CHAPTER 35. ENFORCEMENT ACTIONS
FINANCE CODE
TITLE 3. FINANCIAL INSTITUTIONS AND BUSINESSES
SUBTITLE A. BANKS
CHAPTER 35. ENFORCEMENT ACTIONS
SUBCHAPTER A. ENFORCEMENT ORDERS: BANKS AND MANAGEMENT
Sec. 35.001. DETERMINATION LETTER. (a) If the banking
commissioner determines from examination or other credible
evidence that a state bank is in a condition that may warrant the
issuance of an enforcement order under this chapter, the banking
commissioner may notify the bank in writing of the determination,
the requirements the bank 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.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.002. CEASE AND DESIST ORDER. (a) The banking
commissioner has grounds to issue a cease and desist order to an
officer, employee, or director of a state bank, or the bank
itself acting through an authorized person, if the banking
commissioner determines from examination or other credible
evidence that the bank or person directly or indirectly has:
(1) violated this subtitle or another applicable law;
(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 bank's charter or an agreement
between the bank 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 appears to be necessary and in the best interest of the
bank involved and its depositors, creditors, and shareholders,
the banking commissioner may serve a proposed cease and desist
order on the bank and each person who committed or participated
in the action. The proposed 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 proposed
order; and
(3) state the effective date of the order, which may not be
before the 21st day after the date the proposed order is
delivered or mailed.
(c) The order takes effect if the bank or person against whom
the proposed 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 bank or person.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
237, Sec. 41, eff. September 1, 2007.
Sec. 35.003. REMOVAL OR PROHIBITION ORDER. (a) The banking
commissioner has grounds to remove a present or former officer,
director, or employee of a state bank from office or employment
in, or prohibit a controlling shareholder or other person
participating in the affairs of a state bank from further
participation in the affairs of, a state bank if the banking
commissioner determines from examination or other credible
evidence that:
(1) the person:
(A) intentionally committed or participated in commission of an
act described by Section 35.002(a) with regard to the affairs of
the bank; or
(B) violated a final cease and desist order issued in response
to the same or a similar act;
(2) because of this action by the person:
(A) the bank has suffered or will probably suffer financial loss
or other damage;
(B) the interests of the bank's depositors have been or could be
prejudiced; or
(C) the person has received financial gain or other benefit by
reason of the action; and
(3) the action:
(A) involves personal dishonesty on the part of the person; or
(B) demonstrates wilful or continuing disregard for the safety
or soundness of the bank.
(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 bank
involved and its depositors, creditors, and shareholders, the
banking commissioner may serve a proposed removal or prohibition
order, as appropriate, on a person alleged to have committed or
participated in the action. The proposed 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
before the 21st day after the date the proposed order is
delivered or mailed.
(c) The order takes effect if the person against whom the
proposed 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.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by Acts 1999, 76th Leg., ch. 344, Sec. 2.013, eff. Sept.
1, 1999.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
237, Sec. 42, eff. September 1, 2007.
Sec. 35.004. 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 department 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 department has the burden of
proof and each person against whom the proposed order is directed
may cross-examine and present evidence to show why the proposed
order should not be issued.
(b) After the hearing, the banking commissioner shall issue or
decline to issue the proposed order. The proposed 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 31.202, 31.203, and 31.204.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.005. EMERGENCY ORDER. (a) If the banking commissioner
believes that immediate action is necessary to prevent immediate
and irreparable harm to the bank and its depositors, creditors,
and shareholders, 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 bank and any person against whom the emergency order
is directed of:
(1) the specific conduct requiring the order;
(2) the citation of each law 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 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.
(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 that it 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 emergency order is immediately
final for purposes of enforcement and appeal. The order may be
appealed as provided by Sections 31.202, 31.203, and 31.204.
(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.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
237, Sec. 43, eff. September 1, 2007.
Sec. 35.006. COPY OF LETTER OR ORDER IN BANK RECORDS. A copy of
a 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 bank, regardless of whether the bank is a party, and
filed in the minutes of the board. Each director 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.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
237, Sec. 44, eff. September 1, 2007.
Sec. 35.007. EFFECT OF FINAL REMOVAL OR PROHIBITION ORDER. (a)
Except as otherwise provided by law, without the prior written
approval of the banking commissioner, a person subject to a final
and enforceable removal or prohibition order issued by the
banking commissioner, or by another state, federal, or foreign
financial institution regulatory agency, may not:
(1) serve as a director, officer, or employee of a state bank,
trust company, or other entity chartered or licensed by the
banking commissioner under the laws of this state, including an
interstate branch, trust office, or representative office in this
state of an out-of-state 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 such an entity with respect to voting
securities 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 an affected vote.
(d) Repealed by Acts 2007, 80th Leg., R.S., Ch. 237, Sec. 80,
eff. September 1, 2007.
(e) This section and Section 35.008 do not prohibit a removal or
prohibition order that has indefinite duration or that by its
terms is perpetual.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by Acts 1999, 76th Leg., ch. 344, Sec. 2.014, eff. Sept.
