Bill Text: TX SB1401 | 2017-2018 | 85th Legislature | Enrolled

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Bill Title: Relating to the regulation of banks and trust companies.

Spectrum: Partisan Bill (Republican 2-0)

Status: (Passed) 2017-06-09 - Effective on 9/1/17 [SB1401 Detail]

Download: Texas-2017-SB1401-Enrolled.html

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S.B. No. 1401

AN ACT
relating to the regulation of banks and trust companies.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 31.002(a), Finance Code, is amended by
adding Subdivision (55-a) to read as follows:
(55-a) "Third-party service provider" means a person
who performs activities relating to the business of banking on
behalf of a depository institution for the depository institution's
customers or on behalf of another person directly engaged in
providing financial services for the person's customers. The term:
(A) includes a person who:
(i) provides data processing services;
(ii) performs activities in support of the
provision of financial services, including lending, transferring
funds, fiduciary activities, trading activities, and deposit
taking activities; or
(iii) provides Internet-related services,
including web services, processing electronic bill payments,
developing and maintaining mobile applications, system and
software development and maintenance, and security monitoring; and
(B) does not include a provider of an interactive
computer service or a general audience Internet or communications
platform, except to the extent that the service or platform is
specially designed or adapted for the business of banking and
activities relating to the business of banking.
SECTION 2. Section 31.107, Finance Code, is amended by
amending Subsections (a) and (b) and adding Subsection (d) to read
as follows:
(a) The banking commissioner may regulate and examine, to
the same extent as if the services or activities were performed by a
state bank on its own premises:
(1) the activities of a state bank affiliate; and
(2) the [performance of data processing, electronic
fund transfers, or other bank] services or activities of a
third-party service provider that a state bank or state bank
affiliate has contracted for or otherwise arranged to be performed
on behalf of the [a] state bank or state bank affiliate [by a
third-party contractor, other than a national bank].
(b) The banking commissioner may collect a fee from an
examined third-party service provider [contractor] or affiliate in
connection with each examination to cover the cost of the
examination or may collect that fee from the state banks that use
the examined third-party service provider [contractor].
(d) To promote regulatory efficiency, if, in the preceding
24 months, a third-party service provider or affiliate has been
examined by a federal or state financial services regulatory agency
or by a member agency of the Federal Financial Institutions
Examination Council, or its successor agency, the banking
commissioner may accept the results of that examination instead of
conducting the banking commissioner's own examination of the
third-party service provider or affiliate. Nothing in this
subsection shall be construed as limiting or restricting the
banking commissioner from participating in an examination of a
third-party service provider or affiliate conducted by a federal or
state financial services regulatory agency or by a member agency of
the Federal Financial Institutions Examination Council, or its
successor agency.
SECTION 3. Section 31.301(a), Finance Code, is amended to
read as follows:
(a) Except as expressly provided otherwise by this
subtitle, Chapter 11 or 12, or a rule adopted under this subtitle,
the following are confidential and may not be disclosed by the
banking commissioner or an employee of the department:
(1) information directly or indirectly obtained by the
department in any manner, including an application or examination,
concerning the financial condition or business affairs of a
financial institution, [or] a present, former, or prospective
shareholder, officer, director, or affiliate of a financial
institution, or a third-party service provider of a financial
institution or its affiliate, other than information in a published
statement or in the public portion of a call report or profit and
loss statement; and
(2) all related files and records of the department.
SECTION 4. Subchapter D, Chapter 31, Finance Code, is
amended by adding Section 31.3015 to read as follows:
Sec. 31.3015. DISCLOSURE TO STATE BANKS. The banking
commissioner may disclose to a state bank information about an
affiliate or third-party service provider of the state bank.
SECTION 5. Section 33.106, Finance Code, is amended to read
as follows:
Sec. 33.106. OFFICERS. (a) The board shall annually
appoint the officers of the bank, who serve at the will of the
board. Unless the banking commissioner consents otherwise in
writing, a person may not serve as an officer of the state bank if:
(1) the person is the subject of an order described by
Section 35.007(a); or
(2) the person has been convicted of a felony.
(b) The bank must have a principal executive officer
primarily responsible for the execution of board policies and
operation of the bank and an officer responsible for the
maintenance and storage of all corporate books and records of the
bank and for required attestation of signatures. Those positions
may not be held by the same person. The board may appoint other
officers of the bank as the board considers necessary.
SECTION 6. Section 35.007(a), Finance Code, is amended to
read as follows:
(a) Except as otherwise provided by law, without the prior
written approval of the banking commissioner, a person subject to a
final and enforceable removal or prohibition order issued by the
banking commissioner, or by another state, federal, or foreign
financial institution regulatory agency, may not:
(1) serve as a director, officer, or employee of a
state bank, state [or] trust company, or holding company of a state
bank, or as a director, officer, or employee with financial
responsibility of any other entity chartered, registered,
permitted, or licensed by the banking commissioner under the laws
