Proposed Rules Title 7

TITLE 7. BANKING AND SECURITIES

PART 1. FINANCE COMMISSION OF TEXAS

CHAPTER 9. RULES OF PROCEDURE FOR CONTESTED CASE HEARINGS, APPEALS, AND RULEMAKINGS

SUBCHAPTER B. CONTESTED CASE HEARINGS

7 TAC §9.28

The Finance Commission of Texas (commission) proposes amendments to 7 TAC §9.28, concerning Prefiled Testimony. The purpose of the proposed amendments is to allow for more flexibility in the admission of prefiled written testimony of an investigator who is not available to testify. The proposed amendments preserve the fundamental right to cross-examination in a due process hearing while allowing an exception for the admission of written agency investigation reports meeting the requirements of Rule 803, Texas Rules of Evidence when the investigator is not available to testify.

Larry Craddock, administrative law judge for the commission and for the Texas Department of Banking, Office of Consumer Credit Commissioner, and Department of Savings and Mortgage Lending (finance agencies) has determined that for each year of the first five years that the proposed amendments are in effect, there will be no fiscal implication for state or local government as a result of enforcing or administering the proposed amendments.

Mr. Craddock has also determined that, for each year of the first five years the proposed amendments are in effect, the public benefit anticipated as a result of the amendments will be more flexibility in admission of the written testimony of an investigator who is not available to testify. There is no anticipated cost to persons who are required to comply with the amendments as proposed. There will be no adverse economic effect on small or micro-businesses. There will be no effect on individuals required to comply with the amendments as proposed.

Comments concerning the proposed amendments should be submitted within 31 days of publication to Larry Craddock, Administrative Law Judge, Finance Commission of Texas, 2601 North Lamar Boulevard, Austin, Texas 78705-4294, or by email to larry.craddock@banking.state.tx.us. To be considered, a written comment must be received on or before the 31st day after the date the proposed amendments are published in the Texas Register. At the conclusion of the 31st day after the proposed amendments are published in the Texas Register, no further written comments will be considered or accepted by the commission.

The amendments are proposed pursuant to Government Code, §2001.004, which requires a state agency to adopt rules of practice stating the nature and requirements of all available formal and informal procedures. The amendments are also proposed under specific rulemaking authority contained in the substantive statutes administered by the finance agencies under the jurisdiction of the commission, including Finance Code, §§11.301, 11.302, 11.304, 11.306, 14.157, 31.003, 66.002, 96.002, 151.102, 154.051, 156.102, 181.003, 201.003, 342.551, 351.003 (Tax Refund Anticipation Loans, Acts 2007, 80th Leg., ch. 135), 351.007 (Property Tax Lenders, Acts 2007, 80th Leg., ch. 1220), 348.513, 371.006, 394.214, and 396.051, Health and Safety Code, §711.012(a) and §712.008, and Tax Code, §32.06.

The statutory provisions affected by the proposed amendments are contained in Finance Code, Chapters 11, 12, 13, 14, 31, 35, 61, 66, 91, 96, 121, 151, 154, 156, 181, 185, 201, 301, 341, 342, 348, 351 (Tax Refund Anticipation Loans, Acts 2007, 80th Leg., ch. 135), 351 (Property Tax Lenders, known as the "Property Tax Lender License Act," Acts 2007, 80th Leg., ch. 1220), 371, 394, 396, Health and Safety Code, Chapters 711 and 712, and Tax Code, §32.06 and §32.065.

§9.28.Prefiled Testimony.

On the judge's own motion [~~Sua sponte~~] or on motion of any party, the administrative law judge may omit oral presentation of the direct testimony of any witness and may allow prefiled written testimony to be presented in its place. The written testimony carries the same force and effect as though stated orally by the witness; provided that the witness must be present at the hearing at which such testimony is offered and adopt such testimony under oath, and must be made available for cross-examination. Written reports of agency investigations on fact issues, if offered into evidence in a hearing in which the facts covered by the report are directly at issue, will be treated as prefiled testimony and the investigator must be made available for cross-examination unless the investigator is not available to the agency or unless the report comes into evidence without objection. If the investigator is not available, the report shall be admissible under Rule 803, Texas Rules of Evidence if it meets the requirements for admission into evidence under that rule.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 8, 2008.

TRD-200804241

Leslie L. Pettijohn

Executive Director

Finance Commission of Texas

Earliest possible date of adoption: September 21, 2008

For further information, please call: (512) 936-7621

PART 2. TEXAS DEPARTMENT OF BANKING

CHAPTER 15. CORPORATE ACTIVITIES

SUBCHAPTER C. BANK OFFICES

7 TAC §15.44

The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), proposes new §15.44, concerning the Establishment and Operation of a Center of Monetary Education for Texans (COMET). The new rule is proposed to facilitate the establishment of bank offices in schools so that young people and other members of the school community may improve their financial literacy. A new rule is needed to minimize the administrative requirements for opening an office in a school.

Proposed new §15.44 allows state banks to participate in a financial education program at a school and, at the school's discretion, provide services including receiving deposits, paying withdrawals, and lending money. Under current law, a state bank cannot pay withdrawals or lend money from a school office unless it obtains approval from the department to open a branch.

The Legislature has recognized the need for Texas residents to become more financially literate. In 2005, it passed House Bill (HB) 492, which requires instruction in personal financial literacy in one or more courses for high school graduation. In 2007, the Legislature passed HB 2007, which requires the department to seek to improve the financial literacy and education of Texans and to encourage access to mainstream financial products by persons who have not previously participated in the conventional finance system (the unbanked). Two of the methods authorized by the Legislature are (1) to encourage and aid banks in the development and promotion of financial literacy and education programs and community outreach, and (2) to promote replication of best practices and exemplary programs that foster financial literacy and education.

State banks currently face administrative hurdles in opening school offices that credit unions and national banks do not face. Credit unions are free to open offices in school without prior regulatory approval. The Office of the Comptroller of the Currency (OCC), which regulates national banks, passed a rule in 2001 which allows a national bank to open an office in a school without the office becoming a branch if the principal purpose for the office is educational. See 12 CFR §7.1021. The Federal Deposit Insurance Corporation (FDIC), which normally requires state banks to file branch applications, passed a very similar rule effective June 23, 2008. Now that the branch application requirement has been removed at the federal level for school financial education programs, proposed new §15.44 will make the department's process for establishment of bank offices in schools consistent with federal rules.

The department receives inquiries from banks desiring to offer financial education programs in schools that would include the provision of banking services. Because of current Texas regulations, the banks have been able to offer only limited services without applying for a branch. Under proposed new §15.44 a school and bank could create a more extensive program that would provide greater financial education without the creation of a bank branch. For example, in a high school, a bank employee could be on site managing and overseeing student tellers. These students would be trained in bank operations. Services could include opening deposit accounts, paying withdrawals, or making loans. The department expects that such services would be limited in nature; available only to students, parents, and faculty of the sponsoring school; and accessible on a part-time basis or designated school days. A program providing these services can train the students in personal financial management, which contributes to their financial stability and that of their communities. Such a program could further the legislative goal of community outreach by providing services to the unbanked who have a relationship with the school.

New §15.44 requires any state bank that plans to open a COMET to give the department 30 days written notice before operations commence. The new rule also mandates that the services are to be provided at the discretion of the school. The program must be conducted consistently with safe and sound banking practices and applicable law.

Robert Bacon, Deputy Commissioner, Texas Department of Banking, has determined that for the first five-year period the proposed rule is in effect, there will be no fiscal implications for state government or for local government as a result of enforcing or administering the rule.

Mr. Bacon has also determined that, for each year of the first five years the rule as proposed is in effect, the public benefit anticipated as a result of adopting the proposed rule is that more financial education programs will be established which include the provision of bank services and which include training of students in bank operations. These programs will enhance the financial literacy of students and parents who may be currently unbanked. The schools will benefit by having more bank partners who will help the schools fulfill their legislative mandate of providing a financial literacy curriculum. The banks will benefit by establishing relationships with students that may grow into long-lasting relationships. The state as a whole will benefit by having a more financially literate population.

For each year of the first five years that the rule will be in effect, there will be no economic costs to persons required to comply with the rule as proposed.

There will be no adverse economic effect on small businesses or micro-businesses. There will be no difference in the cost of compliance for small businesses as compared to large businesses.

To be considered, comments on the proposed new section must be submitted no later than 5:00 p.m. on the 31st day after publication of this notice. Comments should be addressed to General Counsel, Texas Department of Banking, Legal Division, 2601 North Lamar Boulevard, Suite 300, Austin, Texas 78705-4294. Comments may also be submitted by email to legal@banking.state.tx.us.

New §15.44 is proposed under Finance Code §12.1085, which requires the department to improve the financial literacy and education of persons in this state and to encourage access to mainstream financial products and services by the unbanked; under Finance Code §31.003(a), which provides that the finance commission may adopt rules to accomplish the purposes of this subtitle and Chapters 11, 12, and 13; under Finance Code §31.002(a)(8)(H), which excepts from the definition of "branch" another office or facility as provided by a rule adopted under Subtitle A of Title 3 of the Texas Finance Code; and, under Finance Code §32.201(b), which provides that the finance commission may adopt rules further defining functions of a state bank that are not required to be conducted at an approved location.

Finance Code §§12.1085, 31.002(a)(8), and 32.203 are affected by the proposed new section.

§15.44.Establishment and Operation of a Center of Monetary Education for Texans.

(a) "Center Of Monetary Education for Texans" (COMET) means a financial education program in which a state bank participates and provides services such as receiving deposits, paying withdrawals, or lending money.

(b) A COMET is not a branch within the meaning of Finance Code §31.002(a)(8), nor is it subject to licensing, registration, or prior regulatory approval, so long as it meets the following conditions:

(1) The service or services are provided on school premises, or a facility used by the school;

(2) The service or services are provided at the discretion of the school;

(3) The principal purpose of each program is financial education. For example, the principal purpose of a program would be considered to be financial education if the program is designed to teach students the principles of personal financial management, banking operations, or the benefits of saving for the future, and is not designed for the purpose of profit-making; and

(4) The program is conducted in a manner that is consistent with safe and sound banking practices and complies with applicable law.

(c) A state bank shall give the banking commissioner 30 days written notice before it begins providing services at a COMET, except that the banking commissioner may waive or shorten the notice period if the banking commissioner does not have a significant supervisory or regulatory concern regarding the bank or its planned COMET. The written notice must include the name of the school and the physical address of the planned COMET, a list of the specific activities to be performed at the planned COMET, the anticipated date for the opening of the COMET, and other information which the banking commissioner may reasonably request.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 8, 2008.

TRD-200804216

A. Kaylene Ray

General Counsel

Texas Department of Banking

Proposed date of adoption: October 17, 2008

For further information, please call: (512) 475-1300

PART 4. TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE LENDING

CHAPTER 75. APPLICATIONS

The Finance Commission of Texas (the "Commission") proposes amendments to Subchapter A, §75.1, concerning the application for permission to organize a state savings bank, and §75.3, concerning publication of notice of charter application; Subchapter C, §75.32, concerning types of additional offices, §75.33, concerning branch office applications, and §75.41, concerning offices and remote service units in other states or territories; and, Subchapter E, §75.121, concerning definitions, in conjunction with the Commission's review of Chapter 75. The Commission is proposing the repeal of §75.37, which is published elsewhere in this issue of the Texas Register.

In general, the purpose of the amendments is to conform the rules to the Department's current practice, to eliminate obsolete provisions, and to add clarification. Section 75.1 has been revised to remove obsolete language and add clarification. Section 75.3 has been revised to provide clarification. Sections 75.32 and 75.33 add language to clarify a current practice. Section 75.41 has been revised to provide clarification and also to delete proposed repealed language. Section 75.121 has been revised to correct the Department's name.

Douglas B. Foster, Savings and Mortgage Lending Commissioner, has determined that for the first five-year period the rules are in effect, there will be no fiscal implications for state or local government as a result of administering the rules.

Commissioner Foster also has determined that for each year of the first five years the rules are in effect, the public benefit anticipated as a result of the proposed amendments will be that the Department's rules will conform to current practice, will be more easily understood by savings banks required to comply with the rules, and will be more easily enforced. There will be no effect on small or micro businesses. There is no anticipated economic cost to persons who are required to comply with the proposed amendments.

Comments on the proposed amendments may be submitted in writing to Caroline C. Jones, Chief Thrift Attorney, Texas Department of Savings and Mortgage Lending, 2601 North Lamar, Suite 201, Austin, Texas 78705, or by email to cjones@sml.state.tx.us.

