(a) Requirements. Instead of a deposit, an approved PEO may maintain a letter of credit. A letter of credit must comply with the following requirements:
  (1) the letter of credit cannot be supported or collateralized by a guaranty;
  (2) the letter of credit and all amendments to the letter of credit must be filed with TDI; and
    (A) be clean, irrevocable, unconditional, and issued by a qualified financial institution;
    (B) contain an issue date;
    (C) stipulate that the beneficiary is the commissioner, that the commissioner need only draw a draft under the letter of credit and present it to obtain funds, and that no other document need be presented;
    (D) show only one amount on the letter of credit;
    (E) state that the letter of credit is not subject to any conditions or qualifications outside of the letter of credit and must not contain reference to any other agreements, documents, or entities;
    (F) contain a statement to the effect that the obligation of the qualified financial institution under the letter of credit is in no way contingent on reimbursement; and
    (G) state that the letter of credit is subject to and governed by either the laws of this state or the laws of the state in which the issuing qualified financial institution is domiciled, and that all drafts drawn on the letter of credit will be presentable at any office in the United States of the issuing qualified financial institution.
(b) Conditions not permitted. The letter of credit must not:
  (1) have a schedule of periodic payments;
  (2) name any beneficiary other than the commissioner; and
  (3) in aggregate of all letters of credit issued to the approved PEO by one qualified financial institution, exceed 10 percent of the financial institution's total equity capital, as shown in the qualified financial institution's most recent report of condition as filed with the appropriate federal or state financial institution regulatory agency.
(c) Term of letter of credit. The term of the letter of credit must be for at least one year and must contain an evergreen clause that prevents the expiration of the letter of credit without written notice from the issuer. The evergreen clause must provide for a period of no less than 30 days' written notice to the commissioner prior to the expiration date or nonrenewal.

Source Note: The provisions of this §13.565 adopted to be effective May 17, 2016, 41 TexReg 3479