CHAPTER 35. ENFORCEMENT ACTIONS

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FINANCE CODE

TITLE 3. FINANCIAL INSTITUTIONS AND BUSINESSES

SUBTITLE A. BANKS

CHAPTER 35. ENFORCEMENT ACTIONS

SUBCHAPTER A. ENFORCEMENT ORDERS: BANKS AND MANAGEMENT

Sec. 35.001. DETERMINATION LETTER. (a) If the banking

commissioner determines from examination or other credible

evidence that a state bank is in a condition that may warrant the

issuance of an enforcement order under this chapter, the banking

commissioner may notify the bank in writing of the determination,

the requirements the bank must satisfy to abate the

determination, and the time in which the requirements must be

satisfied to avert further administrative action. The

determination letter must be delivered by personal delivery or by

registered or certified mail, return receipt requested.

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

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

under this subchapter or an order of supervision or

conservatorship under Subchapter B.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.002. CEASE AND DESIST ORDER. (a) The banking

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

officer, employee, or director of a state bank, or the bank

itself acting through an authorized person, if the banking

commissioner determines from examination or other credible

evidence that the bank or person directly or indirectly has:

(1) violated this subtitle or another applicable law;

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

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

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

(5) violated a condition of the bank's charter or an agreement

between the bank or the person and the banking commissioner or

the department.

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

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

violation appears to be necessary and in the best interest of the

bank involved and its depositors, creditors, and shareholders,

the banking commissioner may serve a proposed cease and desist

order on the bank and each person who committed or participated

in the action. The proposed order must:

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

certified mail, return receipt requested;

(2) state with reasonable certainty the grounds for the proposed

order; and

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

before the 21st day after the date the proposed order is

delivered or mailed.

the proposed order is directed does not request a hearing in

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

is final and nonappealable as to that bank or person.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 41, eff. September 1, 2007.

Sec. 35.003. REMOVAL OR PROHIBITION ORDER. (a) The banking

commissioner has grounds to remove a present or former officer,

director, or employee of a state bank from office or employment

in, or prohibit a controlling shareholder or other person

participating in the affairs of a state bank from further

participation in the affairs of, a state bank if the banking

commissioner determines from examination or other credible

evidence that:

(1) the person:

(A) intentionally committed or participated in commission of an

act described by Section 35.002(a) with regard to the affairs of

the bank; or

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

to the same or a similar act;

(2) because of this action by the person:

(A) the bank has suffered or will probably suffer financial loss

or other damage;

(B) the interests of the bank's depositors have been or could be

prejudiced; or

reason of the action; and

(3) the action:

(A) involves personal dishonesty on the part of the person; or

(B) demonstrates wilful or continuing disregard for the safety

or soundness of the bank.

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

Subsection (a) and finds that a removal or prohibition order

appears to be necessary and in the best interest of the bank

involved and its depositors, creditors, and shareholders, the

banking commissioner may serve a proposed removal or prohibition

order, as appropriate, on a person alleged to have committed or

participated in the action. The proposed order must:

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

certified mail, return receipt requested;

(2) state with reasonable certainty the grounds for removal or

prohibition; and

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

before the 21st day after the date the proposed order is

delivered or mailed.

proposed order is directed does not request a hearing in writing

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

final and nonappealable as to that person.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 344, Sec. 2.013, eff. Sept.

1, 1999.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 42, eff. September 1, 2007.

Sec. 35.004. HEARING ON PROPOSED ORDER. (a) A requested

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

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

was received by the department unless the parties agree to a

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

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

personal delivery or by registered or certified mail, return

receipt requested, of the date set by the banking commissioner

for the hearing. At the hearing, the department has the burden of

proof and each person against whom the proposed order is directed

may cross-examine and present evidence to show why the proposed

order should not be issued.

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

decline to issue the proposed order. The proposed order may be

modified as necessary to conform to the findings at the hearing

and to require the board to take necessary affirmative action to

correct the conditions cited in the order.

