Office of House Bill AnalysisS.B. 565
By: Armbrister
Financial Institutions


Under the Uniform Commercial Code, passed by the 76th Legislature and
effective July 1, 2001, governmental issuers are not authorized to transfer
control over their public funds, as required to perfect security interests
in deposit accounts and certain investments. Consequently, security
interests granted by state agencies, municipalities, and other political
subdivisions to secure their bonds and other public securities are
unperfected.  Senate Bill 565 creates provisions relating to the validity,
enforcement, and priority of a perfected security interest.  


It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 


Senate Bill 565 amends the Government Code to provide that a security
interest created by an issuer by means of a security agreement:  

_is perfected from the time the security agreement is entered into or
adopted until the termination of the security agreement;  

 _is valid and effective according to its terms; 

 _is ranked as to priority in order of the time of perfection; and

_may be enforced as provided by the security agreement or the law that
authorizes the security agreement.  

The bill provides the rights of a lien creditor are subordinate to a
perfected security interest. The bill also provides that a security
interest in real property is perfected when the security agreement or other
official instrument is duly recorded in the real property records of the
county in which the property is located. The bill does not create or exempt
an issuer from a duty to submit public securities to the attorney general
for approval and registration by the comptroller or authorize an issuer to
enter into or adopt a security agreement. 


July 1, 2001, or if the Act does not receive the necessary vote, the Act
takes effect September 1, 2001.