By Giddings, Naishtat, Coleman, Thompson H.B. No. 230
74R80 DWS-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to removal of restrictions on investment of certain funds
1-3 in businesses doing business in South Africa.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 404.024, Government Code, is amended to
1-6 read as follows:
1-7 Sec. 404.024. Authorized Investments. (a) The board may
1-8 determine and designate the amount of state funds to be deposited
1-9 in time deposits in state depositories. The treasurer shall
1-10 recommend to the board a maximum limit for state funds deposited by
1-11 the treasurer at approved state depositories. The percentage of
1-12 state funds to be deposited in state depositories shall be based on
1-13 the interest rates available in competing investments, the demand
1-14 for funds from Texas banks, and the state's liquidity requirements.
1-15 The treasurer shall provide periodic investment reports to the
1-16 board.
1-17 (b) State funds not deposited in state depositories shall be
1-18 invested by the treasurer in:
1-19 (1) direct security repurchase agreements;
1-20 (2) reverse security repurchase agreements;
1-21 (3) direct obligations of or obligations the principal
1-22 and interest of which are guaranteed by the United States;
1-23 (4) direct obligations of or obligations guaranteed by
1-24 agencies or instrumentalities of the United States government;
2-1 (5) bankers' acceptances that:
2-2 (A) are eligible for purchase by the Federal
2-3 Reserve System;
2-4 (B) do not exceed 270 days to maturity; and
2-5 (C) are issued by a bank that has received the
2-6 highest short-term credit rating by a nationally recognized
2-7 investment rating firm;
2-8 (6) commercial paper that:
2-9 (A) does not exceed 270 days to maturity; and
2-10 (B) except as provided by Subsection (h) <(j)>,
2-11 has received the highest short-term credit rating by a nationally
2-12 recognized investment rating firm;
2-13 (7) contracts written by the treasury in which the
2-14 treasury grants the purchaser the right to purchase securities in
2-15 the treasury's marketable securities portfolio at a specified price
2-16 over a specified period and for which the treasury is paid a fee
2-17 and specifically prohibits naked-option or uncovered option
2-18 trading;
2-19 (8) direct obligations of or obligations guaranteed by
2-20 the Inter-American Development Bank, the International Bank for
2-21 Reconstruction and Development (the World Bank), the African
2-22 Development Bank, the Asian Development Bank, and the International
2-23 Finance Corporation that have received the highest credit rating by
2-24 a nationally recognized investment rating firm; and
2-25 (9) bonds issued, assumed, or guaranteed by the State
2-26 of Israel.
2-27 (c) Investments in direct security repurchase agreements and
3-1 reverse security repurchase agreements may be made with state or
3-2 national banks domiciled in this state or with primary dealers as
3-3 approved by the Federal Reserve System.
3-4 (d) The board may contract with a depository for the payment
3-5 of interest on time or demand deposits at a rate not to exceed a
3-6 rate that is lawful under an Act of Congress and rules and
3-7 regulations of the board of governors of the Federal Reserve
3-8 System, the board of directors of the Federal Deposit Insurance
3-9 Corporation, the Federal Savings and Loan Insurance Corporation,
3-10 and the Federal Home Loan Banking Board.
3-11 (e) Not more than 20 percent of the aggregate funds on
3-12 deposit in financial institutions at any time may be in depository
3-13 institutions other than banks.
3-14 (f) The treasurer may invest the gross proceeds from
3-15 obligations of this state or any agency of this state in:
3-16 (1) obligations of a state or an agency, county, city,
3-17 or other political subdivision of a state; and
3-18 (2) mutual funds composed of obligations described by
3-19 Subdivision (1).
3-20 (g) To the extent practicable, the treasurer shall give
3-21 first consideration to Texas banks when investing in direct
3-22 security repurchase agreements.
