CHAPTER 185. ENFORCEMENT ACTIONS
FINANCE CODE
TITLE 3. FINANCIAL INSTITUTIONS AND BUSINESSES
SUBTITLE F. TRUST COMPANIES
CHAPTER 185. ENFORCEMENT ACTIONS
SUBCHAPTER A. ENFORCEMENT ORDERS
Sec. 185.001. DETERMINATION LETTER. (a) If the banking
commissioner determines from examination or other credible
evidence that a state trust company is in a condition that may
warrant the issuance of an enforcement order under this chapter,
the banking commissioner may notify the state trust company in
writing of the determination, the requirements the state trust
company must satisfy to abate the determination, and the time in
which the requirements must be satisfied to avert further
administrative action. The determination letter must be delivered
by personal delivery or by registered or certified mail, return
receipt requested.
(b) The determination letter may be issued in connection with
the issuance of a cease and desist, removal, or prohibition order
under this subchapter or an order of supervision or
conservatorship under Subchapter B.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.002. CEASE AND DESIST ORDER. (a) The banking
commissioner has grounds to issue a cease and desist order to an
officer, employee, director, manager, or managing participant of
a state trust company, or the state trust company itself acting
through an authorized person, if the banking commissioner
determines from examination or other credible evidence that the
state trust company or person directly or indirectly has:
(1) violated this subtitle or another applicable law or rule;
(2) engaged in a breach of trust or other fiduciary duty;
(3) refused to submit to examination or examination under oath;
(4) conducted business in an unsafe or unsound manner; or
(5) violated a condition of the state trust company's charter or
an agreement between the state trust company or the person and
the banking commissioner or the department.
(b) If the banking commissioner has grounds for action under
Subsection (a) and finds that an order to cease and desist from a
violation or other conduct described by Subsection (a) appears to
be necessary and in the best interest of a state trust company
involved and its clients, creditors, and shareholders or
participants, the banking commissioner may serve a proposed cease
and desist order on the state trust company and each person who
committed or participated in the violation. The order must:
(1) be delivered by personal delivery or by registered or
certified mail, return receipt requested;
(2) state with reasonable certainty the grounds for the order;
and
(3) state the effective date of the order, which may not be
earlier than the 21st day after the date the order is mailed or
delivered.
(c) The order takes effect if the state trust company or person
against whom the order is directed does not request a hearing in
writing before the effective date. After taking effect, the order
is final and nonappealable as to that state trust company or
person.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.003. REMOVAL OR PROHIBITION ORDER. (a) The banking
commissioner has grounds to remove a present or former officer,
director, manager, managing participant, or employee of a state
trust company from office or employment in, or to prohibit a
controlling shareholder or participant or other person from
participation in the affairs of, the state trust company if the
banking commissioner determines from examination or other
credible evidence that:
(1) the person:
(A) intentionally committed or participated in the commission of
an act described by Section 185.002(a) with regard to the affairs
of the state trust company; or
(B) violated a final cease and desist order issued in response
to the same or a similar act;
(2) because of that action by the person:
(A) the state trust company has suffered or will probably suffer
financial loss or other damage;
(B) the interests of the trust company's clients have been or
could be prejudiced; or
(C) the person has received financial gain or other benefit by
reason of the violation; and
(3) that action by the person:
(A) involves personal dishonesty on the part of the person; or
(B) demonstrates wilful or continuing disregard for the safety
or soundness of the state trust company.
(b) If the banking commissioner has grounds for action under
Subsection (a) and finds that a removal or prohibition order
appears to be necessary and in the best interest of the state
trust company involved and its clients, creditors, and
shareholders or participants, the banking commissioner may serve
a proposed removal or prohibition order, as appropriate, on an
officer, employee, director, manager or managing participant,
controlling shareholder or participant, or other person alleged
to have committed or participated in the violation or other
conduct described by Section 185.002(a). The order must:
(1) be delivered by personal delivery or by registered or
certified mail, return receipt requested;
(2) state with reasonable certainty the grounds for removal or
prohibition; and
(3) state the effective date of the order, which may not be
earlier than the 21st day after the date the order is mailed or
delivered.
(c) The order takes effect if the person against whom the order
is directed does not request a hearing in writing before the
effective date. After taking effect the order is final and
nonappealable as to that person.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999. Amended by Acts 2001, 77th Leg., ch. 1420, Sec.
6.017(a), eff. Sept. 1, 2001.
Sec. 185.004. HEARING ON PROPOSED ORDER. (a) A requested
hearing on a proposed order shall be held not later than the 30th
day after the date the first request for a hearing on the order
was received by the banking commissioner unless the parties agree
to a later hearing date. Not later than the 11th day before the
date of the hearing, 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. At the hearing, the banking commissioner has the
burden of proof, and each person against whom the order is
directed may cross-examine witnesses and present evidence to show
why the order should not be issued.
