74R9975 E
By Marchant, Junell, Greenberg H.B. No. 2459
Substitute the following for H.B. No. 2459:
By Telford C.S.H.B. No. 2459
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to public funds investment.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Chapter 2256, Government Code, is amended to
1-5 conform to Section 1, Chapter 181, Section 1, Chapter 858, and
1-6 Section 1, Chapter 946, Acts of the 73rd Legislature, Regular
1-7 Session, 1993, and amended to read as follows:
1-8 CHAPTER 2256. PUBLIC FUNDS INVESTMENT
1-9 SUBCHAPTER A. AUTHORIZED INVESTMENTS FOR GOVERNMENTAL ENTITIES
1-10 Sec. 2256.001. Short Title. This subchapter may be cited as
1-11 the Public Funds Investment Act.
1-12 Sec. 2256.002. Definitions. In this subchapter:
1-13 (1) "Bond proceeds" means the proceeds from the sale
1-14 of bonds, notes, and other obligations issued by an entity, and
1-15 reserves and funds maintained by an entity for debt service
1-16 purposes.
1-17 (2) "Carrying value" means the total cost of an
1-18 investment plus or minus amortization or accretion.
1-19 (3) "Funds" means public funds in the custody of a
1-20 state agency or local government that:
1-21 (A) are not required by law to be deposited in
1-22 the state treasury; and
1-23 (B) the state agency or local government has
1-24 authority to invest.
2-1 (4) "Institution of higher education" has the meaning
2-2 assigned by Section 61.003, Education Code.
2-3 (5) "Investment pool" means an entity created under
2-4 this code to invest public funds jointly on behalf of the entities
2-5 that participate in the pool and whose investment objectives in
2-6 order of priority are:
2-7 (A) preservation and safety of principal;
2-8 (B) liquidity; and
2-9 (C) yield.
2-10 (6) "Local government" means a municipality, a county,
2-11 a school district, a district or authority created under Section
2-12 52(b)(1) or (2), Article III, or Section 59, Article XVI, Texas
2-13 Constitution, a fresh water supply district, an institution of
2-14 higher education, a hospital district, and any political
2-15 subdivision, authority, public corporation, body politic, or
2-16 instrumentality of the State of Texas, and any nonprofit
2-17 corporation acting on behalf of any of those entities.
2-18 (7) "Market value" means the face or par value of an
2-19 investment multiplied by the dollar price of the security.
2-20 (8) <(2)> "School district" means a public school
2-21 district.
2-22 (9) "Investing entity" and "entity" mean an entity
2-23 subject to this chapter and described by Section 2256.003.
2-24 (10) "State agency" means an office, department,
2-25 commission, board, or other agency that is part of any branch of
2-26 state government, and any nonprofit corporation acting on behalf of
2-27 any of those entities.
3-1 Sec. 2256.003. Authority to Invest Funds; Entities Subject
3-2 to This Chapter. Each governing body of the following entities may
3-3 purchase, sell, and invest its funds and funds under its control in
3-4 investments authorized under this subchapter in compliance with
3-5 investment policies approved by the governing body and according to
3-6 the standard of care prescribed by Section 2256.005:
3-7 (1) a local government <municipality>;
3-8 (2) a state agency <a county;>
3-9 <(3) a school district;>
3-10 <(4) a district or authority created under:>
3-11 <(A) Article III, Section 52(b)(1) or (2), of
3-12 the Texas Constitution; or>
3-13 <(B) Article XVI, Section 59, of the Texas
3-14 Constitution;>
3-15 <(5) an institution of higher education;>
3-16 <(6) a hospital district;>
3-17 <(7) a nonprofit corporation acting on behalf of an
3-18 entity listed in Subdivisions (1) through (6)>; or
3-19 (3) an investment pool acting on behalf of two or more
3-20 local governments, state agencies, or a combination of those
3-21 entities <(8) a public funds investment pool created under Chapter
3-22 791 acting on behalf of a combination of entities listed in
3-23 Subdivisions (1) through (6)>.
3-24 Sec. 2256.004. Investment Policies; Investment Officer.
3-25 (a) The governing body of an investing entity shall adopt by rule,
3-26 order, ordinance, or resolution, as appropriate, a written
3-27 investment policy regarding the investment of its funds and funds
4-1 under its control.
4-2 (b) The investment policies must:
4-3 (1) be written;
4-4 (2) primarily emphasize safety of principal and
4-5 liquidity; and
4-6 (3) address investment diversification, yield, and
4-7 maturity and the quality and capability of investment management.
4-8 (c) <(b)> The investment policies may provide that bids for
4-9 certificates of deposit be solicited:
4-10 (1) orally;
4-11 (2) in writing;
4-12 (3) electronically; or
4-13 (4) in any combination of those methods.
