Texas 2009 - 81st Regular

Texas House Bill HB3480 Compare Versions

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1	1	H.B. No. 3480
2	2
3	3
4	4	AN ACT
5	5	relating to certain investment products made available to certain
6	6	public school employees and the companies authorized to provide
7	7	those products; providing civil penalties.
8	8	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
9	9	SECTION 1. Section 4, Chapter 22 (S.B. 17), Acts of the 57th
10	10	Legislature, 3rd Called Session, 1962 (Article 6228a-5, Vernon's
11	11	Texas Civil Statutes), is amended to read as follows:
12	12	Sec. 4. In this section and in Sections 5, 6, 7, 8, 8A, 9,
13	13	9A, 9B, 10, 11, 12, and 13 of this Act:
14	14	(1) "Board of trustees" means the board of trustees of
15	15	the Teacher Retirement System of Texas.
16	16	(2) "Educational institution" means a school district
17	17	or an open-enrollment charter school.
18	18	(3) "Eligible qualified investment" means a qualified
19	19	investment product offered by a company that:
20	20	(A) is certified to the board of trustees under
21	21	Section 5 of this Act; or
22	22	(B) is eligible to certify to the board of
23	23	trustees under Section 8 of this Act.
24	24	(4) "Employee" means an employee of an educational
25	25	institution.
26	26	(5) "Qualified investment product" means an annuity or
27	27	investment that:
28	28	(A) meets the requirements of Section 403(b),
29	29	Internal Revenue Code of 1986, and its subsequent amendments;
30	30	(B) complies with applicable federal insurance
31	31	and securities laws and regulations; and
32	32	(C) complies with applicable state insurance and
33	33	securities laws and rules.
34	34	(6) "Retirement system" means the Teacher Retirement
35	35	System of Texas.
36	36	(7) "Salary reduction agreement" means an agreement
37	37	between an educational institution and an employee to reduce the
38	38	employee's salary for the purpose of making direct contributions to
39	39	or purchases of a qualified investment product.
40	40	SECTION 2. Section 6, Chapter 22 (S.B. 17), Acts of the 57th
41	41	Legislature, 3rd Called Session, 1962 (Article 6228a-5, Vernon's
42	42	Texas Civil Statutes), is amended by amending Subsections (c), (d),
43	43	(e), and (f) and adding Subsections (d-1), (d-2), and (f-1) to read
44	44	as follows:
45	45	(c) After consultation with the Texas Department of
46	46	Insurance, the Texas Department of Banking, and the State
47	47	Securities Board, the retirement system may adopt rules only to
48	48	administer this section and Sections 5, 7, 8, 8A, 9A, 9B, 11, 12,
49	49	and 13 of this Act.
50	50	(d) The retirement system shall refer all complaints about
51	51	qualified investment products, including complaints that allege
52	52	violations of this Act by companies that certify to the retirement
53	53	system under Section 5 or 8 of this Act that the companies offer
54	54	qualified investment products, to the appropriate division of the
55	55	Texas Department of Insurance, the Texas Department of Banking, or
56	56	the State Securities Board.
57	57	(d-1) Except as provided by Subsection (d-2) of this
58	58	section, the Texas Department of Insurance, the Texas Department of
59	59	Banking, or the State Securities Board shall investigate a
60	60	complaint received from the retirement system under Subsection (d)
61	61	of this section. If as a result of the investigation the Texas
62	62	Department of Insurance, the Texas Department of Banking, or the
63	63	State Securities Board, as applicable, determines that a violation
64	64	of this Act may have occurred, the Texas Department of Insurance,
65	65	the Texas Department of Banking, or the State Securities Board, as
66	66	applicable, shall forward the results of the investigation relating
67	67	to an alleged violation of this Act to the attorney general.
