Texas 2009 - 81st Regular

Texas House Bill HB77 Compare Versions

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1	1	By: Flynn, Heflin, Hopson H.B. No. 77
2	2	(In the Senate - Received from the House April 23, 2009;
3	3	April 27, 2009, read first time and referred to Committee on
4	4	Finance; May 15, 2009, reported favorably by the following vote:
5	5	Yeas 10, Nays 0; May 15, 2009, sent to printer.)
6	6
7	7
8	8	A BILL TO BE ENTITLED
9	9	AN ACT
10	10	relating to the collateralization of certain public funds and to
11	11	custodians with which certain pledged securities may be deposited;
12	12	providing administrative penalties.
13	13	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
14	14	SECTION 1. Section 404.031(e), Government Code, is amended
15	15	to read as follows:
16	16	(e) Instead of depositing pledged securities with the
17	17	comptroller, a depository may deposit them with a custodian. The
18	18	custodian may be (i) the Texas Treasury Safekeeping Trust Company,
19	19	(ii) [or] a state or national bank that has a capital stock and
20	20	permanent surplus of not less than $5 million, is a state
21	21	depository, and has been designated as a custodian by the
22	22	comptroller, or (iii) a financial institution authorized to
23	23	exercise fiduciary powers that has a capital stock and permanent
24	24	surplus of not less than $5 million, has its main office, a branch
25	25	office, or a trust office in this state, and has been designated as
26	26	a custodian by the comptroller. For purposes of this subsection,
27	27	"financial institution" has the meaning assigned by Section
28	28	201.101(1), Finance Code. The comptroller may designate those
29	29	custodial applicants that are acceptable and may reject those whose
30	30	management or condition, in the opinion of the comptroller, does
31	31	not warrant the placing of securities pledged by state
32	32	depositories. The comptroller may adopt and enforce rules
33	33	governing the designation and conduct of custodians with respect to
34	34	the acceptance and holding of securities pledged by state
35	35	depositories that the public interest requires and that are not
36	36	inconsistent with the law governing custodians as set forth in this
37	37	chapter. The state depository and the custodian of securities
38	38	pledged by that state depository may not be the same bank or be
39	39	owned by the same bank holding company. The securities shall be
40	40	held in trust by the custodian to secure funds deposited by the
41	41	comptroller in the state depository pledging the securities. On
42	42	receipt of the securities, the custodian shall immediately, by book
43	43	entry or otherwise, identify on its books and records the pledge of
44	44	the securities and shall promptly issue and deliver to the
45	45	comptroller controlled trust receipts for the securities pledged.
46	46	The security evidenced by the trust receipts is subject to
47	47	inspection by the comptroller at any time. The depository pledging
48	48	the securities shall pay the charges, if any, of the custodian bank
49	49	for accepting and holding the securities. The custodian, acting
50	50	alone or through a permitted institution, is for all purposes under
51	51	state law and notwithstanding Chapters 8 and 9, Business & Commerce
52	52	Code, the bailee or agent of the comptroller. The security interest
53	53	arising out of a pledge of securities to secure deposits of the
54	54	state is created, attaches, and is perfected for all purposes under
55	55	state law from the time the custodian identifies the pledge of the
56	56	securities on its books and records and issues the trust receipts.
57	57	The security interest remains perfected as of that time in the hands
58	58	of all subsequent custodians and permitted institutions.
59	59	SECTION 2. Section 2257.041(d), Government Code, is amended
60	60	to read as follows:
61	61	(d) A custodian must be approved by the public entity and
62	62	be:
63	63	(1) a state or national bank that:
64	64	(A) is designated by the comptroller as a state
65	65	depository;
66	66	(B) has its main office or a branch office in this
67	67	state; and
68	68	(C) has a capital stock and permanent surplus of
69	69	$5 million or more;
70	70	(2) the Texas Treasury Safekeeping Trust Company;
71	71	(3) a Federal Reserve Bank or a branch of a Federal
72	72	Reserve Bank; [or]
73	73	(4) a federal home loan bank; or
74	74	(5) a financial institution authorized to exercise
75	75	fiduciary powers that is designated by the comptroller as a
76	76	custodian pursuant to Section 404.031(e).
77	77	SECTION 3. Chapter 2257, Government Code, is amended by
78	78	adding Subchapter F to read as follows:
79	79	SUBCHAPTER F. POOLED COLLATERAL TO SECURE
80	80	DEPOSITS OF CERTAIN PUBLIC FUNDS
81	81	Sec. 2257.101. DEFINITION. In this subchapter,
82	82	"participating institution" means a financial institution that
83	83	holds one or more deposits of public funds and that participates in
84	84	the pooled collateral program under this subchapter.
