

6-29                 (1)  implement and clarify this Act;

6-30                 (2)  preserve or protect the safety and soundness of

6-31     state trust companies;

6-32                 (3)  grant the same rights and privileges to state

6-33     trust companies with respect to the exercise of fiduciary powers

6-34     that are or may be granted to a state or national bank that is

6-35     domiciled in this state and exercising fiduciary powers;

6-36                 (4)  provide for recovery of the cost of maintenance

6-37     and operation of the department and the cost of enforcing this Act

6-38     through the imposition and collection of ratable and equitable fees

6-39     for notices, applications, and examinations; and

6-40                 (5)  facilitate the fair hearing and adjudication of

6-41     matters  before  the  banking  commissioner  and  the  finance

6-42     commission.

6-43           (b)  The presence or absence in this Act of a specific

6-44     reference to rules regarding a particular subject does not enlarge

6-45     or diminish the rulemaking authority conferred by this section.

6-46        CHAPTER 2.  POWERS AND DUTIES OF TEXAS DEPARTMENT OF BANKING

6-47                   SUBCHAPTER A.  OPERATION OF DEPARTMENT

6-48     Sec. 2.001.  INTERPRETIVE STATEMENTS AND OPINIONS

6-49     Sec. 2.002.  EXAMINATION

6-50     Sec. 2.003.  STATEMENTS OF CONDITION AND INCOME

6-51     Sec. 2.004.  LIABILITY LIMITED

6-52                (Sections 2.005-2.100 reserved for expansion)

6-53                SUBCHAPTER B.  CONFIDENTIALITY OF INFORMATION

6-54     Sec. 2.101.  DISCLOSURE BY DEPARTMENT PROHIBITED

6-55     Sec. 2.102.  DISCLOSURE TO FINANCE COMMISSION

6-56     Sec. 2.103.  DISCLOSURE TO OTHER AGENCIES

6-57     Sec. 2.104.  OTHER DISCLOSURE PROHIBITED

6-58     Sec. 2.105.  CIVIL DISCOVERY

6-59     Sec. 2.106.  INVESTIGATIVE INFORMATION

6-60     Sec. 2.107.  EMPLOYMENT INFORMATION

6-61     Sec. 2.108.  SHAREHOLDER INSPECTION RIGHTS

6-62        CHAPTER 2.  POWERS AND DUTIES OF TEXAS DEPARTMENT OF BANKING

6-63                   SUBCHAPTER A.  OPERATION OF DEPARTMENT

6-64           Sec. 2.001.  INTERPRETIVE STATEMENTS AND OPINIONS.  (a)  The

6-65     banking commissioner may issue interpretive statements containing

6-66     matters of general policy for the guidance of state trust

6-67     companies.  The banking commissioner shall file the statements for

6-68     publication in the Texas Register.  The banking commissioner may

6-69     amend or repeal a published interpretive statement by  issuing an

 7-1     amended statement or notice of repeal of a statement and filing the

 7-2     statement or notice for publication in the Texas Register.  The

 7-3     secretary of state shall publish the filed statements and  notices

 7-4     in the Texas Register and in a designated chapter of the Texas

 7-5     Administrative Code.

 7-6           (b)  The banking commissioner may issue an opinion in

 7-7     response to a specific request from a member of the public or the

 7-8     state trust company industry directly or through the deputy banking

 7-9     commissioner or the department's attorneys.  If the banking

7-10     commissioner determines that the opinion is useful for the general

7-11     guidance of trust companies, the banking commissioner may file the

7-12     opinion for publication in the Texas Register.  A published opinion

7-13     must be redacted in a manner that preserves the  confidentiality of

7-14     the requesting party, unless the requesting party consents to be

7-15     identified in the published opinion.  The banking commissioner may

7-16     amend or repeal a published opinion by issuing an amended opinion

7-17     or notice  of repeal of an opinion and filing the opinion or notice

7-18     for publication in the Texas Register, except that the requesting

7-19     party may rely on the original opinion if all material  facts were

7-20     originally disclosed to the banking commissioner, considerations of

7-21     safety and soundness of the affected trust companies are not

7-22     implicated with respect to further and prospective reliance on the

7-23     original opinion, and the text and interpretation of relevant

7-24     governing provisions of this Act have not been changed by

7-25     legislative or judicial action.   The secretary of state shall

7-26     publish the filed opinions and notices in the Texas Register and a

7-27     designated chapter of the Texas Administrative Code.

7-28           (c)  An interpretive statement or opinion issued under this

7-29     section does not have the force of law and is not a rule for the

7-30     purposes of Chapter 2001, Government Code, unless adopted by the

7-31     finance commission as provided by Chapter 2001, Government Code.

7-32     An interpretive statement or opinion is an administrative

7-33     construction of this Act entitled to great weight if the

7-34     construction is reasonable and does not conflict with this Act.

7-35           Sec. 2.002.  EXAMINATION.  (a)  The banking commissioner

7-36     shall examine each state trust company annually.  The banking

7-37     commissioner may examine a state trust company more often than

7-38     annually as the banking commissioner considers necessary to

7-39     safeguard the interests of clients, creditors, shareholders,

7-40     participants, or participant-transferees and to enforce this Act.

7-41     The banking commissioner may defer an examination for not more than

7-42     six months if the banking commissioner considers the deferment

7-43     necessary for the efficient enforcement of this Act.

7-44           (b)  Each state trust company shall pay the cost of

7-45     examination, the equitable or proportionate cost of maintenance and

7-46     operation of the department, and the cost of enforcement of this

7-47     Act through the imposition and collection of fees established by

7-48     the finance commission under Section 1.003(a)(4) of this Act.

7-49           (c)  The performance of data processing, electronic fund

7-50     transfers, or other services or activities performed on behalf of a

7-51     state trust company by a third-party contractor and the activities

7-52     of a state trust company affiliate are subject to regulation and

7-53     examination by the banking commissioner to the same extent as if

7-54     the services or activities were performed by that state trust

7-55     company on its own premises.  The banking commissioner may collect

7-56     a fee from the state trust company to cover the cost of the

7-57     examination.

7-58           (d)  The banking commissioner may administer oaths and

7-59     examine persons under oath on any subject that the banking

7-60     commissioner considers pertinent to the financial condition or the

7-61     safety and soundness of the activities of a state trust company.

7-62           (e)  The banking commissioner shall report the results of the

7-63     examination in writing to the officers and directors, managers, or

7-64     managing participants of the state trust company.  A report of

7-65     examination under this section is confidential and may be disclosed

7-66     only under the circumstances set forth in Subchapter B of this

7-67     chapter.

7-68           (f)  The banking commissioner may accept an examination of a

7-69     state trust company, a third-party contractor, or an affiliate of

 8-1     the state trust company by a federal or other governmental agency

 8-2     in lieu of an examination under this section or may conduct an

 8-3     examination of a state trust company, a third-party contractor, or

 8-4     an affiliate of the state trust company jointly with a federal or

 8-5     other governmental agency.

 8-6           Sec. 2.003.  STATEMENTS OF CONDITION AND INCOME.  (a)  Each

 8-7     state trust company periodically shall file with the banking

 8-8     commissioner a copy of its statement of condition and income.

 8-9           (b)  The finance commission by rule may:

8-10                 (1)  specify the form of the statement of condition and

8-11     income, including specified confidential and public information to

8-12     be in the statement;

8-13                 (2)  require public information in the statement to be

8-14     published at the times and in the publications and locations the

8-15     finance commission determines; and

8-16                 (3)  require the statement to be filed with the banking

8-17     commission at the intervals the finance commission determines.

8-18           (c)  A state trust company that fails to file a statement of

8-19     condition and income on or before the date it is due is, after

8-20     notice and hearing, subject to a penalty of not more than $500 a

8-21     day for each day of noncompliance.

8-22           (d)  Except for portions designated to be confidential by the

8-23     banking commissioner, a statement of condition and income is a

8-24     public record.

8-25           Sec. 2.004.  LIABILITY LIMITED.  (a)  The banking

8-26     commissioner, each member of the finance commission, the deputy

8-27     banking commissioner, or an examiner, assistant examiner,

8-28     supervisor, conservator, agent, or other officer or employee of the

8-29     department is not personally liable for damages arising from the

8-30     person's official act or omission, unless the act or omission is

8-31     corrupt or malicious.

8-32           (b)  The attorney general shall defend an action brought

8-33     against a person because of an official act or omission under

8-34     Subsection (a) of this section, regardless of whether the defendant

8-35     has terminated service with the department before the action

8-36     commences.

8-37                (Sections 2.005-2.100 reserved for expansion)

8-38                SUBCHAPTER B.  CONFIDENTIALITY OF INFORMATION

8-39           Sec. 2.101.  DISCLOSURE BY DEPARTMENT PROHIBITED.

8-40     (a)  Information obtained directly or indirectly by the department

8-41     relative to the financial condition or business affairs of a state

8-42     trust company, other than the public portions of a report of

8-43     condition or income statement, or a present, former, or prospective

8-44     shareholder, participant, officer, director, manager, affiliate, or

8-45     service provider of the state trust company, whether obtained

8-46     through application, examination, or otherwise, and each related

8-47     file or record of the department is confidential and may not be

8-48     disclosed by the banking commissioner or an employee of the

8-49     department except as expressly provided otherwise by this Act or a

8-50     rule adopted under Section 1.003(a)(1) of this Act.

8-51           (b)  Information obtained by the department from a federal or

8-52     state regulatory agency that is confidential under federal or state

8-53     law may not be disclosed except as provided by federal or state

8-54     law.

8-55           Sec. 2.102.  DISCLOSURE TO FINANCE COMMISSION.  Confidential

8-56     information may not be disclosed to a member of the finance

8-57     commission.  A member of the finance commission may not be given

8-58     access to the files and records of the department except that the

8-59     banking commissioner may disclose to the finance commission

8-60     information, files, and records pertinent to a hearing or matter

8-61     pending before the finance commission.

8-62           Sec. 2.103.  DISCLOSURE TO OTHER AGENCIES.  (a)  On request

8-63     and execution of an appropriate confidentiality agreement approved

8-64     by the banking commissioner, the banking commissioner may disclose

8-65     to a federal banking regulatory agency confidential information

8-66     relative to a state trust company within the agency's jurisdiction,

8-67     or an affiliate or service provider of the trust company, and may

8-68     permit the agency access to files and records or reports relating

8-69     to the trust company or its affiliate or service provider.

 9-1           (b)  If the banking commissioner considers it necessary or

 9-2     proper to the enforcement of the laws of this state, another state,

 9-3     the United States, or a foreign sovereign state, or to the best

 9-4     interest of the public, the banking commissioner may disclose or

 9-5     authorize release of confidential information to another department

 9-6     of this state, another state, the United States, a foreign

 9-7     sovereign state, or any related agency or instrumentality.

 9-8           Sec. 2.104.  OTHER DISCLOSURE PROHIBITED.  Confidential

 9-9     information that is provided to a state trust company, affiliate,

9-10     or service provider of the trust company, whether in the form of a

9-11     report of examination or otherwise, is the confidential property of

9-12     the department.  The  information may not be made public or

9-13     disclosed by the recipient or by an officer, director, manager,

9-14     employee, or agent of the recipient to a person not officially

9-15     connected to the recipient as officer, director, employee,

9-16     attorney, auditor, independent auditor, or  bonding company, except

9-17     as  authorized by rules adopted under this Act.  A person commits

9-18     an offense if the person discloses or uses the information in

9-19     violation of this section.  An offense under this section is

9-20     punishable as if it were an offense under Section 37.10, Penal

9-21     Code.

9-22           Sec. 2.105.  CIVIL DISCOVERY.  Discovery of confidential

9-23     information from a person subject to this subchapter under subpoena

9-24     or other legal process in a civil proceeding must comply with rules

9-25     adopted under this Act and other applicable law.  The rules may

9-26     restrict release of confidential information to the portion

9-27     directly relevant to the legal dispute at issue and may require

9-28     that a protective order, in the form and under circumstances

9-29     specified by the rules, be issued by a court before release of the

9-30     confidential information.

9-31           Sec. 2.106.  INVESTIGATIVE INFORMATION.  Notwithstanding any

9-32     other law, the banking commissioner may refuse to release

9-33     information or records concerning a state trust company in the

9-34     custody of the department if, in the opinion of the banking

9-35     commissioner, release of the information or records might

9-36     jeopardize an ongoing investigation of potentially unlawful

9-37     activities.

9-38           Sec. 2.107.  EMPLOYMENT INFORMATION.  A person may provide

9-39     employment information to a state trust company or to a person

9-40     providing employment information to the trust company concerning

9-41     the known or suspected involvement of a present or former employee,

9-42     officer, or director in violation of any state or federal law,

9-43     rule, or regulation that has been reported to appropriate state or

9-44     federal authorities.  A person may not be held liable for providing

9-45     information under this section unless the information provided is

9-46     false and the person provided the information with disregard for

9-47     the truth.

9-48           Sec. 2.108.  SHAREHOLDER INSPECTION RIGHTS.

9-49     (a)  Notwithstanding Article 2.44, Texas Business Corporation Act,

9-50     a shareholder or participant of a state trust company may not

9-51     examine:

9-52                 (1)  a report of examination or other confidential

9-53     property of the department that is in the possession of the state

9-54     trust company; or

9-55                 (2)  a book or record of the state trust company that

9-56     directly or indirectly pertains to financial or other information

9-57     maintained by the state trust company on behalf of its clients,

9-58     including a specific item in the minutes of the board  or a

9-59     committee of the board regarding client account review and approval

9-60     or any report that would tend to identify the state trust company's

9-61     client.

9-62           (b)  This section does not affect the rights of a shareholder

9-63     or participant of a state trust company when acting in another

9-64     capacity.

9-65        CHAPTER 3.  POWERS; ORGANIZATION AND ORGANIZATIONAL CHANGES;

9-66                             CAPITAL AND SURPLUS

9-67         SUBCHAPTER A.  ORGANIZATION PROVISIONS; GENERAL PROVISIONS

9-68     Sec. 3.001.  ORGANIZATION AND POWERS OF STATE TRUST COMPANY

9-69     Sec. 3.002.  ARTICLES OF ASSOCIATION OF STATE TRUST COMPANY

 10-1    Sec. 3.003.  APPLICATION FOR STATE TRUST COMPANY CHARTER

 10-2    Sec. 3.004.  NOTICE AND INVESTIGATION OF CHARTER APPLICATION

 10-3    Sec. 3.005.  HEARING AND DECISION ON CHARTER APPLICATION

 10-4    Sec. 3.006.  ISSUANCE OF CHARTER

 10-5    Sec. 3.007.  RESTRICTED CAPITAL

 10-6    Sec. 3.008.  APPLICATION OF LAWS RELATING TO GENERAL BUSINESS

 10-7                   CORPORATIONS

 10-8    Sec. 3.009.  BANKING COMMISSIONER HEARINGS

 10-9    Sec. 3.010.  FINANCE COMMISSION HEARINGS; APPEALS

10-10    Sec. 3.011.  EXEMPTION

10-11    Sec. 3.012.  APPLICATION FOR EXEMPTION

10-12    Sec. 3.013.  ANNUAL CERTIFICATION

10-13    Sec. 3.014.  LIMITATION ON EFFECT OF EXEMPTION

10-14    Sec. 3.015.  CHANGE OF CONTROL

10-15    Sec. 3.016.  GROUNDS FOR REVOCATION OF EXEMPTION

10-16    Sec. 3.017.  NOTICE AND EFFECT OF REVOCATION OF EXEMPTION

10-17    Sec. 3.018.  ACTION AFTER REVOCATION

10-18    Sec. 3.019.  PRIOR EXEMPTION

10-19    Sec. 3.020.  TRUST COMPANIES CHARTERED UNDER PRIOR LAW

10-20    Sec. 3.021.  FOREIGN CORPORATIONS EXERCISING TRUST POWERS

10-21    Sec. 3.022.  ACTIVITIES NOT REQUIRING CHARTER

10-22    (Sections 3.023-3.100 reserved for expansion)

10-23       SUBCHAPTER B.  AMENDMENT OF ARTICLES; CHANGES IN CAPITAL AND

10-24                                  SURPLUS

10-25    Sec. 3.101.  AMENDMENT OR RESTATEMENT OF STATE TRUST COMPANY

10-26                   ARTICLES OF ASSOCIATION

10-27    Sec. 3.102.  ESTABLISHING SERIES OF SHARES OR PARTICIPATION

10-28                  SHARES

10-29    Sec. 3.103.  CHANGE IN RESTRICTED CAPITAL

10-30    Sec. 3.104.  CAPITAL NOTES OR DEBENTURES

10-31    Sec. 3.105.  BOARD DESIGNATION OF CERTIFIED SURPLUS

10-32    (Sections 3.106-3.200 reserved for expansion)

10-33                SUBCHAPTER C.  STATE TRUST COMPANY OFFICES

10-34    Sec. 3.201.  CONDUCT OF TRUST BUSINESS

10-35    Sec. 3.202.  HOME OFFICE

10-36    Sec. 3.203.  ADDITIONAL OFFICES

10-37               (Sections 3.204-3.300 reserved for expansion)

10-38                           SUBCHAPTER D.  MERGER

10-39    Sec. 3.301.  MERGER AUTHORITY

10-40    Sec. 3.302.  MERGER APPLICATION; GROUNDS FOR APPROVAL

10-41    Sec. 3.303.  APPROVAL OF BANKING COMMISSIONER

10-42    Sec. 3.304.  RIGHTS OF DISSENTERS TO MERGER

10-43               (Sections 3.305-3.400 reserved for expansion)

10-44                 SUBCHAPTER E.  PURCHASE OR SALE OF ASSETS

10-45    Sec. 3.401.  AUTHORITY TO PURCHASE ASSETS OF ANOTHER TRUST

10-46                  COMPANY

10-47    Sec. 3.402.  AUTHORITY TO ACT AS DISBURSING AGENT

10-48    Sec. 3.403.  LIQUIDATION OF SELLING INSTITUTION

10-49    Sec. 3.404.  PAYMENT TO CREDITORS

10-50    Sec. 3.405.  SALE OF ASSETS

10-51               (Sections 3.406-3.500 reserved for expansion)

10-52               SUBCHAPTER F.  STATE TRUST REGULATORY SYSTEM:

10-53                        EXIT OF STATE TRUST COMPANY

10-54    Sec. 3.501.  MERGER, REORGANIZATION, OR CONVERSION OF STATE TRUST

10-55                   COMPANY INTO NATIONAL BANK EXERCISING FIDUCIARY

10-56                   POWERS

10-57       CHAPTER 3.  POWERS; ORGANIZATION AND ORGANIZATIONAL CHANGES;

10-58                            CAPITAL AND SURPLUS

10-59        SUBCHAPTER A.  ORGANIZATION PROVISIONS; GENERAL PROVISIONS

10-60          Sec. 3.001.  ORGANIZATION AND POWERS OF STATE TRUST COMPANY.

10-61    (a)  Subject to the other provisions of this chapter, one or more

10-62    persons may organize and charter a state trust company as a state

10-63    trust association or a limited trust association.  A state trust

10-64    company may perform any act as a fiduciary that a state bank or

10-65    national bank exclusively exercising trust powers may perform under

10-66    the laws of this state, including:

10-67                (1)  acting as trustee under a written agreement;

10-68                (2)  receiving money and other property in its capacity

10-69    as trustee for investment in real or personal property;

 11-1                (3)  acting as trustee and performing the fiduciary

 11-2    duties committed or transferred to it by order of a court of

 11-3    competent jurisdiction;

 11-4                (4)  acting as executor, administrator, or trustee of

 11-5    the estate of a deceased person;

 11-6                (5)  acting as a custodian, guardian, conservator, or

 11-7    trustee for a minor or incapacitated person;

 11-8                (6)  acting as a successor fiduciary to a depository

 11-9    institution;

11-10                (7)  receiving for safekeeping personal property;

11-11                (8)  acting as custodian, assignee, transfer agent,

11-12    escrow agent, registrar, or receiver;

11-13                (9)  acting as investment advisor, agent, or attorney

11-14    in fact according to an applicable agreement;

11-15                (10)  exercising additional powers expressly conferred

11-16    by rule of the finance commission; and

11-17                (11)  exercising any incidental power that is

11-18    reasonably necessary to enable it to fully exercise the powers

11-19    expressly conferred according to commonly accepted fiduciary

11-20    customs and usages.

11-21          (b)  Subject to Section 3.008 of this Act, a state trust

11-22    company may exercise the powers of a Texas business  corporation

11-23    reasonably necessary to enable exercise of its specific powers

11-24    under this Act.

11-25          (c)  A state trust company may contribute to a community fund

11-26    or to a charitable, philanthropic, or benevolent instrumentality

11-27    conducive to public welfare amounts that its board considers

11-28    appropriate and in the interests of the trust company.

11-29          (d)  Subject to Section 5.401 of this Act, a state trust

11-30    company may deposit trust funds with itself.

11-31          (e)  A state trust company insured by the Federal Deposit

11-32    Insurance Corporation may receive and pay deposits, with or without

11-33    interest, made by an agency of the United States Government, the

11-34    state, a county, or a municipality.

11-35          Sec. 3.002.  ARTICLES OF ASSOCIATION OF STATE TRUST COMPANY.

11-36    The articles of association of a state trust company must be signed

11-37    and acknowledged by each organizer and must contain:

11-38                (1)  the name of the state trust company, except that

11-39    the banking commissioner may determine that a proposed name is

11-40    potentially misleading to the public and require the organizers to

11-41    select a different name;

11-42                (2)  the period of the state trust company's duration,

11-43    which may be perpetual;

11-44                (3)  the powers of the state trust company, which may

11-45    be stated as:

11-46                      (A)  all powers granted to a state trust company

11-47    in this state; or

11-48                      (B)  a list of the specific powers that the state

11-49    trust company chooses and is authorized to exercise;

11-50                (4)  the aggregate number of shares, or participation

11-51    shares in the case of a limited trust association, that the state

11-52    trust company will be authorized to issue, the number of classes of

11-53    shares or participation shares, which may be one or more, the

11-54    number of shares or participation shares of each class if more than

11-55    one class, and a statement of the par value of the shares or

11-56    participation shares of each class or that the shares or

11-57    participation shares are to be without par value;

11-58                (5)  if the shares or participation shares are to be

11-59    divided into classes, the designation of each class and statement

11-60    of the preferences, limitations, and relative rights of the shares

11-61    or participation shares of each class, which in the  case of a

11-62    limited trust association may be more fully set forth in the

11-63    participation agreement;

11-64                (6)  any provision limiting or denying to shareholders

11-65    or participants the preemptive right to acquire additional or

11-66    treasury shares or participation shares of the state trust company;

11-67                (7)  any provision granting the right of shareholders

11-68    or participants to cumulative voting in the election of directors

11-69    or managers;

 12-1                (8)  the aggregate amount of consideration to be

 12-2    received for all shares or participation shares initially issued by

 12-3    the state trust company, and a statement that all authorized shares

 12-4    or participation shares have been subscribed and that all

 12-5    subscriptions received provide for the consideration to be fully

 12-6    paid in cash before issuance of the charter;

 12-7                (9)  any provision consistent with law that the

 12-8    organizers elect to set forth in the articles of association for

 12-9    the regulation of the internal affairs of the state trust company

12-10    or that is otherwise required by this Act to be set forth in the

12-11    articles of association;

12-12                (10)  the street address of the state trust company's

12-13    home office required to be maintained under Section 3.202 of this

12-14    Act; and

12-15                (11)  the number of directors or managers constituting

12-16    the initial board, which may not be fewer than five or more than

12-17    25, and the names and street addresses of the persons who are to

12-18    serve as directors or managers until the first annual meeting of

12-19    shareholders or participants or until successor directors or

12-20    managers have been elected and qualified; or, at the option of the

12-21    organizers of a limited trust association that will have not fewer

12-22    than five or more than 25 participants, a statement that management

12-23    is vested in a board comprised of all participants, with management

12-24    authority vested in each participant in proportion to the

12-25    participant's contribution to capital as adjusted from time to time

12-26    to properly reflect any additional contribution, and the names and

12-27    street addresses of the persons who are to be the initial managing

12-28    participants.

12-29          Sec. 3.003.  APPLICATION FOR STATE TRUST COMPANY CHARTER.

12-30    (a)  An application for a state trust company charter must be made

12-31    under oath and in the form required by the banking  commissioner

12-32    and must be supported by information, data, records, and opinions

12-33    of counsel that the banking commissioner requires.  The application

12-34    must be accompanied by all charter fees and deposits required by

12-35    statute or rule.

12-36          (b)  The banking commissioner shall grant a state trust

12-37    company charter only on proof satisfactory to the banking

12-38    commissioner that public convenience and advantage will be promoted

12-39    by the establishment of the state trust company.  In determining

12-40    whether public convenience and advantage will be promoted, the

12-41    banking commissioner shall consider:

12-42                (1)  the convenience of the public to be served;

12-43                (2)  whether the organizational and capital structure

12-44    and amount of initial capitalization is adequate for the business

12-45    and location;

12-46                (3)  whether the anticipated volume and nature of

12-47    business indicates a reasonable probability of success and

12-48    profitability based on the market sought to be served;

12-49                (4)  whether the proposed officers, directors, and

12-50    managers, or managing participants, as a group have sufficient

12-51    fiduciary experience, ability, standing, competence,

12-52    trustworthiness, and integrity to justify a belief that the state

12-53    trust company will operate in compliance with law and that success

12-54    of the state trust company is probable;

12-55                (5)  whether each principal shareholder or participant

12-56    has sufficient experience, ability, standing, competence,

12-57    trustworthiness, and integrity to justify a belief that the state

12-58    trust company will be free from improper or unlawful influence or

12-59    interference with respect to the state trust company's operation in

12-60    compliance with law; and

12-61                (6)  whether the organizers are acting in good faith.

12-62          (c)  The organizers bear the burden of proof to establish

12-63    that public convenience and advantage will be promoted by the

12-64    establishment of the state trust company.  The failure of an

12-65    applicant to furnish required information, data, opinions of

12-66    counsel, and other material, or the required fee, is considered an

12-67    abandonment of the application.

12-68          Sec. 3.004.  NOTICE AND INVESTIGATION OF CHARTER APPLICATION.

12-69    (a)  The banking commissioner shall notify the organizers when the

 13-1    application is complete and accepted for filing and all required

 13-2    fees and deposits have been paid.  Promptly after this

 13-3    notification, the organizers shall publish notice of the

 13-4    application and solicit comments and protests, in the form

 13-5    specified by the banking commissioner, in a newspaper of general

 13-6    circulation in the county where the initial home office of the

 13-7    proposed state trust company is to be located.  The banking

 13-8    commissioner may require the organizers to publish the notice at

 13-9    other locations reasonably necessary to solicit the views of

13-10    potentially affected persons.

13-11          (b)  At the expense of the organizers, the banking

13-12    commissioner shall thoroughly investigate the application and

13-13    inquire fully into the identity and character of each proposed

13-14    director, manager, officer, managing participant, and principal

13-15    shareholder or participant.  The banking commissioner shall prepare

13-16    a written report of the investigation, and any person, other than a

13-17    person protesting under Section 3.005 of this Act, may request a

13-18    copy of the nonconfidential portions of the application and written

13-19    report as provided by Chapter 552, Government Code.  Rules adopted

13-20    under this Act may specify the confidential or nonconfidential

13-21    character of information obtained by the department under this

13-22    section.  Except as provided by  Subchapter B, Chapter 2, of this

13-23    Act, or in rules regarding confidential information, the financial

13-24    statement of a proposed officer, director, manager, or managing

13-25    participant is confidential and not subject to public disclosure.

13-26          Sec. 3.005.  HEARING AND DECISION ON CHARTER APPLICATION.

13-27    (a)  Any person may file a protest of an application with the

13-28    banking commissioner.

13-29          (b)  If a protest of the application is not filed on or

13-30    before the 15th day after the last date the notice was published

13-31    under Section 3.004 of this Act, the banking commissioner may

13-32    immediately determine whether all of the necessary conditions set

13-33    forth in Section 3.003(b) of this Act have been established, based

13-34    on the application and investigation.  The banking commissioner

13-35    shall approve the application for charter or set the charter

13-36    application for hearing.

13-37          (c)  If a protest of the application is timely filed,

13-38    accompanied by the fees and deposits required by statute or rule,

13-39    or if the banking commissioner sets a hearing, the banking

13-40    commissioner shall conduct a public hearing and as many prehearing

13-41    conferences and opportunities for discovery as the banking

13-42    commissioner considers advisable and consistent with governing

13-43    statutes and rules.  A person protesting the application is

13-44    entitled to the confidential portions of the application under a

13-45    protective order that restricts the use of confidential information

13-46    to the charter proceedings.

13-47          (d)  Based on the record of the hearing, the banking

13-48    commissioner shall determine whether all of the necessary

13-49    conditions set forth in Section 3.003(b) of this Act have been

13-50    established and shall enter an order granting or denying the

13-51    charter.  The banking commissioner may make approval of any

13-52    application conditional and shall include any conditions in the

13-53    order granting the charter.

13-54          (e)  Chapter 2001, Government Code, does not apply to a

13-55    charter application filed for the purpose of assuming all or any

13-56    portion of the assets, liabilities, and accounts of any depository

13-57    institution or state trust company considered by the banking

13-58    commissioner to be in hazardous condition.

13-59          Sec. 3.006.  ISSUANCE OF CHARTER.  (a)  A state trust company

13-60    may not engage in the trust business until it receives its charter

13-61    from the banking commissioner.  The banking commissioner may not

13-62    deliver the charter until the state trust company has:

13-63                (1)  received cash in at least the full amount of

13-64    restricted  capital  from subscriptions for the issuance of shares

13-65    or participation shares;

13-66                (2)  elected or qualified the initial officers and

13-67    directors or managers, as appropriate, named in the application for

13-68    charter or other officers and directors or managers approved by the

13-69    banking commissioner; and

 14-1                (3)  complied with all other requirements of this Act

 14-2    relating to the organization of the state trust company.

 14-3          (b)  If a state trust company does not open and engage in the

 14-4    trust business within six months after the date it receives its

 14-5    charter or conditional approval of application for charter, the

 14-6    banking commissioner may revoke the charter or cancel the

 14-7    conditional approval of application for charter without judicial

 14-8    action.

 14-9          Sec. 3.007.  RESTRICTED CAPITAL.  (a)  The banking

14-10    commissioner may not issue a charter to a state trust company

14-11    having restricted capital of less than $1 million.

14-12          (b)  The banking commissioner may, on a case-by-case basis,

14-13    require additional restricted capital for a proposed or existing

14-14    state trust company if the banking commissioner finds the condition

14-15    and operations of the existing state trust company or the proposed

14-16    scope or type of operations of the proposed state trust company

14-17    requires additional restricted capital to protect the safety and

14-18    soundness of the trust company.  The safety and soundness factors

14-19    to be considered by the banking commissioner in the exercise of

14-20    discretion, include:

14-21                (1)  the nature and type of business the state trust

14-22    company conducts;

14-23                (2)  the nature and degree of liquidity in assets held

14-24    in a corporate capacity;

14-25                (3)  the amount, type, and depository of fiduciary

14-26    assets that the state trust company manages;

14-27                (4)  the complexity of the state trust company's

14-28    fiduciary duties and degree of discretion undertaken;

14-29                (5)  the competence and experience of the state trust

14-30    company's management;

14-31                (6)  the extent and adequacy of internal controls

14-32    maintained by the state trust company;

14-33                (7)  the presence or absence of annual unqualified

14-34    audits by an independent certified public accountant;

14-35                (8)  the reasonableness of the state trust company's

14-36    business plans for retaining or acquiring additional restricted

14-37    capital; and

14-38                (9)  the existence and adequacy of insurance obtained

14-39    or held by the state trust company to protect its clients,

14-40    beneficiaries, and grantors.

14-41          (c)  The effective date of any order under Subsection (b) of

14-42    this section must be stated in the order and must be on or after

14-43    the 21st day after the date the order is mailed or delivered.

14-44    Unless the state trust company requests a hearing before the

14-45    banking commissioner in writing before the effective date of the

14-46    order, the order takes effect and is final and nonappealable.  This

14-47    subsection does not prohibit an application to reduce capital

14-48    requirements of an existing state trust company under Subsection

14-49    (e) of this section or under Section 3.011 of this Act.

14-50          (d)  Subject to Subsection (e) of this section and Section

14-51    3.011 of this Act, a state trust company to which the banking

14-52    commissioner issues a charter shall at all times maintain

14-53    restricted capital in at least the amount required under Subsection

14-54    (a) of this section and in any additional amount the banking

14-55    commissioner requires under Subsection (b) of this section.

14-56          (e)  Notwithstanding Subsection (a) of this section, on

14-57    application, the banking commissioner may, on a case-by-case basis

14-58    in the exercise of discretion, reduce the amount of minimum

14-59    restricted capital required for a state trust company in a manner

14-60    consistent with protecting the company's safety and soundness.  In

14-61    making a determination under this subsection, the banking

14-62    commissioner shall consider the factors listed by Subsection (b) of

14-63    this section.

14-64          Sec. 3.008.  APPLICATION OF LAWS RELATING TO GENERAL BUSINESS

14-65    CORPORATIONS.  (a)  The Texas Business Corporation Act and the

14-66    Texas Miscellaneous Corporation Laws Act (Article 1302-1.01 et

14-67    seq., Vernon's Texas Civil Statutes) are incorporated into this

14-68    chapter and apply to a state trust company as if they were part of

14-69    this Act to the extent not inconsistent with this Act or the proper

 15-1    business of a state trust company, except that:

 15-2                (1)  a reference to the secretary of state means the

 15-3    banking commissioner unless the context requires otherwise; and

 15-4                (2)  the right of shareholders or participants to

 15-5    cumulative voting in the election of directors or managers exists

 15-6    only if granted by the state trust company's articles of

 15-7    association.

 15-8          (b)  Unless expressly authorized by this Act or a rule of the

 15-9    finance commission, a state trust company may not take an action

15-10    authorized by the Texas Business Corporation Act regarding its

15-11    corporate status, capital structure, or a matter of corporate

15-12    governance, of the type for which the Texas Business Corporation

15-13    Act would require a filing with the secretary of state if the state

15-14    trust company were a business corporation, without submitting the

15-15    filing to the banking commissioner for prior written approval of

15-16    the action.

15-17          (c)  The finance commission may adopt rules to alter or

15-18    supplement the procedures and requirements of the Texas Business

15-19    Corporation Act or the Texas Miscellaneous Corporation Laws Act

15-20    applicable to an action taken under this chapter by a state trust

15-21    company.