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

provided by Sections 31.202, 31.203, and 31.204.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.005. EMERGENCY ORDER. (a) If the banking commissioner

believes that immediate action is necessary to prevent immediate

and irreparable harm to the bank and its depositors, creditors,

and shareholders, the banking commissioner may issue one or more

cease and desist, removal, or prohibition orders as emergency

orders to become effective immediately on service without prior

notice or hearing. Service must be by personal delivery or by

registered or certified mail, return receipt requested.

(b) In each emergency order the banking commissioner shall

notify the bank and any person against whom the emergency order

is directed of:

(1) the specific conduct requiring the order;

(2) the citation of each law alleged to have been violated;

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

and

(4) the right to a hearing.

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

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

nonappealable as to that person.

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

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

banking commissioner; and

(2) held not later than the 20th day after the date that it is

requested unless the parties agree to a later hearing date.

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

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

order affirming or modifying the emergency order is immediately

final for purposes of enforcement and appeal. The order may be

appealed as provided by Sections 31.202, 31.203, and 31.204.

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

stayed by the banking commissioner. The banking commissioner may

impose any condition before granting a stay of the emergency

order.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 43, eff. September 1, 2007.

Sec. 35.006. COPY OF LETTER OR ORDER IN BANK RECORDS. A copy of

a determination letter, proposed order, emergency order, or final

order issued by the banking commissioner under this subchapter

shall be immediately brought to the attention of the board of the

affected bank, regardless of whether the bank is a party, and

filed in the minutes of the board. Each director shall

immediately certify to the banking commissioner in writing that

the certifying person has read and understood the determination

letter, proposed order, emergency order, or final order. The

required certification may not be considered an admission of a

person in a subsequent legal or administrative proceeding.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 44, eff. September 1, 2007.

Sec. 35.007. EFFECT OF FINAL REMOVAL OR PROHIBITION ORDER. (a)

Except as otherwise provided by law, without the prior written

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

and enforceable removal or prohibition order issued by the

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

financial institution regulatory agency, may not:

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

trust company, or other entity chartered or licensed by the

banking commissioner under the laws of this state, including an

interstate branch, trust office, or representative office in this

state of an out-of-state state bank, trust company, or foreign

bank;

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

management of such an entity;

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

entity; or

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

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

to voting rights in such an entity.

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

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

distributive benefit from such an entity with respect to voting

securities owned by the person.

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

are considered to be authorized but unissued for purposes of

determining the procedures for and results of an affected vote.

(d) Repealed by Acts 2007, 80th Leg., R.S., Ch. 237, Sec. 80,

eff. September 1, 2007.

(e) This section and Section 35.008 do not prohibit a removal or

prohibition order that has indefinite duration or that by its

terms is perpetual.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 344, Sec. 2.014, eff. Sept.

1, 1999; Acts 2001, 77th Leg., ch. 412, Sec. 2.14, eff. Sept. 1,

2001.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 80, eff. September 1, 2007.

Sec. 35.008. LIMITATION ON ACTION. The banking commissioner may

not initiate an enforcement action under this subchapter later

than the fifth anniversary of the date the banking commissioner

discovered or reasonably should have discovered the conduct

involved.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.009. ENFORCEMENT OF FINAL ORDER. (a) If the banking

commissioner reasonably believes that a bank or person has

violated a final and enforceable cease and desist, removal, or

prohibition order issued under this subchapter, the banking

commissioner may:

(1) initiate an administrative penalty proceeding against the

bank under Section 35.010;

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

injunction or other available remedy; or

(3) pursue any other action the banking commissioner considers

appropriate under applicable law.

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

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

reasonable attorney's fees from the bank or person violating the

order.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.010. ADMINISTRATIVE PENALTY. (a) The banking

commissioner may initiate a proceeding for an administrative

penalty against a bank by serving on the bank notice of the time

and place of a hearing on the penalty. The hearing may not be

held earlier than the 20th day after the date the notice is

served. The notice must:

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

mail, return receipt requested; and

(2) contain a statement of the conduct alleged to violate the

order.