(b) After the hearing, the banking commissioner shall issue or
decline to issue the order. The order may be modified as
necessary to conform to the findings at the hearing and to
require the board to take necessary affirmative action to correct
the conditions cited in the order.
(c) An order issued under this section is immediately final for
purposes of enforcement and appeal. The order may be appealed as
provided by Sections 181.202-181.204.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.005. EMERGENCY ORDER. (a) If the banking commissioner
believes that immediate action is needed to prevent immediate and
irreparable harm to the state trust company and its clients,
creditors, and shareholders or participants, the banking
commissioner may issue one or more cease and desist, removal, or
prohibition orders as emergency orders to become effective
immediately on service without prior notice or hearing. Service
must be by personal delivery or by registered or certified mail,
return receipt requested.
(b) In each emergency order the banking commissioner shall
notify the state trust company and any person against whom the
order is directed of:
(1) the specific conduct requiring the order;
(2) the citation of each statute or rule alleged to have been
violated;
(3) the immediate and irreparable harm alleged to be threatened;
and
(4) the right to a hearing.
(c) Unless a person against whom the order is directed requests
a hearing in writing before the 11th day after the date the order
is served on the person, the order is final and nonappealable as
to that person.
(d) A hearing requested under Subsection (c) must be:
(1) given priority over all other matters pending before the
banking commissioner; and
(2) held not later than the 20th day after the date the hearing
is requested unless the parties agree to a later hearing date.
(e) After the hearing, the banking commissioner may affirm,
modify, or set aside in whole or part the emergency order. An
order affirming or modifying the order is immediately final for
purposes of enforcement and appeal. The order may be appealed as
provided by Sections 181.202-181.204.
(f) An emergency order continues in effect unless the order is
stayed by the banking commissioner. The banking commissioner may
impose any condition before granting a stay of the emergency
order.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.006. COPY OF LETTER OR ORDER IN STATE TRUST COMPANY
RECORDS. A copy of any determination letter, proposed order,
emergency order, or final order issued by the banking
commissioner under this subchapter shall be immediately brought
to the attention of the board of the affected state trust
company, regardless of whether the state trust company is a
party, and filed in the minutes of the board. Each director,
manager, or managing participant shall immediately certify to the
banking commissioner in writing that the certifying person has
read and understood the determination letter, proposed order,
emergency order, or final order. The required certification may
not be considered an admission of a person in a subsequent legal
or administrative proceeding.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.007. EFFECT OF FINAL REMOVAL OR PROHIBITION ORDER. (a)
Except as provided by other law, without the prior written
approval of the banking commissioner, a person subject to a final
and enforceable removal or prohibition order issued by the
banking commissioner, or by another state, federal, or foreign
financial institution regulatory agency, may not:
(1) serve as a director, officer, or employee of a state trust
company, state bank, or other entity chartered or licensed by the
banking commissioner under the laws of this state while the order
is in effect, including an interstate branch, trust office, or
representative office in this state of an out-of-state bank,
trust company, or foreign bank;
(2) directly or indirectly participate in any manner in the
management of such an entity;
(3) directly or indirectly vote for a director of such an
entity; or
(4) solicit, procure, transfer, attempt to transfer, vote, or
attempt to vote a proxy, consent, or authorization with respect
to voting rights in such an entity.
(b) The person subject to the order remains entitled to receive
dividends or a share of profits, return of contribution, or other
distributive benefit from an entity identified in Subsection
(a)(1) with respect to voting securities in the entity owned by
the person.
(c) If voting securities of an entity identified in Subsection
(a)(1) cannot be voted under this section, the voting securities
are considered to be authorized but unissued for purposes of
determining the procedures for and results of the affected vote.
(d) Participants of a limited trust association in which a
participant has been finally removed or prohibited from
participation in the state trust company's affairs under this
subchapter shall elect a board of managers.
(e) This section and Section 185.008 do not prohibit a removal
or prohibition order that has indefinite duration or that by its
terms is perpetual.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999. Amended by Acts 2001, 77th Leg., ch. 412, Sec. 3.10,
eff. Sept. 1, 2001; Acts 2001, 77th Leg., ch. 1420, Sec.
6.018(a), eff. Sept. 1, 2001.
Sec. 185.008. LIMITATION ON ACTION. The banking commissioner
may not initiate an enforcement action under this subchapter
later than the fifth anniversary of the date the banking
commissioner discovered or reasonably should have discovered the
conduct involved.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.009. ENFORCEMENT OF FINAL ORDER. (a) If the banking
commissioner reasonably believes that a state trust company or
person has violated a final and enforceable cease and desist,
removal, or prohibition order issued under this subchapter, the
banking commissioner may:
(1) initiate administrative penalty proceedings against the
state trust company under Section 185.010;
(2) refer the matter to the attorney general for enforcement by
injunction or other available remedy; or
(3) pursue any other action the banking commissioner considers
appropriate under applicable law.