15-22          (d)  This chapter may not be construed to mean that a state

15-23    trust company is a corporation incorporated under or governed by

15-24    the Texas Business Corporation Act or the Texas Miscellaneous

15-25    Corporation Laws Act.

15-26          Sec. 3.009.  BANKING COMMISSIONER HEARINGS.  (a)  This

15-27    section does not grant a right to hearing to a person that is not

15-28    otherwise granted by governing law.

15-29          (b)  The banking commissioner may convene a hearing to

15-30    receive evidence and argument regarding any matter before the

15-31    banking commissioner for decision or review under this Act.  The

15-32    hearing must be conducted under Chapter 2001, Government Code.

15-33          (c)  A hearing before the banking commissioner that is

15-34    required or authorized by law may be conducted by a hearing officer

15-35    on behalf of the banking commissioner.  A matter made confidential

15-36    by law must be considered by the banking commissioner in a closed

15-37    hearing.

15-38          Sec. 3.010.  FINANCE COMMISSION HEARINGS; APPEALS.

15-39    (a)  Except as expressly provided otherwise by this Act, a decision

15-40    or order of the banking commissioner made under this Act after

15-41    hearing may be appealed directly to a district court of Travis

15-42    County as provided by Subsection (c) of this section or, at the

15-43    option of the appellant, to the finance commission for review.

15-44          (b)  The finance commission shall consider the questions

15-45    raised by the application for review and may also consider

15-46    additional matters pertinent to the appeal.  An order of the

15-47    banking commissioner continues in effect pending review unless the

15-48    order is stayed by the finance commission.  The finance commission

15-49    may impose any condition before granting a stay of the appealed

15-50    order.  The finance commission may not be required to accept

15-51    additional evidence or hold an evidentiary hearing if a hearing was

15-52    held and a record made before the banking commissioner.  The

15-53    finance commission shall remand the proceeding to the banking

15-54    commissioner to receive any additional evidence the finance

15-55    commission chooses to consider.  A hearing before the finance

15-56    commission that is required or authorized by law may be conducted

15-57    by a hearing officer on behalf of the finance commission.  A matter

15-58    made confidential by law must be considered by the finance

15-59    commission in a closed hearing.

15-60          (c)  A person affected by a final order of the banking

15-61    commissioner who elects to appeal directly to district court, or a

15-62    person affected by a final order of the finance commission under

15-63    this section, may appeal the final order by filing a petition for

15-64    judicial review under the substantial evidence rule in a district

15-65    court of Travis County as provided by Chapter 2001, Government

15-66    Code.  A petition for appeal filed in the district court does not

15-67    stay or vacate the appealed order unless the court, after notice

15-68    and hearing, expressly stays or vacates the order.

15-69          Sec. 3.011.  EXEMPTION.  (a)  A state trust company may

 16-1    request in writing that it be exempted from specified provisions of

 16-2    this  Act.  The banking commissioner may grant the exemption in

 16-3    whole or in part if the banking commissioner finds that the state

 16-4    trust company does not transact business with the public.  A state

 16-5    trust company does not transact business with the public if it does

 16-6    not make any sale, solicitation, arrangement, agreement, or

 16-7    transaction to provide a trust or other business service, whether

 16-8    or not for a fee, commission, or any other type of remuneration,

 16-9    with:

16-10                (1)  an individual who is not related within the fourth

16-11    degree of affinity or consanguinity to an individual who controls

16-12    the state trust company; or

16-13                (2)  a sole proprietorship, partnership, joint venture,

16-14    association, trust, estate, business trust, or corporation that is

16-15    not wholly owned by one or more individuals related within the

16-16    fourth degree of affinity or consanguinity to an individual who

16-17    controls the state trust company.

16-18          (b)  At the expense of a state trust company, the banking

16-19    commissioner may examine or investigate the state trust company in

16-20    connection with an application for exemption.  Unless the

16-21    application presents novel or unusual questions, the banking

16-22    commissioner shall approve the application for exemption or set the

16-23    application for hearing not later than the 61st day after the date

16-24    the banking commissioner considers the application complete and

16-25    accepted for filing.  The banking commissioner may require the

16-26    submission of additional information as considered necessary to an

16-27    informed decision.

16-28          (c)  An exemption granted under this section may be made

16-29    subject to conditions or limitations imposed by the banking

16-30    commissioner consistent with this Act.

16-31          (d)  A state trust company that is or has been exempt from a

16-32    provision of this Act under this section or a predecessor statute

16-33    may not transact business with the public unless the banking

16-34    commissioner determines, as provided by Section 3.003 of this Act,

16-35    that public convenience and advantage will be promoted by

16-36    permitting the state trust company to engage in the trust business.

16-37          (e)  The finance commission may adopt rules:

16-38                (1)  defining other circumstances under which a state

16-39    trust company may be exempted from a provision of this Act because

16-40    it does not transact business with the public;

16-41                (2)  specifying the provisions of this Act that are

16-42    subject to an exemption request; and

16-43                (3)  establishing procedures and requirements for

16-44    obtaining, maintaining, or revoking an exemption.

16-45          Sec. 3.012.  APPLICATION FOR EXEMPTION.  (a)  A state trust

16-46    company requesting an exemption under Section 3.011 of this Act

16-47    shall file an application with the banking commissioner including:

16-48                (1)  a nonrefundable application fee set by the finance

16-49    commission;

16-50                (2)  a detailed sworn statement showing the state trust

16-51    company's assets and liabilities as of the end of the calendar

16-52    month previous to the filing of the application;

16-53                (3)  a sworn statement of the reason for requesting the

16-54    exemption;

16-55                (4)  a sworn statement that the state trust company is

16-56    not transacting business with the public and that the company will

16-57    not transact business with the public without the prior written

16-58    permission of the banking commissioner;

16-59                (5)  the current street mailing address and telephone

16-60    number of the physical location in this state at which the state

16-61    trust company will maintain its books and records, with a sworn

16-62    statement that the address given is true and correct and is not a

16-63    United States Postal Service post office box or a private mail box,

16-64    postal box, or mail drop; and

16-65                (6)  a list of the specific provisions of this Act for

16-66    which the request for exemption is made.

16-67          (b)  The banking commissioner may not approve a state trust

16-68    company exemption unless the application is completed as required

16-69    by Subsection (a) of this section.

 17-1          Sec. 3.013.  ANNUAL CERTIFICATION.  Before June 30 of each

 17-2    year, an exempt state trust company shall file a certification that

 17-3    it is maintaining the conditions and limitations of its exemption

 17-4    on a form provided by the banking commissioner.  The certification

 17-5    must be accompanied by a fee set by the finance commission.  The

 17-6    certification is not valid unless it bears an acknowledgment

 17-7    stamped by the department.  The department shall return a copy of

 17-8    the acknowledged annual certification to the state trust company

 17-9    not later than the 30th day after the date the certification is

17-10    filed.  The state trust company shall notify the department of any

17-11    failure to return an acknowledged copy of any annual certification

17-12    within this period.  The banking commissioner may examine or

17-13    investigate the state trust company periodically as necessary to

17-14    verify the certification.

17-15          Sec. 3.014.  LIMITATION ON EFFECT OF EXEMPTION.  (a)  An

17-16    exempt state trust company shall comply with the home office

17-17    provisions of Section 3.202 of this Act.

17-18          (b)  The granting of an exemption to a state trust company

17-19    does not affect the state trust company's obligation to pay any

17-20    corporate franchise tax required by state law.

17-21          Sec. 3.015.  CHANGE OF CONTROL.  Control of an exempt state

17-22    trust company may not be sold or transferred with exempt status.

17-23    If control of an exempt state trust company is transferred, the

17-24    acquiring person must comply with Sections 3.003, 3.004, 3.005, and

17-25    4.001 of this Act and the exempt status of the state trust company

17-26    automatically terminates on the effective date of the transfer.

17-27    The acquiring person must file a separate application to obtain an

17-28    exemption under this Act.

17-29          Sec. 3.016.  GROUNDS FOR REVOCATION OF EXEMPTION.  The

17-30    banking commissioner may revoke an exemption of a state trust

17-31    company if the trust company:

17-32                (1)  makes a false statement under oath on any document

17-33    required to be filed by this Act or finance commission rule;

17-34                (2)  fails to submit to an examination as required by

17-35    Section 2.002 of this Act;

17-36                (3)  withholds requested information from the banking

17-37    commissioner; or

17-38                (4)  violates any provision of this Act applicable to

17-39    an exempt state trust company.

17-40          Sec. 3.017.  NOTICE AND EFFECT OF REVOCATION OF EXEMPTION.

17-41    If the banking commissioner determines from examination or other

17-42    credible evidence that an exempt state trust company has violated

17-43    any of the requirements of this subchapter relating to an exempt

17-44    state trust company, the banking commissioner may by personal

17-45    delivery or registered or certified mail, return receipt requested,

17-46    notify the state trust company in writing that the state trust

17-47    company's exemption has been revoked.  The notice must state

17-48    grounds for the revocation with reasonable certainty.  The notice

17-49    must state its effective date, which may not be before the fifth

17-50    day after the date the notification is mailed or delivered.  The

17-51    revocation takes effect for the state trust company if the state

17-52    trust company does not request a hearing in writing before the

17-53    effective date.  After taking effect the revocation is final and

17-54    nonappealable as to that state trust company, and the state trust

17-55    company is subject to all of the requirements and provisions of the

17-56    Act applicable to nonexempt state trust companies.

17-57          Sec. 3.018.  ACTION AFTER REVOCATION.  (a)  A state trust

17-58    company shall have five days after the date the revocation takes

17-59    effect to comply with all of the provisions of Sections 3.003(b)

17-60    and (c).  If, however, the banking commissioner determines at the

17-61    time of revocation that the state trust company has been engaging

17-62    in or attempting to engage in acts intended or designed to deceive

17-63    or defraud the public, the banking commissioner, in the banking

17-64    commissioner's sole discretion, may waive this compliance period.

17-65          (b)  If the state trust company does not comply with all of

17-66    the provisions of this Act, including capitalization requirements

17-67    determined by the banking commissioner as necessary to assure the

17-68    safety and soundness of the state trust company, within the

17-69    prescribed period, the banking commissioner may:

 18-1                (1)  institute any action or remedy prescribed by this

 18-2    Act or any applicable rule; or

 18-3                (2)  refer the state trust company to the attorney

 18-4    general for institution of a quo warranto proceeding to revoke the

 18-5    state trust company's charter.

 18-6          Sec. 3.019.  PRIOR EXEMPTION.  A state trust company that was

 18-7    exempt under a predecessor to this Act is considered exempt under

 18-8    this Act.

 18-9          Sec. 3.020.  TRUST COMPANIES CHARTERED UNDER PRIOR LAW.  The

18-10    charter of a corporation with trust powers incorporated under any

18-11    laws of this state before May 25, 1987, is void if the charter was

18-12    not presented to the department before May 26, 1988, for

18-13    substitution of a charter or if the department did not issue a new

18-14    substitution charter before May 26, 1989.

18-15          Sec. 3.021.  FOREIGN CORPORATIONS EXERCISING TRUST POWERS.

18-16    (a)  A foreign corporation may not conduct a trust business in this

18-17    state.  A foreign corporation may control a state trust company in

18-18    this state, if the state trust company is formed or acquired and

18-19    operated as provided by this Act and applicable rules.

18-20          (b)  A foreign corporation or other entity chartered or

18-21    domiciled in another jurisdiction as a trust company or depository

18-22    institution with trust powers may act as a trustee in this state

18-23    only as provided by Section 105A, Texas Probate Code.

18-24          Sec. 3.022.  ACTIVITIES NOT REQUIRING CHARTER.  A company

18-25    does not engage in the trust business in a manner requiring a state

18-26    charter by:

18-27                (1)  acting in a manner authorized by law and in the

18-28    scope of authority as an agent of a state trust company;

18-29                (2)  rendering a service customarily performed as an

18-30    attorney in a manner approved and authorized by the Supreme Court

18-31    of Texas or State Bar of Texas;

18-32                (3)  acting as trustee under a deed of trust made only

18-33    as security for the payment of money or for the performance of

18-34    another act;

18-35                (4)  conducting a trust business under a charter that

18-36    authorizes the exercise of trust powers as a depository

18-37    institution, if the exercise of trust powers in this state by the

18-38    depository institution is not otherwise prohibited by law;

18-39                (5)  engaging in a business regulated by the Office of

18-40    Consumer Credit Commissioner, except as limited by rules adopted by

18-41    the finance commission;

18-42                (6)  receiving and distributing rents and proceeds of

18-43    sale as a licensed real estate broker on behalf of a principal in a

18-44    manner authorized by the Texas Real Estate Commission;

18-45                (7)  engaging in a securities transaction or providing

18-46    an investment advisory service as a licensed and registered dealer,

18-47    salesman, or advisor to the extent that the activity is regulated

18-48    by the State Securities Board or the Securities and Exchange

18-49    Commission;

18-50                (8)  engaging in the sale and administration of an

18-51    insurance product by an insurance company or agent licensed by the

18-52    Texas Department of Insurance to the extent that the activity is

18-53    regulated by the Texas Department of Insurance;

18-54                (9)  engaging in the lawful sale of prepaid funeral

18-55    benefits under a permit issued by the banking commissioner under

18-56    Chapter 512, Acts of the 54th Legislature, Regular Session, 1955

18-57    (Article 548b, Vernon's Texas Civil Statutes);

18-58                (10)  engaging in the lawful business of a perpetual

18-59    care cemetery corporation under Chapter 712, Health and Safety

18-60    Code;

18-61                (11)  engaging in the lawful sale of checks under a

18-62    license issued by the banking commissioner under The Sale of Checks

18-63    Act (Article 489d, Vernon's Texas Civil Statutes);

18-64                (12)  acting as trustee under a voting trust as

18-65    provided by Article 2.30, Texas Business Corporation Act;

18-66                (13)  acting as trustee by   a public, private, or

18-67    independent institution of higher education or a university system,

18-68    as defined by Section 61.003, Education Code, including an

18-69    affiliated foundation or corporation of such an institution or

 19-1    system acting as trustee as provided by the Education Code;

 19-2                (14)  engaging in another activity expressly excluded

 19-3    from the application of this Act by rule of the finance commission;

 19-4                (15)  rendering services customarily performed by a

 19-5    certified accountant in a manner authorized by the Texas State

 19-6    Board of Public Accountancy;

 19-7                (16)  serving as trustee of a charitable trust as

 19-8    provided by Article 2.31, Texas Non-Profit Corporation Act (Article

 19-9    1396-2.31, Vernon's Texas Civil Statutes);

19-10                (17)  performing escrow or settlement services if

19-11    licensed under Chapter 9, Insurance Code; or

19-12                (18)  acting as a qualified intermediary in a tax

19-13    deferred exchange under 26 U.S.C. Section 1031 and applicable

19-14    regulations.

19-15               (Sections 3.023-3.100 reserved for expansion)

19-16             SUBCHAPTER B.  AMENDMENT OF ARTICLES; CHANGES IN

19-17                            CAPITAL AND SURPLUS

19-18          Sec. 3.101.  AMENDMENT OR RESTATEMENT OF STATE TRUST COMPANY

19-19    ARTICLES OF ASSOCIATION.  (a)  A state trust company that has been

19-20    granted a certificate of authority under Section 3.006 of this Act

19-21    or a predecessor statute may amend or restate its articles of

19-22    association for any lawful purpose, including the creation of

19-23    authorized but unissued shares or participation shares in one or

19-24    more classes or series.

19-25          (b)  An amendment authorizing the issuance of shares or

19-26    participation shares in series must contain:

19-27                (1)  the designation of each series and a statement of

19-28    any variations in the preferences, limitations, and relative rights

19-29    among series to the extent that the preferences, limitations, and

19-30    relative rights are to be established in the articles of

19-31    association; and

19-32                (2)  a statement of any authority to be vested in the

19-33    board to establish series and determine the preferences,

19-34    limitations, and relative rights of each series.

19-35          (c)  A limited trust association may not amend its articles

19-36    of association to extend its period of existence for a perpetual

19-37    period or for any period of years, unless the period of existence

19-38    is expressly contingent on those events resulting in dissolution of

19-39    the trust association under Section 4.207 of this Act.

19-40          (d)  Amendment or restatement of the articles of association

19-41    of a state trust company and approval of the board and shareholders

19-42    or participants must be made or obtained in accordance with the

19-43    Texas Business Corporation Act for the amendment or restatement of

19-44    articles of incorporation, except as otherwise provided by this Act

19-45    or rules adopted under this Act.  The original and one copy of the

19-46    articles of amendment or restated articles of association must be

19-47    filed with the banking commissioner for approval.  Unless the

19-48    submission presents novel or unusual questions, the banking

19-49    commissioner shall approve or reject the amendment or restatement

19-50    not later than the 31st day after the date the banking commissioner

19-51    considers the submission informationally complete and accepted for

19-52    filing.  The banking commissioner may require the submission of

19-53    additional information as considered necessary to an informed

19-54    decision to approve or reject any amendment or restatement of

19-55    articles of association under this section.

19-56          (e)  If the banking commissioner finds that the amendment or

19-57    restatement conforms to law and any conditions imposed by the

19-58    banking commissioner, and any required filing fee has been paid,

19-59    the banking commissioner shall:

19-60                (1)  endorse the face of the original and copy with the

19-61    date of approval and the word "Approved";

19-62                (2)  file the original in the department's records; and

19-63                (3)  deliver a certified copy of the amendment or

19-64    restatement to the state trust company.

19-65          (f)  An amendment or restatement, if approved, takes effect

19-66    on the date of approval, unless the amendment or restatement

19-67    provides for a different effective date.

19-68          Sec. 3.102.  ESTABLISHING SERIES OF SHARES OR PARTICIPATION

19-69    SHARES.  (a)  If the articles of association expressly give the

 20-1    board authority to establish series and determine the preferences,

 20-2    limitations, and relative rights of each series, the board may do

 20-3    so only on compliance with this section and any rules adopted under

 20-4    this chapter.

 20-5          (b)  A series of shares or participation shares may be

 20-6    established in the manner provided by the Texas Business

 20-7    Corporation Act as if a state trust company were a domestic

 20-8    corporation, but the shares or participation shares of the series

 20-9    may not be issued and sold except on compliance with Section 3.103

20-10    of this Act.  The state trust company shall file the original and

20-11    one copy of the statement of action required by the Texas Business

20-12    Corporation Act with the banking commissioner.  Unless the

20-13    submission presents novel or unusual questions, the banking

20-14    commissioner shall approve or reject the series not later than the

20-15    31st day after the date the banking commissioner considers the

20-16    submission informationally complete and accepted for filing.  The

20-17    banking commissioner may require the submission of additional

20-18    information as considered necessary to an informed decision.

20-19          (c)  If the banking commissioner finds that the interests of

20-20    the clients and creditors of the state trust company will not be

20-21    adversely affected by the series, that the series otherwise

20-22    conforms to law and any conditions imposed by the banking

20-23    commissioner, and that any required filing fee has been paid, the

20-24    banking commissioner shall:

20-25                (1)  endorse the face of the original and copy of the

20-26    statement with the date of approval and the word "Approved";

20-27                (2)  file the original in the department's records; and

20-28                (3)  deliver a certified copy of the statement to the

20-29    trust company.

20-30          Sec. 3.103.  CHANGE IN RESTRICTED CAPITAL.  (a)  A state

20-31    trust company may not reduce or increase its restricted capital

20-32    through dividend, redemption, issuance of shares or participation

20-33    shares, or otherwise without the prior approval of the banking

20-34    commissioner, except as permitted by this section or rules adopted

20-35    under this chapter.

20-36          (b)  Unless otherwise restricted by rules, prior approval is

20-37    not required for an increase in restricted capital accomplished

20-38    through:

20-39                (1)  issuance of shares of common stock or their

20-40    equivalent in participation shares for cash;

20-41                (2)  declaration and payment of pro rata share

20-42    dividends as defined by the Texas Business Corporation Act; or

20-43                (3)  adoption by the board of a resolution directing

20-44    that all or part of undivided profits be transferred to restricted

20-45    capital.

20-46          (c)  Prior approval is not required for a decrease in

20-47    restricted capital caused by incurred losses in excess of undivided

20-48    profits.

20-49          Sec. 3.104.  CAPITAL NOTES OR DEBENTURES.  (a)  With the

20-50    prior written approval of the banking commissioner, a state trust

20-51    company may at any time through action of its board, and without

20-52    requiring action of its shareholders or participants, issue and

20-53    sell its capital notes or debentures.  The notes or debentures must

20-54    be subordinate to the claims of depositors and may be subordinate

20-55    to other claims, including the claims of other creditors or classes

20-56    of creditors or the shareholders or participants.

20-57          (b)  Capital notes or debentures may be convertible into

20-58    shares or participation shares of any class or series.  The

20-59    issuance and sale of convertible capital notes or debentures are

20-60    subject to satisfaction of preemptive rights, if any, to the extent

20-61    provided by law.

20-62          (c)  Without the prior written approval of the banking

20-63    commissioner, interest due or principal repayable on outstanding

20-64    capital notes or debentures may not be paid by a state trust

20-65    company when the state trust company is in hazardous condition or

20-66    insolvent, as determined by the banking commissioner, or to the

20-67    extent that payment will cause the state trust company to be in

20-68    hazardous condition or insolvent.

20-69          (d)  The amount of any outstanding capital notes or

 21-1    debentures that meet the requirements of this section and that are

 21-2    subordinated to unsecured creditors of the state trust company may

 21-3    be included in equity capital of the state trust company for

 21-4    purposes of determining hazardous condition or insolvency, and for

 21-5    such other purposes provided by rules adopted under this Act.

 21-6          Sec. 3.105.  BOARD DESIGNATION OF CERTIFIED SURPLUS.

 21-7    Periodically the board may vote to designate and record the amount

 21-8    of certified surplus in its minutes.  Except to absorb losses in

 21-9    excess of undivided profits and uncertified surplus, certified

21-10    surplus may not be reduced without the prior written approval of

21-11    the banking commissioner.

21-12               (Sections 3.106-3.200 reserved for expansion)

21-13                SUBCHAPTER C.  STATE TRUST COMPANY OFFICES

21-14          Sec. 3.201.  CONDUCT OF TRUST BUSINESS.  A state trust

21-15    company may engage in the trust business at its home office and at

21-16    other locations as permitted by this subchapter.

21-17          Sec. 3.202.  HOME OFFICE.  (a)  Each state trust company must

21-18    have and continuously maintain in this state a home office at which

21-19    the state trust company does business and keeps its corporate books

21-20    and records.  At least one executive officer must maintain an

21-21    office at the home office.

21-22          (b)  Each  officer at the home office is an agent for service

21-23    of process for a state trust company.

21-24          (c)  A state trust company may change its home office to any

21-25    location in this state, if the location that is the home office

21-26    before the change remains an office of the state trust company at

21-27    which the state trust company does business.  To change the

21-28    location of its home office, the state trust company must file a

21-29    written notice with the banking commissioner setting forth the name

21-30    of the state trust company, the street address of its home office

21-31    before the change, the street address to which the home office is

21-32    to be changed, and a copy of the resolution adopted by the board

21-33    authorizing the change.  The change of home office takes effect on

21-34    the 31st day after the date the banking commissioner receives the

21-35    notice.

21-36          (d)  A relocation of a state trust company's home office may

21-37    not be made, or another action that would effect an abandonment of

21-38    the state trust company's initial home office may not be taken,

21-39    without the prior written approval of the banking commissioner.

21-40    The state trust company must establish to the satisfaction of the

21-41    banking commissioner that the abandonment is consistent with the

21-42    original determination of public convenience and advantage for the

21-43    establishment of a state trust company at that location.

21-44          Sec. 3.203.  ADDITIONAL OFFICES.  (a)  A state trust company

21-45    may establish and maintain additional offices anywhere in this

21-46    state by filing a written notice with the banking commissioner

21-47    setting forth the name of the state trust company, the street

21-48    address of the proposed additional office, a description of the

21-49    activities proposed to be conducted at the additional office, and a

21-50    copy of the resolution adopted by the board authorizing the

21-51    additional office.

21-52          (b)  A state trust  company may  commence business at the

21-53    additional office on the 31st day after the date the banking

21-54    commissioner receives the notice, unless the banking commissioner

21-55    specifies an earlier or later date.  The banking commissioner may

21-56    specify a later date on a determination that the written notice

21-57    raises issues that require additional information or additional

21-58    time for analysis.  If a later date is specified, the state trust

21-59    company may establish the additional office only on prior written

21-60    approval by the banking commissioner.  The banking commissioner may

21-61    deny permission to establish an additional office of the state

21-62    trust company if the banking commissioner has a significant

21-63    supervisory or regulatory concern regarding the proposed additional

21-64    office, the applicant, or an affiliate.

21-65               (Sections 3.204-3.300 reserved for expansion)

21-66                           SUBCHAPTER D.  MERGER

21-67          Sec. 3.301.  MERGER AUTHORITY.  (a)  Subject to this

21-68    subchapter and with the prior written approval of the banking

21-69    commissioner, a state trust company may merge with another person

 22-1    to the same extent as a business corporation under the Texas

 22-2    Business Corporation Act.

 22-3          (b)  Implementation of the plan of merger by the parties and

 22-4    approval of the board, shareholders, participants, or owners of the

 22-5    parties must be made or obtained as provided by the Texas Business

 22-6    Corporation Act as if the state trust company were a domestic

 22-7    corporation and all other parties to the merger were foreign

 22-8    corporations and other entities, except as otherwise provided by

 22-9    rules adopted under this chapter.

22-10          Sec. 3.302.  MERGER APPLICATION; GROUNDS FOR APPROVAL.

22-11    (a)  To apply for approval of a merger, the parties must submit the

22-12    original articles of merger, a number of copies of the articles of

22-13    merger equal to the number of surviving, new, and acquiring

22-14    entities, and an application in the form required by the banking

22-15    commissioner.  The banking commissioner may require the submission

22-16    of additional information as considered necessary to an informed

22-17    decision.

22-18          (b)  The banking commissioner shall investigate the condition

22-19    of the merging parties.

22-20          (c)  The banking commissioner may approve the merger if:

22-21                (1)  each resulting state trust company will be solvent

22-22    and have adequate capitalization for its business and location;

22-23                (2)  each resulting state trust company has in all

22-24    respects complied with the statutes and rules relating to the

22-25    organization of a state trust company;

22-26                (3)  all obligations and liabilities of each trust

22-27    company that is a party to the merger have been properly discharged

22-28    or otherwise lawfully assumed or retained by a trust company or

22-29    other fiduciary;

22-30                (4)  each surviving, new, or acquiring person that is

22-31    not authorized to engage in the trust business will not engage in

22-32    the trust business and has in all respects complied with the laws

22-33    of this state; and

22-34                (5)  all conditions imposed by the banking commissioner

22-35    have been satisfied or otherwise resolved.

22-36          Sec. 3.303.  APPROVAL OF BANKING COMMISSIONER.  (a)  If the

22-37    banking commissioner approves the merger and finds that all

22-38    required filing fees and investigative costs have been paid, the

22-39    banking commissioner shall:

22-40                (1)  endorse the face of the original and each copy of

22-41    the articles of merger with the date of approval and the word

22-42    "Approved";

22-43                (2)  file the original in the department's records; and

22-44                (3)  deliver a certified copy of the articles of merger

22-45    to each surviving, new, or acquiring entity.

22-46          (b)  A merger is effective on the date of approval, unless

22-47    the merger agreement provides and the banking commissioner consents

22-48    to a different effective date.

22-49          Sec. 3.304.  RIGHTS OF DISSENTERS TO MERGER.  A shareholder,

22-50    participant, or participant-transferee may dissent from the merger

22-51    to the extent and by following the procedure provided by the Texas

22-52    Business Corporation Act or rules adopted under this Act.

22-53               (Sections 3.305-3.400 reserved for expansion)

22-54                 SUBCHAPTER E.  PURCHASE OR SALE OF ASSETS

22-55          Sec. 3.401.  AUTHORITY TO PURCHASE ASSETS OF ANOTHER TRUST

22-56    COMPANY.  (a)  A state trust company, with the prior written

22-57    approval of the banking commissioner, may purchase all or

22-58    substantially all of the assets of another regulated financial

22-59    institution, including the right to control accounts established

22-60    with the state trust company.  Except as otherwise expressly

22-61    provided by another statute, the purchase of all or part of the

22-62    assets of the institution does not make the purchasing state trust

22-63    company responsible for any liability or obligation of the selling

22-64    institution that the purchasing state trust company does not

22-65    expressly assume.  Except as otherwise provided by this Act, this

22-66    subchapter does not govern or prohibit the purchase by a state

22-67    trust company of all or part of the assets of a corporation or

22-68    other entity that is not a state trust company.

22-69          (b)  To make a purchase under this section, an application in

 23-1    the form required by the banking commissioner must be filed with

 23-2    the banking commissioner.  The banking commissioner shall

 23-3    investigate the condition of the purchaser and seller and may

 23-4    require the submission of additional information as considered

 23-5    necessary to make an informed decision.  The banking commissioner

 23-6    shall  approve the purchase if:

 23-7                (1)  the acquiring state trust company will be solvent

 23-8    and have sufficient capitalization for its business and location;

 23-9                (2)  the acquiring state trust company has complied

23-10    with all applicable statutes and rules;

23-11                (3)  all obligations and liabilities of each trust

23-12    company that is a party to the purchase or sale of assets have been

23-13    properly discharged or otherwise lawfully assumed or retained by a

23-14    trust company or other fiduciary;

23-15                (4)  all conditions imposed by the banking commissioner

23-16    have been satisfied or otherwise resolved; and

23-17                (5)  all fees and costs have been paid.

23-18          (c)  A purchase is effective on the date of approval unless

23-19    the purchase agreement provides for and the banking commissioner

23-20    consents to a different effective date.                

23-21          Sec. 3.402.  AUTHORITY TO ACT AS DISBURSING AGENT.  The

23-22    purchasing state trust company may hold the purchase price and any

23-23    additional funds delivered to it by the selling institution in

23-24    trust for the selling institution and may act as agent of the

23-25    selling institution in disbursing those funds in trust by paying

23-26    the creditors of the selling institution.  If the purchasing state

23-27    trust company acts under written contract of agency approved by the

23-28    banking commissioner that specifically names each creditor and the

23-29    amount to be paid each, and if the agency is limited to the purely

23-30    ministerial act of paying creditors the amounts due them as

23-31    determined by the selling institution and reflected in the contract

23-32    of agency and does not involve discretionary duties or authority

23-33    other than the identification of the creditors named, the

23-34    purchasing trust company:

23-35                (1)  may rely on the contract of agency and the

23-36    instructions included in it; and

23-37                (2)  is not responsible for:

23-38                      (A)  any error made by the selling institution in

23-39    determining its liabilities and creditors to whom the liabilities

23-40    are due or the amounts due the creditors; or

23-41                      (B)  any preference that results from the

23-42    payments made under the contract of agency and the instructions

23-43    included in it.

23-44          Sec. 3.403.  LIQUIDATION OF SELLING INSTITUTION.  If the

23-45    selling institution is at any time after the sale of assets

23-46    voluntarily or involuntarily closed for liquidation by a state or

23-47    federal regulatory agency, the purchasing state trust company shall

23-48    pay to the receiver of the selling institution the balance of the

23-49    money held by it in trust for the selling institution and not yet

23-50    paid to the creditors of the selling institution.  Without further

23-51    action the purchasing state trust company is discharged of all

23-52    responsibilities to the selling institution, its receiver, or its

23-53    creditors, shareholders, participants, or participant-transferees.

23-54          Sec. 3.404.  PAYMENT TO CREDITORS.  Payment to a creditor of

23-55    the selling institution of the amount to be paid the person under

23-56    the terms of the contract of agency may be made by the purchasing

23-57    state trust company by opening an agency account in the name of the

23-58    creditor, crediting the account with the amount to be paid the

23-59    creditor under the terms of the agency contract, and mailing or

23-60    personally delivering a duplicate ticket evidencing the credit to

23-61    the creditor at the creditor's address shown in the records of the

23-62    selling institution.  The relationship between the purchasing state

23-63    trust company and the creditor is that of agent to creditor only to

23-64    the extent of the credit reflected by the ticket.

23-65          Sec. 3.405.  SALE OF ASSETS.  (a)  The board of a state trust

23-66    company, with the banking commissioner's approval, may cause the

23-67    state trust company to sell all or substantially all of its assets,

23-68    including the right to control accounts established with the state

23-69    trust company, without shareholder or participant approval if the

 24-1    banking commissioner finds:

 24-2                (1)  the interests of the state trust company's

 24-3    clients, depositors, and creditors are jeopardized because of the

 24-4    hazardous condition of the state trust company;

 24-5                (2)  the sale is in the best interest of the state

 24-6    trust company's clients, depositors, and creditors; and

 24-7                (3)  if the deposits of the state trust company are

 24-8    insured, the Federal Deposit Insurance Corporation or its successor

 24-9    approves the transaction.

24-10          (b)  A sale under this section must include an assumption and

24-11    promise by the buyer to pay or otherwise discharge:

24-12                (1)  all of a state trust company's liabilities to

24-13    clients and depositors;

24-14                (2)  all of the state trust company's liabilities for

24-15    salaries of the state trust company's employees incurred before the

24-16    date of the sale;

24-17                (3)  obligations incurred by the banking commissioner

24-18    arising out of the supervision or sale of the state trust company;

24-19    and

24-20                (4)  fees and assessments due the department.

24-21          (c)  This section does not limit the incidental power of a

24-22    state trust company to buy and sell assets in the ordinary course

24-23    of business.

24-24          (d)  This section does not affect the banking commissioner's

24-25    right to take action under another law.  The sale by a state trust

24-26    company of all or substantially all of its assets with shareholder

24-27    or participant approval is considered a  voluntary dissolution and

24-28    liquidation and is governed by Subchapter B, Chapter 7, of this

24-29    Act.

24-30              (Sections  3.406-3.500 reserved for expansion)

24-31               SUBCHAPTER F.  STATE TRUST REGULATORY SYSTEM:

24-32                        EXIT OF STATE TRUST COMPANY

24-33          Sec. 3.501.  MERGER, REORGANIZATION, OR CONVERSION OF STATE

24-34    TRUST COMPANY INTO NATIONAL BANK EXERCISING FIDUCIARY POWERS.

24-35    (a)  A state trust company may act as necessary under the laws of

24-36    the United States or this state to merge, reorganize, or convert

24-37    into a national bank exercising fiduciary powers.

