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RULE §17.4 Bonding Requirements

Published: 2015

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(a) Compliance required. Pursuant to Finance Code, §183.112,
a trust company is required to maintain a bond for protection and indemnity
of clients, in reasonable amounts against dishonesty, fraud, defalcation,
forgery, theft, and other insurable losses with a corporate insurance or surety
company. Unless the banking commissioner waives the bonding requirement for
a particular individual, a bond is required for each director, manager, managing
participant, officer, and employee without regard to whether the person receives
salary or other compensation. In addition to complying with Finance Code, §183.112,
a trust company shall comply with this section.
(b) Types of bonds. Bonds must be obtained from a corporate
insurance or surety company authorized to do business in this state, or acceptable
to the banking commissioner and otherwise lawfully permitted to issue the
coverage against all losses arising from dishonesty, fraud, defalcation, forgery,
theft, errors and omission, and other similar insurable losses determined
by the banking commissioner to be reasonably appropriate. In lieu of individual
bonds, schedule or blanket bonds may be utilized, if in a form acceptable
to the banking commissioner, to provide coverage for all directors, managers,
managing participants, officers, and employees of a trust company. In addition,
a trust company through its board must demonstrate that it has conducted a
thorough review of the risks associated with the trust business conducted
to determine if additional specialized bond coverages should be obtained.
The board's review must be fully documented in its minutes.
(c) Holding company's comprehensive insurance coverage. In
lieu of obtaining individual or blanket bond coverage, a trust company which
is owned and controlled by a holding company, may utilize a holding company's
comprehensive insurance coverage to satisfy the requirements of Finance Code, §183.112,
and this section. Utilization by a trust company of its holding company's
comprehensive insurance coverage must be lawfully permitted under terms of
the comprehensive insurance policy and the insurance laws of this state. Evidence
of bond coverage for a trust company's directors, officers, and employees
must be provided to the banking commissioner.
(d) Records. A trust company shall retain all original bonds
to demonstrate compliance with Finance Code, §183.112, and this section,
which documents must be available at all times to the department for examination
and review.

Source Note: The provisions of this §17.4 adopted to be effective September 3, 1998, 23 TexReg 8832; amended to be effective July 11, 2002, 27 TexReg 5962