TITLE 7. BANKING AND SECURITIES
PART 2. TEXAS DEPARTMENT OF BANKING
Subchapter A. General
Source: The provisions of this §17.1 adopted to be effective March 12 1998, 23 TexReg 2289, repealed to be effective July 11, 2002, 27 TexReg 5961.
(a) An advertisement published by or on behalf of a trust company may not include the following:
(1) a guaranteed rate of return or interest rate on funds deposited in trust;
(2) a statement that tends to deceive or mislead the public; or
(3) a term that may deceive the public into belief that the trust company is engaged in the banking business.
(b) Advertisements published by or on behalf of a trust company must be retained in the trust company's records for examination by department personnel.
(c) A trust company that violates this section is subject to an enforcement action initiated by the banking commissioner under Finance Code, §§185.001, et seq.
Source: The provisions of this §17.2 adopted to be effective March 12, 1998, 23 TexReg 2289; amended to be effective July 11, 2002, 27 TexReg 5962.
(a) Agreement in writing. A sale or lease agreement between a trust company and an officer, director, principal shareholder, or affiliate of the trust company must be in writing. Existing verbal agreements must be reduced to writing and approved by the board.
(b) Terms of agreement. A sale or lease agreement between a trust company and an officer, director, principal shareholder, or affiliate must comply with applicable laws and regulations, be subject to the exercise of prudent judgment, and have terms and rates that are substantially equivalent to or more favorable to the trust company than those prevailing at the time for comparable transactions with or involving nonaffiliated parties.
(c) Board action. All proposed transactions subject to Finance Code, §183.109(a), must be considered and voted upon by the board. Under Finance Code, §183.109(a), without the prior approval of a disinterested majority of the board, the transaction at issue must be submitted for prior approval of the banking commissioner. For purposes of this section, approval of a disinterested majority of the board is obtained in the manner specified by the Texas Business Organizations Code, §21.418, with respect to a trust association, or §101.255, with respect to a limited trust association.
(d) Application for approval. If a sale or lease agreement requires the written approval of the banking commissioner prior to consummating, renewing, or extending a sale or lease agreement, a written request for approval must be submitted to the banking commissioner at least 60 days prior to the proposed effective date of the sale or lease agreement and must include the following information:
(1) a copy of the proposed sale or lease agreement;
(2) a complete description of the personal or real property to be sold or leased;
(3) a full disclosure of all existing transactions and/or relationships, whether direct or indirect, between the trust company and the parties involved;
(4) in the case of a lease agreement involving real property, a copy of the minutes of the board meeting reflecting an analysis of the information contained in this subsection;
(5) a certified copy of a board resolution approving the transaction and indicating those directors voting or abstaining, as the case may be, and either:
(A) evidence that the transaction received the approval of a disinterested majority of the board; or
(B) a statement explaining the reasons the approval of a disinterested majority of the board could not be obtained;
(6) copies of appropriate supporting documentation, including analysis of comparable terms and rates for the real or personal property to be sold or leased;
(7) in the case of a lease agreement, evidence demonstrating that the trust company will account for the lease in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 842, Leases; and
(8) other information which the banking commissioner may request.
(e) Records. A trust company shall maintain the originals of all sale or lease agreements with an officer, director, manager, managing participant, principal shareholder, or principal participant of the trust company, or an affiliate, which documents must be made available at all times to the Texas Department of Banking for examination and review. For purposes of this subsection, required documentation need not be retained beyond three years after the expiration of the sale or lease agreement to which the documentation pertains.
(f) Exemption. Subsection (d) of this section does not apply to a legally binding, written lease entered into by a trust company prior to June 16, 1991, until such lease is renewed or extended beyond its original term.
Source: The provisions of this §17.3 adopted to be effective July 2, 1998, 23 TexReg 6715; amended to be effective July 11, 2002, 27 TexReg 5962; amended to be effective November 4, 2010, 35 TexReg 9696; amended to be effective September 8, 2022, 47 TexReg 5332.
(a) Compliance required. Pursuant to Finance Code, §183.112, a trust company is required to maintain a bond for protection and indemnity of clients, in reasonable amounts against dishonesty, fraud, defalcation, forgery, theft, and other insurable losses with a corporate insurance or surety company. Unless the banking commissioner waives the bonding requirement for a particular individual, a bond is required for each director, manager, managing participant, officer, and employee without regard to whether the person receives salary or other compensation. In addition to complying with Finance Code, §183.112, a trust company shall comply with this section.
(b) Types of bonds. Bonds must be obtained from a corporate insurance or surety company authorized to do business in this state, or acceptable to the banking commissioner and otherwise lawfully permitted to issue the coverage against all losses arising from dishonesty, fraud, defalcation, forgery, theft, errors and omission, and other similar insurable losses determined by the banking commissioner to be reasonably appropriate. In lieu of individual bonds, schedule or blanket bonds may be utilized, if in a form acceptable to the banking commissioner, to provide coverage for all directors, managers, managing participants, officers, and employees of a trust company. In addition, a trust company through its board must demonstrate that it has conducted a thorough review of the risks associated with the trust business conducted to determine if additional specialized bond coverages should be obtained. The board's review must be fully documented in its minutes.
(c) Holding company's comprehensive insurance coverage. In lieu of obtaining individual or blanket bond coverage, a trust company which is owned and controlled by a holding company, may utilize a holding company's comprehensive insurance coverage to satisfy the requirements of Finance Code, §183.112, and this section. Utilization by a trust company of its holding company's comprehensive insurance coverage must be lawfully permitted under terms of the comprehensive insurance policy and the insurance laws of this state. Evidence of bond coverage for a trust company's directors, officers, and employees must be provided to the banking commissioner.
(d) Records. A trust company shall retain all original bonds to demonstrate compliance with Finance Code, §183.112, and this section, which documents must be available at all times to the department for examination and review.
Source: The provisions of this §17.4 adopted to be effective September 3, 1998, 23 TexReg 8832; amended to be effective July 11, 2002, 27 TexReg 5962.
(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.
(1) "Cybersecurity incident" means any observed occurrence in an information system, whether maintained by the trust company or by an affiliate or third party service provider at the direction of the trust company, that:
(A) jeopardizes the cybersecurity of the information system or the information the system processes, stores or transmits; or
(B) violates the security policies, security procedures or acceptable use policies of the information system owner to the extent such occurrence results from unauthorized or malicious activity.
(2) "Information system" means a set of applications, services, information technology assets or other information-handling components organized for the collection, processing, maintenance, use, sharing, dissemination or disposition of electronic information, including the operating environment as well as any specialized system such as telephone switching or exchange systems and environmental control systems.
(b) Notice required. A state trust company shall notify the banking commissioner and submit the information required by subsection (c) of this section as soon as practicable but prior to customer notification, and not later than 15 days following the trust company's determination that a cybersecurity incident regarding the trust company's information system will likely:
(1) require submission of a notice or report to another state or federal regulatory agency or to a self-regulatory body other than the notice required by this section;
(2) require sending a data breach notification to trust company clients or beneficiaries of trusts and custodial arrangements handled by the trust company under applicable state or federal law, including Business and Commerce Code, §521.053, or a similar law of another state; or
(3) substantively impact the ability of the state trust company to effect transactions on behalf of its clients or beneficiaries of trusts and custodial arrangements handled by the trust company, accurately report transactions to clients and beneficiaries, or otherwise conduct trust company business.
(c) Content of notice. The confidential notice required by subsection (b) of this section must include, to the extent known at the time of submission:
(1) a brief description of the cybersecurity incident, including the approximate date of the incident, the date the incident was discovered, and the nature of any data that may have been illegally obtained or accessed;
(2) subject to subsection (d) of this section, a list of the state and federal regulatory agencies, self-regulatory bodies, and foreign regulatory agencies to whom notice has been or will be provided; and
(3) the name, address, telephone number, and email address of the employee or agent of the trust company from whom additional information may be obtained regarding the incident.
(d) Omission of certain information. The filing of a suspicious activity report (SAR) related to the cybersecurity incident under applicable federal law constitutes a notice described by subsection (b)(1) of this section. However, the trust company should not reference or mention the filing of a SAR in the notice filed with the commissioner.
(e) Incident response plan. The notice requirement imposed by this section must be incorporated into the trust company's written incident response plan, maintained as part of the trust company's information security program.
(f) Exemptions. This section does not apply to a state trust company that is exempt under Finance Code, §182.011.
Source: The provisions of this §17.5 adopted to be effective January 2, 2020, 44 TexReg 8234.
Subchapter B. Examination and Call Reports
(a) Purpose. The purpose of this section is to provide for the preservation and location of trust company records to enhance the examination process by the department and to provide flexibility to trust companies in conducting their affairs. A trust company that maintains fiduciary records at one or more locations other than its principal place of business should be aware that a separate examination may be required at each such location, the cost of which will be borne by the trust company. This section may not be construed to prevent the maintenance of a duplicate set of records if the trust company considers such to be advisable.
(b) Corporate records. Those books and records of a trust company that are related to corporate governance and operations must be kept and maintained at the trust company's principal place of business in this state. Such books and records include but are not necessarily limited to:
(1) general and subsidiary ledgers;
(2) income and expense ledgers;
(3) supporting documentation for assets and liabilities;
(4) contracts with suppliers and service providers;
(5) corporate state and federal tax information and documentation;
(6) correspondence with the department;
(7) directors minutes;
(8) shareholders minutes;
(9) corporate governance documents such as bylaws, certificate of formation, and stock register; and
(10) reports of condition and income.
(c) Fiduciary records. Those books and records of a trust company that are related to fiduciary accounts and operations may be kept and maintained either at the trust company's principal place of business in this state or at the place where the trust company's fiduciary accounts are administered; provided that such books and records may not be divided and kept partially at different locations without the prior consent of the department. Such books and records include but are not necessarily limited to:
(1) governing documents for each trust, custodial account, agency or other type of account administered;
(2) documentation supporting the purchase or sale of any investments from or to the accounts administered, including broker confirmations and safekeeping receipts;
(3) documentation on any assets accepted in-kind with supporting documentation justifying the amount booked;
(4) account reviews, including administrative and asset reviews;
(5) copies of all correspondence on each account administered, including documents relating to litigation, bankruptcy proceedings or other court action;
(6) copies of income tax returns on any accounts which are required to submit income tax returns;
(7) copies of customer account statements;
(8) trial balance of all accounts administered reflecting all investments, including principal cash and income cash, at market value and cost;
(9) overdraft listing of any overdrawn account administered and reflecting date of overdraft;
(10) large cash balance listing of accounts administered;
(11) safekeeping report from each institution holding items for safekeeping, with reconcilement to the trust company account trial balance;
(12) master asset listing of all investments by type, reflecting account holder, number of units held with cost and market values;
(13) assets by account holder reflecting investments with number of units, cost and market values;
(14) broker commission report reflecting all brokers utilized for purchase or sale of investments, dollar volume, commissions paid and number of transactions;
(15) reconcilement of fiduciary cash accounts including copies of bank account statements;
(16) reconcilement of suspense accounts with listing of items outstanding and origination dates;
(17) complaint file; and
(18) copies of quarterly report of trust assets.
Source: The provisions of this §17.21 adopted to be effective March 12, 1998, 23 TexReg 2289; amended to be effective November 7, 2013, 38 TexReg 7689.
(a) Calculation of fees. A trust company shall pay to the department a fee for examination, whether a regular or special examination, or for an investigation in connection with an application, calculated at a rate not to exceed $110 per examiner hour, to recoup the salary expense of examiners plus a proportionate share of the department's overhead allocable to the examination or investigation function. The banking commissioner in the exercise of discretion may lower the rate in connection with a specific examination or investigation for equitable reasons, without the prior approval of the finance commission.
(b) Travel expenses. In connection with an examination or investigation, a trust company shall reimburse the department for actual travel expenses incurred, including mileage, public transportation, food, and lodging, in addition to paying the fees set forth in subsection (a) of this section.
(c) Payment due. Fees and expenses charged under this section are due no later than the 30th day after a bill for fees and expenses is submitted to the trust company. Failure to pay such fees and expenses or file a request for hearing within the time period may subject the trust company to enforcement proceedings.
(d) Dispute of fees and expenses.
(1) A trust company may dispute the amount of a bill for fees and expenses assessed under this section by paying the amount of fees and expenses that are undisputed and filing a written request for hearing with the banking commissioner on or before the 30th day after a bill for fees and expenses is submitted to the trust company. If the trust company does not request a hearing in writing within the time period allowed, the assessed fees and expenses are final and nonappealable.
(2) A requested hearing must be held not later than the 30th day after the date the request was received by the banking commissioner unless the parties agree to a later hearing date. Each party shall be given written notice by personal delivery or by registered or certified mail, return receipt requested, of the date set by the banking commissioner for the hearing not later than the 11th day before that date. The hearing shall be conducted as provided by Chapter 9 of this title (relating to Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings).
(3) After the hearing, the banking commissioner shall affirm or modify the bill for fees and expenses by written order.
(e) Examination frequency. In general, the frequency of examination by the department of a state trust company under Finance Code, §181.105, will be determined in the manner described by Commissioner Policy Memorandum Number 1004.
Source: The provisions of this §17.22 adopted to be effective March 12, 1998, 23 TexReg 2289; amended to be effective September 4, 2003, 28 TexReg 7348; amended to be effective January 2, 2014, 38 TexReg 9483.
(a) Call report. As used in this section, the term "call report" means a statement of condition and income and results of operations of a trust company as mandated by the banking commissioner pursuant to Finance Code, §181.107.
(b) Reporting requirements of trust companies.
(1) Public trust companies. Each trust company that transacts business with the public shall file four call reports annually with the banking commissioner. Such call reports must be filed with the banking commissioner no later than April 30, July 31, and October 31 of each year, and by January 31 of the subsequent year.
(2) Exempt trust companies. Each trust company that is exempt pursuant to Finance Code, §182.011 or §182.019 shall file an annual call report with the banking commissioner no later than April 30 of each year relating to the preceding calendar year, accompanied by its annual certification, required by Finance Code, §182.013(a), that the trust company is maintaining the conditions and limitations of its exemption.
(3) Call report forms. The call report forms, the instructions for completing the reports and the accompanying materials will be furnished by the banking commissioner to all trust companies subject to this subsection, or may be obtained upon request from the Texas Department of Banking, 2601 North Lamar Boulevard, Austin, Texas 78705-4294. The banking commissioner may make such modifications and additions to call report form and contents under this subsection as considered necessary in the discretionary discharge of the banking commissioner's duties. A trust company must submit all information requested on the call report form.
(c) Special call reports. In addition to the requirements of subsections (b) of this section, the banking commissioner may require a trust company to file and submit a special call report, in such form and manner and containing such information as may be requested, on dates fixed, whenever in the banking commissioner's discretion the special call report is necessary in the performance of the banking commissioner's supervisory duties related to the safety and soundness of the trust company. Special call reports must contain only such information as is specifically requested by the banking commissioner.
(d) Call report declarations and attestations. Each call report or special call report required to be filed under subsections (b) and (c) of this section must contain a declaration by an executive officer, or by another officer designated by the board of directors of the trust company to make such declaration, that the report is true and correct to the best of such individual's knowledge and belief. The correctness of the call report or special call report must also be attested by the signatures of at least two of the directors of the trust company other than the officer making the declaration. The declaration of the directors must state that the call report or special call report has been examined by them and is true and correct to the best of their knowledge and belief.
(e) Lobby notice and publication for public trust companies. The latest call report filed with the banking commissioner pursuant to subsection (b) of this subsection or a Notice of Call Report Availability must be posted in the lobby of each trust company that transacts business with the public at a point accessible to the public. A trust company is not required to publish its call report in a newspaper or other media unless specifically directed to do so by the banking commissioner. A trust company required to publish its call report by the banking commissioner shall publish the report in a newspaper or other medium of general circulation as directed by the banking commissioner.
(f) Confidentiality. Call reports filed under subsection (b)(2) of this section are confidential as provided by Finance Code, §181.107(c)(2). Call reports filed under subsection (b)(1) are public information except for those portions designated as confidential by the banking commissioner, and may be published or otherwise disclosed to the public. Special call reports filed pursuant to subsection (c) of this section and non-public portions of call reports filed pursuant to subsection (b) of this section are confidential, subject only to such disclosure as may be permitted by Finance Code, §§181.301, et seq. or by §3.111 of this title (relating to Confidential Information).
(g) Reports containing significant errors and penalties for failure to file or for filing a report with false or misleading information.
(1) Public trust companies. A trust company that transacts business with the public which fails to make, file, or submit a timely call report or a special call report as required by this section is subject to a penalty not exceeding $500 a day to be collected by the attorney general on behalf of the banking commissioner.
(2) Exempt trust companies. Failure of a trust company that is exempt pursuant to Finance Code, §182.011 or §182.019 to make, file, or submit a timely call report or a special call report as required by this section is grounds for revocation of its exempt status.
(3) Corrections. Any trust company which makes, files, submits or publishes a call report or special call report which contains a significant error, shall file a corrected call report within 20 days from the date of request. For purposes of this subsection, a significant error refers to any difference in the report of condition and/or supporting schedules equating to 5.0% or more of total assets, provided the amount is greater than $50,000, or any difference in the report of income and/or supporting schedules equating to 5.0% or more of total operating income, provided the amount is greater than $5,000. Any trust company which makes, files, submits or publishes a false or misleading call report or special call report is subject to an enforcement action pursuant to Finance Code, §§185.001, et seq.
