JIM MATTOX Attorney General

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# TheAttorney GeneralofTexas

March 15, 1983

Mr.Kenneth H.Ashworth Commissioner Coordinating Board Texas College andUniversity System Opinion No.JM-13 Re: Whether pledged by bank securities to eecure P. 0. Box 12788, Capitol Station Austin, Texas 78711 deposit of junior college district funds maybeplaced for safekeeping with another bank Dear Commissioner Ashworth: You ask two questions regarding the safekeeping of securities pledged by depository banks to secure junior college district funds held bythose depository banks. First, you ask:

Maya bank, chosen as a depository by a public junior college and pledging securities to cover the funds ondeposit bythe college, legally place those securities in safekeeping with another bank that is owned by the same holding company that ownsadepository bank? Section 130.084 of the Texas Education Codeprovides: Theboard of trustees ofjunior college districts shall begoverned in the establishment, management and control of the junior college by the general law governing the establishment, management and control of independent school districts insofar as the general lawis applicable. The provisions of the Education Code relating to junior college districts, section 130.001, et seq., do not contain a provision relating tojunior college district depositories. Thus, according to the express language of section 130.084, junior college districts are governed by the School Depository Act, section 23.71 et seq. of the Education Code. Section 23.79(c) of the Education Code permits adepository bank to deposit or pledge approved securities "with the school district, or with atrustee designated by the school district." Noother provision in the School Depository Act makes reference to a trustee holding approved securities for adepository bank.

p. 53Mr.Kenneth H.Ashworth - Page 2 (JM-13)

“Designate” is not defined in the Education Code. Words that are not defined in astatute are given their ordinary significance unless they are words of art or words connected with a particular subject matter. V.T.C.S. art. 10, §l; National Life Companyv. Stegall, 169 S.W.2d 155, 157 (Tex. 1943). mDesignate” means to indicate or set apart for a purpose or duty. Black’s LawDictionary 402 (5th ed. 1979); Webster’s NewCollegiate Dictionary 308 (1977). Thus, aschool district mayspecify the trustee bank. The power to designate includes the power to approve or disapprove atrustee bank. Neither the School Depository Act nor any other statute of which weare aware prohibits adepository bank from placing for safekeeping pledged securities in another bank owned by the sane holding company that owns the depository bank. Thus, the answer to your first question is yes, g the bank in which the securities are to be placed is designated by the school district as the “trustee” bank. Youalso ask:

If the answer to question (1) is yes, does section 23.79(c), Texas Education Code, give the college the authority to direct the depository bank to place pledged securities in safekeeping with a bank independent of the holding company? Webelieve our discussion of your first question answers your second question. Section 23.79(c) of the Texas Education Code clearly provides that the school district has the authority to select the trustee or bank in which the pledged securities shall be kept. This interpretation is consistent with the remaining provisions of section 23.79(c), which give the school district authority to designate the amount of approved securities and to approve the substitution of approved‘securities bythe depository bank. SUMMARY With the approval of the junior college district, adepository bank holding public junior college funds may place for safekeeping its pledged securities with another bank that is owned by the same holding company as the depository bank. Section 23.79(c) of the Education Code authorizes ajunior college district to direct the depository bank toplace the pledged securities in safekeeping with abank independent of the holding company.

JIM MATTOX Attorney General of Texas

p. 54Mr.Kenneth H.Ashworth - Page 3 (JM-13)

TOMGREEN First Assistant Attorney General DAVIDR. RICHARDS Executive Assistant Attorney General Prepared byYolanda McKeeman Assistant Attorney General APPROVED: OPINIONCOMMITTEE SusanL. Garrison, Chairman Jon Bible Rick Gilpin Yolanda McKeeman JimMoellinger

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