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 * * * * *