CHAPTER 185. ENFORCEMENT ACTIONS

State Codes and Statutes

Back To Homepage

State Codes and Statutes

Statutes > Texas > Finance-code > Title-3-financial-institutions-and-businesses > Chapter-185-enforcement-actions

FINANCE CODE

TITLE 3. FINANCIAL INSTITUTIONS AND BUSINESSES

SUBTITLE F. TRUST COMPANIES

CHAPTER 185. ENFORCEMENT ACTIONS

SUBCHAPTER A. ENFORCEMENT ORDERS

Sec. 185.001. DETERMINATION LETTER. (a) If the banking

commissioner determines from examination or other credible

evidence that a state trust company is in a condition that may

warrant the issuance of an enforcement order under this chapter,

the banking commissioner may notify the state trust company in

writing of the determination, the requirements the state trust

company must satisfy to abate the determination, and the time in

which the requirements must be satisfied to avert further

administrative action. The determination letter must be delivered

by personal delivery or by registered or certified mail, return

receipt requested.

(b) The determination letter may be issued in connection with

the issuance of a cease and desist, removal, or prohibition order

under this subchapter or an order of supervision or

conservatorship under Subchapter B.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.002. CEASE AND DESIST ORDER. (a) The banking

commissioner has grounds to issue a cease and desist order to an

officer, employee, director, manager, or managing participant of

a state trust company, or the state trust company itself acting

through an authorized person, if the banking commissioner

determines from examination or other credible evidence that the

state trust company or person directly or indirectly has:

(1) violated this subtitle or another applicable law or rule;

(2) engaged in a breach of trust or other fiduciary duty;

(3) refused to submit to examination or examination under oath;

(4) conducted business in an unsafe or unsound manner; or

(5) violated a condition of the state trust company's charter or

an agreement between the state trust company or the person and

the banking commissioner or the department.

(b) If the banking commissioner has grounds for action under

Subsection (a) and finds that an order to cease and desist from a

violation or other conduct described by Subsection (a) appears to

be necessary and in the best interest of a state trust company

involved and its clients, creditors, and shareholders or

participants, the banking commissioner may serve a proposed cease

and desist order on the state trust company and each person who

committed or participated in the violation. The order must:

(1) be delivered by personal delivery or by registered or

certified mail, return receipt requested;

(2) state with reasonable certainty the grounds for the order;

and

(3) state the effective date of the order, which may not be

earlier than the 21st day after the date the order is mailed or

delivered.

against whom the order is directed does not request a hearing in

writing before the effective date. After taking effect, the order

is final and nonappealable as to that state trust company or

person.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.003. REMOVAL OR PROHIBITION ORDER. (a) The banking

commissioner has grounds to remove a present or former officer,

director, manager, managing participant, or employee of a state

trust company from office or employment in, or to prohibit a

controlling shareholder or participant or other person from

participation in the affairs of, the state trust company if the

banking commissioner determines from examination or other

credible evidence that:

(1) the person:

(A) intentionally committed or participated in the commission of

an act described by Section 185.002(a) with regard to the affairs

of the state trust company; or

(B) violated a final cease and desist order issued in response

to the same or a similar act;

(2) because of that action by the person:

(A) the state trust company has suffered or will probably suffer

financial loss or other damage;

(B) the interests of the trust company's clients have been or

could be prejudiced; or

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.

is directed does not request a hearing in writing before the

effective date. After taking effect the order is final and

nonappealable as to that person.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999. Amended by Acts 2001, 77th Leg., ch. 1420, Sec.

6.017(a), eff. Sept. 1, 2001.

Sec. 185.004. HEARING ON PROPOSED ORDER. (a) A requested

hearing on a proposed order shall be held not later than the 30th

day after the date the first request for a hearing on the order

was received by the banking commissioner unless the parties agree

to a later hearing date. Not later than the 11th day before the

date of the hearing, each party shall be given written notice by

personal delivery or by registered or certified mail, return

receipt requested, of the date set by the banking commissioner

for the hearing. At the hearing, the banking commissioner has the

burden of proof, and each person against whom the order is

directed may cross-examine witnesses and present evidence to show

why the order should not be issued.

(b) After the hearing, the banking commissioner shall issue or

decline to issue the order. The order may be modified as

necessary to conform to the findings at the hearing and to

require the board to take necessary affirmative action to correct

the conditions cited in the order.

purposes of enforcement and appeal. The order may be appealed as

provided by Sections 181.202-181.204.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.005. EMERGENCY ORDER. (a) If the banking commissioner

believes that immediate action is needed to prevent immediate and

irreparable harm to the state trust company and its clients,

creditors, and shareholders or participants, the banking

commissioner may issue one or more cease and desist, removal, or

prohibition orders as emergency orders to become effective

immediately on service without prior notice or hearing. Service

must be by personal delivery or by registered or certified mail,

return receipt requested.

