1-1 By: Fraser S.B. No. 1611
1-2 (In the Senate - Filed March 9, 2001; March 14, 2001, read
1-3 first time and referred to Committee on Finance; April 2, 2001,
1-4 reported adversely, with favorable Committee Substitute by the
1-5 following vote: Yeas 11, Nays 0; April 2, 2001, sent to printer.)
1-6 COMMITTEE SUBSTITUTE FOR S.B. No. 1611 By: Duncan
1-7 A BILL TO BE ENTITLED
1-8 AN ACT
1-9 relating to the structure and functions of the Texas Treasury
1-10 Safekeeping Trust Company.
1-11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-12 SECTION 1. Section 404.101, Government Code, is amended to
1-13 read as follows:
1-14 Sec. 404.101. DEFINITIONS. In this subchapter:
1-15 (1) "Advisory board" means the Texas treasury
1-16 safekeeping trust company investment advisory board.
1-17 (2) "Participant" means the state, agencies and local
1-18 political subdivisions of the state, and nonprofit corporations,
1-19 foundations, and other charitable organizations created on behalf
1-20 of the state or an agency or local political subdivision of the
1-21 state authorized to deposit money and securities with the trust
1-22 company.
1-23 (3) "The state and its agencies" includes the
1-24 Employees Retirement System of Texas and the Teacher Retirement
1-25 System of Texas.
1-26 (4) [(2)] "Trust company" means the Texas Treasury
1-27 Safekeeping Trust Company.
1-28 SECTION 2. Section 404.103, Government Code, is amended by
1-29 amending Subsection (b) and adding Subsections (e), (f), and (g) to
1-30 read as follows:
1-31 (b) The trust company may enter into contracts, [and] trust
1-32 agreements, or other fiduciary instruments with the comptroller,
1-33 the Federal Reserve System, a depository trust company, and other
1-34 third parties. The trust company shall be liable under those
1-35 contracts in accordance with the terms contained in the contracts.
1-36 Notwithstanding any other statute to the contrary, to the extent
1-37 permitted by the Texas Constitution and the contracts, trust
1-38 agreements, or other fiduciary instruments between the trust
1-39 company, the Federal Reserve System, and a depository trust
1-40 company, the trust company's obligations shall be guaranteed by the
1-41 state, and the state expressly waives all defenses of governmental
1-42 immunity by and on behalf of the trust company, the comptroller,
1-43 and the state and expressly consents to sue and be sued in federal
1-44 court or in any court of competent jurisdiction. However, this
1-45 provision does not alter or affect the immunity accorded to state
1-46 officials and employees under state law. The trust company may
1-47 enter into contracts with the comptroller and the Federal Reserve
1-48 System to provide any services that the Federal Reserve System
1-49 makes available, including:
1-50 (1) safekeeping book-entry United States Treasury and
1-51 agency securities owned by the state and its agencies;
1-52 (2) using the federal reserve wire transfer system to
1-53 transfer money and book-entry securities and to settle securities
1-54 transactions involving book-entry United States Treasury and agency
1-55 securities owned by the state and its agencies;
1-56 (3) collecting, through the Federal Reserve System,
1-57 checks deposited with the treasury;
1-58 (4) receiving payments from and making payments to the
1-59 federal government on behalf of the state and its agencies;
1-60 (5) originating automated clearinghouse transactions
1-61 or other electronic transfers to make payments on behalf of the
1-62 state and its agencies, collecting revenues due the state and its
1-63 agencies, and transferring money between state depositories;
1-64 (6) paying warrants drawn on the treasury and
2-1 presented through the Federal Reserve System for payment; and
2-2 (7) safekeeping collateral pledged to secure deposits
2-3 of public funds.
2-4 (e) The trust company may hire employees and may fix their
2-5 compensation and prescribe their duties or may contract with the
2-6 comptroller's office for staff support.
2-7 (f) The trust company shall develop a fee schedule in the
2-8 amount necessary to recover costs of service and to retain adequate
2-9 reserves to support the operations of the trust company.
2-10 (g) The trust company is exempt from other state laws
2-11 regulating or limiting state purchasing or a purchasing decision if
2-12 the trust company determines that the purchase or decision relates
2-13 to the fiduciary duties of the trust company. The trust company
2-14 shall make all purchases of goods and services using purchasing
2-15 methods that ensure the best value to the trust company and its
2-16 participants. In determining best value, the trust company may
2-17 consider the best value standards applicable to state agencies as
2-18 enumerated in Section 2155.074. The trust company shall develop a
2-19 plan of operation that includes procedures and standards for the
2-20 purchases of goods and services using best value methods.
