SRC-LBB S.B. 1059 78(R)BILL ANALYSIS
Senate Research CenterS.B. 1059
By: Ellis, Rodney
Jurisprudence
7/8/2003
Enrolled
DIGEST AND PURPOSE
Currently, some feel there is a need for increased efficiency in
addressing corporate fraud and providing penalties. An agency within the
Office of the Attorney General could assist district attorneys and county
attorneys in investigating and prosecuting corporate fraud. S.B. 1059
creates a Corporate Integrity Unit within the office of the attorney
general to assist in the enforcement of the laws relating to corporate
fraud or other similar illegal activities. This bill requires companies
entering into contracts with the state to immediately report any financial
irregularities relating to the contract or the company's financial
position.
RULEMAKING AUTHORITY
Rulemaking authority is expressly granted to the governing body of a state
governmental entity in SECTION 2 (Section 2263.004, Government Code) of
this bill.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Subchapter B, Chapter 402, Government Code, by adding
Section 402.0231, as follows:
Sec. 402.0231. CORPORATE INTEGRITY UNIT. (a) Defines "corporate
fraud."
(b) Provides that a corporate integrity unit is created within the office
of the attorney general to assist in the enforcement of the laws relating
to corporate fraud or other similar illegal activities. Requires the unit
to assist district attorneys and county attorneys in the investigation and
prosecution of corporate fraud or other similar illegal activities
allegedly committed by corporations, limited liability companies, and
registered limited liability partnerships, to assist state agencies with
investigation of complaints and administrative enforcement actions for
corporate fraud violations, including the assessment of an administrative
penalty or other administrative sanction, and serve as a clearinghouse for
information relating to the investigation and prosecution of corporate
fraud and other similar illegal activities in this state.
(c) Requires a state agency or local law enforcement agency to cooperate
with the corporate integrity unit by providing information requested by
the unit as necessary to carry out the purposes of this section, to the
extent allowed by law. Provides that information disclosed under this
subsection is confidential and not subject to disclosure under Chapter 552
(Public Information).
SECTION 2. Amends Subtitle F, Title 10, Government Code, by adding
Chapter 2263, as follows:
CHAPTER 2263. ETHICS AND DISCLOSURE REQUIREMENTS FOR OUTSIDE
FINANCIAL ADVISORS AND SERVICE PROVIDERS
Sec. 2263.001. APPLICABILITY. (a) Provides that this chapter applies in
connection with the management or investment of any state funds managed or
invested under certain laws and by or for certain entities.
(b) Provides that this chapter applies in connection with the management
or investment of state funds without regard to whether the funds are held
in the state treasury.
(c) Provides that this chapter does not apply to or in connection with a
state governmental entity that does not manage or invest state funds and
for which state funds are managed or invested only by the comptroller.
Sec. 2263.002. DEFINITION. Defines "financial advisor or service
provider."
Sec. 2263.003. CONSTRUCTION WITH OTHER LAW. Provides that to the extent
of a conflict between this chapter and another law, the law that imposes a
stricter ethics or disclosure requirement controls.
Sec. 2263.004. ETHICS REQUIREMENTS FOR OUTSIDE FINANCIAL ADVISORS OR
SERVICE PROVIDERS. Requires the governing body of a state governmental
entity by rule to adopt standards of conduct applicable to financial
advisors or service providers who are not employees of the state
governmental entity, who provide financial services to the state
governmental entity or advise the state governmental entity or a member of
the governing body of the state governmental entity in connection with the
management or investment of state funds, and who may reasonably be
expected to receive, directly or indirectly, more than $10,000 in
compensation from the entity during a fiscal year or render important
investment or funds management advice to the entity or a member of the
governing body of the entity, as determined by the governing body.
(b) Provides that a contract under which a financial advisor or service
provider renders financial services or advice to a state governmental
entity or other person described by Subsection (a) is voidable by the
state governmental entity if the financial advisor or service provider
violates a standard of conduct adopted under this section.
Sec. 2263.005. DISCLOSURE REQUIREMENTS FOR OUTSIDE FINANCIAL ADVISOR OR
SERVICE PROVIDER. (a) Requires a financial advisor or service provider
described by Section 2263.004 to disclose in writing to the administrative
head of the applicable state governmental entity and to the state auditor
certain information.
(b) Requires the financial advisor or service provider to disclose a
relationship described by Subsection (a) without regard to whether the
relationship is a direct, indirect, personal, private, commercial, or
business relationship.
(c) Requires a financial advisor or service provider described by Section
2263.004 to file annually a statement with the administrative head of the
applicable state governmental entity and with the state auditor. Requires
the statement to disclose each relationship and pecuniary interest
described by Subsection (a), or if no relationship or pecuniary interest
described by that subsection existed during the disclosure period, to
affirmatively state that fact.
(d) Requires the annual statement to be filed not later than February 1
on a form prescribed by the governmental entity, other than the state
auditor, receiving the form. Requires the statement to cover the
reporting period of the previous calendar year. Requires the state
auditor to develop and recommend a uniform form that other governmental
entities receiving the form may prescribe.
(e) Requires the financial advisor or service provider to promptly file
a new or amended statement with the administrative head of the applicable
state governmental entity and with the state auditor whenever there is new
information to report under Subsection (a).
Sec. 2263.006. PUBLIC INFORMATION. Provides that Chapter 552 controls
the extent to which information contained in a statement filed under this
chapter is subject to required public disclosure or excepted from required
public disclosure.
SECTION 3. Provides that the office of the attorney general is not
required to implement Section 402.0231, Government Code, as added by this
Act, unless a specific appropriation for the implementation is provided in
the General Appropriations Act, Acts of the 78th Legislature, Regular
Session, 2003.
SECTION 4. Requires each state governmental entity required to adopt
rules under Chapter 2263, Government Code, as added by this Act, to adopt
its initial rules in time for the rules to take effect not later than
January 1, 2004.
SECTION 5. Effective date: September 1, 2003.