of this state;
(2) directly or indirectly participate in any manner
in the management of such an entity;
(3) directly or indirectly vote for a director of such
an entity; or
(4) solicit, procure, transfer, attempt to transfer,
vote, or attempt to vote a proxy, consent, or authorization with
respect to voting rights in such an entity.
SECTION 7. Section 35.101, Finance Code, is amended by
amending Subsection (c) and adding Subsection (d) to read as
follows:
(c) Subject to Subsection (d), a [A] supervisor serves until
the earlier of:
(1) the expiration of the period stated in the order of
supervision; or
(2) the date the banking commissioner determines that
the requirements for abatement of the order have been satisfied.
(d) The banking commissioner may terminate an order of
supervision at any time.
SECTION 8. Section 35.206(a), Finance Code, is amended to
read as follows:
(a) On certification by the banking commissioner, a book,
record, paper, or document produced or testimony taken as provided
by Section 35.203 [35.204] and held by the department is admissible
as evidence in any case without prior proof of its correctness and
without other proof. The certified book, record, document, or
paper, or a certified copy, is prima facie evidence of the facts it
contains.
SECTION 9. Section 181.002(a), Finance Code, is amended by
adding Subdivision (47-b) and amending Subdivision (49) to read as
follows:
(47-b) "Third-party service provider" means a person
who performs activities relating to the trust business on behalf of
a trust institution for the trust institution's customers or on
behalf of another person directly engaged in providing financial
services for the person's customers. The term:
(A) includes a person who:
(i) provides data processing services;
(ii) performs activities in support of the
provision of financial services, including lending, transferring
funds, fiduciary activities, trading activities, and deposit
taking activities; or
(iii) provides Internet-related services,
including web services, processing electronic bill payments,
developing and maintaining mobile applications, system and
software development and maintenance, and security monitoring; and
(B) does not include a provider of an interactive
computer service or a general audience Internet or communications
platform, except to the extent that the service or platform is
specially designed or adapted for the trust business and activities
relating to the trust business.
(49) "Trust business" means the business of a company
holding itself out to the public as a fiduciary for hire or
compensation to hold or administer accounts. The term includes:
(A) the business of a trustee or custodian of an
individual retirement account described by Section 408(a),
Internal Revenue Code of 1986; and
(B) the business of an administrator or servicer
of individual retirement accounts described by Section 408(a),
Internal Revenue Code of 1986, who possesses or controls any
assets, including cash, of those accounts and who makes the
administrator's or servicer's services available to the public for
hire or compensation.
SECTION 10. Section 181.106, Finance Code, is amended to
read as follows:
Sec. 181.106. REGULATION AND EXAMINATION OF RELATED
ENTITIES. (a) The banking commissioner may regulate and examine,
to the same extent as if the services or activities were performed
by a state trust company on its own premises:
(1) the activities of a state trust company affiliate;
and
(2) the [performance of data processing, electronic
fund transfers, or other] services or activities of a third-party
service provider that a state trust company or state trust company
affiliate has contracted for or otherwise arranged to be performed
on behalf of the [a] state trust company or state trust company
affiliate [by a third-party contractor].
(b) The banking commissioner may collect a fee from an
examined third-party service provider or affiliate in connection
with each examination [the state trust company] to cover the cost of
the examination or may collect that fee from the state trust
companies that use the examined third-party service provider.
(c) To promote regulatory efficiency, if, in the preceding
24 months, a third-party service provider or affiliate has been
examined by a federal or state financial services regulatory agency
or by a member agency of the Federal Financial Institutions
Examination Council, or its successor agency, the banking
commissioner may accept the results of that examination instead of
conducting the banking commissioner's own examination of the
third-party service provider or affiliate. Nothing in this
subsection shall be construed as limiting or restricting the
banking commissioner from participating in an examination of a
third-party service provider or affiliate conducted by a federal or
state financial services regulatory agency or by a member agency of
the Federal Financial Institutions Examination Council, or its
successor agency.
SECTION 11. Section 181.301(a), Finance Code, is amended to
read as follows:
(a) Except as expressly provided otherwise by this subtitle
or a rule adopted under this subtitle [Section 181.003(a)(1)], the
following are confidential and may not be disclosed by the banking
commissioner or an employee of the department:
(1) information directly or indirectly obtained by the
department in any manner, including through an application or
examination, concerning the financial condition or business
affairs of a state trust company, [or] a present, former, or
prospective shareholder, participant, officer, director, manager,
or affiliate of the state trust company, or a third-party service
provider of the state trust company or its affiliate, other than the
public portions of a report of condition or income statement; and
(2) each related file or record of the department.
SECTION 12. Subchapter D, Chapter 181, Finance Code, is
amended by adding Section 181.3015 to read as follows:
Sec. 181.3015. DISCLOSURE TO STATE TRUST COMPANIES. The
banking commissioner may disclose to a state trust company
information about an affiliate or third-party service provider of
the state trust company.
SECTION 13. Section 182.021, Finance Code, is amended to
read as follows:
