SB 137 — TRUST COMPANY ACT CHANGES

C.

For a corporation not engaged in the trust business prior to the effective date of the Trust Company Act, the amount of the surety bond, if financial responsibility is e e 17 not otherwise established to the commissioner's satisfaction, e e n d 18 shall be one hundred thousand dollars ($100,000)] in the = = l ] 19 following amounts:

a l r i 20 Trust Assets Fidelity Bond Amounts t e a t $3,000,000 or less $500,000 m m 21 e d r e 22 More than $3,000,000 but not c e r c 23 more than $15,000,000 $750,000 e a n b 24 More than $15,000,000 but not u [ more than $25,000,000 $1,000,000 .209461.4 - 6 - More than $25,000,000 but not more than $50,000,000 $1,500,000 More than $50,000,000 but not more than $75,000,000 $2,000,000 More than $75,000,000 but not 6 more than $100,000,000 $2,750,000 More than $100,000,000 but not more than $500,000,000 $3,500,000 More than $500,000,000 but not more than $1,000,000,000 $5,000,000 More than $1,000,000,000 $5,000,000 plus $1,000,000 for every $100,000,000 over $1,000,000,000.

AThe trustminimum companycapital shallrequirement file a signed copy of its fidelity bond with the director, and the fidelity bond shall ebe ewaived 17for remainnonprofit acorporations." partSECTION of5. the division's records.

eSection e58-9-7 nNMSA d1978 18(being C.Laws 1973, Chapter 191, Section 7) is amended to read:

Every"58-9-7. fidelity bond filed with the director by a = = l ] 19 trust company pursuant to Subsection A of this section shall a l r i 20 contain a provision prohibiting the bond company from canceling t e a t such fidelity bond for failure to pay the premium unless the m m 21 e d r e 22 bond company files a written notice with the director at least c e r c 23 ten days before canceling the fidelity bond.

EveryFIDELITY fidelityBOND--INSURANCE eREQUIRED--EVIDENCE aOF nFINANCIAL bRESPONSIBILITY 24REQUIRED.-- bondA. filed with the director by a trust company pursuant to u [ Subsection A of this section shall contain a provision .209461.4 - 7 - prohibiting the bond company from canceling such fidelity bond for any other reason unless the bond company files a written notice with the director at least thirty days before canceling the fidelity bond.

No corporation shall obtain a certificate without securing and filing with the director a fidelity bond in the following amounts:

Trust Assets Managed Fidelity Bond Amounts by a Fiduciary $3,000,000 or less $500,000 More than $3,000,000 but not more than $15,000,000 $750,000 More than $15,000,000 but not more than $25,000,000 $1,000,000 More than $25,000,000 but not more than $50,000,000 $1,500,000 More than $50,000,000 but not more than $75,000,000 $2,000,000 SB 137 Page 5 More than $75,000,000 but not more than $100,000,000 $2,750,000 More than $100,000,000 but not more than $500,000,000 $3,500,000 More than $500,000,000 but not more than $1,000,000,000 $5,000,000 More than $1,000,000,000 but not more than $2,000,000,000 $6,000,000 More than $2,000,000,000 $6,000,000 plus $1,000,000 for every $1,000,000,000 over $2,000,000,000.

B.

A trust company shall file a signed copy of its fidelity bond with the director, and the fidelity bond shall remain a part of the division's records.

C.

Every fidelity bond filed with the director by a trust company pursuant to Subsection A of this section shall contain a provision prohibiting the bond company from canceling such fidelity bond for failure to pay the premium unless the bond company files a written notice with the director at least ten days before canceling the fidelity bond.

Every fidelity bond filed with the director by a trust company pursuant to Subsection A of this section shall contain a provision prohibiting the bond company from canceling such fidelity bond for any other reason unless the SB 137 Page 6 bond company files a written notice with the director at least thirty days before canceling the fidelity bond.

Except as provided in Subsection E of this 6 section, a fidelity bond secured and filed pursuant to this section shall contain a deductible clause not to exceed fifteen percent of the face amount of the fidelity bond.

If the director has not issued written approval for the trust company to secure and file a fidelity bond with a deductible clause in e e 17 excess of fifteen percent within thirty days of the expiration e e n d 18 of the trust company's prior fidelity bond, the request of the = = l ] 19 trust company shall be deemed denied.

a l r i 20 [D.] F.