68	68	(d-2) If the Texas Department of Banking receives a
69	69	complaint from the retirement system under Subsection (d) of this
70	70	section that relates to a federally chartered financial
71	71	institution, the Texas Department of Banking shall:
72	72	(1) refer the complaint to the appropriate federal
73	73	regulatory agency; and
74	74	(2) notify the attorney general of the department's
75	75	referral.
76	76	(e) The Texas Department of Insurance, the Texas Department
77	77	of Banking, and the State Securities Board shall cooperate with the
78	78	retirement system in the administration of this Act and shall:
79	79	(1) submit a report to [notify] the retirement system
80	80	at the beginning of each quarter of the fiscal year that provides
81	81	the status of any enforcement action taken or investigation or
82	82	referral made [determination] regarding a product or a company that
83	83	is the subject of a complaint under Subsection (d) of this section;
84	84	and
85	85	(2) promptly notify the retirement system of any final
86	86	enforcement order issued regarding the product or company [violates
87	87	Section 5 or 8A of this Act].
88	88	(f) The retirement system may deny, suspend, [shall reject]
89	89	or revoke the certification of a company if the retirement system
90	90	receives notice that [under Subsection (e) of this section or
91	91	Section 5(c) of this Act of a violation regarding] the company or
92	92	the company's product was determined to be in violation of this Act
93	93	or another law in any judicial or administrative proceeding.
94	94	(f-1) A [The] company whose certification is denied,
95	95	suspended, or revoked under this section may recertify to the board
96	96	of trustees after any applicable period of suspension or
97	97	revocation.
98	98	SECTION 3. Section 8(a), Chapter 22 (S.B. 17), Acts of the
99	99	57th Legislature, 3rd Called Session, 1962 (Article 6228a-5,
100	100	Vernon's Texas Civil Statutes), is amended to read as follows:
101	101	(a) A company that offers qualified investment products
102	102	other than annuity contracts, including a company that offers
103	103	custodial accounts under Section 403(b)(7), Internal Revenue Code
104	104	of 1986, that hold only investment products registered with the
105	105	system under Section 8A of this Act, may certify to the retirement
106	106	system based on rules adopted by the board of trustees. The rules
107	107	shall be based on reasonable factors, including:
108	108	(1) the financial strength of the companies offering
109	109	products; and
110	110	(2) the administrative cost to employees.
111	111	SECTION 4. Section 9(a), Chapter 22 (S.B. 17), Acts of the
112	112	57th Legislature, 3rd Called Session, 1962 (Article 6228a-5,
113	113	Vernon's Texas Civil Statutes), is amended to read as follows:
114	114	(a) An educational institution may not:
115	115	(1) except as provided by Subdivision (8) of this
116	116	subsection and Subsection (b) of this section, refuse to enter into
117	117	a salary reduction agreement with an employee if the qualified
118	118	investment product that is the subject of the salary reduction is an
119	119	eligible qualified investment and is registered with the system
120	120	under Section 8A;
121	121	(2) require or coerce an employee's attendance at any
122	122	meeting at which qualified investment products are marketed;
123	123	(3) limit the ability of an employee to initiate,
124	124	change, or terminate a qualified investment product at any time the
125	125	employee chooses;
126	126	(4) grant exclusive access to an employee by
127	127	discriminating against or imposing barriers to any agent, broker,
128	128	or company that provides qualified investment products under this
129	129	Act;
130	130	(5) grant exclusive access to information about an
131	131	employee's financial information, including information about an
132	132	employee's qualified investment products, to a company or agent or
133	133	affiliate of a company offering qualified investment products
134	134	unless the employee consents in writing to the access;
135	135	(6) accept any benefit from a company or from an agent
136	136	or affiliate of a company that offers qualified investment
137	137	products; [or]
138	138	(7) use public funds to recommend a qualified
139	139	investment product offered by a company or an agent or affiliate of
140	140	a company that offers a qualified investment product; or
141	141	(8) enter into or continue a salary reduction
142	142	agreement with an employee if the qualified investment product that
143	143	is the subject of the salary reduction agreement is not an eligible
144	144	qualified investment, including the investment product of a company
145	145	whose certification has been denied, suspended, or revoked without
146	146	first providing the employee with notice in writing that:
147	147	(A) indicates the reason the subject of the
148	148	salary reduction agreement is no longer an eligible qualified
149	149	investment or why certification has been denied, suspended, or
150	150	revoked; and
151	151	(B) clearly states that by signing the notice the
152	152	employee is agreeing to enter into or continue the salary reduction
153	153	agreement.