Sec. 182.021. ACTIVITIES NOT REQUIRING CHARTER. Subject to
Subchapter C, Chapter 187, a company does not engage in the trust
business in a manner requiring a state charter by:
(1) acting in a manner authorized by law and in the
scope of authority as an agent of a trust institution;
(2) rendering a service customarily performed as an
attorney in a manner approved and authorized by the Supreme Court of
Texas or State Bar of Texas;
(3) acting as trustee under a deed of trust made only
as security for the payment of money or for the performance of
another act;
(4) conducting business as a trust institution if the
exercise of fiduciary powers in this state by the trust institution
is not otherwise prohibited by law;
(5) engaging in a business regulated by the Office of
Consumer Credit Commissioner, except as limited by rules adopted by
the finance commission;
(6) receiving and distributing rents and proceeds of
sale as a licensed real estate broker on behalf of a principal in a
manner authorized by the Texas Real Estate Commission;
(7) engaging in a securities transaction or providing
an investment advisory service as a licensed and registered dealer,
salesman, or advisor to the extent that the activity is regulated by
the State Securities Board or the Securities and Exchange
Commission;
(8) engaging in the sale and administration of an
insurance product by an insurance company or agent authorized or
licensed by the Texas Department of Insurance to the extent that the
activity is regulated by the Texas Department of Insurance;
(9) engaging in the lawful sale of prepaid funeral
benefits under a permit issued by the banking commissioner under
Chapter 154;
(10) engaging in the lawful business of a perpetual
care cemetery corporation under Chapter 712, Health and Safety
Code;
(11) engaging as a principal in the money services
business under a license issued by the banking commissioner under
Chapter 151;
(12) acting as trustee under a voting trust as
provided by Section 6.251, Business Organizations Code;
(13) acting as trustee by a public, private, or
independent institution of higher education or a university system,
as defined by Section 61.003, Education Code, including an
affiliated foundation or corporation of such an institution or
system acting as trustee as provided by the Education Code;
(14) engaging in another activity expressly excluded
from the application of this subtitle by rule of the finance
commission;
(15) rendering services customarily performed by a
certified accountant in a manner authorized by the Texas State
Board of Public Accountancy;
(16) serving as trustee of a charitable trust as
provided by Section 2.106, Business Organizations Code;
(17) performing escrow or settlement services if
licensed or authorized under Title 11, Insurance Code;
(18) acting as a qualified intermediary in a tax
deferred exchange under Section 1031, Internal Revenue Code of
1986, and applicable regulations; [or]
(19) providing permitted services at a trust
representative office established in this state pursuant to
Subchapter C, Chapter 187; or
(20) acting as a trustee or custodian approved by the
Internal Revenue Service under 26 C.F.R. Section 1.408-2(e) of an
individual retirement account described by Section 408(a),
Internal Revenue Code of 1986.
SECTION 14. Section 183.106(a), Finance Code, is amended to
read as follows:
(a) The board shall annually appoint the officers of the
state trust company, who serve at the will of the board. Unless the
banking commissioner consents otherwise in writing, a person may
not serve as an officer of a state trust company if:
(1) the person is the subject of an order described by
Section 185.007(a);
(2) the person has been convicted of a felony; or
(3) the person has violated, with respect to a trust
under which the state trust company has fiduciary responsibility,
Section 113.052 or 113.053(a), Property Code, relating to loan of
trust funds and purchase or sale of trust property by the trustee,
and the violation has not been corrected.
SECTION 15. Section 185.007(a), Finance Code, is amended to
read as follows:
(a) Except as provided by other law, without the prior
written approval of the banking commissioner, a person subject to a
final and enforceable removal or prohibition order issued by the
banking commissioner, or by another state, federal, or foreign
financial institution regulatory agency, may not:
(1) serve as a director, officer, or employee of a
state trust company, [or] state bank, or holding company of a state
bank, or as a director, officer, or employee with financial
responsibility of any other entity chartered, registered,
permitted, or licensed by the banking commissioner under the laws
of this state while the order is in effect;
(2) directly or indirectly participate in any manner
in the management of such an entity;
(3) directly or indirectly vote for a director of such
an entity; or
(4) solicit, procure, transfer, attempt to transfer,
vote, or attempt to vote a proxy, consent, or authorization with
respect to voting rights in such an entity.
SECTION 16. Section 185.101, Finance Code, is amended by
amending Subsection (c) and adding Subsection (d) to read as
follows:
(c) Subject to Subsection (d), the [The] supervisor serves
until the earlier of:
(1) the expiration of the period stated in the order of
supervision; or
(2) the date the banking commissioner determines that
the requirements for abatement of the order have been satisfied.
(d) The banking commissioner may terminate an order of
supervision at any time.
SECTION 17. This Act takes effect September 1, 2017.
______________________________ ______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 1401 passed the Senate on
April 26, 2017, by the following vote: Yeas 31, Nays 0; and that
the Senate concurred in House amendment on May 26, 2017, by the
following vote: Yeas 31, Nays 0.
______________________________
Secretary of the Senate
I hereby certify that S.B. No. 1401 passed the House, with
amendment, on May 19, 2017, by the following vote: Yeas 144,
Nays 0, two present not voting.
______________________________
Chief Clerk of the House
Approved:
______________________________
Date
______________________________
Governor