24-38          (b)  The merger, reorganization, or conversion must be made

24-39    and approval of the state trust company's board, shareholders, or

24-40    participants must be obtained in accordance with the Texas Business

24-41    Corporation Act as if the state trust company were a domestic

24-42    corporation and all other parties to the transaction, if any, were

24-43    foreign corporations or other entities, except as may be otherwise

24-44    provided by rules.  For purposes of this subsection, a conversion

24-45    is considered a merger into the successor national bank exercising

24-46    fiduciary powers.

24-47          (c)  The state trust company does not cease to be a state

24-48    trust company subject to the supervision of the banking

24-49    commissioner unless:

24-50                (1)  the banking commissioner has been given written

24-51    notice of the intention to merge, reorganize, or convert before the

24-52    31st day before the date of the proposed transaction;

24-53                (2)  the state trust company has published notice of

24-54    the transaction, in the form and frequency specified by the banking

24-55    commissioner, in a newspaper of general circulation published in

24-56    the county of its home office or, if such a newspaper is not

24-57    published in the county, in an adjacent county and in other

24-58    locations that the banking commissioner considers appropriate;

24-59                (3)  the state trust company has filed with the banking

24-60    commissioner:

24-61                      (A)  a copy of the application filed with the

24-62    successor regulatory authority, including a copy of each contract

24-63    evidencing or implementing the merger, reorganization, or

24-64    conversion, or other documents sufficient to show compliance with

24-65    applicable law;

24-66                      (B)  a certified copy of all minutes of board

24-67    meetings and shareholder or participant meetings at which action

24-68    was taken regarding the merger, reorganization, or conversion; and

24-69                      (C)  a publisher's certificate showing

 25-1    publication of the required notice;

 25-2                (4)  the banking commissioner determines that:

 25-3                      (A)  all accounts and liabilities of the state

 25-4    trust company are fully discharged, assumed, or otherwise retained

 25-5    by the successor national bank exercising fiduciary powers;

 25-6                      (B)  any conditions imposed by the banking

 25-7    commissioner for the protection of clients and creditors have been

 25-8    met or otherwise resolved; and

 25-9                      (C)  any required filing fees have been paid; and

25-10                (5)  the state trust company has received a certificate

25-11    of authority to do business as a national bank exercising fiduciary

25-12    powers.

25-13       CHAPTER 4.  SHARES AND PARTICIPATION SHARES; SHAREHOLDERS AND

25-14                         PARTICIPANTS; MANAGEMENT

25-15          SUBCHAPTER A.  TRANSFER OF OWNERSHIP INTERESTS IN STATE

25-16                               TRUST COMPANY

25-17    Sec. 4.001.  ACQUISITION OF CONTROL

25-18    Sec. 4.002.  APPLICATION REGARDING ACQUISITION OF CONTROL

25-19    Sec. 4.003.  HEARING AND DECISION ON ACQUISITION OF CONTROL

25-20    Sec. 4.004.  APPEAL FROM ADVERSE DECISION

25-21    Sec. 4.005.  OBJECTION TO OTHER TRANSFER

25-22    Sec. 4.006.  CIVIL ENFORCEMENT; CRIMINAL PENALTIES

25-23               (Sections 4.007-4.100 reserved for expansion)

25-24                     SUBCHAPTER B.  BOARD AND OFFICERS

25-25    Sec. 4.101.  VOTING SECURITIES HELD BY TRUST COMPANY

25-26    Sec. 4.102.  BYLAWS

25-27    Sec. 4.103.  BOARD OF DIRECTORS, MANAGERS, OR MANAGING

25-28                  PARTICIPANTS

25-29    Sec. 4.104.  REQUIRED  BOARD MEETINGS

25-30    Sec. 4.105.  OFFICERS

25-31    Sec. 4.106.  CERTAIN CRIMINAL OFFENSES

25-32    Sec. 4.107.  TRANSACTIONS WITH MANAGEMENT AND AFFILIATES

25-33    Sec. 4.108.  FIDUCIARY RESPONSIBILITY

25-34    Sec. 4.109.  RECORDKEEPING

25-35    Sec. 4.110.  BONDING REQUIREMENTS

25-36    Sec. 4.111.  REPORTS OF APPARENT CRIME

25-37               (Sections 4.112-4.200 reserved for expansion)

25-38     SUBCHAPTER C.  SPECIAL PROVISIONS FOR LIMITED TRUST ASSOCIATIONS

25-39    Sec. 4.201.  FILING OF NOTICE OF FULL LIABILITY

25-40    Sec. 4.202.  LIABILITY OF PARTICIPANTS AND MANAGERS

25-41    Sec. 4.203.  CONTRACTING DEBTS AND OBLIGATIONS

25-42    Sec. 4.204.  MANAGEMENT OF LIMITED TRUST ASSOCIATION

25-43    Sec. 4.205.  WITHDRAWAL OR REDUCTION OF PARTICIPANT'S

25-44                  CONTRIBUTION TO CAPITAL

25-45    Sec. 4.206.  INTEREST IN LIMITED TRUST ASSOCIATION;

25-46                  TRANSFERABILITY OF INTEREST

25-47    Sec. 4.207.  DISSOLUTION

25-48    Sec. 4.208.  ALLOCATION OF PROFITS AND LOSSES

25-49    Sec. 4.209.  DISTRIBUTIONS

25-50    Sec. 4.210.  OTHER PROVISIONS RELATED TO LIMITED TRUST

25-51                  ASSOCIATIONS

25-52       CHAPTER 4.  SHARES AND PARTICIPATION SHARES; SHAREHOLDERS AND

25-53                         PARTICIPANTS; MANAGEMENT

25-54             SUBCHAPTER A.  TRANSFER OF OWNERSHIP INTERESTS IN

25-55                            STATE TRUST COMPANY

25-56          Sec. 4.001.  ACQUISITION OF CONTROL.  (a)  Except as

25-57    expressly permitted by this Act, a person may not without the prior

25-58    written approval of the banking commissioner directly or indirectly

25-59    acquire a legal or beneficial interest in voting securities of a

25-60    state trust company or a corporation or other entity owning voting

25-61    securities of the state trust company if, after the acquisition,

25-62    the person would control the state trust company.  For purposes of

25-63    this subchapter and except as otherwise provided by rules adopted

25-64    under this Act, the principal shareholder or principal participant

25-65    of a state trust company that directly or indirectly owns or has

25-66    the power to vote a greater percentage of voting securities of the

25-67    state trust company than any other shareholder or participant is

25-68    considered to control the state trust company.

25-69          (b)  This subchapter does not prohibit a person from

 26-1    negotiating to acquire, but not acquiring, control of a state trust

 26-2    company or a person that controls a state trust company.

 26-3          (c)  This section does not apply to:

 26-4                (1)  the acquisition of securities in connection with

 26-5    the exercise of a security interest or otherwise in full or partial

 26-6    satisfaction of a debt previously contracted for in good faith if

 26-7    the acquiring person files written notice of acquisition with the

 26-8    banking commissioner before the person votes the securities

 26-9    acquired;

26-10                (2)  the acquisition of voting securities in any class

26-11    or series by a controlling person who has previously complied with

26-12    and received approval under this subchapter or who was identified

26-13    as a controlling person in a prior application filed with and

26-14    approved by the banking commissioner;

26-15                (3)  an acquisition or transfer by operation of law,

26-16    will, or intestate succession if the acquiring person files written

26-17    notice of acquisition with the banking commissioner before the

26-18    person votes the securities acquired; or

26-19                (4)  a transaction exempted by the banking commissioner

26-20    or by rules adopted under this Act because the transaction is not

26-21    within the purposes of this subchapter or the regulation of which

26-22    is not necessary or appropriate to achieve the objectives of this

26-23    subchapter.

26-24          Sec. 4.002.  APPLICATION REGARDING ACQUISITION OF CONTROL.

26-25    (a)  An application for approval to acquire control of a state

26-26    trust company or a person that controls a state trust company must

26-27    be filed under oath by the transferee on a form prescribed by the

26-28    banking commissioner and accompanied by any filing fee required by

26-29    statute or rule.  The application must contain all information

26-30    required by rules adopted under this Act or that the banking

26-31    commissioner requires in a particular application as necessary to

26-32    an informed decision to approve or reject the acquisition.

26-33          (b)  If a person or transferee proposing to acquire voting

26-34    securities subject to this section includes a group of individuals

26-35    or entities acting in concert, the information required by the

26-36    banking commissioner may be required of each member of the group.

26-37          (c)  Information obtained by the banking commissioner under

26-38    this section is confidential and may not be disclosed by the

26-39    banking commissioner or any employee of the department except as

26-40    provided by Subchapter B, Chapter 2, of this Act.

26-41          (d)  Promptly after the applicants are notified by the

26-42    banking commissioner that the application is complete and accepted

26-43    for filing, the applicants shall publish notice of the application,

26-44    its date of filing, and the identity of each applicant, in the form

26-45    specified by the banking commissioner, in a newspaper of general

26-46    circulation in the county where the state trust company's home

26-47    office is located.  Publication of notice of an application filed

26-48    in contemplation of a public tender offer subject to 15 U.S.C.

26-49    Section 78n(d)(1) may be deferred for not more than 34 days after

26-50    the date the application is filed if:

26-51                (1)  the applicant requests confidential treatment and

26-52    represents that a public announcement of the tender offer and the

26-53    filing of appropriate forms with the Securities and Exchange

26-54    Commission or the appropriate federal banking agency, as

26-55    applicable, will occur within the period of deferral; and

26-56                (2)  the banking commissioner determines that the

26-57    public interest will not be harmed by the requested confidential

26-58    treatment.

26-59          (e)  The banking commissioner may waive the requirement that

26-60    a notice be published or permit delayed publication on a

26-61    determination that waiver or delay is in the public interest.  If

26-62    publication of notice is waived under this subsection, the

26-63    information that would be contained in a published notice becomes

26-64    public information under Chapter 552, Government Code, on the 35th

26-65    day after the date the application is filed.

26-66          Sec. 4.003.  HEARING AND DECISION ON ACQUISITION OF CONTROL.

26-67    (a)  Not later than the 60th day after the date the notice is

26-68    published, the banking commissioner shall approve the application

26-69    or set the application for hearing.   If the banking commissioner

 27-1    sets a hearing, the department shall participate as the opposing

 27-2    party and the banking commissioner shall conduct a hearing and one

 27-3    or more prehearing conferences and opportunities for discovery as

 27-4    the banking commissioner considers advisable and consistent with

 27-5    governing statutes and rules.  A hearing held under this section is

 27-6    confidential and closed to the public.

 27-7          (b)  Based on the record, the banking commissioner may issue

 27-8    an order denying an application if:

 27-9                (1)  the acquisition would substantially lessen

27-10    competition, be in restraint of trade, result in a monopoly, or be

27-11    in furtherance of a combination or conspiracy to monopolize or

27-12    attempt to monopolize the trust industry in any part of this state,

27-13    unless:

27-14                      (A)  the anticompetitive effects of the

27-15    acquisition are clearly outweighed in the public interest by the

27-16    probable effect of acquisition in meeting the convenience and needs

27-17    of the community to be served; and

27-18                      (B)  the acquisition is not in violation of the

27-19    law of this state or the United States;

27-20                (2)  the financial condition of the transferee, or any

27-21    member of a group comprising the transferee, might jeopardize the

27-22    financial stability of the state trust company being acquired;

27-23                (3)  plans or proposals to operate, liquidate, or sell

27-24    the state trust company or its assets are not in the best interests

27-25    of the state trust company;

27-26                (4)  the experience, ability, standing, competence,

27-27    trustworthiness, and integrity of the transferee, or any member of

27-28    a group comprising the transferee, are insufficient to justify a

27-29    belief that the state trust company will be free from improper or

27-30    unlawful influence or interference with respect to the state trust

27-31    company's operation in compliance with law;

27-32                (5)  the state trust company will not be solvent, have

27-33    adequate capitalization, or be in compliance with the laws of this

27-34    state after the acquisition;

27-35                (6)  the transferee has failed to furnish all

27-36    information pertinent to the application reasonably required by the

27-37    banking commissioner; or

27-38                (7)  the transferee is not acting in good faith.

27-39          (c)  If an application filed under this section is approved

27-40    by the banking commissioner, the transaction may be consummated.

27-41    Any written commitment from the transferee offered to and accepted

27-42    by the banking commissioner as a condition that the application

27-43    will be approved is enforceable against the state trust company and

27-44    the transferee and is considered for all purposes an agreement

27-45    under this Act.

27-46          Sec. 4.004.  APPEAL FROM ADVERSE DECISION.  (a)  If a hearing

27-47    has been held, the banking commissioner has entered an order

27-48    denying the application, and the order has become final, the

27-49    transferee may appeal the final order by filing a petition for

27-50    judicial review under the substantial evidence rule in a district

27-51    court of Travis County as provided by Chapter 2001, Government

27-52    Code.

27-53          (b)  The filing of an appeal under this section does not stay

27-54    the order of the banking commissioner.

27-55          Sec. 4.005.  OBJECTION TO OTHER TRANSFER.  This subchapter

27-56    does not prevent the banking commissioner from investigating,

27-57    commenting on, or seeking to enjoin or set aside a transfer of

27-58    voting securities that evidence a direct or indirect interest in a

27-59    state trust company, regardless of whether the transfer is included

27-60    within this subchapter, if the banking commissioner considers the

27-61    transfer to be against the public interest.

27-62          Sec. 4.006.  CIVIL ENFORCEMENT; CRIMINAL PENALTIES.  (a)  If

27-63    the banking commissioner believes that a person has committed or is

27-64    about to commit a violation of this subchapter or a rule or order

27-65    of the banking commissioner pertaining to this subchapter, the

27-66    attorney general on behalf of the banking commissioner may apply to

27-67    a district court of Travis County for an order enjoining the

27-68    violation and for other equitable relief the nature of the case

27-69    requires.

 28-1          (b)  A person who knowingly fails or refuses to file the

 28-2    application required by Section 4.002 of this Act commits an

 28-3    offense.  An offense under this subsection is a Class A

 28-4    misdemeanor.

 28-5               (Sections 4.007-4.100 reserved for expansion)

 28-6                     SUBCHAPTER B.  BOARD AND OFFICERS

 28-7          Sec. 4.101.  VOTING SECURITIES HELD BY TRUST COMPANY.

 28-8    (a)  Voting securities of a state trust company held by the state

 28-9    trust company in a fiduciary capacity under a will or trust,

28-10    whether registered in its own name or in the name of its nominee,

28-11    may not be voted in the election of directors or managers or on a

28-12    matter affecting the compensation of directors, managers, officers,

28-13    or employees of the state trust company in that capacity, unless:

28-14                (1)  under the terms of the will or trust, the manner

28-15    in which the voting securities are to be voted may be determined by

28-16    a donor or beneficiary of the will or trust and the donor or

28-17    beneficiary actually makes the determination in the matter at

28-18    issue;

28-19                (2)  the terms of the will or trust expressly direct

28-20    the manner in which the securities must be voted to the extent that

28-21    no discretion is vested in the state trust company as fiduciary; or

28-22                (3)  the securities are voted solely by a cofiduciary

28-23    that is not an affiliate of the state trust company, as if the

28-24    cofiduciary were the sole fiduciary.

28-25          (b)  Voting securities of a state trust company that cannot

28-26    be voted under this section are considered to be authorized but

28-27    unissued for purposes of determining the procedures for and results

28-28    of the affected vote.

28-29          Sec. 4.102.  BYLAWS.  (a)  Each state trust company shall

28-30    adopt bylaws and may amend its bylaws from time to time for the

28-31    purposes and in accordance with the procedures set forth in the

28-32    Texas Business Corporation Act.

28-33          (b)  A limited trust  association in which management is

28-34    retained by the participants is not required to adopt bylaws if

28-35    provisions required by law to be contained in the bylaws are

28-36    contained in the articles of association or the participation

28-37    agreement.  If a limited trust association has adopted bylaws that

28-38    designate each full liability participant, the limited trust

28-39    association shall file with the banking commissioner a copy of the

28-40    bylaws.  Only the portion of the bylaws designating each full

28-41    liability participant is a public record.

28-42          Sec. 4.103.  BOARD OF DIRECTORS, MANAGERS, OR MANAGING

28-43    PARTICIPANTS.  (a)  The board of a state trust company must consist

28-44    of not fewer than five or more than 25 directors, managers, or

28-45    managing participants, the majority of whom must be residents of

28-46    this state.  Except for a limited trust association in which

28-47    management has been retained by its participants, the principal

28-48    executive officer of the state trust company is a member of the

28-49    board.  The principal executive officer acting in the capacity of

28-50    board  member is the board's presiding officer unless the board

28-51    elects a different presiding officer to perform the duties as

28-52    designated by the board.

28-53          (b)  Unless the banking commissioner consents otherwise in

28-54    writing, a person may not serve as director, manager, or managing

28-55    participant of a state trust company if:

28-56                (1)  the state trust company incurs an unreimbursed

28-57    loss attributable to a charged-off obligation of or holds a

28-58    judgment against the person or an entity that was controlled by the

28-59    person at the time of funding and at the time of default on the

28-60    loan that gave rise to the judgment or charged-off obligation;

28-61                (2)  the person has been convicted of a felony; or

28-62                (3)  the person has violated, with respect to a trust

28-63    under which the state trust company has fiduciary responsibility,

28-64    Section 113.052 or 113.053(a), Property Code, relating to loan of

28-65    trust funds and purchase or sale of trust property by the trustee,

28-66    and the violation has not been corrected.

28-67          (c)  If a state trust company other than a limited trust

28-68    association operated by managing participants does not elect

28-69    directors or managers before the 61st day after the date of its

 29-1    regular annual meeting, the banking commissioner may appoint a

 29-2    conservator under Chapter 6 of this Act to operate the state trust

 29-3    company and elect directors or managers, as appropriate.  If the

 29-4    conservator is unable to locate or elect persons willing and able

 29-5    to serve as directors or managers, the banking commissioner may

 29-6    close the state trust company for liquidation.

 29-7          (d)  A vacancy on the board that reduces the number of

 29-8    directors, managers, or managing participants to fewer than five

 29-9    must be filled not later than the 30th day after the date the

29-10    vacancy occurs.  A limited trust association with fewer than five

29-11    managing participants must add one or more new participants or

29-12    elect a board of managers of not fewer than five persons to resolve

29-13    the vacancy.  After 30 days after the date the vacancy occurs, the

29-14    banking commissioner may appoint a conservator under Chapter 6 of

29-15    this Act to operate the state trust company and elect a board of

29-16    not fewer than five persons to resolve the vacancy.  If the

29-17    conservator is unable to locate or elect five persons willing and

29-18    able to serve as directors or managers, the banking commissioner

29-19    may close the state trust company for liquidation.

29-20          (e)  Before each term to which a person is elected to serve

29-21    as a director or manager of a state trust company, or annually for

29-22    a person who is a managing participant, the person shall submit an

29-23    affidavit for filing in the minutes of the state trust company

29-24    stating that the person, to the extent applicable:

29-25                (1)  accepts the position and is not disqualified from

29-26    serving in the position;

29-27                (2)  will not violate or knowingly permit an officer,

29-28    director, manager, managing participant, or employee of the state

29-29    trust company to violate any law applicable to the conduct of

29-30    business of the trust company; and

29-31                (3)  will diligently perform the duties of the

29-32    position.

29-33          (f)  An advisory director or manager is not considered a

29-34    director if the advisory director or manager:

29-35                (1)  is not elected by the shareholders or participants

29-36    of the state trust company;

29-37                (2)  does not vote on matters before the board or a

29-38    committee of the board and is not counted for purposes of

29-39    determining a quorum of the board or committee; and

29-40                (3)  provides solely general policy advice to the

29-41    board.

29-42          Sec. 4.104.  REQUIRED BOARD MEETINGS.  The board of a state

29-43    trust company shall hold at least one regular meeting each quarter.

29-44    At each regular meeting the board shall review and approve the

29-45    minutes of the prior meeting and review the operations, activities,

29-46    and financial condition of the state trust company.  The board may

29-47    designate committees from among its members to perform these duties

29-48    and approve or disapprove the committees' reports at each regular

29-49    meeting.  All actions of the board must be recorded in its minutes.

29-50          Sec. 4.105.  OFFICERS.  (a)  The board shall annually appoint

29-51    the officers of the state trust company, who serve at the pleasure

29-52    of the board.  The state trust company must have a principal

29-53    executive officer primarily responsible for the execution of board

29-54    policies and operation of the state trust company and an officer

29-55    responsible for the maintenance and storage of all corporate books

29-56    and records of the state trust company and for required attestation

29-57    of signatures.  These positions may not be held by the same person.

29-58    The board may appoint other officers of the state trust company as

29-59    the board considers necessary.

29-60          (b)  Unless expressly authorized by a resolution of the board

29-61    recorded in its minutes, an officer or employee may not create or

29-62    dispose of a state trust company asset or create or incur a

29-63    liability on behalf of the state trust company.

29-64          Sec. 4.106.  CERTAIN CRIMINAL OFFENSES.  (a)  An officer,

29-65    director, manager, managing participant, employee, shareholder, or

29-66    participant of a state trust company commits an offense if the

29-67    person knowingly:

29-68                (1)  conceals information or a fact or removes,

29-69    destroys, or conceals a book or record of the state trust company

 30-1    for the purpose of concealing information or a fact from the

 30-2    banking commissioner or an agent of the banking commissioner; or

 30-3                (2)  for the purpose of concealing, removes or destroys

 30-4    any book or record of the state trust company that is material to a

 30-5    pending or anticipated legal or administrative proceeding.

 30-6          (b)  An officer, director, manager, managing participant, or

 30-7    employee of a state trust company commits an offense if the

 30-8    person knowingly makes a false entry in the books or records or in

 30-9    any report or statement of the state trust company.

30-10          (c)  An offense under this section is a felony of the third

30-11    degree.

30-12          Sec. 4.107.  TRANSACTIONS WITH MANAGEMENT AND AFFILIATES.

30-13    (a)  Without the prior approval of a disinterested majority of the

30-14    board recorded in the minutes, or if a disinterested majority

30-15    cannot be obtained the prior written approval of the banking

30-16    commissioner, a state trust company may not directly or indirectly:

30-17                (1)  sell or lease an asset of the state trust company

30-18    to an officer, director, manager, managing participant, or

30-19    principal shareholder or participant of the state trust company or

30-20    an affiliate of the state trust company;

30-21                (2)  purchase or lease an asset in which an officer,

30-22    director, manager, managing participant, or principal shareholder

30-23    or participant of the state trust company or an affiliate of the

30-24    state trust company has an interest; or

30-25                (3)  subject to Section 5.201 of this Act, extend

30-26    credit to an officer, director, manager, managing participant, or

30-27    principal shareholder or participant of the state trust company or

30-28    an affiliate of the state trust company.

30-29          (b)  Notwithstanding Subsection (a) of this section, a lease

30-30    transaction described in Subsection (a)(2) of this section

30-31    involving real property may not be consummated, renewed, or

30-32    extended without the prior written approval of the banking

30-33    commissioner.  For purposes of this subsection only, an affiliate

30-34    of a state trust company does not include a subsidiary of the state

30-35    trust company.

30-36          (c)  Subject to Section 5.201 of this Act, a state trust

30-37    company may not directly or indirectly extend credit to an

30-38    employee, officer, director, manager, managing participant, or

30-39    principal shareholder or participant of the state trust company or

30-40    an affiliate of the state trust company, unless the extension of

30-41    credit:

30-42                (1)  is made on substantially the same terms, including

30-43    interest rates and collateral, as those prevailing at the time for

30-44    comparable transactions by the state trust company with persons who

30-45    are not employees, officers, directors, managers, managing

30-46    participants, principal shareholders, participants, or affiliates

30-47    of the state trust company;

30-48                (2)  does not involve more than the normal risk of

30-49    repayment or present other unfavorable features; and

30-50                (3)  the state trust company follows credit

30-51    underwriting procedures that are not less stringent than those

30-52    applicable to comparable transactions by the state trust company

30-53    with persons who are not employees, officers, directors, managers,

30-54    managing participants, principal shareholders, participants, or

30-55    affiliates of the state trust company.

30-56          (d)  An officer, director, manager, or managing participant

30-57    of a state trust company who knowingly participates in or permits a

30-58    violation of this section commits an offense.  An offense under

30-59    this subsection is a felony of the third degree.

30-60          (e)  The finance commission may adopt rules to administer and

30-61    carry out this section, including rules to establish limits,

30-62    requirements, or exemptions other than those specified by this

30-63    section for particular categories of transactions.

30-64          Sec. 4.108.  FIDUCIARY RESPONSIBILITY.  The board of a state

30-65    trust company is responsible for the proper exercise of fiduciary

30-66    powers by the state trust company and each matter pertinent to the

30-67    exercise of fiduciary powers, including:

30-68                (1)  the determination of policies;

30-69                (2)  the investment and disposition of property held in

 31-1    a fiduciary capacity; and

 31-2                (3)  the direction and review of the actions of each

 31-3    officer, employee, and committee used by the state trust company in

 31-4    the exercise of its fiduciary powers.

 31-5          Sec. 4.109.  RECORDKEEPING.  A state trust company shall keep

 31-6    its fiduciary records separate and distinct from other records of

 31-7    the state trust company in compliance with the rules adopted under

 31-8    this Act.  The fiduciary records must contain all appropriate

 31-9    material information relative to each account.

31-10          Sec. 4.110.  BONDING REQUIREMENTS.  (a)  The board of a state

31-11    trust company shall require a bond for protection and indemnity of

31-12    clients, in reasonable amounts established by rules adopted under

31-13    this chapter, against dishonesty, fraud, defalcation, forgery,

31-14    theft, and other similar insurable losses with a corporate

31-15    insurance or surety company:

31-16                (1)  authorized to do business in this state; or

31-17                (2)  acceptable to the banking commissioner and

31-18    otherwise lawfully permitted to issue the coverage against those

31-19    losses in this state.

31-20          (b)  Except as otherwise provided by rule, a bond is required

31-21    to cover each director, manager, managing participant, officer, and

31-22    employee of a state trust company without regard to whether the

31-23    person receives salary or other compensation.

31-24          (c)  A state trust company may apply to the banking

31-25    commissioner for permission to eliminate the bonding requirement of

31-26    this section for a particular individual.  The banking commissioner

31-27    shall approve the application if the banking commissioner finds

31-28    that the bonding requirement is unnecessary or burdensome.  Unless

31-29    the application presents novel or unusual questions, the banking

31-30    commissioner shall approve the application or set the application

31-31    for hearing not later than the 61st day after the date the banking

31-32    commissioner considers the application complete and accepted for

31-33    filing.

31-34          Sec. 4.111.  REPORTS OF APPARENT CRIME.  (a)  A state trust

31-35    company that is the victim of a robbery, has a shortage of

31-36    corporate or fiduciary funds in excess of  $5,000, or is the victim

31-37    of an apparent or suspected misapplication of its corporate or

31-38    fiduciary funds or property in any amount by a director, manager,

31-39    managing participant, officer, or employee shall report such

31-40    robbery, shortage, or apparent or suspected misapplication to the

31-41    banking commissioner within 48 hours after the time it is

31-42    discovered.  The initial report may be oral if the report is

31-43    promptly confirmed in writing.  The state trust company or a

31-44    director, manager, managing participant, officer, employee, or

31-45    agent is not subject to liability for defamation or another charge

31-46    resulting from information supplied in the report.

31-47          (b)  A trust report filed with the banking commissioner under

31-48    this section may be a copy of a written report filed with an

31-49    appropriate federal agency.

31-50               (Sections 4.112-4.200 reserved for expansion)

31-51     SUBCHAPTER C.  SPECIAL PROVISIONS FOR LIMITED TRUST ASSOCIATIONS

31-52          Sec. 4.201.  FILING OF NOTICE OF FULL LIABILITY.  (a)  A

31-53    limited trust association shall file with the banking commissioner

31-54    a copy of any participation agreement by which a participant of the

31-55    limited trust association agrees to become a full liability

31-56    participant and the name and address of each full liability

31-57    participant.  Only the portion of the filed copy containing the

31-58    designation of each full liability participant is a public record.

31-59          (b)  The banking commissioner may require a complete copy of

31-60    the participation agreement to be filed with the department,

31-61    regardless of whether a state trust company has a full liability

31-62    participant, except that the provisions of the participation

31-63    agreement other than those by which a participant of the limited

31-64    trust association agrees to become a full liability participant are

31-65    confidential and subject to release only as provided by Subchapter

31-66    B, Chapter 2, of this Act.

31-67          Sec. 4.202.  LIABILITY OF PARTICIPANTS AND MANAGERS.

31-68    (a)  Except as provided by Subsection (b) of this section, the

31-69    participants, participant-transferees, and managers of a limited

 32-1    trust association may not be held liable for a debt, obligation, or

 32-2    liability of the limited trust association, including a debt,

 32-3    obligation, or liability under a judgment, decree, or order of

 32-4    court.  A participant, other than a full liability participant, or

 32-5    a manager of a limited trust association is not a proper party to

 32-6    proceedings by or against a limited trust association, unless the

 32-7    object of the proceeding is to enforce a participant's or manager's

 32-8    right against or liability to a limited trust association.

 32-9          (b)  A full liability participant of a limited trust

32-10    association is liable under a judgment, decree, or order of court

32-11    for a debt, obligation, or liability of the limited  trust

32-12    association that accrued during the participation of the full

32-13    liability participant in the limited trust association and before

32-14    the full liability participant or a successor in interest files a

32-15    notice of withdrawal as a full liability participant from the

32-16    limited trust association with the banking commissioner.  The filed

32-17    notice of withdrawal is a public record.

32-18          Sec. 4.203.  CONTRACTING DEBTS AND OBLIGATIONS.  Except as

32-19    provided by this section or the articles of association of the

32-20    limited trust  association, a debt, liability, or other obligation

32-21    may be contracted for or incurred on behalf of a limited trust

32-22    association only by:

32-23                (1)  a majority of the managers, if management of the

32-24    limited trust association has been vested in a board of managers;

32-25                (2)  a majority of the managing participants; or

32-26                (3)  an officer or other agent vested with actual or

32-27    apparent authority to contract for or incur the debt, liability, or

32-28    other obligation.

32-29          Sec. 4.204.  MANAGEMENT OF LIMITED TRUST ASSOCIATION.

32-30    (a)  Management of a limited trust  association is vested in the

32-31    participants in proportion to each participant's contribution to

32-32    capital, as adjusted periodically to properly reflect any

32-33    additional contribution.  The articles of association may provide

32-34    that management of a limited trust  association is vested in a

32-35    board of managers to be elected annually by the participants as

32-36    prescribed by the bylaws.

32-37          (b)  Participants of a limited trust association may not

32-38    retain management and must elect a board of managers if:

32-39                (1)  any participant is disqualified from serving as a

32-40    managing participant under Section 4.103 of this Act;

32-41                (2)  the limited trust association has fewer than five

32-42    or more than 25 participants; or

32-43                (3)  any participant has been removed by the banking

32-44    commissioner under Subchapter A, Chapter 6, of this Act.

32-45          (c)  The articles of association, bylaws, and participation

32-46    agreement of a limited trust  association may use the terms

32-47    "director" and "board" instead of "manager" and "board of

32-48    managers," respectively.

32-49          Sec. 4.205.  WITHDRAWAL OR REDUCTION OF PARTICIPANT'S

32-50    CONTRIBUTION TO CAPITAL.  (a)  A participant may not receive from a

32-51    limited trust  association any part of the participant's

32-52    contribution to capital until:

32-53                (1)  all liabilities of the limited trust association,

32-54    except liabilities to participants on account of contribution to

32-55    capital, have been paid or, if after the withdrawal or reduction,

32-56    sufficient property of the limited trust association will remain to

32-57    pay all liabilities of the limited trust association, except

32-58    liabilities to participants on account of contribution to capital;

32-59                (2)  all participants consent, unless the return of the

32-60    contribution to capital may be demanded as provided by this

32-61    chapter; or

32-62                (3)  the articles of association are canceled or

32-63    amended to set out the withdrawal or reduction.

32-64          (b)  A participant may demand the return of the participant's

32-65    contribution to capital on the dissolution of the association and

32-66    the failure by the full liability participants to exercise the

32-67    right for the business of the limited trust  association to be

32-68    carried on by the remaining participants as provided by Section

32-69    4.207 of this Act.

 33-1          (c)  Unless allowed by the articles of association or by the

 33-2    unanimous consent of all participants of the limited trust

 33-3    association, a participant may demand the return of the

 33-4    participant's contribution to capital only in cash.

 33-5          Sec. 4.206.  INTEREST IN LIMITED TRUST ASSOCIATION;

 33-6    TRANSFERABILITY OF INTEREST.  (a)  The interest of a participant or

 33-7    participant-transferee in a limited trust  association is the

 33-8    personal estate of the participant or the participant-transferee

 33-9    and may be transferred as provided by the bylaws or the

33-10    participation agreement.  A transferee of a participant's interest

33-11    has the status of a participant-transferee and does not by the

33-12    transfer become a participant or obtain a right to participate in

33-13    the management of the limited trust  association.  A

33-14    participant-transferee is entitled to receive only a share of

33-15    profits, return of contribution, or other distributive benefit in

33-16    respect to the interest transferred to which the participant who

33-17    transferred the interest would have been entitled.  A

33-18    participant-transferee may become a participant only as provided by

33-19    the bylaws or the participation agreement.

33-20          (b)  A limited trust association may add additional

33-21    participants in the same manner as participant-transferees after

33-22    payment in full of the capital contribution to the limited trust

33-23    association payable for the issuance of additional participation

33-24    interests.

33-25          Sec. 4.207.  DISSOLUTION.  (a)  A limited trust association

33-26    organized under this chapter is dissolved on:

33-27                (1)  the expiration of the period fixed for the

33-28    duration of the limited trust association;

33-29                (2)  a vote to dissolve or the execution of a written

33-30    consent to dissolve by all full liability participants, if any, and

33-31    a sufficient number of other participants that combined with all

33-32    full liability participants hold at least two-thirds of the

33-33    participation shares in each class in the association, or a greater

33-34    fraction as provided by the articles of association;

33-35                (3)  except as provided by the articles of association,

33-36    the death, insanity, expulsion, bankruptcy, retirement, or

33-37    resignation of a participant unless a majority in interest of all

33-38    remaining participants elect in writing not later than  the 90th

33-39    day after the date of the event to continue the business of the

33-40    association; or

33-41                (4)  the occurrence of an event of dissolution

33-42    specified in the articles of association.

