H.B. No. 3480
AN ACT
relating to certain investment products made available to certain
public school employees and the companies authorized to provide
those products; providing civil penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 4, Chapter 22 (S.B. 17), Acts of the 57th
Legislature, 3rd Called Session, 1962 (Article 6228a-5, Vernon's
Texas Civil Statutes), is amended to read as follows:
Sec. 4. In this section and in Sections 5, 6, 7, 8, 8A, 9,
9A, 9B, 10, 11, 12, and 13 of this Act:
(1) "Board of trustees" means the board of trustees of
the Teacher Retirement System of Texas.
(2) "Educational institution" means a school district
or an open-enrollment charter school.
(3) "Eligible qualified investment" means a qualified
investment product offered by a company that:
(A) is certified to the board of trustees under
Section 5 of this Act; or
(B) is eligible to certify to the board of
trustees under Section 8 of this Act.
(4) "Employee" means an employee of an educational
institution.
(5) "Qualified investment product" means an annuity or
investment that:
(A) meets the requirements of Section 403(b),
Internal Revenue Code of 1986, and its subsequent amendments;
(B) complies with applicable federal insurance
and securities laws and regulations; and
(C) complies with applicable state insurance and
securities laws and rules.
(6) "Retirement system" means the Teacher Retirement
System of Texas.
(7) "Salary reduction agreement" means an agreement
between an educational institution and an employee to reduce the
employee's salary for the purpose of making direct contributions to
or purchases of a qualified investment product.
SECTION 2. Section 6, Chapter 22 (S.B. 17), Acts of the 57th
Legislature, 3rd Called Session, 1962 (Article 6228a-5, Vernon's
Texas Civil Statutes), is amended by amending Subsections (c), (d),
(e), and (f) and adding Subsections (d-1), (d-2), and (f-1) to read
as follows:
(c) After consultation with the Texas Department of
Insurance, the Texas Department of Banking, and the State
Securities Board, the retirement system may adopt rules only to
administer this section and Sections 5, 7, 8, 8A, 9A, 9B, 11, 12,
and 13 of this Act.
(d) The retirement system shall refer all complaints about
qualified investment products, including complaints that allege
violations of this Act by companies that certify to the retirement
system under Section 5 or 8 of this Act that the companies offer
qualified investment products, to the appropriate division of the
Texas Department of Insurance, the Texas Department of Banking, or
the State Securities Board.
(d-1) Except as provided by Subsection (d-2) of this
section, the Texas Department of Insurance, the Texas Department of
Banking, or the State Securities Board shall investigate a
complaint received from the retirement system under Subsection (d)
of this section. If as a result of the investigation the Texas
Department of Insurance, the Texas Department of Banking, or the
State Securities Board, as applicable, determines that a violation
of this Act may have occurred, the Texas Department of Insurance,
the Texas Department of Banking, or the State Securities Board, as
applicable, shall forward the results of the investigation relating
to an alleged violation of this Act to the attorney general.
(d-2) If the Texas Department of Banking receives a
complaint from the retirement system under Subsection (d) of this
section that relates to a federally chartered financial
institution, the Texas Department of Banking shall:
(1) refer the complaint to the appropriate federal
regulatory agency; and
(2) notify the attorney general of the department's
referral.
(e) The Texas Department of Insurance, the Texas Department
of Banking, and the State Securities Board shall cooperate with the
retirement system in the administration of this Act and shall:
(1) submit a report to [notify] the retirement system
at the beginning of each quarter of the fiscal year that provides
the status of any enforcement action taken or investigation or
referral made [determination] regarding a product or a company that
is the subject of a complaint under Subsection (d) of this section;
and
(2) promptly notify the retirement system of any final
enforcement order issued regarding the product or company [violates
Section 5 or 8A of this Act].
(f) The retirement system may deny, suspend, [shall reject]
or revoke the certification of a company if the retirement system
receives notice that [under Subsection (e) of this section or
Section 5(c) of this Act of a violation regarding] the company or
the company's product was determined to be in violation of this Act
or another law in any judicial or administrative proceeding.
