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