33-43          (b)  A dissolution under this section is considered to be the

33-44    initiation of a voluntary liquidation under Subchapter B, Chapter

33-45    7, of this Act.

33-46          (c)  An event of dissolution described by Subsection (a)(3)

33-47    of this section does not cancel or revoke a contract to which the

33-48    limited trust association is a party, including a trust indenture

33-49    or agreement or voluntary dissolution under Subchapter B, Chapter

33-50    7, of this Act, until the period for the remaining participants to

33-51    continue the business of the limited trust association has expired

33-52    without the remaining participants having completed the necessary

33-53    action to continue the business of the limited trust association.

33-54          Sec. 4.208.  ALLOCATION OF PROFITS AND LOSSES.  The profits

33-55    and losses of a limited trust  association may be allocated among

33-56    the participants and among classes of participants as provided by

33-57    the participation agreement.  Without the prior written approval of

33-58    the banking commissioner, the profits and losses must be allocated

33-59    based on the relative interests of the participants as reflected in

33-60    the articles of association and related documents filed with and

33-61    approved by the banking commissioner.

33-62          Sec. 4.209.  DISTRIBUTIONS.  Subject to Section 3.103 of this

33-63    Act, distributions of cash or other assets of a limited trust

33-64    association may be made to the participants as provided by the

33-65    participation agreement.  Without the prior written approval of the

33-66    banking commissioner, distributions must be made to the

33-67    participants based on the relative interests of the participants as

33-68    reflected in the articles of association and related documents

33-69    filed with and approved by the banking commissioner.

 34-1          Sec. 4.210.  OTHER PROVISIONS RELATED TO LIMITED TRUST

 34-2    ASSOCIATIONS.  For purposes of the provisions of this Act other

 34-3    than this subchapter, as the context requires:

 34-4                (1)  a manager and the board of managers are considered

 34-5    to be a director and the board of directors, respectively;

 34-6                (2)  if there is not a board of managers, a participant

 34-7    is considered to be a director and all of the participants are

 34-8    considered to be the board of directors;

 34-9                (3)  a participant or participant-transferee is

34-10    considered to be a shareholder;

34-11                (4)  a participation share is considered to be a share

34-12    of stock; and

34-13                (5)  a distribution is considered to be a dividend.

34-14               CHAPTER 5.  INVESTMENTS, LOANS, AND DEPOSITS

34-15                 SUBCHAPTER A.  ACQUISITION AND OWNERSHIP

34-16                     OF STATE TRUST COMPANY FACILITIES

34-17    Sec. 5.001.  INVESTMENT IN STATE TRUST COMPANY FACILITIES

34-18               (Sections 5.002-5.100 reserved for expansion)

34-19              SUBCHAPTER B.  STATE TRUST COMPANY INVESTMENTS

34-20    Sec. 5.101.  SECURITIES

34-21    Sec. 5.102.  TRANSACTIONS IN STATE TRUST COMPANY SHARES OR

34-22                  PARTICIPATION SHARES

34-23    Sec. 5.103.  SUBSIDIARIES

34-24    Sec. 5.104.  OTHER REAL ESTATE

34-25               (Sections 5.105-5.200 reserved for expansion)

34-26                           SUBCHAPTER C.  LOANS

34-27    Sec. 5.201.  LENDING LIMITS

34-28    Sec. 5.202.  LEASE FINANCING TRANSACTIONS

34-29               (Sections 5.203-5.300 reserved for expansion)

34-30                SUBCHAPTER D.  OTHER INVESTMENT PROVISIONS

34-31    Sec. 5.301.  OTHER INVESTMENT PROVISIONS

34-32    Sec. 5.302.  ENGAGING IN COMMERCE PROHIBITED

34-33               (Sections 5.303-5.400 reserved for expansion)

34-34                       SUBCHAPTER E.  TRUST DEPOSITS

34-35    Sec. 5.401.  TRUST DEPOSITS

34-36               (Sections 5.402-5.500 reserved for expansion)

34-37              SUBCHAPTER F.  LIABILITIES AND PLEDGE OF ASSETS

34-38    Sec. 5.501.  BORROWING LIMIT

34-39    Sec. 5.502.  PLEDGE OF ASSETS

34-40               CHAPTER 5.  INVESTMENTS, LOANS, AND DEPOSITS

34-41             SUBCHAPTER A.  ACQUISITION AND OWNERSHIP OF STATE

34-42                         TRUST COMPANY FACILITIES

34-43          Sec. 5.001.  INVESTMENT IN STATE TRUST COMPANY FACILITIES.

34-44    (a)  In this subchapter, "state trust company facility" means real

34-45    estate, including an improvement, owned, or leased to the extent

34-46    the lease or the leasehold improvements are capitalized, by a state

34-47    trust company for the purpose of:

34-48                (1)  providing space for state trust company employees

34-49    to perform their duties and space for parking by state trust

34-50    company employees and customers;

34-51                (2)  conducting trust business, including meeting the

34-52    reasonable needs and convenience of the public and the state trust

34-53    company's clients, computer operations, document and other item

34-54    processing, maintenance, and record retention and storage;

34-55                (3)  holding, improving, and occupying as an incident

34-56    to future expansion of the state trust company's facilities; or

34-57                (4)  conducting another activity authorized by rules

34-58    adopted under this Act.

34-59          (b)  Without the prior written approval of the banking

34-60    commissioner, a state trust company may not directly or indirectly

34-61    invest an amount in excess of 60 percent of its restricted capital

34-62    in state trust company facilities, furniture, fixtures, and

34-63    equipment.  Except as otherwise provided by rules adopted under

34-64    this Act, in computing this limitation a state trust company:

34-65                (1)  shall include:

34-66                      (A)  its direct investment in state trust company

34-67    facilities;

34-68                      (B)  any investment in equity or investment

34-69    securities of a company holding title to a facility used by the

 35-1    state trust company for the purposes specified by Subsection (a) of

 35-2    this section;

 35-3                      (C)  any loan made by the state trust company to

 35-4    or on the security of equity or investment securities issued by a

 35-5    company holding title to a facility used by the state trust

 35-6    company; and

 35-7                      (D)  any indebtedness incurred on state trust

 35-8    company facilities by a company:

 35-9                            (i)  that holds title to the facility;

35-10                            (ii)  that is an affiliate of the state

35-11    trust company; and

35-12                            (iii)  in which the state trust company is

35-13    invested in the manner described by Paragraph (B) or (C) of this

35-14    subdivision; and

35-15                (2)  may exclude an amount included under Subdivisions

35-16    (1)(B)-(D) of this subsection to the extent any lease of a facility

35-17    from the company  holding title to the facility is capitalized on

35-18    the books of the state trust company.

35-19          (c)  Real estate acquired under Subsection (a)(3) of this

35-20    section and not improved and occupied by the state trust company

35-21    ceases to be a state trust company facility on the third

35-22    anniversary of the date of its acquisition, unless the banking

35-23    commissioner on application grants written approval to further

35-24    delay in the improvement and occupation of the property by the

35-25    state trust company.

35-26          (d)  A state trust company shall comply with regulatory

35-27    accounting principles in accounting for its investment in and

35-28    depreciation of state trust company facilities, furniture,

35-29    fixtures, and equipment.

35-30               (Sections 5.002-5.100 reserved for expansion)

35-31              SUBCHAPTER B.  STATE TRUST COMPANY INVESTMENTS

35-32          Sec. 5.101.  SECURITIES.  (a)  A state trust company may

35-33    invest its restricted capital in any type or character of  equity

35-34    or investment securities under the limitations provided by this

35-35    section.

35-36          (b)  Unless the banking commissioner approves maintenance of

35-37    a lesser amount in writing, a state trust company must invest and

35-38    maintain an amount equal to at least 40 percent of the state trust

35-39    company's restricted capital under Section 3.007 of this Act in

35-40    investment securities that are readily marketable and can be

35-41    converted to cash within four business days.

35-42          (c)  Subject to Subsection (d) of this section, the total

35-43    investment of its restricted capital in equity and investment

35-44    securities of any one issuer, obligor, or maker, and the total

35-45    investment  of its restricted capital in mutual funds, held by the

35-46    state trust company for its own account, may not exceed an amount

35-47    equal to 15 percent of the state trust company's restricted

35-48    capital.  The banking commissioner may authorize investments in

35-49    excess of this limitation on written application if the banking

35-50    commissioner concludes that:

35-51                (1)  the excess investment is not prohibited by other

35-52    applicable law; and

35-53                (2)  the safety and soundness of the requesting state

35-54    trust company is not adversely affected.

35-55          (d)  Notwithstanding Subsection (c) of this section, a state

35-56    trust company may invest its restricted capital in, without

35-57    limitation and subject only to the exercise of prudent judgment:

35-58                (1)  bonds and other legally created general

35-59    obligations of a state, an agency or political subdivision of a

35-60    state, the United States, or an agency or instrumentality of the

35-61    United States;

35-62                (2)  an investment security that this state, an agency

35-63    or political subdivision of this state, the United States, or an

35-64    agency or instrumentality of the United States has unconditionally

35-65    agreed to purchase, insure, or guarantee;

35-66                (3)  securities that are offered and sold under 15

35-67    U.S.C. Section 77d(5);

35-68                (4)  mortgage related securities as defined in 15

35-69    U.S.C. Section 78c(a), except that notwithstanding Section 347 of

 36-1    the Riegle Community Development and Regulatory Improvement Act of

 36-2    1994, a note or obligation that is secured by a first lien on one

 36-3    or more parcels of real estate on which is located one or more

 36-4    commercial structures is subject to the limitations of Subsection

 36-5    (c) of this section;

 36-6                (5)  investment securities issued or guaranteed by the

 36-7    Federal Home Loan Mortgage Corporation, the Federal National

 36-8    Mortgage Association, the Government National Mortgage Association,

 36-9    the Federal Agricultural Mortgage Association, or the Federal Farm

36-10    Credit Banks Funding Corporation;

36-11                (6)  investment securities issued or guaranteed by the

36-12    North American Development Bank; or

36-13                (7)  securities issued by a Federal Home Loan Bank.

36-14          (e)  Notwithstanding 15 U.S.C. Section 77r-1(c), Subsection

36-15    (c) of this section applies to investments in small business

36-16    related securities as defined by 15 U.S.C. Section 78c(a).

36-17          (f)  In the exercise of prudent judgment, a state trust

36-18    company shall, at a minimum:

36-19                (1)  exercise care and caution to make and implement

36-20    investment and management decisions for the entire investment

36-21    portfolio, taking into consideration the safety and soundness of

36-22    the state trust company;

36-23                (2)  pursue an overall investment strategy to enable

36-24    management to make appropriate present and future decisions; and

36-25                (3)  consider, to the extent relevant to the decision

36-26    or action, the size, diversification and liquidity of its corporate

36-27    assets, the general economic conditions, the possible effect of

36-28    inflation or deflation, the expected tax consequences of the

36-29    investment decisions or strategies, the role that each investment

36-30    or course of action plays within the investment portfolio, and the

36-31    expected total return of the portfolio.

36-32          (g)  A state trust company may invest its secondary capital

36-33    in any type or character of equity or investment securities subject

36-34    to the exercise of prudent judgment.  The factors to be considered

36-35    by a state trust company in exercise of prudent judgment include

36-36    the factors contained in Section 5.101(f) of this Act.

36-37          (h)  The finance commission may adopt rules to administer and

36-38    carry out this section, including rules to establish limits,

36-39    requirements, or exemptions other than those specified by this

36-40    section for particular classes or categories of investment, or

36-41    limit or expand investment authority for state trust companies for

36-42    particular classes or categories of securities or other property.

36-43          Sec. 5.102.  TRANSACTIONS IN STATE TRUST COMPANY SHARES OR

36-44    PARTICIPATION SHARES.  Except with the prior written approval of

36-45    the banking commissioner:

36-46                (1)  a state trust company may not acquire its own

36-47    shares or participation shares  unless the amount of its undivided

36-48    profits is sufficient to fully absorb the acquisition of the shares

36-49    or participation shares under regulatory accounting principles; and

36-50                (2)  a state trust company may not acquire a lien upon

36-51    its own shares or participation shares unless the amount of

36-52    indebtedness secured is less than the amount of the state trust

36-53    company's undivided profits.

36-54          Sec. 5.103.  SUBSIDIARIES.  (a)  Except as otherwise provided

36-55    by this Act or rules adopted under this Act, and subject to the

36-56    exercise of prudent judgment, a state trust company may invest its

36-57    secondary capital to acquire or establish one or more subsidiaries

36-58    to conduct any activity that may lawfully be conducted through the

36-59    form of organization chosen for the subsidiary.  The factors to be

36-60    considered by a state trust company in exercise of prudent judgment

36-61    include the factors contained in Section 5.101(f) of this Act.

36-62          (b)  A state trust company that intends to acquire,

36-63    establish, or perform new activities through a subsidiary shall

36-64    submit a letter to the banking commissioner describing in detail

36-65    the proposed activities of the subsidiary.

36-66          (c)  The state trust company may acquire or establish a

36-67    subsidiary or begin performing new activities in an existing

36-68    subsidiary on the 31st day after the date the banking commissioner

36-69    receives the state trust company's letter, unless the banking

 37-1    commissioner specifies an earlier or later date.  The banking

 37-2    commissioner may extend the 30-day period of review on a

 37-3    determination that the state trust company's letter raises issues

 37-4    that require additional information or additional time for

 37-5    analysis.  If the period of review is extended, the state trust

 37-6    company may acquire or establish the subsidiary, or perform new

 37-7    activities in an existing subsidiary, only on prior written

 37-8    approval of the banking commissioner.

 37-9          (d)  A subsidiary of a state trust company is subject to

37-10    regulation by the banking commissioner to the extent provided by

37-11    this Act or rules adopted under this section.  In the absence of

37-12    limiting rules, the banking commissioner may regulate a subsidiary

37-13    as if it were a state trust company.

37-14          Sec. 5.104.  OTHER REAL ESTATE.  (a)  A state trust company

37-15    may not invest its restricted capital in real estate except:

37-16                (1)  as permitted by Section 5.001 of this Act or as

37-17    otherwise provided by this Act, including rules adopted under this

37-18    Act; or

37-19                (2)  if necessary to avoid or minimize a loss on a loan

37-20    or investment previously made in good faith.

37-21          (b)  With the prior written approval of the banking

37-22    commissioner, a state trust company may exchange real estate for

37-23    other real estate or personal property, invest additional funds in

37-24    or improve real estate acquired under this subsection or Subsection

37-25    (a) of this section, or acquire additional real estate to avoid or

37-26    minimize loss on real estate acquired as permitted by Subsection

37-27    (a) of this section.

37-28          (c)  A state trust company shall dispose of any real estate

37-29    subject to Subsection (a) of this section not later than:

37-30                (1)  the fifth anniversary of the date:

37-31                      (A)  it was acquired, except as otherwise

37-32    provided by rules adopted under this Act; or

37-33                      (B)  it ceases to be used as a state trust

37-34    company facility; or

37-35                (2)  the second anniversary of the date it ceases to be

37-36    a state trust company facility as provided by Section 5.001(c) of

37-37    this Act.

37-38          (d)  The banking commissioner on application may grant one or

37-39    more extensions of time for disposing of real estate under

37-40    Subsection (c) of this section if the banking commissioner

37-41    determines that:

37-42                (1)  the state trust company has made a good faith

37-43    effort to dispose of the real estate; or

37-44                (2)  disposal of the real estate would be detrimental

37-45    to the state trust company.

37-46          (e)  Subject to the exercise of prudent judgment, a state

37-47    trust company may invest its secondary capital in real estate.  The

37-48    factors to be considered by a state trust company in exercise of

37-49    prudent judgment include the factors contained in Section 5.101(f)

37-50    of this Act.

37-51               (Sections 5.105-5.200 reserved for expansion)

37-52                           SUBCHAPTER C.  LOANS

37-53          Sec. 5.201.  LENDING LIMITS.  (a)  A state trust company's

37-54    total outstanding loans and extensions of credit to a person other

37-55    than an insider may not exceed an amount equal to 15 percent of the

37-56    state trust company's restricted capital.

37-57          (b)  The aggregate loans and extensions of credit outstanding

37-58    at any time to insiders of the state trust company may not exceed

37-59    an amount equal to 15 percent of the state trust company's

37-60    restricted capital.  All covered transactions between an insider

37-61    and a state trust company must be engaged in only on terms and

37-62    under circumstances, including credit standards, that are

37-63    substantially the same as those for comparable transactions with a

37-64    non-insider.

37-65          (c)  The finance commission may adopt rules to administer and

37-66    carry out this section, including rules to establish limits,

37-67    requirements, or exemptions other than those specified by this

37-68    section for particular classes or categories of loans or extensions

37-69    of credit, and establish collective lending and investment limits.

 38-1          (d)  The banking commissioner may determine whether a loan or

 38-2    extension of credit putatively made to a person will be attributed

 38-3    to another person for purposes of this section.

 38-4          (e)  A state trust company may not lend trust deposits,

 38-5    except that a trustee may make a loan to a beneficiary of the trust

 38-6    if the loan is expressly authorized or directed by the instrument

 38-7    or transaction establishing the trust.

 38-8          (f)  An officer, director, manager, managing participant, or

 38-9    employee of a state trust company who approves or participates in

38-10    the approval of a loan with actual knowledge that the loan violates

38-11    this section is jointly and severally liable to the state trust

38-12    company for the lesser of the amount by which the loan exceeded

38-13    applicable lending limits or the state trust company's actual loss

38-14    and remains liable for that amount until the loan and all prior

38-15    indebtedness of the borrower to the state trust company have been

38-16    fully repaid.  The state trust company may initiate a proceeding to

38-17    collect an amount due under this subsection at any time before the

38-18    date the borrower defaults on the subject loan or any prior

38-19    indebtedness or before the fourth anniversary of that date.  A

38-20    person that is liable for and pays amounts to the state trust

38-21    company under this subsection is entitled to an assignment of the

38-22    state trust company's claim against the borrower to the extent of

38-23    the payments.  For purposes of this subsection, an officer,

38-24    director, manager, managing participant, or employee of a state

38-25    trust company is presumed to know the amount of the state trust

38-26    company's lending limit under Subsection (a) of this section and

38-27    the amount of the borrower's aggregate outstanding indebtedness to

38-28    the state trust company immediately before a new loan or extension

38-29    of credit to that borrower.

38-30          (g)  This subchapter does not confer general banking

38-31    privileges on state trust companies.

38-32          Sec. 5.202.  LEASE FINANCING TRANSACTIONS.  (a)  Subject to

38-33    rules adopted under this Act, a state trust company may become the

38-34    owner and lessor of tangible personal property for lease financing

38-35    transactions on a net lease basis on the specific request and for

38-36    the use of a client.  Without  the written approval of the banking

38-37    commissioner to continue holding property acquired for leasing

38-38    purposes under this subsection, the state trust company may not

38-39    hold the property more than six months after the date of expiration

38-40    of the original or any extended or renewed lease period agreed to

38-41    by the client for whom the property was acquired or by a subsequent

38-42    lessee.

38-43          (b)  Rental payments received by the state trust company in a

38-44    lease financing transaction under this section are considered to be

38-45    rent and not interest or compensation for the use, forbearance, or

38-46    detention of money.  However, a lease financing transaction is

38-47    considered to be a loan or extension of credit for purposes of

38-48    Section 5.201 of this Act.

38-49               (Sections 5.203-5.300 reserved for expansion)

38-50                SUBCHAPTER D.  OTHER INVESTMENT PROVISIONS

38-51          Sec. 5.301.  OTHER INVESTMENT  PROVISIONS.  (a)  Without the

38-52    prior written approval of the banking commissioner, a state trust

38-53    company may not make any investment of its secondary capital in any

38-54    investment that incurs or may incur, under regulatory accounting

38-55    principles, a liability or contingent liability for the state trust

38-56    company.

38-57          (b)  The banking commissioner may, on a case-by-case basis,

38-58    require a state trust company to dispose of any investment of its

38-59    secondary capital, if the banking commissioner finds that the

38-60    divestiture of the asset is necessary to protect the safety and

38-61    soundness of the state trust company.  Among the safety and

38-62    soundness factors to be considered by the banking commissioner in

38-63    the exercise of discretion, include the factors contained in

38-64    Section 3.007(b) of this Act.  The proposed effective date of an

38-65    order requiring an existing state trust company to divest of an

38-66    asset must be stated in the order as on or after the 21st day after

38-67    the date the proposed order is mailed or delivered.  Unless the

38-68    state trust company requests a hearing before the banking

38-69    commissioner in writing before the effective date of the proposed

 39-1    order, the order becomes effective and is final and nonappealable.

 39-2          (c)  Subject to Subsections (a) and (b) of this section, to

 39-3    Section 5.302 of this Act, and to the exercise of prudent judgment,

 39-4    a state trust company may invest  its secondary capital in any type

 39-5    or character of investment for the purpose of generating income or

 39-6    profit.  The factors to be considered by a state trust company in

 39-7    exercise of prudent judgment include the factors contained in

 39-8    Section 5.101(f) of this Act.

 39-9          Sec. 5.302.  ENGAGING IN COMMERCE PROHIBITED.  Except as

39-10    otherwise provided by this Act or rules adopted under this Act, a

39-11    state trust company may not invest its funds in trade or commerce

39-12    by buying, selling, or otherwise dealing goods or by owning or

39-13    operating a business not part of the state trust business, except

39-14    as necessary to fulfill a fiduciary obligation to a client.

39-15               (Sections 5.303-5.400 reserved for expansion)

39-16                       SUBCHAPTER E.  TRUST DEPOSITS

39-17          Sec. 5.401.  TRUST DEPOSITS.  (a) A state trust company may

39-18    deposit trust funds with itself as an investment if authorized by

39-19    the settlor or the beneficiary provided:

39-20                (1)  it maintains as security for the deposits a

39-21    separate fund of securities, legal for trust investments, under

39-22    control of a federal reserve bank or a clearing corporation, as

39-23    defined by Section 8.102, Business & Commerce Code, either in this

39-24    state or elsewhere;

39-25                (2)  the total market value of the security is at all

39-26    times at least equal to the amount of the deposit; and

39-27                (3)  the separate fund is designated as such.

39-28          (b)  A state trust company may make periodic withdrawals from

39-29    or additions to the securities fund required by Subsection (a) of

39-30    this section as long as the required value is maintained.  Income

39-31    from the securities in the fund belongs to the state trust company.

39-32          (c)  Security for a deposit under this section is not

39-33    required for a deposit under Subsection (a) of this section to the

39-34    extent the deposit is insured by the Federal Deposit Insurance

39-35    Corporation or its successor.

39-36          (d)  This subchapter does not confer general banking

39-37    privileges on state trust companies.

39-38               (Sections 5.402-5.500 reserved for expansion)

39-39              SUBCHAPTER F.  LIABILITIES AND PLEDGE OF ASSETS

39-40          Sec. 5.501.  BORROWING LIMIT.  Except with the prior written

39-41    approval of the banking commissioner, a state trust company may not

39-42    have outstanding liabilities, excluding trust deposit liabilities

39-43    arising pursuant to Section 5.401 of this Act, which exceed an

39-44    amount equal to five times its restricted capital.

39-45          Sec. 5.502.  PLEDGE OF ASSETS.  (a)  A state trust company

39-46    may not pledge or create a lien on any of its assets except:

39-47                (1)  to secure the repayment of money borrowed;

39-48                (2)  to secure trust deposits as specifically

39-49    authorized or required by Section 5.401 of this Act, Title 9,

39-50    Property Code, or by rules adopted under this chapter; or

39-51                (3)  to secure deposits made by the United States

39-52    Government, state, county, or municipality, or an agency thereof.

39-53          (b)  An act, deed, conveyance, pledge, or contract in

39-54    violation of this section is void.

39-55                      CHAPTER 6.  ENFORCEMENT ACTIONS

39-56         SUBCHAPTER A.  ENFORCEMENT ORDERS:  STATE TRUST COMPANIES

39-57                              AND MANAGEMENT

39-58    Sec. 6.001.  DETERMINATION LETTER

39-59    Sec. 6.002.  CEASE AND DESIST ORDER

39-60    Sec. 6.003.  REMOVAL OR PROHIBITION ORDER

39-61    Sec. 6.004.  HEARING ON PROPOSED ORDER

39-62    Sec. 6.005.  EMERGENCY ORDERS

39-63    Sec. 6.006.  COPY OF LETTER OR ORDER IN STATE TRUST COMPANY

39-64                  RECORDS

39-65    Sec. 6.007.  EFFECT OF FINAL REMOVAL OR PROHIBITION ORDER

39-66    Sec. 6.008.  LIMITATION ON ACTION

39-67    Sec. 6.009.  ENFORCEMENT OF FINAL ORDER

39-68    Sec. 6.010.  ADMINISTRATIVE PENALTIES

39-69    Sec. 6.011.  PAYMENT OR APPEAL OF ADMINISTRATIVE PENALTIES

 40-1    Sec. 6.012.  CONFIDENTIALITY OF RECORDS

 40-2    Sec. 6.013.  COLLECTION OF FEES

 40-3               (Sections 6.014-6.100 reserved for expansion)

 40-4              SUBCHAPTER B.  SUPERVISION AND CONSERVATORSHIP

 40-5    Sec. 6.101.  ORDER OF SUPERVISION

 40-6    Sec. 6.102.  ORDER OF CONSERVATORSHIP

 40-7    Sec. 6.103.  HEARING

 40-8    Sec. 6.104.  POST-HEARING ORDER

 40-9    Sec. 6.105.  CONFIDENTIALITY OF RECORDS

40-10    Sec. 6.106.  DUTIES OF STATE TRUST COMPANY UNDER SUPERVISION

40-11    Sec. 6.107.  POWERS AND DUTIES OF CONSERVATOR

40-12    Sec. 6.108.  QUALIFICATIONS OF APPOINTEE

40-13    Sec. 6.109.  EXPENSES

40-14    Sec. 6.110.  REVIEW OF SUPERVISOR OR CONSERVATOR DECISIONS

40-15    Sec. 6.111.  VENUE

40-16    Sec. 6.112.  DURATION

40-17    Sec. 6.113.  ADMINISTRATIVE ELECTION OF REMEDIES

40-18               (Sections 6.114-6.200 reserved for expansion)

40-19        SUBCHAPTER C.  UNAUTHORIZED TRUST ACTIVITY:  INVESTIGATION

40-20                              AND ENFORCEMENT

40-21    Sec. 6.201.  INVESTIGATION OF UNAUTHORIZED TRUST ACTIVITY

40-22    Sec. 6.202.  UNAUTHORIZED USE OF "TRUST" AND SIMILAR WORDS

40-23    Sec. 6.203.  SUBPOENA AUTHORITY

40-24    Sec. 6.204.  ENFORCEMENT OF SUBPOENA

40-25    Sec. 6.205.  CONFIDENTIALITY OF SUBPOENAED RECORDS

40-26    Sec. 6.206.  EVIDENCE

40-27    Sec. 6.207.  CEASE AND DESIST ORDER REGARDING UNAUTHORIZED TRUST

40-28                  ACTIVITY

40-29    Sec. 6.208.  EMERGENCY CEASE AND DESIST ORDER REGARDING

40-30                  UNAUTHORIZED TRUST ACTIVITY

40-31    Sec. 6.209.  APPEAL OF CEASE AND DESIST ORDER REGARDING

40-32                  UNAUTHORIZED TRUST ACTIVITY

40-33    Sec. 6.210.  VIOLATION OF FINAL CEASE AND DESIST ORDER REGARDING

40-34                  UNAUTHORIZED TRUST ACTIVITY

40-35    Sec. 6.211.  PENALTY ORDER FOR UNAUTHORIZED TRUST ACTIVITY

40-36    Sec. 6.212.  PAYMENT AND APPEAL OF PENALTY ORDER

40-37    Sec. 6.213.  JUDICIAL REVIEW OF PENALTY ORDER

40-38    Sec. 6.214.  DEPOSIT TO GENERAL REVENUE FUND

40-39                      CHAPTER 6.  ENFORCEMENT ACTIONS

40-40                    SUBCHAPTER A.  ENFORCEMENT ORDERS:

40-41                   STATE TRUST COMPANIES AND MANAGEMENT

40-42          Sec. 6.001.  DETERMINATION LETTER.  (a)  If the banking

40-43    commissioner determines from examination or other credible evidence

40-44    that a state trust company is in a condition that may warrant the

40-45    issuance of an enforcement order under this chapter, the banking

40-46    commissioner may, by personal delivery or by registered or

40-47    certified mail, return receipt requested, notify the state trust

40-48    company in writing of the determination, the requirements the state

40-49    trust company must satisfy to abate the determination, and the time

40-50    in which the requirements must be satisfied to avert further

40-51    administrative action.

40-52          (b)  The determination letter may be issued in connection

40-53    with the issuance of a cease and desist, removal, or prohibition

40-54    order under this subchapter or an order of supervision or

40-55    conservatorship under Subchapter B of this chapter.

40-56          Sec. 6.002.  CEASE AND DESIST ORDER.  (a)  The banking

40-57    commissioner has grounds to issue a cease and desist order to an

40-58    officer, employee, director, manager, or managing participant of a

40-59    state trust company, or the state trust company itself acting

40-60    through an authorized person, if the banking commissioner

40-61    determines from examination or other credible evidence that the

40-62    state trust company or person, directly or indirectly:

40-63                (1)  has violated this Act or another applicable law or

40-64    rule;

40-65                (2)  has engaged in a breach of trust or other

40-66    fiduciary duty;

40-67                (3)  has refused to submit to examination or

40-68    examination under oath;

40-69                (4)  has conducted business in an unsafe or unsound

 41-1    manner; or

 41-2                (5)  has violated a condition of the state trust

 41-3    company's charter or an agreement between the state trust company

 41-4    or the person and the banking commissioner or the department.

 41-5          (b)  If the banking commissioner has grounds for action under

 41-6    Subsection (a) of this section and further finds that an order to

 41-7    cease and desist from a violation appears to be necessary and in

 41-8    the best interest of a state trust company involved and its

 41-9    clients, creditors, and shareholders or participants, the banking

41-10    commissioner, by personal delivery or by registered or certified

41-11    mail, return receipt requested, may serve a proposed cease and

41-12    desist order on the state trust company and each person who

41-13    committed or participated in the violation.  The order must state

41-14    the grounds for the order with reasonable certainty.  The order

41-15    must state its effective date, which may not be before the 21st day

41-16    after the date the order is mailed or delivered.  The order takes

41-17    effect for the state trust company if the trust company does not

41-18    request a hearing in writing before the effective date and takes

41-19    effect for each other person against whom the order is directed if

41-20    that person does not request a hearing in writing before the

41-21    effective date.  After taking effect, the order is final and

41-22    nonappealable as to that state trust company or other person.

41-23          Sec. 6.003.  REMOVAL OR PROHIBITION ORDER.  (a)  The banking

41-24    commissioner has grounds to remove a present or former officer,

41-25    director, manager, managing participant, or employee of a state

41-26    trust company from office or employment in, or prohibit a

41-27    controlling shareholder or participant or other person

41-28    participating in the affairs of the state trust company from

41-29    further participation in the affairs of, the state trust company,

41-30    state bank, or other entity chartered or licensed by the banking

41-31    commissioner under the laws of this state, if the banking

41-32    commissioner determines from examination or other credible evidence

41-33    that:

41-34                (1)  the person committed, participated, or acted, in

41-35    other than an inadvertent or unintentional manner, as described by

41-36    Section 6.002(a) of this Act with regard to the affairs of the

41-37    state trust company, or violated a final cease  and desist order

41-38    issued in response to the same or a similar act;

41-39                (2)  because of this action by the person:

41-40                      (A)  the state trust company has suffered or will

41-41    probably suffer financial loss or other damage;

41-42                      (B)  the interests of the trust company's clients

41-43    have been or could be prejudiced; or

41-44                      (C)  the person has received financial gain or

41-45    other benefit by reason of the violation; and

41-46                (3)  this action by the person:

41-47                      (A)  involves personal dishonesty on the part of

41-48    the person; or

41-49                      (B)  demonstrates wilful or continuing disregard

41-50    for the safety or soundness of the state trust company.

41-51          (b)  If the banking commissioner finds grounds for action

41-52    under Subsection (a)  of this section and further finds that a

41-53    removal or prohibition order appears to be necessary and in the

41-54    best interest of the state trust company involved and its clients,

41-55    creditors, and shareholders or participants, the banking

41-56    commissioner, by personal delivery or by registered or certified

41-57    mail, return receipt requested, may serve a proposed removal or

41-58    prohibition order, as appropriate, on an officer, employee,

41-59    director, manager or managing participant, controlling shareholder

41-60    or participant, or other person alleged to have committed or

41-61    participated in the violation.  The order must state the grounds

41-62    for removal or prohibition with reasonable certainty.  The order

41-63    must state its effective date, which may not be before the 21st day

41-64    after the date the order is mailed or delivered.  The order takes

41-65    effect for a person against whom the order is directed if the

41-66    person does not request a hearing in writing before the effective

41-67    date.  After taking effect the order is final and nonappealable as

41-68    to that person.

41-69          Sec. 6.004.  HEARING ON PROPOSED ORDER.  (a)  A requested

 42-1    hearing on a proposed order shall be held not later than the 30th

 42-2    day after the date the first request for a hearing on the order was

 42-3    received by the banking commissioner unless the parties agree to a

 42-4    later hearing date.  Each party shall be given written notice by

 42-5    personal delivery or by registered or certified mail, return

 42-6    receipt requested, of the date set by the banking commissioner for

 42-7    the hearing not later than the 11th day before that date.  The

 42-8    hearing shall be conducted as provided by Chapter 2001, Government

 42-9    Code.  At the hearing, the banking commissioner has the burden of

42-10    proof and each person against whom the order is directed may

42-11    cross-examine and present evidence to show why the order should not

42-12    be issued.

42-13          (b)  After the hearing, the banking commissioner shall issue

42-14    or decline to issue the order.  The order may be modified as

42-15    necessary to conform to the findings at the hearing and to require

42-16    the board to take necessary affirmative action to correct the

42-17    conditions cited in the order.

42-18          (c)  An order issued under this section is immediately final

42-19    for purposes of enforcement and appeal.  The order may be appealed

42-20    as provided by Section 3.010 of this Act.

42-21          Sec. 6.005.  EMERGENCY ORDERS.  (a)  If the banking

42-22    commissioner believes that immediate action is needed to prevent

42-23    immediate and irreparable harm to the state trust company and its

42-24    clients, creditors, and shareholders or participants, the banking

42-25    commissioner may issue one or more cease and desist, removal, or

42-26    prohibition orders as emergency orders to become effective

42-27    immediately on service without prior notice or hearing.  Service

42-28    must be by personal delivery or by registered or certified mail,

42-29    return receipt requested.