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

banking commissioner shall consider the maintenance of procedures

reasonably adopted to ensure compliance with the order.

that the order has been violated, the banking commissioner may

impose an administrative penalty against the bank in an amount

not to exceed $500 for each day the bank violates the final

order.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.011. PAYMENT OR APPEAL OF ADMINISTRATIVE PENALTY. (a)

When a penalty order under Section 35.010 becomes final, the bank

shall pay the penalty or appeal by filing a petition for judicial

review.

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

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

court sustains the order, the court shall order the bank to pay

the full amount of the penalty or a lower amount determined by

the court. If the court does not sustain the order, a penalty is

not owed. If the final judgment of the court requires payment of

a penalty, interest accrues on the penalty, at the rate charged

on loans to depository institutions by the Federal Reserve Bank

of New York, beginning on the date the judgment is final and

ending on the date the penalty and interest are paid.

order, the banking commissioner shall refer the matter to the

attorney general for enforcement. The attorney general is

entitled to recover reasonable attorney's fees from the bank if

the attorney general prevails in judicial action necessary for

collection of the penalty.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.012. CONFIDENTIALITY OF RECORDS. A copy of a notice,

correspondence, transcript, pleading, or other document in the

records of the department relating to an order issued under this

subchapter is confidential and may be released only as provided

by Subchapter D, Chapter 31, except that the banking commissioner

periodically shall publish all final removal and prohibition

orders. The banking commissioner may release a final cease and

desist order or information regarding the existence of the order

to the public if the banking commissioner concludes that the

release would enhance effective enforcement of the order.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.013. COLLECTION OF FEES. The department may sue to

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

law administered by the department. In the suit a certificate by

the banking commissioner showing the delinquency is prima facie

evidence of:

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

amount; and

(2) compliance by the department with the law relating to the

computation and levy of the fee.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. SUPERVISION AND CONSERVATORSHIP

Sec. 35.101. ORDER OF SUPERVISION. (a) The banking

commissioner by order may appoint a supervisor over a state bank

if the banking commissioner determines from examination or other

credible evidence that the bank is in hazardous condition and

that an order of supervision appears to be necessary and in the

best interest of the bank and its depositors, creditors, and

shareholders, or the public.

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

notice.

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

supervision; or

(2) the date the banking commissioner determines that the

requirements for abatement of the order have been satisfied.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 45, eff. September 1, 2007.

Sec. 35.102. ORDER OF CONSERVATORSHIP. (a) The banking

commissioner by order may appoint a conservator for a state bank

if the banking commissioner determines from examination or other

credible evidence that the bank is in hazardous condition and

immediate and irreparable harm is threatened to the bank, its

depositors, creditors, or shareholders, or the public.

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

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

supervision.

specifically state the basis for the order.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 46, eff. September 1, 2007.

Sec. 35.103. NOTICE AND HEARING. (a) An order issued under

Section 35.101 or 35.102 must contain or be accompanied by a

notice that, at the request of the bank, a hearing before the

banking commissioner will be held at which the bank may

cross-examine and present evidence to contest the order or show

that the bank has satisfied all requirements for abatement of the

order. The department has the burden of proof for any

continuation of the order or the issuance of a new order.

(b) To contest or modify the order or demonstrate that the bank

has satisfied all requirements for abatement of the order, the

bank must submit to the banking commissioner a written request

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

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

hearing, the banking commissioner shall serve notice of the place

and time of the hearing, which must be not later than the 10th

day after the date the banking commissioner receives the request

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

The notice must be delivered by personal delivery or by

registered or certified mail, return receipt requested.

(1) delay a decision for a prompt examination of the bank; and

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

results of the examination and appropriate opportunity for

cross-examination and presentation of other relevant evidence.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.104. POST-HEARING ORDER. (a) If after the hearing the

banking commissioner finds that the bank has been rehabilitated,

that its hazardous condition has been remedied, that irreparable

harm is no longer threatened, or that the bank should otherwise

be released from the order, the banking commissioner shall

release the bank from the order, subject to conditions the

banking commissioner from the evidence believes are warranted to

preserve the safety and soundness of the bank.