4-14 (d) As an integral part of an investment policy, the
4-15 governing body shall adopt an investment strategy governing the
4-16 investment of its funds and funds under its control. An investment
4-17 strategy must describe the investment objectives of the entity
4-18 using the following priorities in order of importance:
4-19 (1) understanding of the suitability of the investment
4-20 to the financial requirements of the entity;
4-21 (2) preservation and safety of principal;
4-22 (3) liquidity;
4-23 (4) marketability of the investment if the need arises
4-24 to liquidate the investment before maturity;
4-25 (5) diversification of the investment portfolio; and
4-26 (6) yield.
4-27 (e) Each investing entity shall designate, by rule, order,
5-1 ordinance, or resolution, as appropriate, one or more officers or
5-2 employees of the state agency, local government, or investment pool
5-3 to be responsible for the investment of its funds. Unless
5-4 otherwise authorized by law, a person may not deposit, withdraw,
5-5 invest, transfer, or manage in any other manner funds of a state
5-6 agency, local government, or investment pool without express
5-7 written authority of the governing body or chief executive officer
5-8 of the state agency, local government, or investment pool,
5-9 consistent with the investment policy adopted by the entity.
5-10 (f) Subsection (e) does not apply to a state agency, local
5-11 government, or investment pool for which an officer of the entity
5-12 is assigned by law the function of investing its funds.
5-13 (g) An officer or employee of a commission created under
5-14 Chapter 391, Local Government Code, is ineligible to be designated
5-15 as an investment officer under Subsection (e).
5-16 (h) The governing body of an investing entity may specify in
5-17 its investment policy that any investment authorized by this
5-18 chapter is not suitable.
5-19 (i) A written copy of the investment policy shall be
5-20 presented to any person seeking to sell to the entity an authorized
5-21 investment. The registered principal of the person seeking to
5-22 sell an authorized investment shall execute a written instrument
5-23 substantially to the effect that the registered principal has:
5-24 (1) received and thoroughly reviewed the investment
5-25 policy of the entity; and
5-26 (2) acknowledged that reasonable procedures and
5-27 controls have been implemented by the person in an effort to
6-1 preclude imprudent investment activities arising out of investment
6-2 transactions conducted between the entity and the person.
6-3 (j) The investment officer of an entity may not buy any
6-4 securities from a person who does not execute and deliver to the
6-5 entity an instrument in substantially the form provided by
6-6 Subsection (i).
6-7 Sec. 2256.005. Standard of Care. (a) Investments shall be
6-8 made with judgment and care, under prevailing circumstances, that a
6-9 person of prudence, discretion, and intelligence would exercise in
6-10 the management of the person's own affairs, not for speculation,
6-11 but for investment, considering the probable safety of capital and
6-12 the probable income to be derived. Investment of funds shall be
6-13 governed by the following investment objectives, in order of
6-14 priority:
6-15 (1) preservation and safety of principal;
6-16 (2) liquidity; and
6-17 (3) yield.
6-18 (b) In determining whether an investment officer has
6-19 exercised prudence with respect to an investment decision, the
6-20 determination shall be made taking into consideration:
6-21 (1) the investment of all funds, or funds under the
6-22 entity's control, over which the officer had responsibility rather
6-23 than a consideration as to the prudence of a single investment; and
6-24 (2) whether the investment decision was consistent
6-25 with the written investment policy of the entity.
6-26 Sec. 2256.006. Authorized Investments: Obligations of, or
6-27 Guaranteed by, Governmental Entities. (a) Except as provided by
7-1 Subsection (b), the <The> following are authorized investments
7-2 under this subchapter:
7-3 (1) obligations of the United States or its agencies
7-4 and instrumentalities;
7-5 (2) direct obligations of this state or its agencies
7-6 and instrumentalities;
7-7 (3) collateralized mortgage obligations directly
7-8 issued by a federal agency or instrumentality of the United States,
7-9 the underlying security for which is guaranteed by an agency or
7-10 instrumentality of the United States;
7-11 (4) other obligations, the principal and interest of
7-12 which are unconditionally guaranteed or insured by, or backed by
7-13 the full faith and credit of, this state or the United States or
7-14 their respective agencies and <its> instrumentalities; and
7-15 (5) obligations of states, agencies, counties, cities,
7-16 and other political subdivisions of any state rated as to
7-17 investment quality by a nationally recognized investment rating
7-18 firm not less than A or its equivalent.
7-19 (b) The following are not authorized investments under this
7-20 section:
7-21 (1) obligations whose payment represents the coupon
7-22 payments on the outstanding principal balance of the underlying
7-23 mortgage-backed security collateral and pays no principal;
7-24 (2) obligations whose payment represents the principal
7-25 stream of cash flow from the underlying mortgage-backed security
7-26 collateral and bears no interest;
7-27 (3) collateralized mortgage obligations that have a
8-1 stated final maturity date of greater than 10 years; and
8-2 (4) collateralized mortgage obligations the interest
8-3 rate of which is determined by an index that adjusts opposite to
8-4 the changes in a market index.
