1. (a) Definitions. The following words and terms, when used in this section shall have the following meanings, unless the context clearly indicates otherwise.

   1. (1) TDCJ--The Texas Department of Criminal Justice, and any division or entity within TDCJ or managed by TDCJ.
   2. (2) Financial advisor or service provider--Includes a person or business entity who acts as a financial advisor, financial consultant, money manager, investment manager, or broker.

2. (b) Applicability.

   1. (1) This section applies in connection with the management or investment of any state funds managed or invested by TDCJ under the Texas Constitution or other law, including Government Code, Chapters 404 and 2256, without regard to whether the funds are held in the state treasury.

   2. (2) This section applies to financial advisors or service providers who are not employees of TDCJ, who provide financial services to or advise TDCJ in connection with the management or investment of state funds, and who:

      1. (A) may reasonably be expected to receive, directly or indirectly, more than $10,000 in compensation from TDCJ during a fiscal year; or
      2. (B) render important investment or funds management advice to TDCJ.
   3. (3) The standards adopted in this section are intended to identify professional and ethical standards by which all financial advisors or service providers must 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 TDCJ.

3. (c) Disclosure Requirements.

   1. (1) A financial advisor or service provider shall disclose in writing to TDCJ and to the state auditor:

      1. (A) any relationship the financial advisor has with any party to a transaction with TDCJ, other than a relationship necessary to the investment or fund management services that the financial advisor performs for TDCJ, if the relationship could reasonably be expected to diminish the financial advisor's independence of judgment in the performance of the person's responsibilities to TDCJ; and
      2. (B) all direct or indirect pecuniary interests the financial advisor has in any party to a transaction with TDCJ, if the transaction is connected with any financial advice or service the financial advisor provides to TDCJ in connection with the management or investment of state funds.
   2. (2) The financial advisor or service provider shall disclose a relationship described by paragraph (1) of this subsection without regard to whether the relationship is a direct, indirect, personal, private, commercial, or business relationship.
   3. (3) A financial advisor or service provider shall file annually a statement with TDCJ and with the state auditor. The statement must disclose each relationship and pecuniary interest described by paragraph (1) of this subsection or, if no relationship or pecuniary interest described by that subsection existed during the disclosure period, the statement must affirmatively state that fact.
   4. (4) The annual statement must be filed not later than April 15 on a form prescribed by TDCJ. The statement must cover the reporting period of the previous calendar year.
   5. (5) The financial advisor or service provider shall promptly file a new or amended statement with TDCJ and with the state auditor whenever there is new information to report under paragraph (1) of this subsection.

4. (d) Standards of Conduct.

   1. (1) Compliance.

      1. (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 TDCJ. In the event of a conflict between a financial advisor's obligations under these standards and under its contract or services agreement, the standard that imposes a stricter ethics or disclosure requirement controls.
      2. (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.
      3. (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 TDCJ, and in accordance with any established policies of TDCJ.

   2. (2) Qualification Standards.

      1. (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 has competence based on education, training or experience. In areas where a financial advisor is not qualified, the financial advisor shall seek the counsel of qualified individuals or refer TDCJ to such persons.
      2. (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 relationship with TDCJ in order to improve professional competence in all areas in which the financial advisor is engaged.

   3. (3) Integrity.

      1. (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 TDCJ. A financial advisor shall perform professional services with honesty, integrity, skill, and care. In the course of professional activities, a financial advisor 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.
      2. (B) A financial advisor 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 TDCJ.
   4. (4) Objectivity. A financial advisor or service provider will maintain objectivity and be free of conflicts of interest in discharging its responsibilities. A financial advisor will remain independent in fact and appearance when providing financial planning and investment advisory services to TDCJ.
   5. (5) Prudence. A financial advisor or service provider shall exercise reasonable and prudent professional judgment in providing professional services to TDCJ.
   6. (6) Competence. A financial advisor or service provider shall strive to continually improve its competence and the quality of services, and discharge its responsibilities to the best of its ability.

   7. (7) Conflicts of Interest.

      1. (A) If a financial advisor or service provider is aware of any significant conflict between the interests of TDCJ and the interests of another person, the financial advisor shall advise TDCJ of the conflict and shall also include appropriate qualifications or disclosures in any related communication.
      2. (B) A financial advisor or service provider shall not perform professional services involving an actual or potential conflict of interest with TDCJ unless the financial advisor's ability to act fairly is unimpaired, there has been full disclosure of the conflict to TDCJ, and TDCJ has expressly agreed in writing to the performance of the services by the financial advisor.

   8. (8) Confidentiality.

      1. (A) A financial advisor or service provider shall not disclose to another person any confidential information obtained from TDCJ or regarding TDCJ's investments unless authorized to do so by TDCJ in writing or required to do so by law.
      2. (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 TDCJ. It may include information of a proprietary nature, information that is excepted from disclosure under the Public Information Act, Government Code, Chapter 552, or information restricted from disclosure under any contract or service agreement with TDCJ.
5. (e) Contract Voidable. A contract under which a financial advisor or service provider renders financial services or advice to TDCJ is voidable by TDCJ if the financial advisor violates a standard of conduct outlined in this section.

Source Note:The provisions of this §151.75 adopted to be effective April 22, 2004, 29 TexReg 3804.