HB 3126 amends Section 830.107 of Government Code regarding the payment of investment advisory fees from participant custodial accounts or annuities. Under current law, a participant in the optional retirement program (ORP) may authorize the payment of an advisory fee from their account or annuity of not more than two percent the value of that account or annuity, if the fee is paid directly to a registered investment advisor providing advice to the participant, and the advisor, providing full-time investment advice, is registered with the Securities Exchange Commission under the Investment Advisers Act of 1940.

Under the proposal, to qualify for receipt of the investment advisory fee the investment advisor would also have to be affiliated with one or more of the ORP vendors currently authorized by the participant’s employer. The proposal would further stipulate that employers, institutions of higher education, may require current vendors to certify at least annually that each investment advisor meet all the requirements of Section 830.107 of Government Code; may require any investment advisor to register with the institution as a service provider and be subject to all policies and procedures adopted by the institution; may prohibit payment of the investment advisory fee if the advisor fails to register or comply with the institution’s policies and procedures; and shall prohibit vendors from paying investment advisory fees to an advisor that does not meet or ceases to meet the requirements of Section 830.107 of Government Code. Finally, the bill would allow an institution, at their discretion, to prohibit an investment advisor form providing investment advisory services to the institution’s participants in ORP for failure to comply with the institution’s policies and procedures.

The bill, if enacted, will have no actuarial effect because it does not propose to change the funding or obligations of any public retirement system.