8-5 Sec. 2256.007. Authorized Investments: Certificates of
8-6 Deposit. A certificate of deposit is an authorized investment
8-7 under this subchapter if the certificate of deposit is issued by a
8-8 state or national bank domiciled in this state or a savings and
8-9 loan association domiciled in this state and is:
8-10 (1) guaranteed or insured by the Federal Deposit
8-11 Insurance Corporation or its successor;
8-12 (2) secured by obligations that are described by
8-13 Section 2256.006(a) <2256.006>, including mortgage backed
8-14 securities directly issued by a federal agency or instrumentality
8-15 that have a market value of not less than the principal amount of
8-16 the certificates, but excluding those mortgage-backed securities of
8-17 the nature described by Section 2256.006(b); or
8-18 (3) secured in any other manner and amount provided by
8-19 law for deposits of the investing entity.
8-20 Sec. 2256.008. Authorized Investments: Repurchase
8-21 Agreements. (a) A fully collateralized repurchase agreement is an
8-22 authorized investment under this subchapter if the repurchase
8-23 agreement:
8-24 (1) has a defined termination date;
8-25 (2) is secured by obligations described by Section
8-26 2256.006(a)(1) <2256.006(1)>; and
8-27 (3) requires the securities being purchased by the
9-1 entity to be <is> pledged to the entity and deposited with the
9-2 entity or with a third party selected and <or> approved by the
9-3 entity<; and>
9-4 <(4) is placed through a primary government securities
9-5 dealer, as defined by the Federal Reserve, or a bank domiciled in
9-6 this state>.
9-7 (b) In this section, "repurchase agreement" means a
9-8 simultaneous agreement to buy, hold for a specified time, and sell
9-9 back at a future date obligations described by Section
9-10 2256.006(a)(1) <2256.006(1)>, at a <the principal and interest of
9-11 which are guaranteed by the United States in> market value at the
9-12 time the funds are disbursed of not less than the principal amount
9-13 of the funds disbursed. The term includes a direct security
9-14 repurchase agreement and a reverse security repurchase agreement.
9-15 (c) Notwithstanding any other law, the term of any reverse
9-16 security repurchase agreement may not exceed 90 days after the date
9-17 the reverse security repurchase agreement is delivered.
9-18 (d) Money received by an entity under the terms of a reverse
9-19 security repurchase agreement shall be used to acquire additional
9-20 authorized investments, but the term of the authorized investment
9-21 acquired must mature not later than the expiration date stated in
9-22 the reverse security repurchase agreement.
9-23 Sec. 2256.009. Authorized Investments: Bankers'
9-24 Acceptances. A bankers' acceptance is an authorized investment
9-25 under this subchapter if the bankers' acceptance:
9-26 (1) has a stated maturity of 270 days or fewer from
9-27 the date of its issuance;
10-1 (2) will be, in accordance with its terms, liquidated
10-2 in full at maturity;
10-3 (3) is eligible for collateral for borrowing from a
10-4 Federal Reserve Bank; and
10-5 (4) is accepted by a bank organized and existing under
10-6 the laws of the United States or any state, if the short-term
10-7 obligations of the bank, or of a bank holding company of which the
10-8 bank is the largest subsidiary, are rated not less than A-1 or P-1
10-9 or an equivalent rating by at least one nationally recognized
10-10 credit rating agency.
10-11 Sec. 2256.010. Authorized Investments: Commercial Paper.
10-12 Commercial paper is an authorized investment under this subchapter
10-13 if the commercial paper:
10-14 (1) has a stated maturity of 270 days or fewer from
10-15 the date of its issuance; and
10-16 (2) is rated not less than A-1 or P-1 or an equivalent
10-17 rating by at least:
10-18 (A) two nationally recognized credit rating
10-19 agencies; or
10-20 (B) one nationally recognized credit rating
10-21 agency and is fully secured by an irrevocable letter of credit
10-22 issued by a bank organized and existing under the laws of the
10-23 United States or any state.
10-24 Sec. 2256.011. Authorized Investments: Mutual Funds.
10-25 (a) A no-load money market mutual fund is an authorized investment
10-26 under this subchapter if the mutual fund:
10-27 (1) is regulated by <registered with> the Securities
11-1 and Exchange Commission;
11-2 (2) has a dollar-weighted average stated <portfolio>
11-3 maturity of 90 <120> days or fewer;
11-4 (3) is continuously rated as to investment quality by
11-5 at least one nationally recognized investment rating firm of not
11-6 less than AAA or its equivalent <is invested exclusively in
11-7 obligations described by Sections 2256.006 through 2256.010>; and
11-8 (4) includes in its investment objectives the
11-9 maintenance of a stable net asset value of $1 for each share.