(b) If the attorney general prevails in an action brought under
Subsection (a)(2), the attorney general is entitled to recover
reasonable attorney's fees from a state trust company or person
violating the order.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.010. ADMINISTRATIVE PENALTY. (a) The banking
commissioner may initiate a proceeding for an administrative
penalty against a state trust company by serving on the state
trust company notice of the time and place of a hearing on the
penalty. The hearing may not be held earlier than the 20th day
after the date the notice is served. The notice must:
(1) be served by personal delivery or registered or certified
mail, return receipt requested; and
(2) contain a statement of the conduct alleged to be in
violation of the order.
(b) In determining whether an order has been violated, the
banking commissioner shall consider the maintenance of procedures
reasonably adopted to ensure compliance with the order.
(c) If the banking commissioner determines after the hearing
that an order has been violated, the banking commissioner may
impose an administrative penalty against a state trust company in
an amount not to exceed $500 for each day the state trust company
violates the final order.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.011. PAYMENT OR APPEAL OF ADMINISTRATIVE PENALTY. (a)
When a penalty order under Section 185.010 becomes final, a state
trust company shall pay the penalty or appeal by filing a
petition for judicial review.
(b) The petition for judicial review stays the penalty order
during the period preceding the decision of the court. If the
court sustains the order, the court shall order the state trust
company to pay the full amount of the penalty or a lower amount
determined by the court. If the court does not sustain the order,
a penalty is not owed. If the final judgment of the court
requires payment of a penalty, interest accrues on the penalty,
at the rate charged on loans to depository institutions by the
New York Federal Reserve Bank, beginning on the date the judgment
is final and ending on the date the penalty and interest are
paid.
(c) If the state trust company does not pay the penalty imposed
under a final and nonappealable penalty order, the banking
commissioner shall refer the matter to the attorney general for
enforcement. The attorney general is entitled to recover
reasonable attorney's fees from the state trust company if the
attorney general prevails in judicial action necessary for
collection of the penalty.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.012. CONFIDENTIALITY OF RECORDS. A copy of a notice,
correspondence, transcript, pleading, or other document in the
records of the department relating to an order issued under this
subchapter is confidential and may be released only as provided
by Subchapter D, Chapter 181, except that the banking
commissioner periodically shall publish all final removal and
prohibition orders. The banking commissioner may release a final
cease and desist order or information relating to the existence
of the order to the public if the banking commissioner concludes
that the release would enhance effective enforcement of the
order.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.013. COLLECTION OF FEES. The banking commissioner may
sue to enforce the collection of a fee owed to the department
under a law administered by the banking commissioner. In the suit
a certificate by the banking commissioner showing the delinquency
is prima facie evidence of:
(1) the levy of the fee or the delinquency of the stated fee
amount; and
(2) compliance by the banking commissioner with the law relating
to the computation and levy of the fee.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
SUBCHAPTER B. SUPERVISION AND CONSERVATORSHIP
Sec. 185.101. ORDER OF SUPERVISION. (a) The banking
commissioner by order may appoint a supervisor over a state trust
company if the banking commissioner determines from examination
or other credible evidence that the state trust company is in
hazardous condition and that an order of supervision appears to
be necessary and in the best interest of the state trust company
and its clients, creditors, and shareholders or participants, or
the public.
(b) The banking commissioner may issue the order without prior
notice.
(c) The supervisor serves until the earlier of:
(1) the expiration of the period stated in the order of
supervision; or
(2) the date the banking commissioner determines that the
requirements for abatement of the order have been satisfied.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.102. ORDER OF CONSERVATORSHIP. (a) The banking
commissioner by order may appoint a conservator for a state trust
company if the banking commissioner determines from examination
or other credible evidence that the state trust company is in
hazardous condition and immediate and irreparable harm is
threatened to the state trust company, its clients, creditors, or
shareholders or participants, or the public.
(b) The banking commissioner may issue the order without prior
notice at any time before, during, or after the period of
supervision.
(c) An order of conservatorship issued under this section must
specifically state the basis for the order.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.103. HEARING. (a) An order issued under Section
185.101 or 185.102 must contain or be accompanied by a notice
that, at the request of the state trust company, a hearing will
be held before the banking commissioner at which the state trust
company may cross-examine witnesses and present evidence to
contest the order or show that it has satisfied all requirements
for abatement of the order. The banking commissioner has the
burden of proof for any continuation of the order or the issuance
of a new order.
