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SUBCHAPTER C. CUSTODIAN; PERMITTED INSTITUTION § 2257.041. Deposit of Securities With Custodian (a) In addition to other authority granted by law, a depository for a public entity other than a state agency may deposit with a custodian a security pledged to secure a deposit of public funds. (b) At the request of the public entity, a depository for a public entity other than a state agency shall deposit with a custodian a security pledged to secure a deposit of public funds. (c) A depository for a state agency shall deposit with a custodian a security pledged to secure a deposit of public funds. The custodian and the state agency shall agree in writing on the terms and conditions for securing a deposit of public funds. (d) A custodian must be approved by the public entity and be: (1) a state or national bank that: (A) is designated by the comptroller as a state depository; (B) has its main office or a branch office in this state; and (C) has a capital stock and permanent surplus of $5 million or more; (2) the Texas Treasury Safekeeping Trust Company; (3) a Federal Reserve Bank or a branch of a Federal Reserve Bank; or (4) a federal home loan bank. (e) A custodian holds in trust the securities to secure the deposit of public funds of the public entity in the depository pledging the securities. Added by Acts 1993, 73rd Leg, ch. 268, § 1, eff. Sept. 1, 1993. Amended by Acts 1995, 74th Leg., ch. 1010, § 1, eff. June 17,1995; Acts 1997, 75th Leg., ch. 891, § 3.17, eff. Sept. 1,1997; Acts 1999, 76th Leg., ch. 344, § 5.007, eff. Sept. 1, 1999. § 2257.042. Deposit of Securities With Permitted Institution (a) A custodian may deposit with a permitted institution an investment security the custodian holds under Section 2257.041. (b) If a deposit is made under Subsection (a): (1) the permitted institution shall hold the investment security to secure funds the public entity deposits in the depository that pledges the investment security; (2) the trust receipt the custodian issues under Section 2257.045 shall show that the custodian has deposited the security in a permitted institution; and (3) the permitted institution, on receipt of the investment security, shall immediately issue to the custodian an advice of transaction or other document that is evidence that the custodian deposited the security in the permitted institution. Added by Acts 1993, 73rd Leg, ch. 268, § 1, eff. Sept. 1, 1993. § 2257.043. Depository as Custodian or Permitted Institution (a) A public entity other than a state agency may prohibit a depository or an entity of which the depository is a branch from being the custodian of or permitted institution for a security the depository pledges to secure a deposit of public funds. (b) A depository or an entity of which the depository is a branch may not be the custodian of or permitted institution for a security the depository pledges to secure a deposit of public funds by a City of San Marcos Investment Policy Page 36