(b) In each emergency order the banking commissioner shall

notify the state trust company and any person against whom the

order is directed of:

(1) the specific conduct requiring the order;

(2) the citation of each statute or rule alleged to have been

violated;

(3) the immediate and irreparable harm alleged to be threatened;

and

(4) the right to a hearing.

a hearing in writing before the 11th day after the date the order

is served on the person, the order is final and nonappealable as

to that person.

(d) A hearing requested under Subsection (c) must be:

(1) given priority over all other matters pending before the

banking commissioner; and

(2) held not later than the 20th day after the date the hearing

is requested unless the parties agree to a later hearing date.

(e) After the hearing, the banking commissioner may affirm,

modify, or set aside in whole or part the emergency order. An

order affirming or modifying the order is immediately final for

purposes of enforcement and appeal. The order may be appealed as

provided by Sections 181.202-181.204.

(f) An emergency order continues in effect unless the order is

stayed by the banking commissioner. The banking commissioner may

impose any condition before granting a stay of the emergency

order.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.006. COPY OF LETTER OR ORDER IN STATE TRUST COMPANY

RECORDS. A copy of any determination letter, proposed order,

emergency order, or final order issued by the banking

commissioner under this subchapter shall be immediately brought

to the attention of the board of the affected state trust

company, regardless of whether the state trust company is a

party, and filed in the minutes of the board. Each director,

manager, or managing participant shall immediately certify to the

banking commissioner in writing that the certifying person has

read and understood the determination letter, proposed order,

emergency order, or final order. The required certification may

not be considered an admission of a person in a subsequent legal

or administrative proceeding.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.007. EFFECT OF FINAL REMOVAL OR PROHIBITION ORDER. (a)

Except as provided by other law, without the prior written

approval of the banking commissioner, a person subject to a final

and enforceable removal or prohibition order issued by the

banking commissioner, or by another state, federal, or foreign

financial institution regulatory agency, may not:

(1) serve as a director, officer, or employee of a state trust

company, state bank, or other entity chartered or licensed by the

banking commissioner under the laws of this state while the order

is in effect, including an interstate branch, trust office, or

representative office in this state of an out-of-state bank,

trust company, or foreign bank;

(2) directly or indirectly participate in any manner in the

management of such an entity;

(3) directly or indirectly vote for a director of such an

entity; or

(4) solicit, procure, transfer, attempt to transfer, vote, or

attempt to vote a proxy, consent, or authorization with respect

to voting rights in such an entity.

(b) The person subject to the order remains entitled to receive

dividends or a share of profits, return of contribution, or other

distributive benefit from an entity identified in Subsection

(a)(1) with respect to voting securities in the entity owned by

the person.

(a)(1) cannot be voted under this section, the voting securities

are considered to be authorized but unissued for purposes of

determining the procedures for and results of the affected vote.

(d) Participants of a limited trust association in which a

participant has been finally removed or prohibited from

participation in the state trust company's affairs under this

subchapter shall elect a board of managers.

(e) This section and Section 185.008 do not prohibit a removal

or prohibition order that has indefinite duration or that by its

terms is perpetual.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999. Amended by Acts 2001, 77th Leg., ch. 412, Sec. 3.10,

eff. Sept. 1, 2001; Acts 2001, 77th Leg., ch. 1420, Sec.

6.018(a), eff. Sept. 1, 2001.

Sec. 185.008. LIMITATION ON ACTION. The banking commissioner

may not initiate an enforcement action under this subchapter

later than the fifth anniversary of the date the banking

commissioner discovered or reasonably should have discovered the

conduct involved.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.009. ENFORCEMENT OF FINAL ORDER. (a) If the banking

commissioner reasonably believes that a state trust company or

person has violated a final and enforceable cease and desist,

removal, or prohibition order issued under this subchapter, the

banking commissioner may:

(1) initiate administrative penalty proceedings against the

state trust company under Section 185.010;

(2) refer the matter to the attorney general for enforcement by

injunction or other available remedy; or

(3) pursue any other action the banking commissioner considers

appropriate under applicable law.