SUBCHAPTER A. CHARTER APPLICATIONS

7 TAC §75.1, §75.3

The amendments are proposed under Texas Finance Code §11.302, which authorizes the Commission to adopt rules to enforce Title 3 of the Texas Finance Code.

The statutory provisions affected by the proposed amendments are contained in Texas Finance Code, Chapter 92.

§75.1.Application for Permission to Organize a State Saving Bank.

(a) (No change.)

(b) The commissioner shall furnish approved forms of application and other information to aid in the filing of the application. The form is available from the department at 2601 North Lamar Boulevard, Suite 201, Austin, Texas 78705 and from the State Savings Bank Information section of the Department's website at www.sml.state.tx.us.

(c) No application to incorporate a savings bank shall be approved unless the application and evidence produced at a hearing satisfy the commissioner that the proposed savings bank has received subscriptions for capital stock and paid-in surplus in the case of a capital stock savings bank, or pledges for savings liability and expense fund in the case of a mutual savings bank, in the minimum amount of $3 million [~~with at least 80% of the total subscriptions being allocated to capital stock or the savings liability and expense account, as applicable~~]. No savings bank with an approved charter shall open or do business as a savings bank until the commissioner certifies that he has received proof satisfactory to him that the amounts of capital stock and paid-in surplus, or the savings liability and expense fund, as set forth in this section, have been received by the savings bank in cash, free of encumbrance.

(d) (No change.)

§75.3.Publication of Notice of Charter Application.

At least 20 days before the date of the hearing, the [~~The~~ ] proposed incorporators shall publish a notice, approved by the Commissioner, [~~at least 20 days before the date of the hearing~~] in a newspaper printed in the English language , and in [of ] general circulation in the county where the proposed savings bank will have its principal office [ ~~a notice approved by the commissioner~~].

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 8, 2008.

TRD-200804165

Douglas B. Foster

Commissioner

Texas Department of Savings and Mortgage Lending

Earliest possible date of adoption: September 21, 2008

For further information, please call: (512) 475-1350

SUBCHAPTER C. ADDITIONAL OFFICES

7 TAC §§75.32, 75.33, 75.41

The amendments are proposed under Texas Finance Code §11.302, which authorizes the Commission to adopt rules to enforce Title 3 of the Texas Finance Code.

The statutory provisions affected by the proposed amendments are contained in Texas Finance Code, Chapter 92.

§75.32.Types of Additional Offices.

Subject to the provisions of §§75.31 - 75.41 of this title (relating to Applications), the following types of additional offices may be established and maintained by a savings bank:

(1) (No change.)

(2) loan production offices at which the savings bank, through its regularly employed personnel, may receive and process applications for loans and contracts and manage or sell real estate owned by the institution but at which no other business of the savings bank is transacted [~~carried on~~];

(3) (No change.)

(4) administrative offices at which the savings bank, through its regularly employed personnel, may transact administrative functions of the institution. Such office may be located separate and apart from the location of any other facility of the savings bank. No savings deposits or loan applications may be accepted at an administrative office; and,[.]

(5) courier/messenger service to transport items relevant to the bank's transactions with its customers, including courier services between financial institutions.

§75.33.Branch Office Applications.

(a) - (d) (No change.)

(e) A branch office application is also required if a state savings bank would like to establish and operate a courier/messenger service pursuant to §75.32(5) of this title (relating to Types of Additional Offices).

§75.41.Offices[ ~~and Remote Service Units~~ ] in Other States or Territories.

To the extent permitted by the laws of the state or territory in question, and subject to this chapter, a savings bank may establish branch offices and[,] loan production offices[ ~~, and remote service units~~] in any state or territory of the United States. Each application for permission to establish such a branch office or[,] loan production office[ ~~, or remote service unit~~ ] shall comply with the applicable requirements of this chapter, and shall include a certified copy of an order from the appropriate state or territorial regulatory authority approving the office or unit, or other evidence satisfactory to the commissioner that all state or territorial regulatory requirements have [~~had~~ ] been satisfied. Each such application shall be set for hearing, if applicable, notice given, hearing held, if applicable, and decision reached in the same manner and within the time provided in this chapter for similar applications for offices [~~or units~~] in this state. The commissioner may not approve such an application unless he shall have affirmatively found from the data furnished with the application, the evidence adduced at the hearing, if applicable, and his official records that all requirements of this chapter applicable to the office [~~or unit~~ ] have been met, and that all applicable requirements of the laws of the state or territory in question have been met.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 11, 2008.

TRD-200804257

Douglas B. Foster

Commissioner

Texas Department of Savings and Mortgage Lending

Earliest possible date of adoption: September 21, 2008

For further information, please call: (512) 475-1350

SUBCHAPTER E. CHANGE OF CONTROL

7 TAC §75.121

The amendments are proposed under Texas Finance Code §11.302, which authorizes the Commission to adopt rules to enforce Title 3 of the Texas Finance Code.

The statutory provisions affected by the proposed amendments are contained in Texas Finance Code, Chapter 92.

§75.121.Definitions.

The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise.

(1) - (2) (No change.)

(3) Commissioner--The Texas Savings and Mortgage Lending Commissioner [~~savings and loan commissioner~~].

(4) - (8) (No change.)

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 11, 2008.

TRD-200804264

Douglas B. Foster

Commissioner

Texas Department of Savings and Mortgage Lending

Earliest possible date of adoption: September 21, 2008

For further information, please call: (512) 475-1350

SUBCHAPTER C. ADDITIONAL OFFICES

7 TAC §75.37

(Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Department of Savings and Mortgage Lending or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)

The Finance Commission of Texas (the "Commission") proposes to repeal Subchapter C, §75.37, concerning remote service units, in conjunction with the Commission's review of Chapter 75. The Commission is proposing revisions to §§75.1, 75.3, 75.32, 75.33, 75.41, and 75.121, which are published elsewhere in this issue of the Texas Register.

The purpose of the repeal of this rule is to eliminate an obsolete procedure that is no longer used by any other similar banking regulatory agency.

Douglas B. Foster, Savings and Mortgage Lending Commissioner, has determined that for the first five-year period the repealed rule is in effect, there will be no fiscal implications for state or local government as a result of administering the rules.

Commissioner Foster also has determined that for each year of the first five years the repealed rule is in effect, the public benefit anticipated as a result of the proposed amendments will be that the Department's rules will conform to current practice, will be more easily understood by savings banks required to comply with the rules, and will be more easily enforced. There will be no effect on small or micro businesses. There is no anticipated economic cost to persons who are required to comply with the proposed repeal.

Comments on the proposed repeal may be submitted in writing to Caroline C. Jones, Chief Thrift Attorney, Texas Department of Savings and Mortgage Lending, 2601 North Lamar, Suite 201, Austin, Texas 78705, or by email to cjones@sml.state.tx.us.

The repeal is proposed under Texas Finance Code §11.302, which authorizes the Commission to adopt rules to enforce Title 3 of the Texas Finance Code.

The statutory provisions affected by the proposed repealed rule are contained in Texas Finance Code, Chapter 92.

§75.37.Remote Service Units.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 8, 2008.

TRD-200804169

Douglas B. Foster

Commissioner

Texas Department of Savings and Mortgage Lending

Earliest possible date of adoption: September 21, 2008

For further information, please call: (512) 475-1350

CHAPTER 77. LOANS, INVESTMENTS, SAVINGS, AND DEPOSITS

The Finance Commission of Texas (the "Commission") proposes amendments to Subchapter A, §77.1, concerning loans authorized, §77.31, concerning loan policies and documentation, §77.72, concerning liquidity, §77.74, concerning local service area investment requirement, and §77.94, concerning subsidiary operations; and Subchapter B, §77.115, concerning user safety at unmanned teller machines, in conjunction with the Commission's review of Chapter 77. The Commission is proposing the repeal of §77.32, 77.101 - 77.104 and 77.106 - 77.113 which is published elsewhere in this issue of the Texas Register.

In general, the purpose of the amendments is to conform the rules to the Department's current practice, to eliminate obsolete provisions, and to add clarification. Sections 77.1, 77.31, 77.72, 77.74, and 77.94 have been revised to clarify current practice. Section 77.115 has been revised to correct the Department's name.

SUBCHAPTER A. AUTHORIZED LOANS AND INVESTMENTS

7 TAC §§77.1, 77.31, 77.72, 77.74, 77.94

The amendments are proposed under Texas Finance Code §11.302, which authorizes the Commission to adopt rules to enforce Title 3 of the Texas Finance Code.

The statutory provisions affected by the proposed amendments are contained in Texas Finance Code, Chapters 94 and 95.

§77.1.Loans Authorized.

(a) A savings bank may originate, invest in, sell, purchase, service, participate, or otherwise deal in (including brokerage or warehousing) the following types of loans or participations, subject to the limitations of this subchapter:

(1) - (9) (No change.)

(10) unsecured loans, in accordance with §77.11 of this title (relating to Unsecured Loans); [~~and~~]

(11) local consumer installment loans which are made for personal, family, or household purposes, including loans fully secured by savings accounts owned or otherwise pledged for or by the borrower; and

(12) [~~(11)~~] loans which are insured or guaranteed by the United States or any instrumentality thereof.

(b) (No change.)

§77.31.Loan Policies and Documentation.

(a) Each savings bank shall establish written policies approved by its board of directors establishing prudent credit underwriting and loan documentation standards. Such standards must be designed to identify potential safety and soundness concerns and ensure that action is taken to address those concerns before they pose a risk to the association's capital. Credit underwriting standards should consider the nature of the markets in which loans will be made; provide for consideration, prior to credit commitment, of the borrower's overall financial condition and resources, the financial stability of any guarantor, the nature and value of underlying collateral, and the borrower's character and willingness to repay as agreed; establish a system of independent, ongoing credit review and appropriate communication to senior management and the board of directors; take adequate account of concentration of credit risk; and are appropriate to the size of the savings bank and the scope of its lending activities. Loan documentation standards should be established and maintained to enable the savings bank to make informed lending decisions and assess risk, as necessary, on an ongoing basis; identify the purpose of the loan and source of repayment, and assess the ability of the borrower to repay the indebtedness in a timely manner; ensure that any claim against a borrower is legally enforceable; demonstrate appropriate administration and monitoring of a loan; and consider the size and complexity of a loan. The following documents are generally appropriate and can be used as a guideline for prudent lending; however, unless such documents are specifically required by other state and federal statutes or regulations, there may be alternative documents equally suitable in satisfying the safety and soundness intent of this section which the savings bank may substitute and still address the safety and soundness concern:

(1) an application for the loan, signed and dated by the borrower or his agent (and if the borrower is a corporation, a board of directors' resolution authorizing the loan), which discloses the purpose for which the loan is sought, the identity of the security property, and the source of funds which will be used to repay the loan;

(2) - (14) (No change.)

(b) - (h) (No change.)

§77.72.Liquidity.

A savings bank shall maintain liquidity in an amount not less than 10% of an amount equal to its average daily deposits for the most recently completed calendar quarter in cash or [~~and~~] readily marketable investments. The term "cash" shall include unpledged demand accounts in other federally insured depository institutions, a Federal Home Loan or Federal Reserve Bank. Whether a security is readily marketable must be determined on an individual security basis; however, to be eligible for inclusion in "readily marketable investments" category:

(1) - (4) (No change.)

§77.74.Local Service Area Investment Requirement.

(a) A savings bank shall maintain an amount equal to at least 15% of its local service area deposits invested in the following categories of assets and investments:

(1) - (3) (No change.)

(4) mortgage-backed securities secured by loans from within the savings bank's local service area; [~~and~~]

(5) loans for community reinvestment purposes;and[.]

(6) local consumer installment loans.

(b) - (d) (No change.)

§77.94.Subsidiary Operations.

(a) The savings bank shall obtain prior written approval of the commissioner for the establishment and location of the main office, and any branch office, agency office, or any other office or facility of the corporation, and for any change of name of the subsidiary.

(b) - (e) (No change.)

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 8, 2008.

TRD-200804166

Douglas B. Foster

Commissioner

Texas Department of Savings and Mortgage Lending

Earliest possible date of adoption: September 21, 2008

For further information, please call: (512) 475-1350

SUBCHAPTER B. SAVINGS AND DEPOSITS

7 TAC §77.115

The amendments are proposed under Texas Finance Code §11.302, which authorizes the Commission to adopt rules to enforce Title 3 of the Texas Finance Code.

The statutory provisions affected by the proposed amendments are contained in Texas Finance Code, Chapters 94 and 95.

§77.115.User Safety at Unmanned Teller Machines.

