Texas 2017 - 85th Regular

Texas Senate Bill SB1401 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1		-	85R27965 EES-F
2		-	By: Campbell S.B. No. 1401
3		-	(Dean)
4		-	Substitute the following for S.B. No. 1401: No.
	1	+	S.B. No. 1401
5	2
6	3
7		-	A BILL TO BE ENTITLED
8	4		AN ACT
9	5		relating to the regulation of banks and trust companies.
10	6		BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	7		SECTION 1. Section 31.002(a), Finance Code, is amended by
12	8		adding Subdivision (55-a) to read as follows:
13	9		(55-a) "Third-party service provider" means a person
14	10		who performs activities relating to the business of banking on
15	11		behalf of a depository institution for the depository institution's
16	12		customers or on behalf of another person directly engaged in
17	13		providing financial services for the person's customers. The term:
18	14		(A) includes a person who:
19	15		(i) provides data processing services;
20	16		(ii) performs activities in support of the
21	17		provision of financial services, including lending, transferring
22	18		funds, fiduciary activities, trading activities, and deposit
23	19		taking activities; or
24	20		(iii) provides Internet-related services,
25	21		including web services, processing electronic bill payments,
26	22		developing and maintaining mobile applications, system and
27	23		software development and maintenance, and security monitoring; and
28	24		(B) does not include a provider of an interactive
29	25		computer service or a general audience Internet or communications
30	26		platform, except to the extent that the service or platform is
31	27		specially designed or adapted for the business of banking and
32	28		activities relating to the business of banking.
33	29		SECTION 2. Section 31.107, Finance Code, is amended by
34	30		amending Subsections (a) and (b) and adding Subsection (d) to read
35	31		as follows:
36	32		(a) The banking commissioner may regulate and examine, to
37	33		the same extent as if the services or activities were performed by a
38	34		state bank on its own premises:
39	35		(1) the activities of a state bank affiliate; and
40	36		(2) the [performance of data processing, electronic
41	37		fund transfers, or other bank] services or activities of a
42	38		third-party service provider that a state bank or state bank
43	39		affiliate has contracted for or otherwise arranged to be performed
44	40		on behalf of the [a] state bank or state bank affiliate [by a
45	41		third-party contractor, other than a national bank].
46	42		(b) The banking commissioner may collect a fee from an
47	43		examined third-party service provider [contractor] or affiliate in
48	44		connection with each examination to cover the cost of the
49	45		examination or may collect that fee from the state banks that use
50	46		the examined third-party service provider [contractor].
51	47		(d) To promote regulatory efficiency, if, in the preceding
52	48		24 months, a third-party service provider or affiliate has been
53	49		examined by a federal or state financial services regulatory agency
54	50		or by a member agency of the Federal Financial Institutions
55	51		Examination Council, or its successor agency, the banking
56	52		commissioner may accept the results of that examination instead of
57	53		conducting the banking commissioner's own examination of the
58	54		third-party service provider or affiliate. Nothing in this
59	55		subsection shall be construed as limiting or restricting the
60	56		banking commissioner from participating in an examination of a
61	57		third-party service provider or affiliate conducted by a federal or
62	58		state financial services regulatory agency or by a member agency of
63	59		the Federal Financial Institutions Examination Council, or its
64	60		successor agency.
65	61		SECTION 3. Section 31.301(a), Finance Code, is amended to
66	62		read as follows:
67	63		(a) Except as expressly provided otherwise by this
68	64		subtitle, Chapter 11 or 12, or a rule adopted under this subtitle,
69	65		the following are confidential and may not be disclosed by the
70	66		banking commissioner or an employee of the department:
71	67		(1) information directly or indirectly obtained by the
72	68		department in any manner, including an application or examination,
73	69		concerning the financial condition or business affairs of a
74	70		financial institution, [or] a present, former, or prospective
75	71		shareholder, officer, director, or affiliate of a financial
76	72		institution, or a third-party service provider of a financial
77	73		institution or its affiliate, other than information in a published
78	74		statement or in the public portion of a call report or profit and
79	75		loss statement; and
80	76		(2) all related files and records of the department.
81	77		SECTION 4. Subchapter D, Chapter 31, Finance Code, is
82	78		amended by adding Section 31.3015 to read as follows:
83	79		Sec. 31.3015. DISCLOSURE TO STATE BANKS. The banking
84	80		commissioner may disclose to a state bank information about an
85	81		affiliate or third-party service provider of the state bank.
86	82		SECTION 5. Section 33.106, Finance Code, is amended to read
87	83		as follows:
88	84		Sec. 33.106. OFFICERS. (a) The board shall annually
89	85		appoint the officers of the bank, who serve at the will of the
90	86		board. Unless the banking commissioner consents otherwise in
91	87		writing, a person may not serve as an officer of the state bank if:
92	88		(1) the person is the subject of an order described by
93	89		Section 35.007(a); or
94	90		(2) the person has been convicted of a felony.
