|
|
A BILL TO BE ENTITLED
|
|
AN ACT
|
|
relating to certain enforcement powers of the banking commissioner; |
|
providing administrative penalties. |
|
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
|
SECTION 1. Section 35.003, Finance Code, is amended by |
|
amending Subsections (a) and (b) and adding Subsection (b-1) to |
|
read as follows: |
|
(a) The banking commissioner has grounds to remove or |
|
prohibit 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 or |
|
any other entity chartered, registered, permitted, or licensed by |
|
the banking commissioner 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 35.002(a) with regard |
|
to the affairs of a financial institution, as defined by Section |
|
201.101 [the bank]; [or] |
|
(B) violated a final cease and desist order |
|
issued by a state or federal regulatory agency against the person or |
|
an entity in which the person is or was an officer, director, or |
|
employee [in response to the same or a similar act]; or |
|
(C) made, or caused to be made, false entries in |
|
the records of a financial institution; |
|
(2) because of this action by the person: |
|
(A) the financial institution [bank] has |
|
suffered or will probably suffer financial loss or expense, or |
|
other damage; |
|
(B) the interests of the [bank's] depositors, |
|
creditors, or shareholders of the financial institution have been |
|
or could be prejudiced; or |
|
(C) the person has received financial gain or |
|
other benefit by reason of the action, or likely would have if the |
|
action had not been discovered; 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 financial institution [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, or [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; and |
|
(4) state the duration of the order, including whether |
|
the duration of the order is perpetual. |
|
(b-1) The banking commissioner may make a removal or |
|
prohibition order perpetual or effective for a specific period of |
|
time, may probate the order, or may impose other conditions on the |
|
order. |
|
SECTION 2. Subsection (b), Section 35.005, Finance Code, is |
|
amended to read as follows: |
|
(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 duration of the order, including whether the |
|
duration of the order is perpetual; and |
|
(5) the right to a hearing. |
|
SECTION 3. Subsection (a), Section 35.007, Finance Code, is |
|
amended to read as follows: |
|
(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 or [,] trust company, or as a director, officer, or |
|
employee with financial responsibility of any other entity |
|
chartered, registered, permitted, 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. |
|
SECTION 4. Subchapter A, Chapter 35, Finance Code, is |
|
amended by adding Section 35.0071 to read as follows: |
|
Sec. 35.0071. APPLICATION FOR RELEASE FROM FINAL REMOVAL OR |
|
PROHIBITION ORDER. (a) After the expiration of 10 years from date |
|
of issuance, a person who is subject to a prohibition or removal |
|
order issued under this subchapter, regardless of the order's |
|
stated duration or date of issuance, may apply to the banking |
|
commissioner to be released from the order. |
|
(b) The application must be made under oath and in the form |
|
required by the banking commissioner. The application must be |
|
accompanied by any required fees. |
|
(c) The banking commissioner, in the exercise of |
|
discretion, may approve or deny an application filed under this |
|
section. |
|
(d) The banking commissioner's decision under Subsection |
|
(c) is final and not appealable. |
|
SECTION 5. Section 35.009, Finance Code, is amended to read |
|
as follows: |
|
Sec. 35.009. ENFORCEMENT BY COMMISSIONER [OF FINAL ORDER]. |
|
(a) If the banking commissioner reasonably believes that a bank or |
|
other person has violated any of the following, the banking |
|
commissioner may take any action authorized under Subsection (a-1): |
|
(1) this subtitle or rules enacted under this subtitle |
|
and, as a result of that violation, exposed or could have exposed |
|
the bank or the bank's depositors, creditors, or shareholders to |
|
harm; |
|
(2) other applicable law of this state and, as a result |
|
of that violation, exposed or could have exposed the bank or the |
|
bank's depositors, creditors, or shareholders to harm; or |
|
(3) a final order issued by the banking commissioner. |
|
(a-1) The [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 or other person, in accordance with Sections |
|
[under Section] 35.010 and 35.011; |
|
(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-1)(2) [(a)(2)], the attorney general is |
|
entitled to recover reasonable attorney's fees from the bank or |
|