On or before [the first day of] March 1 of t e a t each year beginning with the year [1974 ] 2019, every trust m m 21 e d r e 22 company shall increase or adjust its [surety] fidelity bond [if c e r c 23 financial responsibility is not otherwise established to the e a n b 24 commissioner's satisfaction] to an amount equal to [twenty-five u [ percent of the aggregate value of the property, money or other .209461.4 - 8 - valuables held in trust as of the last day of the preceding year if the amount of its surety bond is less than twenty-five percent of the aggregate value of the property, money or other valuables held in trust] the amount required pursuant to Subsection A of this section.

6G. [E.

InThe nofidelity eventbond shallrequired theby amountthis ofsection theshall suretybe bond,for if financial responsibility is not otherwise established to the commissioner'sbenefit satisfaction,of: be less than one hundred thousand dollars ($100,000) nor more than five hundred thousand dollars ($500,000).

F.](1) G.any person damaged by an act or acts of SB 137 Page 7 a trust company or its directors, officers or employees as a result of a violation of the provisions of, or any rule promulgated pursuant to, the Trust Company Act, the Uniform Probate Code, the Uniform Prudent Investor Act or the Uniform Trust Code;

The(2) [surety]any fidelityperson bonddamaged [orby otherthe evidencenegligence, offraud financialor responsibility]embezzlement requiredof bya thistrust sectioncompany shallor beits fordirectors, theofficers benefitor of:employees;

(1)or (3) any person damaged by anany actother orbreach acts of a trust company or its directors, officers or employees as a result of a violation of the provisions of, or any [regulationtrust ecompany. e 17 or] rule promulgated pursuant to, the Trust Company Act, the e e n d 18 Uniform Probate Code, the Uniform Prudent Investor Act or the = = l ] 19 Uniform Trust Code;

aH. l r i 20 (2) any person damaged by the negligence, t e a t fraud or embezzlement of a [certified ] trust company or its m m 21 e d r e 22 directors, officers or employees;

[andThe ]amount orof ca efidelity rbond crequired 23by (3)this anysection personmay damagedbe reduced by anythe otherdirector breachfor ofnonprofit ecorporations athat nhave botherwise 24established trustfinancial ofresponsibility anyto [certifiedthe ]director's trustsatisfaction. company.

u [ H.

The amount of a fidelity bond required by this .209461.4 - 9 - section may be reduced by the director for nonprofit corporations that have otherwise established financial responsibility to the director's satisfaction.

A reduction in the amount of a required fidelity bond approved by the director pursuant to Subsection H of this 6 section shall be reviewed by the director on an annual basis, at which time the reduction may be terminated upon ninety days' written notice by the director to the nonprofit corporation.

[G.] J.

The [commissioner] director shall revoke the certificate of any trust company [which ] that fails to maintain a bond or to otherwise supply evidence of financial responsibility as required by this section.

The board of directors of a trust company shall SB 137 Page 8 acquire suitable insurance to protect the trust company against burglary, robbery, forgery, theft, fraud, embezzlement and other similar insurable losses to which the trust company may e e 17 be exposed in the operation of the trust company.

e e n d 18 L.

The board of directors of a trust company shall = = l ] 19 procure errors and omissions insurance of at least five hundred a l r i 20 thousand dollars ($500,000).

t e a t M.

At least once each year, the board of directors m m 21 e d r e 22 of a trust company shall review the insurance coverage as set c e r c 23 forth in Subsections K and L of this section to determine the e a n b 24 adequacy of coverage in relation to the exposure of the trust u [ company.

The minimum amount of insurance required pursuant to .209461.4 - 10 - this section does not automatically represent adequate insurance coverage in relation to the exposure.

Immediately after procuring the insurance as required by Subsections K and L of this section, the board of directors 6 shall file copies of the insurance policies with the director.

A trust company may be determined by the director to have demonstrated a lack of financial SB 137 Page 9 responsibility when any of the following nonexclusive conditions exist:

or (2) the trust company fails to pay, in the e e 17 manner commonly accepted by business practices, its obligations e e n d 18 when due.

= = l ] 19 P.