Source: The provisions of this §17.23 adopted to be effective May 14, 1998, 23 TexReg 4564; amended to be effective July 11, 2002, 27 TexReg 5962; amended to be effective January 2, 2014, 38 TexReg 9483; amended to be effective January 7, 2016, 41 TexReg 109.
Subchapter A. Loans
Subchapter B. Investments
(a) Subject to Finance Code, §184.101(f), and this section, a trust company may invest for its own account in a mutual fund as defined in Finance Code, §181.002(a)(31), unless the mutual fund portfolio contains an investment that the trust company could not make directly.
(b) Notwithstanding the limits stated in Finance Code, §184.101(c), a trust company may invest in a mutual fund not more than an amount equal to 15% of the trust company´s restricted capital unless a larger investment is permitted under subsection (c) of this section. Pursuant to Finance Code, §184.101(c), the banking commissioner may authorize investments in excess of this limitation on written application if the banking commissioner concludes that:
(1) the excess investment is not prohibited by other applicable law; and
(2) the safety and soundness of the requesting trust company is not adversely affected.
(c) Notwithstanding the limits stated in Finance Code, §184.101(c), and subsection (b) of this section, a trust company may invest in a mutual fund without limit if:
(1) the mutual fund´s stated investment objective is to invest solely in securities that the trust company could invest in directly for its own account without limit under Finance Code, §184.101(d); and
(2) the mutual fund´s portfolio in fact consists wholly of investments in which the trust company could invest directly without limitation under Finance Code, §184.101(d).
(d) A trust company that invests in a mutual fund as permitted by subsection (b) of this section shall periodically determine that its pro rata share of any security in the portfolio of the mutual fund is not in excess of applicable investment and lending limits by reason of being combined with the trust company´s pro rata share of that security held by all other mutual funds in which the trust company has invested and with the trust company´s own direct investment and loan holdings. Documentation of periodic reviews must be maintained by the trust company for examination purposes.
(e) A trust company´s investment in a mutual fund made prior to September 1, 1997, is subject to §19.21 of this title (relating to Grandfathered Investments). Pursuant to §19.21, without the written approval of the banking commissioner, a trust company may not increase its grandfathered investment in a mutual fund on or after September 1, 1997, including by means of an election to reinvest dividends, unless subsection (c) of this section applies.
Source: The provisions of this §19.22 adopted to be effective March 12, 1998, 23 TexReg 2289; amended to be effective July 11, 2002, 27 TexReg 5962.
Subchapter C. Real Estate
(a) Definitions. Words and terms used in this subchapter that are defined in Finance Code, §181.001 et seq. have the same meanings as defined therein. The following words and terms when used in this subchapter shall have the following meanings, unless the context clearly indicates the contrary.
(1) Appraisal--A written report by a state certified or licensed appraiser containing sufficient information to support the trust company's evaluation of OREO taking into consideration market value, analyzing appropriate deductions or discounts, and conforming to generally accepted appraisal standards, unless principles of safety and soundness applicable to trust companies require stricter standards.
(2) Appraiser--A state certified or licensed staff appraiser or a state certified or licensed third party fee appraiser with relevant and competent experience and background as related to a particular appraisal assignment.
(3) Coterminous sublease--A lease with the same duration as the remainder of the master lease.
(4) Evaluation--A written report prepared by an evaluator describing the OREO and its condition, the source of information used in the analysis, the actual analysis and supporting information, and the estimate of the OREO's market value, with any limiting conditions.
(5) Evaluator--An individual who has related real estate training or experience and knowledge of the market relevant to the OREO but who has no direct or indirect interest in the OREO. An appraiser may be an evaluator.
(6) Generally accepted appraisal standards--The Uniform Standards of Professional Appraisal Practice (USPAP) promulgated by the Appraisal Standards Board, Appraisal Foundation, Washington, D.C.
(7) Market value--The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
(A) buyer and seller are typically motivated;
(B) both parties are well informed or well advised, and acting in what they consider their own best interests;
(C) a reasonable time is allowed for exposure in the open market;
(D) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and
(E) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
(8) Non-coterminous sublease--A lease with a duration shorter than the remainder of the master lease.
(9) Other Real Estate Owned (OREO)--Real estate, including improvements, mineral interests, surface, and subsurface rights, owned in whole or in part or leased by a trust company, no matter how acquired, which is not a trust company facility as defined by paragraph (3) of this subsection or leasehold property as permitted under Finance Code, §184.203.
(10) Staff appraiser--An appraiser on the staff of a trust company who has no direct or indirect interest in the OREO.
(11) Third party fee appraiser--An appraiser who has an independent contractor relationship with a trust company and has no direct or indirect interest in the OREO.
(12) Trust company facility--Real property, including improvements, owned or leased, to the extent the lease or the leasehold improvements are capitalized, by a trust company if the real estate is held for the purposes set forth in Finance Code, §184.001, and is not disqualified under Finance Code, §184.002(b). The term also includes capitalized leasehold improvements if held for the same purposes.
(13) Year--For the purposes of this section, a calendar year.
(b) Prohibition on real estate ownership. A trust company may not acquire or hold real estate except as specifically provided under Finance Code, §§184.001-184.003 and 184.203, and this section.
(c) Acquisition of OREO with restricted capital. A trust company may hold OREO purchased with the restricted capital of the trust company only if acquired:
(1) by purchase under judicial or nonjudicial foreclosure, or through a deed in lieu of foreclosure, of real estate that is security for a debt or debts previously contracted in good faith;
(2) by purchase to protect its interest in a debt or debts previously contracted if prudent and necessary to avoid or minimize loss;
(3) with prior written approval of the banking commissioner, by an exchange of OREO or personal property for real estate to avoid or minimize loss on the real estate exchanged or to facilitate the disposition of OREO;
(4) with prior written approval of the banking commissioner, by purchase of additional real estate to avoid or minimize loss on OREO currently held;
(5) by involuntary acquisition of an ownership interest or leasehold interest in real estate as a result of or incidental to a judicial or nonjudicial foreclosure, or by adverse possession, or by operation of law without any action on the part of the trust company to obtain such interest; or
(6) by loss of designation of real estate owned or leased by the trust company as a trust company facility.
(d) Acquisition of OREO with secondary capital. A trust company may hold OREO purchased with the secondary capital of the trust company, subject to the exercise of prudent judgment using the factors set forth in Finance Code, §184.101(f).
(e) Appraisal requirements. Paragraphs (1) - (3) of this subsection apply to OREO acquired with the restricted capital of the trust company.
(1) Subject to paragraph (2) of this subsection, when OREO is acquired, a trust company must substantiate the market value of the OREO by obtaining an appraisal within 90 days of the date of acquisition, unless extended by the banking commissioner. An evaluation may be substituted for an appraisal if the recorded book value of the OREO is $500,000 or less.
(2) An additional appraisal or evaluation is not required when a trust company acquires OREO if a valid appraisal or appropriate evaluation was made in connection with a real estate loan that financed the acquisition of the OREO and the appraisal or evaluation is less than one year old.
(3) An evaluation shall be made on all OREO at least once a year. An appraisal shall be made at least once every three years, unless extended by the banking commissioner, on OREO with a recorded book value in excess of $500,000.
(4) Notwithstanding another provision of this section, the banking commissioner may require an appraisal of OREO if the banking commissioner considers an appraisal necessary to address safety and soundness concerns.
(f) Additional expenditures on OREO. A trust company may re-fit OREO for new tenants or make normal repairs and incur routine maintenance costs to preserve or protect the value of the OREO or to render the OREO in saleable condition without prior notification to or approval by the banking commissioner. Other advances or additional expenditures on OREO acquired with the restricted capital of the trust company must have the prior written approval of the banking commissioner, and must not be:
(1) made for the purpose of speculation in real estate;
(2) made for the purpose of changing or altering the current status or intended use of the OREO; or
(3) inconsistent with principles of safety and soundness applicable to trust companies.
(g) Holding period.
(1) A trust company must dispose of OREO acquired with the restricted capital of the trust company no later than five years after it was acquired or ceases to be used as a trust company facility, unless an extension of time for disposing of the real estate is granted in writing by the banking commissioner pursuant to Finance Code, §184.003(d).
(2) The holding period commences on the date that:
(A) ownership is acquired by the trust company pursuant to subsection (c)(1)-(5) of this section;
(B) OREO is acquired by the trust company through merger/consolidation, conversion, or purchase and assumption;
(C) the trust company first learns of its ownership interest in real estate which has devolved to the trust company by operation of law under subsection (c)(6) of this section;
(D) the trust company ceases to use a former trust company facility or completes its relocation from a former trust company facility to a new trust company facility; or
(E) is three years following the acquisition of real estate as a trust company facility for future expansion or relocation of the trust company if the real estate has not been occupied by the trust company, unless the banking commissioner has granted written approval to a further delay in the improvement and occupation of the real estate.
(3) The banking commissioner may grant one or more additional extensions of time for disposing of OREO acquired with the restricted capital of the trust company if the commissioner finds that the trust company has made a good faith effort to dispose of the OREO or that disposal of the OREO would be detrimental to the safety and soundness of the trust company.
(h) Disposition efforts; documentation. A trust company must make diligent and ongoing efforts to dispose of OREO acquired with the restricted capital of the trust company and must maintain documentation adequate to reflect those efforts. Such documentation must be available for inspection by the commissioner. If secondary capital is adequate to reclassify OREO in a manner that does not impinge on restricted capital, this disposition requirement does not apply.
(i) Disposition of OREO. A trust company may dispose of OREO by:
(1) selling the OREO in a transaction that qualifies as a sale under regulatory accounting principles;
(2) selling the OREO pursuant to a land contract or contract for deed;
(3) retaining the property for its own use as a trust company facility, subject to the approval of the commissioner;
(4) transferring the OREO for market value to an affiliate, subject to Finance Code, §183.109, and applicable federal law, including 12 United States Code, §§371c, 371c-1, and 1828(j);
(5) if the OREO is a master lease, obtaining a coterminous sublease or an assignment of a coterminous sublease, provided that if the trust company acquires or obtains assignment of a non-coterminous sublease, the holding period during which the master lease must be divested is suspended for the duration of the sublease and will commence running again upon termination of the sublease; or
(6) entering into a transaction that does not qualify for disposal under paragraphs (1) - (5) of this subsection; provided that its obligation to dispose of the OREO is not met until the trust company receives or accumulates from the purchaser an amount in cash, principal and interest payments, and private mortgage insurance totaling 10% of the sales price, as measured in accordance with regulatory accounting principles.
(j) Accounting for investments in facilities and OREO. A state trust company shall comply with regulatory accounting principles in accounting for its:
(1) investment in and depreciation of facilities, furniture, fixtures, and equipment; and
(2) investment in OREO and disposition of OREO.
Source: The provisions of this §19.51 adopted to be effective December 31, 1998, 23 TexReg 13030; amended to be effective July 11, 2002, 27 TexReg 5962; amended to be effective November 7, 2013, 38 TexReg 7689; amended to be effective December 31, 2020, 45 TexReg 9413.
Subchapter A. Fees and Other Provisions of General Applicability
Words and terms used in this chapter that are defined in the Trust Company Act, have the same meanings as defined therein. The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise.
(1) Accepted filing-An application, request, notice, or protest filed under the Trust Company Act, this chapter, or another rule adopted pursuant to the Trust Company Act, for which the appropriate fee has been paid pursuant to §21.2 of this title (relating to Filing and Investigative Fees), and regarding which the banking commissioner has notified the person or entity who submitted the filing, in writing, that the submission is complete and has been accepted for filing.
(2) Additional office-A location of a trust company other than the trust company´s home office, at which the trust company engages in the trust business.
(3) Day-A calendar day.
(4) Eligible trust company-A Texas chartered trust company that:
(A) possesses capital and surplus that equals or exceeds current minimum statutory or regulatory requirements;
(B) received a satisfactory rating at the most recent examination by the department or federal regulatory agencies;
(C) is not operating in violation of a regulatory condition or commitment letter; and
(D) is not operating under a memorandum of understanding, determination letter or other notice of determination, order to cease and desist, or other state or federal administrative enforcement order.
(5) General interest items-Include, but are not limited to, local and international news, weather, sports, features, comics, entertainment and advertisements directed to the general public.
(6) Newspaper of general circulation-A newspaper that:
(A) devotes not less than 25% of its total column lineage to general interest items, provided that a newspaper of general circulation does not include a specialized newspaper or other periodical directed to a specific interest group or occupation, such as a legal notice or court related newspaper;
(B) is published at least once a week;
(C) is entered as second class postal matter in the county where published; and
(D) has been published regularly and continuously for at least 12 months before the applicant, protesting party or other entity publishes notice, provided that a weekly newspaper is considered to have been published regularly and continuously if the newspaper omits not more than three issues in a 12 month period.
(7) Public notice-A matter, including an application, request, notice, or protest, whether by proclamation or declaration, required or authorized to be published in a newspaper of general circulation by the Trust Company Act, this chapter, or another rule adopted pursuant to the Trust Company Act, or required to be published by the banking commissioner.
(8) Submitted filing-An initial application, request, notice, or protest filed under the Trust Company Act, this chapter, or another rule adopted pursuant to the Trust Company Act, that has not been abandoned and is not an accepted filing.
(9) Trust Company Act-Finance Code, Title 3, Subtitle F (§§181.001 et seq).
Source: The provisions of this §21.1 adopted to be effective July 2, 1998, 23 TexReg 6715; amended to be effective September 5, 2002, 27 TexReg 8203.
(a) Types of fees. Subsection (b) of this section contains filing fees for specified applications and notices submitted to the department, and subsection (c) of this section requires a fee for protesting an application. These fees are due at the time the application or protest is submitted. Subsection (d) of this section requires an investigation fee to be paid in certain cases once an application has been accepted by the department for filing, and in other cases may require payment of investigative costs upon written request of the department. Pursuant to subsection (e) of this section, an applicant may seek waiver or reduction of required fees.
(b) Filing fees. Simultaneously with a submitted application or notice, an applicant shall pay to the department:
(1) $10,000 for an application for trust company charter pursuant to Finance Code, §182.003;
(2) $5,000 for an application for conversion of exempt trust company to non-exempt pursuant to Finance Code, §182.011(d);
(3) $7,500 for an application to authorize a merger or share exchange pursuant to Finance Code, §182.302, and §21.64 of this title (relating to Application for Merger or Share Exchange), or $4,000 for an application accepted for expedited treatment pursuant to §21.63 of this title (relating to Expedited Filings);
(4) $2,000 for each request to authorize an additional merger if more than one affiliated merger is to occur simultaneously;
(5) $5,000 for an application to authorize a purchase of assets pursuant to Finance Code, §182.401, if the purchase price exceeds an amount equal to three times the sum of the trust company's equity capital less intangible assets;
(6) $2,500 for an application to authorize the sale of substantially all assets pursuant to Finance Code, §182.405;
(7) $1,000 for a subsidiary notice letter pursuant to Finance Code, §184.103(c), plus an amount up to an additional $3,500 if the banking commissioner notifies the applicant that additional information and analysis is required;
(8) $10,000 for an application regarding acquisition of control pursuant to Finance Code, §183.002, or $5,000 if the applicant has previously been approved to control another trust company and no material changes in the applicant´s circumstances have occurred since the prior approval;
(9) $500 for a notice to change home office with no abandonment of existing office pursuant to Finance Code, §182.202(c), and §21.41(a) of this title (relating to Written Notice and Application for Change of Home Office);
(10) $2,000 for an application to relocate the home office with abandonment of existing office pursuant to Finance Code, §182.202(d), and §21.41(b) of this title, or $1,000 for an application accepted for expedited treatment pursuant to §21.3 of this title (relating to Expedited Filings);
(11) $500 for a notice of additional office pursuant to Finance Code, §182.203(a), and §21.42 of this title (relating to Establishment, Relocation and Closing of an Additional Office), plus an additional $1,500 if the banking commissioner notifies the applicant pursuant to Finance Code, §182.203(b), and §21.42(c) of this title that additional information and analysis is required;
(12) $500 for an application for release from a final removal or prohibition order pursuant to Finance Code, §185.0071;
(13) $300 for an application to amend a trust company charter (certificate of formation) pursuant to Finance Code, §182.101;
(14) $2,500 for an application to authorize a reverse stock split subject to the substantive provisions of §21.92 of this title (relating to Amendment of Certificate to Effect a Reverse Stock Split);
(15) $100 for a request for a "no objection" letter to use a name containing a term listed in Finance Code, §181.004, by an entity other than a depository institution or a trust company;
(16) $1,000 for an application to authorize acquisition of treasury stock pursuant to Finance Code, §184.102, and §21.91 of this title (relating to Acquisition and Retention of Shares as Treasury Stock);
(17) $1,000 for an application to authorize an increase or reduction in capital and surplus pursuant to Finance Code, §182.103;
(18) $2,500 for an application by an existing trust company for exemption pursuant to Finance Code, §182.012, and §21.24 of this title (relating to Exemptions for Family Trust Companies);
(19) $2,500 for an application for authority to accept deposits pursuant to Finance Code, §182.101, 184.301, and 184.302, and §21.31 of this title (relating to Notice to Engage in Trust Deposits);
(20) $100 for the annual certification filing for an exempt trust company pursuant to Finance Code, §182.013;
(21) $10,000 for an application to convert from a trust institution to a state trust company pursuant to Finance Code, §182.502; and
(22) $500 for a request to the banking commissioner to exempt an acquisition of control transaction from the requirements of Finance Code, §183.001, pursuant to Finance Code, §183.001(d)(4), which fee will be applied to a subsequent application for approval of an acquisition of control if the exemption is denied.