95	91		(b) The bank must have a principal executive officer
96	92		primarily responsible for the execution of board policies and
97	93		operation of the bank and an officer responsible for the
98	94		maintenance and storage of all corporate books and records of the
99	95		bank and for required attestation of signatures. Those positions
100	96		may not be held by the same person. The board may appoint other
101	97		officers of the bank as the board considers necessary.
102	98		SECTION 6. Section 35.007(a), Finance Code, is amended to
103	99		read as follows:
104	100		(a) Except as otherwise provided by law, without the prior
105	101		written approval of the banking commissioner, a person subject to a
106	102		final and enforceable removal or prohibition order issued by the
107	103		banking commissioner, or by another state, federal, or foreign
108	104		financial institution regulatory agency, may not:
109	105		(1) serve as a director, officer, or employee of a
110	106		state bank, state [or] trust company, or holding company of a state
111	107		bank, or as a director, officer, or employee with financial
112	108		responsibility of any other entity chartered, registered,
113	109		permitted, or licensed by the banking commissioner under the laws
114	110		of this state;
115	111		(2) directly or indirectly participate in any manner
116	112		in the management of such an entity;
117	113		(3) directly or indirectly vote for a director of such
118	114		an entity; or
119	115		(4) solicit, procure, transfer, attempt to transfer,
120	116		vote, or attempt to vote a proxy, consent, or authorization with
121	117		respect to voting rights in such an entity.
122	118		SECTION 7. Section 35.101, Finance Code, is amended by
123	119		amending Subsection (c) and adding Subsection (d) to read as
124	120		follows:
125	121		(c) Subject to Subsection (d), a [A] supervisor serves until
126	122		the earlier of:
127	123		(1) the expiration of the period stated in the order of
128	124		supervision; or
129	125		(2) the date the banking commissioner determines that
130	126		the requirements for abatement of the order have been satisfied.
131	127		(d) The banking commissioner may terminate an order of
132	128		supervision at any time.
133	129		SECTION 8. Section 35.206(a), Finance Code, is amended to
134	130		read as follows:
135	131		(a) On certification by the banking commissioner, a book,
136	132		record, paper, or document produced or testimony taken as provided
137	133		by Section 35.203 [35.204] and held by the department is admissible
138	134		as evidence in any case without prior proof of its correctness and
139	135		without other proof. The certified book, record, document, or
140	136		paper, or a certified copy, is prima facie evidence of the facts it
141	137		contains.
142	138		SECTION 9. Section 181.002(a), Finance Code, is amended by
143	139		adding Subdivision (47-b) and amending Subdivision (49) to read as
144	140		follows:
145	141		(47-b) "Third-party service provider" means a person
146	142		who performs activities relating to the trust business on behalf of
147	143		a trust institution for the trust institution's customers or on
148	144		behalf of another person directly engaged in providing financial
149	145		services for the person's customers. The term:
150	146		(A) includes a person who:
151	147		(i) provides data processing services;
152	148		(ii) performs activities in support of the
153	149		provision of financial services, including lending, transferring
154	150		funds, fiduciary activities, trading activities, and deposit
155	151		taking activities; or
156	152		(iii) provides Internet-related services,
157	153		including web services, processing electronic bill payments,
158	154		developing and maintaining mobile applications, system and
159	155		software development and maintenance, and security monitoring; and
160	156		(B) does not include a provider of an interactive
161	157		computer service or a general audience Internet or communications
162	158		platform, except to the extent that the service or platform is
163	159		specially designed or adapted for the trust business and activities
164	160		relating to the trust business.
165	161		(49) "Trust business" means the business of a company
166	162		holding itself out to the public as a fiduciary for hire or
167	163		compensation to hold or administer accounts. The term includes:
168	164		(A) the business of a trustee or custodian of an
169	165		individual retirement account described by Section 408(a),
170	166		Internal Revenue Code of 1986; and
171	167		(B) the business of an administrator or servicer
172	168		of individual retirement accounts described by Section 408(a),
173	169		Internal Revenue Code of 1986, who possesses or controls any
174	170		assets, including cash, of those accounts and who makes the
175	171		administrator's or servicer's services available to the public for
176	172		hire or compensation.
