Tex. Finance Code § 181.002 — TX Code / Code fi / Chapter 181 / Section 181.002
§ 181.002. DEFINITIONS.
Status: repealed

(a) In this subtitle:

(1) "Account" means the client relationship established with a trust institution involving the transfer of funds or property to the trust institution, including a relationship in which the trust institution acts as trustee, executor, administrator, guardian, custodian, conservator, receiver, registrar, or agent.

(2) "Affiliate" means a company that directly or indirectly controls, is controlled by, or is under common control with a state trust company or other company.

(3) Repealed by Acts 2001, 77th Leg., ch. 1420, Sec. 6.027, eff. Sept. 1, 2001.

(4) "Banking commissioner" means the banking commissioner of Texas or a person designated by the banking commissioner and acting under the banking commissioner's direction and authority.

(5) "Board" means the board of directors, managers, or managing participants of, or a person or group of persons acting in a comparable capacity for, a state trust company or other entity.

(6) Repealed by Acts 2001, 77th Leg., ch. 1420, Sec. 6.027, eff. Sept. 1, 2001.

(7) "Capital" means:

(A) the sum of:

(i) the par value of all shares or participation shares of a state trust company having a par value that have been issued;

(ii) the consideration set by the board for all shares or participation shares of the state trust company without par value that have been issued, except the part of that consideration that:

(a) has been actually received;

(b) is less than all of that consideration; and

(c) the board, by resolution adopted not later than the 60th day after the date of issuance of those shares, has allocated to surplus with the prior approval of the banking commissioner; and

(iii) an amount not included in Subparagraphs (i) and (ii) that has been transferred to capital of the state trust company, on the payment of a share dividend or on adoption by the board of a resolution directing that all or part of surplus be transferred to capital, minus each reduction made as permitted by law; less

(B) all amounts otherwise included in Paragraphs (A)(i) and (ii) that are attributable to the issuance of securities by the state trust company and that the banking commissioner determines, after notice and an opportunity for hearing, should be classified as debt rather than equity securities.

(8) "Certified surplus" means the part of surplus designated by a vote of the board of a state trust company under Section 182.105 and recorded in the board minutes as certified.

(9) "Charter" means a charter issued under this subtitle to engage in a trust business.

(10) "Client" means a person to whom a trust institution owes a duty or obligation under a trust or other account administered by the trust institution, regardless of whether the trust institution owes a fiduciary duty to the person. The term includes a beneficiary of a trust for whom the trust institution acts as trustee and a person for whom the trust institution acts as agent, custodian, or bailee.

(11) "Company" means a corporation, a partnership, an association, a business trust, another trust, or a similar organization, including a trust institution.

(12) "Conservator" means the banking commissioner or an agent of the banking commissioner exercising the powers and duties provided by Subchapter B, Chapter 185.

(13) "Control" means:

(A) the ownership of or ability or power to vote, directly, acting through one or more other persons, or otherwise indirectly, 25 percent or more of the outstanding shares of a class of voting securities of a state trust company or other company;

(B) the ability to control the election of a majority of the board of the state trust company or other company;

(C) the power to exercise, directly or indirectly, a controlling influence over the management or policies of the state trust company or other company as determined by the banking commissioner after notice and an opportunity for hearing; or

(D) the conditioning of the transfer of 25 percent or more of the outstanding shares or participation shares of a class of voting securities of the state trust company or other company on the transfer of 25 percent or more of the outstanding shares of a class of voting securities of another state trust company or other company.

(14) "Department" means the Texas Department of Banking.

(15) "Depository institution" means an entity with the power to accept deposits under applicable law.

(15-a) "Equity capital" means the amount by which the total assets of a state trust company exceed the total liabilities of the trust company.

(16) Repealed by Acts 2001, 77th Leg., ch. 1420, Sec. 6.027, eff. Sept. 1, 2001.

(17) "Equity security" means:

(A) stock or a similar security, any security convertible, with or without consideration, into such a security, a warrant or right to subscribe to or purchase such a security, or a security carrying such a warrant or right;

(B) a certificate of interest or participation in a profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share or participation share, investment contract, voting-trust certificate, or partnership interest; and

(C) a certificate of interest or participation in, temporary or interim certificate for, or receipt for a security described by this subdivision that evidences an existing or contingent equity ownership interest.

(18) "Fiduciary record" means a matter written, transcribed, recorded, received, or otherwise in the possession of a trust institution that is necessary to preserve information concerning an act or event relevant to an account of a trust institution.

(19) "Finance commission" means the Finance Commission of Texas.

(20) Repealed by Acts 2001, 77th Leg., ch. 1420, Sec. 6.027, eff. Sept. 1, 2001.

(21) "Full liability participant" means a participant that agrees under the terms of a participation agreement to be liable under a judgment, decree, or order of court for the entire amount of all debts, obligations, or liabilities of a limited trust association.