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

bank has failed to comply with the lawful requirements of the

banking commissioner, has not been rehabilitated, is insolvent,

or otherwise continues in hazardous condition, the banking

commissioner by order shall:

(1) appoint or reappoint a supervisor under Section 35.101;

(2) appoint or reappoint a conservator under Section 35.102; or

(3) take other appropriate action authorized by law.

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

Sections 31.202, 31.203, and 31.204.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.105. CONFIDENTIALITY OF RECORDS. An order issued under

this subchapter and a copy of a notice, correspondence,

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

department relating to the order are confidential and may be

released only as provided by Subchapter D, Chapter 31, except

that the banking commissioner may release to the public an order

or information regarding the existence of an order if the banking

commissioner concludes that the release would enhance effective

enforcement of the order.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.106. AUTHORITY OF SUPERVISOR. During a period of

supervision, a bank, without the prior approval of the banking

commissioner or the supervisor or as otherwise permitted or

restricted by the order of supervision, may not:

(1) dispose of, sell, transfer, convey, or encumber the bank's

assets;

(2) lend or invest the bank's money;

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

(4) pay a cash dividend to the bank's shareholders.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 47, eff. September 1, 2007.

Sec. 35.107. AUTHORITY OF CONSERVATOR. (a) A conservator

appointed under this subchapter shall immediately take charge of

the bank and all of its property, books, records, and affairs on

behalf and at the direction and control of the banking

commissioner.

(b) Subject to any limitation in the order of appointment or

other direction of the banking commissioner, the conservator has

all the powers of the directors, officers, and shareholders of

the bank and shall conduct the business of the bank and take all

steps the conservator considers appropriate to remove the

conditions causing the conservatorship. During the

conservatorship, the board may not direct or participate in the

affairs of the bank.

adopted under this subtitle, or by Section 12.106, the

conservator has the rights and privileges and is subject to the

duties, restrictions, penalties, conditions, and limitations of

the directors, officers, and employees of state banks.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 48, eff. September 1, 2007.

Sec. 35.108. QUALIFICATIONS OF APPOINTEE. The banking

commissioner may appoint as a supervisor or conservator any

person who in the judgment of the banking commissioner is

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

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

conservator.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.109. EXPENSES. (a) The banking commissioner shall

determine and approve the reasonable expenses attributable to the

service of a supervisor or conservator, including costs incurred

by the department and the compensation and expenses of the

supervisor or conservator and any professional employees

appointed to represent or assist the supervisor or conservator.

The banking commissioner or an employee of the department may not

receive compensation in addition to salary for serving as

supervisor or conservator, but the department may receive

reimbursement for the fully allocated personnel cost associated

with service of the banking commissioner or an employee of the

department as supervisor or conservator.

(b) All approved expenses shall be paid by the bank as the

banking commissioner determines. The banking commissioner has a

lien against the assets and money of the bank to secure payment

of approved expenses. The lien has a higher priority than any

other lien against the bank.

bank may employ an attorney and other persons the bank selects to

assist the bank in contesting or satisfying the requirements of

an order of supervision or conservatorship. The banking

commissioner shall authorize the payment of reasonable fees and

expenses from the bank for the attorney and other persons as

expenses of the supervision or conservatorship.

(d) The banking commissioner may defer collection of assessment

and examination fees by the department from the bank during a

period of supervision or conservatorship if deferral would appear

to aid prospects for rehabilitation. As a condition of release

from supervision or conservatorship, the banking commissioner may

require the rehabilitated bank to pay or develop a reasonable

plan for payment of deferred fees.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.110. REVIEW OF SUPERVISOR OR CONSERVATOR DECISION. (a)

Notwithstanding Section 35.107(b), a majority of the bank's

board, acting directly or through counsel who affirmatively

represents that the requisite majority has been obtained, may

request in writing that the banking commissioner review an action

taken or proposed by the supervisor or conservator. The request

must specify why the action would not be in the best interest of

the bank. The banking commissioner shall investigate to the

extent necessary and make a prompt written ruling on the request.

