PART 2. TEXAS EDUCATION AGENCY
CHAPTER 33. STATEMENT OF INVESTMENT OBJECTIVES, POLICIES, AND GUIDELINES OF THE TEXAS PERMANENT SCHOOL FUND
The State Board of Education (SBOE) adopts an amendment to §33.5, concerning the code of ethics policy for managing and investing the Texas Permanent School Fund (PSF). The amendment is adopted with changes to the proposed text as published in the June 13, 2008, issue of the Texas Register (33 TexReg 4588). The section establishes procedures and requirements for a code of ethics policy relating to the Texas PSF. The adopted amendment addresses reporting campaign contributions and business or financial transactions.
The adopted amendment to 19 TAC §33.5, Code of Ethics, includes the addition of language in new subsection (m) relating to disclosure requirements for political campaign contributions. New subsection (m) applies to PSF service providers and any person or firm responding to a request for proposals relating to the management and investment of the PSF. The political campaign contribution disclosures are semi-annual reports to be filed no later than April 15 and October 15 for the preceding six-month reporting period. Subsequent subsections are re-lettered accordingly and a technical edit is made in re-lettered subsection (s) to include a heading.
In addition, language is added in new subsection (e)(9) requiring an SBOE member to disclose any business or financial transaction greater than $50 in value with a PSF service provider. The business or financial transaction disclosures are quarterly reports to be filed on or before January 15, April 15, July 15, and October 15 and cover the preceding three months. Adopted language in subsection (e)(9) also specifies that the first report filed after the amendment would take effect would cover the preceding one-year period.
The new language in subsections (e)(9) and (m) includes an exemption from the provision in subsection (s) that new reports need only concern events after the effective date of an amendment.
In accordance with the TEC, §43.0031(c), a copy of the proposed amendment to 19 TAC §33.5 was submitted to the Texas Ethics Commission and the state auditor for review and comment following SBOE approval of the proposed amendment for first reading and filing authorization at the May 2008 meeting. The SBOE considered comments from the commission and state auditor prior to final adoption.
In response to comments from the commission and the state auditor, language was added to subsection (e)(9) at adoption to specify that disclosures for business or financial transactions must be submitted in writing to the commissioner of education, include transactions for a business entity in which an SBOE member has significant ownership interest, and be filed even if none of the specified transactions have occurred. Language was also added to subsection (e)(9) to establish that the commissioner will provide disclosed information to all SBOE members.
In response to comments from the commission and the state auditor, language was added to subsection (m)(1) at adoption to specify that campaign contributions must be reported in writing to the commissioner of education, include contributions to any candidate seeking election to the SBOE, and be filed even if no such contributions were made. Language was also added to subsection (m)(1) to establish that the commissioner will provide reported information to all SBOE members. Language was added to subsection (m)(2) to clarify that campaign contribution reporting is required from any person or firm responding to a request for qualification as well as a request for proposals.
Also at adoption, a technical correction was made in subsection (s) to replace the word "effect" with "affect."
As required by the TEC, §43.0031(c), the Texas Ethics Commission and state auditor reviewed the proposal to amend 19 TAC §33.5 and posed several comments and questions for consideration. The comments were reviewed by Texas Education Agency (TEA) staff and shared with the TEA ethics officer and SBOE members. Following is a summary of comments received and corresponding SBOE responses regarding the proposed amendment.
Comment. The Texas Ethics Commission recommended that information be added to specify to whom and how the reports are to be submitted.
Response. The SBOE agreed and added language in subsections (e)(9) and (m) identifying who will receive the written reports.
Comment. The Texas Ethics Commission provided an additional statutory citation that could be added to the list of laws specified in subsection (e)(1) applicable to general ethical standards.
Response. The SBOE took no action. The current proposal did not include changes to the list of applicable laws in subsection (e)(1). This comment will be taken under consideration for future changes.
Comment. The Texas Ethics Commission posed questions relating to business or financial transactions greater than $50 in value addressed in subsection (e)(9), asking whether that amount is cumulative or non-cumulative. The Texas Ethics Commission also sought clarification relating to the due date for reports, asking if the reporting period covers calendar months from the 15th of the month or from the first of each month.
