By:  Staples                                                      S.B. No. 977
	(In the Senate - Filed March 7, 2003; March 13, 2003, read 
first time and referred to Committee on State Affairs; 
April 30, 2003, reported adversely, with favorable Committee 
Substitute by the following vote:  Yeas 7, Nays 0; April 30, 2003, 
sent to printer.)


COMMITTEE SUBSTITUTE FOR S.B. No. 977                                    By:  Staples


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) through (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;  
		(4)  be registered with the State Securities Board; and                
		(5)  maintain net regulatory capital 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 insurance against errors, omissions, 
mysterious disappearance, 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 shall discharge its duties solely in the 
interest of the public retirement system 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.



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