If the action has not yet been taken or if the effect of the

action can be postponed, the banking commissioner may stay the

action on request pending review.

(b) If a majority of the bank's board objects to the banking

commissioner's ruling, the majority may request a hearing before

the banking commissioner. The request must be made not later than

the 10th day after the date the bank is notified of the ruling.

time and place of the hearing by personal delivery or by

registered or certified mail, return receipt requested. The

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

the banking commissioner receives the request for a hearing

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

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

is not in the best interest of the bank.

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

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

supporting the action contested by the board is immediately final

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

Sections 31.202, 31.203, and 31.204. If the order is appealed to

the finance commission, the finance commission may:

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

(2) continue or end supervision or conservatorship; and

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

depositors, creditors, and the public require.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.111. VENUE. (a) A suit filed against a bank while the

bank is under conservatorship, or against a person in connection

with an action taken or decision made by that person as a

supervisor or conservator of a bank, must be brought in Travis

County regardless of whether the bank remains under supervision

or conservatorship.

(b) A conservator may sue a person on the bank's behalf to

preserve, protect, or recover a bank asset, including a claim or

cause of action. Venue is in:

(1) Travis County; or

(2) another location provided by law.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.112. DURATION. A supervisor or conservator serves for

the period necessary to accomplish the purposes of the

supervision or conservatorship as intended by this subchapter. A

rehabilitated bank shall be returned to its former or new

management under conditions reasonable and necessary to prevent

recurrence of the conditions causing the supervision or

conservatorship.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.113. ADMINISTRATIVE ELECTION OF REMEDIES. The banking

commissioner may take any action authorized by Chapter 36

regardless of the existence of supervision or conservatorship. A

period of supervision or conservatorship is not required before a

bank is closed for liquidation or other remedial action is taken.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.114. RELEASE BEFORE HEARING. This subchapter does not

prevent release of the bank from supervision or conservatorship

before a hearing if the banking commissioner is satisfied that

requirements for abatement have been adequately satisfied.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER C. UNAUTHORIZED ACTIVITY: INVESTIGATION AND

ENFORCEMENT

Sec. 35.201. INAPPLICABILITY. This subchapter does not apply to

a financial institution, as that term is defined by Section

201.101, that lawfully maintains its main office or a branch in

this state.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 344, Sec. 2.015, eff. Sept.

1, 1999.

Sec. 35.202. INVESTIGATION OF UNAUTHORIZED ACTIVITY. (a) If

the banking commissioner has reason to believe that a person has

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

activity, the banking commissioner may:

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

(A) determine whether the unauthorized activity has occurred or

is likely to occur; or

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

banking commissioner;

(2) initiate appropriate disciplinary action as provided by this

subchapter; and

(3) report unauthorized activity to a law enforcement agency or

another regulatory agency with appropriate jurisdiction.

(b) The banking commissioner may:

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

evidence the banking commissioner has compiled in connection with

the unauthorized activity, including materials, documents,

reports, and complaints; and

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

as requested.

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

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

report or furnishes, orally or in writing, information concerning

a suspected, anticipated, or completed unauthorized activity to a

law enforcement agency, the banking commissioner, another

regulatory agency with appropriate jurisdiction, or an agent or

employee of a law enforcement agency, the banking commissioner,

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

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

libel, slander, or another relevant tort based on the report or

other information the person furnished as provided by this

subchapter.

(d) This section does not:

(1) affect a common law or statutory privilege or immunity;

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

enforcement agency or other regulatory agency with appropriate

jurisdiction to investigate and prosecute suspected criminal

acts;

(3) prohibit a person from voluntarily disclosing information to

a law enforcement agency or other regulatory agency; or

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

under this subtitle or other law.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.203. SUBPOENA AUTHORITY. (a) This section applies only

to an investigation of an unauthorized activity as provided by

Section 35.202 and does not affect the conduct of a contested

case under Chapter 2001, Government Code.