Response. The SBOE took no action. Based upon TEA staff review, the SBOE determined that no further clarification was needed at this time. These comments will be taken under consideration for future changes if further clarification in this matter is determined to be necessary.
Comment. The Texas Ethics Commission commented that it should be made clear that contribution data collected from a PSF service provider cannot be used for campaign purposes. The Texas Ethics Commission also commented that wording in the proposed rule may give the appearance that there is an expectation that contributions be made and that information reported may be considered by the SBOE in its decision-making process.
Response. The SBOE took no action. Based upon TEA staff review, the SBOE determined that no further clarification was needed at this time. These comments will be taken under consideration for future changes if further clarification in this matter is determined to be necessary.
Comment. The state auditor recommended changing the disclosure requirements in subsection (e)(9) requiring periodic disclosures even if there were no business or financial transactions during the reporting period. The state auditor recommended providing every SBOE member with disclosed information, developing and requiring the use of standard disclosure forms, clarifying more precisely the intended reporting periods, and specifying with whom the disclosure forms must be filed.
Response. The SBOE agreed and added language in subsection (e)(9) to specify that disclosures for business or financial transactions must be filed even if none of the specified transactions have occurred, that the commissioner provide disclosed information to all SBOE members, and that disclosures must be submitted in writing to the commissioner. Based upon TEA staff review, the SBOE took no action on the recommendations relating to the use of standard forms and clarifying the intended reporting period. These comments will be taken under consideration for future changes.
Comment. The state auditor suggested that clarifying language be incorporated in subsection (m)(1) and (2) requiring periodic disclosure even if the PSF service provider made no reportable political contributions during the period. The state auditor recommended providing information to all SBOE members of any political contribution made by a service provider to an SBOE member or candidate, developing and requiring the use of standard disclosure forms, clarifying more precisely the intended reporting periods, and specifying with whom the disclosure forms must be filed. The state auditor also recommended the inclusion of required political contribution reporting by respondents to a request for qualification (RFQ).
Response. The SBOE agreed and added language in subsection (m)(1) to specify that campaign contributions must be filed even if none were made, that the commissioner provide disclosed information to all SBOE members, and that disclosures must be submitted in writing to the commissioner. The SBOE also took action to add language in subsection (m)(2) to include respondents to RFQs in the required reporting requirements. Based upon TEA staff review, the SBOE took no action on the recommendations relating to the use of standard forms and clarifying the intended reporting period. These comments will be taken under consideration for future changes.
The TEA determined that the adopted amendment will have no direct adverse economic impact for small businesses and microbusinesses; therefore, no regulatory flexibility analysis, specified in Texas Government Code, §2006.002, is required.
In accordance with the TEC, §7.102(f), the SBOE approved this rule action for final adoption by a vote of more than two-thirds of its members to specify an effective date earlier than the beginning of the 2009-2010 school year. The earlier effective date is necessary in order to incorporate disclosure requirement provisions in a timely manner. The effective date of the adopted amendment is 20 days after filing as adopted.
The amendment is adopted under the Texas Education Code, §43.0031, which authorizes the State Board of Education to adopt and enforce an ethics policy that provides standards of conduct relating to the management and investment of the PSF, and the Texas Constitution, Article VII, §5(f).
The amendment implements the Texas Education Code, §43.0031, and the Texas Constitution, Article VII, §5(f).
§33.5.Code of Ethics.
(a) Fiduciary responsibility. The members of the State Board of Education (SBOE) serve as fiduciaries of the Texas Permanent School Fund (PSF) and are responsible for prudently investing its assets. The SBOE members or anyone acting on their behalf shall comply with the provisions of this section, the Texas Constitution, Texas statutes, and all other applicable provisions governing the responsibilities of a fiduciary.
(b) Compliance with constitution and code of ethics. The SBOE members are public officials governed by the provisions of the Texas Government Ethics Act, as stated in the Texas Government Code, Chapter 572.