(a) Definitions. Words and terms used in this section [ ~~undesignated head~~] that are defined in the ATM User Safety Act, §1, have the same meanings as defined in the ATM User Safety Act. The following words and terms when used in this section [~~undesignated head~~] shall have the following meanings, unless the context clearly indicates otherwise.

(1) - (4) (No change.)

(5) Department--The Texas [~~Savingsand Loan~~ ] Department of Savings and Mortgage Lending.

(b) - (i) (No change.)

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 11, 2008.

TRD-200804263

Douglas B. Foster

Commissioner

Texas Department of Savings and Mortgage Lending

Earliest possible date of adoption: September 21, 2008

For further information, please call: (512) 475-1350

SUBCHAPTER A. AUTHORIZED LOANS AND INVESTMENTS

7 TAC §77.32

The Finance Commission of Texas (the "Commission") proposes to repeal Subchapter A, §77.32, concerning restrictions on loan procurement fees, in conjunction with the Commission's review of Chapter 77. The Commission is proposing revisions to §§77.1, 77.31, 77.72, 77.74, 77.94, and 77.115, and the repeal of §§77.101 - 77.104 and 77.106 - 77.113, which are published elsewhere in this issue of the Texas Register.

The purpose of the repeal of this rule is to eliminate an obsolete requirement.

The repeal is proposed under Texas Finance Code §11.302, which authorizes the Commission to adopt rules to enforce Title 3 of the Texas Finance Code.

The statutory provisions affected by the proposed repealed rule are contained in Texas Finance Code, Chapter 94.

§77.32.Restriction on Loan Procurement Fees.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 8, 2008.

TRD-200804170

Douglas B. Foster

Commissioner

Texas Department of Savings and Mortgage Lending

Earliest possible date of adoption: September 21, 2008

For further information, please call: (512) 475-1350

SUBCHAPTER B. SAVINGS AND DEPOSITS

7 TAC §§77.101 - 77.104, 77.106 - 77.113

(Editor's note: The text of the following sections proposed for repeal will not be published. The sections may be examined in the offices of the Texas Department of Savings and Mortgage Lending or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)

The Finance Commission of Texas (the "Commission") proposes to repeal Subchapter B, §77.101, concerning the distribution or payment of dividends or interest, §77.102, concerning account balance to which dividends or interest are applied, §77.103, concerning the method of computing dividends, §77.104, concerning advertisements or public representations of account earnings, §77.106, concerning provisions for distribution of earnings on other than regular accounts, §77.107, concerning notice prior to withdrawal, §77.108, concerning deposit accounts, §77.109, concerning NOW accounts, §77.110, concerning checking accounts, §77.111, concerning approval of the commissioner, §77.112, concerning noninterest-bearing deposit accounts, and §77.113, concerning overdraft protection--credit and debit cards, in conjunction with the Commission's review of Chapter 77. The Commission is proposing revisions to §§77.1, 77.31, 77.72, 77.74, 77.94, and 77.115, which are published elsewhere in this issue of the Texas Register.

The purpose of the repeal of these rules is to eliminate obsolete requirements.

Commissioner Foster also has determined that for each year of the first five years the repealed rule is in effect, the public benefit anticipated as a result of the proposed amendments will be that the department's rules will conform to current practice, will be more easily understood by savings banks required to comply with the rules, and will be more easily enforced. There will be no effect on small or micro businesses. There is no anticipated economic cost to persons who are required to comply with the proposed repeals.

The repeal is proposed under Texas Finance Code §11.302, which authorizes the Commission to adopt rules to enforce Title 3 of the Texas Finance Code.

The statutory provisions affected by the proposed repealed rule are contained in Texas Finance Code, Chapter 95.

§77.101.Distribution or Payment of Dividends or Interest.

§77.102.Account Balance to Which Dividends or Interest Are Applied.

§77.103.Method of Computing Dividends.

§77.104.Advertisements or Public Representations of Account Earnings.

§77.106.Provisions for Distribution of Earnings on Other Than Regular Accounts.

§77.107.Notice Prior to Withdrawal.

§77.108.Deposit Accounts.

§77.109.NOW Accounts.

§77.110.Checking Accounts.

§77.111.Approval of the Commissioner.

§77.112.Noninterest-Bearing Deposit Accounts.

§77.113.Overdraft Protection--Credit and Debit Cards.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 8, 2008.

TRD-200804171

Douglas B. Foster

Commissioner

Texas Department of Savings and Mortgage Lending

Earliest possible date of adoption: September 21, 2008

For further information, please call: (512) 475-1350

CHAPTER 79. MISCELLANEOUS

The Finance Commission of Texas (the "Commission") proposes amendments to Subchapter A, §79.4, concerning financial statements, annual reports, and audits, §79.7, concerning examinations; Subchapter E, §79.71, concerning hearings officer; and Subchapter H, §79.122, concerning consumer complaint procedures, in conjunction with the Commission's review of Chapter 79.

In general, the purpose of the amendments is to conform the rules to the Department's current practice, to eliminate obsolete provisions, and to add clarification. Section 79.4 has been revised to remove the option of not having independent audits and to correct the numbering scheme. Section 79.7 has been revised for clarification. Sections 79.71 and 79.122 have been revised to correct the Department's name and contact information.

SUBCHAPTER A. BOOKS, RECORDS, ACCOUNTING PRACTICES, FINANCIAL STATEMENTS AND RESERVES

7 TAC §79.4, §79.7

The amendments are proposed under Texas Finance Code §11.302, which authorizes the Commission to adopt rules to enforce Title 3 of the Texas Finance Code.

The statutory provisions affected by the proposed amendments are contained in Texas Finance Code, Chapters 11, 13, and 96.

§79.4.Financial Statements; Annual Reports; Audits.

(a) Before March 1 [~~January 31~~] of each year, each savings bank shall submit a statement of condition (balance sheet) as of the last business day of December of the preceding year to the commissioner, upon a form to be prescribed and furnished by the commissioner.

(b) For safety and soundness purposes, within [~~Within~~ ] 90 days of its fiscal year end, [each savings bank shall submit an annual written report of its affairs and operations to the commissioner. The report shall include a complete statement of its financial condition, including a balance sheet as of the last day of its fiscal year, and statements of income and expense, cash flows, and changes in its capital accounts for the 12 months ending on the last business day of its previous fiscal year. The report should be prepared on a comparative basis with the most recently completed prior fiscal year in accordance with generally accepted accounting principles including such notes to the financial statements as are necessary to make such statements not misleading. Every such report shall be signed by the president, and chief financial officer and sworn by them under oath to be complete and correct to the best of their knowledge and belief. Every savings bank shall also make such other reports as the commissioner may from time to time require, which reports shall be in such form and filed on such dates as he may prescribe and shall, if required by him, be signed in the same manner as the annual report.]

[~~(c)~~] [~~For safety and soundness purposes,~~] each savings bank is required to have an independent audit of its [~~the~~] financial statements. [ ~~required by subsection (b) of this section if the institution:~~]

~~[(1) received a composite rating of 3, 4 or 5 on the Uniform Financial Institutions' Rating System (CAMEL) as of its most recent report of examination; or]~~

[~~(2)~~] [had total assets at the beginning of its fiscal year of over $500 million. The commissioner may waive the independent audit requirement for an institution with a composite 3, 4 or 5 CAMEL rating if the commissioner determines that the audit procedures would not address the safety and soundness issues that caused the examination rating.] The audit is to be performed in accordance with generally accepted auditing standards and the provisions of 12 Code of Regulations Part 363 Federal Deposit Insurance Corporation Regulations regarding annual independent audits and reporting requirements are incorporated herein, with the exception of any matters specifically addressed by the Act or its related rules.

(c) A copy of the independent audit and all correspondence reasonably related to the audit shall be provided to the Commissioner upon completion.

§79.7.Examinations.

(a) (No change.)

(b) An examination under this [~~the~~] section may be performed jointly or in conjunction with an examination by the Federal Deposit Insurance Corporation or any other federal depository institutions regulatory agency having jurisdiction over a savings bank, and/or the commissioner may accept an examination made by such banking agency in lieu of an examination pursuant to this section.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 8, 2008.

TRD-200804167

Douglas B. Foster

Commissioner

Texas Department of Savings and Mortgage Lending

Earliest possible date of adoption: September 21, 2008

For further information, please call: (512) 475-1350

SUBCHAPTER E. HEARINGS

7 TAC §79.71

The amendments are proposed under Texas Finance Code §11.302, which authorizes the Commission to adopt rules to enforce Title 3 of the Texas Finance Code.

The statutory provisions affected by the proposed amendments are contained in Texas Finance Code, Chapters 11, 13, and 96.

§79.71.Hearings Officer.

The Texas Banking Act, §1.011(b), House Bill 1543, Acts, 74th Legislature, provides that the Finance Commission may employ a hearings [~~hearing~~] officer, who for purposes of Texas Civil Statutes, Government Code, §2003.21, is an employee of the Texas [~~Savings and Loan~~] Department of Savings and Mortgage Lending, Department of Banking and the Office of the Consumer Credit Commissioner. The Finance Commission hearings [~~hearing~~ ] officer shall conduct hearings under provisions of the Act.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 11, 2008.

TRD-200804262

Douglas B. Foster

Commissioner

Texas Department of Savings and Mortgage Lending

Earliest possible date of adoption: September 21, 2008

For further information, please call: (512) 475-1350

SUBCHAPTER H. CONSUMER COMPLAINT PROCEDURES

7 TAC §79.122

The amendments are proposed under Texas Finance Code §11.302, which authorizes the Commission to adopt rules to enforce Title 3 of the Texas Finance Code.

The statutory provisions affected by the proposed amendments are contained in Texas Finance Code, Chapters 11, 13, and 96.

§79.122.Consumer Complaint Procedures.

(a) (No change.)

(b) Notice of how to file complaints

(1) In [n] order to let its consumers know how to file complaints, state savings banks must use the following notice: The (name of state savings bank) is chartered under the laws of the State of Texas and by state law is subject to regulatory oversight by the Texas [~~Savings and Loan~~] Department of Savings and Mortgage Lending . Any consumer wishing to file a complaint against the (name of state savings bank) should contact the Texas [~~Savings and Loan~~] Department of Savings and Mortgage Lending through one of the means indicated below: In Person or by U.S. Mail: 2601 North Lamar Boulevard, Suite 201, Austin, Texas 78705-4294, Telephone No.: (877) 276-5550, Fax No.: (512) 475- 1505 [~~1360~~], E-mail: smlinfo@sml.state.tx.us [~~TSLD@tsld.state.tx.us~~].

(2) (No change.)

(3) Regardless of whether a state savings bank is required by any state or federal law to give privacy notices, each state savings bank must take appropriate steps to let its consumers know how to file complaints by giving them the required notice in compliance with subsection (b) [~~paragraph~~] (1) of this section [~~subsection~~].

(4) The following measures are deemed to be appropriate steps to give the required notice:

(A) In each area where a state savings bank conducts business on a face-to-face basis, the required notice, in the form specified in subsection (b) [~~paragraph~~] (1) of this section [~~subsection~~], must be conspicuously posted. A notice is deemed to be conspicuously posted if a customer with 20/20 vision can read it from the place where he or she would typically conduct business or if it is included on a bulletin board, in plain view, on which all required notices to the general public (such as equal housing posters, licenses, Community Reinvestment Act notices, etc.) are posted.

(B) - (C) (No change.)

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 11, 2008.

TRD-200804261

Douglas B. Foster

Commissioner

Texas Department of Savings and Mortgage Lending

Earliest possible date of adoption: September 21, 2008

For further information, please call: (512) 475-1350

CHAPTER 80. MORTGAGE BROKER AND LOAN OFFICER LICENSING

The Finance Commission of Texas (the "Commission") proposes amendments to Subchapter A, §80.2, concerning definitions, §80.3, concerning licensing - general, §80.5, concerning renewals, and §80.6, concerning sponsorship and termination thereof; Subchapter B, §80.10, concerning prohibition on false, misleading, or deceptive practices and improper dealings; Subchapter C, §80.12, concerning display of license verification and license record changes, and §80.13, concerning books and records; Subchapter G, §80.18, concerning enforceability of liens; and, Subchapter K, §80.23, concerning annual reports, in conjunction with the Commission's review of Chapter 80.

In general, the purpose of the amendments is to conform the rules to the Department's current practice, to eliminate obsolete provisions, and to add clarification. Sections 80.2 and 80.3 have been revised to add clarification. Section 80.5 has been revised to remove obsolete language. Section 80.6 adds language to clarify a current practice. Section 80.10 has been revised to improve consumer awareness and clarify procedures. Sections 80.12 and 80.13 have been revised to clarify procedures. Section 80.18 has been revised to delete a form that does not pertain to the Section, and that already appropriately exists in Section 80.9. Section 80.23 has been revised for clarification.

