By Duncan S.B. No. 982 77R2253 JRD-D 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 fund 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: 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. 1-23 (b) To the extent of a conflict between this chapter and 1-24 another law, the law that imposes a stricter ethics requirement 2-1 controls. 2-2 Sec. 2262.002. ETHICS REQUIREMENTS. In addition to any 2-3 other requirements provided by law, the governing body of a state 2-4 governmental entity that manages or invests state funds shall 2-5 enforce an ethics policy as provided by this chapter for employees 2-6 of, consultants and advisors to, and brokers who provide financial 2-7 services for the state governmental entity. 2-8 Sec. 2262.003. ETHICS REQUIREMENTS FOR EMPLOYEES: FINANCIAL 2-9 DISCLOSURE STATEMENT. (a) Each employee of a state governmental 2-10 entity who exercises significant decision-making or fiduciary 2-11 authority in connection with the management or investment of state 2-12 funds, as determined by the governing body of the entity, shall 2-13 file a financial disclosure statement with a person designated by 2-14 the governing body. 2-15 (b) The content of the financial disclosure statement must 2-16 substantially comply with the requirements of Subchapter B, Chapter 2-17 572. 2-18 (c) The employee shall file the first financial statement 2-19 not later than the 30th day after the date the person is first 2-20 employed by the state governmental entity in a position in which 2-21 the employee exercises authority as described by Subsection (a), 2-22 and shall file annual statements not later than April 30 of each 2-23 subsequent year in which the employee remains employed in such a 2-24 position. The filing deadline may be postponed: 2-25 (1) by the administrative head of the state 2-26 governmental entity for not more than 60 days on written request; 2-27 and 3-1 (2) for an additional period for good cause as 3-2 determined by: 3-3 (A) the presiding officer of a multimember 3-4 governing body; or 3-5 (B) the single state official who governs the 3-6 state governmental entity. 3-7 (d) The state governmental entity shall maintain a financial 3-8 disclosure statement for at least five years after the date of its 3-9 filing. 3-10 Sec. 2262.004. ETHICS REQUIREMENTS FOR EMPLOYEES: DISCLOSURE 3-11 OF CERTAIN RELATIONSHIPS. (a) An employee of a state governmental 3-12 entity who has a business or commercial relationship that could 3-13 reasonably be expected to diminish the employee's independence of 3-14 judgment in the performance of the employee's responsibilities in 3-15 connection with the management or investment of state funds shall 3-16 disclose the relationship in writing to a person designated by the 3-17 governing body. 3-18 (b) An employee who files a disclosure statement under 3-19 Subsection (a) may not give advice or make decisions about matters 3-20 affected by the conflict of interests unless the governing body, 3-21 after consultation with the general counsel of the state 3-22 governmental entity, expressly waives this prohibition. The state 3-23 governmental entity shall maintain a written record of each waiver 3-24 and the reasons for it. 3-25 (c) The governing body may delegate the authority to waive 3-26 prohibitions under Subsection (b) to one or more designated 3-27 employees or officers. The governing body may adopt criteria for 4-1 designated employees to use to determine the kinds of relationships 4-2 that do not constitute a material conflict of interests for 4-3 purposes of Subsection (b). A multimember governing body may 4-4 delegate this authority only by adopting an order on a vote of a 4-5 majority of its members at an open meeting called and held in 4-6 compliance with Chapter 551, and the governing body shall have the 4-7 order entered into the minutes of the meeting. 4-8 Sec. 2262.005. ETHICS REQUIREMENTS FOR CONSULTANTS AND 4-9 ADVISORS. (a) The governing body by rule shall adopt standards of 4-10 conduct applicable to consultants and advisors who advise the state 4-11 governmental entity in connection with the management or investment 4-12 of state funds and who: 4-13 (1) may reasonably be expected to receive more than 4-14 $10,000 in compensation from the entity during a fiscal year; or 4-15 (2) render important investment or funds management 4-16 advice to the entity, as determined by the governing body. 4-17 (b) A consultant or advisor who advises a state governmental 4-18 entity in connection with the management or investment of state 4-19 funds shall disclose in writing to the administrative head of the 4-20 entity any relationship the consultant or advisor has with any 4-21 party to a transaction with the state governmental entity, other 4-22 than a relationship necessary to the investment or funds management 4-23 services that the consultant or advisor performs for the state 4-24 governmental entity, if the relationship could reasonably be 4-25 expected to diminish the person's independence of judgment in the 4-26 performance of the person's responsibilities to the state 4-27 governmental entity. 5-1 (c) The advisor or consultant shall disclose a relationship 5-2 described by Subsection (b) without regard to whether the 5-3 relationship is a direct, indirect, personal, private, commercial, 5-4 or business relationship. 5-5 Sec. 2262.006. DISCLOSURE OF CERTAIN EXPENDITURES BY 5-6 CONSULTANTS, ADVISORS, AND BROKERS. The governing body by rule 5-7 shall require consultants and advisors who provide investment or 5-8 funds management advice to the state governmental entity and 5-9 brokers who provide financial services to the state governmental 5-10 entity to file regularly with the entity a report detailing any 5-11 expenditure of more than $50 made on behalf of a member of the 5-12 governing body or an employee of the state governmental entity. 5-13 Sec. 2262.007. PUBLIC INFORMATION. (a) Statements, 5-14 waivers, and reports filed under this chapter are public 5-15 information subject to required disclosure in accordance with 5-16 Chapter 552. 5-17 (b) The governing body shall designate an employee to be the 5-18 custodian of the statements, waivers, and reports for purposes of 5-19 public disclosure. 5-20 Sec. 2262.008. FORMS. The governing body shall prescribe 5-21 forms for financial disclosure statements, disclosure statements of 5-22 conflicts of interests, and waivers of the prohibition against 5-23 involvement in a matter affected by a conflict of interests. 5-24 SECTION 2. Each state governmental entity required to adopt 5-25 rules under Chapter 2262, Government Code, as added by this Act, 5-26 shall adopt its initial rules in time for the rules to take effect 5-27 not later than January 1, 2002. 6-1 SECTION 3. This Act takes effect September 1, 2001.