(c) Definitions. For purposes of this section, the following terms shall have the following meanings.
(1) SBOE Member--A member of the SBOE; a spouse of an SBOE member; a child or children of an SBOE member.
(2) Persons Providing PSF Investment and Management Services to the SBOE (PSF Service Providers) are the following individuals:
(A) any person responsible by contract for managing the PSF, investing the PSF, executing brokerage transactions, or acting as a custodian of the PSF;
(B) a member of the Investment Advisory Committee;
(C) any person who provides consultant services for compensation regarding the management and investment of the PSF;
(D) any person who provides investment and management advice to an SBOE Member, with or without compensation, if an SBOE Member:
(i) gives the person access to records or information that are identified as confidential; or
(ii) asks the person to interview, meet with, or otherwise confer with current or potential consultants, advisors, money managers, investment custodians, Texas Education Agency (TEA) staff, or others who currently provide, or are likely to provide, services to the SBOE relating to the management or investment of the PSF; or
(E) any member of the TEA PSF staff or legal staff who is responsible for managing the PSF, investing the PSF, executing brokerage transactions, acts as a custodian of the PSF, or provides investment or management advice or legal advice regarding the investment or management of the PSF to an SBOE Member or PSF staff.
(d) Assets affected by this section. The provisions of this section apply to all PSF assets, both publicly and nonpublicly traded investments.
(e) General ethical standards.
(1) SBOE Members and PSF Service Providers must comply with all applicable laws, specifically, the following statutes: Texas Government Code, Chapter 2263 (Ethics and Disclosure Requirements for Outside Financial Advisors and Service Providers), §825.211 (Certain Interests in Loans, Investments, or Contracts Prohibited), §572.051 (Standards of Conduct for Public Servants), §552.352 (Distribution of Confidential Information), §572.058 (Private Interest in Measure or Decision; Disclosure; Removal from Office for Violation), §572.054 (Representation by Former Officer or Employee of Regulatory Agency Restricted), §572.002 (General Definitions), §572.004 (Definition: Regulation), and Chapter 305 (Registration of Lobbyists); and Texas Penal Code, Chapter 36 (Bribery, Corrupt Influence, and Gifts to Public Servants) and Chapter 39 (Abuse of Office, Official Misconduct). The omission of any applicable statute listed in this paragraph does not excuse violation of its provisions.
(2) SBOE Members and PSF Service Providers must be honest in the exercise of their duties and must not take actions that will discredit the PSF.
(3) SBOE Members and PSF Service Providers shall be loyal to the interests of the PSF to the extent that such loyalty is not in conflict with other duties, which legally have priority. SBOE Members and PSF Service Providers shall avoid personal, employment, or business relationships that create conflicts of interest. Should SBOE Members or PSF Service Providers become aware of any conflict of interest, they have an affirmative duty to disclose and to cure the conflict in a manner provided for under this section.
(4) SBOE Members and PSF Service Providers shall not use nonpublic information gained through their relationship with the PSF to seek or obtain personal gain beyond agreed compensation and/or any properly authorized expense reimbursement. This should not be interpreted to forbid the use of PSF as a reference or the communication to others of the fact that a relationship with PSF exists, provided that no misrepresentation is involved.
(5) An SBOE Member shall report in writing the name and address of any PSF Service Provider, as defined by subsection (c)(2)(D) of this section, who provides investment and management advice to that SBOE Member. The SBOE Member shall submit the report to the commissioner of education for distribution to the SBOE within 30 days of the PSF Service Provider first providing investment and management advice to that SBOE Member.
(6) SBOE Members and PSF Service Providers shall report in writing any action described by the Texas Education Code, §7.108, to the commissioner of education for distribution to the SBOE within seven days of discovering the violation.
(7) A PSF Service Provider shall not make any gift or donation to a school or other charitable interest on behalf of, at the request of, or in coordination with an SBOE Member. Any PSF Service Provider or SBOE Member shall disclose in writing to the commissioner of education any information regarding such a donation.
