Texas 2009 - 81st Regular

Texas Senate Bill SB638 Compare Versions

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1	1	S.B. No. 638
2	2
3	3
4	4	AN ACT
5	5	relating to the collateralization of certain public funds;
6	6	providing administrative penalties.
7	7	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
8	8	SECTION 1. Chapter 2257, Government Code, is amended by
9	9	adding Subchapter F to read as follows:
10	10	SUBCHAPTER F. POOLED COLLATERAL TO SECURE
11	11	DEPOSITS OF CERTAIN PUBLIC FUNDS
12	12	Sec. 2257.101. DEFINITION. In this subchapter,
13	13	"participating institution" means a financial institution that
14	14	holds one or more deposits of public funds and that participates in
15	15	the pooled collateral program under this subchapter.
16	16	Sec. 2257.102. POOLED COLLATERAL PROGRAM. (a) As an
17	17	alternative to collateralization under Subchapter B, the
18	18	comptroller by rule shall establish a program for centralized
19	19	pooled collateralization of deposits of public funds and for
20	20	monitoring collateral maintained by participating institutions.
21	21	The rules must provide that deposits of public funds of a county are
22	22	not eligible for collateralization under the program. The
23	23	comptroller shall provide for a separate collateral pool for any
24	24	single participating institution's deposits of public funds.
25	25	(b) Under the pooled collateral program, the collateral of a
26	26	participating institution pledged for a public deposit may not be
27	27	combined with, cross-collateralized with, aggregated with, or
28	28	pledged to another participating institution's collateral pools
29	29	for pledging purposes.
30	30	(c) A participating institution may pledge its pooled
31	31	securities to more than one participating depositor under contract
32	32	with that participating institution.
33	33	(d) The pooled collateral program must provide for:
34	34	(1) participation in the program by a participating
35	35	institution and each affected public entity to be voluntary;
36	36	(2) uniform procedures for processing all collateral
37	37	transactions that are subject to an approved security agreement
38	38	described by Section 2257.103; and
39	39	(3) the pledging of a participating institution's
40	40	collateral securities using a single custodial account instead of
41	41	an account for each depositor of public funds.
42	42	Sec. 2257.103. PARTICIPATION IN POOLED COLLATERAL PROGRAM.
43	43	A financial institution may participate in the pooled collateral
44	44	program only if:
45	45	(1) the institution has entered into a binding
46	46	collateral security agreement with a public agency for a deposit of
47	47	public funds and the agreement permits the institution's
48	48	participation in the program;
49	49	(2) the comptroller has approved the institution's
50	50	participation in the program; and
51	51	(3) the comptroller has approved or provided the
52	52	collateral security agreement form used.
53	53	Sec. 2257.104. COLLATERAL REQUIRED; CUSTODIAN TRUSTEE.
54	54	(a) Each participating institution shall secure its deposits of
55	55	public funds with eligible securities the total value of which
56	56	equals at least 102 percent of the amount of the deposits of public
57	57	funds covered by a security agreement described by Section 2257.103
58	58	and deposited with the participating institution, reduced to the
59	59	extent that the United States or an instrumentality of the United
60	60	States insures the deposits. For purposes of determining whether
61	61	collateral is sufficient to secure a deposit of public funds,
62	62	Section 2257.022(b) does not apply to a deposit of public funds held
63	63	by the participating institution and collateralized under this
64	64	subchapter.
65	65	(b) A participating institution shall provide for the
66	66	collateral securities to be held by a custodian trustee, on behalf
67	67	of the participating institution, in trust for the benefit of the
68	68	pooled collateral program. A custodian trustee must qualify as a
69	69	custodian under Section 2257.041.
70	70	(c) The comptroller by rule shall regulate a custodian
71	71	trustee under the pooled collateral program in the manner provided
72	72	by Subchapter C to the extent practicable. The rules must ensure
73	73	that a custodian trustee depository does not own, is not owned by,
74	74	and is independent of the financial institution or institutions for
75	75	which it holds the securities in trust, except that the rules must
76	76	allow the following to be a custodian trustee:
77	77	(1) a federal reserve bank;
78	78	(2) a banker's bank, as defined by Section 34.105,
79	79	Finance Code; and
80	80	(3) a federal home loan bank.
81	81	Sec. 2257.105. MONITORING COLLATERAL. (a) Each
82	82	participating institution shall file the following reports with the
83	83	comptroller electronically and as prescribed by rules of the
84	84	comptroller:
85	85	(1) a daily report of the aggregate ledger balance of
86	86	deposits of public agencies participating in the pooled collateral
87	87	program that are held by the institution, with each public entity's
88	88	funds held itemized;
89	89	(2) a weekly summary report of the total market value
90	90	of securities held by a custodian trustee on behalf of the
91	91	participating institution;
92	92	(3) a monthly report listing the collateral securities
93	93	held by a custodian trustee on behalf of the participating
94	94	institution, together with the value of the securities; and
95	95	(4) as applicable, a participating institution's
96	96	annual report that includes the participating institution's
97	97	financial statements.