42-30          (b)  In each emergency order the banking commissioner shall

42-31    notify the state trust company and any person against whom the

42-32    order is directed of the specific conduct, activity, or omission

42-33    requiring the order, the citation of each statute or rule alleged

42-34    to have been violated, the immediate and irreparable harm alleged

42-35    to be threatened, and the right to a hearing.  A hearing on the

42-36    order may be requested in writing not later than the 10th day after

42-37    the date the order is served.  Unless a person against whom the

42-38    order is directed requests a hearing in writing before the 11th day

42-39    after the date the order is served on the person, the order is

42-40    final and nonappealable as to that person.

42-41          (c)  A hearing on an emergency order, if requested, must be

42-42    given priority over all other matters pending before the banking

42-43    commissioner and must be held not later than the 20th day after the

42-44    date the order is requested unless the parties agree to a later

42-45    hearing date.

42-46          (d)  Until the hearing, an emergency order continues in

42-47    effect unless the order is stayed by the banking commissioner.  The

42-48    banking commissioner may impose any condition before granting a

42-49    stay of the emergency order.

42-50          (e)  After the hearing, the banking commissioner may affirm,

42-51    modify, or set aside in whole or part the emergency order.  An

42-52    order affirming or modifying the order is immediately final for

42-53    purposes of enforcement and appeal.  The order may be appealed as

42-54    provided by Section 3.010 of this Act.

42-55          Sec. 6.006.  COPY OF LETTER OR ORDER IN STATE TRUST COMPANY

42-56    RECORDS.  A copy of any determination letter, proposed order,

42-57    emergency order, or final order issued by the banking commissioner

42-58    under this subchapter shall be immediately brought to the attention

42-59    of the board of the affected state trust company, regardless of

42-60    whether the state trust company is a party, and filed in the

42-61    minutes of the board.  Each director, manager, or managing

42-62    participant shall immediately certify to the banking commissioner

42-63    in writing that the certifying person has read and understood the

42-64    determination letter, proposed order, emergency order, or final

42-65    order.  The required certification may not be considered an

42-66    admission of a person in a subsequent legal or administrative

42-67    proceeding.

42-68          Sec. 6.007.  EFFECT OF FINAL REMOVAL OR PROHIBITION ORDER.

42-69    (a)  Without the prior written approval of the banking

 43-1    commissioner, a person subject to a final and enforceable removal

 43-2    or prohibition order issued by the banking commissioner:

 43-3                (1)  may not serve as a director, officer, or employee

 43-4    of any state trust company, state bank, or other entity chartered

 43-5    or licensed by the banking commissioner under the laws of this

 43-6    state while the order is in effect;

 43-7                (2)  may not directly or indirectly participate in any

 43-8    manner in the management of such an entity;

 43-9                (3)  may not directly or indirectly vote for a director

43-10    of such an entity;

43-11                (4)  may not solicit, procure, transfer, attempt to

43-12    transfer, vote, or attempt to vote a proxy, consent, or

43-13    authorization with respect to voting rights in such an entity; and

43-14                (5)  remains entitled to receive dividends or a share

43-15    of profits, return of contribution, or other distributive benefit

43-16    from such an entity with respect to voting securities in the entity

43-17    owned by the person.

43-18          (b)  If voting securities of an entity identified in

43-19    Subsection (a)(1) of this section cannot be voted under this

43-20    section, the voting securities are considered to be authorized but

43-21    unissued for purposes of determining the procedures for and results

43-22    of the affected vote.

43-23          (c)  Participants of a limited trust association in which a

43-24    participant has been finally removed or prohibited from

43-25    participation in the state trust company's affairs under this

43-26    subchapter shall elect a board of managers.

43-27          (d)  This section and Section 6.008 of this Act do not

43-28    prohibit a removal or prohibition order that has indefinite

43-29    duration or that by its terms is perpetual.

43-30          Sec. 6.008.  LIMITATION ON ACTION.  The banking commissioner

43-31    may not initiate an enforcement action under this subchapter later

43-32    than the fifth anniversary of the date the conduct or acts involved

43-33    were discovered or reasonably should have been discovered by the

43-34    banking commissioner.

43-35          Sec. 6.009.  ENFORCEMENT OF FINAL ORDER.  (a)  If the banking

43-36    commissioner reasonably believes that a state trust company or

43-37    person has violated a final and enforceable cease and desist,

43-38    removal, or prohibition order issued under this subchapter, the

43-39    banking commissioner may:

43-40                (1)  initiate administrative penalty proceedings

43-41    against the state trust company under Section 6.010 of this Act;

43-42                (2)  refer the matter to the attorney general for

43-43    enforcement by injunction or other available remedy; or

43-44                (3)  pursue any other action the banking commissioner

43-45    considers appropriate under applicable law.

43-46          (b)  If the attorney general prevails in an action brought

43-47    under Subsection (a)(2) of this section, the attorney general is

43-48    entitled to recover reasonable attorney's fees from a state trust

43-49    company or person violating the order.

43-50          Sec. 6.010.  ADMINISTRATIVE PENALTIES.  (a)  The banking

43-51    commissioner may initiate a proceeding for an administrative

43-52    penalty against a state trust company under Section 6.009(a)(1) of

43-53    this Act by serving on the state trust company, by personal

43-54    delivery or registered or certified mail, return receipt requested,

43-55    notice of the time and place of a hearing on the penalty.  The

43-56    hearing may not be held earlier than the 20th day after the date

43-57    the notice is served and shall be conducted under Chapter 2001,

43-58    Government Code.  The notice must contain a statement of the acts

43-59    or conduct alleged to be in violation of the order.

43-60          (b)  In determining whether an order has been violated, the

43-61    banking commissioner shall consider the maintenance of procedures

43-62    reasonably adopted to ensure compliance with the order.

43-63          (c)  If the banking commissioner determines after the hearing

43-64    that an order has been violated, the banking commissioner may

43-65    impose an administrative penalty against a state trust company in

43-66    an amount not to exceed $500 for each day the state trust company

43-67    is in violation of the final order.

43-68          Sec. 6.011.  PAYMENT OR APPEAL OF ADMINISTRATIVE PENALTIES.

43-69    (a)  When a penalty order under Section 6.010 of this Act becomes

 44-1    final, a state trust company shall pay the penalty or appeal by

 44-2    filing a petition for judicial review under the substantial

 44-3    evidence rule in a district court of Travis County.

 44-4          (b)  The petition for judicial review stays the penalty order

 44-5    during the period preceding the decision of the court.  If the

 44-6    court sustains the order, the court shall order the state trust

 44-7    company to pay the full amount of the penalty or a lower amount

 44-8    determined by the court.  If the court does not sustain the order,

 44-9    a penalty is not owed.  If the final judgment of the court requires

44-10    payment of a penalty, interest accrues on the penalty, at the rate

44-11    charged on loans to depository institutions by the New York Federal

44-12    Reserve Bank, beginning on the date the judgment is final and

44-13    ending on the date the penalty and interest are paid.

44-14          (c)  If the state trust company does not pay a final and

44-15    nonappealable penalty order, the banking commissioner shall refer

44-16    the matter to the attorney general for enforcement.  The attorney

44-17    general is entitled to recover reasonable attorney's fees from the

44-18    state trust company if the attorney general prevails in judicial

44-19    action necessary for collection of the penalty.

44-20          (d)  A penalty collected under this section shall be remitted

44-21    to the comptroller for deposit to the credit of the general revenue

44-22    fund.

44-23          Sec. 6.012.  CONFIDENTIALITY OF RECORDS.  A copy of a notice,

44-24    correspondence, transcript, pleading, or other document in the

44-25    records of the department relating to an order issued under this

44-26    subchapter is confidential and may be released only as provided by

44-27    Subchapter B, Chapter 2, of this Act, except that the banking

44-28    commissioner shall publish all final removal and prohibition orders

44-29    on a periodic basis.  The banking commissioner may publish a final

44-30    cease and desist order or information regarding the existence of

44-31    the order to the public if the banking commissioner concludes that

44-32    effective enforcement of the order would be enhanced by the

44-33    release.

44-34          Sec. 6.013.  COLLECTION OF FEES.  The banking commissioner

44-35    may sue to enforce the collection of a fee owed to the department

44-36    under a law administered by the banking commissioner.  In the suit

44-37    a certificate by the banking commissioner showing the delinquency

44-38    is prima facie evidence of:

44-39                (1)  the levy of the fee or the delinquency of the

44-40    stated fee amount; and

44-41                (2)  compliance by the banking commissioner with the

44-42    law relating to the computation and levy of the fee.

44-43               (Sections 6.014-6.100 reserved for expansion)

44-44              SUBCHAPTER B.  SUPERVISION AND CONSERVATORSHIP

44-45          Sec. 6.101.  ORDER OF SUPERVISION.  If the banking

44-46    commissioner determines from examination or other credible evidence

44-47    that a state trust company is in hazardous condition and that an

44-48    order of supervision appears to be necessary and in the best

44-49    interest of the state trust company and its clients, creditors, and

44-50    shareholders or participants, or the public, the banking

44-51    commissioner may without prior notice issue an order appointing a

44-52    supervisor over the state trust company.  The supervisor serves

44-53    until the earlier of the expiration of the period stated in the

44-54    order of supervision or the date the banking commissioner

44-55    determines that the requirements for abatement of the order have

44-56    been satisfied.

44-57          Sec. 6.102.  ORDER OF CONSERVATORSHIP.  In addition to the

44-58    grounds for conservatorship provided by Sections 4.103 and 6.104 of

44-59    this Act, if the banking commissioner determines from examination

44-60    or other credible evidence that a state trust company is in

44-61    hazardous condition and immediate and irreparable harm is

44-62    threatened to the state trust company, its clients, creditors, or

44-63    shareholders or participants, or the public, the banking

44-64    commissioner may without prior notice issue an order appointing a

44-65    conservator at any time before, during, or after the period of

44-66    supervision.  An order of conservatorship issued under this section

44-67    must specifically state the basis for the order.

44-68          Sec. 6.103.  HEARING.  (a)  An order issued under Section

44-69    6.101 or 6.102 of this Act must contain or be accompanied by a

 45-1    notice that a hearing before the banking commissioner will be held

 45-2    at the request of a state trust company at which the state trust

 45-3    company may cross-examine and present evidence to contest the order

 45-4    or show that it has satisfied all requirements for abatement of the

 45-5    order.  The banking commissioner has the burden of proof for any

 45-6    continuation of the order or the issuance of a new order.

 45-7          (b)  A state trust company that seeks to contest or modify

 45-8    the order or demonstrate that it has satisfied all requirements for

 45-9    abatement of the order shall submit a written request for a hearing

45-10    to the banking commissioner.  The request must state the grounds

45-11    for the request to set aside or modify the order.  On receiving a

45-12    request for hearing, the banking commissioner shall serve notice by

45-13    personal delivery or by registered or certified mail, return

45-14    receipt requested, of the time and place of the hearing, which must

45-15    be not later than the 10th day after the date the banking

45-16    commissioner receives the request for a hearing unless the parties

45-17    agree to a later hearing date.

45-18          (c)  The banking commissioner may delay a decision for a

45-19    prompt examination of the state trust company and may reopen the

45-20    record as necessary to allow presentation of the results of the

45-21    examination and appropriate opportunity for cross-examination and

45-22    presentation of other relevant evidence.

45-23          Sec. 6.104.  POST-HEARING ORDER.  (a)  If the banking

45-24    commissioner after the hearing finds that a state trust company has

45-25    been rehabilitated, its hazardous condition has been remedied,

45-26    irreparable harm is no longer threatened, or that the state trust

45-27    company should otherwise be released from the order, the banking

45-28    commissioner shall release the state trust company from the order,

45-29    subject to conditions the banking commissioner from the evidence

45-30    believes are warranted to preserve the safety and soundness of the

45-31    state trust company.

45-32          (b)  If the banking commissioner after the hearing finds that

45-33    a state trust company has failed to comply with the lawful

45-34    requirements of the banking commissioner, has not been

45-35    rehabilitated, is insolvent, or otherwise continues in hazardous

45-36    condition, the banking commissioner by order shall:

45-37                (1)  appoint or reappoint a supervisor pursuant to

45-38    Section 6.101 of this Act;

45-39                (2)  appoint or reappoint a conservator pursuant to

45-40    Section 6.102 of this Act; or

45-41                (3)  take other appropriate action authorized by law.

45-42          (c)  An order issued under Subsection (b)  of this section is

45-43    immediately final for purposes of appeal.  The order may be

45-44    appealed as provided by Section 3.010 of this Act.

45-45          (d)  This subchapter does not prevent release of a state

45-46    trust company from supervision or conservatorship before a hearing

45-47    if the banking commissioner is satisfied that requirements for

45-48    abatement have been adequately satisfied.

45-49          Sec. 6.105.  CONFIDENTIALITY OF RECORDS.  An order issued

45-50    under this subchapter and a copy of a notice, correspondence,

45-51    transcript, pleading, or other document in the records of the

45-52    department relating to the order are confidential and may be

45-53    released only as provided by Subchapter B, Chapter 2, of this Act,

45-54    except that the banking commissioner may release an order or

45-55    information regarding the existence of an order to the public if

45-56    the banking commissioner concludes that effective enforcement of

45-57    the order would be enhanced by the release.

45-58          Sec. 6.106.  DUTIES OF STATE TRUST COMPANY UNDER SUPERVISION.

45-59    During the period of supervision, a state trust company may not,

45-60    without the prior approval of the banking commissioner or the

45-61    supervisor or as otherwise permitted or restricted by the order of

45-62    supervision:

45-63                (1)  dispose of, sell, transfer, convey, or encumber

45-64    the state trust company's assets;

45-65                (2)  lend or invest the trust company's funds;

45-66                (3)  incur a debt, obligation, or liability;

45-67                (4)  pay a cash dividend to the state trust company's

45-68    shareholders or participants; or

45-69                (5)  solicit or accept any new client accounts.

 46-1          Sec. 6.107.  POWERS AND DUTIES OF CONSERVATOR.  (a)  A

 46-2    conservator appointed under this subchapter shall immediately take

 46-3    charge of a state trust company and all of its property, books,

 46-4    records, and affairs on behalf and at the direction and control of

 46-5    the banking commissioner.

 46-6          (b)  Subject to any limitation contained in the order of

 46-7    appointment or other direction of the banking commissioner, the

 46-8    conservator has all the powers of the directors, managers, managing

 46-9    participants, officers, and shareholders or participants of a state

46-10    trust company, shall conduct the business of the state trust

46-11    company, and shall take all steps the conservator considers

46-12    appropriate to remove the causes and conditions that required the

46-13    appointment of a conservator.  During the conservatorship, the

46-14    board may not direct or participate in the affairs of the state

46-15    trust company.

46-16          (c)  Except as otherwise provided by this subchapter, rules

46-17    adopted under this Act, or Section 2.010, Texas Banking Act

46-18    (Article 342-2.010, Vernon's Texas Civil Statutes), the conservator

46-19    has the rights and privileges and is subject to the duties,

46-20    restrictions, penalties, conditions, and limitations of the

46-21    directors, officers, and employees of state trust companies.

46-22          Sec. 6.108.  QUALIFICATIONS OF APPOINTEE.  The banking

46-23    commissioner may appoint any person as a supervisor or conservator

46-24    who in the sole judgment of the banking commissioner is qualified

46-25    to serve.  The banking commissioner may serve or may appoint an

46-26    employee of the department to serve as supervisor or conservator.

46-27          Sec. 6.109.  EXPENSES.  (a)  The banking commissioner shall

46-28    determine and approve the reasonable expenses attributable to the

46-29    service of a supervisor or conservator, including costs incurred by

46-30    the department and the compensation and expenses of the supervisor

46-31    or conservator and any professional employees appointed to

46-32    represent or assist the supervisor or conservator.  The banking

46-33    commissioner or an employee of the department may not receive

46-34    compensation in addition to salary for serving as supervisor or

46-35    conservator, but the department may receive reimbursement for the

46-36    fully allocated personnel cost associated with service of the

46-37    banking commissioner or an employee as supervisor or conservator.

46-38          (b)  All approved expenses shall be paid by the state trust

46-39    company as the banking commissioner determines.  The banking

46-40    commissioner has a lien against the assets and funds of the state

46-41    trust company to secure payment of approved expenses.  The lien has

46-42    a higher priority than any other lien against the state trust

46-43    company.

46-44          (c)  Notwithstanding any other provision of this subchapter,

46-45    the state trust company may employ an attorney and other persons

46-46    the state trust company selects to assist the state trust company

46-47    in contesting or satisfying the requirements of an order of

46-48    supervision or conservatorship.  The banking commissioner shall

46-49    authorize the payment of reasonable fees and expenses from the

46-50    state trust company for the attorney or other persons as expenses

46-51    of the supervision or conservatorship.

46-52          (d)  The banking commissioner may defer collection of

46-53    assessment and examination fees by the department from the state

46-54    trust company during a period of supervision or conservatorship, if

46-55    deferral would appear to aid prospects for rehabilitation.  As a

46-56    condition of release from supervision or conservatorship, the

46-57    banking commissioner may require the rehabilitated state trust

46-58    company to pay or develop a reasonable plan for payment of deferred

46-59    fees.

46-60          Sec. 6.110.  REVIEW OF SUPERVISOR OR CONSERVATOR DECISIONS.

46-61    (a)  Notwithstanding Section 6.107(b) of this Act, a majority of

46-62    the state trust company's board, acting directly or through counsel

46-63    who affirmatively represents that the requisite majority has been

46-64    obtained, may request in writing that the banking commissioner

46-65    review an action taken or proposed by the supervisor or

46-66    conservator.  The request must specify why the action would not be

46-67    in the best interest of the state trust company.  The banking

46-68    commissioner shall investigate to the extent necessary and make a

46-69    prompt written ruling on the request.  If the action is proposed

 47-1    rather than already taken or if the effect of the action can be

 47-2    postponed, the banking commissioner may stay the action on request

 47-3    pending review.

 47-4          (b)  If a majority of the state trust company's board objects

 47-5    to the banking commissioner's ruling, the majority may, not later

 47-6    than the 10th day after the date the state trust company is

 47-7    notified of the ruling, request a hearing before the banking

 47-8    commissioner.

 47-9          (c)  The banking commissioner shall give the board notice of

47-10    the time and place of the hearing by personal delivery or by

47-11    registered or certified mail, return receipt requested.  The

47-12    hearing may not be held later than the 10th day after the date the

47-13    banking commissioner receives the request for a hearing unless the

47-14    parties agree to a later hearing date.  At the hearing the board

47-15    has the burden of proof to demonstrate that the action is not in

47-16    the best interest of the state trust company.

47-17          (d)  After the hearing, the banking commissioner may affirm,

47-18    modify, or set aside in whole or part the prior ruling.  An order

47-19    supporting the action contested by the board is immediately final

47-20    for purposes of appeal.  The order may be appealed as provided by

47-21    Section 3.010 of this Act.  If the order is appealed to the finance

47-22    commission, the finance commission may affirm, terminate, or modify

47-23    the order, continue or end supervision or conservatorship, and

47-24    order further relief as justice, equity, and protection of clients,

47-25    creditors, and the public require.

47-26          Sec. 6.111.  VENUE.  A suit filed against a state trust

47-27    company while the state trust company is under an order of

47-28    conservatorship, or a suit filed against a person in connection

47-29    with an action taken or decision made by that person as a

47-30    supervisor or conservator of a state trust company, regardless of

47-31    whether the state trust company remains under an order of

47-32    supervision or conservatorship, must be brought in Travis County.

47-33    A conservator may sue a person on the trust company's behalf to

47-34    preserve, protect, or recover state trust company assets, including

47-35    claims or causes of action.  The suit may be in:

47-36                (1)  Travis County; or

47-37                (2)  another location where jurisdiction and venue

47-38    against that person may be obtained under law.

47-39          Sec. 6.112.  DURATION.  A supervisor or conservator shall

47-40    serve for the period necessary to accomplish the purposes of the

47-41    supervision or conservatorship as intended by this subchapter.  A

47-42    rehabilitated state trust company shall be returned to its former

47-43    or new management under conditions  reasonable and necessary to

47-44    prevent recurrence of the conditions causing the supervision or

47-45    conservatorship.

47-46          Sec. 6.113.  ADMINISTRATIVE ELECTION OF REMEDIES.  If the

47-47    banking commissioner determines that a state trust company should

47-48    be closed and liquidated under Chapter 7 of this Act, the banking

47-49    commissioner may take any action authorized under that chapter

47-50    regardless of the existence of supervision or conservatorship.  A

47-51    period of supervision or conservatorship is not required before a

47-52    trust company is closed for liquidation or other remedial action is

47-53    taken.

47-54               (Sections 6.114-6.200 reserved for expansion)

47-55        SUBCHAPTER C.  UNAUTHORIZED TRUST ACTIVITY:  INVESTIGATION

47-56                              AND ENFORCEMENT

47-57          Sec. 6.201.  INVESTIGATION OF UNAUTHORIZED TRUST ACTIVITY.

47-58    (a)  If the banking commissioner has reason to believe that a

47-59    person  has engaged, is engaging, or is likely to engage in an

47-60    unauthorized trust activity, the banking commissioner may:

47-61                (1)  make any investigation necessary inside or outside

47-62    this state to determine whether the unauthorized trust activity has

47-63    occurred or is likely to occur, or to aid in the enforcement of the

47-64    laws administered by the banking commissioner;

47-65                (2)  initiate appropriate disciplinary action as

47-66    provided by this subchapter; and

47-67                (3)  report any unauthorized trust activity to a law

47-68    enforcement agency or another regulatory agency with appropriate

47-69    jurisdiction.

 48-1          (b)  The banking commissioner may furnish any materials,

 48-2    documents, reports, complaints, or other evidence the banking

 48-3    commissioner has compiled in connection with the unauthorized

 48-4    activity to a law enforcement agency on written request and may

 48-5    assist the law enforcement agency or other regulatory agency as

 48-6    requested.

 48-7          (c)  A person acting without malice, fraudulent intent, or

 48-8    bad faith is not subject to liability, including liability for

 48-9    libel, slander, or other relevant tort, because the person files a

48-10    report or furnishes, orally or in writing, information concerning a

48-11    suspected, anticipated, or completed unauthorized activity to a law

48-12    enforcement agency, the banking commissioner or another regulatory

48-13    agency with appropriate jurisdiction, or an agent or employee of a

48-14    law enforcement agency, the banking commissioner, or other

48-15    regulatory agency.  The person is entitled to attorney's fees and

48-16    court costs if the person prevails in an action for libel, slander,

48-17    or any other relevant tort based on the report or other information

48-18    the person furnished as provided by this subchapter.  This section

48-19    does not:

48-20                (1)  affect or modify a common law or statutory

48-21    privilege or immunity;

48-22                (2)  preempt the authority or relieve the duty of a law

48-23    enforcement agency or other regulatory agency with appropriate

48-24    jurisdiction to investigate and prosecute suspected criminal acts;

48-25                (3)  prohibit a person from voluntarily disclosing

48-26    information to a law enforcement agency or other regulatory agency;

48-27    or

48-28                (4)  limit a power or duty granted to the banking

48-29    commissioner under this Act or other law.

48-30          Sec. 6.202.  UNAUTHORIZED USE OF "TRUST" AND SIMILAR WORDS.

48-31    (a)  Except as provided in Subsection (b) of this section, a person

48-32    or company may not use in a business name or advertising the words

48-33    "trust," "trust company," or any similar term or phrase, any word

48-34    pronounced "trust" or "trust company," any foreign word which means

48-35    "trust" or "trust company," or any term that tends to imply the

48-36    business is holding out to the public that it engages in the

48-37    business of a fiduciary for hire unless the banking commissioner

48-38    has approved the use in writing after finding that the use will not

48-39    be misleading.  This subsection does not prohibit an individual

48-40    from engaging in the business of a fiduciary for compensation or

48-41    from using the words "trust" or "trustee" for the purpose of

48-42    identifying assets held or actions taken in an existing capacity.

48-43          (b)  This section does not apply to:

48-44                (1)  a state or national bank, a state or federal

48-45    savings bank, a state or federal savings association, a state or

48-46    federal credit union, or a depository or trust company institution

48-47    authorized under this Act to conduct a trust business in this

48-48    state; and

48-49                (2)  another entity organized under the laws of this

48-50    state, another state, the United States, or a foreign sovereign

48-51    state to the extent that:

48-52                      (A)  the entity is authorized under its charter

48-53    or the laws of this state or the United States to use a term, word,

48-54    character, ideogram, phonogram, or phrase prohibited by Subsection

48-55    (a) of this section; and

48-56                      (B)  the entity is authorized by the laws of this

48-57    state or the United States to conduct the activities in which the

48-58    entity is engaged in this state.

48-59          Sec. 6.203.  SUBPOENA AUTHORITY.  (a)  This section applies

48-60    only to an investigation of an unauthorized trust activity as

48-61    provided by Section 6.201 of this Act, and does not affect the

48-62    conduct of a contested case under Chapter 2001, Government Code.

48-63          (b)  The banking commissioner may issue a subpoena to compel

48-64    the attendance and testimony of a witness and the production of a

48-65    book, account, record, paper, or correspondence relating to a

48-66    matter that the banking commissioner has authority to consider or

48-67    investigate at the department's offices in Austin or at another

48-68    place the banking commissioner designates.

48-69          (c)  The banking commissioner or the deputy banking

 49-1    commissioner shall sign and issue the subpoena.

 49-2          (d)  A person who is required by subpoena to attend a

 49-3    proceeding before the banking commissioner is entitled to receive:

 49-4                (1)  reimbursement for mileage, in the amount provided

 49-5    for travel by state employees, for traveling to or returning from a

 49-6    proceeding that is more than 25 miles from the witness's residence;

 49-7    and

 49-8                (2)  a fee for each day or part of a day the witness is

 49-9    necessarily present as a witness in an amount equal to the per diem

49-10    travel allowance of a state employee.

49-11          (e)  The banking commissioner may serve the subpoena or have

49-12    it served by an authorized agent of the banking commissioner, a

49-13    sheriff, or a constable.  The sheriff's or constable's fee for

49-14    serving the subpoena must be the same as the fee paid the sheriff

49-15    or constable for similar services.

49-16          (f)  A person possessing materials located outside this state

49-17    that are requested by the banking commissioner may make the

49-18    materials available to the banking commissioner or a representative

49-19    of the banking commissioner for examination at the place where the

49-20    materials are located.  The banking commissioner may designate a

49-21    representative, including an official of the state in which the

49-22    materials are located, to examine the materials and may respond to

49-23    similar requests from an official of another state, the United

49-24    States, or a foreign country.

49-25          (g)  A subpoena issued under this section to a financial

49-26    institution is not subject to Section 30.007, Civil Practice and

49-27    Remedies Code, as added by Chapter 914, Acts of the 74th

49-28    Legislature, Regular Session, 1995.

49-29          (h)  The authority granted under this section is in addition

49-30    to other law authorizing the banking commissioner to obtain or

49-31    require information.

49-32          Sec. 6.204.  ENFORCEMENT OF SUBPOENA.  (a)  If necessary the

49-33    banking commissioner may apply to a district court of Travis County

49-34    or of the county in which the subpoena was served for enforcement

49-35    of the subpoena, and the court may issue an order compelling

49-36    compliance.

49-37          (b)  If the court orders compliance with the subpoena or

49-38    finds the person in contempt for failure to obey the order, the

49-39    banking commissioner, or the attorney general if representing the

49-40    banking commissioner, may recover reasonable court costs,

49-41    attorney's fees, and investigative costs incurred in the

49-42    proceeding.

49-43          Sec. 6.205.  CONFIDENTIALITY OF SUBPOENAED RECORDS.  (a)  A

49-44    book, account, record, paper, correspondence, or other document

49-45    subpoenaed and produced under this section that is otherwise made

49-46    privileged or confidential by law remains privileged or

49-47    confidential unless admitted into evidence  at an administrative

49-48    hearing or in a court.  The banking commissioner may issue an order

49-49    protecting the confidentiality or privilege of the document and

49-50    restricting its use or distribution by any person or in any

49-51    proceeding, other than a proceeding before the banking

49-52    commissioner.

49-53          (b)  Subject to Subchapter B, Chapter 2, of this Act, and

49-54    confidentiality provisions of other law administered by the banking

49-55    commissioner, information or material acquired under this section

49-56    under a subpoena is not a public record for the period the banking

49-57    commissioner considers reasonably necessary to complete the

49-58    investigation, protect the person being investigated from

49-59    unwarranted injury, or serve the public interest.  The information

49-60    or material is not subject to a subpoena, except a valid grand jury

49-61    subpoena, until released for public inspection by the banking

49-62    commissioner or, after notice and a hearing, a district court

49-63    determines that the public interest and any investigation by the

49-64    banking commissioner would not be jeopardized by obeying the

49-65    subpoena.  The district court order may not apply to:

49-66                (1)  a record or communication received from another

49-67    law enforcement or regulatory agency except on compliance with the

49-68    confidentiality laws governing the records of the other agency; or

49-69                (2)  an internal note, memorandum, report, or

 50-1    communication made in connection with a matter that the banking

 50-2    commissioner has the authority to consider or investigate, except

 50-3    on good cause and compliance with applicable confidentiality laws.

 50-4          Sec. 6.206.  EVIDENCE.  (a)  On certification by the banking

 50-5    commissioner, a book, record, paper, or document produced or

 50-6    testimony taken as provided by Section 6.203 of this Act and held

 50-7    by the department is admissible as evidence in any case without

 50-8    prior proof of its correctness and without other proof.  The

 50-9    certified book, record, document, or paper, or a certified copy, is

50-10    prima facie evidence of the facts it contains.

50-11          (b)  This section does not limit another provision of this

50-12    Act or a law that provides for the admission of evidence or its

50-13    evidentiary value.

50-14          Sec. 6.207.  CEASE AND DESIST ORDER REGARDING UNAUTHORIZED

50-15    TRUST ACTIVITY.  (a)  If the banking commissioner believes a person

50-16    is engaging or is likely to engage in an unauthorized trust

50-17    activity, the banking commissioner may serve on the person, by

50-18    personal delivery or registered or certified mail, return receipt

50-19    requested, to the person's last known address, a proposed cease and

50-20    desist order.  The proposed order must state the acts or practices

50-21    alleged to be an unauthorized activity.  The proposed order must

50-22    state its effective date, which may not be before the 21st day

50-23    after the date the proposed order is  mailed or delivered.  Unless

50-24    the person against whom the proposed order is directed requests a

50-25    hearing in writing before the effective date of the proposed order,

50-26    the order takes effect and is final and nonappealable as to that

50-27    person.

50-28          (b)  A requested hearing on a proposed order shall be held

50-29    not later than the 30th day after the date the first written

50-30    request for a hearing on the order is received by the banking

50-31    commissioner unless the parties agree to a later hearing date.  At

50-32    the hearing, the banking commissioner has the burden of proof and

50-33    must present evidence in support of the order.  Each person against

50-34    whom the order is directed may cross-examine and show cause why the

50-35    order should not be issued.

50-36          (c)  After the hearing, the banking commissioner shall issue

50-37    or decline to issue a cease and desist order.  The proposed order

50-38    may be modified as necessary to conform to the findings at the

50-39    hearing.  An order issued under this section is immediately final

50-40    for purposes of enforcement and appeal and must require the person

50-41    to immediately cease and desist from the unauthorized trust

50-42    activity.

50-43          (d)  The banking commissioner may release a final cease and

50-44    desist order issued under this section or information regarding the

50-45    existence of the order to the public if the banking commissioner

50-46    finds that effective enforcement of the order would be enhanced by

50-47    a release or the public interest will be served.

50-48          Sec. 6.208.  EMERGENCY CEASE AND DESIST ORDER REGARDING

50-49    UNAUTHORIZED TRUST ACTIVITY.  (a)  The banking commissioner may

50-50    issue an emergency cease and desist order if the banking

50-51    commissioner reasonably believes a person is engaging in a

50-52    continuing unauthorized trust activity that is fraudulent or

50-53    threatens immediate and irreparable public harm.

50-54          (b)  On issuance of an emergency cease and desist order, the

50-55    banking commissioner shall serve on each person affected by the

50-56    order, by personal delivery or registered or certified mail, return

50-57    receipt requested, to the person's last known address, an order

50-58    that states the specific charges and requires the person

50-59    immediately to cease and desist from the unauthorized activity.

50-60    The order must contain a notice that a request for hearing may be

50-61    filed under this section.

50-62          (c)  A person affected by an emergency cease and desist order

50-63    may request a hearing before the banking commissioner not later

50-64    than the 10th day after the date on which the person receives the

50-65    order.  A request for a hearing must be in writing and directed to

50-66    the banking commissioner and must state the grounds for the request

50-67    to set aside or modify the order.  Unless a person against whom the

50-68    emergency order is directed requests a hearing in writing before

50-69    the 11th day after the date it is served on the person, the

 51-1    emergency order is final and nonappealable as to that person.

 51-2          (d)  On receiving a request for a hearing, the banking

 51-3    commissioner shall serve notice of the time and place of the

 51-4    hearing by personal delivery or registered or certified mail,

 51-5    return receipt requested.  The hearing must be held not later than

 51-6    the 10th day after the date the banking commissioner receives the

 51-7    request for a hearing unless the parties agree to a later hearing

 51-8    date.  At the hearing, the banking commissioner has the burden of

 51-9    proof and must present evidence in support of the order.  The

51-10    person requesting the hearing may cross-examine witnesses and show

51-11    cause why the order should not be affirmed.

51-12          (e)  Until the hearing, an emergency cease and desist order

51-13    continues in effect unless the order is stayed by the banking

51-14    commissioner.  The banking commissioner may impose any condition

51-15    before granting a stay of the order.

51-16          (f)  After the hearing, the banking commissioner shall

51-17    affirm, modify, or set aside in whole or part the emergency cease

51-18    and desist order.  An order affirming or modifying the emergency

51-19    cease and desist order is immediately final for purposes of

51-20    enforcement and appeal.

51-21          (g)  The banking commissioner may release a final cease and

51-22    desist order issued under this section or information regarding the

51-23    existence of the order to the public if the banking commissioner

51-24    finds that effective enforcement of the order would be enhanced by

51-25    a release or the public interest will be served.

