Amend SB 638 (Senate committee printing) by adding a new 
SECTION 3 and SECTION 4 as follows and renumbering the remaining 
section accordingly:
	SECTION 3.  Section 404.031(e), Government Code, is amended 
to read as follows:
	(e)  Instead of depositing pledged securities with the 
comptroller, a depository may deposit them with a custodian. The 
custodian may be the (i) Texas Treasury Safekeeping Trust Company, 
(ii) [or] a state or national bank that has a capital stock and 
permanent surplus of not less than $5 million, is a state 
depository, and has been designated as a custodian by the 
comptroller, or (iii) a financial institution authorized to 
exercise fiduciary powers that has a capital stock and permanent 
surplus of not less than $5 million, has its main office, branch 
office or a trust office in this state, and has been designated as a 
custodian by the comptroller. For  purposes of this subsection (e), 
"financial institution" has the meaning assigned by Section 
201.101(1), Finance Code. The comptroller may designate those 
custodial applicants that are  acceptable and may reject those 
whose management or condition, in the opinion of the comptroller, 
do not warrant the placing of securities pledged by state 
depositories. The comptroller may adopt and enforce rules governing 
the designation and conduct of custodians  with respect to the 
acceptance and holding of securities pledged by state depositories 
that the public interest requires and that are not inconsistent 
with the law governing custodians as set forth in this chapter. The 
state depository and the custodian of securities pledged by that 
state depository may not be the same bank or be owned by the same 
bank holding company. The securities shall be held in trust by the 
custodian to secure funds deposited by the comptroller in the state 
depository pledging the securities. On receipt of the securities, 
the custodian shall immediately, by book entry or otherwise, 
identify on its books and records the pledge of the securities and 
shall promptly issue and deliver to the comptroller controlled 
trust receipts for the securities pledged. The security evidenced 
by the trust receipts is subject to inspection by the comptroller at 
any time. The depository pledging the securities shall pay the 
charges, if any, of the custodian bank for accepting and holding the 
securities. The custodian, acting alone or through a permitted 
institution, is for all purposes under state law and 
notwithstanding Chapters 8 and 9, Business & Commerce Code, the 
bailee or agent of the comptroller. The security interest arising 
out of a pledge of securities to secure deposits of the state is 
created, attaches, and is perfected for all purposes under state 
law from the time the custodian identifies the pledge of the 
securities on its books and records and issues the trust receipts. 
The security interest remains perfected as of that time in the hands 
of all subsequent custodians and permitted institutions.
	SECTION 4.  Section 2257.041(d), Government Code, is amended 
to read as follows:
	(d)  A custodian must be approved by the public entity and 
be:               
		(1)  a state or national bank that:                                           
			(A)  is designated by the comptroller as a state 
depository;               
			(B)  has its main office or a branch office in this 
state; and             
			(C)  has a capital stock and permanent surplus of 
$5 million or more;      
		(2)  the Texas Treasury Safekeeping Trust Company;                            
		(3)  a Federal Reserve Bank or a branch of a Federal 
Reserve Bank; [or]
		(4)  a federal home loan bank; or[.]                                   
		(5)  a financial institution authorized to exercise 
fiduciary powers that is designated by the comptroller as a 
custodian pursuant to Section 404.031(e).