By: Duncan S.B. No. 982 A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to establishing uniform minimum ethics requirements for 1-3 persons involved in the management or investment of state funds. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Subtitle F, Title 10, Government Code, is amended 1-6 by adding Chapter 2262 to read as follows: 1-7 CHAPTER 2262. ETHICS REQUIREMENTS FOR MANAGING 1-8 OR INVESTING STATE FUNDS 1-9 Sec. 2262.001. APPLICABILITY; CONSTRUCTION WITH OTHER LAW. 1-10 (a) This chapter applies in connection with the management or 1-11 investment of any state funds managed or invested: 1-12 (1) under the Texas Constitution or other law, 1-13 including Chapters 404 and 2256; and 1-14 (2) by or for: 1-15 (A) a public retirement system as defined by 1-16 Section 802.001 that provides service retirement, disability 1-17 retirement, or death benefits for officers or employees of the 1-18 state; 1-19 (B) an institution of higher education as 1-20 defined by Section 61.003, Education Code; or 1-21 (C) another entity that is part of state 1-22 government and that manages or invests state funds or for which 1-23 state funds are managed or invested. 1-24 (b) This chapter applies in connection with the management 1-25 or investment of state funds without regard to whether the funds 2-1 are held in the state treasury. 2-2 (c) This chapter does not apply to or in connection with a 2-3 state governmental entity that does not manage or invest state 2-4 funds and for which state funds are managed or invested only by the 2-5 comptroller. 2-6 (d) To the extent of a conflict between this chapter and 2-7 another law, the law that imposes a stricter ethics requirement 2-8 controls. 2-9 Sec. 2262.002. ETHICS REQUIREMENTS. In addition to any 2-10 other requirements provided by law, the governing body of a state 2-11 governmental entity that manages or invests state funds or for 2-12 which state funds are managed or invested shall enforce an ethics 2-13 policy as provided by this chapter for members of the governing 2-14 body and for officers and employees of, consultants and advisors 2-15 to, and brokers and money managers who provide financial services 2-16 for the state governmental entity. 2-17 Sec. 2262.003. ETHICS REQUIREMENTS FOR OFFICERS AND 2-18 EMPLOYEES: FINANCIAL DISCLOSURE STATEMENT. (a) Each officer and 2-19 employee of a state governmental entity who exercises significant 2-20 decision-making or fiduciary authority in connection with the 2-21 management or investment of state funds, as determined by the 2-22 governing body of the entity, shall file a financial disclosure 2-23 statement with a person designated by the governing body and with 2-24 the state auditor. 2-25 (b) The content of the financial disclosure statement must 2-26 substantially comply with the requirements of Subchapter B, Chapter 3-1 572. 3-2 (c) The officer or employee shall file the first financial 3-3 statement not later than the 30th day after the date the person is 3-4 first employed by the state governmental entity in a position in 3-5 which the officer or employee exercises authority as described by 3-6 Subsection (a) and shall file annual statements not later than 3-7 April 30 of each subsequent year in which the officer or employee 3-8 remains employed in such a position. The filing deadline may be 3-9 postponed: 3-10 (1) by the administrative head of the state 3-11 governmental entity for not more than 60 days on written request; 3-12 and 3-13 (2) for an additional period for good cause as 3-14 determined by: 3-15 (A) the presiding officer of a multimember 3-16 governing body; or 3-17 (B) the single state official who governs the 3-18 state governmental entity. 3-19 (d) The state governmental entity shall maintain a financial 3-20 disclosure statement for at least five years after the date of its 3-21 filing. 3-22 Sec. 2262.004. ETHICS REQUIREMENTS FOR GOVERNING BODY, 3-23 OFFICERS, AND EMPLOYEES: DISCLOSURE OF CERTAIN RELATIONSHIPS. 3-24 (a) A member of the governing body of, or an officer or employee 3-25 of, a state governmental entity who has a direct or indirect 3-26 business or commercial relationship that could reasonably be 4-1 expected to diminish the person's independence of judgment in the 4-2 performance of the person's responsibilities in connection with the 4-3 management or investment of state funds shall disclose the 4-4 relationship in writing to a person designated by the governing 4-5 body and to the state auditor. 4-6 (b) A person who files a disclosure statement under 4-7 Subsection (a) or who is required to file such a statement may not 4-8 give advice or make decisions about matters affected by the 4-9 conflict of interest unless the governing body, after consultation 4-10 with the general counsel of the state governmental entity, 4-11 expressly waives this prohibition. The state governmental entity 4-12 shall maintain a written record of each waiver and the reasons for 4-13 it. 4-14 (c) The governing body may delegate the authority to waive 4-15 prohibitions under Subsection (b) that affect an officer or 4-16 employee to one or more designated officers or employees. The 4-17 governing body may adopt criteria for designated officers or 4-18 employees to use to determine the kinds of relationships that do 4-19 not constitute a material conflict of interest for purposes of 4-20 Subsection (b). A multimember governing body may delegate this 4-21 authority only by adopting an order on a vote of a majority of its 4-22 members at an open meeting called and held in compliance with 4-23 Chapter 551, and the governing body shall have the order entered 4-24 into the minutes of the meeting. 