(22) "Hazardous condition" means:

(A) a refusal by a trust company or an affiliate of a trust company to permit an examination of its books, papers, accounts, records, or affairs by the banking commissioner as provided by Section 181.104;

(B) a violation by a trust company of a condition of its chartering or an agreement entered into between the trust company and the banking commissioner or the department; or

(C) a circumstance or condition in which an unreasonable risk of loss is threatened to clients or creditors of a trust company, excluding risk of loss to a client that arises as a result of the client's decisions or actions, but including a circumstance or condition in which a trust company:

(i) is unable or lacks the means to meet its current obligations as they come due in the regular and ordinary course of business, even if the book or fair market value of its assets exceeds its liabilities;

(ii) has equity capital less than the amount of restricted capital the trust company is required to maintain under Section 182.008, or has equity capital the adequacy of which is threatened, as determined under regulatory accounting principles;

(iii) has concentrated an excessive or unreasonable portion of its assets in a particular type or character of investment;

(iv) violates or refuses to comply with this subtitle, another statute or regulation applicable to trust companies, or a final and enforceable order of the banking commissioner;

(v) is in a condition that renders the continuation of a particular business practice hazardous to its clients and creditors; or

(vi) conducts business in an unsafe or unsound manner, including conducting business with:

(a) inexperienced or inattentive management;

(b) weak or potentially dangerous operating practices;

(c) infrequent or inadequate audits;

(d) administration of assets that is notably deficient in relation to the volume and character of or responsibility for asset holdings;

(e) unsound administrative practices;

(f) frequent and uncorrected material occurrences of violations of law, including rules, or terms of the governing instruments; or

(g) a notable degree of conflicts of interest and engaging in self-dealing.

(23) "Home office" means a location registered with the banking commissioner as a state trust company's home office at which:

(A) the trust company does business;

(B) the trust company keeps its corporate books and records; and

(C) at least one executive officer of the trust company maintains an office.

(24) "Insider" means:

(A) each director, manager, managing participant, officer, and principal shareholder or participant of a state trust company;

(B) each affiliate of the state trust company and each director, officer, and employee of the affiliate;

(C) any person who participates or has authority to participate, other than in the capacity of a director, in major policy-making functions of the state trust company, whether or not the person has an official title or the officer is serving without salary or compensation; or

(D) each company controlled by a person described by Paragraph (A), (B), or (C).

(25) "Insolvent" means a circumstance or condition in which a state trust company:

(A) is unable or lacks the means to meet its current obligations as they come due in the regular and ordinary course of business, even if the value of its assets exceeds its liabilities;

(B) has equity capital that is 50 percent or less of the amount of restricted capital the trust company is required to maintain;

(C) fails to maintain deposit insurance for its deposits with the Federal Deposit Insurance Corporation or its successor, or fails to maintain adequate security for its deposits as provided by Section 184.301(c);

(D) sells or attempts to sell substantially all of its assets or merges or attempts to merge substantially all of its assets or business with another entity other than as provided by Chapter 182; or

(E) attempts to dissolve or liquidate other than as provided by Chapter 186.

(26) "Investment security" means a marketable obligation evidencing indebtedness of a person in the form of a bond, note, debenture, or investment security.

(27) "Limited trust association" means a state trust company organized under this subtitle as a limited liability company, authorized to issue participation shares, and controlled by its participants.

(28) "Loans and extensions of credit" means direct or indirect advances of money by a state trust company to a person that are conditioned on the obligation of the person to repay the funds or that are repayable from specific property pledged by or on behalf of the person.

(29) "Manager" means a person elected to the board of a limited trust association.

(30) "Managing participant" means a participant in a limited trust association in which management has been retained by the participants.

(31) "Mutual funds" means equity securities of an investment company registered under the Investment Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.) and the Securities Act of 1933 (15 U.S.C. Section 77a et seq.). The term does not include money market funds.

(32) "Officer" means the presiding officer of the board, the principal executive officer, or another officer appointed by the board of a state trust company or other company, or a person or group of persons acting in a comparable capacity for the state trust company or other company.

(33) "Operating subsidiary" means a company for which a state trust company has the ownership, ability, or power to vote, directly, acting through one or more other persons, or otherwise indirectly, more than 50 percent of the outstanding shares of each class of voting securities or its equivalent of the company.

(34) "Participant" means an owner of a participation share in a limited trust association.

(35) "Participant-transferee" means a transferee of a participation share who has not received the unanimous consent of all participants to be a participant, or who becomes a participant-transferee under Subchapter C, Chapter 183.

(36) "Participation agreement" means the instrument stating the agreement among the participants of a limited trust association relating to the rights and duties of the participants and participant-transferees, including allocations of income, loss, deduction, credit, distributions, liquidation rights, redemption rights, liabilities of participants, priority rights of participant-transferees to transfer participation shares, rights of participants to purchase participation shares of participant-transferees, the procedures for elections and voting by participants, and any other matter not prohibited by or inconsistent with this subtitle.