177	173		SECTION 10. Section 181.106, Finance Code, is amended to
178	174		read as follows:
179	175		Sec. 181.106. REGULATION AND EXAMINATION OF RELATED
180	176		ENTITIES. (a) The banking commissioner may regulate and examine,
181	177		to the same extent as if the services or activities were performed
182	178		by a state trust company on its own premises:
183	179		(1) the activities of a state trust company affiliate;
184	180		and
185	181		(2) the [performance of data processing, electronic
186	182		fund transfers, or other] services or activities of a third-party
187	183		service provider that a state trust company or state trust company
188	184		affiliate has contracted for or otherwise arranged to be performed
189	185		on behalf of the [a] state trust company or state trust company
190	186		affiliate [by a third-party contractor].
191	187		(b) The banking commissioner may collect a fee from an
192	188		examined third-party service provider or affiliate in connection
193	189		with each examination [the state trust company] to cover the cost of
194	190		the examination or may collect that fee from the state trust
195	191		companies that use the examined third-party service provider.
196	192		(c) To promote regulatory efficiency, if, in the preceding
197	193		24 months, a third-party service provider or affiliate has been
198	194		examined by a federal or state financial services regulatory agency
199	195		or by a member agency of the Federal Financial Institutions
200	196		Examination Council, or its successor agency, the banking
201	197		commissioner may accept the results of that examination instead of
202	198		conducting the banking commissioner's own examination of the
203	199		third-party service provider or affiliate. Nothing in this
204	200		subsection shall be construed as limiting or restricting the
205	201		banking commissioner from participating in an examination of a
206	202		third-party service provider or affiliate conducted by a federal or
207	203		state financial services regulatory agency or by a member agency of
208	204		the Federal Financial Institutions Examination Council, or its
209	205		successor agency.
210	206		SECTION 11. Section 181.301(a), Finance Code, is amended to
211	207		read as follows:
212	208		(a) Except as expressly provided otherwise by this subtitle
213	209		or a rule adopted under this subtitle [Section 181.003(a)(1)], the
214	210		following are confidential and may not be disclosed by the banking
215	211		commissioner or an employee of the department:
216	212		(1) information directly or indirectly obtained by the
217	213		department in any manner, including through an application or
218	214		examination, concerning the financial condition or business
219	215		affairs of a state trust company, [or] a present, former, or
220	216		prospective shareholder, participant, officer, director, manager,
221	217		or affiliate of the state trust company, or a third-party service
222	218		provider of the state trust company or its affiliate, other than the
223	219		public portions of a report of condition or income statement; and
224	220		(2) each related file or record of the department.
225	221		SECTION 12. Subchapter D, Chapter 181, Finance Code, is
226	222		amended by adding Section 181.3015 to read as follows:
227	223		Sec. 181.3015. DISCLOSURE TO STATE TRUST COMPANIES. The
228	224		banking commissioner may disclose to a state trust company
229	225		information about an affiliate or third-party service provider of
230	226		the state trust company.
231	227		SECTION 13. Section 182.021, Finance Code, is amended to
232	228		read as follows:
233	229		Sec. 182.021. ACTIVITIES NOT REQUIRING CHARTER. Subject to
234	230		Subchapter C, Chapter 187, a company does not engage in the trust
235	231		business in a manner requiring a state charter by:
236	232		(1) acting in a manner authorized by law and in the
237	233		scope of authority as an agent of a trust institution;
238	234		(2) rendering a service customarily performed as an
239	235		attorney in a manner approved and authorized by the Supreme Court of
240	236		Texas or State Bar of Texas;
241	237		(3) acting as trustee under a deed of trust made only
242	238		as security for the payment of money or for the performance of
243	239		another act;
244	240		(4) conducting business as a trust institution if the
245	241		exercise of fiduciary powers in this state by the trust institution
246	242		is not otherwise prohibited by law;
247	243		(5) engaging in a business regulated by the Office of
248	244		Consumer Credit Commissioner, except as limited by rules adopted by
249	245		the finance commission;
250	246		(6) receiving and distributing rents and proceeds of
251	247		sale as a licensed real estate broker on behalf of a principal in a
252	248		manner authorized by the Texas Real Estate Commission;
253	249		(7) engaging in a securities transaction or providing
254	250		an investment advisory service as a licensed and registered dealer,
255	251		salesman, or advisor to the extent that the activity is regulated by
256	252		the State Securities Board or the Securities and Exchange
257	253		Commission;
258	254		(8) engaging in the sale and administration of an
259	255		insurance product by an insurance company or agent authorized or
260	256		licensed by the Texas Department of Insurance to the extent that the
261	257		activity is regulated by the Texas Department of Insurance;
262	258		(9) engaging in the lawful sale of prepaid funeral
