Sec. 802.205.  INVESTMENT CUSTODY ACCOUNT.  (a)  If the governing body of a public retirement system contracts for professional investment management services, it also shall enter into an investment custody account agreement designating a bank, depository trust company, or brokerage firm to serve as custodian for all assets allocated to or generated under the contract.
(b)  Under a custody account agreement, the governing body of a public retirement system shall require the designated custodian to perform the duties and assume the responsibilities for funds under the contract for which the agreement is established that are performed and assumed, in the absence of a contract, by the custodian of system funds.
(c)  A political subdivision of which members of the retirement system are officers or employees may pay all or part of the cost of custodial services under a custody account agreement under this section.  Any cost not paid directly by a political subdivision is payable from funds of the public retirement system.
(d)  If the governing body enters into a contract under Subsection (a) with a brokerage firm, the firm must:
(1)  be a broker-dealer registered with the Securities and Exchange Commission;
(2)  be a member of a national securities exchange;
(3)  be a member of the Securities Investor Protection Corporation;
(4)  be registered with the State Securities Board;  and
(5)  maintain net regulatory capital of at least $200 million.
(e)  A brokerage firm contracted with for custodial services under this section may not have discretionary authority over the retirement system's assets in the firm's custody.
(f)  A brokerage firm that provides custodial services under Subsection (a) must provide insurance against errors, omissions, mysterious disappearance, or fraud in an amount equal to the amount of the assets the firm holds in custody.
(g)  A brokerage firm that provides consulting advice, custody of assets, or other services to a public retirement system under this chapter shall discharge its duties solely in the interest of the public retirement system in accordance with Section 802.203.
Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1, 1981.  Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec. 12.205 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1, 1989.  Amended by Acts 1991, 72nd Leg., ch. 621, Sec. 1, eff. Sept. 1, 1991;  Acts 2003, 78th Leg., ch. 916, Sec. 1, eff. June 20, 2003.