HBA-JLV, CBW H.B. 1385 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 1385 By: Capelo Financial Institutions 2/27/2001 Introduced BACKGROUND AND PURPOSE Under the Uniform Commercial Code, passed by the 76th Legislature and effective July 1, 2001, governmental issuers are not authorized to transfer control over their public funds, as required to perfect security interests in deposit accounts and certain investments. Consequently, security interests granted by state agencies, municipalities, and other political subdivisions to secure their bonds and other public securities are unperfected. House Bill 1385 creates provisions relating to the validity, enforcement, and priority of a perfected security interest. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. ANALYSIS House Bill 1385 amends the Government Code to provide that a security interest created by an issuer by means of a security agreement: _is perfected from the time the security agreement is entered into or adopted until the termination of the security agreement; _is valid and effective according to its terms; _is ranked as to priority in order of the time of perfection; and _may be enforced as provided by the security agreement or the law that authorizes the security agreement. The bill provides the rights of a lien creditor are subordinate to a perfected security interest. The bill also provides that a security interest in real property is perfected when the security agreement or other official instrument is duly recorded in the real property records of the county in which the property is located. The bill does not create or exempt an issuer from a duty to submit public securities to the attorney general for approval and registration by the comptroller or authorize an issuer to enter into or adopt a security agreement. EFFECTIVE DATE July 1, 2001, or if the Act does not receive the necessary vote, the Act takes effect September 1, 2001.