(a) The comptroller may deposit state funds with a depository only if the depository has pledged with the comptroller eligible investment securities acceptable to the comptroller in an amount not less than the amount of deposits to be secured. The comptroller shall determine the market value of securities pledged to secure state funds for the purpose of determining the adequacy of the amount of collateral. The comptroller’s valuation of the securities is final and not subject to review.
(b) If the market value of the securities pledged by a depository becomes less than the amount of funds on deposit in the depository, the comptroller shall require that additional collateral be pledged immediately or deposits reduced. If the collateral pledged by a state depository is in excess of the amount required by this chapter, the comptroller may permit the release of the excess collateral. If the balance of state funds in a state depository is increased, the depository shall increase the collateral for the deposits to the amount required by this chapter.

(c) A state depository may substitute one group of eligible securities for another group of securities pledged with the comptroller.
(d) Except as provided by Subsections (e) and (f), a state depository shall deposit any pledged securities with the comptroller. The comptroller shall give the depository a receipt for the securities and place them in the vaults of the treasury.
(e) Instead of depositing pledged securities with the comptroller, a depository may deposit them with a custodian. The custodian may be the (i) Texas Treasury Safekeeping Trust Company, (ii) a state or national bank that has a capital stock and permanent surplus of not less than $5 million, is a state depository, and has been designated as a custodian by the comptroller, or (iii) a financial institution authorized to exercise fiduciary powers that has a capital stock and permanent surplus of not less than $5 million, has its main office, branch office, or a trust office in this state, and has been designated as a custodian by the comptroller. For purposes of this subsection, “financial institution” has the meaning assigned by § 201.101(1), Finance Code. The comptroller may designate those custodial applicants that are acceptable and may reject those whose management or condition, in the opinion of the comptroller, do not warrant the placing of securities pledged by state depositories. The comptroller may adopt and enforce rules governing the designation and conduct of custodians with respect to the acceptance and holding of securities pledged by state depositories that the public interest requires and that are not inconsistent with the law governing custodians as set forth in this chapter. The state depository and the custodian of securities pledged by that state depository may not be the same bank or be owned by the same bank holding company. The securities shall be held in trust by the custodian to secure funds deposited by the comptroller in the state depository pledging the securities. On receipt of the securities, the custodian shall immediately, by book entry or otherwise, identify on its books and records the pledge of the securities and shall promptly issue and deliver to the comptroller controlled trust receipts for the securities pledged. The security evidenced by the trust receipts is subject to inspection by the comptroller at any time. The depository pledging the securities shall pay the charges, if any, of the custodian bank for accepting and holding the securities. The custodian, acting alone or through a permitted institution, is for all purposes under state law and notwithstanding Chapters 8 and 9, Business & Commerce Code, the bailee or agent of the comptroller. The security interest arising out of a pledge of securities to secure deposits of the state is created, attaches, and is perfected for all purposes under state law from the time the custodian identifies the pledge of the securities on its books and records and issues the trust receipts. The security interest remains perfected as of that time in the hands of all subsequent custodians and permitted institutions.
(f) Instead of depositing pledged securities with the comptroller, a state depository may deposit pledged securities with a Federal Reserve Bank or a Federal Home Loan Bank. The securities shall be held by the bank to secure funds deposited by the comptroller in the state depository pledging the securities. When the pledged securities are deposited, the bank may apply book entry to the securities. The records of the bank shall at all times reflect the name of the state depository depositing the pledged securities, and the bank shall issue an advice of transaction to the comptroller and the state depository pledging the securities.
(g) In this section, “permitted institution” means a Federal Reserve Bank, a Federal Home Loan Bank, a “clearing corporation” as defined by § 8.102, Business & Commerce Code, the Texas Treasury Safekeeping Trust Company, a state depository, and any state or nationally chartered bank or trust company that is controlled by a bank holding company that controls a state depository. Neither the state depository that pledges the securities nor any bank that is controlled by a bank holding company that controls that state depository may be the permitted institution with respect to the particular securities pledged by that state depository. A custodian holding in trust securities of a state depository under Subsections (e) and (f) may deposit the pledged securities with a permitted institution if the permitted institution is the third party to the transaction. The securities shall be held by the permitted institution to secure funds deposited by the comptroller in the state depository pledging the securities. On receipt of the securities, the permitted institution shall immediately issue to the custodian an advice of transaction or other document evidencing the deposit of the securities. When the pledged securities held by a custodian are deposited, the permitted institution may apply book entry procedures to the securities. The records of the permitted institution shall at all times reflect the name of the custodian depositing the pledged securities. The custodian shall immediately issue and deliver to the comptroller controlled trust receipts for the pledged securities. The trust receipts shall indicate that the custodian has deposited with the permitted institution the pledged securities held in trust for the state depository pledging the securities. A legal action or proceeding brought by or against the state, arising out of or in connection with the duties of the state depository, the custodian, or other permitted institution under this subchapter must be brought and maintained in state district court in Travis County. In this section, “control” and “bank holding company” have the meanings assigned by § 31.002(a), Finance Code.
(h) On request of the owner or owners, the comptroller or custodian bank may surrender interest coupons or other evidence of interest on securities deposited by state depositories, when the interest is due, if the securities are sufficient to meet the collateral requirements of the state.
(i) A state depository making deposits of securities with the comptroller may cause the securities to be endorsed or stamped, as it considers proper, to show that they are deposited as collateral and not transferable except as provided by this chapter.
(j) If a state depository fails to credit a deposit or part of a deposit made by the comptroller, the comptroller may immediately sell or otherwise convert the securities to money.
(k) Repealed by Acts 1997, 75th Leg., ch. 891, Sec. 3.22(3), eff. Sept. 1, 1997.