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

attendance and testimony of a witness or the production of a

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

matter that the banking commissioner has authority to consider or

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

place the banking commissioner designates.

commissioner or a deputy banking commissioner.

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

before the banking commissioner is entitled to receive:

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

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

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

residence; and

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

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

diem travel allowance of a state employee.

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

served by an authorized agent of the banking commissioner, a

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

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

constable for similar services.

(f) A person possessing materials located outside this state

that are requested by the banking commissioner may make the

materials available to the banking commissioner or a

representative of the banking commissioner for examination at the

place where the materials are located. The banking commissioner

may:

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

state in which the materials are located, to examine the

materials; and

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

state, the United States, or a foreign country.

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

institution is not subject to Section 59.006.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 2001, 77th Leg., ch. 412, Sec. 2.15, eff. Sept.

1, 2001; Acts 2001, 77th Leg., ch. 1420, Sec. 6.103(b), eff.

Sept. 1, 2001.

Sec. 35.204. ENFORCEMENT OF SUBPOENA. (a) If necessary, the

banking commissioner may apply to a district court of Travis

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

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

compelling compliance.

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

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

commissioner, or the attorney general if representing the banking

commissioner, may recover reasonable court costs, attorney's

fees, and investigative costs incurred in the proceeding.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.205. CONFIDENTIALITY OF SUBPOENAED RECORDS. (a) A

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

subpoenaed and produced under Section 35.203 that is otherwise

made privileged or confidential by law remains privileged or

confidential unless admitted into evidence at an administrative

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

order protecting the confidentiality or privilege of the document

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

proceeding, other than a proceeding before the banking

commissioner.

(b) Subject to Subchapter D, Chapter 31, and confidentiality

provisions of other law administered by the banking commissioner,

information or material acquired under Section 35.203 under a

subpoena is not a public record for the period the banking

commissioner considers reasonably necessary to complete the

investigation, to protect the person being investigated from

unwarranted injury, or to serve the public interest. The

information or material is not subject to a subpoena, except a

grand jury subpoena, until released for public inspection by the

banking commissioner or until, after notice and a hearing, a

district court determines that the public interest and any

investigation by the banking commissioner would not be

jeopardized by obeying the subpoena. The district court order may

not apply to:

(1) a record or communication received from another law

enforcement or regulatory agency except on compliance with the

confidentiality laws governing the records of the other agency;

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

in connection with a matter that the banking commissioner has the

authority to consider or investigate, except on good cause and in

compliance with applicable confidentiality laws.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.206. EVIDENCE. (a) On certification by the banking

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

testimony taken as provided by Section 35.204 and held by the

department is admissible as evidence in any case without prior

proof of its correctness and without other proof. The certified

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

facie evidence of the facts it contains.

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

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

its evidentiary value.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.207. CEASE AND DESIST ORDER. (a) The banking

commissioner may serve a proposed cease and desist order on a

person that the banking commissioner believes is engaging or is

likely to engage in an unauthorized activity. The order must:

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

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

address;

(2) state each act or practice alleged to be an unauthorized

activity; and

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

before the 21st day after the date the proposed order is

delivered or mailed.

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

directed requests a hearing in writing before the effective date

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

nonappealable as to that person.

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

for a hearing on the order is received by the department unless

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

department has the burden of proof and must present evidence in

support of the order. Each person against whom the order is

directed may cross-examine and show cause why the order should

not be issued.

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

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

be modified as necessary to conform to the findings at the

hearing. An order issued under this subsection:

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

and

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

the unauthorized activity.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.208. EMERGENCY CEASE AND DESIST ORDER. (a) The banking

commissioner may issue an emergency cease and desist order to a

person whom the banking commissioner reasonably believes is

engaging in a continuing unauthorized activity that is fraudulent

or threatens immediate and irreparable public harm.

