Bill Text: TX HB2820 | 2019-2020 | 86th Legislature | Enrolled

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Bill Title: Relating to the registration and certification of certain investment products made available to public school employees.

Spectrum: Partisan Bill (Republican 2-0)

Status: (Passed) 2019-05-24 - Effective on 9/1/19 [HB2820 Detail]

Download: Texas-2019-HB2820-Enrolled.html

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H.B. No. 2820

AN ACT
relating to the registration and certification of certain
investment products made available to public school employees.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1. ELIGIBLE QUALIFIED INVESTMENTS
SECTION 1.01. 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, and 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.
(2) [(3)] "Eligible qualified investment" means a
qualified investment product offered by a company that[:
[(A)] is eligible to offer the product [certified
to the board of trustees] under Section 6 [5] of this Act[; or
[(B) is eligible to certify to the board of
trustees under Section 8 of this Act].
(3) [(4)] "Employee" means an employee of an
educational institution.
(4) [(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.
(5) [(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 1.02. Sections 5(a) and (f), Chapter 22 (S.B. 17),
Acts of the 57th Legislature, 3rd Called Session, 1962 (Article
6228a-5, Vernon's Texas Civil Statutes), are amended to read as
follows:
(a) An educational institution may enter into a salary
reduction agreement with an employee of the institution only if the
qualified investment product [:
[(1)] is an eligible qualified investment[; and
[(2) is registered with the retirement system under
Section 8A of this Act].
(f) To the greatest degree possible, educational
institutions that enter into a salary reduction agreement with
[employers of] employees [who participate in the program offered]
under this section shall require that contributions to eligible
qualified investments be made by automatic payroll deduction and
deposited directly in the investment accounts.
SECTION 1.03. Sections 6(a) and (b), Chapter 22 (S.B. 17),
Acts of the 57th Legislature, 3rd Called Session, 1962 (Article
6228a-5, Vernon's Texas Civil Statutes), are amended to read as
follows:
(a) An insurance [A] company is eligible to offer qualified
investment products to the employees of educational institutions
under [certify to the retirement system under Section 5 of] this Act
if the company satisfies the following [financial strength]
criteria:
(1) the company is licensed by the Texas Department of
Insurance and is in compliance with minimum capital and surplus
requirements, including applicable risk-based capital and surplus
requirements prescribed by rules adopted by the department
[company's actuarial opinions required under Articles 1.11 and
3.28, Insurance Code, have not been adverse or qualified in the five
years preceding the date the application is filed;
[(2) the company is subject to the annual audit
requirements of Article 1.15A, Insurance Code, and its most recent
audit of financial strength conducted by an independent certified
public accountant is timely filed and does not indicate the
existence of any material adverse financial conditions in the
company for the five years preceding the filing deadline for the
audit;
[(3) the company has not been the subject of an
administrative or regulatory action by the Texas Department of
Insurance under Article 1.32 or 21.28-A or Section 83.051,
Insurance Code, in the five years preceding the date the
application is filed;
[(4) the company has maintained during the five years
preceding the date the application is filed an average of at least
400 percent of the authorized control level, as calculated in
accordance with the risk-based capital and surplus requirements
established in rules adopted by the Texas Department of Insurance;
[(5) the company has not fallen below 300 percent of the
authorized control level, as calculated in accordance with the
risk-based capital and surplus established in rules adopted by the
Texas Department of Insurance, at any time in the five years
preceding the date the application is filed]; and
(2) [(6)] the company has [at least five years']
experience in providing qualified investment products and has a
specialized department dedicated to the service of qualified
investment products, as determined by the educational institution.
(b) 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, is eligible to offer qualified investment products to
employees of educational institutions under this Act [For purposes
of Subsection (a)(4) of this section, the company must calculate
the five-year average on the same date each year].
SECTION 1.04. 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;
(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 1.05. Section 9A, 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. 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 sufficient presence [its main office, a
branch office, or a trust office] in this state to serve the
employees of educational institutions who participate in the plan.