(b) If the attorney general prevails in an action brought under

Subsection (a)(2), the attorney general is entitled to recover

reasonable attorney's fees from a state trust company or person

violating the order.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.010. ADMINISTRATIVE PENALTY. (a) The banking

commissioner may initiate a proceeding for an administrative

penalty against a state trust company by serving on the state

trust company notice of the time and place of a hearing on the

penalty. The hearing may not be held earlier than the 20th day

after the date the notice is served. The notice must:

(1) be served by personal delivery or registered or certified

mail, return receipt requested; and

(2) contain a statement of the conduct alleged to be in

violation of the order.

(b) In determining whether an order has been violated, the

banking commissioner shall consider the maintenance of procedures

reasonably adopted to ensure compliance with the order.

that an order has been violated, the banking commissioner may

impose an administrative penalty against a state trust company in

an amount not to exceed $500 for each day the state trust company

violates the final order.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.011. PAYMENT OR APPEAL OF ADMINISTRATIVE PENALTY. (a)

When a penalty order under Section 185.010 becomes final, a state

trust company shall pay the penalty or appeal by filing a

petition for judicial review.

(b) The petition for judicial review stays the penalty order

during the period preceding the decision of the court. If the

court sustains the order, the court shall order the state trust

company to pay the full amount of the penalty or a lower amount

determined by the court. If the court does not sustain the order,

a penalty is not owed. If the final judgment of the court

requires payment of a penalty, interest accrues on the penalty,

at the rate charged on loans to depository institutions by the

New York Federal Reserve Bank, beginning on the date the judgment

is final and ending on the date the penalty and interest are

paid.

under a final and nonappealable penalty order, the banking

commissioner shall refer the matter to the attorney general for

enforcement. The attorney general is entitled to recover

reasonable attorney's fees from the state trust company if the

attorney general prevails in judicial action necessary for

collection of the penalty.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.012. CONFIDENTIALITY OF RECORDS. A copy of a notice,

correspondence, transcript, pleading, or other document in the

records of the department relating to an order issued under this

subchapter is confidential and may be released only as provided

by Subchapter D, Chapter 181, except that the banking

commissioner periodically shall publish all final removal and

prohibition orders. The banking commissioner may release a final

cease and desist order or information relating to the existence

of the order to the public if the banking commissioner concludes

that the release would enhance effective enforcement of the

order.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.013. COLLECTION OF FEES. The banking commissioner may

sue to enforce the collection of a fee owed to the department

under a law administered by the banking commissioner. In the suit

a certificate by the banking commissioner showing the delinquency

is prima facie evidence of:

(1) the levy of the fee or the delinquency of the stated fee

amount; and

(2) compliance by the banking commissioner with the law relating

to the computation and levy of the fee.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

SUBCHAPTER B. SUPERVISION AND CONSERVATORSHIP

Sec. 185.101. ORDER OF SUPERVISION. (a) The banking

commissioner by order may appoint a supervisor over a state trust

company if the banking commissioner determines from examination

or other credible evidence that the state trust company is in

hazardous condition and that an order of supervision appears to

be necessary and in the best interest of the state trust company

and its clients, creditors, and shareholders or participants, or

the public.

(b) The banking commissioner may issue the order without prior

notice.

(1) the expiration of the period stated in the order of

supervision; or

(2) the date the banking commissioner determines that the

requirements for abatement of the order have been satisfied.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.102. ORDER OF CONSERVATORSHIP. (a) The banking

commissioner by order may appoint a conservator for a state trust

company if the banking commissioner determines from examination

or other credible evidence that the state trust company is in

hazardous condition and immediate and irreparable harm is

threatened to the state trust company, its clients, creditors, or

shareholders or participants, or the public.

(b) The banking commissioner may issue the order without prior

notice at any time before, during, or after the period of

supervision.

specifically state the basis for the order.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.103. HEARING. (a) An order issued under Section

185.101 or 185.102 must contain or be accompanied by a notice

that, at the request of the state trust company, a hearing will

be held before the banking commissioner at which the state trust

company may cross-examine witnesses and present evidence to

contest the order or show that it has satisfied all requirements

for abatement of the order. The banking commissioner has the

burden of proof for any continuation of the order or the issuance

of a new order.

(b) To contest or modify the order or demonstrate that it has

satisfied all requirements for abatement of the order, the state

trust company shall submit to the banking commissioner a written

request for a hearing. The request must state the grounds for the

request to set aside or modify the order. On receiving a request

for hearing, the banking commissioner shall serve notice of the

time and place of the hearing, which must be not later than the

10th day after the date the banking commissioner receives the

request for a hearing unless the parties agree to a later hearing

date. The notice must be delivered by personal delivery or by

registered or certified mail, return receipt requested.