98	98	(b) The comptroller shall provide the participating
99	99	institution an acknowledgment of each report received.
100	100	(c) The comptroller shall provide a daily report of the
101	101	market value of the securities held in each pool.
102	102	(d) The comptroller shall post each report on the
103	103	comptroller's Internet website.
104	104	Sec. 2257.106. ANNUAL ASSESSMENT. (a) Once each state
105	105	fiscal year, the comptroller shall impose against each
106	106	participating institution an assessment in an amount sufficient to
107	107	pay the costs of administering this subchapter. The amount of an
108	108	assessment must be based on factors that include the number of
109	109	public entity accounts a participating institution maintains, the
110	110	number of transactions a participating institution conducts, and
111	111	the aggregate average weekly deposit amounts during that state
112	112	fiscal year of each participating institution's deposits of public
113	113	funds collateralized under this subchapter. The comptroller by
114	114	rule shall establish the formula for determining the amount of the
115	115	assessments imposed under this subsection.
116	116	(b) The comptroller shall provide to each participating
117	117	institution a notice of the amount of the assessment against the
118	118	institution.
119	119	(c) A participating institution shall remit to the
120	120	comptroller the amount assessed against it under this section not
121	121	later than the 45th day after the date the institution receives the
122	122	notice under Subsection (b).
123	123	(d) Money remitted to the comptroller under this section may
124	124	be appropriated only for the purposes of administering this
125	125	subchapter.
126	126	Sec. 2257.107. PENALTY FOR REPORTING VIOLATION. The
127	127	comptroller may impose an administrative penalty against a
128	128	participating institution that does not timely file a report
129	129	required by Section 2257.105.
130	130	Sec. 2257.108. NOTICE OF COLLATERAL VIOLATION;
131	131	ADMINISTRATIVE PENALTY. (a) The comptroller may issue a notice to
132	132	a participating institution that the institution appears to be in
133	133	violation of collateral requirements under Section 2257.104 and
134	134	rules of the comptroller.
135	135	(b) The comptroller may impose an administrative penalty
136	136	against a participating institution that does not maintain
137	137	collateral in an amount and in the manner required by Section
138	138	2257.104 and rules of the comptroller if the participating
139	139	institution has not remedied the violation before the third
140	140	business day after the date a notice is issued under Subsection (a).
141	141	Sec. 2257.109. PENALTY FOR FAILURE TO PAY ASSESSMENT. The
142	142	comptroller may impose an administrative penalty against a
143	143	participating institution that does not pay an assessment against
144	144	it in the time provided by Section 2257.106(c).
145	145	Sec. 2257.110. PENALTY AMOUNT; PENALTIES NOT EXCLUSIVE.
146	146	(a) The comptroller by rule shall adopt a formula for determining
147	147	the amount of a penalty under this subchapter. For each violation
148	148	and for each day of a continuing violation, a penalty must be at
149	149	least $100 per day and not more than $1,000 per day. The penalty
150	150	must be based on factors that include:
151	151	(1) the aggregate average weekly deposit amounts
152	152	during the state fiscal year of the institution's deposits of
153	153	public funds;
154	154	(2) the number of violations by the institution during
155	155	the state fiscal year;
156	156	(3) the number of days of a continuing violation; and
157	157	(4) the average asset base of the institution as
158	158	reported on the institution's year-end report of condition.
159	159	(b) The penalties provided by Sections 2257.107-2257.109
160	160	are in addition to those provided by Subchapter D or other law.
161	161	Sec. 2257.111. PENALTY PROCEEDING CONTESTED CASE. A
162	162	proceeding to impose a penalty under Section 2257.107, 2257.108, or
163	163	2257.109 is a contested case under Chapter 2001.
164	164	Sec. 2257.112. SUIT TO COLLECT PENALTY. The attorney
165	165	general may sue to collect a penalty imposed under Section
166	166	2257.107, 2257.108, or 2257.109.
167	167	Sec. 2257.113. ENFORCEMENT STAYED PENDING REVIEW.
168	168	Enforcement of a penalty imposed under Section 2257.107, 2257.108,
169	169	or 2257.109 may be stayed during the time the order is under
170	170	judicial review if the participating institution pays the penalty
171	171	to the clerk of the court or files a supersedeas bond with the court
172	172	in the amount of the penalty. A participating institution that
173	173	cannot afford to pay the penalty or file the bond may stay the
174	174	enforcement by filing an affidavit in the manner required by the
175	175	Texas Rules of Civil Procedure for a party who cannot afford to file
176	176	security for costs, subject to the right of the comptroller to
177	177	contest the affidavit as provided by those rules.