(f-1) A [The] company whose certification is denied,
suspended, or revoked under this section may recertify to the board
of trustees after any applicable period of suspension or
revocation.
SECTION 3. Section 8(a), Chapter 22 (S.B. 17), Acts of the
57th Legislature, 3rd Called Session, 1962 (Article 6228a-5,
Vernon's Texas Civil Statutes), is amended to read as follows:
(a) A company that offers qualified investment products
other than annuity contracts, including a company that offers
custodial accounts under Section 403(b)(7), Internal Revenue Code
of 1986, that hold only investment products registered with the
system under Section 8A of this Act, may certify to the retirement
system based on rules adopted by the board of trustees. The rules
shall be based on reasonable factors, including:
(1) the financial strength of the companies offering
products; and
(2) the administrative cost to employees.
SECTION 4. Section 9(a), Chapter 22 (S.B. 17), Acts of the
57th Legislature, 3rd Called Session, 1962 (Article 6228a-5,
Vernon's Texas Civil Statutes), is amended to read as follows:
(a) An educational institution may not:
(1) except as provided by Subdivision (8) of this
subsection and Subsection (b) of this section, refuse to enter into
a salary reduction agreement with an employee if the qualified
investment product that is the subject of the salary reduction is an
eligible qualified investment and is registered with the system
under Section 8A;
(2) require or coerce an employee's attendance at any
meeting at which qualified investment products are marketed;
(3) limit the ability of an employee to initiate,
change, or terminate a qualified investment product at any time the
employee chooses;
(4) grant exclusive access to an employee by
discriminating against or imposing barriers to any agent, broker,
or company that provides qualified investment products under this
Act;
(5) grant exclusive access to information about an
employee's financial information, including information about an
employee's qualified investment products, to a company or agent or
affiliate of a company offering qualified investment products
unless the employee consents in writing to the access;
(6) accept any benefit from a company or from an agent
or affiliate of a company that offers qualified investment
products; [or]
(7) use public funds to recommend a qualified
investment product offered by a company or an agent or affiliate of
a company that offers a qualified investment product; or
(8) enter into or continue a salary reduction
agreement with an employee if the qualified investment product that
is the subject of the salary reduction agreement is not an eligible
qualified investment, including the investment product of a company
whose certification has been denied, suspended, or revoked without
first providing the employee with notice in writing that:
(A) indicates the reason the subject of the
salary reduction agreement is no longer an eligible qualified
investment or why certification has been denied, suspended, or
revoked; and
(B) clearly states that by signing the notice the
employee is agreeing to enter into or continue the salary reduction
agreement.
SECTION 5. Chapter 22 (S.B. 17), Acts of the 57th
Legislature, 3rd Called Session, 1962 (Article 6228a-5, Vernon's
Texas Civil Statutes), is amended by adding Sections 9A and 9B to
read as follows:
Sec. 9A. A person, other than an employee of an educational
institution, or an affiliate of the person may not enter into or
renew a contract under which the person is to provide services for
or administer a plan offered by the institution under Section
403(b), Internal Revenue Code of 1986, unless the person:
(1) holds a license or certificate of authority issued
by the Texas Department of Insurance;
(2) is registered as a securities dealer or agent or
investment advisor with the State Securities Board; or
(3) is a financial institution that:
(A) is authorized by state or federal law to
exercise fiduciary powers; and
(B) has its main office, a branch office, or a
trust office in this state.
Sec. 9B. (a) This section applies to an entity under this
Act that enters into a contract with an educational institution to
administer a plan offered by the institution under Section 403(b),
Internal Revenue Code of 1986.
(b) If a person described by Subsection (a) holds a meeting
at which qualified investment products will be marketed to
employees of the educational institution, the person must provide
representatives of other companies certified to the retirement
system under Section 5 or 8 of this Act an opportunity to attend and
market their qualified investment products at the meeting.