263	259		benefits under a permit issued by the banking commissioner under
264	260		Chapter 154;
265	261		(10) engaging in the lawful business of a perpetual
266	262		care cemetery corporation under Chapter 712, Health and Safety
267	263		Code;
268	264		(11) engaging as a principal in the money services
269	265		business under a license issued by the banking commissioner under
270	266		Chapter 151;
271	267		(12) acting as trustee under a voting trust as
272	268		provided by Section 6.251, Business Organizations Code;
273	269		(13) acting as trustee by a public, private, or
274	270		independent institution of higher education or a university system,
275	271		as defined by Section 61.003, Education Code, including an
276	272		affiliated foundation or corporation of such an institution or
277	273		system acting as trustee as provided by the Education Code;
278	274		(14) engaging in another activity expressly excluded
279	275		from the application of this subtitle by rule of the finance
280	276		commission;
281	277		(15) rendering services customarily performed by a
282	278		certified accountant in a manner authorized by the Texas State
283	279		Board of Public Accountancy;
284	280		(16) serving as trustee of a charitable trust as
285	281		provided by Section 2.106, Business Organizations Code;
286	282		(17) performing escrow or settlement services if
287	283		licensed or authorized under Title 11, Insurance Code;
288	284		(18) acting as a qualified intermediary in a tax
289	285		deferred exchange under Section 1031, Internal Revenue Code of
290	286		1986, and applicable regulations; [or]
291	287		(19) providing permitted services at a trust
292	288		representative office established in this state pursuant to
293	289		Subchapter C, Chapter 187; or
294	290		(20) acting as a trustee or custodian approved by the
295	291		Internal Revenue Service under 26 C.F.R. Section 1.408-2(e) of an
296	292		individual retirement account described by Section 408(a),
297	293		Internal Revenue Code of 1986.
298	294		SECTION 14. Section 183.106(a), Finance Code, is amended to
299	295		read as follows:
300	296		(a) The board shall annually appoint the officers of the
301	297		state trust company, who serve at the will of the board. Unless the
302	298		banking commissioner consents otherwise in writing, a person may
303	299		not serve as an officer of a state trust company if:
304	300		(1) the person is the subject of an order described by
305	301		Section 185.007(a);
306	302		(2) the person has been convicted of a felony; or
307	303		(3) the person has violated, with respect to a trust
308	304		under which the state trust company has fiduciary responsibility,
309	305		Section 113.052 or 113.053(a), Property Code, relating to loan of
310	306		trust funds and purchase or sale of trust property by the trustee,
311	307		and the violation has not been corrected.
312	308		SECTION 15. Section 185.007(a), Finance Code, is amended to
313	309		read as follows:
314	310		(a) Except as provided by other law, without the prior
315	311		written approval of the banking commissioner, a person subject to a
316	312		final and enforceable removal or prohibition order issued by the
317	313		banking commissioner, or by another state, federal, or foreign
318	314		financial institution regulatory agency, may not:
319	315		(1) serve as a director, officer, or employee of a
320	316		state trust company, [or] state bank, or holding company of a state
321	317		bank, or as a director, officer, or employee with financial
322	318		responsibility of any other entity chartered, registered,
323	319		permitted, or licensed by the banking commissioner under the laws
324	320		of this state while the order is in effect;
325	321		(2) directly or indirectly participate in any manner
326	322		in the management of such an entity;
327	323		(3) directly or indirectly vote for a director of such
328	324		an entity; or
329	325		(4) solicit, procure, transfer, attempt to transfer,
330	326		vote, or attempt to vote a proxy, consent, or authorization with
331	327		respect to voting rights in such an entity.
332	328		SECTION 16. Section 185.101, Finance Code, is amended by
333	329		amending Subsection (c) and adding Subsection (d) to read as
334	330		follows:
335	331		(c) Subject to Subsection (d), the [The] supervisor serves
336	332		until the earlier of:
337	333		(1) the expiration of the period stated in the order of
338	334		supervision; or
339	335		(2) the date the banking commissioner determines that
340	336		the requirements for abatement of the order have been satisfied.
341	337		(d) The banking commissioner may terminate an order of
342	338		supervision at any time.
343	339		SECTION 17. This Act takes effect September 1, 2017.
	340	+	______________________________ ______________________________
	341	+	President of the Senate Speaker of the House
	342	+	I hereby certify that S.B. No. 1401 passed the Senate on
	343	+	April 26, 2017, by the following vote: Yeas 31, Nays 0; and that
	344	+	the Senate concurred in House amendment on May 26, 2017, by the
	345	+	following vote: Yeas 31, Nays 0.
	346	+	______________________________
	347	+	Secretary of the Senate
	348	+	I hereby certify that S.B. No. 1401 passed the House, with
	349	+	amendment, on May 19, 2017, by the following vote: Yeas 144,
	350	+	Nays 0, two present not voting.
	351	+	______________________________
	352	+	Chief Clerk of the House
	353	+	Approved:
	354	+	______________________________
	355	+	Date
	356	+	______________________________
	357	+	Governor