| (a) Definitions. Financial Advisor or Service Provider
is a person or business entity who acts as a financial advisor, financial
consultant, money manager, investment manager, or broker.
(b) Applicability.
(1) This section applies in connection with the management
or investment of any state funds managed or invested by the Texas
Department of Criminal Justice (TDCJ) under the Texas Constitution
or other law, including Chapters 404 and 2256, Texas Government Code,
without regard to whether the funds are held in the state treasury.
(2) This section applies to financial advisors or service
providers who are not employees of the TDCJ, who provide financial
services to or advise the TDCJ in connection with the management or
investment of state funds, and who:
(A) May reasonably be expected to receive, directly
or indirectly, more than $10,000 in compensation from TDCJ during
a fiscal year; or
(B) Render important investment or funds management
advice to the TDCJ.
(3) The standards adopted in this rule are intended
to identify professional and ethical standards by which all financial
advisors or service providers shall abide in addition to the professional
and ethical standards that may already be imposed on financial advisors
or service providers under any contracts or service agreements with
the TDCJ.
(c) Disclosure Requirements.
(1) A financial advisor or service provider shall disclose
in writing to the TDCJ and to the State Auditor:
(A) Any relationship the financial advisor or service
provider has with any party to a transaction with the TDCJ, other
than a relationship necessary to the investment or fund management
services that the financial advisor or service provider performs for
the TDCJ, if the relationship could reasonably be expected to diminish
the financial advisor's or service provider's independence of judgment
in the performance of the person's responsibilities to the TDCJ; and
(B) All direct or indirect pecuniary interests the
financial advisor or service provider has in any party to a transaction
with the TDCJ, if the transaction is connected with any financial
advice or service the financial advisor or service provider provides
to the TDCJ in connection with the management or investment of state
funds.
(2) The financial advisor or service provider shall
disclose a relationship described by paragraph (1) of subsection (c)
without regard to whether the relationship is a direct, indirect,
personal, private, commercial, or business relationship.
(3) A financial advisor or service provider shall file
annually a statement with the TDCJ and with the State Auditor. The
statement shall disclose each relationship and pecuniary interest
described by paragraph (1) of subsection (c) or, if no relationship
or pecuniary interest described by subsection (c) existed during the
disclosure period, the statement shall affirmatively state that fact.
(4) The annual statement shall be filed no later than
April 15 on a form prescribed by the TDCJ. The statement shall cover
the reporting period of the previous calendar year.
(5) The financial advisor or service provider shall
promptly file a new or amended statement with the TDCJ and with the
State Auditor whenever there is new information to report under paragraph
(1) of subsection (c).
(d) Standards of Conduct.
(1) Compliance.
(A) These standards are intended to be in addition
to, and not in lieu of, a financial advisor's or service provider's
obligations under its contract or service agreement with the TDCJ.
In the event of a conflict between a financial advisor's or service
provider's obligations under these standards and under its contract
or services agreement, the standard that imposes a stricter ethics
or disclosure requirement controls.
(B) A financial advisor or service provider shall be
knowledgeable about these standards, keep current with revisions to
these standards, and abide by the provisions set forth in these standards.
(C) In all professional activities, a financial advisor
or service provider shall perform services in accordance with applicable
laws, rules, and regulations of governmental agencies and other applicable
authorities, including the TDCJ, and in accordance with any established
policies of the TDCJ.
(2) Qualification Standards.
(A) A financial advisor or service provider shall render
opinions or advice, or perform professional services only in those
areas in which the financial advisor or service provider has competence
based on education, training, or experience. In areas where a financial
advisor or service provider is not qualified, the financial advisor
or service provider shall seek the counsel of qualified individuals
or refer the TDCJ to such persons.
(B) A financial advisor or service provider shall keep
informed of developments in the field of financial planning and investments
and participate in continuing education throughout the financial advisor's
or service provider's relationship with the TDCJ in order to improve
professional competence in all areas in which the financial advisor
or service provider is engaged.
(3) Integrity.
(A) A financial advisor or service provider has an
obligation to observe standards of professional conduct in the course
of providing advice, recommendations, and other services performed
for the TDCJ. A financial advisor or service provider shall perform
professional services with honesty, integrity, skill, and care. In
the course of professional activities, a financial advisor or service
provider shall not engage in conduct involving dishonesty, fraud,
deceit, or misrepresentation, or knowingly make a false or misleading
statement to a client, employer, employee, professional colleague,
governmental or other regulatory body or official, or any other person
or entity.
(B) A financial advisor's or service provider's relationship
with a third party shall not be used to obtain illegal or improper
treatment from such third party on behalf of the TDCJ.
(4) Objectivity. A financial advisor or service provider
shall maintain objectivity and be free of conflicts of interest in
discharging their responsibilities. A financial advisor or service
provider shall remain independent in fact and appearance when providing
financial planning and investment advisory services to the TDCJ.
(5) Prudence. A financial advisor or service provider
shall exercise reasonable and prudent professional judgment in providing
professional services to the TDCJ.
(6) Competence. A financial advisor or service provider
shall strive to continually improve their competence and quality of
services, and discharge their responsibilities to the best of their
ability.
(7) Conflicts of Interest.
(A) If a financial advisor or service provider is aware
of any significant conflict between the interests of the TDCJ and
the interests of another person, the financial advisor or service
provider shall advise the TDCJ of the conflict and shall also include
appropriate qualifications or disclosures in any related communication.
(B) A financial advisor or service provider shall not
perform professional services involving an actual or potential conflict
of interest with the TDCJ unless the financial advisor's or service
provider's ability to act fairly is unimpaired, there has been full
disclosure of the conflict to the TDCJ, and the TDCJ has expressly
agreed in writing to the performance of the services by the financial
advisor or service provider.
(8) Confidentiality.
(A) A financial advisor or service provider shall not
disclose to another person any confidential information obtained from
the TDCJ or regarding the TDCJ's investments unless authorized to
do so by the TDCJ in writing or required to do so by law.
(B) For the purposes of this subsection, "confidential
information" refers to information not in the public domain of which
the financial advisor or service provider becomes aware during the
course of rendering professional services to the TDCJ. It may include
information of a proprietary nature, information that is excepted
from disclosure under the Public Information
Act, Chapter 552, Texas Government Code, or information restricted
from disclosure under any contract or service agreement with the TDCJ.
(e) Contract Voidable. A contract under which a financial
advisor or service provider renders financial services or advice to
the TDCJ is voidable by the TDCJ if the financial advisor or service
provider violates a standard of conduct outlined in this rule.
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