(b) The order must:

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

order by personal delivery or registered or certified mail,

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

(2) state the specific charges and require the person

immediately to cease and desist from the unauthorized activity;

and

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

under this section.

a hearing in writing before the 11th day after the date it is

served on the person, the emergency order is final and

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

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

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

order.

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

commissioner shall serve notice of the time and place of the

hearing by personal delivery or registered or certified mail,

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

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

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

date. At the hearing, the department has the burden of proof and

must present evidence in support of the order. The person

requesting the hearing may cross-examine witnesses and show cause

why the order should not be affirmed.

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

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

desist order. An order affirming or modifying the emergency cease

and desist order is immediately final for purposes of enforcement

and appeal.

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

the banking commissioner. The banking commissioner may impose any

condition before granting a stay of the order.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.209. JUDICIAL REVIEW OF CEASE AND DESIST ORDER. (a) A

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

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

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

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

vacates the order.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.210. VIOLATION OF FINAL CEASE AND DESIST ORDER. (a) If

the banking commissioner reasonably believes that a person has

violated a final and enforceable cease and desist order, the

banking commissioner may:

(1) initiate an administrative penalty proceeding under Section

35.211;

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

injunction and any other available remedy; or

(3) pursue any other action the banking commissioner considers

appropriate under applicable law.

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

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

attorney's fees.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.211. ADMINISTRATIVE PENALTY. (a) The banking

commissioner may initiate an action for an administrative penalty

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

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

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

or certified mail, return receipt requested, to the person's last

known address. The hearing may not be held earlier than the 20th

day after the date the notice is served. The notice must contain

a statement of the facts or conduct alleged to violate the cease

and desist order.

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

violated, the banking commissioner shall consider the maintenance

of procedures reasonably adopted to ensure compliance with the

order.

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

commissioner may:

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

$25,000 for each discrete unauthorized act;

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

complete restitution, in the form and amount and within the

period determined by the banking commissioner, to each resident

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

violation; or

(3) both impose the penalty and direct restitution.

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

impose restitution, the banking commissioner shall consider:

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

circumstances, extent, and gravity of any prohibited act;

(2) the economic harm caused by the violation;

(3) the history of previous violations;

(4) the amount necessary to deter future violations;

(5) efforts to correct the violation;

(6) whether the violation was intentional or unintentional;

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

is to be assessed; and

(8) any other matter that justice may require.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.212. PAYMENT AND APPEAL OF ADMINISTRATIVE PENALTY. (a)

When an administrative penalty order under Section 35.211 becomes

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

by law for appeal, shall:

(1) pay the amount of the penalty;

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

judicial review contesting the occurrence of the violation, the

amount of the penalty, or both; or

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

for judicial review contesting the occurrence of the violation,

the amount of the penalty, or both.

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

acts under Subsection (a)(3) may:

(1) stay enforcement of the penalty by:

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

in an escrow account; or

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

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

all judicial review of the order is final; or

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

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

stating that the person is financially unable to pay the amount

of the penalty and is financially unable to give the supersedeas

bond; and

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

by certified mail.

commissioner receives a copy of an affidavit under Subsection

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

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

facts alleged in the affidavit as soon as practicable and shall

stay the enforcement of the penalty on finding that the alleged

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

of proving that the person is financially unable to pay the

amount of the penalty and to give a supersedeas bond.

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

enforcement of the penalty is not stayed, the banking

commissioner may refer the matter to the attorney general for

collection of the amount of the penalty.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.213. JUDICIAL REVIEW OF ADMINISTRATIVE PENALTY. (a) If

on judicial review the court sustains the penalty order, the

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

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

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

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

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

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

appropriate amount plus accrued interest computed at the annual

rate of 10 percent be remitted by the department. The interest

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

was paid and ending on the date the penalty is remitted. If the

person gave a supersedeas bond and if the amount of the penalty

is not upheld by the court, the court shall order the release of

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

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

the bond after the person pays the amount owed.

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

of its judgment that interest accrues on the penalty at the

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

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

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

State Codes and Statutes

State Codes and Statutes

State Codes and Statutes

State Codes and Statutes

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