84R8514 ATP-F
By: Flynn H.B. No. 3308
A BILL TO BE ENTITLED
AN ACT
relating to the regulation of state trust companies.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 181.002(a), Finance Code, is amended by
adding Subdivision (15-a) and amending Subdivision (25) to read as
follows:
(15-a) "Equity capital" means the amount by which the
total assets of a state trust company exceed the total liabilities
of the trust company.
(25) "Insolvent" means a circumstance or condition in
which a state trust company:
(A) is unable or lacks the means to meet its
current obligations as they come due in the regular and ordinary
course of business, even if the value of its assets exceeds its
liabilities;
(B) has equity capital that is 50 percent or less
of the amount of restricted capital the trust company is required to
maintain [less than $500,000, as determined under regulatory
accounting principles];
(C) fails to maintain deposit insurance for its
deposits with the Federal Deposit Insurance Corporation or its
successor, or fails to maintain adequate security for its deposits
as provided by Section 184.301(c);
(D) sells or attempts to sell substantially all
of its assets or merges or attempts to merge substantially all of
its assets or business with another entity other than as provided by
Chapter 182; or
(E) attempts to dissolve or liquidate other than
as provided by Chapter 186.
SECTION 2. Section 181.104(a), Finance Code, is amended to
read as follows:
(a) The banking commissioner shall examine each state trust
company annually, or on another periodic basis as may be required by
rule or policy, or as the commissioner considers necessary to:
(1) safeguard the interests of clients, creditors,
shareholders, participants, or participant-transferees; and
(2) efficiently enforce applicable law.
SECTION 3. Section 181.107(c), Finance Code, is amended to
read as follows:
(c) A [Except for portions designated to be confidential by
the banking commissioner, a] statement of condition and income is a
public record except for:
(1) portions of the statement designated confidential
by the banking commissioner; and
(2) the statement of condition and income for a state
trust company exempt under Section 182.011 or 182.019 with regard
to the period during which the exemption is in effect.
SECTION 4. Section 182.008(a), Finance Code, is amended to
read as follows:
(a) The banking commissioner may not issue a charter to a
state trust company having restricted capital of less than $2 [$1]
million.
SECTION 5. Section 182.011, Finance Code, is amended by
amending Subsections (a), (d), and (e) and adding Subsection (a-1)
to read as follows:
(a) A state trust company may request in writing that it be
exempted from specified provisions of this subtitle. The banking
commissioner may grant the exemption in whole or in part, subject to
Subsection (c), if the banking commissioner finds that the state
trust company [does not transact business with the public. A state
trust company does not transact business with the public if it does
not make any sale, solicitation, arrangement, agreement, or
transaction to provide a trust or other business service, whether
or not for a fee, commission, or any other type of remuneration,
with]:
(1) has only family clients and transacts business
solely on behalf of family clients and their related interests [an
individual who is not related within the fourth degree of affinity
or consanguinity to an individual who controls the state trust
company]; [or]
(2) [a sole proprietorship, partnership, joint
venture, association, trust, estate, business trust, or
corporation that] is [not] wholly owned, directly or indirectly,
legally or beneficially, by one or more family members; and
(3) does not hold itself out to the general public as a
corporate fiduciary for hire [individuals related within the fourth
degree of affinity or consanguinity to an individual who controls
the state trust company].
(a-1) In this section:
(1) "Family client" includes:
(A) a family member;
(B) a former family member;
(C) a key employee of the trust company as
defined by and to the extent permitted by rules adopted under
Subsection (e), including a former key employee for a reasonable
transition period specified by rule;
(D) a nonprofit organization, charitable
foundation, charitable trust, including a charitable lead trust or
charitable remainder trust whose only current beneficiaries are
other family clients and charitable or nonprofit organizations, or
another charitable organization for which all the funding came
exclusively from one or more other family clients;
(E) the estate of a family member or former
family member;
(F) an irrevocable trust under which one or more
other family clients are the only current beneficiaries;
(G) an irrevocable trust funded exclusively by
one or more family clients in which other family clients and
nonprofit organizations, charitable foundations, charitable
trusts, or other charitable organizations are the only current
beneficiaries;
(H) a company wholly owned by, and operated for
the sole benefit of, one or more other family clients;
(I) a revocable trust of which one or more other
family clients are the sole grantors, including any such trust that
becomes irrevocable, wholly or partly, for a reasonable transition
period as specified by rule; and
(J) any other persons as may be permitted by
rules adopted under Subsection (e).
(2) "Family member," with respect to an individual,
means an individual related to the individual within the seventh
degree of consanguinity or affinity, as determined under Subchapter
B, Chapter 573, Government Code, except that a foster child is
considered the child of the foster parent and a person for whom a
guardian was appointed before the person's 18th birthday is
considered the child of the guardian.
(3) "Former family member" includes a former spouse or
stepchild who was a family member but is no longer a family member
due to a divorce or other similar event.
(d) A state trust company that is or has been exempt from a
provision of this subtitle under this section or a predecessor
statute may not transact business with the general public unless
the banking commissioner determines, as provided by Section
182.003, that public convenience and advantage will be promoted by
permitting the state trust company to engage in the trust business
with the general public.
(e) The finance commission may adopt rules:
(1) defining other circumstances under which a state
trust company may be exempted from a provision of this subtitle
because it does not transact business with the general public;
(2) specifying the provisions of this subtitle that
are subject to an exemption request; [and]
(3) establishing procedures and requirements for
obtaining, maintaining, or revoking an exemption; and
(4) defining or further defining terms used by this
section.