2-21 SECTION 3. Subsection (c), Section 404.104, Government Code,
2-22 is amended to read as follows:
2-23 (c) The comptroller shall submit to the Legislative Budget
2-24 Board an audited report regarding the operations of the trust
2-25 company. The trust company may contract with the comptroller's
2-26 office, a certified public accountant, or the state auditor to
2-27 [shall] conduct an independent audit of the operations of the trust
2-28 company [in accordance with Chapter 321].
2-29 SECTION 4. Section 404.105, Government Code, is amended to
2-30 read as follows:
2-31 Sec. 404.105. CAPITAL OR RESERVE [REQUIREMENTS]. The trust
2-32 company shall hold [have] capital stock and [or] reserve balances
2-33 outside the treasury in an amount required by applicable regulatory
2-34 bodies for eligibility for federal reserve services, for
2-35 participation in a depository trust company, and as necessary to
2-36 achieve its purposes under Section 404.103[, but the amount may not
2-37 be more than $1 million]. The stock of the trust company is an
2-38 authorized investment for state funds and shall be held by the
2-39 comptroller, but the amount may not be more than $1 million.
2-40 SECTION 5. Section 404.106, Government Code, is amended by
2-41 amending Subsection (a) and adding Subsection (d) to read as
2-42 follows:
2-43 (a) Any net earnings of the trust company attributable to
2-44 capital stock or investments of capital stock shall be credited
2-45 annually to the account of the treasury and shall be allocated
2-46 annually to the funds held and managed by the comptroller in
2-47 accordance with Section 404.071(a).
2-48 (d) The trust company may hold reserve balances or
2-49 securities as required by the Federal Reserve System or as required
2-50 for participation in a depository trust company.
2-51 SECTION 6. Section 404.107, Government Code, is amended to
2-52 read as follows:
2-53 Sec. 404.107. FEES. (a) Any fees or assessments imposed by
2-54 state law for the incorporation, regulation, or operation of trust
2-55 companies do not apply to the Texas Treasury Safekeeping Trust
2-56 Company.
2-57 (b) Agencies and local political subdivisions of the state
2-58 and nonprofit corporations, foundations, and other charitable
2-59 organizations created on behalf of the state or an agency or local
2-60 political subdivision of the state that are authorized or required
2-61 to deposit money and securities with the trust company shall pay
2-62 the fees established on the trust company's fee schedule.
2-63 SECTION 7. Subchapter G, Chapter 404, Government Code, is
2-64 amended by adding Sections 404.108 through 404.115 to read as
2-65 follows:
2-66 Sec. 404.108. TRUST COMPANY INVESTMENT ADVISORY BOARD.
2-67 (a) The comptroller may appoint an investment advisory board to
2-68 advise the comptroller with respect to managing the assets held by
2-69 the trust company. The advisory board shall provide the
3-1 comptroller guidance on the investment philosophy that should be
3-2 pursued in managing the assets under the trust company's control.
3-3 The advisory board serves in an advisory capacity only and is not a
3-4 fiduciary with respect to the assets held by the trust company.
3-5 (b) The advisory board is composed of seven members
3-6 appointed by the comptroller with the advice of the governor,
3-7 lieutenant governor, and speaker of the house of representatives.
3-8 Members serve at the will of the comptroller and may be removed at
3-9 the comptroller's discretion.
3-10 (c) The members of the advisory board must have knowledge of
3-11 or experience in finance, including the management of funds or
3-12 business operations.
3-13 (d) Appointments to the advisory board shall be made without
3-14 regard to the race, color, disability, sex, religion, age, or
3-15 national origin of appointees.
3-16 (e) Each member of the advisory board must be a Texas
3-17 resident.
3-18 (f) The creation, size, composition, and duration of the
3-19 advisory board is governed exclusively by this subchapter. Chapter
3-20 2110 does not apply to the size, composition, or duration of the
3-21 advisory board.