178	178	Sec. 2257.114. USE OF COLLECTED PENALTIES. Money collected
179	179	as penalties under this subchapter may be appropriated only for the
180	180	purposes of administering this subchapter.
181	181	SECTION 2. Subsection (e), Section 404.031, Government
182	182	Code, is amended to read as follows:
183	183	(e) Instead of depositing pledged securities with the
184	184	comptroller, a depository may deposit them with a custodian. The
185	185	custodian may be the (i) Texas Treasury Safekeeping Trust Company,
186	186	(ii) [or] a state or national bank that has a capital stock and
187	187	permanent surplus of not less than $5 million, is a state
188	188	depository, and has been designated as a custodian by the
189	189	comptroller, or (iii) a financial institution authorized to
190	190	exercise fiduciary powers that has a capital stock and permanent
191	191	surplus of not less than $5 million, has its main office, branch
192	192	office, or a trust office in this state, and has been designated as
193	193	a custodian by the comptroller. For purposes of this subsection,
194	194	"financial institution" has the meaning assigned by Section
195	195	201.101(1), Finance Code. The comptroller may designate those
196	196	custodial applicants that are acceptable and may reject those whose
197	197	management or condition, in the opinion of the comptroller, do not
198	198	warrant the placing of securities pledged by state depositories.
199	199	The comptroller may adopt and enforce rules governing the
200	200	designation and conduct of custodians with respect to the
201	201	acceptance and holding of securities pledged by state depositories
202	202	that the public interest requires and that are not inconsistent
203	203	with the law governing custodians as set forth in this chapter. The
204	204	state depository and the custodian of securities pledged by that
205	205	state depository may not be the same bank or be owned by the same
206	206	bank holding company. The securities shall be held in trust by the
207	207	custodian to secure funds deposited by the comptroller in the state
208	208	depository pledging the securities. On receipt of the securities,
209	209	the custodian shall immediately, by book entry or otherwise,
210	210	identify on its books and records the pledge of the securities and
211	211	shall promptly issue and deliver to the comptroller controlled
212	212	trust receipts for the securities pledged. The security evidenced
213	213	by the trust receipts is subject to inspection by the comptroller at
214	214	any time. The depository pledging the securities shall pay the
215	215	charges, if any, of the custodian bank for accepting and holding the
216	216	securities. The custodian, acting alone or through a permitted
217	217	institution, is for all purposes under state law and
218	218	notwithstanding Chapters 8 and 9, Business & Commerce Code, the
219	219	bailee or agent of the comptroller. The security interest arising
220	220	out of a pledge of securities to secure deposits of the state is
221	221	created, attaches, and is perfected for all purposes under state
222	222	law from the time the custodian identifies the pledge of the
223	223	securities on its books and records and issues the trust receipts.
224	224	The security interest remains perfected as of that time in the hands
225	225	of all subsequent custodians and permitted institutions.
226	226	SECTION 3. Subsection (d), Section 2257.041, Government
227	227	Code, is amended to read as follows:
228	228	(d) A custodian must be approved by the public entity and
229	229	be:
230	230	(1) a state or national bank that:
231	231	(A) is designated by the comptroller as a state
232	232	depository;
233	233	(B) has its main office or a branch office in this
234	234	state; and
235	235	(C) has a capital stock and permanent surplus of
236	236	$5 million or more;
237	237	(2) the Texas Treasury Safekeeping Trust Company;
238	238	(3) a Federal Reserve Bank or a branch of a Federal
239	239	Reserve Bank; [or]
240	240	(4) a federal home loan bank; or
241	241	(5) a financial institution authorized to exercise
242	242	fiduciary powers that is designated by the comptroller as a
243	243	custodian pursuant to Section 404.031(e).
244	244	SECTION 4. The comptroller of public accounts shall adopt
245	245	rules as necessary to implement Subchapter F, Chapter 2257,
246	246	Government Code, as added by this Act, so that the pooled collateral
247	247	program established under that subchapter may begin operating not
248	248	later than the first business day of April 2010.
249	249	SECTION 5. This Act takes effect September 1, 2009.
250	250	______________________________ ______________________________
251	251	President of the Senate Speaker of the House
252	252	I hereby certify that S.B. No. 638 passed the Senate on
253	253	April 7, 2009, by the following vote: Yeas 29, Nays 0, two present
254	254	not voting.
255	255	______________________________
256	256	Secretary of the Senate
257	257	I hereby certify that S.B. No. 638 passed the House on
258	258	May 26, 2009, by the following vote: Yeas 145, Nays 0, one present
259	259	not voting.
260	260	______________________________
261	261	Chief Clerk of the House
262	262	Approved:
263	263	______________________________
264	264	Date
265	265	______________________________
266	266	Governor