Commissioner Foster also has determined that for each year of the first five years the rules are in effect, the public benefit anticipated as a result of the proposed amendments will be that the Department's rules will conform to current practice, will be more easily understood by licensees required to comply with the rules, and will be more easily enforced. There will be no effect on small or micro businesses. There is no anticipated economic cost to persons who are required to comply with the proposed amendments.

Comments on the proposed amendments may be submitted in writing to Jane Black, General Counsel, Texas Department of Savings and Mortgage Lending, 2601 North Lamar, Suite 201, Austin, Texas 78705, or by email to jblack@sml.state.tx.us.

SUBCHAPTER A. LICENSING

7 TAC §§80.2, 80.3, 80.5, 80.6

The amendments are proposed under Texas Finance Code §11.306, which authorizes the Commission to adopt rules to enforce Title 3 of the Texas Finance Code.

The statutory provisions affected by the proposed amendments are contained in Texas Finance Code, Chapter 156.

§80.2.Definitions.

As used in this Chapter, the following terms have the meanings indicated:

(1) - (12) (No change.)

(13) "Criminal Offense" means any violation of any state or federal criminal statute which:

(A) - (B) (No change.)

(D) - (H) (No change.)

§80.3.Licensing - General.

(a) - (b) (No change.)

(1) New loan officer applicants. A loan officer applicant may be issued an inactive license if the applicant completes the promulgated application form and complies with all requirements of the license with the exception of having an active mortgage broker sponsor. The license can be converted to an active license within the license period following the submission and processing of information regarding an active mortgage broker sponsor. If the inactive license is not renewed within the statutory timeframes, the license will expire.

(2) Renewing loan officer licensees. A loan officer may renew his/her license while inactive and may either provide sponsorship information to convert the license to an active license or may continue to be licensed as "inactive".

(3) Mortgage broker licensees. A mortgage broker may place his/her license inactive at any time during the license period. The license will remain inactive until the mortgage broker notifies the department in writing to convert the license to an active license or until the license expires. While in an inactive status, a mortgage broker must continue to meet the statutory requirements of the license including, but not limited to, meeting financial requirements, filing of annual reports as required by §80.23(a) of this title (relating to Annual Reports), and notifying the department of the location of his/her books and records as required by §80.13 of this title (relating to Books and Records).

(d) [~~(c)~~] The fees for the application or for the renewal of a mortgage broker license or loan officer license shall be established by the Commissioner. The amount of the fees may be modified upon not less than 30 days advance notice posted on the Department's website. Fees are nonrefundable and nontransferable.

§80.5.Renewals.

(a) - (b) (No change.)

[(c) THIS SUBSECTION APPLIES ONLY TO ENTITY LICENSES ISSUED UNDER §80.4(c) THAT EXPIRE DURING THE PERIOD OF DECEMBER 1, 2009 THROUGH MARCH 31, 2010. Pursuant to §156.208(f) of the Act, these licenses will be assigned a different expiration date in order to spread more evenly license renewals throughout the year. The initial renewal for an entity mortgage broker license to which this subsection applies will be for a term which expires on the expiration date of the license of the mortgage broker who is the designated representative of the entity on the date of renewal. For instance, if the entity license expires on December 15, 2009, and the license of the designated representative expires on May 15, 2010, the initial renewal license shall be for a period beginning on the renewal date and expiring on May 15, 2010. If the license of the designated representative expires during the period covered in this subsection, the licenses may be renewed simultaneously and the renewal will be for a full two-year term. The renewal fee for a renewal term of less than two years shall be prorated by multiplying the renewal fee times a fraction, the numerator of which shall be the number of months during the renewal term (rounded to the next highest number of months with respect to a partial month), and the denominator shall be 24. If the prorated amount calculated in this subsection is other than a whole dollar amount, the renewal fee shall be rounded to the closest whole dollar.]

§80.6.Sponsorship and Termination Thereof.

(a) An applicant for a Loan Officer license must be sponsored by a licensed Mortgage Broker otherwise the license will be issued as inactive. A Loan Officer may not be sponsored by or act for more than one Mortgage Broker at any given time. The Mortgage Broker must acknowledge and accept the responsibilities set forth in the Act, including responsibility for the actions of the Loan Officer, by executing and providing to the Commissioner a Loan Officer Sponsor Certification form.

(b) If a Loan Officer's license is approved asactive , it will be issued to and must be held by the Sponsoring Mortgage Broker and displayed at the office of the sponsoring Mortgage Broker as specified on the Mortgage Broker's license.

(c) If sponsorship of a Loan Officer is terminated by the sponsoring Mortgage Broker, the Mortgage Broker shall immediately notify the Commissioner that the sponsorship has terminated. If sponsorship is terminated by the Loan Officer, the Loan Officer shall immediately notify the Commissioner that the sponsorship has ended. The license will become inactive. [terminates, the sponsoring Mortgage Broker and the Loan Officer shall immediately notify the Commissioner, and the sponsoring Mortgage Broker shall return the Loan Officer's license to the Commissioner or the Commissioner's Designee, whereupon that license will become inactive.] Sponsorship of a Loan Officer remains in effect until the Commissioner has been notified in writing of the termination of sponsorship. Prior to its scheduled expiration, an inactive Loan Officer's license may be reactivated upon designation of a new sponsoring Mortgage Broker, as evidenced by execution and providing to the Commissioner of a Loan Officer Sponsor Certification form.

(d) (No change.)

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 8, 2008.

TRD-200804168

Douglas B. Foster

Commissioner

Texas Department of Savings and Mortgage Lending

Earliest possible date of adoption: September 21, 2008

For further information, please call: (512) 475-1350

SUBCHAPTER B. PROFESSIONAL CONDUCT

7 TAC §80.10

The amendments are proposed under Texas Finance Code §11.306, which authorizes the Commission to adopt rules to enforce Title 3 of the Texas Finance Code.

The statutory provisions affected by the proposed amendments are contained in Texas Finance Code, Chapter 156.

§80.10.Prohibition on False, Misleading, or Deceptive Practices and Improper Dealings.

(a) No Mortgage Broker or Loan Officer may:

(1) - (6) (No change.)

(7) induce or attempt to induce a party to a contract to breach the contract so the person may make a Mortgage; [or]

(8) alter any document produced or issued by the Department; or

(9) [~~(8)~~] engage in any other practice which the Commissioner, by published interpretation, has determined to be false, misleading, or deceptive.

(b) - (e) (No change.)

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 11, 2008.

TRD-200804260

Douglas B. Foster

Commissioner

Texas Department of Savings and Mortgage Lending

Earliest possible date of adoption: September 21, 2008

For further information, please call: (512) 475-1350

SUBCHAPTER C. ADMINISTRATION AND RECORDS

7 TAC §80.12, §80.13

The amendments are proposed under Texas Finance Code §11.306, which authorizes the Commission to adopt rules to enforce Title 3 of the Texas Finance Code.

The statutory provisions affected by the proposed amendments are contained in Texas Finance Code, Chapter 156.

§80.12.Display of License Verification; License Record Changes.

(a) - (d) (No change.)

(e) Before the tenth day preceding the effective date of a new or changed corporate or assumed name [~~or DBA~~ ], a licensee shall notify the Commissioner in writing of the new name. The request shall be on the form promulgated by the Commissioner and include supporting documentation as well as a $25 processing fee. Prior to conducting business using the new or amended assumed name, the licensee must confirm that the assumed name has been processed, and must download from the Department's website, print and post the amended Verification of Licensure for each licensee using the new or amended assumed name.

§80.13.Books and Records.

In order to assure that each licensee will have all records necessary to enable the Commissioner or the Commissioner's designee to investigate complaints and discharge their responsibilities under the Act and this Chapter, each Mortgage Broker and Loan Officer shall maintain records as set forth below. The particular format of records to be maintained is not specified. However, they must be complete, current, legible, readily accessible, and readily sortable. Records maintained for other purposes, such as compliance with other state and federal laws, will be deemed to satisfy these requirements if they include the same information.

(1) Mortgage Application Records. Each Mortgage Broker and each Loan Officer is required to maintain, at the location specified in his or her application, the following books and records:

(A) A Mortgage Loan file for each Mortgage Loan application received; each such file shall contain at least the following:

(i) a copy of the signed and dated Mortgage Loan application (including any attachments, supplements, or addenda thereto);

(ii) - (v) (No change.)

(B) Mortgage Transaction Log. A mortgage transaction log, maintained on a current basis (which means that all entries must be made within no more than seven days from the date on which the matters they relate to occurred), setting forth, at a minimum:

(i) - (ii) (No change.)

(iii) a description of the disposition of the application for a Mortgage Loan; [~~and~~]

(iv) the identity of the person or entity who initially funded and/or acquired the Mortgage Loan and information as to how to contact them; and,[.]

(v) the name of the originator.

(2) - (7) (No change.)

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 11, 2008.

TRD-200804259

Douglas B. Foster

Commissioner

Texas Department of Savings and Mortgage Lending

Earliest possible date of adoption: September 21, 2008

For further information, please call: (512) 475-1350

SUBCHAPTER G. ENFORCEMENT OF LIENS

7 TAC §80.18

The amendments are proposed under Texas Finance Code §11.306, which authorizes the Commission to adopt rules to enforce Title 3 of the Texas Finance Code.

The statutory provisions affected by the proposed amendments are contained in Texas Finance Code, Chapter 156.

§80.18.Enforceability of Liens.

A violation of this Chapter shall not render an otherwise lawfully taken lien unenforceable.

[~~Figure: 7 TAC §80.18~~]

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 11, 2008.

TRD-200804258

Douglas B. Foster

Commissioner

Texas Department of Savings and Mortgage Lending

Earliest possible date of adoption: September 21, 2008

For further information, please call: (512) 475-1350

SUBCHAPTER K. ANNUAL REPORTS

7 TAC §80.23

The amendments are proposed under Texas Finance Code §11.306, which authorizes the Commission to adopt rules to enforce Title 3 of the Texas Finance Code.

The statutory provisions affected by the proposed amendments are contained in Texas Finance Code, Chapter 156.

§80.23.Annual Reports.

(a) A mortgage broker who held a license anytime during the reporting year shall file an annual report containing such information regarding the mortgage broker activity of the licensee and each sponsored loan officer as the Commissioner may require. The annual report shall be submitted on a form promulgated by the Commissioner. The annual report must be filed before March 1 of each year and shall cover the mortgage broker activities for the calendar year immediately preceding the year in which the report is due.

(b) (No change.)

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 11, 2008.

TRD-200804256

Douglas B. Foster

Commissioner

Texas Department of Savings and Mortgage Lending

Earliest possible date of adoption: September 21, 2008

For further information, please call: (512) 475-1350

PART 5. OFFICE OF CONSUMER CREDIT COMMISSIONER

CHAPTER 84. MOTOR VEHICLE INSTALLMENT SALES

SUBCHAPTER G. EXAMINATIONS

7 TAC §§84.707 - 84.709

The Finance Commission of Texas (commission) re-proposes new §§84.707 - 84.709 concerning Examinations, with regard to recordkeeping requirements for motor vehicle sales finance dealers licensed by the Office of Consumer Credit Commissioner. As a result of informal comments received, the commission withdraws the original proposal of new 7 TAC §§84.707 - 84.709 that appeared in the Texas Register on July 4, 2008 (33 TexReg 5185).

Following the original proposal of these rules, the agency received informal comments from industry stakeholders. The industry provided valuable feedback regarding all three rules. A review of the industry's comments led the agency to the determination that the re-publication of a revised proposal of rules §§84.707 - 84.709 would be beneficial to the industry, consumers, and the agency. This resulting re-proposal incorporates the industry's input and presents the industry with more efficient means of complying with the statutory requirements and to demonstrate that compliance.

The purpose of the new recordkeeping rules is to conform the commission's rules to current practice, to provide clarification for licensees required to comply with the rules, and to provide more specific guidance for the examination process. The following paragraphs outline the individual purposes of each proposed rule.

Section 84.707 specifies the records that must be maintained or reports that must be accessed for retail sellers assigning motor vehicle retail installment sales contracts. The regulation requires the following records or reports: a retail installment sales transaction report, a retail installment sales transaction file for each retail installment sales transaction, an assignment report, general business and accounting records supporting each disbursement made by the licensee in connection with a retail installment sales transaction, and adverse action records. The rule is necessary to ensure that the licensee will be able to comply with the statutory requirement to maintain sufficient documentation for licensed retail sellers who assign their retail installment sales contracts.

