| (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 §21.31 of this title (relating
to Notice to Engage in Trust Deposits). Trust deposits must be fully insured
by deposit insurance issued by the Federal Deposit Insurance Corporation (FDIC),
or its successor, or fully secured by a separate fund of pledged securities,
by pledged certificates of deposit, or a combination of the foregoing.
(b) Pledged collateral. A separate fund of securities or certificates
of deposit that are pledged to secure trust deposits must be maintained in
a federal reserve bank, a state or nationally chartered depository institution,
or a clearing corporation, as defined by Business & Commerce Code, §8.102,
either in this state or elsewhere, and must:
(1) for a fund of securities, contain only bonds, notes, or
other evidences of indebtedness which are investment grade, convertible to
cash within three business days, at least 80% of which have a maturity date
of not later than the 91st day after the date of purchase. For purposes of
this subsection, investment grade refers to a security that is rated "Baa"
or better by Moody's or "BBB" or better by Standard & Poor's rating services
in accordance with the terms of the Uniform Agreement on Classification Of
Assets And Appraisal Of Securities by the Federal Financial Institutions Examination
Council;
(2) for a fund of securities, the value of the securities must
at all times equal or exceed 110% of the deposits held plus accrued and unpaid
interest; provided, however, that if the value of the securities is evaluated
daily and reduced to writing, the value of the securities must at all times
equal or exceed 100% of the deposits held plus accrued and unpaid interest.
In any event, the value of the securities must be evaluated at least monthly
to ensure that the deposits are fully secured; and
(3) for a certificate of deposit, be fully insured by the FDIC.
(c) Noninsurability by FDIC. If a trust company's trust deposits
are not insured by the FDIC, a trust company must provide each client related
to an account from which deposits may be accepted with a written notice conspicuously
stating that: "Your deposit with this trust company is not insured by the
FDIC." This notice must be provided to the client prior to any deposit activity
regarding the related account and must be signed by both the client and the
trust company. The notice must be in type that is boldfaced, capitalized,
underlined or otherwise set out from surrounding written material so as to
be conspicuous. Furthermore, all documents issued by a trust company evidencing
a deposit transaction, must contain a notice complying with the requirements
of this subsection.
(d) Records. A trust company shall maintain all 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.
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