(b) To contest or modify the order or demonstrate that it has
satisfied all requirements for abatement of the order, the state
trust company shall submit to the banking commissioner a written
request for a hearing. The request must state the grounds for the
request to set aside or modify the order. On receiving a request
for hearing, the banking commissioner shall serve notice of the
time and place of the hearing, which must be not later than the
10th day after the date the banking commissioner receives the
request for a hearing unless the parties agree to a later hearing
date. The notice must be delivered by personal delivery or by
registered or certified mail, return receipt requested.
(c) The banking commissioner may:
(1) delay a decision for a prompt examination of the state trust
company; and
(2) reopen the record as necessary to allow presentation of the
results of the examination and appropriate opportunity for
cross-examination and presentation of other relevant evidence.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.104. POST-HEARING ORDER. (a) If after the hearing the
banking commissioner finds that the state trust company has been
rehabilitated, that its hazardous condition has been remedied,
that irreparable harm is no longer threatened, or that the state
trust company should otherwise be released from the order, the
banking commissioner shall release the state trust company from
the order, subject to conditions the banking commissioner from
the evidence believes are warranted to preserve the safety and
soundness of the state trust company.
(b) If after the hearing the banking commissioner finds that the
state trust company has failed to comply with the lawful
requirements of the banking commissioner, has not been
rehabilitated, is insolvent, or otherwise continues in hazardous
condition, the banking commissioner by order shall:
(1) appoint or reappoint a supervisor pursuant to Section
185.101;
(2) appoint or reappoint a conservator pursuant to Section
185.102; or
(3) take other appropriate action authorized by law.
(c) An order issued under Subsection (b) is immediately final
for purposes of appeal. The order may be appealed as provided by
Sections 181.202-181.204.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.105. CONFIDENTIALITY OF RECORDS. An order issued under
this subchapter and a copy of a notice, correspondence,
transcript, pleading, or other document in the records of the
department relating to the order are confidential and may be
released only as provided by Subchapter D, Chapter 181, except
that the banking commissioner may release to the public an order
or information relating to the existence of an order if the
banking commissioner concludes that the release would enhance
effective enforcement of the order.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.106. DUTIES OF STATE TRUST COMPANY UNDER SUPERVISION.
During a period of supervision, a state trust company, without
the prior approval of the banking commissioner or the supervisor
or as otherwise permitted or restricted by the order of
supervision, may not:
(1) dispose of, sell, transfer, convey, or encumber the state
trust company's assets;
(2) lend or invest the state trust company's funds;
(3) incur a debt, obligation, or liability;
(4) pay a cash dividend to the state trust company's
shareholders or participants; or
(5) solicit or accept any new client accounts.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.107. POWERS AND DUTIES OF CONSERVATOR. (a) A
conservator appointed under this subchapter shall immediately
take charge of the state trust company and all of its property,
books, records, and affairs on behalf and at the direction and
control of the banking commissioner.
(b) Subject to any limitation contained in the order of
appointment or other direction of the banking commissioner, the
conservator has all the powers of the directors, managers,
managing participants, officers, and shareholders or participants
of a state trust company and shall conduct the business of the
state trust company and take all steps the conservator considers
appropriate to remove the causes and conditions requiring the
conservatorship. During the conservatorship, the board may not
direct or participate in the affairs of the state trust company.
(c) Except as otherwise provided by this subchapter, by rules
adopted under this subtitle, or by Section 12.106, the
conservator has the rights and privileges and is subject to the
duties, restrictions, penalties, conditions, and limitations of
the directors, officers, and employees of state trust companies.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.108. QUALIFICATIONS OF APPOINTEE. The banking
commissioner may appoint as a supervisor or conservator any
person who in the judgment of the banking commissioner is
qualified to serve. The banking commissioner may serve as, or may
appoint an employee of the department to serve as, a supervisor
or conservator.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.109. EXPENSES. (a) The banking commissioner shall
determine and approve the reasonable expenses attributable to the
service of a supervisor or conservator, including costs incurred
by the department and the compensation and expenses of the
supervisor or conservator and any professional employees
appointed to represent or assist the supervisor or conservator.
The banking commissioner or an employee of the department may not
receive compensation in addition to salary for serving as
supervisor or conservator, but the department may receive
reimbursement for the fully allocated personnel cost associated
with service of the banking commissioner or an employee as
supervisor or conservator.
(b) All approved expenses shall be paid by the state trust
company as the banking commissioner determines. The banking
commissioner has a lien against the assets and funds of the state
trust company to secure payment of approved expenses. The lien
has a higher priority than any other lien against the state trust
company.
