80R1316 JJT-D

By: Flynn H.B. No. 345

A BILL TO BE ENTITLED

AN ACT

relating to the collateralization of certain public funds.

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 COLLATERAL POOL 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 the collateral security agreement and the institution's participation in the program.

Sec. 2257.104. COLLATERAL REQUIRED; CUSTODIAN. (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 does not apply to a deposit of public funds held by the participating institution and collateralized under this subchapter.

(b) The collateral securities may be held by a custodian that holds the securities in trust, for the benefit of the pooled collateral program, on the behalf of the financial institution or institutions for which it holds the securities. A custodian must qualify as a custodian under Section 2257.041.

(c) The comptroller by rule shall regulate a custodian under the pooled collateral program in the manner provided by Subchapter C to the extent practicable. The rules must ensure that a custodian 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.

Sec. 2257.105. MONITORING COLLATERAL. (a) A financial institution participating in the pooled collateral program may not hold public money in an amount greater than the total equity of the institution, as reflected by the institution's financial statements.

(b) Each participating financial 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 funds held by the institution;

(2) a weekly summary report of the total value of securities held by a third party depository on behalf of the institution;

(3) a monthly report listing the collateral securities held by the institution or by a third party depository on its behalf together with the value of the securities; and

(4) an annual report that includes the 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 shall impose an administrative penalty against a participating institution that does not file a report required by Section 2257.105(b).

(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 shall 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 $250 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 shall 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 $500 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 person pays the penalty to the clerk of the court or files a supersedeas bond with the court in the amount of the penalty. A person who 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. (a) This Act takes effect September 1, 2007.

(b) 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.