S.B. No. 638
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 CERTAIN 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 rules must provide that deposits of public funds of a county are
not eligible for collateralization under the program. The
comptroller shall provide for a separate collateral pool for any
single participating institution's deposits of public funds.
(b) Under the pooled collateral program, the collateral of a
participating institution pledged for a public deposit may not be
combined with, cross-collateralized with, aggregated with, or
pledged to another participating institution's collateral pools
for pledging purposes.
(c) A participating institution may pledge its pooled
securities to more than one participating depositor under contract
with that participating institution.
(d) The pooled collateral program must provide for:
(1) participation in the program by a participating
institution and each affected public entity to be voluntary;
(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;
(2) the comptroller has approved the institution's
participation in the program; and
(3) the comptroller has approved or provided the
collateral security agreement form used.
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 the following to be a custodian trustee:
(1) a federal reserve bank;
(2) a banker's bank, as defined by Section 34.105,
Finance Code; and
(3) a federal home loan bank.
Sec. 2257.105. MONITORING COLLATERAL. (a) Each
participating institution shall file the following reports with the
comptroller electronically and as prescribed by rules of the
comptroller:
(1) a daily report of the aggregate ledger balance of
deposits of public agencies participating in the pooled collateral
program that are held by the institution, with each public entity's
funds held itemized;
(2) a weekly summary report of the total market 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
annual report that includes the participating institution's
financial statements.
(b) The comptroller shall provide the participating
institution an acknowledgment of each report received.
(c) The comptroller shall provide a daily report of the
market value of the securities held in each pool.
(d) The comptroller shall post each report on the
comptroller's Internet website.
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 amount of an
assessment must be based on factors that include the number of
public entity accounts a participating institution maintains, the
number of transactions a participating institution conducts, and
the aggregate average weekly deposit amounts during that state
fiscal year of each participating institution's deposits of public
funds collateralized under this subchapter. The comptroller by
rule shall establish the formula for determining the amount of the
assessments imposed under this subsection.
(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. The
comptroller may impose an administrative penalty against a
participating institution that does not timely file a report
required by Section 2257.105.
Sec. 2257.108. NOTICE OF COLLATERAL VIOLATION;
ADMINISTRATIVE PENALTY. (a) The comptroller may issue a notice to
a participating institution that the institution appears to be in
violation of collateral requirements under Section 2257.104 and
rules of the comptroller.
(b) 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 if the participating
institution has not remedied the violation before the third
business day after the date a notice is issued under Subsection (a).
Sec. 2257.109. PENALTY FOR FAILURE TO PAY ASSESSMENT. 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).
Sec. 2257.110. PENALTY AMOUNT; PENALTIES NOT EXCLUSIVE.
(a) The comptroller by rule shall adopt a formula for determining
the amount of a penalty under this subchapter. For each violation
and for each day of a continuing violation, a penalty must be at
least $100 per day and not more than $1,000 per day. The penalty
must be based on factors that include:
(1) the aggregate average weekly deposit amounts
during the state fiscal year of the institution's deposits of
public funds;
(2) the number of violations by the institution during
the state fiscal year;
(3) the number of days of a continuing violation; and
(4) the average asset base of the institution as
reported on the institution's year-end report of condition.
(b) 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 Section 2257.107, 2257.108, or
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 Section
2257.107, 2257.108, or 2257.109.
Sec. 2257.113. ENFORCEMENT STAYED PENDING REVIEW.
Enforcement of a penalty imposed under Section 2257.107, 2257.108,
or 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. Subsection (e), Section 404.031, 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,
"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 3. Subsection (d), Section 2257.041, 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).
SECTION 4. 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 2010.
SECTION 5. This Act takes effect September 1, 2009.
______________________________ ______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 638 passed the Senate on
April 7, 2009, by the following vote: Yeas 29, Nays 0, two present
not voting.
______________________________
Secretary of the Senate
I hereby certify that S.B. No. 638 passed the House on
May 26, 2009, by the following vote: Yeas 145, Nays 0, one present
not voting.
______________________________
Chief Clerk of the House
Approved:
______________________________
Date
______________________________
Governor