(a) Compliance required. A trust company may not deposit trust funds with itself as an investment pursuant to Finance Code, §184.301, unless it first complies with this section and §21.32 of this title (relating to Acceptance of Trust Deposits).

(b) Notice of activity. At least 30 days before accepting trust deposits, a trust company shall file a notice with the banking commissioner containing the following information, together with the filing fee required by §21.2 of this title (relating to Filing and Investigation Fees):

(1) an estimate of the anticipated dollar volume of trust deposits, an estimate of the maximum trust deposit for any one account, and an estimate of the total number of accounts that will invest in trust deposits;

(2) a copy of the added or revised portion of the trust company's strategic plan that addresses the acceptance of trust deposits, in compliance with Texas Department of Banking Policy Memorandum Number 1009, regarding strategic plans;

(3) if trust deposits are to be insured by the Federal Deposit Insurance Corporation (FDIC), or its successor, evidence of such insurance;

(4) if trust deposits are to be secured by a pledged fund of securities: (A) a description of the initial fund of securities securing the anticipated trust deposits, including disclosure of current market value and an evaluation of the securities under the standards of Finance Code, §184.101(e); and (B) identification of the federal reserve bank, state or nationally chartered depository institution, or clearing corporation, that controls the securities pledged against the trust deposits and a copy of the executed pledge agreement with such institution;

(5) if trust deposits are to be secured by a pledged certificate of deposit: (A) evidence of the certificate of deposit that discloses its value and associated costs, including penalties, for early redemption or withdrawal; and (B) identification of the FDIC-insured depository institution that issued the certificate of deposit, a copy of the executed pledge agreement with such institution, and an acknowledgment of the pledge from the issuing institution;

(6) a certified copy of a board resolution directing management of the trust company to: (A) maintain adequate security and/or FDIC insurance to fully secure and/or insure the trust deposits; and (B) maintain adequate policies, procedures, and records regarding trust deposits; and

(7) such other information that the banking commissioner may reasonably request.

(c) Action by banking commissioner.

(1) The trust company may begin accepting trust deposits on the 31st day after the date the banking commissioner receives the trust company's completed notice letter unless the banking commissioner specifies an earlier or later date, requests additional information, or prohibits the activity as provided in this subsection. The banking commissioner may prohibit the trust company from accepting trust deposits only if the banking commissioner concludes that: (A) the trust deposits would not be fully insured or secured as required by Finance Code, §184.301, and this section; (B) the activity would adversely affect the safety and soundness of the trust company; (C) the trust company has a less than satisfactory rating as of the trust company's most recent examination; or (D) the trust company is subject to an enforcement order issued pursuant to Finance Code, Chapter 185, or is not otherwise operating in substantial compliance with all applicable state and federal laws and regulations.

(2) The banking commissioner may extend the 30-day period under paragraph (1) of this subsection if the banking commissioner determines that the trust company's notice raises issues requiring additional information or additional time for analysis. If the 30-day period is extended, the trust company may accept trust deposits only on prior written approval by the banking commissioner, except that the banking commissioner must approve or prohibit the proposed activity or convene a hearing under Finance Code, §181.201, not later than the 60th day after the date the banking commissioner receives the trust company's notice. If a hearing is convened, the banking commissioner must approve or prohibit the proposed activity not later than the 30th day after the date the hearing is completed.

(3) A trust company that is denied the right to accept trust deposits by the banking commissioner under this section may appeal as provided by Finance Code, §§181.202-181.204, or may file a new notice under this section with additional information relevant to the banking commissioner's determination, with applicable filing fee.

(d) Authority to accept trust deposits. Only a trust company which transacts business with the public may deposit trust funds with itself as an investment pursuant to Finance Code, §184.301. An exempt trust company under Finance Code, §§182.011-182.019, may not accept trust deposits.

(e) Records. A trust company shall maintain written documentation adequate to demonstrate compliance with this section, which documents must be available at all times to the department for examination and review. For purposes of this subsection, required documentation need not be retained beyond three years.

Source Note: The provisions of this §21.31 adopted to be effective July 2, 1998, 23 TexReg 6715; amended to be effective September 5, 2002, 27 TexReg 8203