(1) delay a decision for a prompt examination of the state trust

company; and

(2) reopen the record as necessary to allow presentation of the

results of the examination and appropriate opportunity for

cross-examination and presentation of other relevant evidence.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.104. POST-HEARING ORDER. (a) If after the hearing the

banking commissioner finds that the state trust company has been

rehabilitated, that its hazardous condition has been remedied,

that irreparable harm is no longer threatened, or that the state

trust company should otherwise be released from the order, the

banking commissioner shall release the state trust company from

the order, subject to conditions the banking commissioner from

the evidence believes are warranted to preserve the safety and

soundness of the state trust company.

(b) If after the hearing the banking commissioner finds that the

state trust company has failed to comply with the lawful

requirements of the banking commissioner, has not been

rehabilitated, is insolvent, or otherwise continues in hazardous

condition, the banking commissioner by order shall:

(1) appoint or reappoint a supervisor pursuant to Section

185.101;

(2) appoint or reappoint a conservator pursuant to Section

185.102; or

(3) take other appropriate action authorized by law.

for purposes of appeal. The order may be appealed as provided by

Sections 181.202-181.204.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.105. CONFIDENTIALITY OF RECORDS. An order issued under

this subchapter and a copy of a notice, correspondence,

transcript, pleading, or other document in the records of the

department relating to the order are confidential and may be

released only as provided by Subchapter D, Chapter 181, except

that the banking commissioner may release to the public an order

or information relating to the existence of an order if the

banking commissioner concludes that the release would enhance

effective enforcement of the order.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.106. DUTIES OF STATE TRUST COMPANY UNDER SUPERVISION.

During a period of supervision, a state trust company, without

the prior approval of the banking commissioner or the supervisor

or as otherwise permitted or restricted by the order of

supervision, may not:

(1) dispose of, sell, transfer, convey, or encumber the state

trust company's assets;

(2) lend or invest the state trust company's funds;

(3) incur a debt, obligation, or liability;

(4) pay a cash dividend to the state trust company's

shareholders or participants; or

(5) solicit or accept any new client accounts.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.107. POWERS AND DUTIES OF CONSERVATOR. (a) A

conservator appointed under this subchapter shall immediately

take charge of the state trust company and all of its property,

books, records, and affairs on behalf and at the direction and

control of the banking commissioner.

(b) Subject to any limitation contained in the order of

appointment or other direction of the banking commissioner, the

conservator has all the powers of the directors, managers,

managing participants, officers, and shareholders or participants

of a state trust company and shall conduct the business of the

state trust company and take all steps the conservator considers

appropriate to remove the causes and conditions requiring the

conservatorship. During the conservatorship, the board may not

direct or participate in the affairs of the state trust company.

adopted under this subtitle, or by Section 12.106, the

conservator has the rights and privileges and is subject to the

duties, restrictions, penalties, conditions, and limitations of

the directors, officers, and employees of state trust companies.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.108. QUALIFICATIONS OF APPOINTEE. The banking

commissioner may appoint as a supervisor or conservator any

person who in the judgment of the banking commissioner is

qualified to serve. The banking commissioner may serve as, or may

appoint an employee of the department to serve as, a supervisor

or conservator.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.109. EXPENSES. (a) The banking commissioner shall

determine and approve the reasonable expenses attributable to the

service of a supervisor or conservator, including costs incurred

by the department and the compensation and expenses of the

supervisor or conservator and any professional employees

appointed to represent or assist the supervisor or conservator.

The banking commissioner or an employee of the department may not

receive compensation in addition to salary for serving as

supervisor or conservator, but the department may receive

reimbursement for the fully allocated personnel cost associated

with service of the banking commissioner or an employee as

supervisor or conservator.

(b) All approved expenses shall be paid by the state trust

company as the banking commissioner determines. The banking

commissioner has a lien against the assets and funds of the state

trust company to secure payment of approved expenses. The lien

has a higher priority than any other lien against the state trust

company.

state trust company may employ an attorney and other persons the

state trust company selects to assist the state trust company in

contesting or satisfying the requirements of an order of

supervision or conservatorship. The banking commissioner shall

authorize the payment of reasonable fees and expenses from the

state trust company for the attorney or other persons as expenses

of the supervision or conservatorship.

(d) The banking commissioner may defer collection of assessment

and examination fees by the department from the state trust

company during a period of supervision or conservatorship if

deferral appears to aid prospects for rehabilitation. As a

condition of release from supervision or conservatorship, the

banking commissioner may require the rehabilitated state trust

company to pay or develop a reasonable plan for payment of

deferred fees.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.110. REVIEW OF SUPERVISOR OR CONSERVATOR DECISIONS.