(8) A PSF Service Provider shall disclose in writing to the commissioner of education for dissemination to all SBOE Members any business or financial transaction greater than $50 in value with an SBOE Member within 30 days of the transaction. Excluded from this subsection are checking accounts, savings accounts, credit cards, brokerage accounts, mutual funds, or other financial accounts that are provided to the SBOE Member under the same terms and conditions as they are provided to members of the general public.
(9) An SBOE Member shall disclose in writing to the commissioner of education on a quarterly basis any business or financial transaction greater than $50 in value between the SBOE Member, or a business entity in which the SBOE Member has a significant ownership interest, and a PSF Service Provider. A report shall be filed even if there has not been a business or financial transaction greater than $50 in value between the SBOE Member, or a business entity in which the SBOE Member has a significant ownership interest, and a PSF service provider. Excluded from this subsection are checking accounts, savings accounts, credit cards, brokerage accounts, mutual funds, or other financial accounts that are provided to an SBOE Member under the same terms and conditions as they are provided to members of the general public. The reports shall be filed on or before January 15, April 15, July 15, and October 15 and shall cover the preceding three months. The first report filed for each SBOE Member shall cover the preceding one-year period. Subsection (s) of this section does not apply to the first report filed. The commissioner of education shall communicate the information included in the disclosure to all SBOE Members.
(f) Disclosure.
(1) If an SBOE Member has a personal, private, direct, or indirect financial interest in a matter before the SBOE or if an SBOE Member solicited a specific investment action by the PSF staff or a PSF Service Provider, the SBOE Member shall publicly disclose the fact to the SBOE in a public meeting and shall not participate in a discussion or vote on a matter in which the SBOE Member has such interest. The disclosure shall be entered into the minutes of the meeting. For purposes of this section, a matter is a prospective directive to the PSF staff or a PSF Service Provider to undertake a specific investment or divestiture of securities for the PSF. This term does not include ratification of prior securities transactions performed by the PSF staff or a PSF Service Provider and does not include an action to allocate classes of assets within the PSF.
(2) In addition, an SBOE Member shall fully disclose any substantial interest in any publicly or nonpublicly traded PSF investment (business entity) on the SBOE Member's annual financial report filed with the Texas Ethics Commission pursuant to Texas Government Code, §572.021. An SBOE Member has a substantial interest if the SBOE Member:
(A) has a controlling interest in the business entity;
(B) owns more than 10% of the voting interest in the business entity;
(C) owns more than $25,000 of the fair market value of the business entity;
(D) has a direct or indirect participating interest by shares, stock, or otherwise, regardless of whether voting rights are included, in more than 10% of the profits, proceeds, or capital gains of the business entity;
(E) is a member of the board of directors or other governing board of the business entity;
(F) serves as an elected officer of the business entity; or
(G) is an employee of the business entity.
(g) Conflicts of interest.
(1) A conflict of interest exists whenever SBOE Members or PSF Service Providers have personal or private commercial or business relationships that could reasonably be expected to diminish their independence of judgment in the performance of their duties. For example, a person's independence of judgment is diminished when the person is in a position to take action or not take action with respect to PSF and such act or failure to act is, may be, or reasonably appears to be influenced by considerations of personal gain or benefit rather than motivated by the interests of PSF. Conflicts include, but are not limited to, beneficial interests in securities, corporate directorships, trustee positions, or other special relationships that could reasonably be considered a conflict of interest with the duties to the PSF.
(2) An SBOE Member shall fully disclose in any meeting that considers an issue about which the member has a conflict of interest and shall not participate in a discussion or vote on a matter in which the SBOE Member has direct or indirect financial interest.
(3) Any SBOE Member or PSF Service Provider who has a conflict of interest shall disclose the conflict to the commissioner of education and the chair and vice chair of the SBOE on the disclosure form. The disclosure form is provided in this subsection entitled "Potential Conflict of Interest Disclosure Form."
Figure: 19 TAC §33.5(g)(3) (No change.)