A trust company may be determined by the a l r i 20 director to be in an unsafe and unsound condition when any one t e a t of the following nonexclusive conditions exist:

m m 21 e d r e 22 (1) the trust company fails to safely manage c e r c 23 its operations;

e a n b 24 (2) the trust company fails to provide u [ services to its trust customers pursuant to the trust company's .209461.4 - 11 - fiduciary duty;

Upon the filing of an application for a certificate, the director [of the financial institutions division] shall make or cause to be made a careful investigation and examination and shall issue a certificate if [he] the director finds:

SB 137 Page 10 (1) that the persons who will serve as directors or officers, [other than directors and officers of nonprofit corporations] insofar as those persons are known, are qualified to be fiduciaries by character and experience and that the financial status of the stockholders, directors and e e 17 officers [other than directors and officers of nonprofit e e n d 18 corporations] is consistent with their responsibilities and = = l ] 19 duties as fiduciaries;

[except that ] for nonprofit a l r i 20 corporations, [the ] any employee responsible for trust t e a t management shall be qualified to be a fiduciary by character m m 21 e d r e 22 and experience;

c e r c 23 (2) that the name of the proposed company is e a n b 24 not deceptively similar to that of another trust company or u [ bank or is not otherwise misleading;

.209461.4 - 12 - (3) that the capital and surplus are not less than the required minimum, except that this requirement shall not apply to nonprofit corporations;

The director [of the financial institutions division] may consider and inquire into such other facts and circumstances bearing on the proposed trust company and its relation to its locality as in [his ] the director's opinion may be relevant.

The certificate may be granted or denied without hearing, but the director [of the financial institutions division] may, and at the request of the applicant shall, fix a date for a hearing on the SB 137 Page 11 application.

At the hearing, any person may be heard with reference to the facts to be e e 17 investigated." e e n d 18 SECTION 7.

Section 58-9-9 NMSA 1978 (being Laws 1973, = = l ] 19 Chapter 191, Section 9, as amended) is amended to read:

a l r i 20 "58-9-9.

POWERS OF DIRECTOR.--In addition to other powers t e a t conferred by the Trust Company Act, the director [of the m m 21 e d r e 22 financial institutions division has power to] may:

c e r c 23 A.

examine the business and affairs of each trust e a n b 24 company at least once each year and at such other times and to u [ such extent as [he may deem ] the director deems necessary or .209461.4 - 13 - advisable.

] rule the C.

implement by order and [regulationrule [provisions of the ] Trust Company Act;

[and] in making orders and rules to implement the Trust Company Act, the director shall act in the interest of promoting and maintaining a sound trust company system, the security of assets and trust accounts and the protection of persons utilizing trust services;

obtain restraining orders and injunctions to prevent violation of and enforce compliance with the Trust Company Act, and orders and [regulations issued] rules promulgated pursuant to the [provisions of the] Trust Company Act [In making orders and regulations to implement the Trust Company Act, the director shall act in the interest of e e 17 promoting and maintaining a sound trust company system, the e e n d 18 security of assets and trust accounts and the protection of = = l ] 19 persons utilizing trust services], the Uniform Probate Code, a l r i 20 the Uniform Prudent Investor Act and the Uniform Trust Code;

tSB e137 aPage t12 [D.] E.

order any person or trust company to cease m m 21 e d r e 22 violating the Trust Company ActAct, , orders and [regulations c e r c 23 issued] rules promulgated pursuant to the [provisions of the] e a n b 24 Trust Company Act, the Uniform Probate Code, the Uniform u [ Prudent Investor Act or the Uniform Trust Code, or to cease .209461.4 - 14 - engaging in breaches of trust.

[E.] F.

suspend, after notice and hearing, any officer or director, or any employee of a nonprofit corporation, for fraud, embezzlement or failure to comply with the Trust Company Act or orders or [regulations issued] rules promulgated pursuant to the Trust Company ActAct, [or any provision of that act], the Uniform Probate Code, the Uniform Prudent Investor Act or the Uniform Trust Code;

and [F.] G.

SectionA 58-9-10new NMSAsection 1978of (beingthe LawsTrust 1973,Company ChapterAct 191, Section 10, as amended by Laws 2013, Chapter 88, e e 17 Section 4 and by Laws 2013, Chapter 97, Section 4) is amendedenacted e e n d 18 to read:

="APPEALS.-- =A. l ] 19 "58-9-10.