1, 1999; Acts 2001, 77th Leg., ch. 412, Sec. 2.14, eff. Sept. 1,
2001.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
237, Sec. 80, eff. September 1, 2007.
Sec. 35.008. 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.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.009. ENFORCEMENT OF FINAL ORDER. (a) If the banking
commissioner reasonably believes that a bank 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 an administrative penalty proceeding against the
bank under Section 35.010;
(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 the bank or person violating the
order.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.010. ADMINISTRATIVE PENALTY. (a) The banking
commissioner may initiate a proceeding for an administrative
penalty against a bank by serving on the bank 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 by registered or certified
mail, return receipt requested; and
(2) contain a statement of the conduct alleged to violate 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 the order has been violated, the banking commissioner may
impose an administrative penalty against the bank in an amount
not to exceed $500 for each day the bank violates the final
order.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.011. PAYMENT OR APPEAL OF ADMINISTRATIVE PENALTY. (a)
When a penalty order under Section 35.010 becomes final, the bank
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 bank 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 Federal Reserve Bank
of New York, beginning on the date the judgment is final and
ending on the date the penalty and interest are paid.
(c) If the bank does not pay 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 bank if
the attorney general prevails in judicial action necessary for
collection of the penalty.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.012. 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 31, 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 regarding the existence of the order
to the public if the banking commissioner concludes that the
release would enhance effective enforcement of the order.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.013. COLLECTION OF FEES. The department may sue to
enforce the collection of a fee owed to the department under a
law administered by the department. 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 department with the law relating to the
computation and levy of the fee.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
SUBCHAPTER B. SUPERVISION AND CONSERVATORSHIP
Sec. 35.101. ORDER OF SUPERVISION. (a) The banking
commissioner by order may appoint a supervisor over a state bank
if the banking commissioner determines from examination or other
credible evidence that the bank is in hazardous condition and
that an order of supervision appears to be necessary and in the
best interest of the bank and its depositors, creditors, and
shareholders, or the public.
(b) The banking commissioner may issue the order without prior
notice.
(c) A supervisor serves until the earlier of:
(1) the expiration of the period stated in the order of
supervision; or
(2) the date the banking commissioner determines that the
requirements for abatement of the order have been satisfied.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
237, Sec. 45, eff. September 1, 2007.
Sec. 35.102. ORDER OF CONSERVATORSHIP. (a) The banking
commissioner by order may appoint a conservator for a state bank
if the banking commissioner determines from examination or other
credible evidence that the bank is in hazardous condition and
immediate and irreparable harm is threatened to the bank, its
depositors, creditors, or shareholders, 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.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
237, Sec. 46, eff. September 1, 2007.
Sec. 35.103. NOTICE AND HEARING. (a) An order issued under
Section 35.101 or 35.102 must contain or be accompanied by a
notice that, at the request of the bank, a hearing before the
banking commissioner will be held at which the bank may
cross-examine and present evidence to contest the order or show
that the bank has satisfied all requirements for abatement of the
order. The department 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 the bank
has satisfied all requirements for abatement of the order, the
bank must 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 place
and time 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 bank; 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.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.104. POST-HEARING ORDER. (a) If after the hearing the
banking commissioner finds that the bank has been rehabilitated,
that its hazardous condition has been remedied, that irreparable
harm is no longer threatened, or that the bank should otherwise
be released from the order, the banking commissioner shall
release the bank from the order, subject to conditions the
banking commissioner from the evidence believes are warranted to
preserve the safety and soundness of the bank.
(b) If after the hearing the banking commissioner finds that the
bank 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 under Section 35.101;
(2) appoint or reappoint a conservator under Section 35.102; 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 31.202, 31.203, and 31.204.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.105. 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 31, except
that the banking commissioner may release to the public an order
or information regarding the existence of an order if the banking
commissioner concludes that the release would enhance effective
enforcement of the order.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.106. AUTHORITY OF SUPERVISOR. During a period of
supervision, a bank, 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 bank's
assets;
(2) lend or invest the bank's money;
(3) incur a debt, obligation, or liability; or
(4) pay a cash dividend to the bank's shareholders.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
237, Sec. 47, eff. September 1, 2007.
Sec. 35.107. AUTHORITY OF CONSERVATOR. (a) A conservator
appointed under this subchapter shall immediately take charge of
the bank 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 in the order of appointment or
other direction of the banking commissioner, the conservator has
all the powers of the directors, officers, and shareholders of
the bank and shall conduct the business of the bank and take all
steps the conservator considers appropriate to remove the
conditions causing the conservatorship. During the
conservatorship, the board may not direct or participate in the
affairs of the bank.
(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 banks.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
237, Sec. 48, eff. September 1, 2007.
Sec. 35.108. 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, supervisor or
conservator.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.109. 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 of the
department as supervisor or conservator.
(b) All approved expenses shall be paid by the bank as the
banking commissioner determines. The banking commissioner has a
lien against the assets and money of the bank to secure payment
of approved expenses. The lien has a higher priority than any
other lien against the bank.