Section 84.708 specifies the records that must be maintained or reports that must be accessed for retail sellers collecting installments on motor vehicle retail installment sales contracts. The regulation requires the following records or reports: a retail installment sales transaction report, a retail installment sales transaction file for each retail installment sales transaction, an account record for each retail installment sales contract (including payment and collection contact history), an assignment report, general business and accounting records supporting each disbursement made by the licensee in connection with a retail installment sales transaction, insurance loss records (if the licensee negotiates or facilitates insurance claims on behalf of the retail buyer), adverse action records, and repossession records. Additionally, a licensee must have the ability to search its files to access a list of open retail installment sales transactions and a list of retail buyers in alphabetical order. The rule is necessary to ensure that the licensee will be able to comply with the statutory requirement to maintain sufficient documentation for licensed retail sellers who collect on retail installment sales contracts.

Section 84.709 specifies the records that must be maintained or reports that must be accessed for holders who are not retail sellers that service or collect installments on motor vehicle retail installment sales contracts. The regulation requires the following records or reports: a retail installment sales transaction report, a retail installment sales transaction file for each retail installment sales transaction, an account record for each retail installment sales contract (including payment and collection contact history), an assignment report, general business and accounting records supporting each disbursement made by the licensee in connection with a retail installment sales transaction, insurance loss records (if the licensee negotiates or facilitates insurance claims on behalf of the retail buyer), adverse action records, and repossession records. Additionally, a licensee must have the ability to search its files to access a list of open retail installment sales transactions and a list of retail buyers in alphabetical order. The rule is necessary to ensure that the licensee will be able to comply with the statutory requirement to maintain sufficient documentation for licensed holders who are not retail sellers that service or collect on retail installment sales contracts.

In addition, all three recordkeeping regulations grant considerable flexibility by permitting the licensee to maintain the required records by using one of the following systems, or a combination of these systems: a legible paper or manual recordkeeping system, an electronic recordkeeping system, or an optically imaged recordkeeping system unless otherwise specified by statute or regulation.

Leslie L. Pettijohn, Consumer Credit Commissioner, has determined that for the first five-year period the rules are in effect there will be no fiscal implications for state or local government as a result of administering the rules.

Commissioner Pettijohn has determined that for each year of the first five years the new operational rules are in effect the public benefit anticipated will be that the commission's rules will conform to current practice, will be more easily understood by licensees required to comply with the rules, and will be more easily enforced.

The Texas Legislature amended the Texas Finance Code in 2002 to require the licensure of motor vehicle dealers who accept cash for the sale of motor vehicles over time. The Office of Consumer Credit Commissioner, as part of the regulation, is directed to perform routine examinations of the licensees. Section 348.517 of the Texas Finance Code states: "A license holder shall maintain a record of each retail installment transaction made under this chapter as is necessary to enable the commissioner to determine whether the license holder is complying with this chapter." (emphasis added). The proposed new rules provide guidance and clarification to the motor vehicle industry on how to conduct business and maintain records within the limits of the Texas Finance Code.

The records or information required by §§84.707 - 84.709 are already required by statute in order to demonstrate compliance with Chapter 348. These recordkeeping rules merely implement the statute by providing guidance for fulfilling the necessary compliance with §348.517. In other words, any costs are imposed by the Texas Finance Code and are not a result of the re-proposed new rules.

Accordingly, in reference to all three rules, there may be some anticipated economic costs incurred by a person required to comply with Chapter 348 whose operation is not within statutory compliance. The overall potential cost to each licensee is not predictable due to several variable factors, including the type of recordkeeping system currently used and whether the licensee presently maintains records in compliance with Chapter 348. It follows that any licensees who are currently operating outside the statutory parameters may experience some implied costs in order to bring their operations within the statutory requirements as delineated by these rules.

For retail sellers assigning motor vehicle retail installment sales contracts, the agency received a representative list of records typically maintained. The resulting rule in re-proposed §84.707 incorporates this and other input and provides more efficient methods of complying with Chapter 348. The rule as re-proposed eliminates the retention of some records which contain duplicate information and recognizes that certain records are maintained by other holders and therefore are not required to be retained under this rule. Section 84.707 as re-proposed adds further flexibility by not requiring the licensee to maintain certain reports on an ongoing basis, but only that the licensee be able to produce the information in report form when requested.

Thus, re-proposed §84.707 does not present any anticipated costs to persons whose operations are currently in compliance with the provisions of Chapter 348. As stated earlier, the overall potential cost to each licensee who is not in compliance is not predictable due to several variable factors. There will be no adverse economic effect on small or micro-businesses whose operations are in compliance with Chapter 348. Aside from the potential costs to those currently operating outside the statute, there will be no effect on individuals required to comply with §84.707 as re-proposed.

For retail sellers collecting installments on motor vehicle retail installment sales contracts, the resulting rule in §84.708 as re-proposed incorporates industry input and provides more efficient methods of complying with Chapter 348. Section 84.708 as re-proposed refines a number of provisions and adds further flexibility by not requiring the licensee to maintain certain reports on an ongoing basis, but only that the licensee be able to produce the information in report form when requested.

Therefore, §84.708 as re-proposed does not present any anticipated costs to persons whose operations are currently in compliance with the provisions of Chapter 348. Regarding compliance with §84.708, there may be some limited anticipated economic costs incurred by persons whose operations are not in compliance with Chapter 348. The agency has learned through the examination process that some small licensees who use manual recordkeeping systems do not have sufficient storage capacity to maintain information that is required by Chapter 348 and this rule. These small licensees will be obligated to acquire additional storage containers (e.g., one two-drawer locking file cabinet, $150 each) to bring their operations into compliance with Chapter 348 and this rule.

For licensees under §84.708 who utilize an electronic or optically imaged recordkeeping system, some training may be necessary to teach employees how to use existing software to produce the reports contemplated by the rule. The amount of training necessary for each licensee is impossible to predict due to several variable factors, such as number of employees, amount of previous training conducted, and current knowledge of employees. There will be no adverse economic effect on small or micro-businesses whose operations are in compliance with Chapter 348. Aside from the potential costs to those currently operating outside the statute, there will be no effect on individuals required to comply with §84.708 as re-proposed.

For holders who are not retail sellers that service or collect installments on motor vehicle retail installment sales contracts, the resulting rule in §84.709 as re-proposed incorporates industry input and provides more efficient methods of complying with Chapter 348. Section 84.709 as re-proposed refines a number of provisions and adds further flexibility by not requiring the licensee to maintain certain reports on an ongoing basis, but only that the licensee be able to produce the information in report form when requested.

Thus, §84.709 as re-proposed does not present any anticipated costs to persons whose operations are currently in compliance with the provisions of Chapter 348. Regarding compliance with §84.709, there may be some limited anticipated economic costs incurred by persons whose operations are not in compliance with Chapter 348. The agency has learned through the examination process that licensees who utilize an electronic or optically imaged recordkeeping system may need to perform some training to teach employees how to use existing software to produce the reports contemplated by the rule. It is anticipated that some training may also be needed regarding verification that statutorily required information has been received by the holder from the dealer, and concerning proper internal communication between collection staff and data entry staff. The amount of training necessary for each licensee is impossible to predict due to several variable factors, such as number of employees, amount of previous training conducted, and current knowledge of employees. There will be no adverse economic effect on small or micro-businesses whose operations are in compliance with Chapter 348. Aside from the potential costs to those currently operating outside the statute, there will be no effect on individuals required to comply with §84.709 as re-proposed.

It is estimated that between 3,500 and 4,500 small businesses may be subject to these proposed new rules. The projected economic impact of these rules, in implementing the underlying statute, will overall be neutral. Persons who are required to comply with these rules are also statutorily obligated to comply with Chapter 348 and retain records in a manner to demonstrate that compliance. Compliance with these rules will reduce potential liability from private litigation by retail buyers. Furthermore, compliance with these rules will reduce the amount of time examiners from the Office of Consumer Credit Commissioner will spend in each location; consequently, more time efficient examinations will reduce the licensee's staff time dedicated to the agency's examination process.

The agency believes it would not be protective of the economic welfare of the state and its consumers to propose different recordkeeping requirements for small businesses. The agency further believes that the proposed new rules are necessary to comply with legislative mandates issued by the Texas Legislature. The agency is not aware of a more economic way to implement the statutory requirements. The agency invites comments from interested stakeholders and the public on any adverse economic impacts on small businesses and on any more efficient or alternative methods of achieving compliance with Chapter 348 than is contained in these rules.

The agency has attempted to lessen any potential costs by providing flexibility in the recordkeeping rules, which allow paper, electronic, or optically imaged systems. Furthermore, this re-proposal incorporates the ability to access several items, or produce the information in the form of a report or list, which if generated from an electronic system, does not have to be maintained as a separate file or record.

Comments on the proposed new rules may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207 or by email to laurie.hobbs@occc.state.tx.us. To be considered, a written comment must be received on or before the 31st day after the date the proposed rules are published in the Texas Register . At the conclusion of the 31st day after the proposed rules are published in the Texas Register, no further written comments will be considered or accepted by the commission.

These new sections are proposed under Texas Finance Code, §11.304, which authorizes the Finance Commission to adopt rules to enforce Title 4 of the Texas Finance Code. Additionally, Texas Finance Code, §348.513 grants the Finance Commission the authority to adopt rules to enforce the motor vehicle installment sales chapter.

These rules affect Texas Finance Code, Chapter 348.

§84.707.Files and Records Required (Retail Sellers Assigning Retail Installment Sales Contracts).

(a) Applicability. The recordkeeping requirements of this section apply to retail sellers that immediately assign or transfer all retail installment sales contracts to another authorized creditor. If a retail seller collects any installments, excluding downpayments, on a retail installment sales contract, the retail seller must comply with the recordkeeping requirements established under §84.708 of this title (relating to Files and Records Required (Retail Sellers Collecting Installments on Retail Installment Sales Contracts)).

(b) Records required for each retail installment sales transaction. Each licensee must maintain records with respect to each motor vehicle retail installment sales contract made, acquired, serviced, or held under Texas Finance Code, Chapter 348 and make those records available for examination.

(c) Recordkeeping systems. The records required by this section may be maintained by using either a legible paper or manual recordkeeping system, electronic recordkeeping system, optically imaged recordkeeping system, or a combination of the preceding types of systems, unless otherwise specified by statute or regulation.

(d) Records required.

(1) Retail installment sales transaction report. Each licensee must maintain records sufficient to produce a retail installment sales transaction report that contains a listing of each Texas Finance Code, Chapter 348 retail installment sales contract entered into by the licensee. The report is only required to include those retail installment sales contracts that are subject to the record retention period of paragraph (6) of this subsection. The retail installment sales transaction report can be maintained either as a paper record or may be generated from an electronic system. If the retail installment sales transaction report is maintained under a manual recordkeeping system, the retail installment sales transaction report must be updated within a reasonable time from the date the contract is entered into by the licensee. A retail installment sales transaction report must contain the following information:

(A) the date of contract (day, month, and year);

(B) the retail buyer's name(s);

(C) a method of identifying the vehicle, such as the last six (6) digits of the vehicle identification number or the stock number; and

(D) the account number, if the retail seller assigns an account number.

(2) Retail installment sales transaction file. A licensee must maintain a retail installment sales transaction file for each individual retail installment sales contract. The retail installment sales transaction file must contain records and documents to evidence the licensee's compliance with applicable state and federal laws and regulations, including the Equal Credit Opportunity Act and the Truth in Lending Act. If a substantially equivalent electronic record for any of the following records exists, a paper copy of the record does not have to be included in the retail installment sales transaction file if the electronic record can be accessed upon request. The retail installment sales transaction file must include copies of the following records or documents:

(A) for all retail installment sales transactions:

(i) the retail installment sales contract signed by the retail buyer and the retail seller as required by Texas Finance Code, §348.101;

(ii) the purchase or buyer's order reflecting a written computation of any additional amounts that may be included in the cash price of the vehicle and itemized charges, a description of the motor vehicle being purchased, and a description of each motor vehicle being traded in;

(iii) the credit application and any other written or recorded information used in evaluating the application;

(iv) the Texas Department of Transportation's Title Application Receipt (Form VTR-500-RTS), Tax Assessor's Tax Collector's Receipt for Title Application/Registration/Motor Vehicle Tax handwritten receipt (Form 31-RTS), or similar document evidencing the disbursement of the sales tax, and fees for license, title, and registration of the vehicle;

(v) copies of other agreements or disclosures signed by the retail buyer applicable to the retail installment sales transaction; and

(vi) any records applicable to the retail installment transaction outlined by subparagraphs (B) - (J) of this paragraph.