(c) Notwithstanding any other provision of this subchapter, the
state trust company may employ an attorney and other persons the
state trust company selects to assist the state trust company in
contesting or satisfying the requirements of an order of
supervision or conservatorship. The banking commissioner shall
authorize the payment of reasonable fees and expenses from the
state trust company for the attorney or other persons as expenses
of the supervision or conservatorship.
(d) The banking commissioner may defer collection of assessment
and examination fees by the department from the state trust
company during a period of supervision or conservatorship if
deferral appears to aid prospects for rehabilitation. As a
condition of release from supervision or conservatorship, the
banking commissioner may require the rehabilitated state trust
company to pay or develop a reasonable plan for payment of
deferred fees.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.110. REVIEW OF SUPERVISOR OR CONSERVATOR DECISIONS.
(a) Notwithstanding Section 185.107(b), a majority of the state
trust company's board, acting directly or through counsel who
affirmatively represents that the requisite majority has been
obtained, may request in writing that the banking commissioner
review an action taken or proposed by the supervisor or
conservator. The request must specify why the action would not be
in the best interest of the state trust company. The banking
commissioner shall investigate to the extent necessary and make a
prompt written ruling on the request. If the action has not yet
been taken or if the effect of the action can be postponed, the
banking commissioner may stay the action on request pending
review.
(b) If a majority of the state trust company's board objects to
the banking commissioner's ruling, the majority may request a
hearing before the banking commissioner. The request must be made
not later than the 10th day after the date the state trust
company is notified of the ruling.
(c) The banking commissioner shall give the board notice of the
time and place of the hearing by personal delivery or by
registered or certified mail, return receipt requested. The
hearing may not be held later than the 10th day after the date
the banking commissioner receives the request for a hearing
unless the parties agree to a later hearing date. At the hearing
the board has the burden of proof to demonstrate that the action
is not in the best interest of the state trust company.
(d) After the hearing, the banking commissioner may affirm,
modify, or set aside in whole or part the prior ruling. An order
supporting the action contested by the board is immediately final
for purposes of appeal. The order may be appealed as provided by
Sections 181.202-181.204. If the order is appealed to the finance
commission, the finance commission may:
(1) affirm, terminate, or modify the order;
(2) continue or end supervision or conservatorship; and
(3) order further relief as justice, equity, and protection of
clients, creditors, and the public require.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.111. SUIT FILED AGAINST OR ON BEHALF OF STATE TRUST
COMPANY UNDER SUPERVISION OR CONSERVATORSHIP. (a) A suit filed
against a state trust company while the state trust company is
under conservatorship, or against a person in connection with an
action taken or decision made by that person as a supervisor or
conservator of a state trust company, must be brought in Travis
County regardless of whether the state trust company remains
under an order of supervision or conservatorship.
(b) A conservator may sue a person on the trust company's behalf
to preserve, protect, or recover state trust company assets,
including claims or causes of action. The suit may be in:
(1) Travis County; or
(2) another location where jurisdiction and venue against that
person may be obtained under law.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.112. DURATION. A supervisor or conservator serves for
the period necessary to accomplish the purposes of the
supervision or conservatorship as intended by this subchapter. A
rehabilitated state trust company shall be returned to its former
or new management under conditions reasonable and necessary to
prevent recurrence of the conditions causing the supervision or
conservatorship.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.113. ADMINISTRATIVE ELECTION OF REMEDIES. The banking
commissioner may take any action authorized under Chapter 186
regardless of the existence of supervision or conservatorship. A
period of supervision or conservatorship is not required before a
trust company is closed for liquidation or other remedial action
is taken.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.114. RELEASE BEFORE HEARING. This subchapter does not
prevent release of a state trust company from supervision or
conservatorship before a hearing if the banking commissioner is
satisfied that requirements for abatement have been adequately
satisfied.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
SUBCHAPTER C. UNAUTHORIZED TRUST ACTIVITY: INVESTIGATION AND
ENFORCEMENT
Sec. 185.201. INVESTIGATION OF UNAUTHORIZED TRUST ACTIVITY. (a)
If the banking commissioner has reason to believe that a person
has engaged, is engaging, or is likely to engage in an
unauthorized trust activity, the banking commissioner may:
(1) investigate as necessary within or outside this state to:
(A) determine whether the unauthorized trust activity has
occurred or is likely to occur; or
(B) aid in the enforcement of the laws administered by the
banking commissioner;
(2) initiate appropriate disciplinary action as provided by this
subchapter; and
(3) report any unauthorized trust activity to a law enforcement
agency or another regulatory agency with appropriate
jurisdiction.
(b) The banking commissioner may:
(1) on written request furnish to a law enforcement agency
evidence the banking commissioner has compiled in connection with
the unauthorized activity, including materials, documents,
reports, and complaints; and
(2) assist the law enforcement agency or other regulatory agency
as requested.