(a) Notwithstanding Section 185.107(b), a majority of the state

trust company's board, acting directly or through counsel who

affirmatively represents that the requisite majority has been

obtained, may request in writing that the banking commissioner

review an action taken or proposed by the supervisor or

conservator. The request must specify why the action would not be

in the best interest of the state trust company. The banking

commissioner shall investigate to the extent necessary and make a

prompt written ruling on the request. If the action has not yet

been taken or if the effect of the action can be postponed, the

banking commissioner may stay the action on request pending

review.

(b) If a majority of the state trust company's board objects to

the banking commissioner's ruling, the majority may request a

hearing before the banking commissioner. The request must be made

not later than the 10th day after the date the state trust

company is notified of the ruling.

time and place of the hearing by personal delivery or by

registered or certified mail, return receipt requested. The

hearing may not be held later than the 10th day after the date

the banking commissioner receives the request for a hearing

unless the parties agree to a later hearing date. At the hearing

the board has the burden of proof to demonstrate that the action

is not in the best interest of the state trust company.

(d) After the hearing, the banking commissioner may affirm,

modify, or set aside in whole or part the prior ruling. An order

supporting the action contested by the board is immediately final

for purposes of appeal. The order may be appealed as provided by

Sections 181.202-181.204. If the order is appealed to the finance

commission, the finance commission may:

(1) affirm, terminate, or modify the order;

(2) continue or end supervision or conservatorship; and

(3) order further relief as justice, equity, and protection of

clients, creditors, and the public require.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.111. SUIT FILED AGAINST OR ON BEHALF OF STATE TRUST

COMPANY UNDER SUPERVISION OR CONSERVATORSHIP. (a) A suit filed

against a state trust company while the state trust company is

under conservatorship, or against a person in connection with an

action taken or decision made by that person as a supervisor or

conservator of a state trust company, must be brought in Travis

County regardless of whether the state trust company remains

under an order of supervision or conservatorship.

(b) A conservator may sue a person on the trust company's behalf

to preserve, protect, or recover state trust company assets,

including claims or causes of action. The suit may be in:

(1) Travis County; or

(2) another location where jurisdiction and venue against that

person may be obtained under law.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.112. DURATION. A supervisor or conservator serves for

the period necessary to accomplish the purposes of the

supervision or conservatorship as intended by this subchapter. A

rehabilitated state trust company shall be returned to its former

or new management under conditions reasonable and necessary to

prevent recurrence of the conditions causing the supervision or

conservatorship.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.113. ADMINISTRATIVE ELECTION OF REMEDIES. The banking

commissioner may take any action authorized under Chapter 186

regardless of the existence of supervision or conservatorship. A

period of supervision or conservatorship is not required before a

trust company is closed for liquidation or other remedial action

is taken.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.114. RELEASE BEFORE HEARING. This subchapter does not

prevent release of a state trust company from supervision or

conservatorship before a hearing if the banking commissioner is

satisfied that requirements for abatement have been adequately

satisfied.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

SUBCHAPTER C. UNAUTHORIZED TRUST ACTIVITY: INVESTIGATION AND

ENFORCEMENT

Sec. 185.201. INVESTIGATION OF UNAUTHORIZED TRUST ACTIVITY. (a)

If the banking commissioner has reason to believe that a person

has engaged, is engaging, or is likely to engage in an

unauthorized trust activity, the banking commissioner may:

(1) investigate as necessary within or outside this state to:

(A) determine whether the unauthorized trust activity has

occurred or is likely to occur; or

(B) aid in the enforcement of the laws administered by the

banking commissioner;

(2) initiate appropriate disciplinary action as provided by this

subchapter; and

(3) report any unauthorized trust activity to a law enforcement

agency or another regulatory agency with appropriate

jurisdiction.

(b) The banking commissioner may:

(1) on written request furnish to a law enforcement agency

evidence the banking commissioner has compiled in connection with

the unauthorized activity, including materials, documents,

reports, and complaints; and

(2) assist the law enforcement agency or other regulatory agency

as requested.

faith is not subject to liability, including liability for libel,

slander, or other relevant tort, because the person files a

report or furnishes, orally or in writing, information concerning

a suspected, anticipated, or completed unauthorized activity to a

law enforcement agency, the banking commissioner or another

regulatory agency with appropriate jurisdiction, or an agent or

employee of a law enforcement agency, the banking commissioner,

or other regulatory agency. The person is entitled to attorney's

fees and court costs if the person prevails in an action for

libel, slander, or any other relevant tort based on the report or

other information the person furnished as provided by this

subchapter.