(c) Notwithstanding any other provision of this subchapter, the
bank may employ an attorney and other persons the bank selects to
assist the bank 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 bank for the attorney and 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 bank during a
period of supervision or conservatorship if deferral would appear
to aid prospects for rehabilitation. As a condition of release
from supervision or conservatorship, the banking commissioner may
require the rehabilitated bank to pay or develop a reasonable
plan for payment of deferred fees.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.110. REVIEW OF SUPERVISOR OR CONSERVATOR DECISION. (a)
Notwithstanding Section 35.107(b), a majority of the bank'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 bank. 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 bank'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 bank 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 bank.
(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 31.202, 31.203, and 31.204. 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
depositors, creditors, and the public require.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.111. VENUE. (a) A suit filed against a bank while the
bank 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 bank, must be brought in Travis
County regardless of whether the bank remains under supervision
or conservatorship.
(b) A conservator may sue a person on the bank's behalf to
preserve, protect, or recover a bank asset, including a claim or
cause of action. Venue is in:
(1) Travis County; or
(2) another location provided by law.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.112. 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 bank 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.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.113. ADMINISTRATIVE ELECTION OF REMEDIES. The banking
commissioner may take any action authorized by Chapter 36
regardless of the existence of supervision or conservatorship. A
period of supervision or conservatorship is not required before a
bank is closed for liquidation or other remedial action is taken.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.114. RELEASE BEFORE HEARING. This subchapter does not
prevent release of the bank from supervision or conservatorship
before a hearing if the banking commissioner is satisfied that
requirements for abatement have been adequately satisfied.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
SUBCHAPTER C. UNAUTHORIZED ACTIVITY: INVESTIGATION AND
ENFORCEMENT
Sec. 35.201. INAPPLICABILITY. This subchapter does not apply to
a financial institution, as that term is defined by Section
201.101, that lawfully maintains its main office or a branch in
this state.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by Acts 1999, 76th Leg., ch. 344, Sec. 2.015, eff. Sept.
1, 1999.
Sec. 35.202. INVESTIGATION OF UNAUTHORIZED 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
activity, the banking commissioner may:
(1) investigate as necessary within or outside this state to:
(A) determine whether the unauthorized 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 unauthorized 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 another 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, 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 another relevant tort based on the report or
other information the person furnished as provided by this
subchapter.
(d) This section does not:
(1) affect 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.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.203. SUBPOENA AUTHORITY. (a) This section applies only
to an investigation of an unauthorized activity as provided by
Section 35.202 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's 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.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by Acts 2001, 77th Leg., ch. 412, Sec. 2.15, eff. Sept.
1, 2001; Acts 2001, 77th Leg., ch. 1420, Sec. 6.103(b), eff.
Sept. 1, 2001.
Sec. 35.204. ENFORCEMENT OF SUBPOENA. (a) If necessary, the
banking commissioner may apply to a district court of Travis
County or of 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.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.205. CONFIDENTIALITY OF SUBPOENAED RECORDS. (a) A
book, account, record, paper, correspondence, or other document
subpoenaed and produced under Section 35.203 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 31, and confidentiality
provisions of other law administered by the banking commissioner,
information or material acquired under Section 35.203 under a
subpoena is not a public record for the period the banking
commissioner considers reasonably necessary to complete the
investigation, to protect the person being investigated from
unwarranted injury, or to 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 until, 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 in
compliance with applicable confidentiality laws.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.206. EVIDENCE. (a) On certification by the banking
commissioner, a book, record, paper, or document produced or
testimony taken as provided by Section 35.204 and held by the
department is admissible as evidence in any case without prior
proof of its correctness and without other proof. The certified
book, record, document, or paper, or a certified copy, is prima
facie evidence of the facts it contains.
(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.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.207. CEASE AND DESIST ORDER. (a) The banking
commissioner may serve a proposed cease and desist order on a
person that the banking commissioner believes is engaging or is
likely to engage in an unauthorized 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 each act or practice alleged to be an unauthorized
activity; and
(3) state the effective date of the order, which may not be
before the 21st day after the date the proposed order is
delivered or mailed.
(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 department unless
the parties agree to a later hearing date. At the hearing, the
department 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 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 activity.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.208. EMERGENCY CEASE AND DESIST ORDER. (a) The banking
commissioner may issue an emergency cease and desist order to a
person whom the banking commissioner reasonably believes is
engaging in a continuing unauthorized 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 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 department 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.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.209. JUDICIAL REVIEW 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.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.210. 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 an administrative penalty proceeding under Section
35.211;
(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.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.211. ADMINISTRATIVE PENALTY. (a) The banking
commissioner may initiate an action for an administrative penalty
against a person for 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 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 violate 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 discrete unauthorized act;
(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.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.212. PAYMENT AND APPEAL OF ADMINISTRATIVE PENALTY. (a)
When an administrative penalty order under Section 35.211 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.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 35.213. 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 by the department. 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 if 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 if the amount
of the penalty is reduced, the court shall order the release of
the bond after the person pays the amount owed.
(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.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.