3-23 (h) <The treasurer may not use state funds to invest in or
3-24 purchase obligations of a private corporation or other private
3-25 business entity doing business in the Republic of South Africa
3-26 unless the corporation or other entity:>
3-27 <(1) has:>
4-1 <(A) adopted the Statement of Principles for
4-2 South Africa as they existed in 1987, as described in the >þLReport on
4-3 the Signatory Companies to the Statement of Principles for South
4-4 Africaää< published by Arthur D. Little, Inc., Cambridge,
4-5 Massachusetts, and has obtained a performance rating in Category 1
4-6 or 2 of the Statement of Principles for South Africa rating system
4-7 as determined by Arthur D. Little, Inc.; or>
4-8 <(B) agreed to the Code of Conduct that is
4-9 enforced by the United States Department of State under Section
4-10 208, Comprehensive Anti-Apartheid Act of 1986 (Pub. L. No. 99-440)
4-11 and has received a rating of "Making Satisfactory Progress"; and>
4-12 <(2) does not supply strategic products or services
4-13 for use by the government, military, or police of the Republic of
4-14 South Africa.>
4-15 <(i) For the purposes of Subsection (h) of this section:>
4-16 <(1) "Doing business in the Republic of South Africa"
4-17 means conducting or performing manufacturing, assembly, or
4-18 warehousing operations within the Republic of South Africa or, if a
4-19 bank or other financial institution, lending money to the
4-20 government of the Republic of South Africa or any of its agencies
4-21 or instrumentalities.>
4-22 <(2) "Strategic products or services" means articles
4-23 designated as arms, ammunition, or implements of war as provided by
4-24 22 Code of Federal Regulations Part 121 or data processing
4-25 equipment or computers sold for military or police use or for use
4-26 in connection with restrictions on travel within the Republic of
4-27 South Africa by residents of that country.>
5-1 <(j)> The treasurer may not use state funds to invest in or
5-2 purchase obligations of a private corporation or other private
5-3 business entity doing business in Northern Ireland unless the
5-4 corporation or other entity:
5-5 (1) adheres to fair employment practices; and
5-6 (2) does not discriminate on the basis of race, color,
5-7 religion, sex, national origin, or disability.
5-8 (i) <(k)> Notwithstanding Subsection (b)(6)(B) <(a)(6)(B)>,
5-9 the treasurer may purchase commercial paper with a rating lower
5-10 than the rating required by that subsection to provide liquidity
5-11 for commercial paper issued by the treasurer or an agency of the
5-12 state.
5-13 SECTION 2. Section 161.173, Natural Resources Code, is
5-14 amended to read as follows:
5-15 Sec. 161.173. INVESTMENT OF MONEY IN FUND. (a) Money
5-16 <Except as limited by Subsection (b) of this section, money> in the
5-17 fund that is not immediately committed to paying principal of and
5-18 interest on the bonds, to the purchase of land, or to the payment
5-19 of expenses as provided in this chapter may be invested in:
5-20 (1) direct security repurchase agreements and reverse
5-21 security repurchase agreements made with state or national banks
5-22 domiciled in this state or with primary dealers as approved by the
5-23 Federal Reserve System;
5-24 (2) direct obligations of or obligations the principal
5-25 and interest of which are guaranteed by the United States;
5-26 (3) direct obligations of or obligations guaranteed by
5-27 the Federal Home Loan Banks, the Federal National Mortgage
6-1 Association, the Federal Farm Credit System, the Student Loan
6-2 Marketing Association, the Federal Home Loan Mortgage Corporation,
6-3 or a successor organization to one of those organizations;
6-4 (4) bankers' acceptances that:
6-5 (A) are eligible for purchase by members of the
6-6 Federal Reserve System;
6-7 (B) do not exceed 270 days to maturity; and
6-8 (C) are issued by a bank that has received the
6-9 highest short-term credit rating by a nationally recognized
6-10 investment rating firm;
6-11 (5) commercial paper that:
6-12 (A) does not exceed 270 days to maturity; and
6-13 (B) has received the highest short-term credit
6-14 rating by a nationally recognized investment rating firm;
6-15 (6) contracts written by the board in which the board
6-16 grants the purchaser the right to purchase securities in the
6-17 board's marketable securities portfolio at a specified price over a
6-18 specified period and for which the board is paid a fee and
6-19 specifically prohibits naked-option or uncovered option trading;
6-20 (7) obligations of a state or an agency, county, city,
6-21 or other political subdivision of a state and mutual funds composed
6-22 of these obligations;
6-23 (8) an investment instrument, obligation, or other
6-24 evidence of indebtedness the payment of which is directly or
6-25 indirectly guaranteed by the full faith and credit of the United
6-26 States;
6-27 (9) an investment, account, depository receipt, or
7-1 deposit that is fully:
7-2 (A) insured by the Federal Deposit Insurance
7-3 Corporation, the Federal Savings and Loan Insurance Corporation, or
7-4 a successor organization to one of those organizations; or
7-5 (B) secured by securities described by
7-6 Subdivision (2), (3), or (8) of this subsection;
7-7 (10) a collateralized mortgage obligation fully
7-8 secured by securities or mortgages issued or guaranteed by the
7-9 Government National Mortgage Association (GNMA) or any entity
7-10 described by Subdivision (3) of this subsection;
7-11 (11) a security or evidence of indebtedness issued by
7-12 the Farm Credit System Financial Assistance Corporation, the
7-13 Private Export Funding Corporation, or the Export-Import Bank; and
7-14 (12) any other investment authorized for investment of
7-15 state funds by the treasurer under Section 404.024, Government
7-16 Code.
