1-1     By:  Duncan                                            S.B. No. 982
 1-2           (In the Senate - Filed February 28, 2001; March 1, 2001, read
 1-3     first time and referred to Committee on Finance; April 24, 2001,
 1-4     reported adversely, with favorable Committee Substitute by the
 1-5     following vote:  Yeas 12, Nays 0; April 24, 2001, sent to printer.)
 1-6     COMMITTEE SUBSTITUTE FOR S.B. No. 982                   By:  Duncan
 1-7                            A BILL TO BE ENTITLED
 1-8                                   AN ACT
 1-9     relating to establishing uniform minimum ethics requirements for
1-10     persons involved in the management or investment of state funds.
1-11           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-12           SECTION 1.  Subtitle F, Title 10, Government Code, is amended
1-13     by adding Chapter 2262 to read as follows:
1-14               CHAPTER 2262.  ETHICS REQUIREMENTS FOR MANAGING
1-15                          OR INVESTING STATE FUNDS
1-16           Sec. 2262.001.  APPLICABILITY; CONSTRUCTION WITH OTHER LAW.
1-17     (a)  This chapter applies in connection with the management or
1-18     investment of any state funds managed or invested:
1-19                 (1)  under the Texas Constitution or other law,
1-20     including Chapters 404 and 2256; and
1-21                 (2)  by or for:
1-22                       (A)  a public retirement system as defined by
1-23     Section 802.001 that provides service retirement, disability
1-24     retirement, or death benefits for officers or employees of the
1-25     state;
1-26                       (B)  an institution of higher education as
1-27     defined by Section 61.003, Education Code; or
1-28                       (C)  another entity that is part of state
1-29     government and that manages or invests state funds or for which
1-30     state funds are managed or invested.
1-31           (b)  This chapter applies in connection with the management
1-32     or investment of state funds without regard to whether the funds
1-33     are held in the state treasury.
1-34           (c)  This chapter does not apply to or in connection with a
1-35     state governmental entity that does not manage or invest state
1-36     funds and for which state funds are managed or invested only by the
1-37     comptroller.
1-38           (d)  To the extent of a conflict between this chapter and
1-39     another law, the law that imposes a stricter ethics requirement
1-40     controls.
1-41           Sec. 2262.002.  ETHICS REQUIREMENTS.  In addition to any
1-42     other requirements provided by law, the governing body of a state
1-43     governmental entity that manages or invests state funds or for
1-44     which state funds are managed or invested shall enforce an ethics
1-45     policy as provided by this chapter for members of the governing
1-46     body and for officers and employees of, consultants and advisors
1-47     to, and brokers and money managers who provide financial services
1-48     for the state governmental entity.
1-49           Sec. 2262.003.  ETHICS REQUIREMENTS FOR OFFICERS AND
1-50     EMPLOYEES: FINANCIAL DISCLOSURE STATEMENT.  (a)  Each officer and
1-51     employee of a state governmental entity who exercises significant
1-52     decision-making or fiduciary authority in connection with the
1-53     management or investment of state funds, as determined by the
1-54     governing body of the entity, shall file a financial disclosure
1-55     statement with a person designated by the governing body and with
1-56     the state auditor.
1-57           (b)  The content of the financial disclosure statement must
1-58     substantially comply with the requirements of Subchapter B, Chapter
1-59     572.
1-60           (c)  The officer or employee shall file the first financial
1-61     statement not later than the 30th day after the date the person is
1-62     first employed by the state governmental entity in a position in
1-63     which the officer or employee exercises authority as described by
1-64     Subsection (a) and shall file annual statements not later than
 2-1     April 30 of each subsequent year in which the officer or employee
 2-2     remains employed in such a position.  The filing deadline may be
 2-3     postponed:
 2-4                 (1)  by the administrative head of the state
 2-5     governmental entity for not more than 60 days on written request;
 2-6     and
 2-7                 (2)  for an additional period for good cause as
 2-8     determined by:
 2-9                       (A)  the presiding officer of a multimember
2-10     governing body; or
2-11                       (B)  the single state official who governs the
2-12     state governmental entity.
2-13           (d)  The state governmental entity shall maintain a financial
2-14     disclosure statement for at least five years after the date of its
2-15     filing.
2-16           Sec. 2262.004.  ETHICS REQUIREMENTS FOR GOVERNING BODY,
2-17     OFFICERS, AND EMPLOYEES: DISCLOSURE OF CERTAIN RELATIONSHIPS.
2-18     (a)  A member of the governing body of, or an officer or employee
2-19     of, a state governmental entity who has a direct or indirect
2-20     business or commercial relationship that could reasonably be
2-21     expected to diminish the person's independence of judgment in the
2-22     performance of the person's responsibilities in connection with the
2-23     management or investment of state funds shall disclose the
2-24     relationship in writing to a person designated by the governing
2-25     body and to the state auditor.
2-26           (b)  A person who files a disclosure statement under
2-27     Subsection (a) or who is required to file such a statement may not
2-28     give advice or make decisions about matters affected by the
2-29     conflict of interest unless the governing body, after consultation
2-30     with the general counsel of the state governmental entity,
2-31     expressly waives this prohibition.  The state governmental entity
2-32     shall maintain a written record of each waiver and the reasons for
2-33     it.