SECTION 6. Section 10(a), Chapter 22 (S.B. 17), Acts of the
57th Legislature, 3rd Called Session, 1962 (Article 6228a-5,
Vernon's Texas Civil Statutes), is amended to read as follows:
(a) A person commits an offense if the person:
(1) sells or offers for sale an [a qualified]
investment product that is not an eligible qualified investment or
that is not registered under Section 8A of this Act and that the
person knows will be the subject of a salary reduction agreement;
(2) violates the licensing requirements of Title 13,
Insurance Code, with regard to a qualified investment product that
the person knows will be the subject of a salary reduction
agreement; or
(3) engages in activity described by Subchapter B,
Chapter 541, Insurance Code, with regard to a qualified investment
product that the person knows will be the subject of a salary
reduction agreement.
SECTION 7. Chapter 22 (S.B. 17), Acts of the 57th
Legislature, 3rd Called Session, 1962 (Article 6228a-5, Vernon's
Texas Civil Statutes), is amended by adding Section 10A to read as
follows:
Sec. 10A. (a) A person who violates this Act is subject to a
civil penalty in an amount that does not exceed:
(1) $10,000 for a single violation; or
(2) $1,000,000 for multiple violations.
(b) For purposes of determining the amount of a civil
penalty under this section, the court shall consider the following
factors:
(1) the seriousness, nature, circumstances, extent,
and persistence of the conduct constituting the violation;
(2) the harm to other persons resulting directly or
indirectly from the violation;
(3) cooperation by the person in any inquiry conducted
by the state concerning the violation, efforts to prevent future
occurrences of the violation, and efforts to mitigate the harm
caused by the violation;
(4) the history of previous violations by the person;
(5) the need to deter the person or others from
committing such violations in the future; and
(6) other matters as justice may require.
(c) The attorney general may institute an action:
(1) for injunctive relief to restrain a violation by a
person who is or who appears to be in violation of or threatening to
violate this Act; or
(2) to collect a civil penalty under this section.
(d) An action under this section must be filed in a district
court in Travis County.
(e) The attorney general may recover reasonable expenses
incurred in obtaining injunctive relief under this section,
including court costs, reasonable attorney's fees, investigative
costs, witness fees, and deposition expenses.
SECTION 8. (a) Section 9(a), Chapter 22 (S.B. 17), Acts of
the 57th Legislature, 3rd Called Session, 1962 (Article 6228a-5,
Vernon's Texas Civil Statutes), as amended by this Act, applies to a
salary reduction agreement that is entered into or renewed on or
after the effective date of this Act. A salary reduction agreement
that is entered into or renewed before the effective date of this
Act is governed by the law in effect on the date the agreement was
entered into or renewed, and the former law remains in effect for
that purpose.
(b) Sections 9A and 9B, Chapter 22 (S.B. 17), Acts of the
57th Legislature, 3rd Called Session, 1962 (Article 6228a-5,
Vernon's Texas Civil Statutes), as added by this Act, apply to a
contract to administer a plan under Section 403(b), Internal
Revenue Code of 1986, offered by a school district or
open-enrollment charter school that is entered into or renewed on
or after the effective date of this Act. A contract entered into or
renewed before the effective date of this Act is governed by the law
in effect on the date the contract was entered into or renewed, and
the former law remains in effect for that purpose.
(c) Section 10(a), Chapter 22 (S.B. 17), Acts of the 57th
Legislature, 3rd Called Session, 1962 (Article 6228a-5, Vernon's
Texas Civil Statutes), as amended by this Act, and Section 10A,
Chapter 22 (S.B. 17), Acts of the 57th Legislature, 3rd Called
Session, 1962 (Article 6228a-5, Vernon's Texas Civil Statutes), as
added by this Act, apply only to a violation that occurs on or after
the effective date of this Act. A violation that occurred before
the effective date of this Act is covered by the law in effect at the
time the violation occurred, and the former law is continued in
effect for that purpose.
SECTION 9. This Act takes effect September 1, 2009.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 3480 was passed by the House on May
14, 2009, by the following vote: Yeas 134, Nays 8, 3 present, not
voting; and that the House concurred in Senate amendments to H.B.
No. 3480 on May 29, 2009, by the following vote: Yeas 136, Nays 0,
1 present, not voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 3480 was passed by the Senate, with
amendments, on May 27, 2009, by the following vote: Yeas 31, Nays
0.
______________________________
Secretary of the Senate
APPROVED: __________________
Date
__________________
Governor