4-25 Sec. 2262.005. ETHICS REQUIREMENTS FOR GOVERNING BODY, 4-26 OFFICERS, AND EMPLOYEES: ANNUAL ETHICS COMPLIANCE STATEMENT. 5-1 (a) Each member of the governing body of a state governmental 5-2 entity that manages or invests state funds or for which state funds 5-3 are managed or invested and each officer and employee of the 5-4 governmental entity required to file a financial disclosure 5-5 statement under Section 2262.003 shall file annually a compliance 5-6 statement certifying that the person is in compliance with all 5-7 applicable requirements prescribed by or under this chapter. The 5-8 person shall file the statement with a person designated by the 5-9 governing body and with the state auditor. 5-10 (b) The governing body of the state governmental entity 5-11 shall prescribe the date by which the compliance statement must be 5-12 filed. 5-13 Sec. 2262.006. ETHICS REQUIREMENTS FOR CONSULTANTS, 5-14 ADVISORS, MONEY MANAGERS, AND BROKERS. (a) The governing body by 5-15 rule shall adopt standards of conduct applicable to consultants, 5-16 advisors, money managers, and brokers who advise the state 5-17 governmental entity or a member of the governing body of the state 5-18 governmental entity in connection with the management or investment 5-19 of state funds or provide financial services to the state 5-20 governmental entity and who: 5-21 (1) may reasonably be expected to receive more than 5-22 $10,000 in compensation from the entity during a fiscal year; or 5-23 (2) render important investment or funds management 5-24 advice to the entity or a member of the governing body of the 5-25 entity, as determined by the governing body. 5-26 (b) A consultant, advisor, money manager, or broker who 6-1 advises a state governmental entity or a member of the governing 6-2 body of the state governmental entity in connection with the 6-3 management or investment of state funds or provides financial 6-4 services to the state governmental entity shall disclose in writing 6-5 to the administrative head of the entity and to the state auditor 6-6 any relationship the consultant, advisor, money manager, or broker 6-7 has with any party to a transaction with the state governmental 6-8 entity, other than a relationship necessary to the investment or 6-9 funds management services that the consultant, advisor, money 6-10 manager, or broker performs for the state governmental entity, if 6-11 the relationship could reasonably be expected to diminish the 6-12 person's independence of judgment in the performance of the 6-13 person's responsibilities to the state governmental entity. 6-14 (c) The consultant, advisor, money manager, or broker shall 6-15 disclose a relationship described by Subsection (b) without regard 6-16 to whether the relationship is a direct, indirect, personal, 6-17 private, commercial, or business relationship. 6-18 (d) A consultant, advisor, money manager, or broker 6-19 described by Subsection (a) shall file annually a statement with 6-20 the administrative head of the applicable state governmental entity 6-21 and with the state auditor. The statement must disclose each 6-22 relationship described by Subsection (b), if any. The state 6-23 auditor by rule shall prescribe the date by which the statement 6-24 must be filed. The state auditor may prescribe a uniform date or 6-25 may prescribe different dates for statements filed in relation to 6-26 different state governmental entities. The consultant, advisor, 7-1 money manager, or broker shall file a new or amended statement with 7-2 the administrative head of the applicable state governmental entity 7-3 and with the state auditor whenever there is new information to 7-4 report under Subsection (b). 7-5 Sec. 2262.007. DISCLOSURE OF CERTAIN EXPENDITURES BY 7-6 CONSULTANTS, ADVISORS, MONEY MANAGERS, AND BROKERS. The governing 7-7 body by rule shall require consultants, advisors, money managers, 7-8 and brokers who provide investment or funds management advice to 7-9 the state governmental entity or provide financial services to the 7-10 state governmental entity to file regularly with the entity a 7-11 report detailing any expenditure of more than $250 made on behalf 7-12 of a member of the governing body or an officer or employee of the 7-13 state governmental entity. 7-14 Sec. 2262.008. PUBLIC INFORMATION. (a) Chapter 552 7-15 controls the extent to which information contained in a statement, 7-16 waiver, or report filed under this chapter is subject to required 7-17 public disclosure or excepted from required public disclosure. 7-18 (b) The governing body shall designate an employee to be the 7-19 custodian of the statements, waivers, and reports for purposes of 7-20 public disclosure under Chapter 552. 7-21 Sec. 2262.009. FORMS. The state auditor shall prescribe 7-22 forms for financial disclosure statements, annual ethics compliance 7-23 statements, disclosure statements of conflicts of interests, and 7-24 waivers of the prohibition against involvement in a matter affected 7-25 by a conflict of interest. 7-26 SECTION 2. Each state governmental entity required to adopt 8-1 rules under Chapter 2262, Government Code, as added by this Act, 8-2 shall adopt its initial rules in time for the rules to take effect 8-3 not later than January 1, 2002. 8-4 SECTION 3. This Act takes effect September 1, 2001.