(37) "Participation shares" means the units into which the proprietary interests of a limited trust association are divided or subdivided by means of classes, series, relative rights, or preferences.

(38) "Principal shareholder" means a person who owns or has the ability or power to vote, directly, acting through one or more other persons, or otherwise indirectly, 10 percent or more of the outstanding shares or participation shares of any class of voting securities of a state trust company or other company.

(39) "Restricted capital" means the sum of capital and certified surplus.

(40) "Regulatory accounting principles" means generally accepted accounting principles as modified by rules adopted under:

(A) this subtitle; or

(B) an applicable federal statute or regulation.

(41) "Secondary capital" means the amount by which the assets of a state trust company exceed restricted capital, required by Section 182.008, and liabilities.

(42) "Shareholder" means an owner of a share in a state trust company.

(43) "Shares" means the units into which the proprietary interests of a state trust company are divided or subdivided by means of classes, series, relative rights, or preferences.

(44) "State bank" means a banking association or limited banking association organized or reorganized under Subtitle A, including an association organized under the laws of this state before September 1, 1997, with the express power to receive and accept deposits and possessing other rights and powers granted by that subtitle expressly or by implication. The term does not include a savings association, savings bank, or credit union.

(45) "State trust company" or "trust company" means a trust association or limited trust association organized or reorganized under this subtitle, including an association organized under the laws of this state before September 1, 1997. If the context or circumstances require, the term includes a trust company organized under the laws of another state that lawfully maintains a trust office in this state in accordance with Chapter 187.

(46) "Subsidiary" means a state trust company or other company that is controlled by another person. The term includes a subsidiary of a subsidiary.

(47) "Supervisor" means the banking commissioner or an agent of the banking commissioner exercising the powers and duties specified in Subchapter B, Chapter 185.

(47-a) "Surplus" means the amount by which the assets of a state trust company exceed the company's liabilities, capital, and undivided profits.

(47-b) "Third-party service provider" means a person who performs activities relating to the trust business on behalf of a trust institution for the trust institution's customers or on behalf of another person directly engaged in providing financial services for the person's customers. The term:

(A) includes a person who:

(i) provides data processing services;

(ii) performs activities in support of the provision of financial services, including lending, transferring funds, fiduciary activities, trading activities, and deposit taking activities;

(iii) for the purpose of furnishing to third parties reports indicating a person's creditworthiness, credit standing, or credit capacity, regularly engages in the practice of assembling or evaluating, and maintaining, public record information and credit account information from persons who furnish that information regularly and in the ordinary course of business; or

(iv) provides Internet-related services, including web services, processing electronic bill payments, developing and maintaining mobile applications, system and software development and maintenance, and security monitoring; and

(B) does not include a provider of an interactive computer service or a general audience Internet or communications platform, except to the extent that the service or platform is specially designed or adapted for the trust business and activities relating to the trust business.

(48) "Trust association" means a trust company organized under this subtitle as a corporation, authorized to issue shares of stock, and controlled by its shareholders.

(49) "Trust business" means the business of a company holding itself out to the public as a fiduciary for hire or compensation to hold or administer accounts. The term includes:

(A) the business of a trustee or custodian of an individual retirement account described by Section 408(a), Internal Revenue Code of 1986; and

(B) the business of an administrator or servicer of individual retirement accounts described by Section 408(a), Internal Revenue Code of 1986, who makes the administrator's or servicer's services available to the public for hire or compensation.

(50) "Trust deposits" means client funds held by a trust institution and authorized to be deposited with itself as a permanent investment or pending investment, distribution, or payment of debts on behalf of the client.

(51) "Trust institution" means a bank, credit union, foreign bank, savings association, savings bank, or trust company that is authorized by its charter to conduct a trust business.

(52) "Unauthorized trust activity" means an act or practice within this state by a company without a charter, license, permit, registration, or other authority issued or granted by the banking commissioner or other appropriate regulatory authority for which such a charter, license, permit, registration, or other authority is required to conduct trust business.

(53) "Undivided profits" means the part of equity capital of a state trust company equal to the balance of its net profits, income, gains, and losses since the date of its formation minus subsequent distributions to shareholders or participants and transfers to surplus or capital under share dividends or appropriate board resolutions. The term includes amounts allocated to undivided profits as a result of a merger.

(54) "Voting security" means a share, participation share, or other evidence of proprietary interest in a state trust company or other company that has as an attribute the right to vote or participate in the election of the board of the trust company or other company, regardless of whether the right is limited to the election of fewer than all of the board members. The term includes a security that is convertible or exchangeable into a voting security and a nonvoting participation share of a managing participant.

(b) The definitions provided by this section shall be liberally construed to accomplish the purposes of this subtitle.

(c) The finance commission by rule may adopt other definitions to accomplish the purposes of this subtitle.