51-26          Sec. 6.209.  APPEAL OF CEASE AND DESIST ORDER REGARDING

51-27    UNAUTHORIZED TRUST ACTIVITY.  (a)  A person affected by a cease and

51-28    desist order issued, affirmed, or modified after a hearing may file

51-29    a petition for judicial review in the district court of Travis

51-30    County under the substantial evidence rule as provided by Chapter

51-31    2001, Government Code.

51-32          (b)  A filed petition for judicial review does not stay or

51-33    vacate the order unless the court, after hearing, specifically

51-34    stays or vacates the order.

51-35          Sec. 6.210.  VIOLATION OF FINAL CEASE AND DESIST ORDER

51-36    REGARDING UNAUTHORIZED TRUST ACTIVITY.  (a)  If the banking

51-37    commissioner reasonably believes that a person has violated a final

51-38    and enforceable cease and desist order, the banking commissioner

51-39    may:

51-40                (1)  initiate administrative penalty proceedings under

51-41    Section 6.211 of this Act;

51-42                (2)  refer the matter to the attorney general for

51-43    enforcement by injunction and any other available remedy; or

51-44                (3)  pursue any other action the banking commissioner

51-45    considers appropriate under applicable law.

51-46          (b)  If the attorney general prevails in an action brought

51-47    under Subsection (a)(2) of this section, the attorney general is

51-48    entitled to reasonable attorney's fees.

51-49          Sec. 6.211.  PENALTY ORDER FOR UNAUTHORIZED TRUST ACTIVITY.

51-50    (a)  The banking commissioner may initiate an action for an

51-51    administrative penalty against a person under Section 6.210(a)(1)

51-52    of this Act by serving on the person, by personal delivery or

51-53    registered or certified mail, return receipt requested, to the

51-54    person's last known address, notice of the time and place of a

51-55    hearing on the penalty.  The hearing may not be held earlier than

51-56    the 20th day after the date the notice is served and shall be

51-57    conducted under Chapter 2001, Government Code.  The notice must

51-58    contain a statement of the facts or conduct alleged to be in

51-59    violation of the cease and desist order.

51-60          (b)  In determining whether a cease and desist order has been

51-61    violated, the banking commissioner shall consider the maintenance

51-62    of procedures reasonably adopted to ensure compliance with the

51-63    order.

51-64          (c)  If the banking commissioner after the hearing determines

51-65    that a cease and desist order has been violated, the banking

51-66    commissioner may:

51-67                (1)  impose an administrative penalty in an amount not

51-68    to exceed $25,000 for each separate act of unauthorized activity;

51-69                (2)  direct the person against whom the order was

 52-1    issued to make complete restitution, in the form and amount and

 52-2    within the period determined by the banking commissioner, to each

 52-3    resident of this state and entity operating in this state damaged

 52-4    by the violation; or

 52-5                (3)  impose both the penalty and direct restitution.

 52-6          (d)  In determining the amount of the penalty and whether to

 52-7    impose restitution, the banking commissioner shall consider:

 52-8                (1)  the seriousness of the violation, including the

 52-9    nature, circumstances, extent, and gravity of any prohibited act;

52-10                (2)  the economic harm caused by the violation;

52-11                (3)  the history of previous violations;

52-12                (4)  the amount necessary to deter future violations;

52-13                (5)  efforts to correct the violation;

52-14                (6)  whether the violation was intentional or

52-15    unintentional;

52-16                (7)  the financial ability of the person against whom

52-17    the penalty is to be assessed; and

52-18                (8)  any other matter that justice may require.

52-19          Sec. 6.212.  PAYMENT AND APPEAL OF PENALTY ORDER.  (a)  When

52-20    a penalty order under Section 6.211 of this Act becomes final, a

52-21    person affected by the order shall, within the time permitted by

52-22    law for appeal:

52-23                (1)  pay the amount of the penalty;

52-24                (2)  pay the amount of the penalty and file a petition

52-25    for judicial review contesting the occurrence of the violation, the

52-26    amount of the penalty, or both; or

52-27                (3)  without paying the amount of the penalty, file a

52-28    petition for judicial review contesting the occurrence of the

52-29    violation, the amount of the penalty, or both.

52-30          (b)  Within the time permitted by law for appeal, a person

52-31    who acts under Subsection (a)(3) of this section may:

52-32                (1)  stay enforcement of the penalty by:

52-33                      (A)  paying the amount of the penalty to the

52-34    court for placement in an escrow account; or

52-35                      (B)  giving the court a supersedeas bond that is

52-36    approved by the court for the amount of the penalty and that is

52-37    effective until all judicial review of the order is final; or

52-38                (2)  request the court to stay enforcement of the

52-39    penalty by:

52-40                      (A)  filing with the court a sworn affidavit of

52-41    the person stating that the person is financially unable to pay the

52-42    amount of the penalty and is financially unable to give the

52-43    supersedeas bond; and

52-44                      (B)  giving a copy of the affidavit to the

52-45    banking commissioner by certified mail.

52-46          (c)  If the banking commissioner receives a copy of an

52-47    affidavit under Subsection (b)(2) of this section, the banking

52-48    commissioner may file with the court, within five days after the

52-49    date the copy is received, a contest to the affidavit.  The court

52-50    shall hold a hearing on the facts alleged in the affidavit as soon

52-51    as practicable and shall stay  the enforcement of the penalty on

52-52    finding that the alleged facts are true.  The person who files an

52-53    affidavit has the burden of proving that the person is financially

52-54    unable to pay the amount of the penalty and to give a supersedeas

52-55    bond.

52-56          (d)  If the person does not pay the amount of the penalty and

52-57    the enforcement of the penalty is not stayed, the banking

52-58    commissioner may refer the matter to the attorney general for

52-59    collection of the amount of the penalty.

52-60          Sec. 6.213.  JUDICIAL REVIEW OF PENALTY ORDER.  (a)  Judicial

52-61    review of a penalty order of the banking commissioner:

52-62                (1)  is instituted by filing a petition as provided by

52-63    Chapter 2001, Government Code; and

52-64                (2)  is under the substantial evidence rule.

52-65          (b)  If the court sustains the order, the court shall order

52-66    the person to pay the full amount of the penalty or a lower amount

52-67    determined by the court.  If the court does not sustain the order,

52-68    a penalty is not owed.

52-69          (c)  When the judgment of the court becomes final, if the

 53-1    person paid the amount of the penalty and if that amount is reduced

 53-2    or is not upheld by the court, the court shall order that the

 53-3    appropriate amount plus accrued interest computed at the annual

 53-4    rate of 10 percent be remitted to the person.  The interest shall

 53-5    be paid for the period beginning on the date the penalty was paid

 53-6    and ending on the date the penalty is remitted.  If the person gave

 53-7    a supersedeas bond and the amount of the penalty is not upheld by

 53-8    the court, the court shall order the release of the bond.  If the

 53-9    person gave a supersedeas bond and the amount of the penalty is

53-10    reduced, the court shall order the release of the bond after the

53-11    person pays the amount of the penalty.

53-12          (d)  If the judgment of the court requires payment of a

53-13    penalty that has not previously been paid, the court shall order as

53-14    part of its judgment that interest accrues on the penalty at the

53-15    annual rate of 10 percent, beginning on the date the judgment is

53-16    final and ending on the date the penalty and interest are paid.

53-17          Sec. 6.214.  DEPOSIT TO GENERAL REVENUE FUND.  A penalty

53-18    collected under this subchapter shall be remitted to the

53-19    comptroller for deposit to the credit of the general revenue fund.

53-20                 CHAPTER 7.  DISSOLUTION AND RECEIVERSHIP

53-21                     SUBCHAPTER A.  GENERAL PROVISIONS

53-22    Sec. 7.001.  DEFINITION

53-23    Sec. 7.002.  REMEDIES EXCLUSIVE

53-24    Sec. 7.003.  APPOINTMENT OF INDEPENDENT RECEIVER

53-25    Sec. 7.004.  FEDERAL DEPOSIT INSURANCE CORPORATION AS

53-26                  LIQUIDATOR

53-27    Sec. 7.005.  SUCCESSION OF TRUST POWERS

53-28               (Sections 7.006-7.100 reserved for expansion)

53-29                   SUBCHAPTER B.  VOLUNTARY DISSOLUTION

53-30    Sec. 7.101.  APPROVALS REQUIRED FOR VOLUNTARY DISSOLUTION

53-31    Sec. 7.102.  NOTICE OF VOLUNTARY DISSOLUTION

53-32    Sec. 7.103.  SAFE DEPOSITS AND OTHER BAILMENTS

53-33    Sec. 7.104.  FIDUCIARY ACTIVITIES

53-34    Sec. 7.105.  FINAL LIQUIDATION

53-35    Sec. 7.106.  ADMINISTRATIVE AUTHORITY; ELECTION OF REMEDIES

53-36               (Sections 7.107-7.200 reserved for expansion)

53-37          SUBCHAPTER C.  INVOLUNTARY DISSOLUTION AND LIQUIDATION

53-38    Sec. 7.201.  ACTION TO CLOSE STATE TRUST COMPANY

53-39    Sec. 7.202.  INVOLUNTARY CLOSING

53-40    Sec. 7.203.  NATURE AND DURATION OF RECEIVERSHIP

53-41    Sec. 7.204.  CONTEST OF LIQUIDATION

53-42    Sec. 7.205.  NOTICE OF STATE TRUST COMPANY CLOSING

53-43    Sec. 7.206.  INVENTORY

53-44    Sec. 7.207.  TITLE IN RECEIVER

53-45    Sec. 7.208.  RIGHTS FIXED

53-46    Sec. 7.209.  DEPOSITORIES

53-47    Sec. 7.210.  PENDING LAWSUITS

53-48    Sec. 7.211.  NEW LAWSUITS

53-49    Sec. 7.212.  RECORDS WITH THIRD PARTIES

53-50    Sec. 7.213.  INJUNCTION IN AID OF LIQUIDATION

53-51    Sec. 7.214.  SUBPOENA

53-52    Sec. 7.215.  EXECUTORY CONTRACTS; ORAL AGREEMENTS

53-53    Sec. 7.216.  PREFERENCES

53-54    Sec. 7.217.  OTHER POWERS OF RECEIVER; ADMINISTRATIVE

53-55                  EXPENSES

53-56    Sec. 7.218.  DISPOSAL OF PROPERTY; SETTLING CLAIMS

53-57    Sec. 7.219.  DISCRETION OF COURT

53-58    Sec. 7.220.  FILING REPORTS; EXPENSES

53-59    Sec. 7.221.  COURT-ORDERED AUDIT

53-60    Sec. 7.222.  SAFE DEPOSITS AND OTHER BAILMENTS

53-61    Sec. 7.223.  FIDUCIARY ACTIVITIES

53-62    Sec. 7.224.  DISPOSITION AND MAINTENANCE OF RECORDS

53-63    Sec. 7.225.  RECORDS ADMITTED

53-64    Sec. 7.226.  RESUMPTION OF BUSINESS

53-65    Sec. 7.227.  AFTER-DISCOVERED ASSETS

53-66               (Sections 7.228-7.300 reserved for expansion)

53-67             SUBCHAPTER D.  CLAIMS AGAINST RECEIVERSHIP ESTATE

53-68    Sec. 7.301.  FILING CLAIMS

53-69    Sec. 7.302.  PROOF OF CLAIM

 54-1    Sec. 7.303.  JUDGMENT AS PROOF OF CLAIM

 54-2    Sec. 7.304.  SECURED CLAIMS

 54-3    Sec. 7.305.  UNLIQUIDATED OR UNDETERMINED CLAIMS

 54-4    Sec. 7.306.  SET-OFF

 54-5    Sec. 7.307.  ACTION ON CLAIMS

 54-6    Sec. 7.308.  OBJECTION TO APPROVED CLAIM

 54-7    Sec. 7.309.  APPEAL OF REJECTED CLAIM

 54-8    Sec. 7.310.  PAYMENT OF CLAIMS

 54-9    Sec. 7.311.  PRIORITY OF CLAIMS AGAINST INSURED STATE TRUST

54-10                  COMPANY

54-11    Sec. 7.312.  PRIORITY OF CLAIMS AGAINST UNINSURED STATE TRUST

54-12                  COMPANY

54-13    Sec. 7.313.  EXCESS ASSETS

54-14    Sec. 7.314.  UNCLAIMED FUNDS AND PROPERTY

54-15                 CHAPTER 7.  DISSOLUTION AND RECEIVERSHIP

54-16                     SUBCHAPTER A.  GENERAL PROVISIONS

54-17          Sec. 7.001.  DEFINITION.  In this chapter, "administrative

54-18    expense" means:

54-19                (1)  an expense designated as an administrative expense

54-20    by Subchapter C or D of this chapter;

54-21                (2)  court costs and expenses of operation and

54-22    liquidation of a state trust company estate;

54-23                (3)  wages owed to an employee of a state trust company

54-24    for services rendered within three months before the date the state

54-25    trust company was closed for liquidation and not exceeding:

54-26                      (A)  $2,000 to each employee; or

54-27                      (B)  another amount set by rules adopted under

54-28    this Act;

54-29                (4)  current wages owed to an employee of a state trust

54-30    company whose services are retained by the receiver for services

54-31    rendered after the date the state trust company is closed for

54-32    liquidation;

54-33                (5)  an unpaid expense of supervision or

54-34    conservatorship of the state trust company before its closing for

54-35    liquidation; and

54-36                (6)  any unpaid fees or assessments owed to the

54-37    department.

54-38          Sec. 7.002.  REMEDIES EXCLUSIVE.  (a)  Unless the banking

54-39    commissioner requests, a court may not:

54-40                (1)  order the closing or suspension of operation of a

54-41    state trust company; or

54-42                (2)  appoint for a state trust company a receiver,

54-43    supervisor, conservator, or liquidator, or other manager or

54-44    overseer with similar responsibility.

54-45          (b)  A person may not be designated receiver, supervisor,

54-46    conservator, or liquidator without the voluntary approval and

54-47    concurrence of the banking commissioner.

54-48          (c)  This chapter prevails over any other conflicting law of

54-49    this state.

54-50          Sec. 7.003.  APPOINTMENT OF INDEPENDENT RECEIVER.  (a)  On

54-51    request of the banking commissioner, the court in which the

54-52    liquidation proceeding is pending may appoint an independent

54-53    receiver and may require a suitable bond of the independent

54-54    receiver.

54-55          (b)  If an independent receiver is appointed, the banking

54-56    commissioner is discharged as receiver but shall remain a party to

54-57    the liquidation proceeding with standing to initiate or contest any

54-58    motion.  The views of the banking  commissioner are entitled to

54-59    deference if not contrary to the plain meaning of this chapter.

54-60          Sec. 7.004.  FEDERAL DEPOSIT INSURANCE CORPORATION AS

54-61    LIQUIDATOR.  The banking commissioner without court action may

54-62    tender a state trust company that has been closed for liquidation

54-63    to the Federal Deposit Insurance Corporation or its successor as

54-64    receiver and liquidating agent if the trust deposits of the state

54-65    trust company were insured by the Federal Deposit Insurance

54-66    Corporation or its successor on the date of closing.  After

54-67    acceptance of tender of the state trust company, the Federal

54-68    Deposit Insurance Corporation or its successor shall perform the

54-69    acts and duties as receiver of the state trust company that it

 55-1    considers necessary or desirable and that are permitted or required

 55-2    by federal law or this chapter.  If the Federal Deposit Insurance

 55-3    Corporation or its successor refuses to accept tender of the state

 55-4    trust company, the banking commissioner shall act as receiver.

 55-5          Sec. 7.005.  SUCCESSION OF TRUST POWERS.  (a)  If a state

 55-6    trust company in the process of voluntary or involuntary

 55-7    dissolution and liquidation is acting as trustee, guardian,

 55-8    executor, administrator, or escrow agent, or in another fiduciary

 55-9    or custodial capacity, the banking commissioner may authorize the

55-10    sale of the state trust company's administration of fiduciary

55-11    accounts to a successor entity with fiduciary powers.

55-12          (b)  The successor entity shall, without the necessity of

55-13    action by a court or the creator or a beneficiary of the fiduciary

55-14    relationship, continue the office, trust, or fiduciary relationship

55-15    and shall perform all the duties and exercise all the powers

55-16    connected with or incidental to the fiduciary relationship in the

55-17    same manner as if the successor entity had been originally

55-18    designated as the fiduciary.

55-19          (c)  This section applies to all fiduciary relationships,

55-20    including a trust established for the benefit of a minor by court

55-21    order under Section 142.005, Property Code.  This section does not

55-22    affect any right of a court or a party to the instrument governing

55-23    the fiduciary relationship to subsequently designate another

55-24    trustee as the successor fiduciary.

55-25               (Sections 7.006-7.100 reserved for expansion)

55-26                   SUBCHAPTER B.  VOLUNTARY DISSOLUTION

55-27          Sec. 7.101.  APPROVALS REQUIRED FOR VOLUNTARY DISSOLUTION.

55-28    (a)  A state trust company may initiate voluntary dissolution and

55-29    surrender its charter as provided by this subchapter:

55-30                (1)  with the approval of the banking commissioner;

55-31                (2)  after complying with the provisions of the Texas

55-32    Business Corporation Act regarding board and shareholder approval

55-33    for voluntary dissolution; and

55-34                (3)  by filing the notice of dissolution as provided by

55-35    Section 7.102(a) of this Act.

55-36          (b)  Unless the banking commissioner directs or consents

55-37    otherwise, the home office and all branch offices of the state

55-38    trust company shall remain open for business during normal business

55-39    hours until the last date specified in published notices for

55-40    presentation of claims, withdrawal of accounts, and redemption of

55-41    property.

55-42          (c)  The shareholders or participants of a state trust

55-43    company initiating voluntary dissolution shall by resolution

55-44    appoint one or more persons to act as liquidating agent or

55-45    committee who shall conduct the liquidation as provided by law and

55-46    under the supervision of the board.  The board, in consultation

55-47    with the banking commissioner, shall require the liquidating agent

55-48    or committee to give a suitable bond.

55-49          Sec. 7.102.  NOTICE OF VOLUNTARY DISSOLUTION.  (a)  After

55-50    resolutions to dissolve and liquidate the state trust company have

55-51    been adopted by the board and shareholders or participants, a

55-52    majority of the directors, managers, or managing participants shall

55-53    verify and file duplicate certified copies with the banking

55-54    commissioner of:

55-55                (1)  the resolutions of the shareholders or

55-56    participants that are adopted at a meeting for which proper notice

55-57    was given or by unanimous written consent and that approve the

55-58    dissolution and liquidation of the state trust company;

55-59                (2)  if the trust company is operated by a board of

55-60    directors or managers, the resolutions of the board approving the

55-61    dissolution and liquidation of the  state trust company;

55-62                (3)  a copy of the notice to the shareholders or

55-63    participants informing them of the meeting; and

55-64                (4)  a plan of liquidation.

55-65          (b)  The banking commissioner shall review the submitted

55-66    documentation and conduct any necessary investigation or

55-67    examination.   If the proceedings appear to have been properly

55-68    conducted and the bond to be given by the liquidating agent or

55-69    committee is adequate for its purposes, the banking commissioner

 56-1    shall consent to dissolution and direct the state trust company to

 56-2    publish notice of its pending dissolution.

 56-3          (c)  The state trust company shall publish notice in a

 56-4    newspaper of general circulation in each community where its home

 56-5    office or a branch is located at least once each week for eight

 56-6    consecutive weeks or at other times specified by the banking

 56-7    commissioner or rules adopted under this Act.  The notice must

 56-8    state that the state trust company is liquidating, that clients,

 56-9    depositors, and creditors must present their claims for payment on

56-10    or before a specific date, and that all safe deposit box holders

56-11    and bailors of property left with the state trust company should

56-12    remove their property on or before a specified date.  The dates

56-13    selected by the state trust company must be approved by the banking

56-14    commissioner and must allow the affairs of the state trust company

56-15    to be wound up as quickly as feasible and allow creditors, clients,

56-16    and owners of property adequate time for presentation of claims,

56-17    withdrawal of accounts, and redemption of property.  The banking

56-18    commissioner may adjust the dates with or without republication of

56-19    notice if additional time appears needed for these activities.

56-20          (d)  At the same time as or promptly after publication of the

56-21    notice, the state trust company shall mail to each of the state

56-22    trust company's known clients, depositors, creditors, safe deposit

56-23    box holders, and bailors of property left with the state trust

56-24    company, at the mailing address shown on the state trust company's

56-25    records, an individual notice containing the information required

56-26    in a notice under Subsection (c) of this section and specific

56-27    information pertinent to the account or property of the addressee.

56-28          (e)  A notice under this section must be in the form and

56-29    include the information required by the banking commissioner.

56-30          Sec. 7.103.  SAFE DEPOSITS AND OTHER BAILMENTS.  (a)  A

56-31    contract between the state trust company and a person for bailment,

56-32    or of deposit for hire, or for the lease of a safe, vault, or box,

56-33    ceases on the date specified as the date for removal of property in

56-34    the notices or a later date approved by the banking commissioner.

56-35    A person who has paid rental or storage charges for a period

56-36    extending beyond the date designated for removal of property has an

56-37    unsecured claim against the state trust company for a refund of any

56-38    unearned amount paid.

56-39          (b)  If the property is not removed by the date specified in

56-40    the notices or by the banking commissioner, an officer of the state

56-41    trust company, in the presence of a notary public who is not an

56-42    officer or employee of the state trust company and who is bonded in

56-43    an amount and by sureties approved by the banking commissioner,

56-44    shall inventory the property and may open a safe, vault, box,

56-45    package, parcel, or receptacle in the custody or possession of the

56-46    state trust company to make the inventory.  The property shall be

56-47    marked to identify, to the extent possible, its owner or the person

56-48    who left it with the state trust company.  After all property

56-49    belonging to others that is in the state trust company's custody

56-50    and control has been inventoried, a master list certified by the

56-51    state trust company officer and the notary public shall be

56-52    furnished to the banking commissioner.  The master list shall be

56-53    kept in a place and dealt with in a manner the banking commissioner

56-54    specifies pending delivery of the property to its owner or to the

56-55    comptroller as unclaimed property.

56-56          Sec. 7.104.  FIDUCIARY ACTIVITIES.  (a)  As soon after

56-57    publication of the notice of dissolution as is practicable, the

56-58    state trust company shall terminate all fiduciary positions it

56-59    holds, surrender all property held by it as a fiduciary, and settle

56-60    its fiduciary accounts.

56-61          (b)  Unless all fiduciary accounts are settled and

56-62    transferred by the last date specified in published notices or by

56-63    the banking commissioner and unless the banking commissioner

56-64    directs otherwise, the state trust company shall mail individual

56-65    notices to each trustor and beneficiary of any remaining trust,

56-66    escrow arrangement, or other fiduciary relationship advising the

56-67    person of an office location open during normal business hours and

56-68    a telephone number at that location where administration of the

56-69    remaining fiduciary accounts will continue until settled or

 57-1    transferred.

 57-2          Sec. 7.105.  FINAL LIQUIDATION.  (a)  After the state trust

 57-3    company has taken all of the actions specified by Sections 7.102,

 57-4    7.103, and 7.104 of this Act and has paid all its debts and

 57-5    obligations and transferred all property for which a legal claimant

 57-6    has been found after the time for presentation of claims has

 57-7    expired, the state trust company shall, under oath or affirmation

 57-8    of a majority of its board or managing participants, make a list

 57-9    from its books of the names of each depositor, creditor, owner of

57-10    personal property in the state trust company's possession or

57-11    custody, or lessee of any safe, vault, or box, who has not claimed

57-12    or has not received a deposit, debt, dividend, interest, balance,

57-13    or other amount or property due to the person.

57-14          (b)  The list, accompanied by any necessary identifying

57-15    information, shall be filed with the banking commissioner.  The

57-16    state trust company shall pay any unclaimed funds and deliver any

57-17    unclaimed property to the comptroller as provided by Chapter 74,

57-18    Property Code, and certify to the banking commissioner that the

57-19    unclaimed funds and property have been paid or delivered.

57-20          (c)  After the banking commissioner has reviewed the list and

57-21    has reconciled the unclaimed cash and property with the amounts of

57-22    money and property reported and transferred to the comptroller, the

57-23    banking commissioner shall allow the state trust company to

57-24    distribute the state trust company's remaining assets, if any,

57-25    among its shareholders, participants, or participant-transferees as

57-26    their ownership interests appear.

57-27          (d)  After distribution of all remaining assets, the state

57-28    trust company shall:

57-29                (1)  file with the department, under the oath or

57-30    affirmation of a majority of its board or managing participants,

57-31    another affidavit accompanied by schedules showing the distribution

57-32    to each shareholder, participant, or participant-transferee; and

57-33                (2)  tender to the department:

57-34                      (A)  all copies of reports of examination of the

57-35    state trust company in its possession; and

57-36                      (B)  its original charter, or an affidavit

57-37    stating that the original charter is lost, and any branch

57-38    certificates of authority.

57-39          (e)  After verifying the submitted information and documents,

57-40    the banking commissioner shall issue a certificate canceling the

57-41    charter of the state trust company.

57-42          Sec. 7.106.  ADMINISTRATIVE AUTHORITY; ELECTION OF REMEDIES.

57-43    (a)  A state trust company in the process of voluntary dissolution

57-44    and liquidation remains subject to this Act, including provisions

57-45    for examination by the banking commissioner, and the state trust

57-46    company shall furnish reports required by the banking commissioner.

57-47          (b)  The banking commissioner may authorize a deviation from

57-48    the procedures for voluntary dissolution in this subchapter if the

57-49    banking commissioner determines that the interests of claimants are

57-50    not jeopardized by the deviation.

57-51          (c)  If the banking commissioner determines that the

57-52    voluntary liquidation is being conducted in an improper or illegal

57-53    manner or is not in the best interests of the state trust company's

57-54    clients and creditors or that the state trust company is insolvent

57-55    or imminently insolvent, the banking commissioner may close the

57-56    state trust company for involuntary dissolution and liquidation

57-57    under this chapter.

57-58          (d)  After a state trust company's charter has been

57-59    voluntarily surrendered and canceled, the state trust company may

57-60    not resume business or reopen except on application for and

57-61    approval of a new charter.

57-62               (Sections 7.107-7.200 reserved for expansion)

57-63          SUBCHAPTER C.  INVOLUNTARY DISSOLUTION AND LIQUIDATION

57-64          Sec. 7.201.  ACTION TO CLOSE STATE TRUST COMPANY.  (a)  The

57-65    banking commissioner may close and liquidate a state trust company

57-66    on finding that:

57-67                (1)  the interests of its clients and creditors are

57-68    jeopardized by the state trust company's insolvency or imminent

57-69    insolvency; and

 58-1                (2)  the best interests of clients and creditors would

 58-2    be served by requiring that the state trust company be closed and

 58-3    its assets liquidated.

 58-4          (b)  A majority of the state trust company's directors,

 58-5    managers, or managing participants may voluntarily close the state

 58-6    trust company and place it with the banking commissioner for

 58-7    liquidation.

 58-8          Sec. 7.202.  INVOLUNTARY CLOSING.  (a)  After closing a state

 58-9    trust company under Section 7.201 of this Act, the banking

58-10    commissioner shall place a sign at its main entrance stating that

58-11    the state trust company has been closed and the findings on which

58-12    the closing of the state trust company is based.  A correspondent

58-13    bank of the closed state trust company may not pay an item drawn on

58-14    the account of the closed state trust company that is presented for

58-15    payment after the correspondent has received actual notice of

58-16    closing unless it previously certified the item for payment.

58-17          (b)  As soon as practicable after posting the sign at the

58-18    state trust company's main entrance, the banking commissioner shall

58-19    tender the state trust company to the Federal Deposit Insurance

58-20    Corporation as provided by Section 7.004 of this Act or initiate a

58-21    receivership proceeding by filing a copy of the notice contained on

58-22    the sign in a district court in the county where the state trust

58-23    company's home office is located.  The court in which the notice is

58-24    filed shall docket it as a case styled, "In re liquidation of ____"

58-25    (inserting the name of the state trust company).  As soon as this

58-26    notice is filed, the court has constructive custody of all the

58-27    state trust company's assets, and any action initiated that seeks

58-28    to directly or indirectly affect state trust company assets is

58-29    considered to be an intervention in the receivership proceeding and

58-30    subject to this subchapter and Subchapter D of this chapter.

58-31          (c)  Venue for an action instituted to effect, contest, or

58-32    otherwise intervene in the liquidation of a state trust company is

58-33    in Travis County, except that on motion filed and served

58-34    concurrently with or before the filing of the answer, the court

58-35    may, upon a finding of good cause, transfer the action to the

58-36    county of the state trust company's home office.

58-37          Sec. 7.203.  NATURE AND DURATION OF RECEIVERSHIP.  (a)  The

58-38    court may not require a bond from the banking commissioner as

58-39    receiver.  Any reference in this chapter to the receiver is a

58-40    reference to the banking commissioner as receiver and any

58-41    successors in office, the Federal Deposit Insurance Corporation if

58-42    acting as receiver as provided by Section 7.004 of this Act and

58-43    federal law, or an independent receiver appointed at the request of

58-44    the banking commissioner as provided by Section 7.003 of this Act.

58-45    The receiver and all employees and agents acting on behalf of the

58-46    receiver are acting in an official capacity and are subject to the

58-47    protection of Section 2.010, Texas Banking Act (Article 342-2.010,

58-48    Vernon's Texas Civil Statutes).  The acts of the receiver are the

58-49    acts of the state trust company in liquidation and this state and

58-50    its political subdivisions are not liable and may not be held

58-51    accountable for any debt or obligation of a state trust company in

58-52    receivership.

58-53          (b)  The receiver has all the powers of the directors,

58-54    managers, managing participants, officers, and shareholders or

58-55    participants of the state trust company as necessary to support an

58-56    action taken on behalf of the state trust company.

58-57          (c)  Section 64.072, Civil Practice and Remedies Code,

58-58    applies to the receivership of a state trust company except as

58-59    provided by this subsection.  A state trust company receivership

58-60    shall be administered continuously for the length of time necessary

58-61    to complete its purposes, and a period prescribed by other law

58-62    limiting the time for the administration of receiverships or of

58-63    corporate affairs generally, including Section 64.072(d), Civil

58-64    Practice and Remedies Code, does not apply.

58-65          Sec. 7.204.  CONTEST OF LIQUIDATION.  (a)  A state trust

58-66    company, acting through a majority of its directors, managers, or

58-67    managing participants, may intervene in the action filed by the

58-68    banking commissioner to challenge the banking commissioner's

58-69    closing of the state trust company and to enjoin the banking

 59-1    commissioner or other receiver from liquidating its assets.  The

 59-2    intervenors must file the intervention not later than the second

 59-3    business day after the closing of the state trust company,

 59-4    excluding legal holidays.  The court may issue an ex parte order

 59-5    restraining the receiver from liquidating state trust company

 59-6    assets pending a hearing on the injunction.  The receiver shall

 59-7    comply with the restraining order but may petition the court for

 59-8    permission to liquidate an asset as necessary to prevent its loss

 59-9    or diminution pending the outcome of the injunction.

59-10          (b)  The court shall hear this action as quickly as possible

59-11    and shall give it priority over other business.

59-12          (c)  The state trust company or receiver may appeal the

59-13    court's judgment as in other civil cases, except that the receiver

59-14    shall retain all state trust company assets pending a final

59-15    appellate court order even if the banking commissioner does not

59-16    prevail in the trial court.  If the banking commissioner prevails

59-17    in the trial court, liquidation of the state trust company may

59-18    proceed unless the trial court or appellate court orders otherwise.

59-19    If liquidation is enjoined or stayed pending appeal, the trial

59-20    court retains jurisdiction to permit liquidation of an asset as

59-21    necessary to prevent its loss or diminution pending the outcome of

59-22    the appeal.

59-23          Sec. 7.205.  NOTICE OF STATE TRUST COMPANY CLOSING.  (a)  As

59-24    soon as reasonably practicable after initiation of the receivership

59-25    proceeding, the receiver shall publish notice, in a newspaper of

59-26    general circulation in each community where the state trust

59-27    company's home office and a branch are located.  The notice must

59-28    state that the state trust company has been closed for liquidation,

59-29    that clients and creditors must present their claims for payment on

59-30    or before a specific date, and that all safe deposit box holders

59-31    and bailors of property left with the state trust company should

59-32    remove their property not later than a specified date.  The

59-33    receiver shall select the dates to allow the affairs of the state

59-34    trust company to be wound up as quickly as feasible while allowing

59-35    creditors,  clients, and owners of property adequate time for

59-36    presentation of claims, withdrawal of accounts, and redemption of

59-37    property, but may not select a date before the 121st day after the

59-38    date of the notice.  The receiver may adjust the dates with the

59-39    approval of the court with or without republication of notice if

59-40    additional time appears needed for these activities.

59-41          (b)  As soon as reasonably practicable given the state of

59-42    state trust company records and the adequacy of staffing, the

59-43    receiver shall mail to each of the state trust company's known

59-44    clients, creditors, safe deposit box holders, and bailors of

59-45    property left with the state trust company, at the mailing address

59-46    shown on the state trust company's records, an individual notice

59-47    containing the information required in a notice under Subsection

59-48    (a) of this section and specific information pertinent to the

59-49    account or property of the addressee.

59-50          (c)  The receiver may determine the form and content notices

59-51    under this section.

59-52          Sec. 7.206.  INVENTORY.  As soon as reasonably practicable

59-53    given the state of state trust company records and the adequacy of

59-54    staffing, the receiver shall prepare a comprehensive inventory of

59-55    the state trust company's assets for filing with the court.  The

59-56    inventory shall be open to inspection.

59-57          Sec. 7.207.  TITLE IN RECEIVER.  (a)  The receiver has the

59-58    title to all the state trust company's property, contracts, and

59-59    rights of action, wherever located, beginning on the date the state

59-60    trust company is closed for liquidation.

59-61          (b)  The rights of the receiver have priority over a

59-62    contractual lien or statutory landlord's lien under Chapter 54,

59-63    Property Code, judgment lien, attachment lien, or voluntary lien

59-64    that arises after the date of the closing of the state trust

59-65    company for liquidation.

59-66          (c)  The filing or recording of a receivership order in a

59-67    record office of this state gives the same notice that would be

59-68    given by a deed, bill of sale, or other evidence of title duly

59-69    filed or recorded by the state trust company in liquidation.  The

 60-1    recording clerk shall index a recorded receivership order in the

 60-2    records to which the order relates.