7-17 (b) <The board may not invest in or purchase obligations of
7-18 a private corporation or other private business entity doing
7-19 business in the Republic of South Africa unless the corporation or
7-20 other entity:>
7-21 <(1) has:>
7-22 <(A) adopted the Statement of Principles for
7-23 South Africa as they existed in 1987, as described in the Report on
7-24 the Signatory Companies to the Statement of Principles for South
7-25 Africa published by Arthur D. Little, Inc., Cambridge,
7-26 Massachusetts, and has obtained a performance rating in Category 1
7-27 or 2 of the Statement of Principles for South Africa rating system
8-1 as determined by Arthur D. Little, Inc.; or>
8-2 <(B) agreed to the Code of Conduct that is
8-3 enforced by the United States Department of State under Section
8-4 208, Comprehensive Anti-Apartheid Act of 1986 (Pub. L. No. 99-440)
8-5 and has received a rating of "Making Satisfactory Progress"; and>
8-6 <(2) does not supply strategic products or services
8-7 for use by the government, military, or police of the Republic of
8-8 South Africa.>
8-9 <(c)> In this section:
8-10 (1) "Direct security repurchase agreement" means an
8-11 agreement under which the board buys, holds for a specified time,
8-12 and then sells back any of the following securities, obligations,
8-13 or participation certificates:
8-14 (A) United States government securities;
8-15 (B) direct obligations of or obligations the
8-16 principal and interest of which are guaranteed by the United
8-17 States;
8-18 (C) direct obligations of or obligations
8-19 guaranteed by the Federal Home Loan Banks, the Federal National
8-20 Mortgage Association, the Federal Farm Credit System, the Student
8-21 Loan Marketing Association, the Federal Home Loan Mortgage
8-22 Corporation, or a successor organization to one of those
8-23 organizations; or
8-24 (D) any other investment instrument, obligation,
8-25 or other evidence of indebtedness the payment of which is directly
8-26 or indirectly guaranteed by the full faith and credit of the United
8-27 States.
9-1 (2) <"Doing business in the Republic of South Africa"
9-2 means conducting or performing manufacturing, assembly, or
9-3 warehousing operations within the Republic of South Africa and for
9-4 a bank or other financial institution, lending money to the
9-5 government of the Republic of South Africa or any of its agencies
9-6 or instrumentalities.>
9-7 <(3)> "Market value" means the fair and reasonable
9-8 prevailing price at which a security is being sold on the open
9-9 market at the time of the appraisement of the security by the
9-10 board.
9-11 (3) <(4)> "Reverse security repurchase agreement"
9-12 means an agreement under which the board sells and after a
9-13 specified time buys back any of the securities, obligations, or
9-14 participation certificates listed in Paragraphs (A) through (D) of
9-15 Subdivision (1) of this subsection.
9-16 <(5) "Strategic products or services" means articles
9-17 designated as arms, ammunition, or implements of war as provided by
9-18 22 Code of Federal Regulations Part 121 or data processing
9-19 equipment or computers sold for military or police use or for use
9-20 in connection with restriction on travel within the Republic of
9-21 South Africa by residents of that country.>
9-22 SECTION 3. Section 59.016, Agriculture Code, is amended to
9-23 read as follows:
9-24 Sec. 59.016. INVESTMENTS. (a) The authority shall give
9-25 timely instruction to the board of the dates on which principal on
9-26 bonds matures and interest becomes payable. The board shall
9-27 administer the fund accordingly.