(4) A person who files a statement under paragraph (3) of this subsection disclosing a possible conflict of interest may not give advice or make decisions about a matter affected by the possible conflict of interest unless the SBOE, after consultation with the general counsel of the TEA, expressly waives this prohibition. The SBOE may delegate the authority to waive this prohibition.
(h) Prohibited transactions and interests. For purposes of this section, the term "direct placement" (with respect to investments that are not publicly traded) is defined as a direct sale of securities, generally to institutional investors, with or without the use of brokers or underwriters.
(1) No SBOE Member or PSF Service Provider shall:
(A) have a financial interest in a direct placement investment of the PSF;
(B) serve as an officer, director, or employee of an entity in which a direct placement investment is made by the PSF; or
(C) serve as a consultant to, or receive any fee, commission or payment from, an entity in which a direct placement investment is made by the PSF.
(2) No SBOE Member or PSF Service Provider shall:
(A) act as a representative or agent of a third party in dealing with a PSF manager or consultant; or
(B) be employed for two years after the end of his or her term on the SBOE with an organization in which the PSF invested, unless the organization's stock or other evidence of ownership is traded on the public stock or bond exchanges.
(i) Solicitation of support. No SBOE Member shall solicit support on behalf of any political candidate from a PSF Service Provider or any PSF manager, consultant, or staff member. The manager, PSF Service Provider, consultant, or staff member shall report any such incident in writing to the commissioner of education for distribution to the SBOE.
(j) Hiring external professionals. The SBOE may contract with private professional investment managers to help make PSF investments. The SBOE has the authority and responsibility to hire other external professionals, including custodians or consultants. The SBOE shall select each professional based solely on merit and subject to the provisions of §33.55 of this title (relating to Standards for Selecting Consultants, Investment Managers, Custodians, and Other Professionals To Provide Outside Expertise for the Fund).
(k) Responsibilities of PSF Service Providers. The PSF Service Providers shall be notified in writing of the code of ethics contained in this section. Any existing contracts for investment and any future investment shall strictly conform to this code of ethics. The PSF Service Provider shall report in writing any suggestion or offer by an SBOE Member to deviate from the provisions of this section to the commissioner of education for distribution to the SBOE within 30 days of the PSF Service Provider discovering the violation. The PSF Service Provider shall report in writing any violation of this code of ethics committed by another PSF Service Provider to the commissioner of education for distribution to the SBOE within 30 days of the PSF Service Provider discovering the violation. A PSF Service Provider or other person retained in a fiduciary capacity must comply with the provisions of this section.
(l) Gifts and entertainment.
(1) Bribery. SBOE Members are prohibited from soliciting, offering, or accepting gifts, payments, and other items of value in exchange for an official act, including a vote, recommendation, or any other exercise of official discretion (Texas Penal Code, §36.02).
(2) Acceptance of gifts.
(A) An SBOE Member may not accept gifts, favors, services, or benefits that may reasonably tend to influence the SBOE Member's official conduct or that the SBOE Member knows or should know are intended to influence the SBOE Member's official conduct. For purposes of this paragraph, a gift does not include an item with a value of less than $50, excluding cash or negotiable instruments.
(B) An SBOE Member may not accept a gift, favor, service, or benefit from a person that the SBOE Member knows is interested or is likely to become interested in a charter, contract, purchase, payment, claim, or other pecuniary transaction over which the SBOE has discretion.
(C) An SBOE Member may not accept a gift, favor, service, or benefit from a person that the SBOE Member knows to be subject to the regulation, inspection, or investigation of the SBOE or the TEA.
(D) An SBOE Member may not solicit, accept, or agree to accept a benefit from a person with whom civil or criminal litigation is pending or contemplated by the SBOE or the TEA.
(E) So long as the gift or benefit is not given by a person subject to the SBOE's or the TEA's regulation, inspection, or investigation, an SBOE Member may accept a gift, payment, or contribution from an individual who is not registered as a lobbyist with the Texas Ethics Commission if it fits into one of the following categories:
(i) items worth less than $50 (may not be cash, checks, or negotiable instruments);
(ii) independent relationship, such as kinship, or a personal, professional, or business relationship independent of the SBOE Member's official capacity;
(iii) fees for services rendered outside the SBOE Member's official capacity;
(iv) government property issued by a governmental entity that allows the use of the property; or
(v) food, lodging, entertainment, and transportation, if accepted as a guest and the donor is present.