SECTION 1.06. Section 9B(b), 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:
(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 eligible to sell qualified
investment products under Section 6 [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 1.07. 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 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 1.08. Section 11(c), 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:
(c) The notice required under this section must be uniform
and:
(1) be in at least 14-point type;
(2) contain spaces for:
(A) the name, address, and telephone number of
the agent and company offering the annuity contract for sale;
(B) the name, address, and telephone number of
the company underwriting the annuity;
(C) the license number of the person offering to
sell the product;
(D) the name of the state agency that issued the
person's license;
(E) the name of the company account
representative who has the authority to respond to inquiries or
complaints; and
(F) with respect to fixed annuity products:
(i) the current interest rate or the
formula used to calculate the current rate of interest;
(ii) the guaranteed rate of interest and
the percentage of the premium to which the interest rate applies;
(iii) how interest is compounded;
(iv) the amount of any up-front, surrender,
withdrawal, deferred sales, and market value adjustment charges or
any other contract restriction that exceeds 10 years;
(v) the time, if any, the annuity is
required to be in force before the purchaser is entitled to the full
bonus accumulation value;
(vi) the manner in which the amount of the
guaranteed benefit under the annuity is computed;
(vii) whether loans are guaranteed to be
available under the annuity;
(viii) what restrictions, if any, apply to
the availability of money attributable to the value of the annuity
once the purchaser is retired or separated from the employment of
the employer;
(ix) the amount of any other fees, costs, or
penalties;
(x) whether the annuity guarantees the
participant the right to surrender a percentage of the surrender
value each year, and the percentage, if any; and
(xi) whether the annuity guarantees the
interest rate associated with any settlement option; and
(3) state, in plain language:
(A) that the company offering the annuity must
comply with Section 6 [5] of this Act and that the annuity must be a
qualified investment product [registered under Section 8A of this
Act];
(B) [that the potential purchaser may contact the
retirement system or access its Internet website to determine which
companies are in compliance with Section 5 of this Act and which
qualified investment products are registered under Section 8A of
this Act;
[(C)] the civil remedies available to the
employee;
(C) [(D)] that the employee may purchase any
eligible qualified investment through a salary reduction
agreement;
(D) [(E)] the name and telephone number of the
Texas Department of Insurance division that specializes in consumer
protection; and
(E) [(F)] the name and telephone number of the
attorney general's division that specializes in consumer
protection.
SECTION 1.09. Section 12, 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. 12. A company that offers an eligible qualified
investment that is subject to a salary reduction agreement shall
require [demonstrate annually to the retirement system] that each
of its representatives are properly licensed and qualified, by
training and continuing education, to sell and service the
company's eligible qualified investments.
SECTION 1.10. The following laws are repealed:
(1) Sections 5(b), (c), (d), and (e), Chapter 22 (S.B.
17), Acts of the 57th Legislature, 3rd Called Session, 1962
(Article 6228a-5, Vernon's Texas Civil Statutes);
(2) Sections 6(c), (d), (d-1), (d-2), (e), (f), (f-1),
(g), (h), and (i), Chapter 22 (S.B. 17), Acts of the 57th
Legislature, 3rd Called Session, 1962 (Article 6228a-5, Vernon's
Texas Civil Statutes);
(3) Section 7, Chapter 22 (S.B. 17), Acts of the 57th
Legislature, 3rd Called Session, 1962 (Article 6228a-5, Vernon's
Texas Civil Statutes);
(4) Section 8, Chapter 22 (S.B. 17), Acts of the 57th
Legislature, 3rd Called Session, 1962 (Article 6228a-5, Vernon's
Texas Civil Statutes);
(5) Section 8A, Chapter 22 (S.B. 17), Acts of the 57th
Legislature, 3rd Called Session, 1962 (Article 6228a-5, Vernon's
Texas Civil Statutes);
(6) Section 11(b), Chapter 22 (S.B. 17), Acts of the
57th Legislature, 3rd Called Session, 1962 (Article 6228a-5,
Vernon's Texas Civil Statutes); and
(7) Section 13, Chapter 22 (S.B. 17), Acts of the 57th
Legislature, 3rd Called Session, 1962 (Article 6228a-5, Vernon's
Texas Civil Statutes).