(c) Filing fee for protest. A person or entity filing a protest to the application of another person or entity shall pay a fee of $2,500 simultaneously with such protest filing. The purpose of the fee required under this subsection is to partially offset the department's increased cost of processing and reduce the costs incurred by the applicant resulting solely from the protest.
(d) Investigative fees and costs. An applicant for a trust company charter, conversion from an exempt trust company to a non-exempt trust company or limited trust association, or conversion of a trust institution to a state trust company shall pay an investigation fee of $10,000 once the application has been accepted for filing. If required by the banking commissioner, an applicant under another type of application or filing listed in subsection (b) of this section shall pay the reasonable investigative costs of the department incurred in any investigation, review, or examination considered appropriate by the department, calculated as provided by §17.22(a) of this title (relating to Examination and Investigation Fees). Such investigation fee or costs must be paid by the applicant upon written request of the department. Failure to timely pay the investigation fee or a bill for investigative costs constitutes grounds for denial of the submitted or accepted filing.
(e) Reduction or waiver of fees. Fees paid are nonrefundable and the banking commissioner shall charge fees on a consistent and nondiscriminatory basis. However, in the exercise of discretion, the banking commissioner may reduce, waive, or refund all or part of a filing fee, investigation fee, or bill for investigative costs if the banking commissioner concludes that:
(1) the application demonstrates that the fee creates an unreasonable hardship on the applicant; or
(2) the nature of the application will result in substantially reduced processing time compared to normal expectations for an application of that type.
(f) Severability. If any fee or cost recovery set forth in this section is finally determined by a court of competent jurisdiction to be invalid that fee or cost recovery shall be severed from this section and the remainder of this section shall remain fully enforceable.
Source: The provisions of this §21.2 adopted to be effective March 12, 1998, 23 TexReg 2290; amended to be effective July 2, 1998, 23 TexReg 6715; amended to be effective December 31, 1998, 23 TexReg 13022; amended to be effective September 5, 2002, 27 Tex Reg 8203; amended to be effective January 2, 2014, 38 TexReg 9484; amended to be effective January 2, 2020, 44 TexReg 8236.
(a) Eligible trust companies may file an expedited filing according to forms and instructions provided by the department solely for home office relocations within the same city pursuant to Finance Code, §182.202(d), and §21.41(b) of this title (relating to Written Notice and Application for Change of Home Office), together with the fee required by §21.2 of this title (relating to Filing and Investigation Fees). Notice must be published as required by §21.41(e) of this title.
(b) Notwithstanding another provision of this section, the banking commissioner may deny expedited filing treatment to an eligible trust company, in the exercise of discretion, if the banking commissioner finds that the filing involves one or more of the following:
(1) the proposed transaction involves significant policy, supervisory, or legal issues;
(2) approval of the proposed transaction is contingent on additional statutory or regulatory approval by the banking commissioner or another state or federal regulatory agency;
(3) the proposed transaction will result in a fixed asset investment in excess of the limitation contained in Finance Code, §184.002(a);
(4) the proposed transaction significantly impacts the strategic plan of the trust company;
(5) the proposed transaction would cause capital and surplus to fall below current minimum statutory or regulatory requirements;
(6) the proposed transaction involves an issue of regulatory concern as determined by the banking commissioner in the exercise of discretion; or
(7) the application is deficient and specific additional information is required, or the filing fee has not been paid.
(c) The banking commissioner may deny or withdraw expedited filing treatment if a protest is filed. If a protest is filed, the application will be processed under §21.41 of this title.
(d) The department shall notify the applicant on or before the 15th day following the date the application is accepted for filing if expedited filing treatment is not available under this section. Such notification must be in writing and must indicate the reason why expedited treatment is not available. Notification is effective when mailed by the department and is not subject to appeal.
(e) Unless the applicant is otherwise notified by the department, an expedited filing is approved on the 15th day after the date the applicant is notified that expedited filing treatment is available or the expiration of the period for filing a public comment or protest, whichever is the last to occur.
Source: The provisions of this §21.3 adopted to be effective July 2, 1998, 23 TexReg 6715; amended to be effective September 5, 2002, 27 TexReg 8203.
(a) Required information. The banking commissioner may investigate and evaluate facts related to a submitted filing or accepted filing to the extent necessary to reach an informed decision. The banking commissioner may require any person or entity connected with the matter to which the submitted or accepted filing pertains to submit additional information, including, but not limited to, an opinion of counsel with respect to a matter of law or an opinion, review or compilation prepared by a certified public accountant.
(b) Accepted for filing. On or before the 15th day after initial submission of an application, the banking commissioner shall issue a written notice informing the applicant either that all filing fees have been paid and the application is complete and accepted for filing, or that the application is deficient and specific additional information is required.
(c) Time limit for providing required information. Unless otherwise provided for in the Trust Company Act, this chapter or rules and regulations adopted pursuant to the Trust Company Act, all required information necessary for the banking commissioner to declare that a submission is an accepted filing shall be provided to the department on or before the 61st day after the date of the initial submission of the filing. Upon a finding of good and sufficient cause, the banking commissioner shall grant an applicant additional time to complete the application. Extensions will be communicated to the applicant before the expiration of the filing period.
(d) Abandoned filing. The banking commissioner may determine any submitted or accepted filing to be abandoned, without prejudice to the right to refile, if the information required by the Trust Company Act, this chapter, or any rule or regulation adopted pursuant to the Trust Company Act, or additional requested information, is not furnished within the time period specified by subsection (c) of this section or as requested by the banking commissioner in writing to the person or entity making the submission. The banking commissioner may determine a submitted or accepted filing for which fees required by the Trust Company Act or by this chapter are not paid within 30 days of receipt of the initial submission to be abandoned.
(e) Notice. The banking commissioner shall give written notice of any submitted or accepted filing considered to be abandoned. Notice of abandonment shall be effective upon mailing by the department. Fees paid related to an abandoned filing are nonrefundable.
Source: The provisions of this §21.4 adopted to be effective May 14, 1998, 23 TexReg 4565; amended to be effective September 5, 2002, 27 TexReg 8203; amended to be effective September 4, 2014, 39 TexReg 6825.
(a) General. A person or entity required or authorized to file public notice in connection with a trust company notice or application, including a person or entity requesting authorization for a merger, purchase of assets, or another application requiring public notice, shall publish notice in a newspaper of general circulation in its specified community and in such other locations as may be required by the banking commissioner.
(b) Contents. The public notice must state that a filing is being made; the date (or expected date) of the filing; sufficient information describing the proposed transaction, and other related information required by the Trust Company Act, this chapter or rules and regulations adopted pursuant to the Trust Company Act, and any other information as may be required by the banking commissioner. In addition, the notice must include substantially the following text as a separately stated paragraph:
"Any person wishing to comment on this application, either for or against, may file written comments with the Texas Department of Banking, 2601 North Lamar Boulevard, Austin, Texas 78705-4294 on or before the 14th day after the date of this publication. Such comments will be made a part of the record before and considered by the banking commissioner. Any person wishing to formally protest and oppose (describe type of application in general terms) and participate in the application process may do so by filing a written notice of protest with the Texas Department of Banking on or before the 14th calendar day after the date of this publication accompanied by a protest filing fee of $2,500. The protest fee may be reduced or waived by the banking commissioner upon a showing of substantial hardship."
(c) Publisher´s affidavit. A person or entity required to file public notice under this section shall file with the banking commissioner a copy of the notice and a publisher´s affidavit attesting to the date of publication.
(d) One publication sufficient. Unless otherwise required by the Trust Company Act or rules and regulations adopted pursuant to the Trust Company Act, one public notice publication per submitted or accepted filing in each community specified by the banking commissioner is sufficient if in substantial compliance with this section and chapter and with the Trust Company Act, as determined by the banking commissioner. The banking commissioner reserves the right to require additional publication based on a determination that a particular publication is insufficient or is otherwise not in compliance.
(e) Other acceptable public notice. The banking commissioner may determine that public notice required by another regulatory agency of a trust company satisfies the public notice requirements of this section. For example, if a trust company converts, merges, or organizes into a financial institution that is no longer regulated by the banking commissioner and the banking commissioner determines that public notice requirements imposed by the successor regulatory authority satisfy the notice requirements of the Trust Company Act and this section, the banking commissioner may permit the notice required by the successor regulatory authority to serve as notice under this section.
Source: The provisions of this §21.5 adopted to be effective May 14, 1998, 23 TexReg 4565; amended to be effective September 5, 2002, 27 TexReg 8203.
(a) Form of application. An application to engage in a state trust company under Finance Code, §182.003, must be filed on a form prescribed by the banking commissioner.
(b) Notice to applicant. The banking commissioner shall issue a written notice as required by §21.4 of this title (relating to Required Information and Abandoned Filings) informing the applicant either that all filing fees have been paid and the application is complete and accepted for filing, or that the application is deficient and specific additional information is required. If a protest is timely filed, the department will notify the applicant of the protest.
(c) Action on applications. If an application is not protested and if the banking commissioner has not ordered a hearing, the banking commissioner shall approve or deny an application for a trust company charter on or before the 180th day after the date the application is accepted for filing, unless extended by written agreement between the applicant and the banking commissioner. If the application is protested, the application will be acted on in accordance with §21.10 of this title (relating to Protested Applications).
(d) Violation of processing times. If an application is not protested or a hearing is not convened, an applicant may appeal directly to the banking commissioner for a timely resolution of a dispute arising from a violation of a processing period set forth in this section. An applicant may appeal by filing a written request with the banking commissioner on or before the 30th day after the date the decision is made on the application, requesting review by the banking commissioner to determine whether the established period for the granting or denying of the application has been exceeded. The decision on the appeal shall be based on the written appeal filed by the applicant, any response by the department, and any agreements between the parties. The banking commissioner may convene a hearing to take evidence on the matter.
(e) Decision on appeal. The banking commissioner shall decide the appeal in the applicant´s favor if the banking commissioner determines that the time periods established in this section have been exceeded and the department has failed to establish good cause for the delay. The banking commissioner shall issue a written decision to the applicant on or before the 60th day after the filing of an appeal. If an appeal is decided in an applicant´s favor, the department will reimburse the application fee paid by the applicant. A decision in favor of the applicant under this subsection does not affect a decision to grant or deny the application based on applicable substantive law without regard to whether the application was timely processed.
Source: The provisions of this §21.6 adopted to be effective May 14, 1998, 23 TexReg 4565; amended to be effective September 5, 2002, 27 TexReg 8203; amended to be effective July 10, 2008, 33 TexReg 5277; amended to be effective January 2, 2020, 44 TexReg 8236.
(a) Scope. This section governs submission of specified forms of copies of original documents to the Texas Department of Banking (the department) for processing by the corporate activities division of the department pursuant to this chapter, and does not permit, prohibit, or affect correspondence with or documents submitted to the department for another purpose, including:
(1) applications submitted to the special audits division of the department; and
(2) documents submitted to the department as required or permitted by Government Code, Chapter 2001, and Chapter 9 of this title (relating to Rules of Procedure for Contested Case Hearings, Appeals, and Rulemaking).
(b) Reproduction. For purposes of this section, the term reproduction means:
(1) a photographic or photostatic copy or similar reproduction of an original document that is submitted to the department by mail or hand delivery;
(2) a facsimile copy of an original document submitted by telephonic document transmission to the fax number specified by the department; or
(3) if permitted by the department with respect to a specific filing, an electronic copy of an original document submitted to the email address specified by the department.
(c) Filings. Subject to the length limitations of subsection (d) of this section, a document required or authorized to be filed with the department may be a reproduction, including an application or a supplement to or substitution for a portion of a previously filed and accepted application. Receipt of a reproduction by the department is not equivalent to accepted for filing.
(d) Page limitations. A reproduction submitted by telephonic document transmission to the department´s fax machine may not exceed 25 pages in total length, including the transmittal document required by subsection (e) of this section, or it will be rejected for filing. The transmission of portions of any particular filing at different times is treated as one reproduction for purposes of this subsection.
(e) Transmittal document. A cover sheet or transmittal document must accompany every reproduction submitted under this section and must:
(1) clearly identify the sender by name, address, and phone number, the documents being delivered or transmitted, and the number of pages in the submission;
(2) contain clear and concise instructions concerning the sender´s request with respect to the submission; and
(3) contain complete and accurate information regarding the payment of required filing fees, if any.
(f) Time of receipt. To be considered received by the department, a reproduction must be in clearly legible form. The date the submission is actually received by the department or the date and time imprinted by the department´s fax machine on the last page of a reproduction submitted by telephonic document transfer will determine the time of receipt, provided that a reproduction received after 4:30 p.m. is considered received at 8:00 a.m. on the next business day. A reproduction will not be considered received until the department receives the entire document and the required filing fee, if any.
(g) Equivalent of original. For all purposes attendant to filing, a reproduction of a document filed with the department under this section, including reproduction of signatures thereon, is considered an original document.
Source: The provisions of this §21.7 adopted to be effective May 14, 1998, 23 TexReg 4565; amended to be effective January 2, 2020, 44 TexReg 8236.
(a) In accordance with the applicable provisions of the Trust Company Act, the following corporate forms regarding a state trust company, along with the applicable filing fees, must be filed with the banking commissioner:
(1) a certificate of correction as authorized by Texas Business Organizations Code (TBOC), §4.101;
(2) certificate of amendment under the Finance Code, §182.101;
(3) restated, or, amended and restated, certificate of formation under the Finance Code, §182.101, and TBOC §3.059 and §21.052;
(4) certificate of merger under the Finance Code, §182.301 et seq, as supplemented by the TBOC §10.151;
(5) certificate of exchange under TBOC, §10.151;
(6) statement of event or fact pursuant to TBOC §4.055;
(7) establishment of a series of shares by the board of directors under the Finance Code, §182.102, as supplemented by TBOC §21.155 and §21.156;
(8) statement regarding a restriction on the transfer of shares under TBOC, §21.212; and
(9) abandonment of a merger or interest exchange prior to its effective date under TBOC §4.057.
(b) For purposes of corporate filings with the banking commissioner under subsection (a) of this section, state trust companies may utilize a modified version of forms promulgated by the secretary of state if the banking commissioner or the finance commission has not promulgated an appropriate corporate form; however, the banking commissioner may require the submission of additional information. The modified corporate forms must:
(1) specifically reference the applicable provisions of the Finance Code;
(2) change references from "corporation" to "association"; and
(3) change the references to "stated capital" and similar terms defined in the TBOC to an appropriate reference to terms defined in the Finance Code.
(c) In accordance with the applicable provisions of the Finance Code and the TBOC, a state trust company may file the following corporate forms with the secretary of state as instructed in the Finance Code or the TBOC:
(1) name registrations under TBOC §§5.151-5.155;
(2) assumed name certificates under TBOC §5.051;
(3) a statement appointing an agent authorized to receive service of process under Finance Code §201.103;
(4) an amendment to a statement appointing an agent to receive service of process under Finance Code §201.103; and
(5) a cancellation of the appointment of an agent to receive service of process under Finance Code §201.103.
(d) The following corporate forms are inapplicable to state trust companies and are not required to be filed by a state trust company with either the secretary of state or the banking commissioner:
(1) changes of registered office or agent under TBOC §5.202 or §5.203;
(2) name reservations under TBOC §5.101;
(3) certificate of termination under TBOC §11.101; and
(4) certificate of reinstatement under TBOC §11.202.
Source: The provisions of this §21.9 adopted to be effective July 10, 2008, 33 TexReg 5277; amended to be effective September 9, 2010, 35 TexReg 8102; amended to be effective November 7, 2013, 38 TexReg 7690.
(a) A protest of a charter application must be received by the department before the 15th day after the date the organizers publish notice and must be accompanied by any fee required by §21.5(b) of this title (relating to Public Notice). If the protest is untimely, the department will return all fees and deposits to the protesting party. If the protest is timely, the department shall notify the applicant of the protest and mail or deliver a complete copy of the nonconfidential sections of the charter application to the protesting party before the 15th day after the later of the date of receipt of the protest or receipt of the charter application.
(b) A protesting party must file a detailed protest responding to each contested statement in the nonconfidential portion of the application not later than the 20th day after the date the protesting party receives the application from the department. The protesting party must relate each statement and response in his protest to the standards for approval set forth in Finance Code §182.003(b).
(c) The applicant must file a written reply to the protesting party's detailed response on or before the 10th day after the date the response is filed.
(d) The protesting party's response and the applicant's reply must be in the form and must be served as required by Finance Code §182.005(b). Any comment received by the department and any reply of the applicant to the comment shall be made available to the protesting party.
Source: The provisions of this §21.10 adopted to be effective July 10, 2008, 33 TexReg 5277.
(a) The banking commissioner may not be compelled to hold a hearing before granting or denying the charter application. He may grant a hearing at the request of an applicant or a protesting party. He may order a hearing without any party having requested one.
(b) A party requesting a hearing must indicate with specificity the issues involved that cannot be determined on the basis of the record complied under §21.10(b)-(d) of this title (relating to Protested Applications) and why the issues cannot be determined.
(c) If the banking commissioner sets a hearing, he shall conduct a public hearing and one or more prehearing conferences as he considers advisable and consistent with applicable law. He shall also allow the parties to undertake such discovery as he considers advisable and consistent with applicable law, except that he may not permit discovery of confidential information in the charter application or the investigation report.