(c) A person acting without malice, fraudulent intent, or bad
faith is not subject to liability, including liability for libel,
slander, or other relevant tort, because the person files a
report or furnishes, orally or in writing, information concerning
a suspected, anticipated, or completed unauthorized activity to a
law enforcement agency, the banking commissioner or another
regulatory agency with appropriate jurisdiction, or an agent or
employee of a law enforcement agency, the banking commissioner,
or other regulatory agency. The person is entitled to attorney's
fees and court costs if the person prevails in an action for
libel, slander, or any other relevant tort based on the report or
other information the person furnished as provided by this
subchapter.
(d) This section does not:
(1) affect or modify a common law or statutory privilege or
immunity;
(2) preempt the authority or relieve the duty of a law
enforcement agency or other regulatory agency with appropriate
jurisdiction to investigate and prosecute suspected criminal
acts;
(3) prohibit a person from voluntarily disclosing information to
a law enforcement agency or other regulatory agency; or
(4) limit a power or duty granted to the banking commissioner
under this subtitle or other law.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.202. SUBPOENA AUTHORITY. (a) This section applies
only to an investigation of an unauthorized trust activity as
provided by Section 185.201, and does not affect the conduct of a
contested case under Chapter 2001, Government Code.
(b) The banking commissioner may issue a subpoena to compel the
attendance and testimony of a witness or the production of a
book, account, record, paper, or correspondence relating to a
matter that the banking commissioner has authority to consider or
investigate at the department's offices in Austin or at another
place the banking commissioner designates.
(c) The subpoena must be signed and issued by the banking
commissioner or a deputy banking commissioner.
(d) A person who is required by subpoena to attend a proceeding
before the banking commissioner is entitled to receive:
(1) reimbursement for mileage, in the amount provided for travel
by a state employee, for traveling to or returning from a
proceeding that is more than 25 miles from the witness's
residence; and
(2) a fee for each day or part of a day the witness is
necessarily present as a witness in an amount equal to the per
diem travel allowance of a state employee.
(e) The banking commissioner may serve the subpoena or have it
served by an authorized agent of the banking commissioner, a
sheriff, or a constable. The sheriff or constable's fee for
serving the subpoena is the same as the fee paid the sheriff or
constable for similar services.
(f) A person possessing materials located outside this state
that are requested by the banking commissioner may make the
materials available to the banking commissioner or a
representative of the banking commissioner for examination at the
place where the materials are located. The banking commissioner
may:
(1) designate a representative, including an official of the
state in which the materials are located, to examine the
materials; and
(2) respond to a similar request from an official of another
state, the United States, or a foreign country.
(g) A subpoena issued under this section to a financial
institution is not subject to Section 59.006.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999. Amended by Acts 2001, 77th Leg., ch. 412, Sec. 3.11,
eff. Sept. 1, 2001; Acts 2001, 77th Leg., ch. 1420, Sec.
6.103(e), eff. Sept. 1, 2001.
Sec. 185.203. ENFORCEMENT OF SUBPOENA. (a) If necessary, the
banking commissioner may apply to a district court in Travis
County or in the county in which the subpoena was served for
enforcement of the subpoena, and the court may issue an order
compelling compliance.
(b) If the court orders compliance with the subpoena or finds
the person in contempt for failure to obey the order, the banking
commissioner, or the attorney general if representing the banking
commissioner, may recover reasonable court costs, attorney's
fees, and investigative costs incurred in the proceeding.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.204. CONFIDENTIALITY OF SUBPOENAED RECORDS. (a) A
book, account, record, paper, correspondence, or other document
subpoenaed and produced under Section 185.202 that is otherwise
made privileged or confidential by law remains privileged or
confidential unless admitted into evidence at an administrative
hearing or in a court. The banking commissioner may issue an
order protecting the confidentiality or privilege of the document
and restricting its use or distribution by any person or in any
proceeding, other than a proceeding before the banking
commissioner.
(b) Subject to Subchapter D, Chapter 181, and confidentiality
provisions of other law administered by the banking commissioner,
information or material acquired under Section 185.202 under a
subpoena is not a public record for the period the banking
commissioner considers reasonably necessary to complete the
investigation, protect the person being investigated from
unwarranted injury, or serve the public interest. The information
or material is not subject to a subpoena, except a grand jury
subpoena, until released for public inspection by the banking
commissioner or, after notice and a hearing, a district court
determines that the public interest and any investigation by the
banking commissioner would not be jeopardized by obeying the
subpoena. The district court order may not apply to:
(1) a record or communication received from another law
enforcement or regulatory agency except on compliance with the
confidentiality laws governing the records of the other agency;
or
(2) an internal note, memorandum, report, or communication made
in connection with a matter that the banking commissioner has the
authority to consider or investigate, except on good cause and
compliance with applicable confidentiality laws.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.205. EVIDENCE. (a) On certification by the banking
commissioner, a book, record, paper, or document produced or
testimony taken as provided by Section 185.202 and held by the
department is admissible as evidence in any case without prior
proof of its correctness and without other proof. The certified
book, record, document, or paper, or a certified copy, is prima
facie evidence of the facts it contains.