 60-3          Sec. 7.208.  RIGHTS FIXED.  The rights and liabilities of the

 60-4    state trust company in liquidation and of a client, creditor,

 60-5    officer, director, manager, managing participant, employee,

 60-6    shareholder, participant, participant-transferee, agent, or other

 60-7    person interested in the state trust company's estate are fixed on

 60-8    the date of closing of the state trust company for liquidation

 60-9    except as otherwise directed by the court or as expressly provided

60-10    otherwise by this subchapter or Subchapter D of this chapter.

60-11          Sec. 7.209.  DEPOSITORIES.  (a)  The receiver may deposit

60-12    funds collected on behalf of the state trust company estate in:

60-13                (1)  the Texas Treasury Safekeeping Trust Company in

60-14    accordance with procedures established by the comptroller; or

60-15                (2)  one or more depository institutions in this state,

60-16    the deposits of which are insured by the Federal Deposit Insurance

60-17    Corporation or its successor, if the receiver, using sound

60-18    financial judgment, determines that it would be advantageous to do

60-19    so.

60-20          (b)  If receivership funds deposited in an account at a state

60-21    bank exceed the maximum insured amount, the receiver shall require

60-22    the excess deposit to be adequately secured through pledge of

60-23    securities or otherwise, without approval of the court.  The

60-24    depository bank may secure the deposits of the state trust company

60-25    in liquidation on behalf of the receiver, notwithstanding any other

60-26    provision of this Act.

60-27          Sec. 7.210.  PENDING LAWSUITS.  (a)  A judgment or order of a

60-28    court of this state or of any other jurisdiction in an action

60-29    pending by or against the state trust company, rendered after the

60-30    date the state trust company was closed for liquidation, is not

60-31    binding on the receiver unless the receiver was made a party to the

60-32    suit.

60-33          (b)  Before the first anniversary of the date the state trust

60-34    company was closed for liquidation, the receiver may not be

60-35    required to plead to any suit pending against the state trust

60-36    company in a court in this state on the date the state trust

60-37    company was closed for liquidation and in which the receiver is a

60-38    proper plaintiff or defendant.

60-39          (c)  Sections 64.052, 64.053, and 64.056, Civil Practice and

60-40    Remedies Code, do not apply to a state trust company estate being

60-41    administered under this subchapter and Subchapter D of this

60-42    chapter.

60-43          Sec. 7.211.  NEW LAWSUITS.  (a)  Except as otherwise provided

60-44    by this section, the court in which the receivership proceeding is

60-45    pending under this subchapter has exclusive jurisdiction to hear

60-46    and determine all actions or proceedings instituted by or against

60-47    the state trust company or receiver after the receivership

60-48    proceeding starts.

60-49          (b)  The receiver may file in any jurisdiction an ancillary

60-50    suit that may be helpful to obtain jurisdiction or venue over a

60-51    person or property.

60-52          (c)  Exclusive venue of an action or proceeding instituted

60-53    against the receiver or the receiver's employee, including an

60-54    employee of the department, that asserts personal liability on the

60-55    part of the receiver or employee lies in Travis County.

60-56          Sec. 7.212.  RECORDS WITH THIRD PARTIES.  (a)  Each state

60-57    trust company affiliate, officer, director, manager, managing

60-58    participant, employee, shareholder, participant,

60-59    participant-transferee, trustee, agent, servant, employee,

60-60    attorney, attorney-in-fact, or correspondent shall immediately

60-61    deliver to the receiver any property, book, record, account,

60-62    document, or other writing of the state trust company or that

60-63    relates to the business of the state trust company without cost to

60-64    the receiver.

60-65          (b)  If by contract or otherwise any book, record, account,

60-66    document, or other property that can be copied is the property of a

60-67    person listed in Subsection (a) of this section, it shall be

60-68    copied, the copy shall be delivered to the receiver, and the

60-69    original shall be retained by the owner until notification by the

 61-1    receiver that it is no longer required in the administration of the

 61-2    state trust company's estate or at another time the court, after

 61-3    notice and hearing, directs.  A copy is considered to be a record

 61-4    of the state trust company in liquidation under Section 7.225 of

 61-5    this Act.

 61-6          Sec. 7.213.  INJUNCTION IN AID OF LIQUIDATION.  (a)  On

 61-7    application by the receiver, the court may with or without notice

 61-8    issue an injunction:

 61-9                (1)  restraining each state trust company officer,

61-10    director, manager, managing participant, employee, shareholder,

61-11    participant, participant-transferee, trustee, agent, servant,

61-12    employee, attorney, attorney-in-fact, accountant or accounting

61-13    firm, correspondent, or another person from transacting the state

61-14    trust company's business or wasting or disposing of its property;

61-15    or

61-16                (2)  requiring the delivery of its property or assets

61-17    to the receiver subject to the further order of the court.

61-18          (b)  The court, at any time during a proceeding under this

61-19    subchapter, may issue another injunction or order considered

61-20    necessary or desirable to prevent:

61-21                (1)  interference with the receiver or the proceeding;

61-22                (2)  waste of the assets of the state trust company;

61-23                (3)  the beginning or prosecution of an action;

61-24                (4)  the obtaining of a preference, judgment,

61-25    attachment, garnishment, or other lien; or

61-26                (5)  the making of a levy against the state trust

61-27    company or against its assets.

61-28          Sec. 7.214.  SUBPOENA.  (a)  In addition to the authority

61-29    granted by law to the receiver relating to the taking of a

61-30    deposition of a witness in a civil action, the receiver may request

61-31    the court ex parte to issue a subpoena to compel the attendance and

61-32    testimony of a witness before the receiver and the production of a

61-33    book, account, record, paper, or correspondence or other record

61-34    relating to the receivership estate.  For this purpose, the

61-35    receiver or the receiver's designated representative may administer

61-36    an oath or affirmation, examine a witness, or receive evidence.

61-37    The court has statewide subpoena power and may compel attendance

61-38    and production of a record before the receiver at the state trust

61-39    company, the office of the receiver, or another location.

61-40          (b)  A person served with a subpoena under this section may

61-41    file a motion with the court for a protective order as provided by

61-42    Rule 166b, Texas Rules of Civil Procedure.  In a case of

61-43    disobedience of a subpoena, or of the contumacy of a witness

61-44    appearing before the receiver or the receiver's designated

61-45    representative, the receiver may request and the court may issue an

61-46    order requiring the person subpoenaed to obey the subpoena, give

61-47    evidence, or produce a book, account, record, paper, or

61-48    correspondence or other record relating to the matter in question.

61-49          (c)  Each witness who is required to appear before the

61-50    receiver is entitled to receive:

61-51                (1)  reimbursement for mileage, in the amount for

61-52    travel by state employees, for traveling to or returning from a

61-53    proceeding that is more than 25 miles from the witness's residence;

61-54    and

61-55                (2)  a fee of not less than $10 a day and not more than

61-56    an amount equal to the per diem travel allowance of a state

61-57    employee for each day or part of a day the witness is necessarily

61-58    present as a witness, as established by the receiver with the

61-59    approval of the court.

61-60          (d)  All disbursements made in the payment of fees under

61-61    Subsection (c) of this section are administrative expenses of

61-62    liquidation.

61-63          (e)  The receiver may serve the subpoena or have it served by

61-64    the receiver's authorized agent, a sheriff, or a constable.  The

61-65    sheriff's or constable's fee for serving a subpoena must be the

61-66    same as the fee paid the sheriff or constable for similar services.

61-67          (f)  A subpoena issued under this section to a financial

61-68    institution is not subject to Section 30.007, Civil Practice and

61-69    Remedies Code, as added by Chapter 914, Acts of the 74th

 62-1    Legislature, Regular Session, 1995.

 62-2          (g)  On certification by the receiver under official seal, a

 62-3    book, account, record, paper, correspondence, or other record or

 62-4    document produced or testimony taken as provided by this section

 62-5    and held by the receiver is admissible in evidence  in any case

 62-6    without prior proof of its correctness and without other proof

 62-7    except the certificate of the receiver that the book, account,

 62-8    record, paper, correspondence, document, or testimony was received

 62-9    from the person producing the material or testifying.  The

62-10    certified book, account, record, paper, correspondence, or other

62-11    record or document, or a certified copy of such a document, is

62-12    prima facie evidence of the facts it contains.  This section does

62-13    not limit another provision of this subchapter, Subchapter D of

62-14    this chapter, or another law that provides for the admission of

62-15    evidence or its evidentiary value.

62-16          Sec. 7.215.  EXECUTORY CONTRACTS; ORAL AGREEMENTS.  (a)  Not

62-17    later than six months after the date the receivership proceeding

62-18    begins, the receiver may terminate any executory contract to which

62-19    the state trust company is a party, or any obligation of the state

62-20    trust company as a lessee.  A lessor who receives notice of the

62-21    receiver's election to terminate the lease before the 60th day

62-22    preceding the termination date is not entitled to rent or damages

62-23    for termination, other than rent accrued to the date of

62-24    termination.

62-25          (b)  An agreement that tends to diminish or defeat the

62-26    interest of the estate in a state trust company asset is not valid

62-27    against the receiver unless the agreement:

62-28                (1)  is in writing;

62-29                (2)  was executed by the state trust company and any

62-30    person claiming an adverse interest under the agreement, including

62-31    the obligor, at the same time as the acquisition of the asset by

62-32    the state trust company;

62-33                (3)  was approved by the board of the state trust

62-34    company or its designated committee, and the approval is reflected

62-35    in the minutes of the board or committee; and

62-36                (4)  has been continuously since its execution an

62-37    official record of the state trust company.

62-38          Sec. 7.216.  PREFERENCES.  (a)  Any transfer of or lien on

62-39    the property or assets of a state trust company is voidable by the

62-40    receiver if the transfer or lien:

62-41                (1)  is made or created after:

62-42                      (A)  four months before the date the state trust

62-43    company is closed for liquidation; or

62-44                      (B)  one year before the date the state trust

62-45    company is closed for liquidation if the receiving creditor was at

62-46    the time an affiliate, officer, director, manager, managing

62-47    participant, principal shareholder, or participant of the state

62-48    trust company or an affiliate of the trust company;

62-49                (2)  was made or created with the intent of giving to a

62-50    creditor or depositor, or enabling a creditor or depositor to

62-51    obtain, a greater percentage of the claimant's debt than is given

62-52    or obtained by another claimant of the same class; and

62-53                (3)  is accepted by a creditor or depositor having

62-54    reasonable cause to believe that a preference will occur.

62-55          (b)  Each state trust company officer, director, manager,

62-56    managing participant, employee, shareholder, participant,

62-57    participant-transferee, trustee, agent, servant, employee,

62-58    attorney-in-fact, or correspondent, or other person acting on

62-59    behalf of the state trust company, who has participated in

62-60    implementing a voidable transfer or lien, and each person receiving

62-61    property or the benefit of property of the state trust company as a

62-62    result of the voidable transfer or lien, is personally liable for

62-63    the property or benefit received and shall account to the receiver

62-64    for the benefit of the clients and creditors of the state trust

62-65    company.

62-66          (c)  The receiver may avoid a transfer of or lien on the

62-67    property or assets of a state trust company that a client,

62-68    creditor, shareholder, participant, or participant-transferee of

62-69    the state trust company could have avoided and may recover the

 63-1    property transferred or its value from the person to whom it was

 63-2    transferred or from a person who has received it, unless the

 63-3    transferee or recipient was a bona fide holder for value before the

 63-4    date the state trust company was closed for liquidation.

 63-5          Sec. 7.217.  OTHER POWERS OF RECEIVER; ADMINISTRATIVE

 63-6    EXPENSES.  The receiver may employ agents, legal counsel,

 63-7    accountants, appraisers, consultants, and other personnel the

 63-8    receiver considers necessary to assist in the performance of the

 63-9    receiver's duties.  The receiver may use personnel of the

63-10    department if the receiver considers the use to be advantageous or

63-11    desirable.  The expense of employing these persons is an

63-12    administrative expense of liquidation.

63-13          Sec. 7.218.  DISPOSAL OF PROPERTY; SETTLING CLAIMS.  (a)  In

63-14    the course of liquidating a state trust company, the receiver on

63-15    order of the court entered with or without hearing may:

63-16                (1)  sell all or part of the real and personal property

63-17    of the state trust company;

63-18                (2)  borrow money and pledge all or part of the assets

63-19    of the state trust company to secure the debt created, except that

63-20    the receiver may not be held personally liable to repay borrowed

63-21    funds;

63-22                (3)  compromise or compound a doubtful or uncollectible

63-23    debt or claim owed by or owing to the state trust company; and

63-24                (4)  enter another agreement on behalf of the state

63-25    trust company that the receiver considers necessary or proper to

63-26    the management, conservation, or liquidation of its assets.

63-27          (b)  If the amount of a debt or claim owed by or owing to the

63-28    state trust company or the value of an item of property of the

63-29    trust company does not exceed $20,000, excluding interest, the

63-30    receiver may compromise or compound the debt or claim or sell the

63-31    property on terms the receiver considers to be in the best

63-32    interests of the state trust company estate without obtaining the

63-33    approval of the court.

63-34          (c)  The receiver may with the approval of the court sell or

63-35    offer or agree to sell an asset of the state trust company, other

63-36    than fiduciary assets, to a depositor or creditor of the state

63-37    trust company.  Payment may be in whole or in part out of

63-38    distributions payable to the purchasing creditor or depositor on

63-39    account of an approved claim against the state trust company's

63-40    estate.  On application by the receiver, the court may designate

63-41    one or more representatives to act for certain clients or creditors

63-42    as a class in the purchase, holding, and management of assets

63-43    purchased by the class under this section, and the receiver may

63-44    with the approval of the court advance the expenses of the

63-45    appointed representative against the security of the claims of the

63-46    class.

63-47          Sec. 7.219.  DISCRETION OF COURT.  If the court requires

63-48    notice and hearing before entering an order, the court shall fix

63-49    the time and place of the hearing and prescribe whether the notice

63-50    is to be given by service on specific parties, by publication, or

63-51    by a combination of these methods.  The court may not enter an

63-52    order requested by a person other than the receiver without notice

63-53    to the receiver and an opportunity for the receiver to be heard.

63-54          Sec. 7.220.  FILING REPORTS; EXPENSES.  (a)  The receiver

63-55    shall file quarterly reports with the court showing the operation,

63-56    receipts, expenditures, and general condition of the state trust

63-57    company in liquidation.  The receiver shall also file a final

63-58    report regarding the liquidated state trust company showing all

63-59    receipts and expenditures and giving a full explanation and a

63-60    statement of the disposition of all assets of the state trust

63-61    company.

63-62          (b)  The receiver shall pay all administrative expenses out

63-63    of funds or assets of the state trust company.  Each quarter the

63-64    receiver shall submit an itemized report of those expenses, sworn

63-65    to by the receiver.  The court shall approve the report  unless an

63-66    objection is filed before the 11th day after the date of submission

63-67    of the account.  An objection, if any, may be made only by a party

63-68    in interest and must specify each item objected to and the ground

63-69    for the objection.  The court shall set the objection for hearing

 64-1    and notify the parties of this action.  The objecting party has the

 64-2    burden of proof to show that the item objected to is improper,

 64-3    unnecessary, or excessive.

 64-4          (c)  The court may prescribe whether the notice of the

 64-5    receiver's report is to be given by service on specific parties, by

 64-6    publication, or by a combination of these methods.

 64-7          Sec. 7.221.  COURT-ORDERED AUDIT.  The court in which the

 64-8    receivership proceeding is pending may order an audit of the books

 64-9    and records of the receiver that relate to the receivership.  A

64-10    report of an audit ordered under this section shall be filed with

64-11    the court.  The receiver shall make the books and records relating

64-12    to the receivership available to the auditor as required by the

64-13    court order.  The receiver shall pay the expenses of an audit

64-14    ordered under this section as an administrative expense.

64-15          Sec. 7.222.  SAFE DEPOSITS AND OTHER BAILMENTS.  (a)  A

64-16    contract between the state trust company and another person for

64-17    bailment, of deposit for hire, or for the lease of a safe, vault,

64-18    or box ceases on the date specified for removal of property in the

64-19    notices that were published and mailed or a later date approved by

64-20    the receiver or the court.  A person who has paid rental or storage

64-21    charges for a period extending beyond the date designated as the

64-22    date for removal of property shall have a claim against the state

64-23    trust company estate for a refund of any unearned amount paid.

64-24          (b)  If the property is not removed by the date specified in

64-25    the notices or by the receiver or the court, the receiver shall

64-26    inventory the property and may open a safe, vault, or box, or any

64-27    package, parcel, or receptacle, in the custody or possession of the

64-28    receiver, to make the inventory.  The property shall be marked to

64-29    identify, to the extent possible, its owner or the person who left

64-30    it with the state trust company.  After all property belonging to

64-31    others that is in the receiver's custody and control has been

64-32    inventoried, the receiver shall compile a master list that is

64-33    divided for each office of the state trust company that received

64-34    property that remains unclaimed.  The receiver shall publish, in a

64-35    newspaper of general circulation in each community in which the

64-36    state trust company had an office that received property that

64-37    remains unclaimed, the list and the names of the owners of the

64-38    property as shown in the state trust company's records.  The

64-39    published notice shall specify a procedure for claiming the

64-40    property, unless the court, on application of the receiver,

64-41    approves an alternate procedure.

64-42          Sec. 7.223.  FIDUCIARY ACTIVITIES.  (a)  As soon after

64-43    beginning the receivership proceeding as is practicable, the

64-44    receiver shall terminate all fiduciary positions it holds,

64-45    surrender all property held by it as a fiduciary, and settle the

64-46    state trust company's fiduciary accounts.  The receiver shall

64-47    release all segregated and identifiable fiduciary property held by

64-48    the state trust company to successor fiduciaries.

64-49          (b)  With the approval of the court, the receiver may sell

64-50    the administration of all or substantially all remaining fiduciary

64-51    accounts to one or more successor fiduciaries on terms that appear

64-52    to be in the best interests of the state trust company's estate and

64-53    the persons interested in the fiduciary accounts.

64-54          (c)  If commingled fiduciary funds held by the state trust

64-55    company as trustee are insufficient to satisfy all fiduciary claims

64-56    to the commingled funds, the receiver shall distribute commingled

64-57    funds pro rata to all fiduciary claimants of commingled funds based

64-58    on their proportionate interests after payment of administrative

64-59    expenses related solely to the fiduciary claims.  The fictional

64-60    tracing rule does not apply.

64-61          (d)  The receiver may require certain fiduciary claimants to

64-62    file proofs of claim if the records of the state trust company are

64-63    insufficient to identify their respective interests.

64-64          Sec. 7.224.  DISPOSITION AND MAINTENANCE OF RECORDS.  (a)  On

64-65    approval by the court, the receiver may dispose of records of the

64-66    state trust company in liquidation that are obsolete and

64-67    unnecessary to the continued administration of the receivership

64-68    proceeding.

64-69          (b)  The receiver may devise a method for the effective,

 65-1    efficient, and economical maintenance of the records of the state

 65-2    trust company and of the receiver's office, including maintaining

 65-3    those records on any medium approved by the records management

 65-4    division of the Texas State Library.

 65-5          (c)  To maintain the records of a liquidated state trust

 65-6    company after the closing of the receivership proceeding, the

 65-7    receiver may reserve assets of an estate, deposit them in an

 65-8    account, and use them for maintenance, storage, and disposal of

 65-9    records in closed receivership estates.

65-10          (d)  Records of a liquidated state trust company are not

65-11    government records for any purpose, including Chapter 552,

65-12    Government Code, but shall be preserved and disposed of as if they

65-13    were records of the department under Chapter 441, Government Code.

65-14    These records are confidential as provided by Subchapter B, Chapter

65-15    2, of this Act, rules adopted under this Act, and Section 30.007,

65-16    Civil Practice and Remedies Code, as added by Chapter 914, Acts of

65-17    the 74th Legislature, Regular Session, 1995.

65-18          Sec. 7.225.  RECORDS ADMITTED.  (a)  A book, record,

65-19    document, or paper of a state trust company in liquidation obtained

65-20    by the receiver and held in the course of the receivership

65-21    proceeding, or a certified copy of such a record under the official

65-22    seal of the receiver shall be received in evidence in all cases

65-23    without proof of correctness or other proof, except the certificate

65-24    of the receiver that the records were received from the custody of

65-25    the state trust company or found among its effects.

65-26          (b)  The receiver may certify the correctness of a paper,

65-27    document, or record of the receiver's office, including those

65-28    described by Subsection (a) of this section, and may certify any

65-29    fact contained in the paper, document, or record.  The paper,

65-30    document, or record shall be received in evidence in all cases in

65-31    which the original would be evidence.

65-32          (c)  The original book, record, document, or paper, or a

65-33    certified copy of such a record is prima facie evidence of the

65-34    facts it contains.

65-35          (d)  A copy of an original record or another record that is

65-36    maintained on a medium approved by the records management division

65-37    of the Texas State Library, within the scope of this section, and

65-38    produced by the receiver or the receiver's authorized

65-39    representative under this section has the same force and effect as

65-40    the original record and may be used the same as the original record

65-41    in a judicial or administrative proceeding in this state.

65-42          Sec. 7.226.  RESUMPTION OF BUSINESS.  (a)  A state trust

65-43    company closed under Section 7.201 of this Act may not be reopened

65-44    without the approval of the banking commissioner unless a contest

65-45    of liquidation under Section 7.204 of this Act is finally resolved

65-46    adversely to the banking commissioner and the court authorizes its

65-47    reopening.

65-48          (b)  If a state trust company reopens under this section, the

65-49    banking commissioner may place temporary limits on the right of

65-50    withdrawals by, or payments to, individual clients and creditors,

65-51    in accordance with applicable law.

65-52          (c)  As a depositor or creditor of a reopened state trust

65-53    company, this state or a political subdivision of this state may

65-54    agree to temporary limits that the banking commissioner places on

65-55    payments or withdrawals.

65-56          Sec. 7.227.  AFTER-DISCOVERED ASSETS.  (a)  If the banking

65-57    commissioner discovers, after the receivership has been closed by

65-58    final order of the court, assets that have value and were abandoned

65-59    as worthless or unknown during receivership, the banking

65-60    commissioner shall report the discovery to the court.  The court

65-61    may reopen the receivership proceeding for continued  liquidation

65-62    if the value of the after-discovered assets justifies the

65-63    reopening.

65-64          (b)  If the banking commissioner suspects that the

65-65    information may have been intentionally or fraudulently concealed,

65-66    the banking commissioner shall notify appropriate civil and

65-67    criminal authorities to determine what penalties, if any, may be

65-68    available.

65-69               (Sections 7.228-7.300 reserved for expansion)

 66-1             SUBCHAPTER D.  CLAIMS AGAINST RECEIVERSHIP ESTATE

 66-2          Sec. 7.301.  FILING CLAIMS.  (a)  A person other than a

 66-3    shareholder, participant, or participant-transferee acting in that

 66-4    capacity who has a claim against a state trust company in

 66-5    liquidation, including a claimant with a secured claim and a

 66-6    claimant under a fiduciary relationship that has been ordered by

 66-7    the receiver to file a claim pursuant to Section 7.223 of this Act,

 66-8    may assert the claim by presenting proof of the claim to the

 66-9    receiver at a place specified by the receiver within the period

66-10    specified by the receiver under Section 7.205 of this Act.  Receipt

66-11    of the required proof of claim by the receiver is a condition

66-12    precedent to the payment of a claim.  Except as provided by

66-13    Subsection (b) of this section and Section 7.310(b) of this Act, a

66-14    claim that is not filed within the period specified by the court

66-15    may not participate in a distribution of the assets by the

66-16    receiver.  Interest does not accrue on a claim after the date the

66-17    state trust company is closed for liquidation.

66-18          (b)  Subject to court approval, the receiver may accept a

66-19    claim filed after the date specified if the claim is filed with the

66-20    receiver not later than the 180th day after the date notice of the

66-21    claimant's right to file a proof of claim is mailed to the

66-22    claimant.  If accepted and approved, the claim is subordinate to an

66-23    approved claim of a general creditor.

66-24          Sec. 7.302.  PROOF OF CLAIM.  (a)  A proof of claim must be a

66-25    written statement signed by the claimant that includes:

66-26                (1)  the claim;

66-27                (2)  the consideration for the claim;

66-28                (3)  a statement of whether collateral is held or a

66-29    security interest is asserted against the claim and, if so, a

66-30    description of the collateral held or security interest asserted;

66-31                (4)  any right of priority of payment for the claim or

66-32    other specific right asserted by the claimant;

66-33                (5)  a statement of whether a payment has been made on

66-34    the claim and, if so, the amount and source of the payment, to the

66-35    extent known by the claimant;

66-36                (6)  a statement that the amount claimed is justly owed

66-37    by the state trust company in liquidation to the claimant; and

66-38                (7)  any other matter that is required by the court in

66-39    which the receivership is pending.

66-40          (b)  The receiver may designate the form of the proof of

66-41    claim.  A proof of claim shall be filed under oath unless the oath

66-42    is waived by the receiver.  A proof of claim filed with the

66-43    receiver is considered filed in an official proceeding for purposes

66-44    of Chapter 37, Penal Code.

66-45          (c)  If a claim is founded on an instrument in writing, the

66-46    original instrument, unless lost or destroyed, shall be filed with

66-47    the proof of claim.  After the instrument is filed, the receiver

66-48    may permit the claimant to substitute a copy of the instrument

66-49    until the final disposition of the claim.  If the instrument is

66-50    lost or destroyed, a statement of that fact and of the

66-51    circumstances of the loss or destruction shall be filed under oath

66-52    with the claim.

66-53          Sec. 7.303.  JUDGMENT AS PROOF OF CLAIM.  A judgment entered

66-54    against a state trust company before the date the state trust

66-55    company was closed for liquidation may not be given higher priority

66-56    than an unsecured creditor unless the judgment creditor in a proof

66-57    of claim proves the allegations supporting the judgment to the

66-58    receiver's satisfaction.  A judgment against the state trust

66-59    company entered after the date the state trust company was closed

66-60    for liquidation may not be considered as evidence of liability or

66-61    of the amount of damages.  A judgment against the state trust

66-62    company taken by default or by collusion before the date the state

66-63    trust company was closed for liquidation may not be considered as

66-64    conclusive evidence of the liability of the state trust company to

66-65    the judgment creditor or of the amount of damages to which the

66-66    judgment creditor is entitled.

66-67          Sec. 7.304.  SECURED CLAIMS.  (a)  The owner of a secured

66-68    deposit may file a claim as a creditor against a state trust

66-69    company in liquidation.  The value of security shall be determined

 67-1    under supervision of the court by converting the security into

 67-2    money.

 67-3          (b)  The owner of a secured claim against a state trust

 67-4    company in liquidation may surrender the security and file a claim

 67-5    as a general creditor or apply the security to the claim and

 67-6    discharge the claim.  If the owner applies the security and

 67-7    discharges the claim, any deficiency shall be treated as a claim

 67-8    against the general assets of the state trust company on the same

 67-9    basis as a claim of an unsecured creditor.  The amount of the

67-10    deficiency shall be determined as provided by Section 7.305 of this

67-11    Act, except that if the amount of the deficiency has been

67-12    adjudicated by a court of competent jurisdiction in a proceeding in

67-13    which the  receiver has had notice and an opportunity to be heard,

67-14    the court's decision is conclusive as to the amount.

67-15          (c)  The value of security held by a secured creditor shall

67-16    be determined under supervision of the court by:

67-17                (1)  converting the security into money according to

67-18    the terms of the agreement under which the security was delivered

67-19    to the creditor; or

67-20                (2)  agreement, arbitration, compromise, or litigation

67-21    between the creditor and the receiver.

67-22          Sec. 7.305.  UNLIQUIDATED OR UNDETERMINED CLAIMS.  (a)  A

67-23    claim based on an unliquidated or undetermined demand shall be

67-24    filed within the period provided by Subchapter C of this chapter

67-25    for the filing of a claim.  The claim may not share in any

67-26    distribution to claimants until the claim is definitely liquidated,

67-27    determined, and allowed.  After the claim is liquidated,

67-28    determined, and allowed, the claim shares ratably with the claims

67-29    of the same class in all subsequent distributions.

67-30          (b)  For the purposes of this section, a demand is considered

67-31    unliquidated or undetermined if the right of action on the demand

67-32    accrued while a state trust company was closed for liquidation and

67-33    the liability on the demand has not been determined or the amount

67-34    of the demand has not been liquidated.

67-35          (c)  If the receiver in all other respects is in a position

67-36    to close the receivership proceeding, the proposed closing is

67-37    sufficient grounds for the rejection of any remaining claim based

67-38    on an unliquidated or undetermined demand.  The receiver shall

67-39    notify the claimant of the intention to close the proceeding.  If

67-40    the demand is not liquidated or determined before the 61st day

67-41    after the date of the notice, the receiver may reject the claim.

67-42          Sec. 7.306.  SET-OFF.  (a)  Mutual credits and mutual debts

67-43    shall be set off and only the balance allowed or paid, except that

67-44    a set-off may not be allowed in favor of a person if:

67-45                (1)  the obligation of a state trust company to the

67-46    person did not on the date the state trust company was closed for

67-47    liquidation entitle the person to share as a claimant in the assets

67-48    of the state trust company;

67-49                (2)  the obligation of the state trust company to the

67-50    person was purchased by or transferred to the person after the date

67-51    the state trust company was closed for liquidation or for the

67-52    purpose of increasing set-off rights; or

67-53                (3)  the obligation of the person or the state trust

67-54    company is as a trustee or fiduciary.

67-55          (b)  On request, the receiver shall provide a person with an

67-56    accounting statement identifying each debt that is due and payable.

67-57    If a person owes a state trust company an amount that is due and

67-58    payable against which the person asserts set-off of mutual credits

67-59    that may become due and payable from the state trust company in the

67-60    future, the person shall promptly pay to the receiver the amount

67-61    due and payable.  The  receiver shall promptly refund, to the

67-62    extent of the person's prior payment, mutual credits that become

67-63    due and payable to the person by the state trust company in

67-64    liquidation.

67-65          Sec. 7.307.  ACTION ON CLAIMS.  (a)  Not later than six

67-66    months after the last day permitted for the filing of claims or a

67-67    later date allowed by the court, the receiver shall accept or

67-68    reject each filed claim in whole or in part, except for an

67-69    unliquidated or undetermined claim governed by Section 7.305 of

 68-1    this Act.  The receiver may approve or reject a claim filed against

 68-2    a state trust company in liquidation, and shall reject a claim if

 68-3    the receiver doubts its validity.

 68-4          (b)  The receiver shall mail written notice to each claimant,

 68-5    specifying the disposition of the person's claim.  If a claim is

 68-6    rejected in whole or in part, the receiver in the notice shall

 68-7    specify the basis for rejection and advise the claimant of the

 68-8    procedures and deadline for appeal.

 68-9          (c)  The receiver shall send each claimant a summary schedule

68-10    of approved and rejected claims by priority class and notify the

68-11    claimant:

68-12                (1)  that a copy of a schedule of claims disposition

68-13    including only the name of the claimant, the amount of the claim

68-14    allowed, and the amount of the claim rejected is available on

68-15    request; and

68-16                (2)  of the procedure and deadline for filing objection

68-17    to an approved claim.

68-18          (d)  The receiver and the receiver's agents and employees,

68-19    including employees of the department, are not liable for and a

68-20    cause of action may not be brought against any of them for an

68-21    action taken or not taken by them relating to the adjustment,

68-22    negotiation, or settlement of claims.

68-23          Sec. 7.308.  OBJECTION TO APPROVED CLAIM.  On or before the

68-24    date specified for objection to an approved claim, which shall be

68-25    set by the receiver with court approval, a depositor, creditor,

68-26    other claimant, shareholder, participant, or participant-transferee

68-27    of the state trust company may file an objection to an approved

68-28    claim.  The objection shall be heard and determined by the court.

68-29    If the objection is sustained, the court shall direct an

68-30    appropriate modification of the schedule.

68-31          Sec. 7.309.  APPEAL OF REJECTED CLAIM.  If an action on a

68-32    rejected claim is not brought in the court in which the

68-33    receivership proceeding is pending within three months after the

68-34    date of service of notice, the action of the receiver is final and

68-35    not subject to review.  If the action is timely brought, review is

68-36    de novo as if originally filed in the court and subject to the

68-37    rules of procedure and appeal applicable to civil cases.  This

68-38    action is separate from the receivership proceeding and is not

68-39    initiated by a claimant's attempt to appeal the action of the

68-40    receiver by intervening in the receivership proceeding.

68-41          Sec. 7.310.  PAYMENT OF CLAIMS.  (a)  Except as expressly

68-42    provided otherwise by this subchapter or Subchapter C of this

68-43    chapter, without the approval of the court the receiver may not

68-44    make a payment on a claim, other than a claim for an obligation

68-45    incurred by the receiver for administrative expenses.

68-46          (b)  The banking commissioner shall deposit in one or more

68-47    banks located in this state all funds available for the benefit of

68-48    nonclaiming depositors and creditors.  The banking commissioner

68-49    shall pay the depositors or creditors on demand any amount held for

68-50    their benefit.

68-51          (c)  After all objections have been heard and decided as

68-52    provided by Section 7.308 of this Act, the time for filing appeals

68-53    has expired as provided by Section 7.309 of this Act, and funds

68-54    have been made available to provide for the payment of all

68-55    nonclaiming depositors and creditors in accordance with Subsection

68-56    (b) of this section, the receiver may periodically make partial

68-57    distribution to the holders of approved claims if a proper reserve

68-58    is established for the pro rata payment of rejected claims that

68-59    have been appealed and any claims based on unliquidated or

68-60    undetermined demands governed by Section 7.305 of this Act.

68-61          (d)  As soon as practicable after the determination of all

68-62    objections, appeals, and claims based on previously unliquidated or

68-63    undetermined demands governed by Section 7.305 of this Act and

68-64    funds have been made available to provide for the payment of all

68-65    nonclaiming depositors and creditors in accordance with Subsection

68-66    (b) of this section, the receiver shall distribute the assets of

68-67    the state trust company in satisfaction of approved claims other

68-68    than claims asserted in a person's capacity as a shareholder,

68-69    participant, or participant-transferee.

 69-1          Sec. 7.311.  PRIORITY OF CLAIMS AGAINST INSURED STATE TRUST

 69-2    COMPANY.  The distribution of assets from the estate of a state

 69-3    trust company the trust deposits of which are insured by the

 69-4    Federal Deposit Insurance Corporation or its successor shall be

 69-5    made in the same order of priority as assets would be distributed

 69-6    on liquidation or purchase of assets and assumption of liabilities

 69-7    of a national bank under federal law.