85	85	Sec. 2257.102. POOLED COLLATERAL PROGRAM. (a) As an
86	86	alternative to collateralization under Subchapter B, the
87	87	comptroller by rule shall establish a program for centralized
88	88	pooled collateralization of deposits of public funds and for
89	89	monitoring collateral maintained by participating institutions.
90	90	The rules must provide that deposits of public funds of a county are
91	91	not eligible for collateralization under the program. The
92	92	comptroller shall provide for a separate collateral pool for any
93	93	single participating institution's deposits of public funds.
94	94	(b) Under the program, the collateral of a participating
95	95	institution pledged for a public deposit may not be combined with,
96	96	cross-collateralized with, aggregated with, or pledged to another
97	97	participating institution's collateral pools for pledging
98	98	purposes.
99	99	(c) A participating institution may pledge its pooled
100	100	securities to more than one participating depositor under contract
101	101	with that participating institution.
102	102	(d) The pooled collateral program must provide for:
103	103	(1) participation in the program by a participating
104	104	institution and each affected public entity to be voluntary;
105	105	(2) uniform procedures for processing all collateral
106	106	transactions that are subject to an approved security agreement
107	107	described by Section 2257.103; and
108	108	(3) the pledging of a participating institution's
109	109	collateral securities using a single custodial account instead of
110	110	an account for each depositor of public funds.
111	111	Sec. 2257.103. PARTICIPATION IN POOLED COLLATERAL PROGRAM.
112	112	A financial institution may participate in the pooled collateral
113	113	program only if:
114	114	(1) the institution has entered into a binding
115	115	collateral security agreement with a public agency for a deposit of
116	116	public funds and the agreement permits the institution's
117	117	participation in the program;
118	118	(2) the comptroller has approved the institution's
119	119	participation in the program; and
120	120	(3) the comptroller has approved or provided the
121	121	collateral security agreement form used.
122	122	Sec. 2257.104. COLLATERAL REQUIRED; CUSTODIAN TRUSTEE. (a)
123	123	Each participating institution shall secure its deposits of public
124	124	funds with eligible securities the total value of which equals at
125	125	least 102 percent of the amount of the deposits of public funds
126	126	covered by a security agreement described by Section 2257.103 and
127	127	deposited with the participating institution, reduced to the extent
128	128	that the United States or an instrumentality of the United States
129	129	insures the deposits. For purposes of determining whether
130	130	collateral is sufficient to secure a deposit of public funds,
131	131	Section 2257.022(b) does not apply to a deposit of public funds held
132	132	by the participating institution and collateralized under this
133	133	subchapter.
134	134	(b) A participating institution shall provide for the
135	135	collateral securities to be held by a custodian trustee, on behalf
136	136	of the participating institution, in trust for the benefit of the
137	137	pooled collateral program. A custodian trustee must qualify as a
138	138	custodian under Section 2257.041.
139	139	(c) The comptroller by rule shall regulate a custodian
140	140	trustee under the pooled collateral program in the manner provided
141	141	by Subchapter C to the extent practicable. The rules must ensure
142	142	that a custodian trustee depository does not own, is not owned by,
143	143	and is independent of the financial institution or institutions for
144	144	which it holds the securities in trust, except that the rules must
145	145	allow the following to be a custodian trustee:
146	146	(1) a federal reserve bank;
147	147	(2) a banker's bank, as defined by Section 34.105,
148	148	Finance Code; and
149	149	(3) a federal home loan bank.
150	150	Sec. 2257.105. MONITORING COLLATERAL. (a) Each
151	151	participating institution shall file the following reports with the
152	152	comptroller electronically and as prescribed by rules of the
153	153	comptroller:
154	154	(1) a daily report of the aggregate ledger balance of
155	155	deposits of public agencies participating in the pooled collateral
156	156	program that are held by the institution, with each public entity's
157	157	funds held itemized;
158	158	(2) a weekly summary report of the total market value
159	159	of securities held by a custodian trustee on behalf of the
160	160	participating institution;
161	161	(3) a monthly report listing the collateral securities
162	162	held by a custodian trustee on behalf of the participating
163	163	institution together with the value of the securities; and
164	164	(4) as applicable, a participating institution's
165	165	annual report that includes the participating institution's
166	166	financial statements.
167	167	(b) The comptroller shall provide the participating
168	168	institution an acknowledgment of each report received.
169	169	(c) The comptroller shall provide a daily report of the
170	170	market value of the securities held in each pool.
171	171	(d) The comptroller shall post each report on the
172	172	comptroller's Internet website.