person committing the violation [violating the order]. |
|
SECTION 6. Section 35.010, Finance Code, is amended to read |
|
as follows: |
|
Sec. 35.010. ADMINISTRATIVE PENALTY. (a) The banking |
|
commissioner may initiate a proceeding for an administrative |
|
penalty against a bank or other person by serving on the bank or |
|
other person, as applicable, 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 |
|
constitute a violation; and |
|
(3) if the alleged violation is described by Section |
|
35.009(a)(1) or (2), identify corrective action that the bank or |
|
other person must take to avoid or reduce the amount of a penalty |
|
that would otherwise be imposed under this section [violate the
|
|
order]. |
|
(b) In determining the amount of any penalty to be imposed |
|
[whether an order has been violated], the banking commissioner |
|
shall consider the following factors: |
|
(1) the financial resources of the bank or other |
|
person; |
|
(2) the good faith of the bank or other person, |
|
including any corrective action taken; |
|
(3) the gravity of the violation; |
|
(4) the history of previous violations; |
|
(5) an offset of the amount of the penalty by the |
|
amount of any penalty imposed by another state or federal agency for |
|
the same conduct; and |
|
(6) any other matter that justice may require |
|
[maintenance of procedures reasonably adopted to ensure compliance
|
|
with the order]. |
|
(c) If the banking commissioner determines after the |
|
hearing that the alleged conduct occurred and that the conduct |
|
constitutes a violation [order has been violated], the banking |
|
commissioner may impose an administrative penalty against a [the] |
|
bank or other person, as applicable, in an amount: |
|
(1) if imposed against a bank, not less than $500 and |
|
not more than $10,000 for each violation for each day the violation |
|
continues, except that the maximum administrative penalty that may |
|
be imposed is the lesser of $500,000 or one percent of the bank's |
|
assets; or |
|
(2) if imposed against a person other than a bank, not |
|
less than $500 and not more than $5,000 for each violation for each |
|
day the violation continues, except that the maximum administrative |
|
penalty that may be imposed is $250,000 [not to exceed $500 for each
|
|
day the bank violates the final order]. |
|
SECTION 7. Section 35.011, Finance Code, is amended to read |
|
as follows: |
|
Sec. 35.011. PAYMENT OR APPEAL OF ADMINISTRATIVE PENALTY. |
|
(a) When a penalty order under Section 35.010 becomes final, the |
|
bank or other person, as applicable, 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 or other person, |
|
as applicable, to pay the full amount of the penalty or a lower |
|
amount determined by the court. If the court does not sustain the |
|
order, a penalty is not owed. If the final judgment of the court |
|
requires payment of a penalty, interest accrues on the penalty, at |
|
the rate charged on loans to depository institutions by the Federal |
|
Reserve Bank of New York, beginning on the date the judgment is |
|
final and ending on the date the penalty and interest are paid. |
|
(c) If the bank or other person, as applicable, does not pay |
|
the penalty imposed under a final and nonappealable penalty order, |
|
the banking commissioner shall refer the matter to the attorney |
|
general for enforcement. The attorney general is entitled to |
|
recover reasonable attorney's fees from the bank or other person, |
|
as applicable, if the attorney general prevails in judicial action |
|
necessary for collection of the penalty. |
|
SECTION 8. Section 35.012, Finance Code, is amended to read |
|
as follows: |
|
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, a final order imposing an administrative penalty, or |
|
information regarding the existence of any of those orders [the
|
|
order] to the public if the banking commissioner concludes that the |
|
release would enhance effective enforcement of the order. |
|
SECTION 9. Section 185.003, Finance Code, is amended by |
|
amending Subsections (a) and (b) and adding Subsection (b-1) to |
|
read as follows: |
|
(a) The banking commissioner has grounds to remove or |
|
prohibit 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 or any other entity chartered, registered, |
|
permitted, or licensed by the banking commissioner 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 a financial institution, as defined by |
|
Section 201.101 [the state trust company]; [or] |
|
(B) violated a final cease and desist order |
|
issued by a state or federal regulatory agency against the person or |
|
an entity in which the person is or was an officer, director, or |
|
employee [in response to the same or a similar act]; or |
|
(C) made, or caused to be made, false entries in |