11-10 (b) In addition to a no-load money market mutual fund
11-11 permitted as an authorized investment in Subsection (a), a no-load
11-12 mutual fund is an authorized investment under this subchapter if
11-13 the mutual fund:
11-14 (1) is registered with the Securities and Exchange
11-15 Commission;
11-16 (2) has an average weighted maturity of less than two
11-17 years;
11-18 (3) is invested exclusively in obligations approved by
11-19 this subchapter;
11-20 (4) is continuously rated as to investment quality by
11-21 at least one nationally recognized investment rating firm of not
11-22 less than AAA or its equivalent;
11-23 (5) is continuously rated as to volatility by at least
11-24 one nationally recognized investment rating firm of not less than
11-25 AAA or its equivalent; and
11-26 (6) conforms to the requirements set forth in Sections
11-27 2256.013(b) and (c).
12-1 (c) An entity is not authorized by this section to:
12-2 (1) invest in the aggregate more than 80 percent of
12-3 its monthly average fund balance, excluding bond proceeds and
12-4 reserves and other funds held for debt service, in money market
12-5 mutual funds described in Subsection (a) or mutual funds described
12-6 in Subsection (b), either separately or collectively; or
12-7 (2) invest its funds or funds under its control,
12-8 excluding bond proceeds and reserves and other funds held for debt
12-9 service, in any one <money market> mutual fund described in
12-10 Subsection (a) or (b) in an amount that exceeds 10 percent of the
12-11 total assets of the <money market> mutual fund.
12-12 Sec. 2256.012. Authorized Investments: Guaranteed
12-13 Investment Contracts. (a) A guaranteed investment contract is an
12-14 authorized investment for state agencies for bond proceeds under
12-15 this subchapter if the guaranteed investment contract:
12-16 (1) has a defined termination date;
12-17 (2) is secured by obligations described by Section
12-18 2256.006(a)(1), excluding those obligations described by Section
12-19 2256.006(b), in an amount at least equal to the amount of bond
12-20 proceeds invested under the contract; and
12-21 (3) is pledged to the entity and deposited with the
12-22 entity or with a third party selected and approved by the entity.
12-23 (b) Bond proceeds, other than bond proceeds representing
12-24 reserves and funds maintained for debt service purposes, may not be
12-25 invested in a guaranteed investment contract with a term of longer
12-26 than five years from the date of issuance of the bonds.
12-27 (c) To be eligible as an authorized investment:
13-1 (1) the governing body of the entity must specifically
13-2 authorize guaranteed investment contracts as an eligible investment
13-3 in the order, ordinance, or resolution authorizing the issuance of
13-4 bonds;
13-5 (2) the entity must receive bids from at least three
13-6 separate providers with no material financial interest in the bonds
13-7 from which proceeds were received;
13-8 (3) the entity must purchase the highest yielding
13-9 guaranteed investment contract for which a qualifying bid is
13-10 received;
13-11 (4) the price of the guaranteed investment contract
13-12 must take into account the reasonably expected drawdown schedule
13-13 for the bond proceeds to be invested; and
13-14 (5) the provider must certify the administrative costs
13-15 reasonably expected to be paid to third parties in connection with
13-16 the guaranteed investment contract. <AUTHORIZED INVESTMENTS:
13-17 COMMON TRUST FUNDS. (a) A qualified common trust fund is an
13-18 authorized investment for the local funds of an institution of
13-19 higher education and for the bond proceeds and reserves and other
13-20 funds held for debt service of a municipality, county, school
13-21 district, or navigation district if the common trust fund:>
13-22 <(1) is owned or administered by a bank domiciled in
13-23 this state;>
13-24 <(2) consists exclusively of assets that are
13-25 obligations described by Sections 2256.006 through 2256.010;>
13-26 <(3) complies with the Internal Revenue Code of 1986
13-27 and applicable federal regulations governing the investment of bond
14-1 proceeds and reserves and other funds held for debt service; and>
14-2 <(4) meets the cash flow requirements and the
14-3 investment needs of the political subdivision or institution.>
14-4 <(b) In this section, "common trust fund" includes a
14-5 comparable investment device.>
14-6 Sec. 2256.013. AUTHORIZED INVESTMENTS: INVESTMENT POOLS.
14-7 (a) An entity may invest its funds and funds under its control
14-8 through an eligible investment pool if the governing body of the
14-9 entity by rule, order, ordinance, or resolution, as appropriate,
14-10 authorizes investment in the particular pool. An investment pool
14-11 shall invest the funds it receives from entities in authorized
14-12 investments permitted by this subchapter.