(B) for a vehicle titled in Texas, a copy of the completed Texas Department of Transportation/Comptroller of Public Accounts' Application for Texas Certificate of Title (Form 130-U) signed by the retail buyer and seller that was filed with the appropriate county tax assessor-collector.

(C) for a vehicle titled outside of Texas, a copy of the application for certificate of title for the buyer or the properly assigned evidence of ownership to the buyer including the Comptroller of Public Accounts' Texas Motor Vehicle Sales Tax Exemption Certificate (Form 14-312).

(D) for a retail installment sales transaction in which a power of attorney is necessary to transfer title to the buyer, a copy of the Texas Department of Transportation's Power of Attorney to Transfer a Motor Vehicle (Form VTR-271) or any other similar document used as a power of attorney.

(E) for a retail installment sales transaction in which the retail buyer elects to have the vehicle registered in another county as permitted by Texas Transportation Code, §501.0234, a completed copy of the Texas Department of Transportation's County of Title Issuance form (Form VTR-136) signed by the retail buyer.

(F) for a retail installment sales transaction involving a downpayment, a copy of any document relating to the downpayment including:

(i) receipts for cash downpayments;

(ii) promissory notes or other documents evidencing the retail buyer's agreement to pay the cash downpayment over time;

(iii) documents or forms signed by the retail buyer relating to a manufacturer's or distributor's rebate as permitted by the Texas Finance Code, §348.404(a); and

(iv) documents or forms evidencing the payoff of any trade-in vehicle shown on the retail installment sales contract.

(G) for a retail installment sales transaction involving the disbursement of funds for money advanced pursuant to Texas Finance Code, §348.404(b) and (c), a copy of any document relating to the disbursement of funds for money advanced.

(H) for a retail installment sales transaction in which the licensee issues a certificate of insurance regarding insurance policies issued by or through the licensee in connection with the retail installment sales transaction, copies of the certificates of insurance.

(I) for a retail installment sales transaction in which the licensee issues a certificate of coverage regarding ancillary products issued by or through the licensee in connection with the retail installment sales transaction, records of the ancillary products (motor vehicle theft protection plans, service contracts, maintenance agreements, etc.) including all certificates of coverage.

(J) for a retail installment sales transaction where separate disclosures are required by federal or state law including the following:

(i) a transaction where disclosures required by the Truth in Lending Act are not incorporated into the text of the retail installment sales contract and the credit was extended for primarily for personal, family, or household purposes, a copy of the Truth in Lending statement required by Regulation Z, Truth in Lending, 12 C.F.R. §226.18, et seq.;

(ii) a transaction involving a cosigner, the notice to cosigner required by the Federal Trade Commission's Credit Practices Trade regulation, 16 C.F.R. §444.3;

(iii) a transaction where a used vehicle is sold and the vehicle was purchased primarily for personal, family or household purposes, a copy of the signed Buyers Guide, if:

(I) the retail seller has included the optional signature line; or

(II) language has been added to the Buyers Guide constituting a warranty agreement.

(3) Assignment report. A licensee must maintain or produce an assignment report, whether paper or electronic, including any Texas Finance Code, Chapter 348 retail installment sales contract made by or acquired by the licensee that is assigned from its licensed or registered location. The assignment report must show the name of the retail buyer, the account number or other unique number given to the retail buyer, the date of assignment, and the name and address to which the accounts are assigned.

(4) General business and accounting records. General business and accounting records concerning retail installment sales transactions must be maintained. The business and accounting records must include receipts, documents, or other records for each disbursement made by the licensee at the retail buyer's direction or request, on his behalf, or for his benefit, that is charged to the retail buyer, including:

(A) Comptroller of Public Accounts' Dealer Motor Vehicle Inventory Tax Statement (Form 50-246); and

(B) Comptroller of Public Accounts' Texas Motor Vehicle Seller-Financed Sales Tax Report (Form 14-117).

(5) Adverse action records. Each licensee must maintain adverse action records regarding all applications relating to Texas Finance Code, Chapter 348 retail installment sales transactions where the applicant was denied credit. The adverse action records must include those records and documents required by Regulation B, Equal Credit Opportunity Act, 12 C.F.R. §202.1 et seq. , including the credit application; any written or recorded information used in evaluating the application; the adverse action notice (if required); notice of incompleteness, if applicable; and counteroffer notice, if applicable. Adverse action records must be maintained according to the record retention requirements under federal law.

(6) Retention and availability of records. All books and records required by this subsection must be available for inspection at any time by Office of Consumer Credit Commissioner staff, and must be retained for a period of four years from the date of the contract, two years from the date of the final entry made thereon by the licensee, whichever is later, or a different period of time if required by federal law. Upon notification of an examination pursuant to Texas Finance Code, §348.514(f), the licensee must have the required books and records at the licensed location or registered office specified on the license. The records required by this subsection must be kept at an office in the state designated by the licensee except when the retail installment sales transactions are transferred under an agreement which gives the commissioner access to the documents. Documents may be maintained out of state if the licensee has in writing acknowledged responsibility for either making the records available within the state for examination or by acknowledging responsibility for additional examination costs associated with examinations conducted out of state.

§84.708.Files and Records Required (Retail Sellers Collecting Installments on Retail Installment Sales Contracts).

(a) Applicability. The recordkeeping requirements of this section apply to retail sellers that service or collect installments on retail installment sales contracts.

(d) Record search requirements.

(1) Open retail installment sales transactions. A licensee must be able to access or produce a list of all open retail installment sales transactions. If the list of open transactions is accessed through an electronic system, the licensee must be able to generate a separate report of open transactions. Alternatively, a licensee may provide a list containing open and closed retail installment sales transactions as long as the open transactions are designated as "open."

(2) Alphabetical search. A licensee must be able to access records in alphabetical order by retail buyer name for open and closed transactions during the record retention period required by subsection (e)(8) of this section.

(e) Records required.

(1) Retail installment sales transaction report. Each licensee must maintain records sufficient to produce a retail installment sales transaction report that contains a listing of each Texas Finance Code, Chapter 348 retail installment sales contract made or acquired by the licensee. The report is only required to include those retail installment sales contracts that are subject to the record retention period of paragraph (8) of this subsection. The retail installment sales transaction report can be maintained either as a paper record or may be generated from an electronic system. If the retail installment sales transaction report is maintained under a manual recordkeeping system, the retail installment sales transaction report must be updated within a reasonable time from the date the contract is made or acquired. A retail installment sales transaction report must contain the following information:

(A) the date of contract (day, month, and year);

(B) the retail buyer's name(s);

(C) a method of identifying the vehicle, such as the last six (6) digits of the vehicle identification number or the stock number; and

(D) the account number.

(A) for all retail installment sales transactions:

(i) the retail installment sales contract signed by the retail buyer and the retail seller as required by Texas Finance Code, §348.101;

(iii) the credit application and any other written or recorded information used in evaluating the application;

(iv) the original certificate of title to the vehicle, a certified copy of the negotiable certificate of title, or a copy of the front and back of either the original or certified copy of the title;

(v) the Texas Department of Transportation's Title Application Receipt (Form VTR-500-RTS), Tax Assessor's Tax Collector's Receipt for Title Application/Registration/Motor Vehicle Tax handwritten receipt (Form 31-RTS), or similar document evidencing the disbursement of the sales tax, and fees for license, title, and registration of the vehicle;

(vi) copies of other agreements or disclosures signed by the retail buyer applicable to the retail installment sales transaction; and

(vii) any records applicable to the retail installment transaction outlined by subparagraphs (B) - (N) of this paragraph.

(F) for a retail installment sales transaction involving a downpayment, a copy of any record or document relating to the downpayment including:

(i) receipts for cash downpayments;

(ii) promissory notes or other documents evidencing the retail buyer's agreement to pay the cash downpayment over time;

(iii) documents or forms signed by the retail buyer relating to a manufacturer's or distributor's rebate as permitted by the Texas Finance Code, §348.404(a); and

(iv) documents or forms evidencing the payoff of any trade-in vehicle shown on the retail installment sales contract.

(G) for a retail installment sales contract that has an itemized charge for the inspection of the vehicle, a copy of the work order, inspection receipt, or other verifiable evidence that reflects that the inspection was performed including the date and cost of the inspection.

(H) for a retail installment sales transaction involving the disbursement of funds for money advanced pursuant to Texas Finance Code, §348.404(b) and (c), a copy of any document, form, or agreement relating to the disbursement of funds for money advanced.

(I) for a retail installment sales transaction in which the licensee issues a certificate of insurance regarding insurance policies issued by or through the licensee in connection with the retail installment sales transaction, copies of the certificates of insurance.

(J) for a retail installment sales transaction in which the licensee issues a certificate of coverage regarding ancillary products issued by or through the licensee in connection with the retail installment sales transaction, records of the ancillary products (motor vehicle theft protection plans, service contracts, maintenance agreements, etc.) including all certificates of coverage.

(K) for a retail installment sales transaction involving insurance claims:

(i) if the licensee does not negotiate or facilitate insurance claims on behalf of the retail buyer, records are not required to be maintained under this subparagraph.

(ii) if the licensee negotiates or facilitates insurance claims on behalf of the retail buyer, supplemental insurance records supporting the settlement or denials of claims reported in the insurance loss records provided by paragraph (6) of this subsection including:

(I) Credit life insurance claims. The supplemental insurance records for credit life insurance claims must include the death certificate or other written records relating to the death of the retail buyer; proof of loss or claim form that discloses the amount of indebtedness at the time of death; check copies or electronic payment receipts that reflect the gross amount of the claim paid, including the amount of insurance benefits paid to beneficiaries other than the licensee which is in excess of the net amount necessary to pay the indebtedness; and the amount that is paid to beneficiaries other than the licensee.

(II) Credit accident and health insurance claims. The supplemental insurance records for credit accident and health insurance claims must include any written records relating to the disability, including statements from the physician, employer, and retail buyer; the proof of loss or claim form filed by the retail buyer; and copies of the checks or electronic payment receipts reflecting disability payments paid by the insurance carrier.

(III) Credit involuntary unemployment insurance claims. The supplemental insurance records for credit involuntary unemployment insurance claims must include any written document relating to the termination, layoff, or dismissal of the retail buyer; the proof of loss or claim form filed by the retail buyer; copies of the checks or electronic payment receipts reflecting the payment of the claim by the insurance carrier; and any other pertinent written record relating to the involuntary unemployment insurance claim.

(IV) Collateral protection insurance claims. The supplemental insurance records for collateral protection insurance claims must include the law enforcement report, fire department report, or other written record reflecting the loss or destruction of any covered motor vehicle; the proof of loss or claim form filed by the retail buyer; copies of the checks or electronic payment receipts reflecting the payment of the claim by the insurance carrier; and any other pertinent written record relating to the collateral protection insurance claim.

(V) Credit gap insurance claims. The supplemental insurance records for credit gap insurance claims must include the gap insurance claim form; proof of loss and settlement check from the retail buyer's basic comprehensive, collision, or uninsured/underinsured policy or other parties' liability insurance policy for the settlement of the insured total loss of the motor vehicle; documents that provide verification of the retail buyer's primary insurance deductible; if the accident was investigated by a law enforcement officer, a copy of the offense or police report filed in connection with the total loss of the motor vehicle; if the accident was not investigated by a law enforcement officer, a copy of the Texas Department of Public Safety's "Driver's Accident Report" (Form ST-2) filed in connection with the total loss of the motor vehicle; and copies of the checks reflecting the settlement amount paid by the licensee for the gap insurance claim.

(L) for a retail installment sales transaction where separate disclosures are required by federal or state law including the following:

(ii) a transaction involving a cosigner, the notice to cosigner required by the Federal Trade Commission's Credit Practices Trade regulation, 16 C.F.R. §444.3;

(iii) a transaction where a used vehicle is sold and the vehicle was purchased primarily for personal, family or household purposes, a copy of the signed Buyers Guide, if:

(I) the retail seller has included the optional signature line; or

(II) language has been added to the Buyers Guide constituting a warranty agreement.

(M) for a retail installment sales transaction that has been repaid in full, copies of any documents or records evidencing the discharge or release of lien as prescribed by 43 TAC, §17.3(h) (relating to Motor Vehicle Certificates of Title).

(N) for a retail installment sales transaction involving a repossession, the records required by subsection (f) of this section.

(3) Account record for each retail installment sales contract (including payment and collection contact history). A separate paper or electronic record must be maintained for each retail installment sales contract. The paper or electronic account record must be readily available by reference to either a retail buyer's name or account number.

