A state bank may trade certain securities, but it cannot underwrite securities issues or invest in equity securities except to reduce a good-faith loss. Some investments are capped or need commissioner approval.
Sec. 34.101. SECURITIES. (a) A state bank may purchase and sell securities without recourse solely on the order and for the account of a customer. (b) Except as otherwise provided by this subtitle or rules adopted under this subtitle, a state bank may not: (1) underwrite an issue of securities; or (2) invest its money in equity securities except as necessary to avoid or minimize a loss on a loan or investment previously made in good faith. (c) A state bank may purchase investment securities for its own account under limitations and restrictions prescribed by rules adopted under this subtitle. Except as otherwise provided by this section, the amount of the investment securities of any one obligor or maker held by the bank for its own account may not exceed an amount equal to 15 percent of the bank's unimpaired capital and surplus. The banking commissioner may authorize investments in excess of this limitation on written application if the banking commissioner determines that: (1) the excess investment is not prohibited by other applicable law; and (2) the safety and soundness of the requesting state bank is not adversely affected. (d) Notwithstanding Subsections (a)-(c), a state bank may, without limit and subject to the exercise of prudent banking judgment, deal in, underwrite, or purchase for its own account: (1) bonds and other legally created general obligations of a state, an agency or political subdivision of a state, the United States, or an instrumentality of the United States; (2) obligations that this state, an agency or political subdivision of this state, the United States, or an instrumentality of the United States has unconditionally agreed to purchase, insure, or guarantee; (3) securities that are offered and sold under 15 U.S.C. Section 77d(5); (4) mortgage related securities or small business related securities, as those terms are defined by 15 U.S.C. Section 78c(a); (5) mortgages, obligations, or other securities that are or ever have been sold by the Federal Home Loan Mortgage Corporation under 12 U.S.C. Sections 1434 and 1455; (6) obligations, participation, or other instruments of or issued by the Federal National Mortgage Association or the Government National Mortgage Association; (7) obligations issued by the Federal Agricultural Mortgage Corporation, the Federal Farm Credit Banks Funding Corporation, or a Federal Home Loan Bank; (8) obligations of the Federal Financing Bank or the Environmental Financing Authority; (9) obligations or other instruments or securities of the Student Loan Marketing Association; (10) qualified Canadian government obligations, as defined by 12 U.S.C. Section 24; or (11) if the state bank is well capitalized, as defined by Section 38, Federal Deposit Insurance Act (12 U.S.C. Section 1831o), obligations, including limited obligation bonds, revenue bonds, and obligations that satisfy the requirements of 26 U.S.C. Section 142(b)(1), issued by or on behalf of a state or a political subdivision of a state, including a municipal corporate instrumentality of one or more states or a public agency or authority of a state or political subdivision of a state. (e) Notwithstanding Subsections (a) and (b), subject to the exercise of prudent banking judgment, a state bank may deal in, underwrite, or purchase for its own account, including for purposes of Subsection (c) obligations as to which the bank is under commitment, the following: (1) obligations issued by a development bank, corporation, or other entity created by international agreement if the United States is a member and a capital stock shareholder; (2) obligations issued by a state or political subdivision or an agency of a state or political subdivision for housing, university, or dormitory purposes, that are at the time eligible for purchase by a state bank for its own account; or (3) bonds, notes, and other obligations issued by the Tennessee Valley Authority or by the United States Postal Service. (f) A state bank may not invest more than an amount equal to 25 percent of the bank's unimpaired capital and surplus in investment grade adjustable rate preferred stock and money market (auction rate) preferred stock. (g) A state bank may deposit money in a federally insured financial institution, a Federal Reserve Bank, or a Federal Home Loan Bank without limitation. (h) The finance commission may adopt rules to administer and carry out this section, including rules to: (1) define or further define terms used by this section; (2) establish limits, requirements, or exemptions other than those specified by this section for particular classes or categories of securities; and (3) limit or expand investment authority for state banks for particular classes or categories of securities. Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997. Amended by Acts 2001, 77th Leg., ch. 528, Sec. 9, eff. Sept. 1, 2001. Amended by: Acts 2007, 80th Leg., R.S., Ch. 110 (H.B. 2007), Sec. 5, eff. September 1, 2007.