Source: The provisions of this §21.11 adopted to be effective July 10, 2008, 33 TexReg 5277.
The banking commissioner in the exercise of discretion may waive or modify any requirement imposed by this chapter.
Source: The provisions of this §21.12 adopted to be effective July 10, 2008, 33 TexReg 5277.
Subchapter B. Trust Company Chartering and Powers
An applicant for a trust company charter may, at its option, withhold the identity of prospective officers until such time as the banking commissioner issues a final order on the application. Approval of the application will be conditional upon the applicant´s submitting resumes of qualified proposed officers to the banking commissioner. Upon receipt of the resumes, the banking commissioner shall review and investigate the qualification of the proposed officers and deliver the certificate of authority pursuant to Finance Code, §182.006, if the banking commissioner finds that the proposed officers meet the requirements of Finance Code, §182.003(b)(3).
Source: The provisions of this §21.23 adopted to be effective May 14, 1998, 23 TexReg 4565; amended to be effective September 5, 2002, 27 TexReg 8203.
(a) Definitions. Definitions in Finance Code, §182.011(a - 1), are incorporated herein by reference except for the term "family member." As used in this section and in Finance Code, Title 3, Subtitle F (the Trust Company Act), the following words and terms shall have the following meanings, unless the context clearly indicates otherwise:
(1) "Family" means individuals who are related within the seventh degree of affinity or consanguinity to a shared common ancestor.
(2) "Family member" means each individual included in the definition of "family," provided 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. The term "family member" also includes the shared common ancestor.
(3) "Key employee" means the president of the trust company, any of its officers in charge of a principal business unit, division or function (such as administration or finance), an officer who performs a policymaking function for the trust company, or another person who performs similar policymaking functions for the trust company.
(b) Application for exemption.
(1) Pursuant to Finance Code, §182.011 and §182.012, a trust company may request in writing that it be exempted from specified provisions of the Trust Company Act, if it has only family clients, transacts business solely on behalf of family clients and their related interests, is wholly owned, directly or indirectly, legally or beneficially, by one or more family members, and does not hold itself out to the general public as a corporate fiduciary for hire.
(2) The application must:
(A) be accompanied by the appropriate filing fee required by §21.2 of this title (relating to Filing and Investigation Fees);
(B) specify the specific exemptions requested and the reasons or justification for requesting the exemptions; and
(C) include a copy of the trust company's certificate of formation containing, or a proposed amendment to the certificate of formation that would cause it to contain, the following statement in its purposes clause: "The sole purpose for which the trust company is organized is to act as a corporate fiduciary for accounts in which all beneficiaries are descendants of and related within the seventh degree of affinity or consanguinity to _____________ (name of common ancestor), and their related interests to the extent permitted by the Texas Finance Code or applicable rules and regulations."
(c) Exemption. Subject to conditions or limitations being imposed by the banking commissioner, a family trust company may request exemption from the following provisions of the Trust Company Act:
(1) the requirement of Finance Code, §183.103(a), that five is the minimum number of directors, managers, or managing participants that can be specified in the certificate of formation, provided that the certificate of formation must specify the number of directors, managers, or managing participants, consistent with paragraph (2) of this subsection;
(2) the requirement of Finance Code, §183.103(a), that the number of directors, managers, or managing participants of a trust company cannot be less than five or more than 25, the majority of whom must be residents of this state, provided that the board of a trust company seeking exemption under this section must consist of not fewer than three or more than 25 directors, managers, or managing participants, at least one of whom must be a resident of this state;
(3) the restrictions of Finance Code, §183.109(a)-(c), regarding transactions with management and affiliates;
(4) the limitations of Finance Code, §184.002, on investment in trust company facilities;
(5) the limitations of Finance Code, §184.101, on securities investments, provided that the exemption request must address each limitation and the reasons for exemption separately;
(6) the restrictions of Finance Code, §184.102, regarding transactions in state trust company shares or participation shares;
(7) the limitations of Finance Code, §184.003, on other real estate investments; and
(8) the limitations of Finance Code, §§184.201 - 184.203, regarding lending limit and lease financing transaction restrictions, provided that no loans may be made from a trust company's minimum restricted capital amount.
(d) Notice to applicant. The banking commissioner shall issue a written notice as required by §21.4 of this title (relating to Required Information and Abandoned Filings) informing the applicant either that all filing fees have been paid and the application is complete and accepted for filing, or that the application is deficient and specific additional information is required.
(e) Notice to clients. A family trust company which has been granted an exemption under subsection (c) of this section must provide each family client with a copy of the exemption granted by the banking commissioner. The trust company must maintain an acknowledged receipt of such notice in its files.
(f) Transition period for certain former family clients. Pursuant to Finance Code, §182.011(a - 1)(1)(C) and (I), a family trust company may continue providing services to a former key employee or a formerly revocable trust that is no longer an eligible family client for a period of one year after the date of the disqualifying event. The banking commissioner may grant an extension of up to one year in response to a written request if the commissioner determines that:
(1) the trust company has acted diligently and in good faith in its efforts to terminate the disqualified relationship in a manner consistent with its fiduciary duties; and
(2) additional time is needed to avoid harm to the affected beneficiaries and appropriately discharge the trust company's fiduciary duties with respect to the disqualified relationship.
(g) Effect on existing family trust company. A family trust company with exemptions granted prior to September 1, 2015, under Finance Code, §182.011 and §182.012, is not required to take any action to preserve its exemption as a result of changes in law made by Acts 2015, 84th Leg., R.S., Ch. 250, §5. However, unless and until any such family trust company amends its certificate of formation to name a new shared common ancestor, the control person named in its certificate of formation is considered to be the shared common ancestor for purposes of determining eligibility of family members under Finance Code, §182.011, and this section.
Source: The provisions of this §21.24 adopted to be effective September 3, 1998, 23 TexReg 8832; amended to be effective September 5, 2002, 27 TexReg 8203; amended to be effective May 10, 2007, 32 TexReg 2463; amended to be effective November 7, 2013, 38 TexReg 7690; amended to be effective January 7, 2016, 41 TexReg 110; amended to be effective May 5, 2016, 41 TexReg 3100.
Subchapter C. Trust Deposits
(a) Compliance required. A trust company may not deposit trust funds with itself as an investment pursuant to Finance Code, §184.301, unless it first complies with this section and §21.32 of this title (relating to Acceptance of Trust Deposits).
(b) Notice of activity. At least 30 days before accepting trust deposits, a trust company shall file a notice with the banking commissioner containing the following information, together with the filing fee required by §21.2 of this title (relating to Filing and Investigation Fees):
(1) an estimate of the anticipated dollar volume of trust deposits, an estimate of the maximum trust deposit for any one account, and an estimate of the total number of accounts that will invest in trust deposits;
(2) a copy of the added or revised portion of the trust company´s strategic plan that addresses the acceptance of trust deposits, in compliance with Texas Department of Banking Policy Memorandum Number 1009, regarding strategic plans;
(3) if trust deposits are to be insured by the Federal Deposit Insurance Corporation (FDIC), or its successor, evidence of such insurance;
(4) if trust deposits are to be secured by a pledged fund of securities:
(A) a description of the initial fund of securities securing the anticipated trust deposits, including disclosure of current market value and an evaluation of the securities under the standards of Finance Code, §184.101(e); and
(B) identification of the federal reserve bank, state or nationally chartered depository institution, or clearing corporation, that controls the securities pledged against the trust deposits and a copy of the executed pledge agreement with such institution;
(5) if trust deposits are to be secured by a pledged certificate of deposit:
(A) evidence of the certificate of deposit that discloses its value and associated costs, including penalties, for early redemption or withdrawal; and
(B) identification of the FDIC-insured depository institution that issued the certificate of deposit, a copy of the executed pledge agreement with such institution, and an acknowledgment of the pledge from the issuing institution;
(6) a certified copy of a board resolution directing management of the trust company to:
(A) maintain adequate security and/or FDIC insurance to fully secure and/or insure the trust deposits; and
(B) maintain adequate policies, procedures, and records regarding trust deposits; and
(7) such other information that the banking commissioner may reasonably request.
(c) Action by banking commissioner.
(1) The trust company may begin accepting trust deposits on the 31st day after the date the banking commissioner receives the trust company´s completed notice letter unless the banking commissioner specifies an earlier or later date, requests additional information, or prohibits the activity as provided in this subsection. The banking commissioner may prohibit the trust company from accepting trust deposits only if the banking commissioner concludes that:
(A) the trust deposits would not be fully insured or secured as required by Finance Code, §184.301, and this section;
(B) the activity would adversely affect the safety and soundness of the trust company;
(C) the trust company has a less than satisfactory rating as of the trust company´s most recent examination; or
(D) the trust company is subject to an enforcement order issued pursuant to Finance Code, Chapter 185, or is not otherwise operating in substantial compliance with all applicable state and federal laws and regulations.
(2) The banking commissioner may extend the 30-day period under paragraph (1) of this subsection if the banking commissioner determines that the trust company´s notice raises issues requiring additional information or additional time for analysis. If the 30-day period is extended, the trust company may accept trust deposits only on prior written approval by the banking commissioner, except that the banking commissioner must approve or prohibit the proposed activity or convene a hearing under Finance Code, §181.201, not later than the 60th day after the date the banking commissioner receives the trust company´s notice. If a hearing is convened, the banking commissioner must approve or prohibit the proposed activity not later than the 30th day after the date the hearing is completed.
(3) A trust company that is denied the right to accept trust deposits by the banking commissioner under this section may appeal as provided by Finance Code, §§181.202-181.204, or may file a new notice under this section with additional information relevant to the banking commissioner´s determination, with applicable filing fee.
(d) Authority to accept trust deposits. Only a trust company which transacts business with the public may deposit trust funds with itself as an investment pursuant to Finance Code, §184.301. An exempt trust company under Finance Code, §182.011-182.019, may not accept trust deposits.
(e) Records. A trust company shall maintain written documentation adequate to demonstrate compliance with this section, which documents must be available at all times to the department for examination and review. For purposes of this subsection, required documentation need not be retained beyond three years.
Source: The provisions of this §21.31 adopted to be effective July 2, 1998, 23 TexReg 6715; amended to be effective September 5, 2002, 27 TexReg 8203.
(a) Compliance required. A trust company may not deposit trust funds with itself as an investment pursuant to Finance Code, §184.301, unless it first complies with this section and §21.31 of this title (relating to Notice to Engage in Trust Deposits). Trust deposits must be fully insured by deposit insurance issued by the Federal Deposit Insurance Corporation (FDIC), or its successor, or fully secured by a separate fund of pledged securities, by pledged certificates of deposit, or a combination of the foregoing.
(b) Pledged collateral. A separate fund of securities or certificates of deposit that are pledged to secure trust deposits must be maintained in a federal reserve bank, a state or nationally chartered depository institution, or a clearing corporation, as defined by Business & Commerce Code, §8.102, either in this state or elsewhere, and must:
(1) for a fund of securities, contain only bonds, notes, or other evidences of indebtedness which are investment grade, convertible to cash within three business days, at least 80% of which have a maturity date of not later than the 91st day after the date of purchase. For purposes of this subsection, investment grade refers to a security that is rated "Baa" or better by Moody´s or "BBB" or better by Standard & Poor´s rating services in accordance with the terms of the Uniform Agreement on Classification Of Assets And Appraisal Of Securities by the Federal Financial Institutions Examination Council;
(2) for a fund of securities, the value of the securities must at all times equal or exceed 110% of the deposits held plus accrued and unpaid interest; provided, however, that if the value of the securities is evaluated daily and reduced to writing, the value of the securities must at all times equal or exceed 100% of the deposits held plus accrued and unpaid interest. In any event, the value of the securities must be evaluated at least monthly to ensure that the deposits are fully secured; and
(3) for a certificate of deposit, be fully insured by the FDIC.
(c) Noninsurability by FDIC. If a trust company´s trust deposits are not insured by the FDIC, a trust company must provide each client related to an account from which deposits may be accepted with a written notice conspicuously stating that: "Your deposit with this trust company is not insured by the FDIC." This notice must be provided to the client prior to any deposit activity regarding the related account and must be signed by both the client and the trust company. The notice must be in type that is boldfaced, capitalized, underlined or otherwise set out from surrounding written material so as to be conspicuous. Furthermore, all documents issued by a trust company evidencing a deposit transaction, must contain a notice complying with the requirements of this subsection.
(d) Records. A trust company shall maintain all written documentation adequate to demonstrate compliance with this section, which documents must be available at all times to the department for examination and review. For purposes of this subsection, required documentation need not be retained beyond three years.
Source: The provisions of this §21.32 adopted to be effective July 2, 1998, 23 TexReg 6715; amended to be effective September 5, 2002, 27 TexReg 8203.
Subchapter D. Trust Company Offices
(a) Relocation by notice. If the location that is the home office of a trust company prior to a proposed relocation of the home office is to remain an additional office of the trust company after the relocation, the trust company may relocate its home office by filing a written notice pursuant to Finance Code, §182.202(c). The filed notice must contain all information required by subsection (c) of this section, accompanied by the required filing fee pursuant to §21.2 of this title (relating to Filing and Investigation Fees), and notice of the submission must be published as required by subsection (e) of this section. A trust company filing notice of a home office relocation under this subsection may relocate its home office on the 31st day after the required notice and fee have been received by the banking commissioner, unless the banking commissioner gives notice in writing, prior to the expiration of that time period, that an earlier or later date is authorized or that additional information and additional time for analysis is required. Upon issuance of a notice requiring additional information and additional time for analysis, the trust company may relocate its home office only on written approval of the banking commissioner. Except as otherwise provided in this section, the banking commissioner shall evaluate the notice under the criteria of §21.42(e) of this title (relating to Establishment, Relocation and Closing of an Additional Office).
(b) Relocation by application. If Finance Code, §182.202(c), and subsection (a) of this section do not apply, a trust company desiring to change its home office location must file an application with the banking commissioner pursuant to Finance Code, §182.202(d), setting forth all information required by subsection (d) of this section, accompanied by the required filing fee pursuant to §21.2 of this title, and notice of the submission must be published as required by subsection (e) of this section. The banking commissioner shall issue a written notice no later than 15 days after the date the initial filing is received, as required by §21.4 of this title (relating to Required Information and Abandoned Filings), informing the applicant either that all filing fees have been paid and the application is complete and accepted for filing, or that the application is deficient and specific additional information is required. Except as otherwise provided in this section, the banking commissioner shall evaluate the application under the criteria of §21.42(e) of this title. An applicant under this subsection may not relocate its home office without the prior written approval of the banking commissioner.
(c) Contents of notice. The notice filed under subsection (a) of this section must disclose:
(1) the name of the trust company requesting the home office relocation;
(2) the street address of the trust company's home office before the requested home office relocation;
(3) the street address of the trust company's proposed home office;
(4) the desired effective date of the home office relocation under subsection (a) of this section;
(5) a copy of the resolution adopted by the trust company's board of directors authorizing the proposed home office relocation;
(6) the cost to be incurred in connection with the relocation and a statement of the impact of such cost on the trust company's ability to meet liquidity requirements;
(7) evidence that the trust company has considered applicable federal law, if any;
(8) a description of any actual, proposed, or contemplated financial involvement by an officer, director, manager, managing participant, or principal shareholder or participant of the trust company with respect to its home office relocation; and
(9) such other information as the banking commissioner may require.
(d) Contents of application. The application submitted under subsection (b) of this section must disclose:
(1) the name of the trust company requesting the home office relocation;
(2) the street address of the trust company's home office before the requested home office relocation;
(3) the street address of the trust company's proposed home office;
(4) the desired effective date for the home office relocation;
(5) a copy of the resolution adopted by the trust company's board of directors authorizing the home office relocation;
(6) the cost to be incurred in connection with the relocation and a statement of the impact of such cost on the trust company's ability to meet liquidity requirements;
(7) a written statement signed by the principal executive officer of the trust company or a majority of the trust company's board of directors stating whether the home office relocation will result in an abandonment of all or a part of the community served by the trust company present home office location and, if so, an explanation of how the abandonment is consistent with the original determination of public convenience and advantage for the establishment of the trust company at its existing home office location;
(8) a written statement signed by the principal executive officer of the trust company or a majority of the trust company's board of directors stating whether the home office relocation is anticipated to result in a reduction of trust services presently offered by the trust company at its present location within the 18-month period after the proposed effective date of the relocation and, if so, an explanation of the anticipated reduction in trust and fiduciary services and how the diminution in services is consistent with the original determination of public convenience and advantage for the establishment of the trust company at its existing home office location;
(9) a description of any actual, proposed, or contemplated financial involvement by an officer, director, manager, managing participant, or principal shareholder or participant of the trust company with respect to the home office relocation;
(10) evidence that the trust company has considered applicable federal law, if any; and
(11) such other information as the banking commissioner may require.
(e) Public notice and participation.
(1) Within 14 days of the initial submission of a notice or application under subsection (a) or (b) of this section, the trust company shall publish notice of the submission as required by §21.5 of this title (relating to Public Notice). Notice must be published in the community where the current home office of the trust company is located and in the community where the proposed home office will be located, and must disclose the locations of the existing and proposed home offices.
(2) For a period of 14 days after publication of notice or such longer period as the banking commissioner may allow for good cause shown, the public may submit written comments or protests. Persons submitting comments are not entitled to further notice of or participation in the proceedings. In the event of a properly filed protest, each protesting party has the rights and responsibilities of a protesting party to a notice of additional office under §21.42 of this title.