(d) This section does not:

(1) affect or modify a common law or statutory privilege or

immunity;

(2) preempt the authority or relieve the duty of a law

enforcement agency or other regulatory agency with appropriate

jurisdiction to investigate and prosecute suspected criminal

acts;

(3) prohibit a person from voluntarily disclosing information to

a law enforcement agency or other regulatory agency; or

(4) limit a power or duty granted to the banking commissioner

under this subtitle or other law.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.202. SUBPOENA AUTHORITY. (a) This section applies

only to an investigation of an unauthorized trust activity as

provided by Section 185.201, and does not affect the conduct of a

contested case under Chapter 2001, Government Code.

(b) The banking commissioner may issue a subpoena to compel the

attendance and testimony of a witness or the production of a

book, account, record, paper, or correspondence relating to a

matter that the banking commissioner has authority to consider or

investigate at the department's offices in Austin or at another

place the banking commissioner designates.

commissioner or a deputy banking commissioner.

(d) A person who is required by subpoena to attend a proceeding

before the banking commissioner is entitled to receive:

(1) reimbursement for mileage, in the amount provided for travel

by a state employee, for traveling to or returning from a

proceeding that is more than 25 miles from the witness's

residence; and

(2) a fee for each day or part of a day the witness is

necessarily present as a witness in an amount equal to the per

diem travel allowance of a state employee.

(e) The banking commissioner may serve the subpoena or have it

served by an authorized agent of the banking commissioner, a

sheriff, or a constable. The sheriff or constable's fee for

serving the subpoena is the same as the fee paid the sheriff or

constable for similar services.

(f) A person possessing materials located outside this state

that are requested by the banking commissioner may make the

materials available to the banking commissioner or a

representative of the banking commissioner for examination at the

place where the materials are located. The banking commissioner

may:

(1) designate a representative, including an official of the

state in which the materials are located, to examine the

materials; and

(2) respond to a similar request from an official of another

state, the United States, or a foreign country.

(g) A subpoena issued under this section to a financial

institution is not subject to Section 59.006.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999. Amended by Acts 2001, 77th Leg., ch. 412, Sec. 3.11,

eff. Sept. 1, 2001; Acts 2001, 77th Leg., ch. 1420, Sec.

6.103(e), eff. Sept. 1, 2001.

Sec. 185.203. ENFORCEMENT OF SUBPOENA. (a) If necessary, the

banking commissioner may apply to a district court in Travis

County or in the county in which the subpoena was served for

enforcement of the subpoena, and the court may issue an order

compelling compliance.

(b) If the court orders compliance with the subpoena or finds

the person in contempt for failure to obey the order, the banking

commissioner, or the attorney general if representing the banking

commissioner, may recover reasonable court costs, attorney's

fees, and investigative costs incurred in the proceeding.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.204. CONFIDENTIALITY OF SUBPOENAED RECORDS. (a) A

book, account, record, paper, correspondence, or other document

subpoenaed and produced under Section 185.202 that is otherwise

made privileged or confidential by law remains privileged or

confidential unless admitted into evidence at an administrative

hearing or in a court. The banking commissioner may issue an

order protecting the confidentiality or privilege of the document

and restricting its use or distribution by any person or in any

proceeding, other than a proceeding before the banking

commissioner.

(b) Subject to Subchapter D, Chapter 181, and confidentiality

provisions of other law administered by the banking commissioner,

information or material acquired under Section 185.202 under a

subpoena is not a public record for the period the banking

commissioner considers reasonably necessary to complete the

investigation, protect the person being investigated from

unwarranted injury, or serve the public interest. The information

or material is not subject to a subpoena, except a grand jury

subpoena, until released for public inspection by the banking

commissioner or, after notice and a hearing, a district court

determines that the public interest and any investigation by the

banking commissioner would not be jeopardized by obeying the

subpoena. The district court order may not apply to:

(1) a record or communication received from another law

enforcement or regulatory agency except on compliance with the

confidentiality laws governing the records of the other agency;

(2) an internal note, memorandum, report, or communication made

in connection with a matter that the banking commissioner has the

authority to consider or investigate, except on good cause and

compliance with applicable confidentiality laws.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.205. EVIDENCE. (a) On certification by the banking

commissioner, a book, record, paper, or document produced or

testimony taken as provided by Section 185.202 and held by the

department is admissible as evidence in any case without prior

proof of its correctness and without other proof. The certified

book, record, document, or paper, or a certified copy, is prima

facie evidence of the facts it contains.