14-13 (b) To be eligible to receive funds from and invest funds on
14-14 behalf of an entity under this chapter, an investment pool must
14-15 furnish to the investment officer or other authorized
14-16 representative of the entity an offering circular or other similar
14-17 disclosure instrument that contains, at a minimum, the following
14-18 information:
14-19 (1) the types of investments in which money is allowed
14-20 to be invested;
14-21 (2) the maximum average dollar-weighted maturity
14-22 allowed, based on the stated maturity date, of the pool;
14-23 (3) the maximum stated maturity date any investment
14-24 security within the portfolio has;
14-25 (4) the objectives of the pool;
14-26 (5) the size of the pool;
14-27 (6) the names of the members of the advisory board of
15-1 the pool and the dates their terms expire;
15-2 (7) the custodian bank that will safekeep the pool's
15-3 assets;
15-4 (8) whether the intent of the pool is to maintain a
15-5 net asset value of one dollar and the risk of market price
15-6 fluctuation;
15-7 (9) whether the only source of payment is the assets
15-8 of the pool at market value or whether there is a secondary source
15-9 of payment, such as insurance or guarantees, and a description of
15-10 the secondary source of payment;
15-11 (10) the name and address of the independent auditor
15-12 of the pool;
15-13 (11) the requirements to be satisfied for an entity to
15-14 deposit funds in and withdraw funds from the pool and any deadlines
15-15 or other operating policies required for the entity to invest funds
15-16 in and withdraw funds from the pool; and
15-17 (12) the performance history of the pool, including
15-18 yield, average dollar-weighted maturities, and expense ratios.
15-19 (c) To maintain eligibility to receive funds from and invest
15-20 funds on behalf of an entity under this chapter, an investment pool
15-21 must furnish to the investment officer or other authorized
15-22 representative of the entity:
15-23 (1) investment transaction confirmations; and
15-24 (2) a monthly report that contains, at a minimum, the
15-25 following information:
15-26 (A) the types and percentage breakdown of
15-27 securities in which the pool is invested;
16-1 (B) the current average dollar-weighted
16-2 maturity, based on the stated maturity date, of the pool;
16-3 (C) the current percentage of the pool's
16-4 portfolio in investments that have stated maturities of more than
16-5 one year;
16-6 (D) the carrying value versus the market value
16-7 of the pool's portfolio, using amortized cost valuation;
16-8 (E) the size of the pool;
16-9 (F) the number of participants in the pool;
16-10 (G) the custodian bank that is safekeeping the
16-11 assets of the pool;
16-12 (H) a listing of daily transaction activity of
16-13 the entity participating in the pool;
16-14 (I) the yield and expense ratio of the pool;
16-15 (J) the portfolio managers of the pool; and
16-16 (K) any changes or addenda to the offering
16-17 circular.
16-18 (d) An entity by contract may delegate to an investment pool
16-19 the authority to hold legal title as custodian of investments
16-20 purchased with its local funds.
16-21 (e) In this section, "yield" shall be calculated in
16-22 accordance with regulations governing the registration of open-end
16-23 management investment companies under the Investment Company Act of
16-24 1940, as promulgated from time to time by the federal Securities
16-25 and Exchange Commission. <BIDS FOR COMMON TRUST FUND INVESTMENTS.
16-26 (a) An institution of higher education or a municipality, county,
16-27 school district, or navigation district may invest in a common
17-1 trust fund under Section 2256.012 only after soliciting orally or
17-2 in another manner competitive bids from at least three banks.>
17-3 <(b) The solicitations for bids required by Subsection (a)
17-4 for a county shall be made only to banks located in the county
17-5 unless there are fewer than three banks available for the
17-6 investment located in the county; in which case, the solicitations
17-7 shall be made to each bank in the county and, as necessary to
17-8 complete the solicitations, to banks located in this state.>
17-9 <(c) The solicitations for bids required by Subsection (a)
17-10 for a municipality or a school district shall be made only to banks
17-11 located in the municipality or school district unless there are
17-12 fewer than three banks available for the investments located in the
17-13 municipality or school district; in which case, the solicitations
17-14 shall be made to each bank in the municipality or school district
17-15 and, as necessary to complete the solicitations, to banks in a
17-16 county in which the municipality or school district is located. If
17-17 there are fewer than three banks available for investments in the
17-18 municipality or school district and in the counties in which the
17-19 municipality or school district is located, the solicitations shall
17-20 be made to each bank in the municipality or school district and in
17-21 the counties in which the municipality or school district is
17-22 located, and, as necessary to complete the solicitations, to banks
17-23 located in this state.>
17-24 <(d) This section applies to a nonprofit corporation acting
17-25 on behalf of a municipality, county, or school district as it
17-26 applies to the municipality, county, or school district.>
17-27 Sec. 2256.0131. PORTFOLIO OF CERTAIN INVESTMENT POOLS. A
18-1 public funds investment pool created to function as a money market
18-2 mutual fund must mark to market its portfolio daily and, to the
18-3 extent reasonably possible, stabilize at a $1 net asset value. If
18-4 the ratio of the market value of the portfolio divided by the book
18-5 value of the portfolio is less than 0.995 or greater than 1.005,
18-6 portfolio holdings shall be sold as necessary to maintain the ratio
18-7 between 0.995 and 1.005.