10-1 (b) Money <Except as provided by Subsection (c) of this
10-2 section, money> in the fund that is not immediately committed to
10-3 paying principal of and interest on the bonds or to paying expenses
10-4 as provided by Section 59.015 of this code may be invested by the
10-5 board in:
10-6 (1) a direct security repurchase agreement or reverse
10-7 security repurchase agreement made with a state or national bank
10-8 domiciled in this state or with a primary dealer approved by the
10-9 federal reserve system;
10-10 (2) a direct obligation of or obligation the principal
10-11 and interest of which are guaranteed by the United States
10-12 government;
10-13 (3) a direct obligation of or obligation guaranteed by
10-14 the Federal Home Loan Banks, the Federal National Mortgage
10-15 Association, the Federal Farm Credit System, the Student Loan
10-16 Marketing Association, the Federal Home Loan Mortgage Corporation,
10-17 or a successor to one of those organizations;
10-18 (4) a bankers' acceptance that:
10-19 (A) is eligible for purchase by a member of the
10-20 federal reserve system;
10-21 (B) matures in 270 days or less; and
10-22 (C) is issued by a bank that has received the
10-23 highest short-term credit rating by a nationally recognized
10-24 investment rating firm;
10-25 (5) commercial paper that:
10-26 (A) matures in 270 days or less; and
10-27 (B) has received the highest short-term credit
11-1 rating by a nationally recognized investment rating firm;
11-2 (6) a contract that is written by the board in which
11-3 the board grants the purchaser the right to purchase securities in
11-4 the board's marketable securities portfolio at a specified price
11-5 over a specified period and for which the board is paid a fee and
11-6 that specifically prohibits naked-option or uncovered option
11-7 trading;
11-8 (7) an obligation of a state or of an agency, county,
11-9 city, or other political subdivision of a state or a mutual fund
11-10 composed of those obligations;
11-11 (8) an investment instrument, obligation, or other
11-12 evidence of indebtedness the payment of which is directly or
11-13 indirectly guaranteed by the full faith and credit of the United
11-14 States government;
11-15 (9) an investment, account, depository receipt, or
11-16 deposit that is fully:
11-17 (A) insured by the Federal Deposit Insurance
11-18 Corporation or a successor to that organization; or
11-19 (B) secured by a security described by
11-20 Subdivision (2), (3), or (8) of this subsection;
11-21 (10) a collateralized mortgage obligation fully
11-22 secured by securities or mortgages issued or guaranteed by the
11-23 Government National Mortgage Association (GNMA) or any entity
11-24 identified by Subdivision (3) of this subsection;
11-25 (11) a security or evidence of indebtedness issued by
11-26 the Farm Credit System Financial Assistance Corporation, the
11-27 Private Export Funding Corporation, or the Export-Import Bank; and
12-1 (12) any other investment authorized for investment of
12-2 state funds by the state treasurer under Section 404.024,
12-3 Government Code.
12-4 (c) <The board may not invest in or purchase obligations of
12-5 a private corporation or other private business entity doing
12-6 business in the Republic of South Africa unless the corporation or
12-7 other entity:>
12-8 <(1) has:>
12-9 <(A) adopted the Statement of Principles for
12-10 South Africa as they existed in 1987, as described in the >þLReport on
12-11 the Signatory Companies to the Statement of Principles for South
12-12 Africaää< published by Arthur D. Little, Inc., Cambridge,
12-13 Massachusetts, and has obtained a performance rating in Category 1
12-14 or 2 of the Statement of Principles for South Africa rating system
12-15 as determined by Arthur D. Little, Inc.; or>
12-16 <(B) agreed to the Code of Conduct that is
12-17 enforced by the United States Department of State under Section
12-18 208, Comprehensive Anti-Apartheid Act of 1986 (Pub. L. No. 99-440)
12-19 and has received a rating of "Making Satisfactory Progress"; and>
12-20 <(2) does not supply strategic products or services
12-21 for use by the government, military, or police of the Republic of
12-22 South Africa.>
12-23 <(d)> In this section:
12-24 (1) "Direct security repurchase agreement" means an
12-25 agreement under which the board buys, holds for a specified time,
12-26 and then sells back any of the following securities, obligations,
12-27 or participation certificates:
13-1 (A) a United States government security;
13-2 (B) a direct obligation of or an obligation the
13-3 principal and interest of which are guaranteed by the United States
13-4 government;
13-5 (C) a direct obligation of or an obligation
13-6 guaranteed by the Federal Home Loan Banks, the Federal National
13-7 Mortgage Association, the Federal Farm Credit System, the Student
13-8 Loan Marketing Association, the Federal Home Loan Mortgage
13-9 Corporation, or a successor to one of those organizations; or
13-10 (D) any other investment instrument, obligation,
13-11 or other evidence of indebtedness the payment of which is directly
13-12 or indirectly guaranteed by the full faith and credit of the United
13-13 States government.
