S.B. 977 78(R)    BILL ANALYSIS


S.B. 977
By: Staples
Pensions & Investments
Committee Report (Unamended)



BACKGROUND AND PURPOSE 

Currently, many public retirement systems utilize brokerage firms as
custodians of their assets. However, Section 802.205, Government Code,
does not explicitly allow brokerage firms to serve as custodians.  S.B.
977 allows public retirement systems to contract with brokerage firms for
management and custodial services.  This bill also provides safeguards to
ensure the brokerage firms meet certain criteria. 



RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any
additional rulemaking authority to a state officer, department, agency, or
institution. 

ANALYSIS

SECTION 1.  Amends Section 802.205, Government Code, by amending
Subsection (a) and adding Subsections (d)-(g), as follows: 

(a)  Includes a brokerage firm as an entity which may serve as a
designated custodian for assets of certain public retirement systems. 

(d)  Requires a brokerage firm to meet certain requirements, if a
governing body enters into a contract under Subsection (a) with a
brokerage firm. 

(e)  Prohibits a brokerage firm contracted with for custodial services
under this section from having discretionary authority over the retirement
system's assets in the firm's custody. 

(f)  Requires a brokerage firm that provides custodial services under
Subsection (a) to provide insurance against errors, omissions, mysterious
disappearance, or fraud in an amount equal to the amount of the assets the
firm holds in custody. 

(g)  Requires a brokerage firm that provides consulting advice, custody of
assets, or other services to a public retirement system under this chapter
to discharge its duties solely in the interest of the public retirement
system in accordance with Section 802.203, Government Code. 

SECTION 2.  (a)  Makes application of this Act prospective.

           (b)  Provides that this Act validates a contract with a
brokerage firm for the 
            custody of assets of a public retirement system that was
entered into before the effective date of this Act as being in compliance
with the law of this state if the requirements of Section 802.205,
Government Code, as amended by this Act, are satisfied by the contract. 

SECTION 3.  Effective date.

EFFECTIVE DATE

Effective date:  upon passage or September 1, 2003.