(A) Required information. The account record for each retail installment sales contract must contain at least the following information, unless stated otherwise:

(i) account number as recorded in the retail installment sales transaction report;

(ii) retail installment sales contract payment schedule and terms itemized to show:

(I) date of contract;

(II) number of installments;

(III) due date of installments;

(IV) amount of each installment; and

(V) maturity date;

(iii) name, address, and telephone number of retail buyer;

(iv) names and addresses of co-retail buyer or other obligors, if any;

(v) amount financed;

(vi) total time price differential charge;

(vii) total of payments;

(viii) amount of premium charges for insurance products;

(ix) payment history information:

(I) itemized payment entries showing date payment received; dual postings are acceptable if date of posting is other than date of receipt;

(II) if requested during an examination or investigation, a payoff amount that denotes amounts applied to principal, time price differential, default, deferment, or other authorized charges;

(x) for a retail installment sales contract where the licensee receives a refund of insurance charges or authorized ancillary products, a licensee is responsible for substantiating final entries and ensuring that refunds were paid to the retail buyer or applied to the retail buyer's account. Refund amounts must be itemized to show:

(I) time price differential refunded, if any;

(II) the amount of any insurance charges refunded;

(III) the amount of any authorized ancillary products charges refunded;

(xi) collection contact history, including a written record of:

(I) all collection contacts made by a licensee with the retail buyer or any other person related to the retail installment sales transaction;

(II) all collection contacts made by the retail buyer with the licensee;

(III) for the collection contacts in subclauses (I) and (II) of this clause, the written record must include the date, method of contact, contacted party, person initiating the contact, and a summary of the contact;

(IV) copies of individual collection notices or letters or references to standard collection letters sent to the retail buyer.

(B) Corrective entries. A licensee may make corrective entries to the account record for each retail installment sales contract if the corrective entry is justified. A licensee must maintain the reason and supporting documentation for each corrective entry made to the account record. The reason for the corrective entry may be recorded in the collection contact history of the account record. The supporting documentation justifying the corrective entry can be maintained in the individual account record for each retail installment sales contract or properly stored and indexed in a licensee's optically imaged recordkeeping system. If a licensee manually maintains the account record, the licensee must properly correct an improper entry by drawing a single line through the improper entry and entering the correct information above or below the improper entry. No erasures or other obliterations may be made on the payments received or collection contact history section of the manual account record for each retail installment sales contract.

(4) Assignment report. A licensee must maintain or produce an assignment report, whether paper or electronic, including any Texas Finance Code, Chapter 348 retail installment sales contract made by or acquired by the licensee that is assigned from its licensed or registered location. The assignment report must show the name of the retail buyer, the account number or other unique number given to the retail buyer, the date of assignment, and the name and address to which the accounts are assigned.

(5) General business and accounting records. General business and accounting records concerning retail installment sales transactions must be maintained. The business and accounting records must include receipts, documents, or other records for each disbursement made by the licensee at the retail buyer's direction or request, on his behalf, or for his benefit, that is charged to the retail buyer, including:

(A) Comptroller of Public Accounts' Dealer Motor Vehicle Inventory Tax Statement (Form 50-246);

(B) Comptroller of Public Accounts' Texas Motor Vehicle Seller-Financed Sales Tax Report (Form 14-117); and

(6) Insurance loss records. Each licensee who negotiates or facilitates the filing of insurance claims must maintain a register or be able to generate a report, paper or electronic, reflecting information on credit life, credit accident and health, credit property, credit involuntary unemployment, and single-interest insurance claims whether paid or denied by the insurance carrier. If the reason for the denial of a credit life insurance or credit accident and health insurance claim is based upon the medical records of the retail buyer, supplemental records supporting the denial of the claim must be made available upon request.

(A) Credit life insurance claims. The register or report pertaining to credit life insurance claims must show the name of the retail buyer, the account number, and the date of death.

(B) Credit accident and health insurance claims. The register or report pertaining to credit accident and health insurance claims must show the name of the retail buyer, the account number, and the date of the initial filing of a claim for any continuous period of disability.

(C) Credit involuntary unemployment insurance claims. The register or report pertaining to credit involuntary unemployment insurance claims must show the name of the retail buyer, the account number, and the date of the initial filing of the claim.

(D) Credit gap insurance claims. The register or report pertaining to credit gap insurance claims must show the name of the retail buyer, the account number, and the date of the claim.

(E) Collateral protection insurance claims. The register or report pertaining to collateral protection insurance claims must show the name of the retail buyer, the account number, and the amount of the insurance written on the motor vehicle.

(7) Adverse action records. Each licensee must maintain adverse action records regarding all applications relating to Texas Finance Code, Chapter 348 retail installment sales transactions where the applicant was denied credit. The adverse action records must include those records and documents required by Regulation B, Equal Credit Opportunity Act, 12 C.F.R. §202.1 et seq. , including the credit application; any written or recorded information used in evaluating the application; the adverse action notice (if required); notice of incompleteness, if applicable; and counteroffer notice, if applicable. Adverse action records must be maintained according to the record retention requirements under federal law.

(8) Retention and availability of records. All books and records required by this subsection must be available for inspection at any time by Office of Consumer Credit Commissioner staff, and must be retained for a period of four years from the date of the contract, two years from the date of the final entry made thereon, whichever is later, or a different period of time if required by federal law. Upon notification of an examination pursuant to Texas Finance Code, §348.514(f), the licensee must have the required books and records at the licensed location or registered office specified on the license. The records required by this subsection must be kept at an office in the state designated by the licensee except when the retail installment sales transactions are transferred under an agreement which gives the commissioner access to the documents. Documents may be maintained out of state if the licensee has in writing acknowledged responsibility for either making the records available within the state for examination or by acknowledging responsibility for additional examination costs associated with examinations conducted out of state.

(f) Repossession records.

(1) Repossession report. A licensee must be able to access or produce a list of all retail installment sales transactions involving repossession by the licensee. If the list of repossessions is accessed through an electronic system, the licensee must be able to generate a separate report of repossessions. If the repossession report is maintained under a manual recordkeeping system, the licensee must maintain a current list of accounts in repossession. A manual repossession report must be updated within a reasonable time from the date of repossession. The repossession report must include the retail buyer's name, account number, and date of repossession. If accounts have been subsequently assigned, the assignment must be noted in the repossession report as well as on the record of assigned accounts as prescribed in subsection (e)(4) of this section.

(2) Required information. For a retail installment sales transaction involving the repossession of the vehicle, the following records must be maintained, including:

(A) a condition report indicating the condition of the collateral;

(B) any invoices or receipts for any reasonable and authorized out-of-pocket expenses that are assessed to the buyer and incurred in connection with the repossession or sequestration of the vehicle including cost of storing, reconditioning, and reselling the vehicle;

(C) for a vehicle disposed of in a public or private sale as permitted by the Texas Business & Commerce Code, §9.610, the following documents:

(i) one of the three following notices:

(I) for a transaction not involving consumer goods, a copy of any Notification of Disposition of Collateral letter sent to the retail buyer and other obligors as required by Texas Business & Commerce Code, §9.613;

(II) for a transaction involving consumer goods, a copy of any Notice of Our Plan to Sell Property as sent to the retail buyer and other obligors as required by Texas Business & Commerce Code, §9.614; or

(III) a copy of the waiver of the notice of intended disposition prescribed by subclause (I) or (II) of this clause, as applicable, signed by the retail buyer and other obligors after default;

(ii) copies of any evidence of a fair private sale or the commercial reasonableness of the private sale;

(iii) copies of the auction receipts or documentation of the date, place, manner of sale of the vehicle, and amounts received for disposition of the vehicle reflecting the commercial reasonableness of the sale if the vehicle's disposition is by a public sale or a dealer-only auction;

(iv) the bill of sale showing the name and address of the purchaser of the repossessed collateral and the purchase price of the vehicle;

(v) for a disposition or sale of collateral creating a surplus balance, a copy of the check representing the payment of the surplus balance paid to the retail buyer or other obligors;

(vi) for a disposition or sale of collateral resulting in a surplus or deficiency, a copy of the explanation of calculation of surplus or deficiency as required by Texas Business & Commerce Code, §9.616, if applicable;

(vii) a copy of the waiver of the deficiency letter if the retail seller elects to waive the deficiency balance in lieu of sending the explanation of calculation of surplus or deficiency form;

(D) for a vehicle disposed of using the strict foreclosure method as permitted by the Texas Business & Commerce Code, §9.620 and §9.621, the following documents:

(i) one of the three following notices;

(I) for a transaction not involving consumer goods and where less than 60% of the cash price of the vehicle has been paid, a copy of the notice of proposal to accept collateral in full or partial satisfaction of the obligation;

(II) for a transaction involving consumer goods, a copy of the notice of proposal to accept collateral in full satisfaction of the obligation; or

(III) for a transaction where more than 60% of the cash price of the vehicle has been paid, a copy of the debtor or obligor's waiver of compulsory disposition of collateral signed by the retail buyers and other obligors after default;

(ii) for a transaction where the retail buyer rejects the offer under clause (i)(I) or (II) of this subparagraph, a copy of the retail buyer's signed objection to retention of the collateral;

(iii) copies of the records reflecting the partial or total satisfaction of the obligation; and

(E) for a vehicle disposed by another authorized method pursuant to the Texas Business & Commerce Code, Chapter 9, a copy of any and all records or documents relating to the disposition of the collateral.

§84.709.Files and Records Required (Holders Taking Assignment of Retail Installment Sales Contracts).

(a) Applicability. The recordkeeping requirements of this section apply to holders who are not retail sellers that service or collect installments on retail installment sales contracts.

(d) Record search requirements.

(e) Records required.

(1) Retail installment sales transaction report. Each licensee must maintain records sufficient to produce a retail installment sales transaction report that contains a listing of each Texas Finance Code, Chapter 348 retail installment sales contract acquired by the licensee. The report is only required to include those retail installment sales contracts that are subject to the record retention period of paragraph (8) of this subsection. The retail installment sales transaction report can be maintained either as a paper record or may be generated from an electronic system. If the retail installment sales transaction report is maintained under a manual recordkeeping system, the retail installment sales transaction report must be updated within a reasonable time from the date the contract is acquired. A retail installment sales transaction report must contain the following information:

(A) the date of contract (day, month, and year);

(B) the retail buyer's name(s);

(C) a method of identifying the vehicle, such as the last six (6) digits of the vehicle identification number or the stock number; and

(D) the account number.

(A) for all retail installment sales transactions:

(i) the retail installment sales contract signed by the retail buyer and the retail seller as required by Texas Finance Code, §348.101;

(ii) the credit application and any other written or recorded information used in evaluating the application;

(iii) the original certificate of title to the vehicle, a certified copy of the negotiable certificate of title, or a copy of the front and back of either the original or certified copy of the title; and

(iv) any records applicable to the retail installment transaction outlined by subparagraphs (B) - (I) of this paragraph.

(D) for a retail installment sales contract that has an itemized charge for the inspection of the vehicle, a copy of the work order, inspection receipt, or other verifiable evidence that reflects that the inspection was performed including the date and cost of the inspection.

(E) for a retail installment sales transaction in which insurance policies are issued by or through the licensee in connection with the retail installment sales transaction, copies of the certificates of insurance.

(F) for a retail installment sales transaction involving insurance claims:

(i) if the licensee does not negotiate or facilitate insurance claims on behalf of the retail buyer, records are not required to be maintained under this subparagraph.

(G) for a retail installment sales transaction where separate disclosures are required by federal or state law including the following:

(ii) a transaction involving a cosigner, the notice to cosigner required by the Federal Trade Commission's Credit Practices Trade regulation, 16 C.F.R. §444.3.

(H) for a retail installment sales transaction that has been repaid in full, copies of any documents or records evidencing the discharge or release of lien as prescribed by 43 TAC §17.3(h) (relating to motor Vehicle Certificates of Title).

(I) for a retail installment sales transaction involving repossession, the records required by subsection (f) of this section.

(A) Required information. The account record for each retail installment sales contract must contain at least the following information, unless stated otherwise:

(i) account number as recorded in the retail installment sales transaction report;

(ii) retail installment sales contract payment schedule and terms itemized to show:

(I) date of contract;

(II) number of installments;

(III) due date of installments;

(IV) amount of each installment; and

(V) maturity date;

(iii) name, address, and telephone number of retail buyer;

(iv) names and addresses of co-retail buyer or other obligors, if any;

(v) amount financed;

(vi) total time price differential charge;

(vii) total of payments;

(viii) amount of premium charges for insurance products;

(ix) payment history information:

(I) itemized payment entries showing date payment received; dual postings are acceptable if date of posting is other than date of receipt;

(II) if requested during an examination or investigation, a payoff amount that denotes amounts applied to principal, time price differential, default, deferment, or other authorized charges;

(I) time price differential refunded, if any;

(II) the amount of any insurance charges refunded;

(III) the amount of any authorized ancillary products charges refunded;

(xi) collection contact history, including a written record of:

(I) all collection contacts made by a licensee with the retail buyer or any other person related to the retail installment sales transaction;

(II) all collection contacts made by the retail buyer with the licensee;

(IV) copies of individual collection notices or letters or references to standard collection letters sent to the retail buyer.