173	173	Sec. 2257.106. ANNUAL ASSESSMENT. (a) Once each state
174	174	fiscal year, the comptroller shall impose against each
175	175	participating institution an assessment in an amount sufficient to
176	176	pay the costs of administering this subchapter. The amount of an
177	177	assessment must be based on factors that include the number of
178	178	public entity accounts a participating institution maintains, the
179	179	number of transactions a participating institution conducts, and
180	180	the aggregate average weekly deposit amounts during that state
181	181	fiscal year of each participating institution's deposits of public
182	182	funds collateralized under this subchapter. The comptroller by
183	183	rule shall establish the formula for determining the amount of the
184	184	assessments imposed under this subsection.
185	185	(b) The comptroller shall provide to each participating
186	186	institution a notice of the amount of the assessment against the
187	187	institution.
188	188	(c) A participating institution shall remit to the
189	189	comptroller the amount assessed against it under this section not
190	190	later than the 45th day after the date the institution receives the
191	191	notice under Subsection (b).
192	192	(d) Money remitted to the comptroller under this section may
193	193	be appropriated only for the purposes of administering this
194	194	subchapter.
195	195	Sec. 2257.107. PENALTY FOR REPORTING VIOLATION. The
196	196	comptroller may impose an administrative penalty against a
197	197	participating institution that does not timely file a report
198	198	required by Section 2257.105.
199	199	Sec. 2257.108. NOTICE OF COLLATERAL VIOLATION;
200	200	ADMINISTRATIVE PENALTY. (a) The comptroller may issue a notice to
201	201	a participating institution that the institution appears to be in
202	202	violation of collateral requirements under Section 2257.104 and
203	203	rules of the comptroller.
204	204	(b) The comptroller may impose an administrative penalty
205	205	against a participating institution that does not maintain
206	206	collateral in an amount and in the manner required by Section
207	207	2257.104 and rules of the comptroller if the participating
208	208	institution has not remedied the violation before the third
209	209	business day after the date a notice is issued under Subsection (a).
210	210	Sec. 2257.109. PENALTY FOR FAILURE TO PAY ASSESSMENT. The
211	211	comptroller may impose an administrative penalty against a
212	212	participating institution that does not pay an assessment against
213	213	it in the time provided by Section 2257.106(c).
214	214	Sec. 2257.110. PENALTY AMOUNT; PENALTIES NOT EXCLUSIVE.
215	215	(a) The comptroller by rule shall adopt a formula for determining
216	216	the amount of a penalty under this subchapter. For each violation
217	217	and for each day of a continuing violation, a penalty must be at
218	218	least $100 per day and not more than $1,000 per day. The penalty
219	219	must be based on factors that include:
220	220	(1) the aggregate average weekly deposit amounts
221	221	during the state fiscal year of the institution's deposits of
222	222	public funds;
223	223	(2) the number of violations by the institution during
224	224	the state fiscal year;
225	225	(3) the number of days of a continuing violation; and
226	226	(4) the average asset base of the institution as
227	227	reported on the institution's year-end report of condition.
228	228	(b) The penalties provided by Sections 2257.107-2257.109
229	229	are in addition to those provided by Subchapter D or other law.
230	230	Sec. 2257.111. PENALTY PROCEEDING CONTESTED CASE. A
231	231	proceeding to impose a penalty under Section 2257.107, 2257.108, or
232	232	2257.109 is a contested case under Chapter 2001.
233	233	Sec. 2257.112. SUIT TO COLLECT PENALTY. The attorney
234	234	general may sue to collect a penalty imposed under Section
235	235	2257.107, 2257.108, or 2257.109.
236	236	Sec. 2257.113. ENFORCEMENT STAYED PENDING REVIEW.
237	237	Enforcement of a penalty imposed under Section 2257.107, 2257.108,
238	238	or 2257.109 may be stayed during the time the order is under
239	239	judicial review if the participating institution pays the penalty
240	240	to the clerk of the court or files a supersedeas bond with the court
241	241	in the amount of the penalty. A participating institution that
242	242	cannot afford to pay the penalty or file the bond may stay the
243	243	enforcement by filing an affidavit in the manner required by the
244	244	Texas Rules of Civil Procedure for a party who cannot afford to file
245	245	security for costs, subject to the right of the comptroller to
246	246	contest the affidavit as provided by those rules.
247	247	Sec. 2257.114. USE OF COLLECTED PENALTIES. Money collected
248	248	as penalties under this subchapter may be appropriated only for the
249	249	purposes of administering this subchapter.
250	250	SECTION 4. The comptroller of public accounts shall adopt
251	251	rules as necessary to implement Subchapter F, Chapter 2257,
252	252	Government Code, as added by this Act, so that the pooled collateral
253	253	program established under that subchapter may begin operating not
254	254	later than the first business day of April 2010.
255	255	SECTION 5. This Act takes effect September 1, 2009.
256	256	* * * * *