78R6924 SGA-D
By: Staples S.B. No. 977
A BILL TO BE ENTITLED
AN ACT
relating to custody of the assets of certain public retirement
systems.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 802.205, Government Code, is amended by
amending Subsection (a) and adding Subsections (d)-(g) to read as
follows:
(a) If the governing body of a public retirement system
contracts for professional investment management services, it also
shall enter into an investment custody account agreement
designating a bank, [or a] depository trust company, or brokerage
firm to serve as custodian for all assets allocated to or generated
under the contract.
(d) If the governing body enters into a contract under
Subsection (a) with a brokerage firm, the firm must:
(1) be a broker-dealer registered with the Securities
and Exchange Commission;
(2) be a member of a national securities exchange;
(3) be a member of the Securities Investor Protection
Corporation; and
(4) maintain equity of at least $200 million.
(e) A brokerage firm contracted with for custodial services
under this section may not have discretionary authority over the
retirement system's assets in the firm's custody.
(f) A brokerage firm that provides custodial services under
Subsection (a) must provide excess securities investor protection
corporation or equivalent insurance against errors, omissions, or
fraud in an amount equal to the amount of the assets the firm holds
in custody.
(g) A brokerage firm that provides consulting advice,
custody of assets, or other services to a public retirement system
under this chapter is considered a fiduciary in accordance with
Section 802.203.
SECTION 2. (a) This Act applies to a contract with a
brokerage firm for the custody of assets of a public retirement
system under Section 802.205, Government Code, as amended by this
Act, that is entered into on or after the effective date of this
Act.
(b) 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. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2003.