(b) This section does not limit another provision of this

subtitle or a law that provides for the admission of evidence or

its evidentiary value.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.206. CEASE AND DESIST ORDER REGARDING UNAUTHORIZED

TRUST ACTIVITY. (a) The banking commissioner may serve a

proposed cease and desist order on a person the banking

commissioner believes is engaging or is likely to engage in an

unauthorized trust activity. The order must:

(1) be delivered by personal delivery or registered or certified

mail, return receipt requested, to the person's last known

address;

(2) state the acts or practices alleged to be an unauthorized

activity; and

(3) state the effective date of the order, which may not be

earlier than the 21st day after the date the proposed order is

mailed or delivered.

(b) Unless the person against whom the proposed order is

directed requests a hearing in writing before the effective date

of the proposed order, the order takes effect and is final and

nonappealable as to that person.

later than the 30th day after the date the first written request

for a hearing on the order is received by the banking

commissioner unless the parties agree to a later hearing date. At

the hearing, the banking commissioner has the burden of proof and

must present evidence in support of the order. Each person

against whom the order is directed may cross-examine witnesses

and show cause why the order should not be issued.

(d) After the hearing, the banking commissioner shall issue or

decline to issue a cease and desist order. The proposed order may

be modified as necessary to conform to the findings at the

hearing. An order issued under this subsection:

(1) is immediately final for purposes of enforcement and appeal;

and

(2) must require the person to immediately cease and desist from

the unauthorized trust activity.

(e) The banking commissioner may release a final cease and

desist order issued under this section or information relating to

the existence of the order to the public if the banking

commissioner finds that the release would enhance the effective

enforcement of the order or will serve the public interest.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.207. EMERGENCY CEASE AND DESIST ORDER. (a) The

banking commissioner may issue an emergency cease and desist

order to a person who the banking commissioner reasonably

believes is engaging in a continuing unauthorized trust activity

that is fraudulent or threatens immediate and irreparable public

harm.

(b) The order must:

(1) be delivered on issuance to each person affected by the

order by personal delivery or registered or certified mail,

return receipt requested, to the person's last known address;

(2) state the specific charges and require the person

immediately to cease and desist from the unauthorized activity;

and

(3) contain a notice that a request for hearing may be filed

under this section.

requests a hearing in writing before the 11th day after the date

it is served on the person, the emergency order is final and

nonappealable as to that person. A request for a hearing must:

(1) be in writing and directed to the banking commissioner; and

(2) state the grounds for the request to set aside or modify the

order.

(d) On receiving a request for a hearing, the banking

commissioner shall serve notice of the time and place of the

hearing by personal delivery or registered or certified mail,

return receipt requested. The hearing must be held not later than

the 10th day after the date the banking commissioner receives the

request for a hearing unless the parties agree to a later hearing

date. At the hearing, the banking commissioner has the burden of

proof and must present evidence in support of the order. The

person requesting the hearing may cross-examine witnesses and

show cause why the order should not be affirmed.

(e) After the hearing, the banking commissioner shall affirm,

modify, or set aside in whole or part the emergency cease and

desist order. An order affirming or modifying the emergency cease

and desist order is immediately final for purposes of enforcement

and appeal.

(f) An order continues in effect unless the order is stayed by

the banking commissioner. The banking commissioner may impose any

condition before granting a stay of the order.

(g) The banking commissioner may release a final cease and

desist order issued under this section or information regarding

the existence of the order to the public if the banking

commissioner finds that the release would enhance the effective

enforcement of the order or will serve the public interest.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.208. APPEAL OF CEASE AND DESIST ORDER. (a) A person

affected by a cease and desist order issued, affirmed, or

modified after a hearing may file a petition for judicial review.

(b) A filed petition for judicial review does not stay or vacate

the order unless the court, after hearing, specifically stays or

vacates the order.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.209. VIOLATION OF FINAL CEASE AND DESIST ORDER. (a)

If the banking commissioner reasonably believes that a person has

violated a final and enforceable cease and desist order, the

banking commissioner may:

(1) initiate administrative penalty proceedings under Section

185.210;

(2) refer the matter to the attorney general for enforcement by

injunction and any other available remedy; or

(3) pursue any other action the banking commissioner considers

appropriate under applicable law.