(f) Certificate of formation. An amendment to the certificate of formation of the trust company is not required to effect a change in the location of its home office under this section. However, if the certificate of formation is subsequently restated for any reason, the trust company must include the address of its then current home office in the restated certificate of formation.
Source: The provisions of this §21.41 adopted to be effective July 2, 1998, 23 TexReg 6715; amended to be effective September 5, 2002, 27 TexReg 8203; amended to be effective November 7, 2013, 38 TexReg 7690.
(a) Establishment or relocation by notice. A trust company may establish or relocate an additional office pursuant to Finance Code, §182.203, by filing a written notice with the banking commissioner containing all information required by subsection (b) of this section, accompanied by the required filing fee pursuant to §21.2 of this title (relating to Filing and Investigation Fees), and notice of the submission must be published as required by subsection (d) of this section. A trust company filing notice of an additional office under this subsection may establish the additional office on the 31st day after the date the required notice and fee are received by the banking commissioner unless the banking commissioner gives notice in writing, prior to the expiration of that time period, that an earlier or later date is authorized or that additional information is required pursuant to subsection (c) of this section.4
(b) Contents of notice. The notice filed under subsection (a) of this section must disclose:
(1) the name and home office location of the trust company requesting the additional office;
(2) the street address of the trust company´s proposed additional office;
(3) a description of the activities proposed to be conducted at the proposed additional office;
(4) the desired effective date for establishment of the additional office;
(5) a certified copy of the resolution adopted by the trust company´s board of directors authorizing the proposed additional office;
(6) the cost to be incurred in connection with the establishment of the additional office and a statement of the impact of such cost on the trust company´s ability to meet liquidity requirements;
(7) a description of any actual proposed, or contemplated financial involvement by any officer, director, manager, managing participant, or principal shareholder or participant of the trust company with respect to establishing the additional office;
(8) evidence that the trust company has considered applicable federal law, if any; and
(9) such other information as the banking commissioner may require.5
(c) Request for additional information. At any time before the 31st day after the date the notice required by subsection (a) of the section is filed, the banking commissioner may issue written notice to the trust company specifying a later date for establishing or relocating an additional office and requiring the submission of additional information and additional time for analysis. Upon issuance of a notice requiring the submission of additional information and additional time for analysis, the trust company may establish or relocate the additional office only on written approval of the banking commissioner.
(d) Public notice and participation.
(1) Within 14 days of the initial submission of the notice required under subsection (a) of this section, the trust company shall publish notice of the submission as required by §21.5 of this title (relating to Public Notice). Notice must be published in the community where the proposed additional office will be located and must specifically disclose the location of the proposed additional office.6
(2) For a period of 14 days after publication of notice or such longer period as the banking commissioner may allow for good cause shown, the public may submit written comments or protests. Persons submitting comments will not be charged fees or costs, but are not entitled to further notice of or participation in the proceedings. Each protesting party has the rights and responsibilities set forth in subsections (f) and (g) of this section.
(e) Criteria for determining significant supervisory or regulatory concern. The banking commissioner may deny permission to establish or relocate an additional office of a trust company if the commissioner has significant supervisory or regulatory concern about the proposed transaction.
(1) In evaluating whether significant supervisory concerns exist regarding a proposed additional office, the banking commissioner shall consider the financial condition of the trust company, the financial effect of the additional office on the trust company, the management abilities of the trust company, and the history and prospects of the trust company and its affiliates regarding fulfillment of responsibilities to regulatory agencies and to the public. A request will ordinarily be denied if the trust company is in less than satisfactory financial condition as of its most recent examination.
(2) In evaluating whether significant regulatory concerns exist regarding a proposed additional office, the banking commissioner will consider the relevant marketplace and the convenience of the public in accessing desired trust services and preferred trustees. The banking commissioner will follow the principles that the marketplace normally is the best regulator of economic activity, and that healthy competition promotes a sound and more efficient trust company system that serves customers well. Accordingly, absent significant supervisory concerns, the general policy of the banking commissioner is to approve applications, requests and notices to establish and relocate additional offices, provided that approval would not otherwise violate applicable provisions of federal or state law (including any requirements for federal banking agency approval).
(3) In evaluating whether the banking commissioner should have significant supervisory or regulatory concerns as set forth in paragraphs (1) and (2) of this subsection, the banking commissioner will consider written material in the record, including the contents of the application, notice or request, comments on file, the department´s files as they relate to the current financial condition of the trust company, and other data that the banking commissioner may properly officially notice. Specifically, the banking commissioner shall approve the establishment or relocation of an additional office if the following considerations are met:
(A) the department´s files do not indicate significant supervisory concerns as they relate to the current financial condition of the trust company, including but not limited to its capital, asset quality, management, earnings and liquidity;
(B) the costs of establishing or relocating the office, including costs of purchasing or leasing the office site, necessary furnishings, staffing and equipment, do not significantly affect the operations of the trust company as a whole;
(C) the projected earnings appear reasonable and sufficient to support expenses attributable to the establishment and relocation of the office without jeopardizing the safety and soundness of the trust company;
(D) the depth and quality of management of the trust company and of the proposed additional office are sufficient to justify a belief that the trust company will operate in compliance with law;
(E) the trust company has demonstrated a responsiveness to recommendations made in past state and federal regulatory examinations or other regulatory findings and the trust company has generally been operated in substantial compliance with all applicable state and federal laws; and
(F) no areas of general supervisory concern exist as determined by the banking commissioner in the exercise of discretion.
(4) The banking commissioner shall direct the department to assemble, evaluate, and make a recommendation regarding all relevant documentation and data as set forth in this subsection on or before the 30th day after the date the application is accepted for filing.
(5) The banking commissioner shall either approve, conditionally approve, or deny the application, notice, or request on or before the 30th day after the date of the department´s recommendation.
(f) Protest.
(1)A protest may be initiated by notifying the department in writing of the intent to protest the establishment of an additional office at the specified location within the time period allowed by subsection(d) of this section, accompanied by the filing fee as set forth in §21.2(c) of this title (relating to Filing and Investigation Fees). If the protest is untimely, the filing fee will be returned to the protesting party. If the protest is timely, the department will notify the applicant of the protest and mail or deliver a complete copy of the non-confidential sections of the application to the protesting party on or before the 14th day after receipt of the protest or the application, whichever occurs later.
(2) The protesting party shall file a detailed protest responding to each substantive statement contained in the notice on or before the 20th day after the date of receipt of the application. The protesting party´s response must indicate with regard to each such statement whether it is admitted or denied. The applicant shall file a written reply to the detailed response on or before the 10th day after the date the response is filed. Both the detailed response and the reply thereto must be verified by affidavit and must contain a certificate of service on the opposing party. When applicable, statements in the response and in the reply may be supported by references to data available in sources of which official notice may properly be taken. Comments received by the department and any replies of the applicant to such comments will also be made available to the protesting party.
(3) The banking commissioner may extend any time period set forth in this subsection for good cause shown. Good cause includes, but is not limited to, failure of the department to furnish required documentation, forms, or information within a reasonable time to permit its effective use by the recipient, or failure of a party to timely serve a filed document on an opposing party. The filing date is the date the document is actually received by the department and not the date of mailing. Failure to timely file a required document is considered an abandonment of the application or protest, as applicable. Rule 21a, Texas Rules of Civil Procedure, governs the methods and manner of authorized service and the computation of time periods under this subsection.
(g) Hearing.
(1) The banking commissioner may not be compelled to hold a hearing prior to allowing or not allowing an additional office to be established. In the exercise of discretion, the banking commissioner may consider granting a hearing on a notice of additional office at the request of either the filing trust company or a protesting party. The banking commissioner may order a hearing even if no hearing has been requested.
(2)A party requesting a hearing must indicate with specificity what issues are involved that cannot be determined on the basis of the record compiled pursuant to subsection (e) of this section and why the issues cannot be so determined. The request for hearing and the banking commissioner´s decision with regard to granting a hearing will be made a part of the record. If a hearing is not requested or if a request for hearing is denied, the banking commissioner will consider the notice in the manner set forth in and solely on the basis of the written record established pursuant to subsection (e) of this section.
(3) If a hearing is granted, the administrative law judge shall enter appropriate order(s) and conduct the hearing within 30 days after the date the hearing was granted, or as soon thereafter as is reasonably possible, under Chapter 9 of this title (relating to Rules of Procedure for Contested Case Hearings, Appeals, and Rulemakings) and the Administrative Procedure Act (Texas Government Code, Chapter 2001). Issues will be limited to those on which testimony is absolutely necessary, and the administrative law judge may require testimony to be submitted in written form and prefiled. No evidence will be received on matters that are not in dispute. No issues or evidence will be considered that are not relevant to the standards set forth in subsection (e) of this section or that are not supported by the notice, response, or reply. A proposal for decision, exceptions and replies to such proposal for decision, the final decision of the banking commissioner, and motions for rehearing are governed by Chapter 9 of this title.
(h) Closing an additional office.7
(1) Subject to paragraph (2) of this subsection, at least 30 days prior to the date a trust company proposes to close an additional office, the trust company shall file written notice with the banking commissioner disclosing:
(A) the name and home office location of the trust company seeking to close the additional office location;
(B) the street address of the additional office location to be closed;
(C) the effective date of the proposed closing;
(D) evidence of distribution of written notice of closing to all customers and account holders at least 45 days prior to the proposed closing date.
(E) the place and street address of location where records from the closed office will be transferred;
(F) a copy of the resolution adopted by the trust company´s board of directors authorizing the proposed closing of the additional location; and
(G) such other information as the banking commissioner may require.8
(2) If the trust company must comply with notice requirements of federal banking law applicable to closing a branch office, in lieu of compliance with paragraph (1) of this subsection, the trust company may provide the banking commissioner with a copy of the closing notice filed with the appropriate federal banking regulator simultaneously with its filing.
(3) Once the additional office has been closed, the trust company may not reopen the additional office except upon notice or application for a new additional office in compliance with this section.
Source: The provisions of this §21.42 adopted to be effective July 2, 1998, 23 TexReg 6715; amended to be effective September 5, 2002, 27 TexReg 8203; amended to be effective January 2, 2020, 44 TexReg 8236.
(a) A bank authorized by its charter to conduct a trust business that maintains its principal office or a branch in this state in accordance with governing law may freely establish one or more representative trust offices in this state to the extent authorized by its primary regulator and governing law, except that a foreign bank must comply with Finance Code §204.106 in lieu of this section.
(b) An out-of-state bank authorized by its charter to conduct a trust business that has not established or acquired a branch in this state may establish a representative trust office in this state:
(1) if not chartered by a federal banking regulatory agency and not insured by the Federal Deposit Insurance Corporation, only after complying with §21.44 of this title (relating to Representative Trust Offices of Out-of-State Trust Companies and Uninsured State Banks); or
(2) if chartered by a federal banking regulatory agency or insured by the Federal Deposit Insurance Corporation, after filing a written notice with the banking commissioner disclosing:
(A) the name of the institution and the address of its principal office;
(B) the physical address and the proposed opening date of the proposed office;
(C) a description of proposed activities at the office consistent with the limitations of Finance Code §187.201
(D) copies of any regulatory notices, filings, or publications required by the trust institution's home state regulator and/or its primary federal regulator regarding the establishment of the office; and
(E) a copy of the institution's registration filed with the secretary of state pursuant to Finance Code §201.102.
(c) An out-of-state bank that has established and is maintaining a representative trust office in this state pursuant to subsection (b) of this section may establish additional representative trust offices in this state without providing notice to the banking commissioner.
Source: The provisions of this §21.43 adopted to be effective May 5, 2016, 41 TexReg 3101; amended to be effective January 2, 2020, 44 TexReg 8236.
(a) Required notice. An out-of-state trust company or a state-chartered bank, the deposits of which are not insured by the Federal Deposit Insurance Corporation, may establish an initial representative trust office in this state after registration with the banking commissioner in accordance and in compliance with Finance Code §187.202 and this section, provided that the relevant home state regulator is a current party to regulatory information sharing and cooperation agreements with the banking commissioner that satisfy the requirements of Finance Code §181.303 and §187.301. At least 30 days before the proposed opening date of the proposed office, the institution must submit a written notice to the banking commissioner containing:
(1) the name of the institution and the address of its principal office;
(2) the physical address and the proposed opening date of the proposed office;
(3) a description of the proposed activities at the office consistent with the limitations of Finance Code §187.201;
(4) a copy of the institution's chartering document and evidence that the institution is active and in good standing;
(5) a copy of the resolution adopted by the board of the institution authorizing establishment of the proposed office;
(6) a copy of the institution's registration filed with the secretary of state pursuant to Finance Code §201.102;
(7) copies of any home state regulatory notices or filings required in connection with establishing the proposed office in this state;
(8) contact information for the institution's home state regulator;
(9) current financial statements evidencing tangible equity capital, defined as the total of owner's equity, surplus, and undivided profits reduced by the total of intangible assets, in an amount that equals or exceeds the minimum amount of restricted capital required for a state trust company pursuant to Finance Code §182.008; and
(10) the executed agreement required by subsection (b) of this section.
(b) Required agreement. The institution must submit its enforceable written agreement in the form provided by the banking commissioner, duly executed by an authorized officer of the institution, in which the institution agrees to:
(1) maintain tangible equity capital in an amount that equals or exceeds the minimum amount of restricted capital required for a state trust company pursuant to Finance Code §182.008, at all times during the period an office of the institution is maintained in this state;
(2) cooperate with and participate in examination at least once every 12 months at the discretion of the banking commissioner, and to pay the costs of each such examination as provided by §17.22 of this title (relating to Examination and Investigation Fees); and
(3) provide prompt written notice to the banking commissioner:
(A) pursuant to Finance Code §187.306, at least 30 days before the effective date of the event, or, in the case of an emergency transaction, a shorter period before the effective date consistent with applicable state or federal law, of:
(i) a merger or other transaction that would cause a change of control with respect to the institution and require an application to be filed with the home state regulator;
(ii) a transfer of all or substantially all of the trust accounts or trust assets of the institution to another person; or
(iii) the relocation, closing, or other disposition of an office of the institution in this state.
(B) not later than 30 days after the institution receives notice of the imposition of or a proposed enforcement action or condition by the institution's home state regulator.
(c) When the office may open. The institution may commence business at the representative trust office on the 31st day after the date the banking commissioner receives the notice unless the banking commissioner specifies an earlier or later date.
(1) The 30-day period of review may be extended by the banking commissioner on a determination that the written notice raises issues that require additional information or additional time for analysis. If the period of review is extended, the institution may establish the representative trust office only on prior written approval by the banking commissioner.
(2) The banking commissioner may deny approval of the representative trust office if the banking commissioner finds that the institution lacks sufficient financial resources to undertake the proposed expansion without adversely affecting its safety or soundness or that the proposed office would be contrary to the public interests.
(d) Additional offices. An out-of-state trust company or uninsured state-chartered bank that has established and is maintaining a representative trust office in this state pursuant to this section may establish additional representative trust offices in this state without providing notice to the banking commissioner.
Source: The provisions of this §21.44 adopted to be effective May 5, 2016, 41 TexReg 3101.
Subchapter E. Change of Control
(a) General. Without the prior written consent of the banking commissioner, or as otherwise provided by this section, a person or entity may not, directly or indirectly, acquire a legal or beneficial interest in voting securities of a trust company or a corporation or other entity owning voting securities of a trust company if, after the acquisition, the person or entity would control the trust company. Except as otherwise provided in this section, an application must be filed with the banking commissioner for review and consideration of the proposed transaction.9
(b) Form of application. The applicant shall submit a fully completed, verified application on a form prepared and prescribed by the banking commissioner and simultaneously tender the required filing fee pursuant to §21.2 of this title (relating to Filing and Investigation Fees). The application must, except to the extent expressly waived in writing by the banking commissioner, disclose the following information:
(1) the identity, biographical data, business background, and experience relating to trust industry matters, and a current statement of financial condition, a statement of changes in net worth and a statement of cash flows of each person by whom, or on whose behalf, the acquisition is to be made and by each person acting in concert with others seeking to acquire voting securities subject to Finance Code, §183.001, and to this section. Financial statements will be considered current if audited and dated within 180 days of the date of the application or will be considered current if unaudited and dated within 90 days of the date of the application. All financial statements must be accompanied by an affidavit of no material change dated as of the date of application;
(2) a completed authorization to release employment, financial, credit, fingerprint information, and criminal history records to the department;
(3) a completed confirmation inquiry form;
(4) the identity of each entity other than a natural person seeking to acquire control or working in concert with others to acquire control of a trust company and a copy of the entity´s most recent audited financial statement. Financial statements will be considered current if audited and dated within 180 days of the date of the application or will be considered current if unaudited and dated within 90 days of the date of the application. All financial statements must be accompanied by an affidavit of no material change dated as of the date of application;
(5) a description of all material, pending or adjudicated legal or administrative proceedings in which each acquiring person or entity is or was a party. A material legal proceeding includes a proceeding in which the person or entity has been charged with, cited for, or convicted under a state or federal law relating to trust or other financial institutions, securities or financial instrument reporting, or a felony or crime that directly relates to the duties and responsibilities involved in the operation of a trust company or financial institution under the laws of a state, the United States, or another country. A material legal proceeding also includes a proceeding that resulted in a material unsatisfied judgment, or may result in a judgment, against the acquiring person or entity and such loss contingency must be disclosed in the financial statements of the acquiring person or entity under generally accepted accounting principles, or is otherwise material. A material administrative proceeding includes a proceeding in which the person or entity is or has been subject to a cease and desist, removal, enforcement, or other order, including an order of supervision or conservatorship issued by a state, federal, or foreign regulatory agency;
(6) the terms and conditions of the proposed acquisition or change of control and the manner in which the acquisition or change of control is to be made;
(7) the identity, source, and amount of the funds or other consideration used or to be used in making the acquisition or change of control;
(8) if a portion of the funds or other consideration to be used in making the acquisition has been borrowed or is to be borrowed or otherwise obtained for the purpose of making the acquisition, a complete description of the transaction, the names of the parties to the transaction, and a summary of all arrangements, agreements, or understandings with such parties including terms of repayment;
(9) the applicant´s current or proposed business or strategic plan including amendments to a current plan;
(10) plans or proposals to liquidate the trust company, to sell its assets or merge it with another trust company or other entity, or to make other major changes in its business, corporate structure, or management;
(11) plans or proposals to change officers and directors of the trust company and the related trust or financial institution management experience of proposed or current officers and directors;
(12) the terms and conditions of an offer, invitation, agreement, or arrangement under which a voting security will be acquired and any contract affecting such security or its financing after it is acquired;
(13) pro forma financial statements with projections indicating whether the acquired or controlled trust company will be adequately capitalized for a period of not less than two years from the date of acquisition; and
(14) such other information that the banking commissioner requires to be included in the particular application as considered necessary to an informed decision to approve or reject the proposed acquisition. The applicant bears the burden to supply all material information necessary to enable the banking commissioner to make a fully informed decision regarding the application.