(F) The following provisions govern the disposition of an individual who is a PSF Service Provider or who is both a lobbyist registered with the Texas Ethics Commission and who represents a person subject to the SBOE's or the TEA's regulation, inspection, or investigation.
(i) An SBOE Member may not accept:
(I) loans, cash, or negotiable instruments;
(II) travel or lodging for a pleasure trip;
(III) travel and lodging in connection with a fact-finding trip or to a seminar or conference at which the SBOE Member does not provide services;
(IV) entertainment worth more than $50 in a calendar year;
(V) gifts, other than awards and mementos, that combined are worth more than $50 in value for a calendar year. Gifts do not include food, entertainment, lodging, and transportation; or
(VI) individual awards and mementos worth more than $50 each.
(ii) An SBOE Member may accept food and beverages if the PSF Service Provider or lobbyist is present.
(G) An SBOE Member may not solicit, agree to accept, or accept an honorarium in consideration for services that the SBOE Member would not have been asked to provide but for the SBOE Member's official position. An SBOE Member may accept food, transportation, and lodging in connection with a speech performed as a result of the SBOE Member's position. An SBOE Member must report the food, lodging, or transportation accepted under this subparagraph in the SBOE Member's annual personal financial statement.
(H) Under no circumstances shall an SBOE Member accept a prohibited gift if the source of the gift is not identified or if the SBOE Member knows or has reason to know that the gift is being offered through an intermediary.
(I) If an unsolicited prohibited gift is received by an SBOE Member, he or she should return the gift to its source. If that is not possible or feasible, the gift should be donated to charity. The SBOE Member shall report the return of the gift or the donation of the gift to the commissioner of education.
(J) A PSF Service Provider shall file a report annually on April 15 of each year on the expenditure report provided in this subsection entitled "Report of Expenditures of Persons Providing Services to the State Board of Education Relating to the Management and Investment of the Permanent School Fund." The report shall be for the time period beginning on January 1 and ending on December 31 of the previous year. The expenditure report must describe in detail any expenditure of more than $50 made by the person on behalf of:
(i) an SBOE Member;
(ii) the commissioner of education; or
(iii) an employee of the TEA or of a nonprofit corporation created under the Texas Education Code, §43.006.
Figure: 19 TAC §33.5(l)(2)(J)(iii) (No change.)
(K) A PSF Service Provider shall file a report annually with the TEA's PSF office, in the format specified by the PSF staff, on or before April 15 of each year. The report will be deemed to be filed when it is actually received. The report shall be for the time period beginning on January 1 and ending on December 31 of the previous year. It shall list any individuals who served in any of the following capacities at any time during the reporting period:
(i) all members of the governing body of the PSF Service Provider;
(ii) the officers of the PSF Service Provider;
(iii) any broker who conducts transactions with PSF funds;
(iv) all members of the governing body of the firm of a broker who conducts transactions with PSF funds; and
(v) all officers of the firm of a broker who conducts transactions with PSF funds.
(L) This subsection does not apply to campaign contributions.
(M) Each SBOE Member and each PSF Service Provider shall, no later than April 15, file an annual report affirmatively disclosing any violation of this code of ethics known to that person during the time period beginning January 1 and ending December 31 of the previous year which has not previously been disclosed in writing to the commissioner of education for distribution to all board members, or affirmatively state that the person has no knowledge of any such violation. For purposes of this subparagraph only, "SBOE Member" means only the individual elected official.
(m) Campaign contributions.
