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