(c) Public notice. Not earlier than the 14th day before or later than the 14th day after the date of initial submission of an application filed pursuant to §21.4 of this title (relating to Required Information and Abandoned Filings), the applicant shall publish notice as required by Finance Code, §183.002(d), and §21.5 of this title (relating to Public Notice) in the county where the trust company´s home office is located. One publication under this subsection is adequate unless the banking commissioner expressly requires additional notice.
(d) Confidentiality. Information obtained by the banking commissioner under this section is confidential and may not be disclosed by the banking commissioner or an officer or employee of the department, subject only to such disclosure as may be permitted by Finance Code, §183.002(c), or by §3.111 of this title (relating to Confidential Information).
(e) Grandfather clause. A principal shareholder or participant that is considered to control a trust company, under Finance Code, §183.001(b), is exempt from filing an application under this section until the principal shareholder acquires one or more additional shares or participation shares of the trust company.
(f) Capital requirements. A person or entity seeking to acquire control of a trust company subject to this section must bring the trust company into compliance with the minimum capital requirements of Finance Code, §182.008, or such amount as required by the banking commissioner at the time the transaction is consummated.
(g) Exemptions. In addition to the acquisitions specifically exempted pursuant to Finance Code, §183.001(d), the following types of involuntary acquisitions of control do not require prior written approval of the banking commissioner:
(1) the inadvertent acquisition of control of a trust company by a shareholder as a result of a stock redemption or repurchase by the issuer if the potential controlling shareholder or participant of a trust company did not vote or have any direct or indirect input into the issuer´s decision to repurchase or redeem the voting securities;
(2) the acquisition and control by a qualified employee stock ownership plan (ESOP) of less than 25% of voting securities of a trust company unless an officer, director, or principal shareholder or participant directly or indirectly controls the voting securities held by the ESOP, in which event an application for acquisition of control must be filed by the officer, director or principal shareholder or participant, if as a result that person would control over 25% of the voting securities;
(3) the acquisition of control of a trust company as a result of a shareholder receiving proportionate voting securities in a trust company arising from the liquidation of a holding company;
(4) the acquisition of additional shares of voting securities of a trust company by virtue of a pro-rata stock dividend or stock split not resulting in increased ownership percentage;
(5) the acquisition of control of a trust company as a result of a gift made in good faith, provided:
(A) the donee is related to the donor within the second degree of consanguinity or affinity;
(B) neither the donor nor donee is under an enforcement order; and
(C) notice of the gift is given to the banking commissioner pursuant to subsection (h) of this section;
(6) the acquisition of control of a trust company as a result of the transfer of voting securities by gift to a limited partnership or other estate planning vehicle, if determined by the banking commissioner to have an equivalent effect, if:
(A) the limited partnership owns no other voting securities other than the securities transferred;
(B) the donor is the sole general partner of the limited partnership who retains sole voting authority over the voting securities;
(C) neither the donor nor donee is under an enforcement order; and
(D) notice of the gift is given to the banking commissioner pursuant to subsection (h) of this section; and
(7) the acquisition of control of a trust company by another entity if:
(A) the transaction is subject to an application to be reviewed by a federal or state regulatory authority that will be the primary regulator of the trust company after the transaction is consummated; and
(B) that regulatory authority has entered into an information sharing agreement with the banking commissioner.
(h) Notices in lieu of filing. In the event that an application is not required because of exemption under Finance Code, §183.001(d), or subsection (g) of this section, but an application is required to be filed with a federal regulatory authority or a regulatory authority of another state, a copy of the application as filed with another agency must be filed with the banking commissioner within seven days of the date of such other filing or filings. A notice in lieu of filing is also required of a person claiming an exemption under Finance Code, §183.001(d), or paragraph (5) or (6) of subsection (g) of this section. This notice must be filed before the securities acquired are voted and must be accompanied by a completed authorization pursuant to subsection (b)(2) of this section. No filing fees are required for notices filed under this section; however, should the banking commissioner determine that an application is required, the appropriate filing fee pursuant to §21.2 of this title is required.
(i) Approval. Automatic approval; conditional approval. If an application filed under this section is not approved by the banking commissioner or is not set for hearing on or before the 60th day after notice is published pursuant to subsection (c) of this section, the transaction may be consummated. The banking commissioner may, before the expiration of the initial 60-day period, give the applicant written notice that the application has been approved, in which case the transaction may be immediately consummated on receipt of the notice. The banking commissioner may also, before the expiration of the initial 60-day period, give an applicant written notice that the application has been approved subject to certain conditions. The applicant shall enter into a written agreement with the banking commissioner concerning the conditions on or before the 30th day after the date of notification of conditional approval. An agreement entered into by the applicant and the banking commissioner concerning conditional approval is enforceable against the applicant and the trust company and is considered for all purposes an agreement under the provisions of Finance Code, §185.002(a). In the event that an applicant who has received conditional approval does not enter into an agreement with the banking commissioner as required by this subsection, the banking commissioner shall set the matter for hearing.
(j) Consummation of an acquisition or change of control transaction. The acquisition or change of control of the voting securities must be consummated as proposed in the application, in the agreement concerning conditional approval as provided in subsection (i) of this section, or as provided in a final order pursuant to subsection (m) of this section. A transaction approved or conditionally approved under this section must be consummated within 12 months after the date of approval by the banking commissioner unless an extension is granted in writing. Until a transaction is consummated, the banking commissioner reserves the right to alter, suspend or withdraw approval should an interim development warrant such action.
(k) Notification by banking commissioner. A notification by the banking commissioner under this section may be by registered or certified mail, return receipt requested, and is complete when the notification is deposited in the United States mail postage prepaid, return receipt requested, addressed to the address furnished in the application.
(l) Abandoned filing. The banking commissioner may determine an application to be abandoned pursuant to §21.4 of this title.
(m) Hearing on application. The banking commissioner shall set an application for hearing on or before the 60th day after notice is published as required by Finance Code, §183.003, and subsection (i) of this section. The notice of hearing must comply with Government Code, §2001.051, and shall state that the purpose of the hearing is to give the applicant an opportunity to show all required qualifications for the banking commissioner´s approval of the acquisition or change of control application have been met. The applicant has the burden of showing all such required qualifications by a preponderance of evidence. After the hearing, the banking commissioner shall grant or deny the application based solely upon the evidence presented at the hearing. An applicant may not appeal denial of an application or conditional approval of an application until a final order is issued. If after a hearing has been held, the banking commissioner has entered an order denying the application, and the order has become final, the applicant may appeal the final order as provided by Finance Code, §183.004, and Government Code, Chapter 2001.
Source: The provisions of this §21.51 adopted to be effective September 3, 1998, 23 TexReg 8832; amended to be effective September 5, 2002, 27 TexReg 8203.
Subchapter F. Application for Merger, Conversion, or Sale of Assets
(a) Words and terms used in this subchapter that are defined in the Trust Company Act or in §21.1 of this title (relating to Definitions), have the same meanings as defined therein.
(b) The following words and terms, when used in this subchapter, shall have the following meanings unless the context clearly indicates the contrary.
(1) Annual report--Formal financial statements and accompanying narrative of management issued yearly for the benefit of shareholders and other interested parties.
(2) Chartering agency--A government authority that has chartering jurisdiction over an entity involved in a transaction under this subchapter.
(3) Corporation or domestic corporation--A corporation for profit subject to the provisions of the Texas Business Organizations Code, except a foreign corporation.
(4) Current financial statements--Audited financial statements dated as of a date not more than 180 days prior to the date of submission of an application, or unaudited financial statements dated as of a date not more than 90 days prior to the date of submission of an application.
(5) Fiduciary institution--A bank, savings association, savings bank, credit union, or other financial institution with the power to act as a fiduciary under applicable law.
(6) Low-quality asset--An asset as defined in 12 United States Code, §371c(b)(10), currently an asset that falls in any one or more of the following categories:
(A) an asset classified as "substandard," "doubtful," or "loss," or treated as "other loans especially mentioned" in the most recent report of examination or inspection of an affiliate prepared by either a federal or state supervisory agency;
(B) an asset in a nonaccrual status;
(C) an asset on which principal or interest payments are more than 30 days past due; or
(D) an asset whose terms has been renegotiated or compromised due to the deteriorating financial condition of the obligor.
(7) Material administrative proceeding--A past or pending proceeding by a state, federal, or foreign regulatory agency against the applicant or other person involved in a transaction under this subchapter that resulted in or could result in the issuance of a cease and desist, removal, enforcement action, determination letter or other order, including an order of supervision or conservatorship; excluding, however, a past proceeding that resulted in an order, other than a removal order, that has been satisfied or otherwise terminated more than five years prior to the date the application or notice requesting such information is submitted.
(8) Material legal proceeding--
(A) a past or pending criminal proceeding against the applicant or other person involved in a transaction under this subchapter that resulted or may result in conviction of the applicant or other person of a crime under a state or federal law or the law of a foreign country relating to fiduciaries, banks or other financial institutions, securities, financial instrument reporting, or another crime involving moral turpitude; or
(B) a past or pending proceeding that has or may result in a judgment against the applicant or other person or entity involved in a transaction under this subchapter and the loss contingency must be disclosed in the financial statements of the entity under generally accepted accounting principles, or is otherwise material.
(9) Merger--A transaction that is:
(A) the division of a trust company into two or more new trust companies, fiduciary institutions, or other entities, or into a surviving trust company and one or more new trust companies, fiduciary institutions, or other entities; or
(B) the combination of one or more trust companies with one or more fiduciary institutions or other entities, resulting in:
(i) one or more surviving trust companies, fiduciary institutions, or other entities;
(ii) the creation of one or more new trust companies, fiduciary institutions, or other entities; or
(iii) one or more surviving trust companies, fiduciary institutions, or other entities and the creation of one or more new trust companies, fiduciary institutions, or other entities.
(10) Other entity--An entity, whether or not organized for profit, including a corporation, limited or general partnership, joint venture, joint stock company, cooperative, association, or another legal entity organized pursuant to the laws of this state or another state or country to the extent such laws or the constituent documents of that entity, consistent with such laws, permit that entity to enter into a merger or share exchange subject to this subchapter.
(11) Principal executive officer--An officer primarily responsible for the execution of board policies and operation of a trust company or other entity.
(12) Purchase of assets--The purchase other than in the ordinary course of business of all, substantially all, or a part of the assets of a trust company, fiduciary institution, or other entity, including but not limited to fiduciary rights pertaining to client accounts.
(13) Regulatory restriction--A memorandum of understanding, determination letter, notice of determination, order to cease and desist, or other state or federal administrative enforcement order issued by a state or federal banking regulatory agency, or another limitation imposed on a fiduciary institution or other entity by a state or federal banking regulatory agency that restricts its ability to act without authorization from the regulatory agency imposing the condition.
(14) Resulting trust company--A trust company that is a surviving or newly created entity in a merger.
(15) Sale of assets--The sale, lease, exchange, or other disposition of substantially all of the assets of a trust company, including but not limited to fiduciary rights pertaining to client accounts, other than in the ordinary course of business.
(16) Share exchange--A transaction by which one or more trust companies, fiduciary institutions, or other entities acquire all of the outstanding shares of one or more classes or series of one or more trust companies under the authority of Finance Code, §182.301, and the Texas Business Organizations Code.
(17) Trust company--A state trust company as defined by Finance Code, §181.002(a).
(18)Verified--Documents submitted by the applicant that have been attested to as true and correct, but not necessarily notarized.
Source: The provisions of this §21.61 adopted to be effective December 31, 1998, 23 TexReg 13033; amended to be effective September 5, 2002, 27 TexReg 8203; amended to be effective November 7, 2013, 38 TexReg 7690; amended to be effective January 2, 2020, 44 TexReg 8236.
Without the prior written consent of the banking commissioner, a trust company may not consummate a merger, conversion, sale of assets, purchase of assets, or share exchange. Except as otherwise provided by Finance Code, Chapter 182, Subchapters D-F, or this subchapter, an application must be filed with the banking commissioner for review and consideration of the proposed transaction.
Source: The provisions of this §21.62 adopted to be effective December 31, 1998, 23 TexReg 13033; amended to be effective September 5, 2002, 27 TexReg 8203.
(a) An eligible trust company as defined in §21.1(4) of this title (relating to Definitions) may file an expedited filing in lieu of an application required under §21.64 of this title (relating to Application for Merger or Share Exchange) and simultaneously tender the required filing fee pursuant to §21.2 of this title (relating to Filing and Investigation Fees).10
(b) An expedited filing consists of a letter application including, except to the extent waived by the banking commissioner, the following items:
(1) a summary of the transaction;
(2) a current pro forma balance sheet and income statement for all parties to the transaction, with adjustments, reflecting the proposed transaction as of the most recent quarter ended immediately prior to the filing of the application, demonstrating that each resulting trust company meets the statutory capital requirement or capital requirement imposed by order or condition of the banking commissioner. The pro forma must include a statement of fiduciary assets as well as corporate assets;
(3) an executed opinion of counsel conforming to the requirements of §21.64(b)(12) of this title;
(4) copies of all other required regulatory notices or filings submitted to other state or federal regulatory agencies concerning the transaction; and
(5) a copy of the public notice published in conformity with §21.64(d) of this title.
(c) The banking commissioner shall notify the applicant on or before a date that is 15 days after receipt of the application if expedited filing treatment is not available under this section for any reason. Such notification must be in writing and must indicate the reason expedited treatment is not available. Notification is effective when mailed by the banking commissioner and is not subject to appeal.
(d) The banking commissioner may deny expedited filing treatment to an eligible trust company if, in the exercise of discretion, the banking commissioner finds that the application involves one or more of the following:
(1) the proposed transaction involves significant policy, supervisory, or legal issues;
(2) approval of the proposed transaction is contingent on additional statutory or regulatory approval by the banking commissioner or another state or federal regulatory agency;
(3) the proposed transaction contemplates a resulting entity that is not an authorized fiduciary institution;
(4) the proposed transaction involves a fiduciary institution or other entity that is not domiciled in Texas;
(5) the proposed transaction would cause the corporate or fiduciary assets of a resulting trust company to increase by more than 100%;
(6) the proposed transaction involves a trust company that has experienced, since the last commercial examination by a state or federal regulatory agency, corporate or fiduciary asset growth, through acquisition or otherwise, greater than 100%; or
(7) a resulting fiduciary institution that is not "well capitalized" as defined in 12 Code of Federal Regulations, §325.103, or that will not meet capital requirements imposed by its principal regulator.
(e) The banking commissioner shall approve or deny an expedited filing on or before a date that is 30 days after the date the expedited filing is accepted for filing pursuant to §21.4 of this title (relating to Required Information and Abandoned Filings). The banking commissioner may, in the exercise of discretion, before the expiration of the period for decision, give the applicant written notice that the banking commissioner will convene a hearing to obtain evidence related to the application, and the decision will thereafter be made in accordance with §21.72 of this title (relating to Approval; Conditional Approval; Denial of Application; Hearings).
(f) The applicant bears the burden to supply all material information necessary to enable the banking commissioner to make a fully informed decision regarding the expedited filing.
Source: The provisions of this §21.63 adopted to be effective December 31, 1998, 23 TexReg 13033; amended to be effective July 10, 2008, 33 TexReg 5277.
(a) Scope. This section governs an application for merger or share exchange pursuant to Finance Code, §§182.301 et seq. This section does not apply to a merger that results in a trust company becoming another fiduciary institution under another regulatory system pursuant to Finance Code, §182.501, or other applicable law, and such transactions are governed by §21.67 of this title (relating to Notice of Merger, Reorganization, or Conversion of a Trust Company Into Another Fiduciary Institution).