(1) A PSF Service Provider shall, no later than April 15 and October 15, file a semi-annual report of each political contribution that the PSF Service Provider has made to an SBOE Member or a candidate seeking election to the SBOE in writing to the commissioner of education. The report shall be for the six-month time period preceding the reporting dates and include the name of each SBOE Member or candidate seeking election to the SBOE who received a contribution, the amount of each contribution, and date of each contribution. Subsection (s) of this section does not apply to the first report filed. A report shall be filed even if the PSF Service Provider made no reportable contribution during the reporting period to an SBOE Member or a candidate seeking election to the SBOE. The commissioner of education shall communicate the information included in the disclosure to all SBOE Members.
(2) Any person or firm filing a response to a request for proposals (RFP) or a request for qualification (RFQ) relating to the management and investments of the PSF shall disclose in the response whether at any time in the preceding four years from the due date of the response to the RFP or RFQ the person or firm has made a campaign contribution to a candidate for or member of the SBOE.
(n) Compliance with professional standards.
(1) SBOE Members and PSF Service Providers who are members of professional organizations which promulgate standards of conduct must comply with those standards.
(2) PSF Service Providers must comply with the Code of Ethics and Standards of Professional Conduct of the Association for Investment Management and Research.
(o) Transactions between PSF Service Providers and/or consultants.
(1) PSF Service Providers or persons who act as consultants to the SBOE regarding investment and management of the PSF shall not engage in any transaction involving the assets of the PSF with another PSF Service Provider or a person who acts as a consultant to the SBOE regarding investment and management of the PSF.
(2) PSF Service Providers and/or consultants to the SBOE who provide advice regarding investment and management of the PSF shall report to the SBOE on a quarterly basis all investment transactions or trades and any fees or compensation paid or received in connection with the transactions or trades with another PSF Service Provider or a person who acts as a consultant to the SBOE regarding investment and management of the PSF.
(p) Compliance and enforcement.
(1) The SBOE will enforce this rule through its chair and vice chair and the commissioner of education.
(2) Any violation will be reported to the chair and vice chair of the SBOE and the commissioner of education and a recommended action will be presented to the SBOE. A violation of this section may result in the termination of the contract or a lesser sanction. Repeated minor violations may also result in the termination of the contract.
(3) The executive director of the PSF shall act as custodian of all statements, waivers, and reports required under this section for purposes of public disclosure requirements.
(4) The ethics officer of the TEA may respond to inquiries concerning the provisions of this section. The ethics officer may confer with the general counsel and the executive director of the PSF.
(5) No payment shall be made to a PSF Service Provider who has failed to timely file a completed report as described by subsection (k) of this section, until a completed report is filed.
(q) Ethics training. The SBOE shall receive annual training regarding state ethics laws through the Texas Ethics Commission and the TEA's ethics officer.
(r) TEA general ethical standards. The commissioner of education and PSF staff shall comply with the General Ethical Standards for the Staff of the Permanent School Fund and the Commissioner of Education.
(s) Reporting period. A new report required by an amendment to the code of ethics need only concern events after the effective date of the amendment. An amendment to a rule that presently requires a report does not affect the reporting period unless the amendment explicitly changes the reporting period.
(t) Statutory statement.
(1) A "statutory financial advisor or service provider" as defined in this subsection shall on or before April 15 file a statement as required by Texas Government Code, §2263.005, with the commissioner of education and the state auditor, for the previous calendar year. The statement will be deemed filed when it is actually received. A statutory financial advisor or service provider shall promptly file a new or amended statement with the commissioner of education and the state auditor whenever there is new information required to be reported under Texas Government Code, §2263.005(a).
(2) A "statutory financial advisor or service provider" is a member of the Investment Advisory Committee or an individual or business entity, including a financial advisor, financial consultant, money or investment manager, or broker, who is not an employee of the TEA, but who provides financial services or advice to the TEA or the SBOE or an SBOE member in connection with the management and investment of the PSF and who may reasonably be expected to receive, directly or indirectly, more than $5,000 in compensation from the TEA or the SBOE during a fiscal year.
(3) An annual statement required to be filed under this subsection will be made using the form developed by the state auditor.
This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on August 4, 2008.