18-8 Sec. 2256.0132. ADVISORY BOARD OF INVESTMENT POOLS. (a) An
18-9 investment pool other than a pool described by Subsection (b) shall
18-10 establish an advisory board composed of participants in the pool
18-11 and other persons.
18-12 (b) A public funds investment pool created under Chapter 791
18-13 and managed by a state agency shall establish an advisory board
18-14 composed equally of participants in the pool and other persons who
18-15 do not have a business relationship with the pool. A board member
18-16 must be qualified to advise the pool.
18-17 Sec. 2256.0133. RATING OF CERTAIN INVESTMENT POOLS. A
18-18 public funds investment pool must be continuously rated no lower
18-19 than AAA or AAA-m or at an equivalent rating by at least one
18-20 nationally recognized rating service.
18-21 Sec. 2256.014. AUTHORIZED INVESTMENTS: INSTITUTIONS OF
18-22 HIGHER EDUCATION. In addition to the authorized investments
18-23 permitted by this subchapter, an institution of higher education
18-24 may purchase, sell, and invest its funds and funds under its
18-25 control in the following:
18-26 (1) cash management and fixed income funds sponsored
18-27 by organizations exempt from federal income taxation under Section
19-1 501(f), Internal Revenue Code of 1986 (26 U.S.C. Section 501(f));
19-2 (2) negotiable certificates of deposit issued by a
19-3 bank that has a certificate of deposit rating of at least 1 or the
19-4 equivalent by a nationally recognized credit rating agency or that
19-5 is associated with a holding company having a commercial paper
19-6 rating of at least A-1, P-1, or the equivalent by a nationally
19-7 recognized credit rating agency; and
19-8 (3) corporate bonds, debentures, or similar debt
19-9 obligations rated by a nationally recognized investment rating firm
19-10 in one of the two highest long-term rating categories, without
19-11 regard to gradations within those categories. <BANK UNWILLING TO
19-12 BID; PRESUMPTION. A governmental entity or nonprofit corporation
19-13 that is notified by a bank that the bank is unable or unwilling to
19-14 bid for investments under Section 2256.012 may presume that the
19-15 bank continues to be unable or unwilling to bid for investments
19-16 until the bank in writing notifies the entity otherwise.>
19-17 Sec. 2256.015. INTERNAL MANAGEMENT REPORTS. (a) Not less
19-18 than quarterly, the investment officer shall prepare and submit to
19-19 the governing body of the entity a written report of the entity's
19-20 local funds investment transactions for the preceding reporting
19-21 period.
19-22 (b) The report must:
19-23 (1) describe in detail the investment position of the
19-24 entity on the date of the report;
19-25 (2) be prepared jointly by all investment officers of
19-26 the entity;
19-27 (3) be signed by each investment officer of the
20-1 entity;
20-2 (4) contain a summary statement of each pooled fund
20-3 group that states the:
20-4 (A) beginning market value for the reporting
20-5 period;
20-6 (B) additions and changes to the market value
20-7 during the period; and
20-8 (C) ending market value for the period;
20-9 (5) state the carrying value and market value of each
20-10 separately invested asset at the beginning and end of the reporting
20-11 period by type of asset and fund type invested;
20-12 (6) state the maturity date of each separately
20-13 invested asset;
20-14 (7) state the account or fund or pooled fund group in
20-15 the state agency or local government for which each individual
20-16 investment was acquired; and
20-17 (8) state the compliance of the investment portfolio
20-18 of the state agency or local government as it relates to the
20-19 investment strategy expressed in the agency's or local government's
20-20 investment policy.
20-21 (c) The report shall be presented not less than quarterly to
20-22 the governing body and the chief executive officer of the entity.
20-23 (d) In this section:
20-24 (1) "Pooled fund group" means an internally created
20-25 fund of a state agency or local government in which one or more
20-26 institutional accounts of the state agency or local government are
20-27 invested.
21-1 (2) "Separately invested asset" means an account or
21-2 fund of a state agency or local government that is not invested in
21-3 a pooled fund group.
21-4 Sec. 2256.016. SUBCHAPTER CUMULATIVE. (a) The authority
21-5 granted by this subchapter is in addition to that granted by other
21-6 law. Except as provided by Subsection (b), this subchapter does
21-7 not:
21-8 (1) prohibit an investment specifically authorized by
21-9 other law; or
21-10 (2) authorize an investment specifically prohibited by
21-11 other law.
21-12 (b) Notwithstanding any other law, a security described by
21-13 Section 2256.006(b) is not an authorized investment for an
21-14 investing entity.