IMPAIRMENTA OFperson CAPITAL--UNSAFEaggrieved CONDITIONS--by a lfinal rorder iof 20the RECEIVERSHIP.--director tmay eappeal ato tthe A.district court pursuant to the provisions of Section 39-3-1.1 NMSA 1978.

If it appears to the director that the capital m m 21 e d r e 22 of a trust company is either reduced or impaired below [five c e r c 23 hundred thousand dollars ($500,000)] the minimum capital e a n b 24 requirements set forth in Section 58-9-6 NMSA 1978, except for u [ nonprofit corporations, [or the affairs of the company are in .209461.4 - 15 - an unsound condition ] the director shall order the company to make good any deficit [or to remedy the unsafe condition of its affairs] within sixty days of the date of the order and may restrict and regulate the operation of the trust business until the capital is restored.

IfThe thecommencement deficiencyof inproceedings capitalpursuant hasto notSB been137 madePage good13 [andSubsection theA unsafeof conditionthis remediedsection ]does withinnot, theunless prescribedspecifically time,ordered theby director may apply to the districtcourt, courtoperate inas thea countystay in which the principal office of the companydirector's isorder." locatedSECTION to9. [be appointed ] have a receiver appointed for the liquidation or rehabilitation of the company.

Section 58-9-10 NMSA 1978 (being Laws 1973, Chapter 191, Section 10, as amended by Laws 2013, Chapter 88, Section 4 and by Laws 2013, Chapter 97, Section 4) is amended to read:

"58-9-10.

IMPAIRMENT OF CAPITAL--UNSAFE CONDITIONS-- RECEIVERSHIP.-- A.

If it appears to the director that the capital of a trust company is either reduced or impaired below the minimum capital requirements set forth in Section 58-9-6 NMSA 1978, except for nonprofit corporations, the director shall order the company to make good any deficit within sixty days of the date of the order and may restrict and regulate the operation of the trust business until the capital is restored.

B.

If the deficiency in capital has not been made good within the prescribed time, the director may apply to the district court in the county in which the principal office of the company is located to have a receiver appointed for the liquidation or rehabilitation of the company.

The director may investigate, upon complaint or SB 137 Page 14 otherwise, if it appears that a trust company is conducting business in an unsafe, unsound, financially irresponsible or e e 17 injurious manner or in violation of the Trust Company Act, or e e n d 18 the rules promulgated pursuant to that act, the Uniform Probate = = l ] 19 Code, the Uniform Prudent Investor Act or the Uniform Trust a l r i 20 Code, or when it appears that any person is engaging in trust t e a t business without being certified pursuant to the Trust Company m m 21 e d r e 22 Act.

c e r c 23 D.

If it appears upon sufficient ground or evidence e a n b 24 satisfactory to the director that a trust company has engaged u [ in or is about to engage in any act or practice in violation of .209461.4 - 16 - the Trust Company Act, or any rule or order pursuant to that act, or the Uniform Probate Code, the Uniform Prudent Investor Act or the Uniform Trust Code, to the extent that the security of the assets and trust accounts or the protection of persons utilizing the trust services have been or may be jeopardized, 6 the director may summarily order the trust company to cease and desist from that act or practice, or the director may apply to the district court of the first judicial district of Santa Fe county to enjoin the trust company in engaging in the act or practice and to enforce compliance with the Trust Company Act, the Uniform Probate Code, the Uniform Prudent Investor Act or the Uniform Trust Code, or for any other appropriate equitable relief.

Upon a proper showing, if a temporary restraining order, a SB 137 Page 15 preliminary injunction or a permanent injunction is granted, a receiver may be appointed for the defendant or defendant's assets, and the certification of the trust company e e 17 may be canceled and such additional or other equitable remedies e e n d 18 may be provided as the court deems appropriate.

The director = = l ] 19 shall not be required to post a bond.

a l r i 20 E.

