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. 3-60 * * * * *