(b) Form of application. The applicant shall submit a fully completed, verified application on a form prescribed by the banking commissioner and simultaneously tender the required filing fee pursuant to §21.2 of this title (relating to Filing and Investigation Fees). The application must, except to the extent waived by the banking commissioner, include the following information:
(1) a summary of the proposed transaction;
(2) a copy of all agreements related to the proposed transaction executed by an authorized representative of each party to the merger or share exchange;
(3) certificate and plan of merger or share exchange in accordance with the Texas Business Organizations Code, which must include the following::
(A) a current draft of the certificate of merger or share exchange, and such number of additional copies equal to the number of surviving, new, or acquired entities, executed and acknowledged by an authorized officer for each party to the merger or share exchange;
(B) the plan of merger or share exchange;
(C) the certificate or restated certificate of formation of each resulting trust company;
(D) the certificate or restated certificate of formation, or other constitutive documents, of each newly created or surviving entity other than a resulting trust company; and
(E) if a party to a merger is an entity required to file documents with the Texas secretary of state before the transaction can be legally consummated, a provision in the certificate of merger conditioning the merger upon the approval of the banking commissioner, containing wording substantially as follows, as applicable: This merger shall become effective upon the final approval and filing of the certificate of merger by the Secretary of State of Texas and with the Banking Commissioner of Texas which shall be on or before _________ (date), which is the 90th day after the date of filing of such certificate of merger with the Secretary of State;
(4) for each party to the merger or share exchange, a certified copy of those portions of the minutes of board meetings and shareholder or participant meetings (or their equivalent) at which action was taken regarding approval of the merger or share exchange, or a certificate of an officer verifying the action taken by the board of directors and the shareholders or participants approving the merger or share exchange, or an explanation of the basis for concluding such action was not required;
(5) for each resulting trust company, an assessment of its future prospects, proposed officers and directors, and proposed offices and other locations;
(6) an assessment of the current regulatory and financial condition of each party to the transaction;
(7) a copy of current financial statements for each entity involved in the proposed transaction, accompanied by an affidavit of no material change dated no earlier than 30 days prior to the date of submission of the application;
(8) a copy of the latest annual report for each fiduciary institution and holding company involved in the proposed transaction;
(9) a copy of that portion of the most recent watch list for each fiduciary institution involved in the proposed transaction that identifies low-quality assets;
(10) a description of the due diligence review conducted by or for each trust company that is a party to the transaction and a summary of findings;
(11) a description of all material legal or administrative proceedings involving any party to the merger or share exchange;
(12) an opinion of legal counsel that conforms with §21.68 of this title (relating to Opinion of Legal Counsel), concluding the following:
(A) each resulting trust company will be solvent and will have adequate capitalization for its business and location;
(B) the merger or share exchange has been duly authorized by the board and shareholders or participants of each participating trust company, fiduciary institution, or other entity, including trust companies in accordance with applicable law;
(C) the merger or share exchange will not cause or result in a material violation of the laws of this state relative to the organization and operation of trust companies;
(D) all liabilities of each trust company that is a party to the merger or share exchange will be discharged or otherwise assumed or retained by a trust company or other fiduciary;
(E) each surviving, new, or acquiring entity that is not authorized to engage in the trust business will not engage in the trust business and has in all respects complied with the laws of this state;
(F) all conditions with respect to the merger or share exchange that have been imposed by the banking commissioner have been satisfied or otherwise resolved or, to the best knowledge of legal counsel, no such conditions have been imposed;1
(13) a copy of each filing or application regarding the proposed merger or share exchange that is required to be made with another state or federal regulatory agency, complete with all related attachments, exhibits, and correspondence;
(14) a current pro forma balance sheet and income statement for each party to the transaction, with adjustments, reflecting the proposed merger or share exchange as of the most recent quarter ended immediately prior to the filing of the application. The pro forma must include a statement of fiduciary assets as well as corporate assets;
(15) for each resulting trust company, a copy of the strategic plan that complies with the banking commissioner´s Memorandum 1009, including projections of the balance sheet and income statement of each resulting trust company as of the quarter ending one year from the date of the pro forma financial statement required by paragraph (14) of this subsection;
(16) an explanation of compliance with or nonapplicability of provisions of governing law relating to rights of dissenting shareholders or participants to the merger or share exchange;
(17) a copy of all securities offering documents, proxy statements, or other disclosure materials delivered or to be delivered to shareholders or participants of a party concerning the merger or share exchange;
(18) an explanation of the manner and basis of converting or exchanging any of the shares or other evidences of ownership of an entity that is a party to the merger or share exchange into shares, obligations, evidences of ownership, rights to purchase securities, or other securities of one or more of the surviving, acquiring, or new entities, into cash or other property, including shares, obligations, evidences of ownership, rights to purchase securities, or other securities of another person or entity, or into a combination of the foregoing;
(19) for antitrust purposes, an analysis of the anticipated competitive effect of the proposed transaction in the affected markets and a statement of the basis of the analysis of the competitive effects, or if applicable, a copy of the analysis of competitive effects of the proposed transaction addressed in a companion federal regulatory agency application; and
(20) such other information that the banking commissioner, in the exercise of discretion, requires to be included in the particular application as considered necessary to an informed decision to approve or deny the proposed merger or share exchange.2
(c) Applicant´s duty to disclose. The applicant bears the burden to supply all material information necessary to enable the banking commissioner to make a fully informed decision regarding the application.
(d) Public notice. Not earlier than the 14th day before or later than the 14th day after the date of the initial submission of the application, the applicant shall publish notice in accordance with the requirements of §21.5 of this title (relating to Public Notice) in the specified communities where the home office of the applicant, the target entity, and the resulting trust company are located.3
(e) Approval by the banking commissioner and filings with a chartering agency.
(1) The banking commissioner shall approve a merger or share exchange only if the application indicates substantial compliance with all conditions of Finance Code, §182.302(c).
(2) If any party is required to file with its chartering agency after acceptance for filing pursuant to §21.4(b) of this title (relating to Required Information and Abandoned Filings), an applicant for merger or share exchange shall file the original certificate of merger or share exchange as certified by the chartering agency with the banking commissioner.
(3) After approval of an application under this section by the banking commissioner, the certificate of merger or share exchange previously filed with the chartering agency, if applicable, will be accepted and a certificate of merger or share exchange will be issued by the banking commissioner who shall perform the duties required by Finance Code, §182.303(a). With respect to a transaction that requires filing with the Texas secretary of state, if the banking commissioner does not approve the certificate of merger or share exchange on or before the 90th day after the filing of the certificate of merger with the Texas secretary of state, the applicant must refile the certificate of merger or share exchange with both the Texas secretary of state and with the banking commissioner.
(4) After issuance of the certificate of merger or share exchange by the banking commissioner, the applicant shall file a statement with the chartering authority, if applicable, certifying that any future event upon which the effectiveness of the merger or share exchange was conditioned, has been satisfied and the date upon which the condition was satisfied.
(5) The date of issuance of the certificate of merger or share exchange by the banking commissioner constitutes the date of approval pursuant to Finance Code, §182.303(b), unless the merger or exchange agreement provides for a later effective date which has been approved by the banking commissioner.
Source: The provisions of this §21.64 adopted to be effective December 31, 1998, 23 TexReg 13033; amended to be effective September 5, 2002, 27 TexReg 8203; amended to be effective November 7, 2013, 38 TexReg 7690.
(a) Scope. This section governs notice of the merger, reorganization, or conversion of a trust company into another form of fiduciary institution in a manner that results in extinguishment of the trust company charter, pursuant to Finance Code, §182.501, or other applicable law.14
(b) Form of notice. A trust company does not cease to be subject to the jurisdiction of the banking commissioner until the banking commissioner is given written notice of intent to merge, reorganize, or convert into another form of fiduciary institution before the 31st day preceding the date of the proposed transaction and the merger, reorganization, or conversion has otherwise become effective.15 The notice must, except to the extent waived by the banking commissioner, include the following information:
(1) a summary of the proposed transaction;
(2) a copy of all agreements or other documentation related to the proposed transaction executed by an authorized representative of the applicant and other parties, if any;
(3) a copy of each filing regarding the proposed transaction that is required to be filed with other state or federal regulatory agencies, complete with all related attachments, exhibits, and correspondence;
(4) a certified copy of the relevant portions of the minutes of board meetings and shareholder or participant meetings (or their equivalent) at which action was taken regarding approval of the transaction, or a certificate of an officer verifying the action taken by the board of directors and the shareholders or participants approving the merger, reorganization, or conversion;
(5) Opinion of legal counsel. An opinion of legal counsel that conforms with the requirements of §21.68 of this title (relating to Opinion of Legal Counsel), concluding the following:
(A) the merger, reorganization, or conversion of the trust company has been duly authorized by its board and shareholders or participants in accordance with the Texas Business Corporation Act;
(B) all liabilities of the trust company will be discharged or otherwise retained by the successor fiduciary institution; and
(C) all conditions with respect to the merger, reorganization, or conversion imposed by the banking commissioner have been satisfied or otherwise resolved or, to the best knowledge of legal counsel, no such conditions have been imposed;16
(6) a publisher´s certificate showing publication of notice as required by subsection (c) of this section; and
(7) an explanation of compliance with the provisions of the Texas Business Corporation Act relating to rights of dissenting shareholders or participants.
(c) Notices, publication, and certificate of authority.
(1) The applicant shall submit a copy of the published notice of the proposed transaction required by the successor regulatory authority or shall publish notice as required by §21.5 of this title (relating to Public Notice). Submission of such notice, with the publisher´s certificate required by subsection (b)(6) of this section, is considered notice of the transaction in accordance with Finance Code, §182.501(c)(2). The banking commissioner may require, upon written notice to the applicant, such other publication requirements at such times and places and in such manner as considered appropriate.17
(2) Within 14 days after receipt of the certificate of authority to do business, or such other document issued by the successor regulatory authority that authorizes the consummation of the merger, reorganization, or conversion, the successor fiduciary institution shall provide written notice to the banking commissioner of the effective date and a copy of the certificate of authority or other document.
(d) Filing fees. A filing fee is not required in connection with notice under this section.
Source: The provisions of this §21.67 adopted to be effective December 31, 1998, 23 TexReg 13033; amended to be effective September 5, 2002, 27 TexReg 8203.
(a) An opinion of legal counsel required by this subchapter must be addressed to the banking commissioner and state the opinions expressed, the specific documents reviewed and the matters considered of both law and fact, as legal counsel has considered necessary or appropriate in the exercise of professional judgment for the opinions expressed, and the assumptions, qualifications, limitations, and exceptions made or taken with respect to the opinions expressed. A draft opinion may be submitted with an application under this chapter provided a final, signed opinion is delivered to the banking commissioner prior to final action on the application. Any variation in the final opinion from the draft version must be specifically called to the attention of the banking commissioner.
(b) An opinion letter required under this subchapter will be governed by and interpreted in accordance with the Third Party Legal Opinion Report, Including the Legal Opinion Accord, of the Section of Business Law (American Bar Association, 1991), available in pamphlet form as reprinted from the November 1991 issue of The Business Lawyer (Volume 47, Number 1, Page 167), (the Accord), or a successor document officially promulgated by an appropriate authority.
(c) Unless specifically noted in the opinion, the banking commissioner will assume that the opinions expressed are based upon and subject to the assumptions, qualifications, limitations and exceptions set forth in the Accord, provided the Accord is incorporated by reference. In addition, whether or not stated in the Accord, if specifically noted in the opinion, counsel:
(1) need not express an opinion as to the laws of the United States or a foreign jurisdiction unless such an opinion is specifically requested by the banking commissioner;18
(2) may assume that the parties to the transaction have engaged only in activities provided in their respective constitutive documents, and that all surviving parties to the transaction will engage only in activities provided in their respective constitutive documents;
(3) may assume that the transaction will be consummated in accordance with its terms as disclosed in the application; and
(4) may qualify the opinions given as opinions solely for the benefit of the banking commissioner that may not be quoted in whole or in part or otherwise referred to in another document or report, and that may not be furnished to a person or entity other than the banking commissioner and the department without the written consent of counsel, except as may be permitted or required by law, including Finance Code, §§181.301 et seq, and Government Code, Chapter 552.
(d) Legal counsel shall specifically notify the banking commissioner of any substantive deviation from the assumptions, qualifications, limitations and exceptions allowed in this section and the Accord, and any substantive deviation from the opinion requirements of the section of this subchapter that governs a particular application. Deviations may result in a processing delay of the application to the extent additional analysis is required to understand the purpose of the deviation. A substantive deviation from the requirements of this subchapter applicable to legal opinions that is not brought to the attention of the banking commissioner will be considered a material misrepresentation in the application.
(e) Legal counsel rendering an opinion under this subchapter shall be an attorney in good standing admitted to practice before the highest court of a state, territory or district of the United States. However, legal counsel shall be well versed and professionally competent in applicable Texas law, or should seek the advice and opinion of an attorney in good standing admitted to practice before the highest courts in this state if legal counsel may not properly and ethically render opinions regarding applicable Texas law. An opinion of local legal counsel must be disclosed if relied on by legal counsel.
(f) Legal counsel rendering an opinion under this subchapter shall be independent of the applicant, the notice provider, or another person or entity required to submit an opinion of counsel pursuant to this section. Legal counsel is considered independent if able to exercise independent professional judgment and render candid advice, whether in private practice or employed by an applicant.
Source: The provisions of this §21.68 adopted to be effective December 31, 1998, 23 TexReg 13033; amended to be effective September 5, 2002, 27 TexReg 8203.
The rights of dissenting shareholders or participants to a transaction under this subchapter may be governed by the Texas Business Organizations Code or other applicable law relating to the rights of dissenters, and applicants shall provide evidence of compliance with or inapplicability of such provisions of law.
Source: The provisions of this §21.69 adopted to be effective December 31, 1998, 23 TexReg 13033; amended to be effective November 7, 2013, 38 TexReg 7690.
(a) Authority. An application under this subchapter is subject to such investigation as considered necessary, in the banking commissioner´s sole discretion, in order to make an informed decision regarding an application.
(b) Costs and fees. An applicant under this subchapter shall pay reasonable costs incurred in the investigation including the cost of a required examination, as provided by §21.2 of this title (relating to Filing and Investigation Fees).
(c) Examinations. The banking commissioner may consider the following factors in determining whether to require an examination of one or more of the entities to the transaction:
(1) a question exists regarding the solvency or potential solvency of the applicant or one or more of the fiduciary institutions or other entities involved in the proposed transaction;
(2) a trust company or other fiduciary institution involved in the transaction has not been examined by a state, federal, or foreign regulatory agency within the 18-month period immediately preceding the date of submission of the application;
(3) a trust company or other fiduciary institution involved in the proposed transaction has numerous substantive violations cited in its last examination report, or has a less than satisfactory corporate or trust regulatory rating;
(4) a question exists regarding the experience, ability, standing, trustworthiness, or integrity of the existing or proposed officers, directors, managers or managing participants of a party involved in the proposed transaction;
(5) a question exists whether a resulting trust company will operate in compliance with the law;
(6) a question exists whether a resulting trust company will be free from improper or unlawful influence or interference from its principal shareholders with respect to operation in compliance with the law;
(7) a question exists whether a resulting trust company will have adequate capitalization;
(8) one or more of the parties to the transaction are under a regulatory restriction; or
(9) such other factors as determined in the sole discretion of the banking commissioner.
Source: The provisions of this §21.70 adopted to be effective December 31, 1998, 23 TexReg 13033.
(a) Approval, conditional approval, or denial. Except as otherwise provided by §21.63 of this title (relating to Expedited Filings), the banking commissioner shall approve or deny an application filed under this subchapter on or before a date that is 60 days after the date the application is accepted for filing pursuant to §21.4 of this title (relating to Required Information and Abandoned Filings).
(b) Pre-decision hearing. The banking commissioner may, in the exercise of discretion, before the expiration of the initial period for decision provided by subsection (a) of this section, give the applicant written notice that the banking commissioner will convene a hearing to obtain evidence related to the application. Such notice by the banking commissioner suspends the specified period for approval or denial of an application, and the banking commissioner shall approve or deny the application on or before a date that is 30 days after the date the final proposal for decision resulting from the hearing is provided to the banking commissioner and the applicant.
(c) Acceptance of conditional approval. The banking commissioner may give the applicant written notice that the application has been approved subject to certain conditions. The applicant shall provide the banking commissioner with written confirmation of acceptance of the conditions on or before a date that is 10 days after the date of notification to the applicant of the conditional approval. An agreement between the applicant and the banking commissioner concerning conditional approval is enforceable against the applicant. In the event an applicant who has received conditional approval does not provide the banking commissioner with written confirmation as required by this subsection, consummation of the transaction constitutes confirmation of acceptance of the conditions imposed by the banking commissioner and is considered for all purposes an agreement enforceable against the applicant.
(d) Requests for hearing. An applicant may request a hearing on or before a date that is 30 days after the effective date of notice of denial or conditional approval of an application under this subchapter by the banking commissioner. The request for hearing must be in writing and state with specificity the reasons the applicant alleges that the decision of the banking commissioner is in error. The applicant has the burden of proof for each issue specified in the request for hearing. The request for hearing and the banking commissioner´s decision to deny or condition the application will be made a part of the record.