(A) Credit life insurance claims. The register or report pertaining to credit life insurance claims must show the name of the retail buyer, the account number, and the date of death.

(D) Credit gap insurance claims. The register or report pertaining to credit gap insurance claims must show the name of the retail buyer, the account number, and the date of the claim.

(f) Repossession records.

(2) Required information. For a retail installment sales transaction involving the repossession of the vehicle, the following records must be maintained, including:

(A) a condition report indicating the condition of the collateral;

(C) for a vehicle disposed of in a public or private sale as permitted by the Texas Business & Commerce Code, §9.610, the following documents:

(i) one of the three following notices:

(III) a copy of the waiver of the notice of intended disposition prescribed by subclause (I) or (II) of this clause, as applicable, signed by the retail buyer and other obligors after default;

(ii) copies of any evidence of a fair private sale or the commercial reasonableness of the private sale;

(iv) the bill of sale showing the name and address of the purchaser of the repossessed collateral and the purchase price of the vehicle;

(v) for a disposition or sale of collateral creating a surplus balance, a copy of the check representing the payment of the surplus balance paid to the retail buyer or other obligors;

(vii) a copy of the waiver of the deficiency letter if the retail seller elects to waive the deficiency balance in lieu of sending the explanation of calculation of surplus or deficiency form;

(D) for a vehicle disposed of using the strict foreclosure method as permitted by the Texas Business & Commerce Code, §9.620 and §9.621, the following documents:

(i) one of the three following notices;

(II) for a transaction involving consumer goods, a copy of the notice of proposal to accept collateral in full satisfaction of the obligation; or

(ii) for a transaction where the retail buyer rejects the offer under clause (i)(I) or (II) of this subparagraph, a copy of the retail buyer's signed objection to retention of the collateral;

(iii) copies of the records reflecting the partial or total satisfaction of the obligation; and

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 8, 2008.

TRD-200804219

Leslie L. Pettijohn

Commissioner

Office of Consumer Credit Commissioner

Earliest possible date of adoption: September 21, 2008

For further information, please call: (512) 936-7621

PART 7. STATE SECURITIES BOARD

CHAPTER 115. SECURITIES DEALERS AND AGENTS

7 TAC §115.16

The Texas State Securities Board proposes new §115.16, concerning use of senior-specific certifications and professional designations. The proposed new rule would prohibit the misleading use of designations that imply that the registered dealer or agent has special training in providing brokerage services to senior citizens or retirees. While prohibiting the use of misleading designations, the proposed rule would provide a means by which an accredited designating or certifying organization could be recognized so that persons who meet the qualifications set by the organization may use a recognized designation.

The proposal is based on the model rule adopted in March 2008 by the North American Securities Administrators Association, Inc. that represents the culmination of a multi-state effort to focus national attention on unscrupulous behavior targeting senior investors.

Micheal Northcutt, Director, Registration Division, and Benette Zivley, Director, Inspections and Compliance Division, have determined that for the first five-year period the rule is in effect there will be no foreseeable fiscal implications for state or local government as a result of enforcing or administering the rule.

Mr. Northcutt and Mr. Zivley also have determined that for each year of the first five years the rule is in effect the public benefits anticipated as a result of enforcing the rule will be that senior investors will be afforded protection from persons using misleading designations that imply special training or expertise in providing brokerage or other financial services to seniors and registered persons will be placed on notice that their use of misleading designations is administratively actionable.

There will be no effect on micro- or small businesses. There is no anticipated economic cost to persons who are required to comply with the rule as proposed. There is no anticipated impact on local employment.

Comments on the proposal to be considered by the Board should be submitted in writing within 30 days after publication of the proposed section in the Texas Register. Comments should be sent to David Weaver, State Securities Board, P.O. Box 13167, Austin, Texas 78711-3167, or sent by facsimile to (512) 305-8310.

The new rule is proposed under Texas Civil Statutes, Article 581-28-1. Section 28-1 provides the Board with the authority to adopt rules and regulations necessary to carry out and implement the provisions of the Texas Securities Act, including rules and regulations governing registration statements and applications; defining terms; classifying securities, persons, and matters within its jurisdiction; and prescribing different requirements for different classes.

The proposal affects Texas Civil Statutes, Article 581-14.

§115.16.Use of Senior-Specific Certifications and Professional Designations.

(a) The use of a senior specific certification or designation by any person in connection with the offer, sale, or purchase of securities, that indicates or implies that the user has special certification or training in advising or servicing senior citizens or retirees, in such a way as to mislead any person shall be an inequitable practice within the meaning of the Texas Securities Act, §14.A(3). The prohibited use of such certifications or professional designation includes, but is not limited to, the following:

(1) use of a certification or professional designation by a person who has not actually earned or is otherwise ineligible to use such certification or designation;

(2) use of a nonexistent or self-conferred certification or professional designation;

(3) use of a certification or professional designation that indicates or implies a level of occupational qualifications obtained through education, training, or experience that the person using the certification or professional designation does not have; and

(4) use of a certification or professional designation that was obtained from a designating or certifying organization that:

(A) is primarily engaged in the business of instruction in sales and/or marketing;

(B) does not have reasonable standards or procedures for assuring the competency of its designees or certificants;

(C) does not have reasonable standards or procedures for monitoring and disciplining its designees or certificants for improper or unethical conduct; or

(D) does not have reasonable continuing education requirements for its designees or certificants in order to maintain the designation or certificate.

(b) There is a rebuttable presumption that a designating or certifying organization is not disqualified solely for purposes of subsection (a)(4) of this section when the organization has been accredited by:

(1) The American National Standards Institute;

(2) The National Commission for Certifying Agencies; or

(3) an organization that is on the United States Department of Education's list entitled "Accrediting Agencies Recognized for Title IV Purposes" and the designation or credential issued therefrom does not primarily apply to sales and/or marketing.

(c) In determining whether a combination of words (or an acronym standing for a combination of words) constitutes a certification or professional designation indicating or implying that a person has special certification or training in advising or servicing senior citizens or retirees, factors to be considered shall include:

(1) use of one or more words such as "senior," "retirement," "elder," or like words, combined with one or more words such as "certified," "registered," "chartered," "adviser," "specialist," "consultant," "planner," or like words, in the name of the certification or professional designation; and

(2) the manner in which those words are combined.

(d) For purposes of this rule, a certification or professional designation does not include a job title within an organization that is licensed or registered by a state or federal financial services regulatory agency, when that job title:

(1) indicates seniority or standing within the organization; or

(2) specifies an individual's area of specialization within the organization.

(e) For purposes of subsection (d) of this section, "financial services regulatory agency" includes, but is not limited to, an agency that regulates broker-dealers, investment advisers, or investment companies as defined under the Investment Company Act of 1940.

(f) Nothing in this rule shall limit the Securities Commissioner's authority to enforce existing provisions of law.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 6, 2008.

TRD-200804114

Denise Voigt Crawford

Securities Commissioner

State Securities Board

Earliest possible date of adoption: September 21, 2008

For further information, please call: (512) 305-8303

CHAPTER 116. INVESTMENT ADVISERS AND INVESTMENT ADVISER REPRESENTATIVES

7 TAC §116.16

The Texas State Securities Board proposes new §116.16, concerning use of senior-specific certifications and professional designations. The proposed new rule would prohibit the misleading use of designations that imply that the registered investment adviser or investment adviser representative has special training in advising senior citizens or retirees about their investments. While prohibiting the use of misleading designations, the proposed rule would provide a means by which an accredited designating or certifying organization could be recognized so that persons who meet the qualifications set by the organization may use a recognized designation.

Mr. Northcutt and Mr. Zivley also have determined that for each year of the first five years the rule is in effect the public benefits anticipated as a result of enforcing the rule will be that senior investors will be afforded protection from persons using misleading designations that imply special training or expertise in advising senior citizens or retirees about investing and registered persons will be placed on notice that their use of misleading designations is administratively actionable.

The proposal affects Texas Civil Statutes, Article 581-14.

§116.16.Use of Senior-Specific Certifications and Professional Designations.

(a) The use of a senior specific certification or designation by any person in connection with the provision of advice as to the value of or the advisability of investing in, purchasing, or selling securities, either directly or indirectly or through publications or writings, or by issuing or promulgating analyses or reports relating to securities, that indicates or implies that the user has special certification or training in advising or servicing senior citizens or retirees, in such a way as to mislead any person shall be an inequitable practice within the meaning of the Texas Securities Act, §14.A(3). The prohibited use of such certifications or professional designation includes, but is not limited to, the following:

(1) use of a certification or professional designation by a person who has not actually earned or is otherwise ineligible to use such certification or designation;

(2) use of a nonexistent or self-conferred certification or professional designation;

(4) use of a certification or professional designation that was obtained from a designating or certifying organization that:

(A) is primarily engaged in the business of instruction in sales and/or marketing;

(B) does not have reasonable standards or procedures for assuring the competency of its designees or certificants;

(C) does not have reasonable standards or procedures for monitoring and disciplining its designees or certificants for improper or unethical conduct; or

(D) does not have reasonable continuing education requirements for its designees or certificants in order to maintain the designation or certificate.

(1) The American National Standards Institute;

(2) The National Commission for Certifying Agencies; or

(2) the manner in which those words are combined.

(1) indicates seniority or standing within the organization; or

(2) specifies an individual's area of specialization within the organization.

(f) Nothing in this rule shall limit the Securities Commissioner's authority to enforce existing provisions of law.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 6, 2008.

TRD-200804115

Denise Voigt Crawford

Securities Commissioner

State Securities Board

Earliest possible date of adoption: September 21, 2008

For further information, please call: (512) 305-8303

CHAPTER 133. FORMS

7 TAC §133.21

(Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the State Securities Board or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)

The Texas State Securities Board proposes the repeal of §133.21, a form concerning minimum bookkeeping records for securities dealers registered in Texas. The proposed repeal will eliminate an outdated form.

Micheal Northcutt, Director, Registration Division, and Benette Zivley, Director, Inspections and Compliance Division, have determined that for the first five-year period the repeal is in effect there will be no foreseeable fiscal implications for state or local government as a result of enforcing or administering the repeal.

Mr. Northcutt and Mr. Zivley also have determined that for each year of the first five years the repeal is in effect the public benefit anticipated as a result of enforcing the repeal will be the elimination of an obsolete form. There will be no effect on micro- or small businesses. There is no anticipated economic cost to persons who are required to comply with the repeal as proposed. There is no anticipated impact on local employment.

Comments on the proposal to be considered by the Board should be submitted in writing within 30 days after publication of the proposal in the Texas Register. Comments should be sent to David Weaver, State Securities Board, P.O. Box 13167, Austin, Texas 78711-3167, or sent by facsimile to (512) 305-8310.

The repeal is proposed under Texas Civil Statutes, Article 581-28-1. Section 28-1 provides the Board with the authority to adopt rules and regulations necessary to carry out and implement the provisions of the Texas Securities Act, including rules and regulations governing registration statements and applications; defining terms; classifying securities, persons, and matters within its jurisdiction; and prescribing different requirements for different classes.

Statutes and codes affected: none applicable.

§133.21.Minimum Bookkeeping Records for Securities Dealers Registered in Texas.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 6, 2008.

TRD-200804117

Denise Voigt Crawford

Securities Commissioner

State Securities Board

Earliest possible date of adoption: September 21, 2008

For further information, please call: (512) 305-8303

7 TAC §133.22

The Texas State Securities Board proposes the repeal of §133.22, a form concerning memorandum to securities dealers. The proposed repeal will eliminate an outdated form.

Micheal Northcutt, Director, Registration Division, and Benette Zivley, Director, Inspections and Compliance Division, have determined that for the first five-year period the repeal is in effect there will be no foreseeable fiscal implications for state or local government as a result of enforcing or administering the repeal.

Statutes and codes affected: none applicable.

§133.22.Memorandum to Securities Dealers.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 6, 2008.

TRD-200804116

Denise Voigt Crawford

Securities Commissioner

State Securities Board

Earliest possible date of adoption: September 21, 2008

For further information, please call: (512) 305-8303