 69-8          Sec. 7.312.  PRIORITY OF CLAIMS AGAINST UNINSURED STATE TRUST

 69-9    COMPANY.  (a)  The priority of distribution of assets from the

69-10    estate of a state trust company the trust deposits of which are not

69-11    insured by the Federal Deposit Insurance Corporation or its

69-12    successor shall be in accordance with the order of each class as

69-13    provided by this section.  Every claim in each class shall be paid

69-14    in full, or adequate funds shall  be retained for that payment,

69-15    before the members of the next class receive any payment.  A

69-16    subclass may not be established within a class, except for a

69-17    preference or subordination within a class expressly created by

69-18    contract or other instrument or in the articles of association.

69-19          (b)  Assets shall be distributed in the following order of

69-20    priority:

69-21                (1)  administrative expenses;

69-22                (2)  approved claims of secured trust deposits to the

69-23    extent of the value of the security as provided by Section 7.304(a)

69-24    of this Act;

69-25                (3)  approved claims of secured creditors to the extent

69-26    of the value of the security as provided by Section 7.304(b) of

69-27    this Act;

69-28                (4)  approved claims by beneficiaries of insufficient

69-29    commingled fiduciary funds or missing fiduciary property and

69-30    approved claims of clients of the state trust company;

69-31                (5)  other approved claims of general creditors not

69-32    falling within a higher priority under this section, including

69-33    unsecured claims for taxes and debts due the federal government or

69-34    a state or local government;

69-35                (6)  approved claims of a type described by

69-36    Subdivisions (1)-(5) of this subsection that were not filed within

69-37    the period prescribed by this subchapter; and

69-38                (7)  claims of capital note or debenture holders or

69-39    holders of similar obligations and proprietary claims of

69-40    shareholders, participants, participant-transferees, or other

69-41    owners according to the terms established by issue, class, or

69-42    series.

69-43          (c)  Subject to Sections 7.310 and 7.313 of this Act and

69-44    after fully satisfying all timely filed and  approved claims of a

69-45    higher priority, the banking commissioner may make a ratable

69-46    distribution to approved claimants within a particular class or

69-47    priority if there are insufficient funds to fully satisfy all of

69-48    those claims, after reserving funds for administrative expenses, if

69-49    necessary.

69-50          Sec. 7.313.  EXCESS ASSETS.  (a)  If state trust company

69-51    assets remain after the receiver has provided for unclaimed

69-52    distributions and all of the liabilities of the state trust company

69-53    in liquidation, the receiver shall distribute the remaining assets

69-54    to the shareholders or participants of the state trust company.  If

69-55    the remaining assets are not liquid or otherwise require continuing

69-56    administration, the receiver may call a meeting of the shareholders

69-57    or participants and participant-transferees of the state trust

69-58    company by giving notice in a newspaper of general circulation in

69-59    the county where the home office of the state trust company was

69-60    located and by written notice to the shareholders or participants

69-61    and participant-transferees of record at their last known

69-62    addresses.

69-63          (b)  At the meeting, the shareholders or participants shall

69-64    appoint one or more agents to take over the affairs to continue the

69-65    liquidation for the benefit of the shareholders or participants and

69-66    participant-transferees.  Voting privileges are governed by the

69-67    state trust company's bylaws and articles of association.  If a

69-68    quorum cannot be obtained at the meeting, the banking commissioner

69-69    shall appoint an agent.

 70-1          (c)  An agent appointed under Subsection (b) of this section

 70-2    shall execute and file with the court a bond approved by the court,

 70-3    conditioned on the faithful performance of all the duties of the

 70-4    trust.  Under order of the court the receiver shall transfer and

 70-5    deliver to the agent or agents for continued liquidation under the

 70-6    court's supervision all assets of the state trust company remaining

 70-7    in the receiver's hands, and the court shall discharge the receiver

 70-8    from further liability to the state trust company and its clients,

 70-9    creditors, shareholders, participants, and participant-transferees.

70-10    The state trust company may not resume business and the charter of

70-11    the state trust company is void on the date the court issues the

70-12    order directing the receiver to transfer and deliver the remaining

70-13    assets of the state trust company to the agent or agents.

70-14          Sec. 7.314.  UNCLAIMED FUNDS AND PROPERTY.  After completion

70-15    of the liquidation, any unclaimed property remaining in the hands

70-16    of the receiver shall be tendered to the comptroller as provided by

70-17    Chapter 74, Property Code.

70-18                      CHAPTER 8.   GENERAL PROVISIONS

70-19    Sec. 8.001.  LIABILITIES, DEFENSES, AND INDEMNIFICATION

70-20                  OF CORPORATE OFFICIALS

70-21    Sec. 8.002.  ATTACHMENT, INJUNCTION, OR EXECUTION

70-22    Sec. 8.003.  SLANDER OR LIBEL OF STATE TRUST COMPANY

70-23    Sec. 8.004.  AUTHORITY TO ACT AS NOTARY PUBLIC

70-24    Sec. 8.005.  EXEMPTION FROM SECURITIES LAW

70-25    Sec. 8.006.  SUCCESSION OF TRUST POWERS

70-26    Sec. 8.007.  DISCOVERY OF CLIENT RECORDS

70-27    Sec. 8.008.  COMPLIANCE REVIEW COMMITTEE

70-28    Sec. 8.009.  PARITY

70-29                      CHAPTER 8.   GENERAL PROVISIONS

70-30          Sec. 8.001.  LIABILITIES, DEFENSES, AND INDEMNIFICATION OF

70-31    CORPORATE OFFICIALS.  (a)  The provisions of the Texas Business

70-32    Corporation Act regarding liability, defenses, and indemnification

70-33    of a director, officer, agent, or employee apply to a director,

70-34    officer, agent, or employee of a state trust company in this state.

70-35    Except as limited by those provisions, a disinterested director,

70-36    manager, managing participant, officer, or employee of a state

70-37    trust company may not be held personally liable in an action

70-38    seeking monetary damages arising from the conduct of the state

70-39    trust company's affairs unless the damages resulted from the gross

70-40    negligence or wilful or intentional misconduct of the person during

70-41    the person's term of office with the state trust company.

70-42          (b)  A director, manager, managing participant, officer, or

70-43    employee of a state trust company is disinterested with respect to

70-44    a decision or transaction if the director, manager, managing

70-45    participant, officer, or employee fully discloses any interest in

70-46    the decision or transaction and does not participate in the

70-47    decision or transaction, or if the decision or transaction does not

70-48    involve:

70-49                (1)  personal profit for the director, manager,

70-50    managing participant, officer, or employee through dealing with the

70-51    state trust company or usurping an opportunity of the trust

70-52    company;

70-53                (2)  buying or selling assets of the state trust

70-54    company in a transaction in which the director, manager, managing

70-55    participant, officer, or employee has a direct or indirect

70-56    pecuniary interest;

70-57                (3)  dealing with a state trust company or other person

70-58    in which the director, manager, managing participant, officer, or

70-59    employee is also a director, manager, managing participant,

70-60    officer, or employee or otherwise has a significant direct or

70-61    indirect financial interest; or

70-62                (4)  dealing with a family member of the director,

70-63    manager, managing participant, officer, or employee.

70-64          (c)  A director, manager, managing participant, or officer

70-65    who, in performing the person's duties and functions, acts in good

70-66    faith and reasonably believes that reliance is warranted is

70-67    entitled to rely on information or an opinion, report, statement,

70-68    including a financial statement or other financial data, decision,

70-69    judgment, or performance, including a decision, judgment, or

 71-1    performance by a committee, prepared, presented, made, or rendered

 71-2    by:

 71-3                (1)  one or more directors, managers, managing

 71-4    participants, officers, or employees of the state trust company, or

 71-5    of an entity under joint or common control with the state trust

 71-6    company, who the director, manager, managing participant, or

 71-7    officer reasonably believes merits confidence;

 71-8                (2)  legal counsel, a public accountant, or another

 71-9    person who the director, manager, managing participant, or officer

71-10    reasonably believes merits confidence; or

71-11                (3)  a committee of the board of which the director,

71-12    manager, or managing participant is not a member.

71-13          (d)  In this section, "family member" means a person's:

71-14                (1)  spouse;

71-15                (2)  minor child; or

71-16                (3)  adult child who resides in the person's home.

71-17          Sec. 8.002.  ATTACHMENT, INJUNCTION, OR EXECUTION.  (a)  An

71-18    attachment, injunction, or execution for the purpose of collecting

71-19    a money judgment or securing a prospective money judgment against a

71-20    state trust company may not be issued against a state trust company

71-21    located in this state before the judgment is final and all appeals

71-22    have been exhausted or foreclosed by law.

71-23          (b)  This section does not affect an attachment, injunction,

71-24    execution, or writ of garnishment issued to or served on a state

71-25    trust company for the purpose of collecting a money judgment or

71-26    securing a prospective money judgment against a client of or client

71-27    account in the state trust company.

71-28          Sec. 8.003.  SLANDER OR LIBEL OF STATE TRUST COMPANY.  (a)  A

71-29    person commits an offense if the person:

71-30                (1)  knowingly makes, circulates, or transmits to

71-31    another person an untrue statement that is derogatory to the

71-32    financial condition of a state trust company located in this state;

71-33    or

71-34                (2)  intentionally, to injure the state trust company,

71-35    counsels, aids, procures, or induces another person to knowingly

71-36    make, circulate, or transmit to another person an untrue statement

71-37    that is derogatory to the financial condition of a state trust

71-38    company located in this state.

71-39          (b)  An offense under this section is a state jail felony.

71-40          Sec. 8.004.  AUTHORITY TO ACT AS NOTARY PUBLIC.  A notary

71-41    public is not disqualified from taking an acknowledgment or proof

71-42    of a written instrument as provided by Section 406.016, Government

71-43    Code, solely because of the person's ownership of stock or

71-44    participation interest in or employment by a state trust company

71-45    that is an interested party in the underlying transaction.

71-46          Sec. 8.005.  EXEMPTION FROM SECURITIES LAW.  (a)  An officer,

71-47    director, manager, managing participant, or employee of a state

71-48    trust company with fewer than 500 shareholders or participants or a

71-49    holding company with fewer than 500 shareholders or participants

71-50    that controls a state trust company is exempt from the registration

71-51    and licensing provisions of The Securities Act (Article 581-1 et

71-52    seq., Vernon's Texas Civil Statutes) with respect to that person's

71-53    participation in a sale or other transaction involving securities

71-54    issued by the state trust company or the holding company of which

71-55    that person is an officer, director, manager, managing participant,

71-56    or employee.

71-57          (b)  A person may not be compensated for services performed

71-58    under the exemption provided by this section.

71-59          Sec. 8.006.  SUCCESSION OF TRUST POWERS.  If a reorganizing

71-60    or selling state trust company at the time of a merger,

71-61    reorganization, conversion, or sale of substantially all of its

71-62    assets under Chapter 3 of this Act or other applicable law is

71-63    acting as trustee, guardian, executor, or administrator, or in

71-64    another fiduciary capacity, the successor entity with fiduciary

71-65    powers may, without the necessity of judicial action or action by

71-66    the creator of the trust, continue the office, trust, or fiduciary

71-67    relationship.  The successor entity may perform all the duties and

71-68    exercise all the powers connected with or incidental to the

71-69    fiduciary relationship in the same manner as if the successor

 72-1    entity had been originally designated as the fiduciary.

 72-2          Sec. 8.007.  DISCOVERY OF CLIENT RECORDS.  Civil discovery of

 72-3    a client record maintained by a state trust company is governed by

 72-4    Section 30.007, Civil Practice and Remedies Code, as added by

 72-5    Chapter 914, Acts of the 74th Legislature, Regular Session, 1995.

 72-6          Sec. 8.008.  COMPLIANCE REVIEW COMMITTEE.  (a)  In this

 72-7    section:

 72-8                (1)  "Civil action" means a civil proceeding pending in

 72-9    a court or other adjudicatory tribunal with jurisdiction to issue a

72-10    request or subpoena for records, including an alternative dispute

72-11    resolution mechanism, voluntary or required, under which a party

72-12    may compel the production of records.  The term does not include an

72-13    examination or enforcement proceeding initiated by the Federal

72-14    Deposit Insurance Corporation or its successor and the board of

72-15    governors of the Federal Reserve System or its successor, in

72-16    exercise of their jurisdiction.

72-17                (2)  "Compliance review document" means a document

72-18    prepared for or created by a compliance review committee.

72-19          (b)  A state trust company or an affiliate of a state trust

72-20    company, including its holding company, may establish a compliance

72-21    review committee to test, review, or evaluate the institution's

72-22    conduct, transactions, or potential transactions for the purpose of

72-23    monitoring and improving or enforcing compliance with:

72-24                (1)  a statutory or regulatory requirement;

72-25                (2)  financial reporting to a governmental agency;

72-26                (3)  the policies and procedures of the state trust

72-27    company or its affiliates; or

72-28                (4)  safe, sound, and fair lending practices.

72-29          (c)  Except as provided by Subsection (d) of this section:

72-30                (1)  a compliance review document is confidential and

72-31    is not discoverable or admissible in evidence in a civil action;

72-32                (2)  an individual serving on a compliance review

72-33    committee or acting under the direction of a compliance review

72-34    committee may not be required to testify in a civil action as to

72-35    the contents or conclusions of a compliance review document or as

72-36    to an action taken or discussions conducted by or for a compliance

72-37    review committee; and

72-38                (3)  a compliance review document or an action taken or

72-39    discussion conducted by or for a compliance review committee that

72-40    is disclosed to a governmental agency remains confidential and is

72-41    not discoverable or admissible in a civil action.

72-42          (d)  Subsection (c)(2) of this section does not apply to an

72-43    individual that has management responsibility for the operations,

72-44    records, employees, or activities being examined or evaluated by

72-45    the compliance review committee.

72-46          (e)  This section does not limit the discovery or

72-47    admissibility in a civil action of a document that is not a

72-48    compliance review document.

72-49          Sec. 8.009. PARITY.  (a)  A state trust company has the same

72-50    rights and privileges with respect to the exercise of fiduciary

72-51    powers that are or may be granted to a state or national bank that

72-52    is domiciled in this state and exercising fiduciary powers.

72-53          (b)  A state trust company that intends to exercise a right

72-54    or privilege with respect to the exercise of fiduciary powers

72-55    granted to a regulated financial institution described in

72-56    Subsection (a) of this section that is not authorized for state

72-57    trust companies under the statutes and rules of this state shall

72-58    submit a letter to the banking commissioner, describing in detail

72-59    the activity in which the state trust company intends to engage and

72-60    the specific authority for the regulated financial institution

72-61    described in Subsection (a) to undertake the proposed activity and

72-62    shall attach copies, if available, of relevant state and federal

72-63    law, including regulations and interpretive letters.  The state

72-64    trust company may begin to perform the proposed activity after the

72-65    30th day after the date the banking commissioner receives the state

72-66    trust company's letter unless the banking commissioner specifies an

72-67    earlier or later date or prohibits the activity.  The banking

72-68    commissioner may prohibit the state trust company from performing

72-69    the activity only if the banking commissioner finds that:

 73-1                (1)  a regulated financial institution described in

 73-2    Subsection (a) of this section that is domiciled in this state does

 73-3    not possess the specific right or privilege to perform the activity

 73-4    the state trust company seeks to perform; or

 73-5                (2)  the performance of the activity by the state trust

 73-6    company would adversely affect the safety and soundness of the

 73-7    requesting state trust company.

 73-8          (c)  The banking commissioner may extend the 30-day period

 73-9    under Subsection (b) of this section if the banking commissioner

73-10    determines that the state trust company's letter raises issues

73-11    requiring additional information or additional time for analysis.

73-12    If the 30-day period is extended, the state trust company may

73-13    perform the proposed activity only on prior written approval by the

73-14    banking commissioner, except that the banking commissioner must

73-15    approve or prohibit the proposed activity or convene a hearing

73-16    under Section 3.009 of this Act not later than the 60th day after

73-17    the date the commissioner receives the state trust company's

73-18    letter.  If a hearing is convened under Section 3.009 of this Act,

73-19    the banking commissioner must approve or prohibit the proposed

73-20    activity not later than the 30th day after the date the hearing is

73-21    completed.

73-22          (d)  A state trust company that is denied the requested right

73-23    or privilege to engage in an activity by the banking commissioner

73-24    under this section may appeal as provided by Section 3.010 of this

73-25    Act or may resubmit a letter under this subsection with additional

73-26    information or authority relevant to the banking commissioner's

73-27    determination.  A denial is immediately final for purposes of

73-28    appeal.

73-29          (e)  The finance commission may adopt rules implementing the

73-30    method or manner in which a state trust company exercises specific

73-31    rights and privileges, including rules regarding the exercise of

73-32    rights and privileges that would be prohibited to state trust

73-33    companies.  The finance commission may not adopt rules under this

73-34    subsection unless it finds that:

73-35                (1)  regulated financial institutions described in

73-36    Subsection (a) of this section that are domiciled in this state

73-37    possess the rights or privileges to perform activities the rules

73-38    would permit state trust companies to perform; and

73-39                (2)  the rules contain adequate safeguards and

73-40    controls, consistent with safety and soundness, to address the

73-41    concern of the legislature evidenced by the state law the rules

73-42    would impact.

73-43          (f)  The exercise of rights and privileges by a state trust

73-44    company in compliance with and in the manner authorized by this

73-45    section is not a violation of any statute of this state.

73-46          SECTION 2.  Section 2001.223, Government Code, is amended to

73-47    read as follows:

73-48          Sec. 2001.223.  Exceptions From Declaratory Judgment, Court

73-49    Enforcement, and Contested Case Provisions.  Section 2001.038 and

73-50    Subchapters C through H  do not apply to:

73-51                (1)  the granting, payment, denial, or withdrawal of

73-52    financial or medical assistance or benefits under service programs

73-53    of the Texas Department of Human Services;

73-54                (2)  action by the Banking Commissioner or the Finance

73-55    Commission of Texas regarding the issuance of a state bank or state

73-56    trust company charter for a bank or trust company to assume the

73-57    assets and liabilities of a financial institution that the

73-58    commissioner considers to be in hazardous condition as defined by

73-59    Section 1.002(a), Texas Banking Act (Article 342-1.002, Vernon's

73-60    Texas Civil Statutes), or Section 1.002(a), Texas Trust Company

73-61    Act, as applicable;

73-62                (3)  a hearing or interview conducted by the Board of

73-63    Pardons and Paroles or the pardons and paroles division of the

73-64    Texas Department of Criminal Justice relating to the grant,

73-65    rescission, or revocation of parole or other form of administrative

73-66    release; or

73-67                (4)  the suspension, revocation, or termination of the

73-68    certification of a breath analysis operator or technical supervisor

73-69    under the rules of the Department of Public Safety.

 74-1          SECTION 3.  Section 712.0441(h), Health and Safety Code, is

 74-2    amended to read as follows:

 74-3          (h)  If a fund is misappropriated by its trustee or is not

 74-4    otherwise handled as required by this chapter, the commissioner may

 74-5    take action against the trustee as provided in Chapter 6, Texas

 74-6    Trust Company Act [Articles 342-1104 and 342-1105 of The Texas

 74-7    Banking Code] .

 74-8          SECTION 4.  Section 1, Article 9.05, Insurance Code, is

 74-9    amended to read as follows:

74-10          Sec. 1.  Any corporation heretofore chartered under the

74-11    provisions of Article 9.03 of this Act, or its antecedents, Article

74-12    9.01, Texas Insurance Code, or Chapter 40, Acts, 41st Legislature,

74-13    1929 (codified as Article 1302a, Vernon's Texas Civil Statutes),

74-14    having as one of its powers "to act as trustee under any lawful

74-15    trust committed to it by contract or will, appointment by any court

74-16    having jurisdiction of the subject matter, as trustee, receiver or

74-17    guardian and as executor or guardian under the terms of any will

74-18    and as any administrator of the estates of decedents under the

74-19    appointment of the court" may transfer and assign to a state bank

74-20    [or trust company] created under the provisions of the Texas

74-21    Banking Act (Article 342-1.001 et seq., Vernon's Texas Civil

74-22    Statutes) or a predecessor of that Act, as amended, or to a state

74-23    trust company created under the provisions of the Texas Trust

74-24    Company Act or a predecessor of that Act, as amended, all of its

74-25    fiduciary business in which such corporation is named or acting as

74-26    guardian, trustee, executor, administrator or in any other

74-27    fiduciary capacity, whereupon said state bank or trust company

74-28    shall, without the necessity of any judicial action in the courts

74-29    of the State of Texas or any action by the creator or beneficiary

74-30    of such trust or estate, continue the guardianship, trusteeship,

74-31    executorship, administration or other fiduciary relationship, and

74-32    perform all of the duties and obligations of such corporation, and

74-33    exercise all of the powers and authority relative thereto now being

74-34    exercised by such corporation, and provided further that the

74-35    transfer or assignment by such corporation of such fiduciary

74-36    business being conducted by it under the powers granted in its

74-37    original charter, as amended, shall not constitute or be deemed a

74-38    resignation or refusal to act upon the part of such corporation as

74-39    to any such guardianship, trust, executorship, administration, or

74-40    any other fiduciary capacity; and provided further that the naming

74-41    or designation by a testator or the creator of a living trust of

74-42    such corporation to act as trustee, guardian, executor, or in any

74-43    other fiduciary capacity, shall be considered the naming or

74-44    designation of the state bank or trust company and authorizing such

74-45    state bank or trust company to act in said fiduciary capacity.  All

74-46    transfers and assignments of fiduciary business by such

74-47    corporations to a state bank or trust company consistent with the

74-48    provisions of this Act are hereby validated.

74-49          SECTION 5.  Section 105A(c), Texas Probate Code, is amended

74-50    to read as follows:

74-51          (c)  No foreign bank or trust company shall establish or

74-52    maintain any branch office, agency or other place of business

74-53    within this state, or shall in any way solicit, directly or

74-54    indirectly, any fiduciary business in this state of the types

74-55    embraced by subdivision (a) hereof.  Except as authorized herein or

74-56    as may otherwise be authorized by the laws of this state, no

74-57    foreign bank or trust company shall act in a fiduciary capacity in

74-58    this state.  Nothing in this Section shall be construed to

74-59    authorize foreign banks and trust companies to issue or to sell or

74-60    otherwise market or distribute in this state any investment

74-61    certificates, trust certificates, or other types of securities

74-62    (including without limiting the generality of the foregoing any

74-63    securities of the types authorized by Chapter 7 of the Insurance

74-64    Code of 1951 prior to the repeal thereof), or to conduct any

74-65    activities or exercise any powers of the type embraced and

74-66    regulated by the Texas Banking Act (Article 342-1.001 et seq.,

74-67    Vernon's Texas Civil Statutes) or the Texas Trust Company Act other

74-68    than those conducted and exercised in a fiduciary capacity under

74-69    the terms and conditions hereof.

 75-1          SECTION 6.  Section 2.13, Texas Savings Bank Act (Article

 75-2    489e, Vernon's Texas Civil Statutes), is amended to read as

 75-3    follows:

 75-4          Sec. 2.13.  The name of a savings bank must include the words

 75-5    "State Savings Bank" or the abbreviation "SSB."  These words or the

 75-6    abbreviation must be preceded by an appropriate descriptive word or

 75-7    words approved by the commissioner.  The commissioner may not

 75-8    approve the incorporation of a savings bank having the same name as

 75-9    another financial institution authorized to do business in this

75-10    state under this Act, the Texas Savings and Loan Act (Article 852a,

75-11    Vernon's Texas Civil Statutes), [or] the Texas Banking Act (Article

75-12    342-1.001 et seq., Vernon's Texas Civil Statutes), or the Texas

75-13    Trust Company Act or a name so nearly resembling the name of

75-14    another financial institution as to be calculated to deceive unless

75-15    the savings bank is formed by the reincorporation, reorganization,

75-16    or consolidation of the other financial institution or on the sale

75-17    of the property or franchise of the other savings bank.  A person

75-18    or company, either domestic or foreign, other than a state or

75-19    federal savings bank, may not do business under a name or title

75-20    that contains the words "savings bank," that indicates or

75-21    reasonably implies that the business is the character or kind of

75-22    business carried on or transacted by a savings bank, or that is

75-23    calculated to lead any person to believe that its business is that

75-24    of a savings bank.  On application by the commissioner or any

75-25    savings bank, a court of competent jurisdiction may issue an

75-26    injunction to restrain a person or company from violating this

75-27    section.

75-28          SECTION 7.  Article 7.06(2), Texas Miscellaneous Corporation

75-29    Laws Act (Article 1302-7.06, Vernon's Texas Civil Statutes), is

75-30    amended to read as follows:

75-31                (2)  "Corporation" means:

75-32                      (a)  Any corporation, association, or other

75-33    organization incorporated or organized under the Texas Business

75-34    Corporation Act, the Texas Non-Profit Corporation Act (Article

75-35    1396-1.01 et seq., Vernon's Texas Civil Statutes), the Texas

75-36    Banking Act (Article 342-1.001 et seq., Vernon's Texas Civil

75-37    Statutes) or a predecessor of that Act, the Texas Trust Company Act

75-38    or a predecessor of that Act, the Insurance Code, the Texas Savings

75-39    and Loan Act (Article 852a, Vernon's Texas Civil Statutes), Chapter

75-40    76, Acts of the 43rd Legislature, 1st Called Session, 1933 (Article

75-41    1434a, Vernon's Texas Civil Statutes), the Texas Credit Union Act

75-42    (Article 2461-1.01 et seq., Vernon's Texas Civil Statutes), the

75-43    Cooperative Association Act (Article 1396-50.01, Vernon's Texas

75-44    Civil Statutes), Articles 1399 through 1407, Revised Statutes,

75-45    Article 1448, Revised Statutes, Section 2, Chapter 42, Acts of the

75-46    42nd Legislature, 3rd Called Session, 1932 (Article 1524c, Vernon's

75-47    Texas Civil Statutes), the State Housing Law (Article 1528a,

75-48    Vernon's Texas Civil Statutes), the Electric Cooperative

75-49    Corporation Act (Article 1528b, Vernon's Texas Civil Statutes), the

75-50    Telephone Cooperative Act (Article 1528c, Vernon's Texas Civil

75-51    Statutes), the Automobile Club Services Act (Article 1528d,

75-52    Vernon's Texas Civil Statutes), the Texas Professional Corporation

75-53    Act (Article 1528e, Vernon's Texas Civil Statutes), the Texas

75-54    Professional Association Act (Article 1528f, Vernon's Texas Civil

75-55    Statutes), the Texas Mutual Trust Investment Company Act (Article

75-56    1528i, Vernon's Texas Civil Statutes), Chapter 221, Health and

75-57    Safety Code, the Texas Transportation Corporation Act (Article

75-58    1528l, Vernon's Texas Civil Statutes), the Cultural Education

75-59    Facilities Corporation Act (Article 1528m, Vernon's Texas Civil

75-60    Statutes), Chapter 262, Health and Safety Code, Chapter 264, Health

75-61    and Safety Code, Title 4, Agriculture [Agricultural] Code,

75-62    Subchapter A, Chapter 301, Health and Safety Code, Subchapter B,

75-63    Chapter 301, Health and Safety Code, or the Higher Education

75-64    Authority Act, Chapter 53, Education Code;

75-65                      (b)  Any corporation, association, or other

75-66    organization incorporated or organized under the laws of this state

75-67    that is governed in whole or in part by the Texas Business

75-68    Corporation Act, the Texas Non-Profit Corporation Act (Article

75-69    1396-1.01 et seq., Vernon's Texas Civil Statutes), or the Texas

 76-1    Miscellaneous Corporation Laws Act (Article 1302-1.01 et seq.,

 76-2    Vernon's Texas Civil Statutes); or

 76-3                      (c)  To the extent permitted by federal law, any

 76-4    federally chartered bank, savings and loan association, or credit

 76-5    union.

 76-6          SECTION 8.  Section 6, Acts of the 60th Legislature, Regular

 76-7    Session, 1967 (Article 5069-50.04, Vernon's Texas Civil Statutes),

 76-8    is amended to read as follows:

 76-9          Sec. 6.  The provisions of this Act are cumulative of the

76-10    Texas Banking Act; the Texas Trust Company Act; the "Texas Savings

76-11    and Loan Act," as amended; and Articles 2461 through 2484, Revised

76-12    Civil Statutes of Texas, 1925, as amended and the amendments

76-13    thereto, and Section 5 of House Bill No. 47, Acts of the 46th

76-14    Legislature, Regular Session, 1939, and Chapter 173, Acts of the

76-15    51st Legislature, Regular Session, 1949, relating to Credit Unions

76-16    and the amendments thereto.

76-17          SECTION 9.  Article 2.31, Texas Non-Profit Corporation Act

76-18    (Article 1396-2.31, Vernon's Texas Civil Statutes), is amended to

76-19    read as follows:

76-20          Art. 2.31.  POWER TO SERVE AS TRUSTEE.  A corporation that is

76-21    described by Section 501(c)(3) or 170(c), Internal Revenue Code of

76-22    1986, or a corresponding provision of a subsequent federal tax law,

76-23    or a corporation listed by the Internal Revenue Service in the

76-24    Cumulative List of Organizations Described in Section 170(c)of the

76-25    Internal Revenue Code of 1986, I.R.S. Publication 78, may serve as

76-26    the trustee of a trust:

76-27          (1)  of which the corporation is a beneficiary; or

76-28          (2)  benefiting another organization described by one of

76-29    those sections of the Internal Revenue Code of 1986, or a

76-30    corresponding provision of a subsequent federal tax law, or listed

76-31    by the Internal Revenue Service in the Cumulative List of

76-32    Organizations Described in Section 170(c)of the Internal Revenue

76-33    Code of 1986, I.R.S. Publication 78. [if the service as trustee is

76-34    in furtherance of the purposes for which the corporation was

76-35    formed].

76-36          SECTION 10.  Chapter XI, The Texas Banking Code (Article

76-37    342-1101 et seq., Vernon's Texas Civil Statutes), is repealed.

76-38          SECTION 11.  A change in law made by this Act does not

76-39    affect:

76-40                (1)  the validity of any action taken by the Finance

76-41    Commission of Texas or banking commissioner of Texas before the

76-42    effective date of this Act; or

76-43                (2)  a civil, criminal, or administrative proceeding

76-44    completed before the effective date of this Act.

76-45          SECTION 12.  A trust company that exists on the effective

76-46    date of this Act retains the powers provided by its charter and is

76-47    subject to the jurisdiction and control of the banking commissioner

76-48    of Texas as if it were a trust company chartered under the Texas

76-49    Trust Company Act, as added by this Act.

76-50          SECTION 13.  (a)  The changes in criminal law made by this

76-51    Act apply only to an offense committed on or after the effective

76-52    date of this Act.  For purposes of this section, an offense is

76-53    committed before the effective date of this Act if any element of

76-54    the offense occurs before that date.

76-55          (b)  The repeal of a criminal law made by this Act does not

76-56    apply to an offense committed under the repealed law before the

76-57    effective date of this Act.

76-58          (c)  An offense committed before the effective date of this

76-59    Act is covered by the law in effect when the offense was committed,

76-60    and the former law is continued in effect for that purpose.

76-61          SECTION 14.  A principal shareholder or participant that is

76-62    considered to control a state trust company under Section 4.001(a),

76-63    Texas Trust Company Act, as added by this Act, is not required to

76-64    file a change of control application under Section 4.002, Texas

76-65    Trust Company Act, as added by this Act, until the person  acquires

76-66    one or more additional shares or participation shares of the state

76-67    trust company on or after the effective date of this Act.

76-68          SECTION 15.  The changes in civil enforcement provisions,

76-69    penalties, and procedures made by Chapter 6, Texas Trust Company

 77-1    Act, as added by this Act, do not apply to a civil enforcement

 77-2    proceeding begun by the service of a notice for hearing or proposed

 77-3    civil enforcement order by the banking commissioner before the

 77-4    effective date of this Act.  That proceeding is governed by the law

 77-5    in effect when the proceeding was begun, and that law is continued

 77-6    in effect for that purpose.

 77-7          SECTION 16.  (a)  If this Act conflicts with another Act of

 77-8    the 75th Legislature, Regular Session, 1997, other than an Act

 77-9    adopting a nonsubstantive revision of statutes relating to

77-10    financial institutions and practices:

77-11                (1)  the change in law made in the other Act prevails

77-12    and the substance of the change is given effect as part of the

77-13    Texas Trust Company Act adopted by this Act unless:

77-14                      (A)  this Act or the conflicting Act expressly

77-15    provides otherwise; or

77-16                      (B)  it is not possible to give the conflicting

77-17    law effect within the context of the Texas Trust Company Act, in

77-18    which event the Texas Trust Company Act prevails; and

77-19                (2)  the text of a law that is reenacted in the other

77-20    Act only because of the constitutional requirement that the amended

77-21    law be reenacted at length is superseded by this Act.

77-22          (b)  If this Act conflicts with an Act of the 75th

77-23    Legislature, Regular Session, 1997, adopting a nonsubstantive

77-24    revision of statutes relating to financial institutions and

77-25    practices, this Act prevails.

77-26          (c)  If this Act and another Act of the 75th Legislature,

77-27    Regular Session, 1997, make the same substantive change from the

77-28    current law but differ in text, this Act prevails regardless of the

77-29    relative dates of enactment.

77-30          SECTION 17.  SEVERABILITY.  If any provision of this Act or

77-31    its application to any person, entity or circumstance is held

77-32    invalid, the invalidity does not affect other provisions or

77-33    applications of this Act that can be given effect without the

77-34    invalid provision or application, and to this end the provisions of

77-35    this Act are declared to be severable.

77-36          SECTION 18.  This Act takes effect September 1, 1997, except

77-37    that Section 3.022(16), Texas Trust Company Act, as added by this

77-38    Act, and Article 2.31, Texas Non-Profit Corporation Act (Article

77-39    1396-2.31, Vernon's Texas Civil Statutes), as amended by this Act,

77-40    take effect immediately, and apply to all corporations serving as

77-41    trustee of a charitable trust before, on, or after the effective

77-42    date of this Act, including all corporations whose status as

77-43    trustee of a charitable trust is the subject of litigation or

77-44    proceedings pending before, on, or after the effective date of this

77-45    Act.

77-46          SECTION 19.  The importance of this legislation and the

77-47    crowded condition of the calendars in both houses create an

77-48    emergency and an imperative public necessity that the

77-49    constitutional rule requiring bills to be read on three several

77-50    days in each house be suspended, and this rule is hereby suspended,

77-51    and that this Act take effect and be in force according to its

77-52    terms, and it is so enacted.

77-53                                 * * * * *