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


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
 
 
  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
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