TRD-200804030
Cristina De La Fuente-Valadez
Director, Policy Coordination
Texas Education Agency
Effective date: August 24, 2008
Proposal publication date: June 13, 2008
For further information, please call: (512) 475-1497
SUBCHAPTER D. UNIFORM BANK BID OR REQUEST FOR PROPOSAL AND DEPOSITORY CONTRACT
The State Board of Education (SBOE) adopts amendments to §109.51 and §109.52, concerning uniform depository bank bid and contract forms. The amendments are adopted without changes to the proposed text as published in the June 13, 2008, issue of the Texas Register (33 TexReg 4591) and will not be republished. Section 109.51 establishes the requirement that each school district submit a blank uniform bid form to each bank located in the district and, if desired, to other banks interested in acting as depository for all funds. The section includes the bid form prescribed by the SBOE. Section 109.52 establishes the requirement that each school district select a bank as a school depository and enter into a depository contract with the bank. A school district may select and contract with more than one bank. The section includes the depository contract form with the content prescribed by the SBOE. The adopted amendments update the current rules to reflect statutory changes resulting from House Bill (HB) 2411, 80th Texas Legislature, 2007.
HB 2411, 80th Texas Legislature, 2007, amended the Texas Education Code, §45.206, requiring school districts to choose whether to select a depository through a competitive bidding process or through a request for proposal process. The decision to use a request for proposal process is entirely voluntary. Current SBOE rule provides a uniform bid blank form and uniform depository contract form for selecting a depository by competitive bidding only.
In accordance with the statutory change, the adopted amendments to 19 TAC Chapter 109, Subchapter D, revise the methods a district may choose to select a depository to include a request for proposal process. The required forms adopted in rule are also updated to include current depository services reflective of technological advances since the forms were last updated. The updated forms were developed in conjunction with stakeholder meetings with bankers and school district personnel. The adopted amendments to 19 TAC Chapter 109, Subchapter D, also change the subchapter title to read, "Uniform Bank Bid or Request for Proposal and Depository Contract." Specifically, the adopted amendments include the following.
The adopted amendment to 19 TAC §109.51 includes new language throughout to allow each school district to choose whether to select a depository through a competitive bidding process or through a request for proposal process. The adopted amendment also includes an updated uniform bid blank form (Figure: 19 TAC §109.51(c)) and a new uniform proposal blank form (Figure: 19 TAC §109.51(d)). The title of 19 TAC §109.51 and the uniform bid blank form are also updated.
The adopted amendment to 19 TAC §109.52 includes an updated uniform depository contract form (Figure: 19 TAC §109.52(b)). Minor technical changes to language in the section are adopted but no changes were made to the uniform surety bond form (Figure: 19 TAC §109.52(d)).
Not later than the 60th day before the date a school district's current depository contract expires, the district shall choose whether to select a depository through a competitive bidding process or through a request for proposal process. The school district would document its choice of method to select a depository.
The Texas Education Agency determined that the adopted amendments will have no direct adverse economic impact for small businesses and microbusinesses; therefore, no regulatory flexibility analysis, specified in Texas Government Code, §2006.002, is required.
In accordance with the TEC, §7.102(f), the SBOE approved this rule action for final adoption by a vote of more than two-thirds of its members to specify an effective date earlier than the beginning of the 2009-2010 school year. The earlier effective date is necessary in order to begin implementing the rule amendments before the start of the next school year. The effective date of the adopted new section is 20 days after filing as adopted.
No comments were received regarding the proposed amendments.
The amendments are adopted under the Texas Education Code, §§7.102(c)(34), 45.206, and 45.208, which authorizes the State Board of Education to prescribe a uniform bid blank form for a school district to use in selecting a depository bank and to prescribe a uniform depository contract form.
The amendments implement the Texas Education Code, §§7.102(c)(34), 45.206, and 45.208.
This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on July 28, 2008.
TRD-200803936
Cristina De La Fuente-Valadez
Director, Policy Coordination
Texas Education Agency
Effective date: August 17, 2008
Proposal publication date: June 13, 2008
For further information, please call: (512) 475-1497