2-34           (c)  The governing body may delegate the authority to waive
2-35     prohibitions under Subsection (b) that affect an officer or
2-36     employee to one or more designated officers or employees.  The
2-37     governing body may adopt criteria for designated officers or
2-38     employees to use to determine the kinds of relationships that do
2-39     not constitute a material conflict of interest for purposes of
2-40     Subsection (b).  A multimember governing body may delegate this
2-41     authority only by adopting an order on a vote of a majority of its
2-42     members at an open meeting called and held in compliance with
2-43     Chapter 551, and the governing body shall have the order entered
2-44     into the minutes of the meeting.
2-45           Sec. 2262.005.  ETHICS REQUIREMENTS FOR GOVERNING BODY,
2-46     OFFICERS, AND EMPLOYEES: ANNUAL ETHICS COMPLIANCE STATEMENT.
2-47     (a)  Each member of the governing body of a state governmental
2-48     entity that manages or invests state funds or for which state funds
2-49     are managed or invested and each officer and employee of the
2-50     governmental entity required to file a financial disclosure
2-51     statement under Section 2262.003 shall file annually a compliance
2-52     statement certifying that the person is in compliance with all
2-53     applicable requirements prescribed by or under this chapter. The
2-54     person shall file the statement with a person designated by the
2-55     governing body and with the state auditor.
2-56           (b)  The governing body of the state governmental entity
2-57     shall prescribe the date by which the compliance statement must be
2-58     filed.
2-59           Sec. 2262.006.  ETHICS REQUIREMENTS FOR CONSULTANTS,
2-60     ADVISORS, MONEY MANAGERS, AND BROKERS.  (a)  The governing body by
2-61     rule shall adopt standards of conduct applicable to consultants,
2-62     advisors, money managers, and brokers  who advise the state
2-63     governmental entity or a member of the governing body of the state
2-64     governmental entity in connection with the management or investment
2-65     of state funds or provide financial services to the state
2-66     governmental entity and who:
2-67                 (1)  may reasonably be expected to receive more than
2-68     $10,000 in compensation from the entity during a fiscal year; or
2-69                 (2)  render important investment or funds management
 3-1     advice to the entity or a member of the governing body of the
 3-2     entity, as determined by the governing body.
 3-3           (b)  A consultant, advisor, money manager, or broker who
 3-4     advises a state governmental entity or a member of the governing
 3-5     body of the state governmental entity in connection with the
 3-6     management or investment of state funds or provides financial
 3-7     services to the state governmental entity shall disclose in writing
 3-8     to the administrative head of the entity and to the state auditor
 3-9     any relationship the consultant, advisor, money manager, or broker
3-10     has with any party to a transaction with the state governmental
3-11     entity, other than a relationship necessary to the investment or
3-12     funds management services that the consultant, advisor, money
3-13     manager, or broker performs for the state governmental entity, if
3-14     the relationship could reasonably be expected to diminish the
3-15     person's independence of judgment in the performance of the
3-16     person's responsibilities to the state governmental entity.
3-17           (c)  The consultant, advisor, money manager, or broker shall
3-18     disclose a relationship described by Subsection (b) without regard
3-19     to whether the relationship is a direct, indirect, personal,
3-20     private, commercial, or business relationship.
3-21           (d)  A consultant, advisor, money manager, or broker
3-22     described by Subsection (a)  shall file annually a statement with
3-23     the administrative head of the applicable state governmental entity
3-24     and with the state auditor. The statement must disclose  each
3-25     relationship described by Subsection (b), if any.  The state
3-26     auditor by rule shall prescribe the date by which the statement
3-27     must be filed.  The state auditor may prescribe a uniform date or
3-28     may prescribe different dates for statements filed in relation to
3-29     different state governmental entities. The consultant, advisor,
3-30     money manager, or broker shall file a new or amended statement with
3-31     the administrative head of the applicable state governmental entity
3-32     and with the state auditor whenever there is new information to
3-33     report under Subsection (b).
3-34           Sec. 2262.007.  DISCLOSURE OF CERTAIN EXPENDITURES BY
3-35     CONSULTANTS, ADVISORS, MONEY MANAGERS, AND BROKERS.  The governing
3-36     body by rule shall require consultants, advisors, money managers,
3-37     and brokers who provide investment or funds management advice to
3-38     the state governmental entity or provide financial services to the
3-39     state governmental entity to file regularly with the entity a
3-40     report detailing any expenditure of more than $250 made on behalf
3-41     of a member of the governing body or an officer or employee of the
3-42     state governmental entity.
3-43           Sec. 2262.008.  PUBLIC INFORMATION.  (a)  Chapter 552
3-44     controls the extent to which information contained in a statement,
3-45     waiver, or report filed under this chapter is subject to required
3-46     public disclosure or excepted from required public disclosure.
3-47           (b)  The governing body shall designate an employee to be the
3-48     custodian of the statements, waivers, and reports for purposes of
3-49     public disclosure under Chapter 552.
3-50           Sec. 2262.009.  FORMS.  The state auditor shall prescribe
3-51     forms for financial disclosure statements, annual ethics compliance
3-52     statements, disclosure statements of conflicts of interests, and
3-53     waivers of the prohibition against involvement in a matter affected
3-54     by a conflict of interest.
3-55           SECTION 2.  Each state governmental entity required to adopt
3-56     rules under Chapter 2262, Government Code, as added by this Act,
3-57     shall adopt its initial rules in time for the rules to take effect
3-58     not later than January 1, 2002.
3-59           SECTION 3.  This Act takes effect September 1, 2001.
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