|
the records of a financial institution; |
|
(2) because of this [that] action by the person: |
|
(A) the financial institution [state trust
|
|
company] has suffered or will probably suffer financial loss or |
|
expense, or other damage; |
|
(B) the interests of the [trust company's] |
|
clients, depositors, creditors, or shareholders of the financial |
|
institution have been or could be prejudiced; or |
|
(C) the person has received financial gain or |
|
other benefit by reason of the action, or likely would have if the |
|
action had not been discovered [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 financial institution [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 before [earlier than] the 21st day after the date the |
|
proposed order is delivered or mailed; and |
|
(4) state the duration of the order, including whether |
|
the duration of the order is perpetual [or delivered]. |
|
(b-1) The banking commissioner may make a removal or |
|
prohibition order perpetual or effective for a specific period of |
|
time, may probate the order, or may impose other conditions on the |
|
order. |
|
SECTION 10. Subsection (b), Section 185.005, Finance Code, |
|
is amended to read as follows: |
|
(b) In each emergency order the banking commissioner shall |
|
notify the state trust company and any person against whom the |
|
emergency 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 duration of the order, including whether the |
|
duration of the order is perpetual; and |
|
(5) the right to a hearing. |
|
SECTION 11. Subsection (a), Section 185.007, Finance Code, |
|
is amended to read as follows: |
|
(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 or [,] state bank, or as a director, officer, or |
|
employee with financial responsibility of any other entity |
|
chartered, registered, permitted, 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. |
|
SECTION 12. Subchapter A, Chapter 185, Finance Code, is |
|
amended by adding Section 185.0071 to read as follows: |
|
Sec. 185.0071. APPLICATION FOR RELEASE FROM FINAL REMOVAL |
|
OR PROHIBITION ORDER. (a) After the expiration of 10 years from |
|
the date of issuance, a person who is subject to a prohibition or |
|
removal order issued under this subchapter, regardless of the |
|
order's stated duration or date of issuance, may apply to the |
|
banking commissioner to be released from the order. |
|
(b) The application must be made under oath and in the form |
|
required by the banking commissioner. The application must be |
|
accompanied by any required fees. |
|
(c) The banking commissioner, in the exercise of |
|
discretion, may approve or deny an application filed under this |
|
section. |
|
(d) The banking commissioner's decision under Subsection |
|
(c) is final and not appealable. |
|
SECTION 13. Section 185.009, Finance Code, is amended to |
|
read as follows: |
|
Sec. 185.009. ENFORCEMENT BY COMMISSIONER [OF FINAL ORDER]. |
|
(a) If the banking commissioner reasonably believes that a state |
|
trust company or other person has violated any of the following, the |
|
banking commissioner may take any action authorized under |
|
Subsection (a-1): |
|
(1) this subtitle or rules enacted under this subtitle |
|
and, as a result of that violation, exposed or could have exposed |
|
the state trust company or its clients, creditors, shareholders, or |
|
participants to harm; |
|
(2) other applicable law of this state and, as a result |
|
of that violation, exposed or could have exposed the state trust |
|
company or its clients, creditors, shareholders, or participants to |
|
harm; or |
|
(3) a final order issued by the banking commissioner. |
|
(a-1) The [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 or other person, as applicable, in |
|
accordance with Sections [under Section] 185.010 and 185.011; |
|
(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-1)(2) [(a)(2)], the attorney general is |
|
entitled to recover reasonable attorney's fees from a state trust |
|
company or person committing the violation [violating the order]. |
|
SECTION 14. Section 185.010, Finance Code, is amended to |
|
read as follows: |
|
Sec. 185.010. ADMINISTRATIVE PENALTY. (a) The banking |
|
commissioner may initiate a proceeding for an administrative |
|
penalty against a state trust company or other person by serving on |
|
the state trust company or other person, as applicable, 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 |
|
constitute a [be in] violation; and |
|
(3) if the alleged violation is described by Section |
|
185.009(a)(1) or (2), identify corrective action that the state |
|
trust company or other person must take to avoid or reduce the |
|
amount of a penalty that would otherwise be imposed under this |