(b) This section does not limit another provision of this
subtitle or a law that provides for the admission of evidence or
its evidentiary value.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.206. CEASE AND DESIST ORDER REGARDING UNAUTHORIZED
TRUST ACTIVITY. (a) The banking commissioner may serve a
proposed cease and desist order on a person the banking
commissioner believes is engaging or is likely to engage in an
unauthorized trust activity. The order must:
(1) be delivered by personal delivery or registered or certified
mail, return receipt requested, to the person's last known
address;
(2) state the acts or practices alleged to be an unauthorized
activity; and
(3) state the effective date of the order, which may not be
earlier than the 21st day after the date the proposed order is
mailed or delivered.
(b) Unless the person against whom the proposed order is
directed requests a hearing in writing before the effective date
of the proposed order, the order takes effect and is final and
nonappealable as to that person.
(c) A requested hearing on a proposed order shall be held not
later than the 30th day after the date the first written request
for a hearing on the order is received by the banking
commissioner unless the parties agree to a later hearing date. At
the hearing, the banking commissioner has the burden of proof and
must present evidence in support of the order. Each person
against whom the order is directed may cross-examine witnesses
and show cause why the order should not be issued.
(d) After the hearing, the banking commissioner shall issue or
decline to issue a cease and desist order. The proposed order may
be modified as necessary to conform to the findings at the
hearing. An order issued under this subsection:
(1) is immediately final for purposes of enforcement and appeal;
and
(2) must require the person to immediately cease and desist from
the unauthorized trust activity.
(e) The banking commissioner may release a final cease and
desist order issued under this section or information relating to
the existence of the order to the public if the banking
commissioner finds that the release would enhance the effective
enforcement of the order or will serve the public interest.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.207. EMERGENCY CEASE AND DESIST ORDER. (a) The
banking commissioner may issue an emergency cease and desist
order to a person who the banking commissioner reasonably
believes is engaging in a continuing unauthorized trust activity
that is fraudulent or threatens immediate and irreparable public
harm.
(b) The order must:
(1) be delivered on issuance to each person affected by the
order by personal delivery or registered or certified mail,
return receipt requested, to the person's last known address;
(2) state the specific charges and require the person
immediately to cease and desist from the unauthorized activity;
and
(3) contain a notice that a request for hearing may be filed
under this section.
(c) Unless a person against whom the emergency order is directed
requests a hearing in writing before the 11th day after the date
it is served on the person, the emergency order is final and
nonappealable as to that person. A request for a hearing must:
(1) be in writing and directed to the banking commissioner; and
(2) state the grounds for the request to set aside or modify the
order.
(d) On receiving a request for a hearing, the banking
commissioner shall serve notice of the time and place of the
hearing by personal delivery or registered or certified mail,
return receipt requested. The hearing must be held not later than
the 10th day after the date the banking commissioner receives the
request for a hearing unless the parties agree to a later hearing
date. At the hearing, the banking commissioner has the burden of
proof and must present evidence in support of the order. The
person requesting the hearing may cross-examine witnesses and
show cause why the order should not be affirmed.
(e) After the hearing, the banking commissioner shall affirm,
modify, or set aside in whole or part the emergency cease and
desist order. An order affirming or modifying the emergency cease
and desist order is immediately final for purposes of enforcement
and appeal.
(f) An order continues in effect unless the order is stayed by
the banking commissioner. The banking commissioner may impose any
condition before granting a stay of the order.
(g) The banking commissioner may release a final cease and
desist order issued under this section or information regarding
the existence of the order to the public if the banking
commissioner finds that the release would enhance the effective
enforcement of the order or will serve the public interest.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.208. APPEAL OF CEASE AND DESIST ORDER. (a) A person
affected by a cease and desist order issued, affirmed, or
modified after a hearing may file a petition for judicial review.
(b) A filed petition for judicial review does not stay or vacate
the order unless the court, after hearing, specifically stays or
vacates the order.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.209. VIOLATION OF FINAL CEASE AND DESIST ORDER. (a)
If the banking commissioner reasonably believes that a person has
violated a final and enforceable cease and desist order, the
banking commissioner may:
(1) initiate administrative penalty proceedings under Section
185.210;
(2) refer the matter to the attorney general for enforcement by
injunction and any other available remedy; or
(3) pursue any other action the banking commissioner considers
appropriate under applicable law.