13-14 (2) <"Doing business in the Republic of South Africa"
13-15 means conducting or performing manufacturing, assembly, or
13-16 warehousing operations in the Republic of South Africa or, in the
13-17 case of a bank or other financial institution, lending money to the
13-18 government of the Republic of South Africa or any of its agencies
13-19 or instrumentalities.>
13-20 <(3)> "Market value" means the fair and reasonable
13-21 prevailing price at which a security is being sold on the open
13-22 market at the time of the appraisement of the security by the
13-23 board.
13-24 (3) <(4)> "Reverse security repurchase agreement"
13-25 means an agreement under which the board sells and after a
13-26 specified time buys back any of the securities, obligations, or
13-27 participation certificates listed by Subdivision (1) of this
14-1 subsection.
14-2 <(5) "Strategic products or services" means articles
14-3 designated as arms, ammunition, or implements of war as provided by
14-4 22 C.F.R. Part 121 or data processing equipment or computers sold
14-5 for military or police use or for use in connection with
14-6 restriction on travel in the Republic of South Africa by residents
14-7 of that country.>
14-8 SECTION 4. Section 27, Texas Local Fire Fighters Retirement
14-9 Act (Article 6243e, Vernon's Texas Civil Statutes), is amended to
14-10 read as follows:
14-11 Sec. 27. INVESTMENT OF ASSETS. (a) A board of trustees
14-12 established under this Act shall keep a sufficient amount of cash
14-13 on hand to make payments as they become due under the retirement
14-14 system. If a board determines that the fund of its retirement
14-15 system contains an amount in excess of the amount needed to make
14-16 payments as they become due, the board may invest any portion of
14-17 the excess in:
14-18 (1) bonds or other interest-bearing obligations and
14-19 securities of the United States, the state, or a political
14-20 subdivision of the state;
14-21 (2) shares and share accounts of savings and loan
14-22 associations to the extent that the shares and share accounts are
14-23 insured by the Federal Savings and Loan Insurance Corporation;
14-24 (3) first-lien real estate mortgage securities insured
14-25 by the Federal Housing Administration;
14-26 (4) bonds of companies incorporated within the United
14-27 States;
15-1 (5) common and preferred stocks of companies
15-2 incorporated within the United States that, unless the stocks are
15-3 bank or insurance stocks, are listed on an exchange registered with
15-4 the Securities and Exchange Commission or its successor;
15-5 (6) guaranteed investment contracts offered by
15-6 insurance companies;
15-7 (7) money market funds;
15-8 (8) mutual funds and other pooled funds;
15-9 (9) international stocks traded as American depository
15-10 receipts; and
15-11 (10) over-the-counter stocks.
15-12 (b) In making investments for a retirement system, its board
15-13 of trustees shall exercise the judgment and care, under the
15-14 circumstances prevailing at the time of the investment, that
15-15 persons of ordinary prudence, discretion, and intelligence exercise
15-16 in the management of their own affairs, not in speculation but when
15-17 making a permanent disposition of their funds, considering the
15-18 probable income from the disposition and the probable safety of
15-19 their capital.
15-20 (c) At any particular time, not more than 60 percent of the
15-21 book value of the assets of a fund may be invested in corporate
15-22 stocks. A board of trustees established under this Act may not
15-23 invest in the stock or bonds of one corporation more than five
15-24 percent of the book value of the assets of a fund. A retirement
15-25 system may not own more than five percent of the voting stock of
15-26 one corporation.
15-27 (d) <After August 31, 1991, a board of trustees established
16-1 under this Act may not acquire an investment in a bank or other
16-2 financial institution that directly or through a subsidiary has a
16-3 loan outstanding to the government of the Republic of South Africa
16-4 or to an instrumentality of that government.>
16-5 <(e)> A board of trustees established under this Act shall
16-6 adopt a written investment policy stating how assets of the
16-7 retirement system that it administers may be invested.
16-8 SECTION 5. The importance of this legislation and the
16-9 crowded condition of the calendars in both houses create an
16-10 emergency and an imperative public necessity that the
16-11 constitutional rule requiring bills to be read on three several
16-12 days in each house be suspended, and this rule is hereby suspended,
16-13 and that this Act take effect and be in force from and after its
16-14 passage, and it is so enacted.