154	154	SECTION 5. Chapter 22 (S.B. 17), Acts of the 57th
155	155	Legislature, 3rd Called Session, 1962 (Article 6228a-5, Vernon's
156	156	Texas Civil Statutes), is amended by adding Sections 9A and 9B to
157	157	read as follows:
158	158	Sec. 9A. A person, other than an employee of an educational
159	159	institution, or an affiliate of the person may not enter into or
160	160	renew a contract under which the person is to provide services for
161	161	or administer a plan offered by the institution under Section
162	162	403(b), Internal Revenue Code of 1986, unless the person:
163	163	(1) holds a license or certificate of authority issued
164	164	by the Texas Department of Insurance;
165	165	(2) is registered as a securities dealer or agent or
166	166	investment advisor with the State Securities Board; or
167	167	(3) is a financial institution that:
168	168	(A) is authorized by state or federal law to
169	169	exercise fiduciary powers; and
170	170	(B) has its main office, a branch office, or a
171	171	trust office in this state.
172	172	Sec. 9B. (a) This section applies to an entity under this
173	173	Act that enters into a contract with an educational institution to
174	174	administer a plan offered by the institution under Section 403(b),
175	175	Internal Revenue Code of 1986.
176	176	(b) If a person described by Subsection (a) holds a meeting
177	177	at which qualified investment products will be marketed to
178	178	employees of the educational institution, the person must provide
179	179	representatives of other companies certified to the retirement
180	180	system under Section 5 or 8 of this Act an opportunity to attend and
181	181	market their qualified investment products at the meeting.
182	182	SECTION 6. Section 10(a), Chapter 22 (S.B. 17), Acts of the
183	183	57th Legislature, 3rd Called Session, 1962 (Article 6228a-5,
184	184	Vernon's Texas Civil Statutes), is amended to read as follows:
185	185	(a) A person commits an offense if the person:
186	186	(1) sells or offers for sale an [a qualified]
187	187	investment product that is not an eligible qualified investment or
188	188	that is not registered under Section 8A of this Act and that the
189	189	person knows will be the subject of a salary reduction agreement;
190	190	(2) violates the licensing requirements of Title 13,
191	191	Insurance Code, with regard to a qualified investment product that
192	192	the person knows will be the subject of a salary reduction
193	193	agreement; or
194	194	(3) engages in activity described by Subchapter B,
195	195	Chapter 541, Insurance Code, with regard to a qualified investment
196	196	product that the person knows will be the subject of a salary
197	197	reduction agreement.
198	198	SECTION 7. Chapter 22 (S.B. 17), Acts of the 57th
199	199	Legislature, 3rd Called Session, 1962 (Article 6228a-5, Vernon's
200	200	Texas Civil Statutes), is amended by adding Section 10A to read as
201	201	follows:
202	202	Sec. 10A. (a) A person who violates this Act is subject to a
203	203	civil penalty in an amount that does not exceed:
204	204	(1) $10,000 for a single violation; or
205	205	(2) $1,000,000 for multiple violations.