(b) If the attorney general prevails in an action brought under
Subsection (a)(2), the attorney general is entitled to reasonable
attorney's fees.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.210. ADMINISTRATIVE PENALTY. (a) The banking
commissioner may initiate an action for an administrative penalty
against a person for a violation of a cease and desist order by
serving on the person notice of the time and place of a hearing
on the penalty. The notice must be delivered by personal delivery
or registered or certified mail, return receipt requested, to the
person's last known address. The hearing may not be held earlier
than the 20th day after the date the notice is served. The notice
must contain a statement of the facts or conduct alleged to be in
violation of the cease and desist order.
(b) In determining whether a cease and desist order has been
violated, the banking commissioner shall consider the maintenance
of procedures reasonably adopted to ensure compliance with the
order.
(c) If the banking commissioner after the hearing determines
that a cease and desist order has been violated, the banking
commissioner may:
(1) impose an administrative penalty in an amount not to exceed
$25,000 for each separate act of unauthorized activity;
(2) direct the person against whom the order was issued to make
complete restitution, in the form and amount and within the
period determined by the banking commissioner, to each resident
of this state and entity operating in this state damaged by the
violation; or
(3) both impose the penalty and direct restitution.
(d) In determining the amount of the penalty and whether to
impose restitution, the banking commissioner shall consider:
(1) the seriousness of the violation, including the nature,
circumstances, extent, and gravity of any prohibited act;
(2) the economic harm caused by the violation;
(3) the history of previous violations;
(4) the amount necessary to deter future violations;
(5) efforts to correct the violation;
(6) whether the violation was intentional or unintentional;
(7) the financial ability of the person against whom the penalty
is to be assessed; and
(8) any other matter that justice may require.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.211. PAYMENT AND APPEAL OF ADMINISTRATIVE PENALTY. (a)
When an administrative penalty order under Section 185.210
becomes final, a person affected by the order, within the time
permitted by law for appeal, shall:
(1) pay the amount of the penalty;
(2) pay the amount of the penalty and file a petition for
judicial review contesting the occurrence of the violation, the
amount of the penalty, or both; or
(3) without paying the amount of the penalty, file a petition
for judicial review contesting the occurrence of the violation,
the amount of the penalty, or both.
(b) Within the time permitted by law for appeal, a person who
acts under Subsection (a)(3) may:
(1) stay enforcement of the penalty by:
(A) paying the amount of the penalty to the court for placement
in an escrow account; or
(B) giving the court a supersedeas bond that is approved by the
court for the amount of the penalty and that is effective until
all judicial review of the order is final; or
(2) request the court to stay enforcement of the penalty by:
(A) filing with the court a sworn affidavit of the person
stating that the person is financially unable to pay the amount
of the penalty and is financially unable to give the supersedeas
bond; and
(B) giving a copy of the affidavit to the banking commissioner
by certified mail.
(c) Not later than the fifth day after the date the banking
commissioner receives a copy of an affidavit under Subsection
(b)(2), the banking commissioner may file with the court a
contest to the affidavit. The court shall hold a hearing on the
facts alleged in the affidavit as soon as practicable and shall
stay the enforcement of the penalty on finding that the alleged
facts are true. The person who files an affidavit has the burden
of proving that the person is financially unable to pay the
amount of the penalty and to give a supersedeas bond.
(d) If the person does not pay the amount of the penalty and the
enforcement of the penalty is not stayed, the banking
commissioner may refer the matter to the attorney general for
collection of the amount of the penalty.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 185.212. JUDICIAL REVIEW OF ADMINISTRATIVE PENALTY. (a)
If on judicial review the court sustains the penalty order, the
court shall order the person to pay the full amount of the
penalty or a lower amount determined by the court. If the court
does not sustain the order, a penalty is not owed.
(b) When the judgment of the court becomes final, if the person
paid the amount of the penalty and if that amount is reduced or
is not upheld by the court, the court shall order that the
appropriate amount plus accrued interest computed at the annual
rate of 10 percent be remitted to the person. The interest shall
be paid for the period beginning on the date the penalty was paid
and ending on the date the penalty is remitted. If the person
gave a supersedeas bond and the amount of the penalty is not
upheld by the court, the court shall order the release of the
bond. If the person gave a supersedeas bond and the amount of the
penalty is reduced, the court shall order the release of the bond
after the person pays the amount of the penalty.
(c) If the judgment of the court requires payment of a penalty
that has not previously been paid, the court shall order as part
of its judgment that interest accrues on the penalty at the
annual rate of 10 percent, beginning on the date the judgment is
final and ending on the date the penalty and interest are paid.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.