|
section [of the order]. |
|
(b) In determining the amount of any penalty to be imposed |
|
[whether an order has been violated], the banking commissioner |
|
shall consider the following factors: |
|
(1) the financial resources of the state trust company |
|
or other person; |
|
(2) the good faith of the state trust company or other |
|
person, including any corrective action taken; |
|
(3) the gravity of the violation; |
|
(4) the history of previous violations; |
|
(5) an offset of the amount of the penalty by the |
|
amount of any penalty imposed by another state or federal agency for |
|
the same conduct; and |
|
(6) any other matter that justice may require |
|
[maintenance of procedures reasonably adopted to ensure compliance
|
|
with the order]. |
|
(c) If the banking commissioner determines after the |
|
hearing that the alleged conduct occurred and that the conduct |
|
constitutes a violation [an order has been violated], the banking |
|
commissioner may impose an administrative penalty against a state |
|
trust company or other person, as applicable, in an amount: |
|
(1) if imposed against a state trust company, not less |
|
than $500 and not more than $10,000 for each violation for each day |
|
the violation continues, except that the maximum administrative |
|
penalty that may be imposed is the lesser of $500,000 or one percent |
|
of the state trust company's assets; or |
|
(2) if imposed against a person other than a state |
|
trust company, not less than $500 and not more than $5,000 for each |
|
violation for each day the violation continues, except that the |
|
maximum administrative penalty that may be imposed is $250,000 [not
|
|
to exceed $500 for each day the state trust company violates the
|
|
final order]. |
|
SECTION 15. Section 185.011, Finance Code, is amended to |
|
read as follows: |
|
Sec. 185.011. PAYMENT OR APPEAL OF ADMINISTRATIVE PENALTY. |
|
(a) When a penalty order under Section 185.010 becomes final, a |
|
state trust company or other person, as applicable, 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 or |
|
other person, as applicable, 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 of New York, beginning on the |
|
date the judgment is final and ending on the date the penalty and |
|
interest are paid. |
|
(c) If the state trust company or other person, as |
|
applicable, does not pay the penalty imposed under a final and |
|
nonappealable penalty order, the banking commissioner shall refer |
|
the matter to the attorney general for enforcement. The attorney |
|
general is entitled to recover reasonable attorney's fees from the |
|
state trust company or other person, as applicable, if the attorney |
|
general prevails in judicial action necessary for collection of the |
|
penalty. |
|
SECTION 16. Section 185.012, Finance Code, is amended to |
|
read as follows: |
|
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, a final order imposing an administrative penalty, or |
|
information regarding [relating to] the existence of any of those |
|
orders [the order] to the public if the banking commissioner |
|
concludes that the release would enhance effective enforcement of |
|
the order. |
|
SECTION 17. Subsection (a), Section 202.005, Finance Code, |
|
is amended to read as follows: |
|
(a) The commissioner may: |
|
(1) examine a bank holding company that controls a |
|
Texas bank to the same extent as if the bank holding company were a |
|
Texas state bank; and |
|
(2) bring an enforcement proceeding under Chapter 35 |
|
against a bank holding company or other person that violates or |
|
participates in a violation of Subtitle A, an agreement filed with |
|
the commissioner under this chapter, or a rule adopted by the |
|
finance commission or order issued by the commissioner under |
|
Subtitle A, as if the bank holding company were a Texas state bank. |
|
SECTION 18. The changes in law made by this Act apply only |
|
to conduct occurring on or after the effective date of this Act. |
|
Conduct occurring before the effective date of this Act is governed |
|
by the law in effect on the date the conduct occurred, and the |
|
former law is continued in effect for that purpose. |
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SECTION 19. This Act takes effect immediately if it |
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receives a vote of two-thirds of all the members elected to each |
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house, as provided by Section 39, Article III, Texas Constitution. |
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If this Act does not receive the vote necessary for immediate |
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effect, this Act takes effect September 1, 2011. |