80R14352 JJT-F

By: Flynn H.B. No. 345

Substitute the following for H.B. No. 345:

By: Flynn C.S.H.B. No. 345

A BILL TO BE ENTITLED

AN ACT

relating to the collateralization of certain public funds; providing administrative penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Chapter 2257, Government Code, is amended by adding Subchapter F to read as follows: SUBCHAPTER F. POOLED COLLATERAL TO SECURE DEPOSITS OF PUBLIC FUNDS

Sec. 2257.101. DEFINITION. In this subchapter, "participating institution" means a financial institution that holds one or more deposits of public funds and that participates in the pooled collateral program under this subchapter.

Sec. 2257.102. POOLED COLLATERAL PROGRAM. (a) As an alternative to collateralization under Subchapter B, the comptroller by rule shall establish a program for centralized pooled collateralization of deposits of public funds and for monitoring collateral maintained by participating institutions. The comptroller may provide for a separate collateral pool for any single participating institution's deposits of public funds and also provide for one or more collateral pools for centralized collateralization of two or more identifiable participating institutions' deposits of public funds.

(b) The pooled collateral program must provide for:

(1) voluntary participation in the program by a participating institution;

(2) uniform procedures for processing all collateral transactions that are subject to an approved security agreement described by Section 2257.103; and

(3) the pledging of a participating institution's collateral securities using a single custodial account instead of an account for each depositor of public funds.

Sec. 2257.103. PARTICIPATION IN POOLED COLLATERAL PROGRAM. A financial institution may participate in the pooled collateral program only if:

(1) the institution has entered into a binding collateral security agreement with a public agency for a deposit of public funds and the agreement permits the institution's participation in the program; and

(2) the comptroller has approved:

(A) the institution's participation in the program; and

(B) the form of the collateral security agreement.

Sec. 2257.104. COLLATERAL REQUIRED; CUSTODIAN TRUSTEE. (a) Each participating institution shall secure its deposits of public funds with eligible securities the total value of which equals at least 102 percent of the amount of the deposits of public funds covered by a security agreement described by Section 2257.103 and deposited with the participating institution, reduced to the extent that the United States or an instrumentality of the United States insures the deposits. For purposes of determining whether collateral is sufficient to secure a deposit of public funds, Section 2257.022(b) does not apply to a deposit of public funds held by the participating institution and collateralized under this subchapter.

(b) A participating institution shall provide for the collateral securities to be held by a custodian trustee, on behalf of the participating institution, in trust for the benefit of the pooled collateral program. A custodian trustee must qualify as a custodian under Section 2257.041.

(c) The comptroller by rule shall regulate a custodian trustee under the pooled collateral program in the manner provided by Subchapter C to the extent practicable. The rules must ensure that a custodian trustee depository does not own, is not owned by, and is independent of the financial institution or institutions for which it holds the securities in trust, except that the rules must allow a banker's bank, as defined by Section 34.105, Finance Code, and a federal home loan bank to be a custodian trustee.

Sec. 2257.105. MONITORING COLLATERAL. Each participating institution shall file the following reports with the comptroller, as prescribed by rules of the comptroller:

(1) a daily report of the aggregate amount of deposits of public agencies participating in the pooled collateral program that are held by the institution;

(2) a weekly summary report of the total value of securities held by a custodian trustee on behalf of the participating institution;

(3) a monthly report listing the collateral securities held by a custodian trustee on behalf of the participating institution together with the value of the securities; and

(4) as applicable, a participating institution's call report or annual report that includes the participating institution's financial statements.

Sec. 2257.106. ANNUAL ASSESSMENT. (a) Once each state fiscal year, the comptroller shall impose against each participating institution an assessment in an amount sufficient to pay the costs of administering this subchapter. The assessment must be imposed pro rata according to the aggregate average weekly deposit amounts during that state fiscal year of each institution's deposits of public funds collateralized under this subchapter.

(b) The comptroller shall provide to each participating institution a notice of the amount of the assessment against the institution.

(c) A participating institution shall remit to the comptroller the amount assessed against it under this section not later than the 45th day after the date the institution receives the notice under Subsection (b).

(d) Money remitted to the comptroller under this section may be appropriated only for the purposes of administering this subchapter.

Sec. 2257.107. PENALTY FOR REPORTING VIOLATION. (a) The comptroller may impose an administrative penalty against a participating institution that does not file a report required by Section 2257.105.

(b) The penalty must be in an amount equal to $100 for each day that elapses after the date the report is due until the date the report is filed.

Sec. 2257.108. PENALTY FOR COLLATERAL VIOLATION. (a) The comptroller may impose an administrative penalty against a participating institution that does not maintain collateral in an amount and in the manner required by Section 2257.104 and rules of the comptroller.

(b) The penalty must be in an amount equal to $100 for each day the participating institution fails to maintain the collateral as required.

Sec. 2257.109. PENALTY FOR FAILURE TO PAY ASSESSMENT. (a) The comptroller may impose an administrative penalty against a participating institution that does not pay an assessment against it in the time provided by Section 2257.106(c).

(b) The penalty must be in an amount equal to $100 for each day that elapses after the date the assessment is due until the date the assessment is paid.

Sec. 2257.110. PENALTIES NOT EXCLUSIVE. The penalties provided by Sections 2257.107-2257.109 are in addition to those provided by Subchapter D or other law.

Sec. 2257.111. PENALTY PROCEEDING CONTESTED CASE. A proceeding to impose a penalty under Sections 2257.107-2257.109 is a contested case under Chapter 2001.

Sec. 2257.112. SUIT TO COLLECT PENALTY. The attorney general may sue to collect a penalty imposed under Sections 2257.107-2257.109.

Sec. 2257.113. ENFORCEMENT STAYED PENDING REVIEW. Enforcement of a penalty imposed under Sections 2257.107-2257.109 may be stayed during the time the order is under judicial review if the participating institution pays the penalty to the clerk of the court or files a supersedeas bond with the court in the amount of the penalty. A participating institution that cannot afford to pay the penalty or file the bond may stay the enforcement by filing an affidavit in the manner required by the Texas Rules of Civil Procedure for a party who cannot afford to file security for costs, subject to the right of the comptroller to contest the affidavit as provided by those rules.

Sec. 2257.114. USE OF COLLECTED PENALTIES. Money collected as penalties under this subchapter may be appropriated only for the purposes of administering this subchapter.

SECTION 2. Section 2257.002(4), Government Code, is amended to read as follows:

(4) "Eligible security" means:

(A) a surety bond;

(B) an investment security;

(C) an ownership or beneficial interest in an investment security, other than an option contract to purchase or sell an investment security;

(D) a fixed-rate collateralized mortgage obligation that has an expected weighted average life of 10 years or less and does not constitute a high-risk mortgage security; [or]

(E) a floating-rate collateralized mortgage obligation that does not constitute a high-risk mortgage security; or

(F) a letter of credit issued by a federal home loan bank.

SECTION 3. The comptroller of public accounts shall adopt rules as necessary to implement Subchapter F, Chapter 2257, Government Code, as added by this Act, so that the pooled collateral program established under that subchapter may begin operating not later than the first business day of April 2008.

SECTION 4. This Act takes effect September 1, 2007.