Consent Order Page 1

Order No. 2024-017

IN THE MATTER OF:

QUEST TRUST COMPANY

HOUSTON, TEXAS

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BEFORE:

THE BANKING

COMMISSIONER OF TEXAS

1. Respondent is a Texas state-chartered trust company, charter number 1050-32.

Respondent is subject to supervision and examination by the Texas Department of Banking

(Department).

2. The Department has jurisdiction over Respondent and the subject matter of this

proceeding pursuant to the Texas Trust Company Act, subtitle F of title 3 of the Texas Finance

Code (Finance Code).

3. Respondent has been properly notified of its right to an administrative hearing

under Finance Code Chapter 185.

4. The undersigned representative of Respondent has full authority to enter into and

bind Respondent to the terms and conditions of this Consent Order.

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7. Nothing in this Order diminishes the regulatory or enforcement powers of the

Company Act or other applicable law.

8. This Order does not restrict the Department, the Commissioner, or the Finance

Commission of Texas with respect to any enforcement action or other recourse regarding any past,

current, or future violations by Respondent. Nothing herein shall be construed to limit

Respondent’s right to contest any future finding or determination of non-compliance.

9. For purposes of this Order and the proceedings related to it, Respondent knowingly

and voluntarily waives:

a. service upon Respondent of this Order;

b. the right to present defenses to the allegations in this proceeding;

c. notice and hearing prior to imposition of this Order;

et seq., and any other challenge to the validity of this Order.

proceeding and without Respondent admitting or denying any of the factual findings of the

Commissioner or violations of law or regulations.

11. Respondent has represented and agreed that undirected cash deposited into

customer accounts that were established after February 22, 2024, along with the proceeds thereof,

shall be kept in new accounts (New Customer Accounts) that are separate and segregated from all

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customer accounts, and the proceeds thereof, established on or prior to February 22, 2024 (Existing

12. Respondent has represented and agreed that undirected cash deposited into Existing

Customer Accounts after April 1, 2024 (Existing Customer New Deposits), and the proceeds

thereof, are being separately tracked and segregated on the Respondent’s book and records from

undirected cash deposited into Existing Customer Accounts before April 1, 2024 (Existing

Customer Legacy Deposits).

13. Respondent has represented that it has mailed corrected monthly reports for

December 2023 that comply with applicable law, including clearly stating the fair market value of

the undirected cash held in brokered certificates of deposits as of the applicable date, and disclosing

in a clear and conspicuous manner that undirected cash may lose value and may not be fully insured

by the Federal Deposit Insurance Corporation or other government agencies.

16. The Commissioner has considered this matter and finds as follows:

a. Respondent has filed inaccurate reports regarding its trust business operations with the

Department in violation of applicable regulatory requirements;

b. Respondent has provided misleading statements to its customers that did not disclose

material facts relating to assets entrusted with the Respondent in violation of applicable

law;

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1. Without prior written consent from the Commissioner, the Respondent shall not:

a. make any dividend or distribution of any kind to any shareholders;

other employees who are not involved in the daily operations of the Respondent.

2. As soon as possible, and in any event no later than thirty (30) days after the date of

this Order, the Respondent shall submit corrected quarterly reports for 2023 to the Department in

compliance with all applicable instructions and regulations, including but not limited to the

instructions to value certificates of deposits and other custodial assets at fair market value as of the

report date.

3. Respondent shall promptly comply with any instructions or guidance from the IRS

relating to annual IRS reports and forms, including without limitation Form 5498 reports, including

any instructions to correct reports and forms previously submitted to the IRS. Respondent will

request formal guidance from the IRS on this matter no later than May 3, 2024.

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and regulations and provide clear, reasonable disclosure of relevant material facts, including

deposits and the risks of loss to that cash.

6. The Respondent shall not invest any undirected cash received after entry of this

Order from any source, including prior investments of undirected cash and new deposits, in any

manner other than (a) demand deposit accounts, including but not limited to checking, money

market, and savings accounts, held for the benefit of customers at federally insured depository

institutions (b) certificates of deposit of a federally insured depository institution with maturity of

90 days or less, (c) United States government securities with maturity of 90 days or less, or (d)

money market mutual funds rated “AAA” by S&P Global or an equivalent rating from an eligible

rating service, as defined in chapter 152 of the Texas Finance Code, investing solely in United

States government securities with maturity of 90 days or less.

accordance with § 6 of this Order or to fund customer withdrawals in accordance with §§ 8-9

of this Order; provided, however, that the Respondent may use the proceeds of assets in the New

Customer Accounts for other purposes, including but not limited to funding operating expenses or

restricted capital allocations, as long as (a) the fair market value of the assets in the New Customer

Accounts exceeds the total undirected cash balances of the customer accounts established after

February 22, 2024, and (b) such use is permitted by applicable customer agreements and other

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applicable law.

the Respondent shall fund such withdrawals only from amounts deposited by such customer into

such accounts.

9. Withdrawals on account of undirected cash from Existing Customer Accounts shall

only be funded from Existing Customer Accounts in accordance with this § 9 of this Order.

10. The withdrawal limits in § 9 of this Order do not apply to internal account transfers,

including Roth conversions, rollovers or client account portability, inherited account transfers,

qualified domestic relations orders, and specific customer account consolidations or separations.

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For internal account transfers, undirected cash balances in the account to which such balances are

which such balances are transferred (e.g., New Customer Accounts or Existing Customer

Accounts).

11. Upon occurrence of the Non-Payment Date, the Respondent shall immediately (a)

provide clear and conspicuous written disclosures to all customers with claims to Existing

Customer Accounts that the customers can only withdraw undirected cash balances in an amount

equal to the fair market value of each customer’s total pro rata interest in the aggregate Existing

Customer Accounts, and such disclosures must state the present amount available for withdrawal,

and (b) provide written notice to the Department of this occurrence. In addition, if directed to do

so in writing by the Department within its sole and absolute discretion, the Respondent shall

immediately provide clear and conspicuous written disclosures to all customers with claims to

or otherwise liquidated certificates of deposits or other custodial assets in Existing Customer

Account at a loss, the Respondent must immediately make restitution by replenishing that Existing

Customer Account in an amount equal to the amount paid for those securities less the amount

received for those securities.

13. If the Respondent decides to continue funding withdrawals on account of

undirected cash deposited before the entry of this Order using both funds from Existing Customer

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Accounts and non-custodial corporate funds owned by the Respondent, as permitted by § 9 of this

The Respondent shall make the restitution payments required by § 12 of this Order with non-

custodial corporate funds owned by the Respondent, and without using the Respondent’s restricted

capital. Nothing in this Order reduces the Respondent’s restricted capital or affects the

Respondent’s related obligations to maintain restricted capital as required by applicable law. For

the avoidance of doubt, if it becomes impossible for the Respondent to make the restitution

payments as required by this Order because the Respondent lacks the non-custodial, non-restricted-

capital corporate assets needed to do so, the Respondent shall not be deemed to be in violation of

this Order, but the Respondent agrees that any unpaid restitution obligations will be non-contingent

liabilities and current obligations of the Respondent owed to the customers with claims to the

Existing Customer Account on a pro rata basis, and the Respondent will immediately inform the

needs.

This Order against Respondent is effective on the date signed by the Commissioner and is

final and non-appealable as of that date.

Signed on this 26th day of April, 2024.

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/s/ Charles G. Cooper

Charles G. Cooper

AGREED AS TO FORM AND SUBSTANCE:

Quest Trust Company

By: H. Quincy Long, CEO Quest Trust Company