21-15 Sec. 2256.017 <2256.016>. SUBCHAPTER NOT APPLICABLE TO
21-16 RETIREMENT SYSTEMS AND CERTAIN STATE AGENCIES. This subchapter
21-17 does not apply to a public retirement system as defined by Section
21-18 802.001, to state funds invested as authorized by Section 404.024,
21-19 or to funds invested by an institution of higher education as
21-20 authorized by Section 51.0031(c), Education Code.
21-21 SUBCHAPTER B. MISCELLANEOUS PROVISIONS
21-22 <INVESTMENT OF LOCAL FUNDS>
21-23 Sec. 2256.051. PRIVATE AUDITOR. Notwithstanding any other
21-24 law, a state agency shall employ a private auditor if authorized by
21-25 the legislative audit committee on the committee's initiative or on
21-26 request of the governing body of the agency.
21-27 Sec. 2256.052. PAYMENT FOR SECURITIES PURCHASED BY STATE.
22-1 The comptroller, the state treasurer, or the disbursing officer of
22-2 an agency that has the power to invest assets directly may pay for
22-3 authorized securities purchased from or through a member in good
22-4 standing of the National Association of Securities Dealers or from
22-5 or through a national or state bank on receiving an invoice from
22-6 the seller of the securities showing that the securities have been
22-7 purchased by the board or agency and that the amount to be paid for
22-8 the securities is just, due, and unpaid.
22-9 Sec. 2256.053. DELIVERY OF SECURITIES PURCHASED BY STATE. A
22-10 security purchased under this chapter may be delivered to the state
22-11 treasurer, a bank, or the board or agency investing its funds. The
22-12 delivery shall be made under normal and recognized practices in the
22-13 securities and banking industries, including the book entry
22-14 procedure of the Federal Reserve Bank.
22-15 Sec. 2256.054. DEPOSIT OF SECURITIES PURCHASED BY STATE. At
22-16 the direction of the state treasurer or the agency, a security
22-17 purchased under this chapter may be deposited in trust with a bank
22-18 or federal reserve bank or branch designated by the treasurer,
22-19 whether in or outside the state. The deposit shall be evidenced by
22-20 a trust receipt of the bank with which the securities are
22-21 deposited.
22-22 Sec. 2256.055. ELECTRONIC FUNDS TRANSFER. Any local
22-23 government may use electronic means to transfer or invest all funds
22-24 collected or controlled by the local government.
22-25 <Sec. 2256.051. ><Definitions><. In this subchapter:>
22-26 <(1) "Investment pool" means an entity created under
22-27 Chapter 791 to invest public funds of two or more local
23-1 governments.>
23-2 <(2) "Local funds" means public funds in the custody
23-3 of a state agency or political subdivision that:>
23-4 <(A) are not required by law to be deposited in
23-5 the state treasury; and>
23-6 <(B) the agency or subdivision has authority to
23-7 invest.>
23-8 <(3) "Political subdivision" means a county,
23-9 municipality, or special purpose district.>
23-10 <(4) "State agency" means an office, department,
23-11 commission, board, other agency, institution of higher education,
23-12 or river authority that is part of any branch of state government.>
23-13 <Sec. 2256.052. ><Rules Governing Investment><. Each state
23-14 agency or political subdivision shall adopt rules governing the
23-15 investment of its local funds, including rules specifying the scope
23-16 of authority of officers and employees designated to invest local
23-17 funds.>
23-18 <Sec. 2256.053. ><Investment Rate of Return><. A state agency,
23-19 political subdivision, or investment pool shall invest its local
23-20 funds in investments that:>
23-21 <(1) yield the highest possible rate of return;>
23-22 <(2) protect the principal; and>
23-23 <(3) are consistent with the operating requirements of
23-24 the agency, subdivision, or pool as determined by the governing
23-25 body.>
23-26 <Sec. 2256.054. ><Designation of Investment Officer><.
