Bulletin: TX2012004

 Dear Associates:  

The Texas Commissioner of Insurance has considered the question of whether P-53 should be repealed.  The Commissioner took testimony on this issue at the 2012 Texas Title Insurance Periodic Hearing, Docket No. 2732, held on February 28, 2012.

Commissioner's Order 12-0217 dated March 19, 2012 states: "...at the February 28, 2012, hearing, in accordance with the Notice of Hearing issued on January 12, 2012, the Commissioner considered whether P-53 should be modified further or repealed. The Commissioner determined that TDI would not repeal P-53 as a result of the February 28, 2012, hearing ..."

Should you be requested to provide a producer with something of value that defers a business expense of a producer, please review P-53 to determine if such action would constitute a rebate or discount.  The Commissioner's Order means that P-53 remains intact as written.

Certain relevant portions of P-53 are set out below for your review:

1. (a) "Producer" means a real estate broker, real estate agent, lender, mortgage company, mortgage broker, builder, developer, attorney, or architect who is not an Affiliate of an Authorized Person. A Trade Association is not a Producer; however, Paragraphs 2 and 3 of this rule apply to a Trade Association.

1. (d) "Business Expense" means a cost to operate or promote a business, including but not limited to costs of furnishings, postage, office supplies, advertising, electronic media, computer hardware, computer software, telephones, telephone charges, printing, copiers, fax machines, office equipment, vehicles, staff, employee compensation, and rent. An expense that a Producer, in accordance with generally acceptable accounting principles, is permitted to deduct for tax purposes is presumed to be a Business Expense. Without limiting this definition, the following constitute the payment of Business Expenses of a Producer by an Authorized Person, subject to the provisions of paragraph 3 herein:

(1) jointly, with a Producer, advertising real property not owned by the Authorized Person for sale or lease;

(2) contributing to a Producer or paying any part of the Producer's costs of any of the following:

(A) for sale or for lease signs;

(B) advertisements, in any media or form, that promote any one property not owned by the Authorized Person for sale or lease;

(C) boxes or similar items in which to store advertising media;

(D) hosting an open house;

(E) prizes, food, beverages, gifts, decorations, entertainment or professional services given at open houses; or

(F) parties or receptions which promote a Producer or the Producer's properties or activities of the Producer.

 3. Notwithstanding Paragraph 2, an Authorized Person or its Affiliates may:

(a) join a Trade Association and voluntarily participate in a Trade Association's activities provided that the level of such participation does not exceed normal participation (not more than two hours per business week) of a volunteer member of a Trade Association and is not an activity that would ordinarily be performed by paid staff of a Trade Association;

(b) purchase advertising promoting the title insurance company or the title insurance agent at market rates from any person in any publication, event, or media;

(c) deliver to a party in the transaction or the party's representative legal documents or funds which are directly or indirectly related to a real estate transaction closed by the Authorized Person; and

d) engage in legal promotional and educational activities that are not conditioned on the referral of title insurance business.

5. In addition to any other sanction or penalty which the Commissioner may impose by law, after notice and opportunity for hearing, any person (including a Producer or Authorized Person) found to have violated this Rule is subject to a civil penalty of not more than $10,000 for each act of violation and for each day of violation, unless a greater penalty is specified by the Insurance Code or another insurance law of Texas. The Escrow Officer, Title Insurance Agent or Direct Operation license or the certificate of authority of any person found in violation of this Rule may be suspended or revoked, after notice and opportunity for hearing. [emphasis added]

The foregoing section 5 of P-53 means that the person asking you to take an impermissible action can also be fined $5,000 for each act of violation.  Many producers are unaware they are also liable to the Texas Insurance Department should you agree to violate P-53.  Providing them with a copy of this bulletin or the entirety of P-53 may prove useful.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.