If an investigation pursuant to Subsection C of t e a t this section reveals that a trust company is conducting m m 21 e d r e 22 business in an unsafe, unsound or injurious manner, or in c e r c 23 violation of the Trust Company Act or rules promulgated e a n b 24 pursuant to that act, the Uniform Probate Code, the Uniform u [ Prudent Investor Act or the Uniform Trust Code, or that any .209461.4 - 17 - person is engaging in trust business without being certified pursuant to the Trust Company Act, the trust company or person investigated shall pay to the director an investigation fee at the rate of one hundred fifty dollars ($150) per day or fraction of a day for each authorized representative engaged in 6 the investigation." SECTION 9.10.

DISCONTINUING BUSINESS--REORGANIZATIONBUSINESS--REORGANIZATION-- -- CONTINUING JURISDICTION.-- A.

Whenever any corporation desires to discontinue doing a trust business and surrenders its certificate or if its certificate is suspended or revoked, the company shall [nevertheless]SB 137 Page 16 continue to be subject to the [provisions of the] Trust Company Act for so long as it acts as a fiduciary with respect to any trust business previously undertaken.

e e 17 B.

A trust company seeking to relinquish its e e n d 18 certificate by liquidation shall file an application for = = l ] 19 dissolution with the director.

The application shall include a a l r i 20 comprehensive plan for dissolution setting forth the proposed t e a t disposition of all assets and liabilities in reasonable detail m m 21 e d r e 22 to effect a liquidation.

The plan of dissolution shall provide c e r c 23 for the discharge or assumption of all the trust company's e a n b 24 known and unknown claims and liabilities and for the transfer u [ of all its responsibilities as a trustee to a successor trustee .209461.4 - 18 - or trustees.

Additionally, the application for dissolution shall include other evidence, certifications, affidavits, documents or information as the director may require demonstrating how assets and liabilities will be disposed of, the timetable for effecting disposition of the assets and 6 liabilities and the trust company's proposal for addressing any claims that are asserted after the dissolution has been completed.

The director may conduct a special examination of the trust company for purposes of SB 137 Page 17 evaluating the application.

A trust company seeking to reorganize, including any change in ownership of the corporation of ten percent or greater, shall file an application for reorganization with the e e 17 director.

The application shall include a comprehensive plan e e n d 18 for reorganization setting forth the proposed disposition of = = l ] 19 all assets and liabilities in reasonable detail to effect a a l r i 20 reorganization.

The plan of reorganization shall provide for t e a t the assumption of all the trust company's known and unknown m m 21 e d r e 22 claims and liabilities and for the transfer of all its c e r c 23 responsibilities as a trustee to a successor trustee or e a n b 24 trustees.

Additionally, the application for reorganization u [ shall include other evidence, certifications, affidavits, .209461.4 - 19 - documents or information as the director may require demonstrating how assets and liabilities will be treated and the trust company's proposal for addressing any claims that are asserted after the reorganization has been completed.

The director shall examine the application for completeness and 6 compliance with the requirements of this section, the business entity laws applicable to the required type of reorganization and applicable rules.

The director may conduct a special examination of the trust company for purposes of evaluating the application." SECTION 10.11.

Section 58-9-12 NMSA 1978 (being Laws 1973, SB 137 Page 18 Chapter 191, Section 12) is amended to read:

It [shall be] is unlawful for any corporation to carry on or conduct a trust company business or to advertise or hold itself out as being engaged in or doing a trust company e e 17 business or to use in connection with its business the words e e n d 18 "trust company" or words of similar import without first having = = l ] 19 complied with all the provisions of law relating to trust a l r i 20 companies.

All officers, directors or trustees of any t e a t corporation violating this section [shall be ] are guilty of a m m 21 e d r e 22 misdemeanor and shall be punished by a fine not to exceed five c e r c 23 thousand dollars ($5,000) or imprisonment in the county jail e a n b 24 for a definite term not exceeding one year or bothboth. [such fine u [ and imprisonment].

.209461.4 - 20 - B.

Any person refusing or obstructing access to the director to any books, records or papers, refusing to furnish required information or hindering a full examination of the books, accounts, papers or finances of a trust company is guilty of a misdemeanor and shall be punished by a fine not to 6 exceed five thousand dollars ($5,000) or imprisonment in the county jail for a definite term not exceeding one year or both." SECTION 11.12.

SECTION 12.13.

-SB 21137 -Page 15 e e 17 e e n d 18 = = l ] 19 a l r i 20 t e a t m m 21 e d r e 22 c e r c 23 e a n b 24 u [ .209461.4