23-27 (a) Each state agency or political subdivision shall designate, by
24-1 rule, order, ordinance, or resolution, one or more officers or
24-2 employees of the agency, subdivision, or investment pool to be
24-3 responsible for the investment of its local funds.>
24-4 <(b) Subsection (a) does not apply if an officer of the
24-5 agency or subdivision is assigned by law the function of investing
24-6 its local funds.>
24-7 <(c) An officer or employee of a commission created under
24-8 Chapter 391, Local Government Code, is ineligible to be designated
24-9 as an investment officer under Subsection (a).>
24-10 <Sec. 2256.055. ><Express Authority Required><. A person may
24-11 not deposit, withdraw, invest, transfer, or manage in any other
24-12 manner local funds of a state agency or political subdivision
24-13 without express written authority of the governing body or chief
24-14 executive officer of the agency or subdivision.>
24-15 <Sec. 2256.056. ><Legal Title in Investment Pool><. A political
24-16 subdivision by contract may delegate to an investment pool the
24-17 authority to hold legal title as custodian of investments purchased
24-18 with its local funds.>
24-19 <Sec. 2256.057. ><Internal Management Reports><. (a) At least
24-20 annually, the investment officer of a state agency or political
24-21 subdivision shall prepare a written report of the agency's or
24-22 subdivision's local funds investment transactions for the preceding
24-23 year.>
24-24 <(b) The report must:>
24-25 <(1) describe in detail the investment position of the
24-26 agency or subdivision on the date of the report;>
24-27 <(2) be prepared jointly by all investment officers of
25-1 the agency or subdivision; and>
25-2 <(3) be signed by each investment officer of the
25-3 agency or subdivision.>
25-4 <(c) The report shall be delivered to the governing body and
25-5 the chief executive officer of the agency or subdivision.>
25-6 <Sec. 2256.058. ><Private Auditor><. Notwithstanding any other
25-7 law, a state agency shall employ a private auditor if authorized by
25-8 the legislative audit committee on the committee's initiative or on
25-9 request of the governing body of the agency.>
25-10 <Sec. 2256.059. ><Effect of Other Law><. This subchapter does
25-11 not:>
25-12 <(1) prohibit an investment specifically authorized by
25-13 other law; or>
25-14 <(2) authorize an investment specifically prohibited
25-15 by other law.>
25-16 <SUBCHAPTER C. PAYMENT FOR AND DELIVERY AND DEPOSIT
25-17 OF SECURITIES PURCHASED BY STATE>
25-18 <Sec. 2256.101. ><Authorized Investments; Application of
25-19 Income><. (a) A board or agency of the state that may direct the
25-20 investment of funds of the board or agency may invest those funds
25-21 in:>
25-22 <(1) direct obligations of the United States;>
25-23 <(2) obligations the principal and interest of which
25-24 are guaranteed by the United States;>
25-25 <(3) direct obligations of or participation
25-26 certificates guaranteed by:>
25-27 <(A) a farm credit bank;>
26-1 <(B) the Federal National Mortgage Association;>
26-2 <(C) a federal home loan bank; or>
26-3 <(D) a bank for cooperatives;>
26-4 <(4) certificates of deposit of a bank or trust
26-5 company, the deposits of which are fully secured by a pledge of
26-6 securities described by Subdivisions (1) through (3);>
26-7 <(5) other securities made eligible for investment by
26-8 other law or the constitution; or>
26-9 <(6) a combination of securities described by
26-10 Subdivisions (1) through (5).>
26-11 <(b) The board or agency shall direct the application of
26-12 income from investments under this section.>
26-13 <Sec. 2256.102. ><Payment for Securities Purchased by State><.
26-14 The comptroller, the state treasurer, or the disbursing officer of
26-15 an agency that has the power to invest assets directly may pay for
26-16 authorized securities purchased from or through a member in good
26-17 standing of the National Association of Securities Dealers or from
26-18 or through a national or state bank on receiving an invoice from
26-19 the seller of the securities showing that the securities have been
26-20 purchased by the board or agency and that the amount to be paid for
26-21 the securities is just, due, and unpaid.>
26-22 <Sec. 2256.103. ><Delivery of Securities Purchased by State><.
26-23 A security purchased under Section 2256.102 may be delivered to the
26-24 state treasurer, a bank, or the board or agency investing its
26-25 funds. The delivery shall be made under normal and recognized
26-26 practices in the securities and banking industries, including the
26-27 book entry procedure of the Federal Reserve Bank.>
27-1 <Sec. 2256.104. ><Deposit of Securities Purchased by State><.
27-2 At the direction of the state treasurer or the agency, a security
27-3 purchased under Section 2256.102 may be deposited in trust with a
27-4 bank or federal reserve bank or branch designated by the treasurer,
27-5 whether in or outside the state. The deposit shall be evidenced by
27-6 a trust receipt of the bank with which the securities are
27-7 deposited.>
27-8 SECTION 2. Section 1, Chapter 181; Section 1, Chapter 858;
27-9 and Section 1, Chapter 946, Acts of the 73rd Legislature, Regular
27-10 Session, 1993, are repealed.
27-11 SECTION 3. As provided by Section 1.02, Senate Bill No. 959,
27-12 Acts of the 74th Legislature, Regular Session, 1995, this Act
27-13 controls over Senate Bill No. 959 to the extent of any conflict.
27-14 SECTION 4. This Act takes effect September 1, 1995.
27-15 SECTION 5. An entity that acquired authorized investment
27-16 securities under Chapter 2256, Government Code, before the
27-17 effective date of this Act that are no longer authorized investment
27-18 securities under that chapter as amended by this Act is not
27-19 required by this Act to liquidate those securities before the final
27-20 stated maturity of the investment.
27-21 SECTION 6. The importance of this legislation and the
27-22 crowded condition of the calendars in both houses create an
27-23 emergency and an imperative public necessity that the
27-24 constitutional rule requiring bills to be read on three several
27-25 days in each house be suspended, and this rule is hereby suspended.