SECTION 6. Section 182.012, Finance Code, is amended by
amending Subsection (a) and adding Subsection (c) to read as
follows:
(a) A state trust company requesting an exemption under
Section 182.011 shall file an application with the banking
commissioner that includes:
(1) a nonrefundable application fee set by the finance
commission;
(2) a detailed sworn statement showing the state trust
company's assets and liabilities as of the end of the calendar month
preceding the filing of the application;
(3) a sworn statement of the reason for requesting the
exemption;
(4) a sworn statement that the state trust company:
(A) has or will have only family clients and
transacts or will transact business solely on behalf of family
clients and their related interests;
(B) is or will be wholly owned, directly or
indirectly, legally or beneficially, by one or more family members;
(C) does not or will not hold itself out to the
general public as a corporate fiduciary for hire; and
(D) [is not transacting business with the public
and that the company] will not transact business with the general
public without the prior written permission of the banking
commissioner;
(5) the current street mailing address and telephone
number of the physical location in this state at which the state
trust company will maintain its books and records, with a sworn
statement that the address given is true and correct and is not a
United States Postal Service post office box or a private mail box,
postal box, or mail drop; and
(6) a list of the specific provisions of this subtitle
for which the request for an exemption is made.
(c) In this section, "family client" and "family member"
have the meanings assigned by Section 182.011.
SECTION 7. Sections 182.013(a) and (c), Finance Code, are
amended to read as follows:
(a) An [Before June 30 of each year, an] exempt state trust
company shall file a certification annually with its statement of
condition and income, on a form provided by the banking
commissioner, that it is maintaining the conditions and limitations
of its exemption. The certification must be accompanied by a fee
set by the finance commission. [The certification is not valid
unless it bears an acknowledgment stamped by the department.]
(c) The [banking commissioner may examine or investigate
the] state trust company shall maintain records [periodically as]
necessary to verify the certification. The records are subject to
examination under Section 181.104.
SECTION 8. Section 182.015, Finance Code, is amended to
read as follows:
Sec. 182.015. CHANGE OF CONTROL OF EXEMPT STATE TRUST
COMPANY. [Control of an exempt state trust company may not be sold
or transferred with exempt status.] If control of an exempt state
trust company is sold or otherwise transferred, the acquiring
person must comply with Sections 182.003, 182.004, 182.005, [and]
183.001, and 183.002. For the exempt status of the state trust
company to continue, the acquiring person must file a certification
with the banking commissioner that the state trust company will
comply, or continue to comply, with the requirements of Section
182.011 after control is transferred. The banking commissioner may
examine or investigate the acquiring person and the state trust
company as necessary to verify the certification. If the
commissioner determines that the state trust company will not
comply, or continue to comply, with the requirements of Section
182.011 after control is transferred, the commissioner shall
terminate the exemption on the effective date of the transfer.
After the termination, the [automatically terminates on the
effective date of the transfer. The] acquiring person must file a
separate application to obtain a new [an] exemption for the state
trust company under Section 182.011.
SECTION 9. Section 182.019, Finance Code, is amended to
read as follows:
Sec. 182.019. PRIOR EXEMPTION. (a) Subject to Subsection
(b), a [A] state trust company that was exempt before September 1,
1997, may no longer operate with that prior exempt status after the
earlier of:
(1) September 1, 2020; or
(2) the date control is sold or otherwise transferred
[under a predecessor to this subtitle is considered exempt under
this subtitle].
(b) A state trust company may apply for a new exemption
under Section 182.011 before loss of its exempt status under
Subsection (a).
SECTION 10. Section 184.101(b), Finance Code, is amended to
read as follows:
(b) Unless the banking commissioner in writing approves
maintenance of a lesser amount, a state trust company must invest
and maintain an amount equal to at least 50 [40] percent of the
state trust company's restricted capital under Section 182.008 in
investment securities that are readily marketable and can be
converted to cash within four business days.
SECTION 11. The following provisions of the Finance Code
are repealed:
(1) Sections 181.104(b) and (c);
(2) Section 182.013(b); and
(3) Section 184.101(b).
SECTION 12. (a) Not later than September 1, 2020, a state
trust company that has restricted capital in an amount that is less
than the amount required by Section 182.008, Finance Code, as
amended by this Act, shall increase its restricted capital to at
least the amount required under that section, unless the state
trust company has an exemption under Section 182.011 or 182.019,
Finance Code, as amended by this Act. As permitted by Section
182.008(e), Finance Code, a state trust company may apply to the
banking commissioner of Texas for approval of restricted capital in
an amount that is less than the amount required under Section
182.008.
(b) A state trust company that has an exemption under
Section 182.019, Finance Code, on September 1, 2015, and has
restricted capital in an amount that is less than the amount
required by Section 182.008(a), Finance Code, as amended by this
Act, shall increase its restricted capital to at least $250,000 on
or before September 1, 2020.
(c) The Finance Commission of Texas may adopt rules
specifying procedures for ratable increases in restricted capital
for state trust companies as required by this section and for
deferrals and extensions of time for a state trust company acting in
good faith to achieve minimum required restricted capital.
SECTION 13. Not later than September 1, 2016, a state trust
company shall comply with the investment liquidity requirements of
Section 184.101(b), Finance Code, as amended by this Act. On
written application, the banking commissioner of Texas may extend
the period for compliance for a state trust company for good cause
shown.
SECTION 14. This Act takes effect September 1, 2015.