(e) Hearings on denial of applications. Requests for hearing under this subchapter will be forwarded to the administrative law judge who shall enter appropriate orders and conduct the hearing on or before a date that is 60 days after the date the request for hearing was received, or as soon after that as is reasonably possible, under Chapter 9 of this title (relating to Rules of Procedure for Contested Case Hearings, Appeals, and Rulemaking) and Government Code, Chapter 2001. A proposal for decision, exceptions and replies to such proposal for decision, the final decision of the banking commissioner, and motions for rehearing are governed by Chapter 9 of this title. An applicant may not appeal denial of an application or conditional approval of an application until a final order is issued. After a hearing and final order, the applicant may appeal the final order as provided in Finance Code, §§181.202-181.204.
Source: The provisions of this §21.72 adopted to be effective December 31, 1998, 23 TexReg 13033; amended to be effective September 5, 2002, 27 TexReg 8203.
A transaction under this subchapter must be consummated as proposed in the application, in the agreement concerning conditional approval, or as provided in a final order. An approved transaction under this subchapter must be consummated within 12 months after the date of approval by the banking commissioner unless an extension is granted in writing. Until a transaction is consummated, the banking commissioner may alter, suspend, or withdraw approval should an interim development warrant such action.
Source: The provisions of this §21.73 adopted to be effective December 31, 1998, 23 TexReg 13033.
A notification by the banking commissioner under this subchapter may be by registered or certified mail, return receipt requested, and is complete when the notification is deposited in the United States mail postage prepaid, return receipt requested, mailed to the address furnished in the application. Notification may also be made in person to the applicant, or to the trust company or another person, fiduciary institution, foreign corporation or domestic corporation, or other entity subject to this subchapter, by agent-receipted delivery or by courier-receipted delivery to the address furnished in the application, by email to the email address furnished in the application, or by telephonic document transfer to the fax number furnished in the application. Notice by telephonic document transfer served after 6:00 p.m. local time of recipient is considered as notice served on the following day.
Source: The provisions of this §21.74 adopted to be effective December 31, 1998, 23 TexReg 13033; amended to be effective January 2, 2020, 44 TexReg 8236.
The banking commissioner may determine an application under this subchapter to be abandoned pursuant to §21.4 of this title (relating to Required Information and Abandoned Filings).
Source: The provisions of this §21.75 adopted to be effective December 31, 1998, 23 TexReg 13033.
Information obtained by the banking commissioner under this subchapter is presumed to be public information unless such information is confidential under Finance Code, §181.301 et seq,19 or under exceptions contained in Government Code, Chapter 552. The applicant has the burden to request confidential treatment for specified information, to segregate and mark documents claimed to be confidential, and to specifically reference the provision of law that allows confidential treatment.
Source: The provisions of this §21.76 adopted to be effective December 31, 1998, 23 TexReg 13033; amended to be effective September 5, 2002, 27 TexReg 8203.
Subchapter G. Charter Amendments and Certain Changes in Outstanding Stock
(a) Permitted acquisition of treasury stock. Pursuant to Finance Code, §§182.103, 184.101, and 184.102, a trust company may acquire its own shares to be held as treasury stock, if prior notice of the proposed transaction is filed with the banking commissioner pursuant to subsection (b) of this section and the plan of acquisition has not been disapproved by the banking commissioner pursuant to subsection (d) of this section.
(b) Notice filing. A trust company that desires to effect a treasury stock transaction shall file notice of its intention to enter into a plan of acquisition with the banking commissioner, setting forth or including as exhibits the following:
(1) consistent with subsection (g) of this section, the pro forma effects of the plan of acquisition on the trust company´s liquidity and restricted and secondary capital, and disclosure of the basis for the calculations, including:
(A) the price or price range per share at which the shares will be acquired;
(B) the number of shares sought to be acquired, expressed as a maximum; and
(C) the source of funds for the acquisition;
(2) the date by which the plan of acquisition will be completed;
(3) a certified copy of a resolution duly adopted by the board of directors, approving the plan of acquisition; and
(4) a current draft of the securities offering document or other disclosure materials proposed to be delivered to shareholders considering the sale of the trust company´s shares to the trust company.
(c) Consummation of plan of acquisition. If a notice of intention to acquire treasury stock filed under this section is not disapproved by the banking commissioner on or before the 30th day after the notice is complete and accepted for filing, the transaction may be consummated in the manner and in accordance with the terms set forth in the plan of acquisition. The banking commissioner may, before the expiration of the 30-day period, impose conditions on the plan of acquisition, including limitations on the number of shares to be acquired, the source of funds for the acquisition, or a condition that the transaction be consummated as of a specified date. A notification by the banking commissioner under this section may be by registered or certified mail, return receipt requested, and is complete when the notification is deposited in the United States mail postage prepaid, return receipt requested, addressed to the address furnished in the notice.
(d) Disapproval. The banking commissioner may disapprove the proposed plan of acquisition if the banking commissioner concludes that the trust company's plan of acquisition:
(1) will result in an acquisition of treasury stock at an aggregate cost in excess of its undivided profits,
(2) may threaten the adequacy of the trust company´s liquidity and the requirements of Finance Code, §184.101(b);
(3) may threaten the adequacy of the trust company's equity capital or its restricted capital, or could result in a trust company failing to maintain the minimum required level in restricted capital set forth in Finance Code, §182.103; or
(4) could otherwise place the trust company in an unsafe or unsound condition.
(e) Compliance with securities law.
(1) An issuer´s purchase of its own shares is a transaction subject to the antifraud provisions of federal securities law, see 15 United States Code, §78j, 17 Code of Federal Regulations, §240.10b-5, and Spector v. L Q Motor Inns, Inc., 517 F.2d 278 (5th Cir. 1975), cert. denied, 423 U.S. 1055 (1976). Such a transaction is also subject to the antifraud provisions of state securities law, see Texas Civil Statutes, Article 581-33(B). Potential liability of the trust company to the selling shareholder can therefore arise if the trust company withholds or misrepresents material facts that the seller would have considered important in making the decision to sell.
(2) Any transaction consummated under subsection (c) of this section does not constitute a determination by the banking commissioner that the trust company has complied with applicable securities law.
(f) Retention of treasury stock. The banking commissioner may require a trust company to cancel and retire all or part of shares held as treasury stock to the status of authorized and unissued shares if the banking commissioner concludes that holding treasury stock in the amount held by the trust company creates safety and soundness or other regulatory concerns.
(g) Accounting for treasury stock. A trust company shall account for the acquisition and retention of treasury stock in accordance with generally accepted accounting principles under either the cost method or the par value method (see Accounting Research Bulletin Number 43), although use of the cost method may avoid the reduction in restricted capital that would be required under the par value method. The method used for accounting for treasury stock must be clearly reflected in the trust company´s accounting records.
(h) Status of treasury stock. Shares held by a trust company as treasury stock may not be voted, directly or indirectly, at any meeting of shareholders, and may not be counted in determining the total number of outstanding shares at any given time.
Source: The provisions of this §21.91 adopted to be effective December 31, 1998, 23 TexReg 13039; amended to be effective September 5, 2002, 27 TexReg 8203; amended to be effective July 10, 2008, 33 TexReg 5277.
(a) Definitions. The following words and terms when used in this section shall have the following meanings, unless the context clearly indicates otherwise.
(1) Affiliate--For purposes of this section only, a person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with a trust company seeking to effect a reverse stock split. A person who is not an affiliate of the trust company at the commencement of its reverse stock split will not be considered an affiliate of the trust company prior to the completion of the reverse stock split.
(2) Appraisal report--A report, opinion (other than an opinion of counsel), or appraisal, prepared by an outside party, that is materially related to the reverse stock split, including a report, opinion, or appraisal relating to the consideration or the fairness of the consideration to be offered to shareholders in connection with the reverse stock split or the fairness of such transaction to the trust company or to unaffiliated shareholders.
(3) Reverse stock split--An amendment to the certificate of formation of a trust company that achieves a reduction in the number of issued shares of such trust company by requiring exchange of all issued shares in a particular class for a proportionately smaller number of shares, generally with a proportionately increased par or stated value. The equity capital of the trust company remains substantially the same.
(4) Share--A unit representing ownership of at least part of the proprietary interests of a trust company, whether or not divided or subdivided by means of classes, series, relative rights, or preferences; and includes a stock or similar security; or a security convertible, with or without consideration, into such a security, or carrying a warrant or right to subscribe to or purchase such a security; or such warrant or right; or another security determined by the banking commissioner to be an equity security as defined by Finance Code, §181.002(a).
(5) Unaffiliated shareholder--A shareholder of a share subject to a reverse stock split who is not an affiliate of the trust company that issued the share.
(b) Procedure. Pursuant to Finance Code, §182.101, to effectuate a reverse stock split in compliance with this section, a trust company shall:
(1) obtain the approval of its shareholders as required by law; and
(2) obtain the approval of the banking commissioner pursuant to subsection (d) of this section, by filing an application setting forth the information and documents required by subsection (c) of this section and the filing fee required by §21.2 of this title (relating to Filing and Investigation Fees).
(c) Application. A trust company proposing a reverse stock split transaction shall file with the banking commissioner a written application seeking approval of the proposed amendment to its certificate of formation, stating the results of the vote of shareholders regarding the proposed reverse stock split and stating the percentage of shares of unaffiliated shareholders that were voted in favor of the proposed reverse stock split, or undertaking to supplement the application after conditional approval is obtained to provide shareholder approval information, setting forth or including as exhibits the following:
(1) the original and one copy of the proposed amendment to the certificate of formation, to be processed in the manner required by Finance Code, §182.101, and a description of the material terms of the proposed reverse stock split, including terms or arrangements relating to any shareholder of the trust company which are not identical to those relating to other shareholders of the same class;
(2) any plan or proposal of the trust company, regarding activities or transactions which are to occur after the reverse stock split which relate to or would result in:
(A) an extraordinary corporate transaction, such as a merger, reorganization, or liquidation, involving the trust company or any of its subsidiaries;
(B) a sale or transfer of a material amount of assets of the trust company or any of its subsidiaries;
(C) a change in the present board of directors or management of the trust company, including a plan or proposal to change the number or term of directors, to fill an existing vacancy on the board or to change a material term of the employment contract of an executive officer;
(D) a material change in the present dividend rate or policy or indebtedness or capitalization of the trust company;
(E) any other material change in the trust company's corporate structure or business;
(3) the corporate purpose or purposes of the trust company for the reverse stock split, and alternative means, if any, considered by the trust company to accomplish such purposes and the reasons for their rejection, and the reason for choosing the structure of a reverse stock split and for undertaking such transaction at this time;
(4) a certified resolution of the board of directors of the trust company approving the proposed amendment to the certificate of formation, accompanied by a statement whether or not the board of directors of the trust company reasonably believes that the reverse stock split is fair or unfair to unaffiliated shareholders that:
(A) identifies each director, if any, that dissented to or abstained from voting on the merits of the reverse stock split, and describes, if known to the trust company after making reasonable inquiry, the reasons for each dissent or abstention; and
(B) states the number and percentage of disinterested directors that voted in favor of the proposed reverse stock split;
(5) whether or not the trust company obtained an appraisal report and, if an appraisal report was obtained, a copy of the appraisal report. To the extent not addressed in the appraisal report, the trust company shall disclose:
(A) the identity, qualifications, and method of selection of the outside party that prepared the appraisal report, any material relationship between the outside party or its affiliates and the trust company or its affiliates which existed during the past two years or is mutually understood to be contemplated, and any compensation received or to be received as a result of such relationship;
(B) a summary of the performance of such appraisal report, including the procedures followed, the findings and recommendations, the bases for and methods of arriving at such findings and recommendations, instructions received from the trust company, and any limitation imposed by the trust company on the scope of the investigation; and
(C) whether such appraisal report will be made available for inspection and copying at the home office of the trust company during its regular business hours by any shareholder of the trust company or such shareholder's representative who has been so designated in writing;
(6) with respect to the class of shares to which the reverse stock split relates, the aggregate amount and percentage of shares beneficially owned by any pension, profit sharing, or similar plan of the trust company, and by each officer, director, principal shareholder, and subsidiary of the trust company;
(7) with respect to any purchases of such shares made by the trust company since the commencement of the trust company's second full fiscal year preceding the date of the application, the amount of such shares purchased, the range of prices paid for such shares, and the average purchase price for each quarterly period of the trust company during such period;
(8) to the extent known to the trust company after reasonable inquiry, any transaction in the class of shares subject to the proposed reverse stock split that was effected during the past 60 days by the trust company or by an officer, director, principal shareholder, or subsidiary of the trust company, including the identity of the person who effected the transaction, the date of the transaction, the amount of shares involved, the price per share, and where and how the transaction was effected;
(9) to the extent known to the trust company after reasonable inquiry, a description and/or a copy of any contract, arrangement, understanding, or relationship (whether or not legally enforceable) in connection with the reverse stock split between the trust company (or an officer, director, principal shareholder, or subsidiary of the trust company) and any person with respect to any shares of the trust company (including a contract, arrangement, understanding, or relationship concerning the transfer or the voting of any such shares, joint ventures, loan, or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies, consents, or authorizations), naming the persons with whom such contracts, arrangements, understandings, or relationships have been entered into and giving the material provisions thereof, including such information for any of such shares that are pledged or otherwise subject to a contingency, the occurrence of which would give another person the power to direct the voting or disposition of such shares, except that disclosure of standard default and similar provisions contained in loan agreements need not be included;
(10) to the extent known to the trust company after reasonable inquiry, whether or not any officer, director, principal shareholder, or subsidiary of the trust company has made a recommendation in support of or opposed to the reverse stock split and, if so, the reasons for such recommendation;
(11) whether or not appraisal rights are being voluntarily accorded by the trust company to shareholders in connection with the reverse stock split and whether or not any provision has been or will be made to allow unaffiliated shareholders to obtain counsel or appraisal services at the voluntary expense of the trust company and, if so, a detailed description of such appraisal rights or counsel or appraisal services;
(12) a reasonably itemized statement of all expenses incurred or estimated to be incurred in connection with the reverse stock split, including filing fees, legal, accounting, and appraisal fees, solicitation expenses, and printing costs, and disclosure of the person who has paid or will be responsible for paying such expenses;
(13) the proxy statement furnished to shareholders of the trust company in connection with obtaining shareholder approval for the reverse stock split, or a draft of the proxy statement to be furnished to shareholders in the event approval of the banking commissioner is sought prior to a shareholder vote; and
(14) such other information that the banking commissioner requires to be included in the particular application as considered necessary to an informed decision to approve or reject the proposed amendment effectuating a reverse stock split.
(d) Standards for approval.
(1) The banking commissioner shall process the proposed reverse stock split in accordance with Finance Code, §182.101(d). The banking commissioner shall require that the reverse stock split be for a valid business purpose of the trust company, viewed as an entity distinct from its affiliates, and be accomplished through fair dealing with and a fair price to unaffiliated shareholders. The banking commissioner may impose conditions on approval, including a condition that an independent appraisal report be obtained regarding the value of the unaffiliated shareholders' shares, exclusive of any element of value arising from the accomplishment or expectation of the proposed transaction, and without minority discount. Share value determined by an independent and properly prepared appraisal report that is fully disclosed to trust company shareholders or by the market price of publicly traded shares will be presumed to be a fair value unless extenuating circumstances to the contrary are specifically noted.
(2) In the event approval of the banking commissioner is obtained prior to approval by shareholders, the trust company shall file a statement with the banking commissioner certifying that any future event or condition upon which the approval of the transaction was conditioned has been satisfied and the date that each such condition was satisfied. Upon receipt of such statement, the banking commissioner shall file the approved amendment to the certificate of formation in accordance with Finance Code, §182.101(e).
(3) An issuer's purchase of its own shares is a transaction subject to the antifraud provisions of federal securities law, see 15 United States Code, §78j, 17 Code of Federal Regulations (CFR), §240.10b-5, and Spector v. L Q Motor Inns, Inc., 517 F.2d 278 (5th Cir. 1975), cert. denied, 423 U.S. 1055 (1976). Such a transaction is also subject to the antifraud provisions of state securities law, see Texas Civil Statutes, Article 581-33(B). Potential liability of the trust company to the selling shareholder can therefore arise if the trust company withholds or misrepresents material facts that the seller would have considered important in making the decision to sell. Consequently, a trust company must disclose to the shareholders in writing, prior to or simultaneously with the written notice of the shareholders meeting, all material information necessary to an informed decision regarding the proposed reverse stock split. If the reverse stock split involves publicly traded shares and is subject to 15 CFR, §240.13e-3, the registration statement required by federal law is considered to satisfy this disclosure obligation. Approval of an application under this section by the banking commissioner does not constitute a determination that the trust company has complied with applicable securities law.
(e) Exemptions.
(1) This section does not apply to a reverse stock split that:
(A) will not result in fractional shares;
(B) permits each shareholder to choose to cash in the resulting fractional share by selling it to the trust company or to round up to the next highest whole share by purchasing fractional interests, provided that:
(i) the specified sale and purchase prices are equivalent and reasonable; and
(ii) no fractional share resulting from the reverse stock split is less than 10% of a full share;
(C) is adopted by means of a unanimous written consent of shareholders; or
(D) the banking commissioner expressly exempts after written application as not within the purposes of this section.
(2) An amendment to the certificate of formation that implements a reverse stock split exempt from this section is filed and processed in accordance with Finance Code, §182.101.
(3) The availability of an exemption from the requirements of this section does not relieve a trust company from its obligation to comply with applicable securities law.
Source: The provisions of this §21.92 adopted to be effective December 31, 1998, 23 TexReg 13039; amended to be effective September 5, 2002, 27 TexReg 8203; amended to be effective November 7, 2013, 38 TexReg 7690.