ARTICLE 2. CONFORMING CHANGE
SECTION 2.01. Section 17.46(b), Business & Commerce Code,
as amended by Chapters 324 (S.B. 1488), 858 (H.B. 2552), and 967
(S.B. 2065), Acts of the 85th Legislature, Regular Session, 2017,
is reenacted and amended to read as follows:
(b) Except as provided in Subsection (d) of this section,
the term "false, misleading, or deceptive acts or practices"
includes, but is not limited to, the following acts:
(1) passing off goods or services as those of another;
(2) causing confusion or misunderstanding as to the
source, sponsorship, approval, or certification of goods or
services;
(3) causing confusion or misunderstanding as to
affiliation, connection, or association with, or certification by,
another;
(4) using deceptive representations or designations
of geographic origin in connection with goods or services;
(5) representing that goods or services have
sponsorship, approval, characteristics, ingredients, uses,
benefits, or quantities which they do not have or that a person has
a sponsorship, approval, status, affiliation, or connection which
the person does not;
(6) representing that goods are original or new if
they are deteriorated, reconditioned, reclaimed, used, or
secondhand;
(7) representing that goods or services are of a
particular standard, quality, or grade, or that goods are of a
particular style or model, if they are of another;
(8) disparaging the goods, services, or business of
another by false or misleading representation of facts;
(9) advertising goods or services with intent not to
sell them as advertised;
(10) advertising goods or services with intent not to
supply a reasonable expectable public demand, unless the
advertisements disclosed a limitation of quantity;
(11) making false or misleading statements of fact
concerning the reasons for, existence of, or amount of price
reductions;
(12) representing that an agreement confers or
involves rights, remedies, or obligations which it does not have or
involve, or which are prohibited by law;
(13) knowingly making false or misleading statements
of fact concerning the need for parts, replacement, or repair
service;
(14) misrepresenting the authority of a salesman,
representative or agent to negotiate the final terms of a consumer
transaction;
(15) basing a charge for the repair of any item in
whole or in part on a guaranty or warranty instead of on the value of
the actual repairs made or work to be performed on the item without
stating separately the charges for the work and the charge for the
warranty or guaranty, if any;
(16) disconnecting, turning back, or resetting the
odometer of any motor vehicle so as to reduce the number of miles
indicated on the odometer gauge;
(17) advertising of any sale by fraudulently
representing that a person is going out of business;
(18) advertising, selling, or distributing a card
which purports to be a prescription drug identification card issued
under Section 4151.152, Insurance Code, in accordance with rules
adopted by the commissioner of insurance, which offers a discount
on the purchase of health care goods or services from a third party
provider, and which is not evidence of insurance coverage, unless:
(A) the discount is authorized under an agreement
between the seller of the card and the provider of those goods and
services or the discount or card is offered to members of the
seller;
(B) the seller does not represent that the card
provides insurance coverage of any kind; and
(C) the discount is not false, misleading, or
deceptive;
(19) using or employing a chain referral sales plan in
connection with the sale or offer to sell of goods, merchandise, or
anything of value, which uses the sales technique, plan,
arrangement, or agreement in which the buyer or prospective buyer
is offered the opportunity to purchase merchandise or goods and in
connection with the purchase receives the seller's promise or
representation that the buyer shall have the right to receive
compensation or consideration in any form for furnishing to the
seller the names of other prospective buyers if receipt of the
compensation or consideration is contingent upon the occurrence of
an event subsequent to the time the buyer purchases the merchandise
or goods;
(20) representing that a guaranty or warranty confers
or involves rights or remedies which it does not have or involve,
provided, however, that nothing in this subchapter shall be
construed to expand the implied warranty of merchantability as
defined in Sections 2.314 through 2.318 and Sections 2A.212 through
2A.216 to involve obligations in excess of those which are
appropriate to the goods;
(21) promoting a pyramid promotional scheme, as
defined by Section 17.461;
(22) representing that work or services have been
performed on, or parts replaced in, goods when the work or services
were not performed or the parts replaced;
(23) filing suit founded upon a written contractual
obligation of and signed by the defendant to pay money arising out
of or based on a consumer transaction for goods, services, loans, or
extensions of credit intended primarily for personal, family,
household, or agricultural use in any county other than in the
county in which the defendant resides at the time of the
commencement of the action or in the county in which the defendant
in fact signed the contract; provided, however, that a violation of
this subsection shall not occur where it is shown by the person
filing such suit that the person neither knew or had reason to know
that the county in which such suit was filed was neither the county
in which the defendant resides at the commencement of the suit nor
the county in which the defendant in fact signed the contract;
(24) failing to disclose information concerning goods
or services which was known at the time of the transaction if such
failure to disclose such information was intended to induce the
consumer into a transaction into which the consumer would not have
entered had the information been disclosed;
(25) using the term "corporation," "incorporated," or
an abbreviation of either of those terms in the name of a business