3-22 Sec. 404.109. RESTRICTIONS ON ADVISORY BOARD APPOINTMENT,
3-23 MEMBERSHIP, AND EMPLOYMENT. A person is not eligible for
3-24 appointment to the advisory board if the person or the person's
3-25 spouse:
3-26 (1) is employed by or participates in the management
3-27 of a business entity or other organization receiving funds from the
3-28 trust company;
3-29 (2) owns or controls, directly or indirectly, more
3-30 than a 10 percent interest in a business entity or other
3-31 organization receiving funds from the trust company; or
3-32 (3) receives money from the business entity or other
3-33 organization receiving funds from the trust company that exceeds
3-34 five percent of the person's gross income for the preceding
3-35 calendar year.
3-36 Sec. 404.110. ADVISORY BOARD MEMBER TRAINING. (a) Before a
3-37 member of the advisory board may assume the member's duties, the
3-38 member must complete at least one course of the training program
3-39 established under this section.
3-40 (b) A training program established under this section shall
3-41 provide information regarding:
3-42 (1) the role and functions of the trust company;
3-43 (2) the assets managed by and programs operated by the
3-44 trust company; and
3-45 (3) the statutes applicable to the trust company,
3-46 including Chapters 551, 552, and 2001.
3-47 Sec. 404.111. COMPENSATION; EXPENSES. Members of the
3-48 advisory board serve without compensation but are entitled to
3-49 reimbursement for actual and necessary expenses in attending
3-50 meetings of the advisory board or performing other official duties
3-51 authorized by the comptroller.
3-52 Sec. 404.112. MEETINGS. (a) The advisory board may meet as
3-53 often as necessary, but shall meet at least twice each year.
3-54 (b) Advisory board meetings are subject to Chapter 551.
3-55 Sec. 404.113. INVESTMENT MANAGEMENT. (a) The comptroller
3-56 may delegate investment authority and may contract with private
3-57 professional investment managers to manage or assist in managing
3-58 assets held by the trust company.
3-59 (b) The comptroller may delegate a power or duty relating to
3-60 the investment of assets held by the trust company to an employee
3-61 or agent of the comptroller, including professional investment
3-62 managers.
3-63 Sec. 404.114. PERSONNEL. (a) The comptroller may appoint a
3-64 person to serve as chief executive officer in managing the trust
3-65 company and carrying out the policies of the trust company. The
3-66 chief executive officer and employees of the trust company serve at
3-67 the will of the comptroller.
3-68 (b) The comptroller may delegate any of the comptroller's
3-69 duties to the chief executive officer and trust company employees.
4-1 (c) The chief executive officer or the chief executive
4-2 officer's designee shall develop a career ladder program and a
4-3 system of compensation necessary to retain qualified staff.
4-4 (d) The chief executive officer or the chief executive
4-5 officer's designee shall develop a system of annual performance
4-6 evaluations. Merit pay for trust company employees must be based
4-7 on the system established under this subsection.
4-8 (e) The chief executive officer or the chief executive
4-9 officer's designee shall prepare and maintain a written policy
4-10 statement to assure implementation of a program of equal employment
4-11 opportunity under which all personnel decisions are made without
4-12 regard to race, color, disability, religion, age, or national
4-13 origin.
4-14 (f) The chief executive officer shall appoint an internal
4-15 auditor for the trust company. The appointment of the internal
4-16 auditor must be approved by the comptroller. The comptroller may
4-17 require the internal auditor to submit certain reports directly to
4-18 the comptroller.
4-19 (g) Except as provided by this section and Section
4-20 404.103(e), trust company employees hired under this subchapter are
4-21 state employees for all purposes, including accrual of leave time,
4-22 insurance benefits, retirement benefits, and travel regulations,
4-23 Chapter 104, Civil Practice and Remedies Code, and Chapter 501,
4-24 Labor Code.
4-25 Sec. 404.115. LIABILITY INSURANCE FOR CERTAIN BOARD MEMBERS,
4-26 OFFICIALS, AND STAFF. (a) The trust company may purchase or
4-27 otherwise acquire insurance to protect members of the advisory
4-28 board and the trust company staff.
4-29 (b) Insurance purchased or acquired by the trust company
4-30 under this section may:
4-31 (1) protect against any type of liability to third
4-32 persons that might be incurred while conducting trust company
4-33 business; and
4-34 (2) provide for all costs of defending against such
4-35 liability, including court costs and attorney's fees.
4-36 (c) This section does not authorize the purchase or
4-37 acquisition of insurance to protect against liability not described
4-38 in Subsection (b).
4-39 SECTION 8. This Act takes effect September 1, 2001.
4-40 * * * * *