FINANCE CODE
CHAPTER 35. ENFORCEMENT ACTIONS
SUBCHAPTER A. ENFORCEMENT ORDERS: BANKS AND MANAGEMENT
§ 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, § 1, eff. Sept. 1, 1997.
§ 35.002. 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 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 or
participants, 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, § 1, eff. Sept. 1, 1997.
§ 35.003. 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 bank from office or employment in, or prohibit a controlling
shareholder or participant 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 or
participants, 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, § 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 344, § 2.013, eff. Sept. 1, 1999.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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 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 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, § 1, eff. Sept. 1, 1997.
§ 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,
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.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 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) Participants of a limited banking association in which a
participant has been finally removed or prohibited from
participation in the bank's affairs under this subchapter shall
elect a board of managers.
(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, § 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 344, § 2.014, eff. Sept. 1, 1999;
Acts 2001, 77th Leg., ch. 412, § 2.14, eff. Sept. 1, 2001.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
SUBCHAPTER B. SUPERVISION AND CONSERVATORSHIP
§ 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 participants, 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, § 1, eff. Sept. 1, 1997.
§ 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 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.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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 or
participants.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 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, managers, managing participants,
officers, and shareholders or participants 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
SUBCHAPTER C. UNAUTHORIZED ACTIVITY: INVESTIGATION AND
ENFORCEMENT
§ 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, § 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 344, § 2.015, eff. Sept. 1, 1999.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997. Amended
by Acts 2001, 77th Leg., ch. 412, § 2.15, eff. Sept. 1, 2001;
Acts 2001, 77th Leg., ch. 1420, § 6.103(b), eff. Sept. 1, 2001.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
§ 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, § 1, eff. Sept. 1, 1997.
