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�	S.B.�No.�638

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�	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.
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�	______________________________	______________________________
�	���President of the Senate	Speaker of the House�����
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�	�������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.
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�	______________________________
�	Secretary of the Senate����
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�	�������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.
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�	______________________________
�	Chief Clerk of the House���
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�	Approved:
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�	______________________________�
�	������������Date
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�	______________________________�
�	����������Governor