(b) If the attorney general prevails in an action brought under

Subsection (a)(2), the attorney general is entitled to reasonable

attorney's fees.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.210. ADMINISTRATIVE PENALTY. (a) The banking

commissioner may initiate an action for an administrative penalty

against a person for a violation of a cease and desist order by

serving on the person notice of the time and place of a hearing

on the penalty. The notice must be delivered by personal delivery

or registered or certified mail, return receipt requested, to the

person's last known address. The hearing may not be held earlier

than the 20th day after the date the notice is served. The notice

must contain a statement of the facts or conduct alleged to be in

violation of the cease and desist order.

(b) In determining whether a cease and desist order has been

violated, the banking commissioner shall consider the maintenance

of procedures reasonably adopted to ensure compliance with the

order.

that a cease and desist order has been violated, the banking

commissioner may:

(1) impose an administrative penalty in an amount not to exceed

$25,000 for each separate act of unauthorized activity;

(2) direct the person against whom the order was issued to make

complete restitution, in the form and amount and within the

period determined by the banking commissioner, to each resident

of this state and entity operating in this state damaged by the

violation; or

(3) both impose the penalty and direct restitution.

(d) In determining the amount of the penalty and whether to

impose restitution, the banking commissioner shall consider:

(1) the seriousness of the violation, including the nature,

circumstances, extent, and gravity of any prohibited act;

(2) the economic harm caused by the violation;

(3) the history of previous violations;

(4) the amount necessary to deter future violations;

(5) efforts to correct the violation;

(6) whether the violation was intentional or unintentional;

(7) the financial ability of the person against whom the penalty

is to be assessed; and

(8) any other matter that justice may require.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.211. PAYMENT AND APPEAL OF ADMINISTRATIVE PENALTY. (a)

When an administrative penalty order under Section 185.210

becomes final, a person affected by the order, within the time

permitted by law for appeal, shall:

(1) pay the amount of the penalty;

(2) pay the amount of the penalty and file a petition for

judicial review contesting the occurrence of the violation, the

amount of the penalty, or both; or

(3) without paying the amount of the penalty, file a petition

for judicial review contesting the occurrence of the violation,

the amount of the penalty, or both.

(b) Within the time permitted by law for appeal, a person who

acts under Subsection (a)(3) may:

(1) stay enforcement of the penalty by:

(A) paying the amount of the penalty to the court for placement

in an escrow account; or

(B) giving the court a supersedeas bond that is approved by the

court for the amount of the penalty and that is effective until

all judicial review of the order is final; or

(2) request the court to stay enforcement of the penalty by:

(A) filing with the court a sworn affidavit of the person

stating that the person is financially unable to pay the amount

of the penalty and is financially unable to give the supersedeas

bond; and

(B) giving a copy of the affidavit to the banking commissioner

by certified mail.

commissioner receives a copy of an affidavit under Subsection

(b)(2), the banking commissioner may file with the court a

contest to the affidavit. The court shall hold a hearing on the

facts alleged in the affidavit as soon as practicable and shall

stay the enforcement of the penalty on finding that the alleged

facts are true. The person who files an affidavit has the burden

of proving that the person is financially unable to pay the

amount of the penalty and to give a supersedeas bond.

(d) If the person does not pay the amount of the penalty and the

enforcement of the penalty is not stayed, the banking

commissioner may refer the matter to the attorney general for

collection of the amount of the penalty.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

Sec. 185.212. JUDICIAL REVIEW OF ADMINISTRATIVE PENALTY. (a)

If on judicial review the court sustains the penalty order, the

court shall order the person to pay the full amount of the

penalty or a lower amount determined by the court. If the court

does not sustain the order, a penalty is not owed.

(b) When the judgment of the court becomes final, if the person

paid the amount of the penalty and if that amount is reduced or

is not upheld by the court, the court shall order that the

appropriate amount plus accrued interest computed at the annual

rate of 10 percent be remitted to the person. The interest shall

be paid for the period beginning on the date the penalty was paid

and ending on the date the penalty is remitted. If the person

gave a supersedeas bond and the amount of the penalty is not

upheld by the court, the court shall order the release of the

bond. If the person gave a supersedeas bond and the amount of the

penalty is reduced, the court shall order the release of the bond

after the person pays the amount of the penalty.

that has not previously been paid, the court shall order as part

of its judgment that interest accrues on the penalty at the

annual rate of 10 percent, beginning on the date the judgment is

final and ending on the date the penalty and interest are paid.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.

1, 1999.

State Codes and Statutes

State Codes and Statutes

State Codes and Statutes

State Codes and Statutes

Loading..

Loading, Please Wait!