entity that is not incorporated under the laws of this state or
another jurisdiction;
(26) selling, offering to sell, or illegally promoting
an annuity contract under Chapter 22, Acts of the 57th Legislature,
3rd Called Session, 1962 (Article 6228a-5, Vernon's Texas Civil
Statutes), with the intent that the annuity contract will be the
subject of a salary reduction agreement, as defined by that Act, if
the annuity contract is not an eligible qualified investment under
that Act [or is not registered with the Teacher Retirement System of
Texas as required by Section 8A of that Act];
(27) taking advantage of a disaster declared by the
governor under Chapter 418, Government Code, by:
(A) selling or leasing fuel, food, medicine, or
another necessity at an exorbitant or excessive price; or
(B) demanding an exorbitant or excessive price in
connection with the sale or lease of fuel, food, medicine, or
another necessity;
(28) using the translation into a foreign language of
a title or other word, including "attorney," "immigration
consultant," "immigration expert," "lawyer," "licensed," "notary,"
and "notary public," in any written or electronic material,
including an advertisement, a business card, a letterhead,
stationery, a website, or an online video, in reference to a person
who is not an attorney in order to imply that the person is
authorized to practice law in the United States;
(29) delivering or distributing a solicitation in
connection with a good or service that:
(A) represents that the solicitation is sent on
behalf of a governmental entity when it is not; or
(B) resembles a governmental notice or form that
represents or implies that a criminal penalty may be imposed if the
recipient does not remit payment for the good or service;
(30) delivering or distributing a solicitation in
connection with a good or service that resembles a check or other
negotiable instrument or invoice, unless the portion of the
solicitation that resembles a check or other negotiable instrument
or invoice includes the following notice, clearly and conspicuously
printed in at least 18-point type:
"SPECIMEN-NON-NEGOTIABLE";
(31) in the production, sale, distribution, or
promotion of a synthetic substance that produces and is intended to
produce an effect when consumed or ingested similar to, or in excess
of, the effect of a controlled substance or controlled substance
analogue, as those terms are defined by Section 481.002, Health and
Safety Code:
(A) making a deceptive representation or
designation about the synthetic substance; or
(B) causing confusion or misunderstanding as to
the effects the synthetic substance causes when consumed or
ingested;
(32) a licensed public insurance adjuster directly or
indirectly soliciting employment, as defined by Section 38.01,
Penal Code, for an attorney, or a licensed public insurance
adjuster entering into a contract with an insured for the primary
purpose of referring the insured to an attorney without the intent
to actually perform the services customarily provided by a licensed
public insurance adjuster, provided that this subdivision may not
be construed to prohibit a licensed public insurance adjuster from
recommending a particular attorney to an insured; [or]
(33) owning, operating, maintaining, or advertising a
massage establishment, as defined by Section 455.001, Occupations
Code, that:
(A) is not appropriately licensed under Chapter
455, Occupations Code, or is not in compliance with the applicable
licensing and other requirements of that chapter; or
(B) is not in compliance with an applicable local
ordinance relating to the licensing or regulation of massage
establishments; or
(34) [(33)] a warrantor of a vehicle protection
product warranty using, in connection with the product, a name that
includes "casualty," "surety," "insurance," "mutual," or any other
word descriptive of an insurance business, including property or
casualty insurance, or a surety business.
ARTICLE 3. TRANSITIONS; CONFLICT WITH OTHER LEGISLATION; EFFECTIVE
DATE
SECTION 3.01. The changes in law made by this Act to Chapter
22 (S.B. 17), Acts of the 57th Legislature, 3rd Called Session,
1962 (Article 6228a-5, Vernon's Texas Civil Statutes), apply only
to an offer of a qualified investment product under that Act that is
made on or after the effective date of this Act. An offer of a
qualified investment product that is made before the effective date
of this Act is governed by the law as it existed immediately before
the effective date of this Act, and that law is continued in effect
for that purpose.
SECTION 3.02. The change in law made by this Act to 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), applies only to an offense committed on or after the
effective date of this Act. For purposes of this section, an
offense is committed before the effective date of this Act if any
element of the offense occurs before that date. An offense
committed before the effective date of this Act is governed by the
law in effect when the offense was committed, and the former law is
continued in effect for that purpose.
SECTION 3.03. Section 17.46(b), Business & Commerce Code,
as amended by this Act, applies only to a cause of action that
accrues on or after the effective date of this Act. A cause of
action that accrues before the effective date of this Act is
governed by the law as it existed immediately before the effective
date of this Act, and that law is continued in effect for that
purpose.
SECTION 3.04. To the extent of any conflict, this Act
prevails over another Act of the 86th Legislature, Regular Session,
2019, relating to nonsubstantive additions to and corrections in
enacted codes.
SECTION 3.05. This Act takes effect September 1, 2019.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 2820 was passed by the House on April
10, 2019, by the following vote: Yeas 146, Nays 0, 1 present, not
voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 2820 was passed by the Senate on May
10, 2019, by the following vote: Yeas 31, Nays 0.
______________________________
Secretary of the Senate
APPROVED: _____________________
Date
_____________________
Governor