206	206	(b) For purposes of determining the amount of a civil
207	207	penalty under this section, the court shall consider the following
208	208	factors:
209	209	(1) the seriousness, nature, circumstances, extent,
210	210	and persistence of the conduct constituting the violation;
211	211	(2) the harm to other persons resulting directly or
212	212	indirectly from the violation;
213	213	(3) cooperation by the person in any inquiry conducted
214	214	by the state concerning the violation, efforts to prevent future
215	215	occurrences of the violation, and efforts to mitigate the harm
216	216	caused by the violation;
217	217	(4) the history of previous violations by the person;
218	218	(5) the need to deter the person or others from
219	219	committing such violations in the future; and
220	220	(6) other matters as justice may require.
221	221	(c) The attorney general may institute an action:
222	222	(1) for injunctive relief to restrain a violation by a
223	223	person who is or who appears to be in violation of or threatening to
224	224	violate this Act; or
225	225	(2) to collect a civil penalty under this section.
226	226	(d) An action under this section must be filed in a district
227	227	court in Travis County.
228	228	(e) The attorney general may recover reasonable expenses
229	229	incurred in obtaining injunctive relief under this section,
230	230	including court costs, reasonable attorney's fees, investigative
231	231	costs, witness fees, and deposition expenses.
232	232	SECTION 8. (a) Section 9(a), Chapter 22 (S.B. 17), Acts of
233	233	the 57th Legislature, 3rd Called Session, 1962 (Article 6228a-5,
234	234	Vernon's Texas Civil Statutes), as amended by this Act, applies to a
235	235	salary reduction agreement that is entered into or renewed on or
236	236	after the effective date of this Act. A salary reduction agreement
237	237	that is entered into or renewed before the effective date of this
238	238	Act is governed by the law in effect on the date the agreement was
239	239	entered into or renewed, and the former law remains in effect for
240	240	that purpose.
241	241	(b) Sections 9A and 9B, Chapter 22 (S.B. 17), Acts of the
242	242	57th Legislature, 3rd Called Session, 1962 (Article 6228a-5,
243	243	Vernon's Texas Civil Statutes), as added by this Act, apply to a
244	244	contract to administer a plan under Section 403(b), Internal
245	245	Revenue Code of 1986, offered by a school district or
246	246	open-enrollment charter school that is entered into or renewed on
247	247	or after the effective date of this Act. A contract entered into or
248	248	renewed before the effective date of this Act is governed by the law
249	249	in effect on the date the contract was entered into or renewed, and
250	250	the former law remains in effect for that purpose.
251	251	(c) Section 10(a), Chapter 22 (S.B. 17), Acts of the 57th
252	252	Legislature, 3rd Called Session, 1962 (Article 6228a-5, Vernon's
253	253	Texas Civil Statutes), as amended by this Act, and Section 10A,
254	254	Chapter 22 (S.B. 17), Acts of the 57th Legislature, 3rd Called
255	255	Session, 1962 (Article 6228a-5, Vernon's Texas Civil Statutes), as
256	256	added by this Act, apply only to a violation that occurs on or after
257	257	the effective date of this Act. A violation that occurred before
258	258	the effective date of this Act is covered by the law in effect at the
259	259	time the violation occurred, and the former law is continued in
260	260	effect for that purpose.
261	261	SECTION 9. This Act takes effect September 1, 2009.
262	262	______________________________ ______________________________
263	263	President of the Senate Speaker of the House
264	264	I certify that H.B. No. 3480 was passed by the House on May
265	265	14, 2009, by the following vote: Yeas 134, Nays 8, 3 present, not
266	266	voting; and that the House concurred in Senate amendments to H.B.
267	267	No. 3480 on May 29, 2009, by the following vote: Yeas 136, Nays 0,
268	268	1 present, not voting.
269	269	______________________________
270	270	Chief Clerk of the House
271	271	I certify that H.B. No. 3480 was passed by the Senate, with
272	272	amendments, on May 27, 2009, by the following vote: Yeas 31, Nays
273	273	0.
274	274	______________________________
275	275	Secretary of the Senate
276	276	APPROVED: __________________
277	277	Date
278	278	__________________
279	279	Governor