By Marchant, Junell, Greenberg H.B. No. 2459
74R6786 RJA-F
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 (3) <(7)> a nonprofit corporation acting on behalf of
3-18 a local government or a state agency <an entity listed in
3-19 Subdivisions (1) through (6)>; or
3-20 (4) an investment pool acting on behalf of two or more
3-21 local governments, state agencies, or a combination of those
3-22 entities <(8) a public funds investment pool created under Chapter
3-23 791 acting on behalf of a combination of entities listed in
3-24 Subdivisions (1) through (6)>.
3-25 Sec. 2256.004. Investment Policies; Investment Officer.
3-26 (a) The governing body of an investing entity shall adopt by rule,
3-27 order, ordinance, or resolution, as appropriate, a written
4-1 investment policy regarding the investment of its funds and funds
4-2 under its control.
4-3 (b) The investment policies must:
4-4 (1) be written;
4-5 (2) primarily emphasize safety of principal and
4-6 liquidity; and
4-7 (3) address investment diversification, yield, and
4-8 maturity and the quality and capability of investment management.
4-9 (c) <(b)> The investment policies may provide that bids for
4-10 certificates of deposit be solicited:
4-11 (1) orally;
4-12 (2) in writing;
4-13 (3) electronically; or
4-14 (4) in any combination of those methods.
4-15 (d) As an integral part of an investment policy, the
4-16 governing body shall adopt an investment strategy governing the
4-17 investment of its funds and funds under its control. An investment
4-18 strategy must describe the investment objectives of the entity
4-19 using the following priorities in order of importance:
4-20 (1) suitability of the investment to the financial
4-21 requirements of the entity;
4-22 (2) safety of principal;
4-23 (3) liquidity;
4-24 (4) marketability of the investment if the need arises
4-25 to liquidate the investment before maturity;
4-26 (5) diversification of the investment portfolio; and
4-27 (6) yield.
5-1 (e) Each investing entity shall designate, by rule, order,
5-2 ordinance, or resolution, as appropriate, one or more officers or
5-3 employees of the state agency, local government, or investment pool
5-4 to be responsible for the investment of its funds. A person may
5-5 not deposit, withdraw, invest, transfer, or manage in any other
5-6 manner funds of a state agency, local government, or investment
5-7 pool without express written authority of the governing body or
5-8 chief executive officer of the state agency, local government, or
5-9 investment pool, consistent with the investment policy adopted by
5-10 the entity.
5-11 (f) Subsection (e) does not apply to a state agency, local
5-12 government, or investment pool for which an officer of the entity
5-13 is assigned by law the function of investing its funds.
5-14 (g) An officer or employee of a commission created under
5-15 Chapter 391, Local Government Code, is ineligible to be designated
5-16 as an investment officer under Subsection (e).
5-17 (h) The governing body of an investing entity may specify in
5-18 its investment policy that any investment authorized by this
5-19 chapter is not suitable.
5-20 (i) A written copy of the investment policy shall be
5-21 presented to any person seeking to sell to the entity an authorized
5-22 investment. The person, either in an individual capacity or on
5-23 behalf of the employer of the person, seeking to sell an authorized
5-24 investment shall execute a written instrument substantially to the
5-25 effect that the person has:
5-26 (1) received and thoroughly reviewed the investment
5-27 policy of the entity; and
6-1 (2) certifies that reasonable procedures and controls
6-2 have been implemented in an effort to preclude imprudent investment
6-3 activities arising out of investment transactions conducted between
6-4 the entity and the person, either in an individual capacity or on
6-5 behalf of the employer of the person.
6-6 (j) The investment officer of an entity may not buy any
6-7 securities from a person who does not execute and deliver to the
6-8 entity an instrument in substantially the form provided by
6-9 Subsection (i).
6-10 Sec. 2256.005. Standard of Care. (a) Investments shall be
6-11 made with judgment and care, under prevailing circumstances, that a
6-12 person of prudence, discretion, and intelligence would exercise in
6-13 the management of the person's own affairs, not for speculation,
6-14 but for investment, considering the probable safety of capital and
6-15 the probable income to be derived. Investment of funds shall be
6-16 governed by the following investment objectives, in order of
6-17 priority:
6-18 (1) preservation and safety of principal;
6-19 (2) liquidity; and
6-20 (3) yield.
6-21 (b) In determining whether an investment officer has
6-22 exercised prudence with respect to an investment decision, the
6-23 determination shall be made taking into consideration:
6-24 (1) the investment of all funds, or funds under the
6-25 entity's control, over which the officer had responsibility rather
6-26 than a consideration as to the prudence of a single investment; and
6-27 (2) whether the investment decision was consistent
7-1 with the written investment policy of the entity.
7-2 Sec. 2256.006. Authorized Investments: Obligations of, or
7-3 Guaranteed by, Governmental Entities. (a) Except as provided by
7-4 Subsection (b), the <The> following are authorized investments
7-5 under this subchapter:
7-6 (1) obligations of the United States or its agencies
7-7 and instrumentalities;
7-8 (2) direct obligations of this state or its agencies;
7-9 (3) collateralized mortgage obligations directly
7-10 issued by a federal agency or instrumentality of the United States,
7-11 the underlying security for which is guaranteed by an agency or
7-12 instrumentality of the United States;
7-13 (4) other obligations, the principal and interest of
7-14 which are unconditionally guaranteed or insured by, or backed by
7-15 the full faith and credit of, this state or the United States or
7-16 its instrumentalities, including bonds issued, assumed, or
7-17 guaranteed by the State of Israel; and
7-18 (5) obligations of states, agencies, counties, cities
7-19 and other political subdivisions of any state rated as to
7-20 investment quality by a nationally recognized investment rating
7-21 firm not less than A or its equivalent.
7-22 (b) The following are not authorized investments under this
7-23 section:
7-24 (1) obligations whose payment represents the coupon
7-25 payments on the outstanding principal balance of the underlying
7-26 mortgage-backed security collateral and pays no principal;
7-27 (2) obligations whose payment represents the principal
8-1 stream of cash flow from the underlying mortgage-backed security
8-2 collateral and bears no interest;
8-3 (3) collateralized mortgage obligations that have a
8-4 stated final maturity date of greater than 10 years; and
8-5 (4) collateralized mortgage obligations the interest
8-6 rate of which is determined by an index that adjusts opposite to
8-7 the changes in a market index.
8-8 Sec. 2256.007. Authorized Investments: Certificates of
8-9 Deposit. A certificate of deposit is an authorized investment
8-10 under this subchapter if the certificate of deposit is issued by a
8-11 state or national bank domiciled in this state or a savings and
8-12 loan association domiciled in this state and is:
8-13 (1) guaranteed or insured by the Federal Deposit
8-14 Insurance Corporation or its successor;
8-15 (2) secured by obligations that are described by
8-16 Section 2256.006(a) <2256.006>, including mortgage backed
8-17 securities directly issued by a federal agency or instrumentality
8-18 that have a market value of not less than the principal amount of
8-19 the certificates, but excluding those mortgage-backed securities of
8-20 the nature described by Section 2256.006(b); or
8-21 (3) secured in any other manner and amount provided by
8-22 law for deposits of the investing entity.
8-23 Sec. 2256.008. Authorized Investments: Repurchase
8-24 Agreements. (a) A fully collateralized repurchase agreement is an
8-25 authorized investment under this subchapter if the repurchase
8-26 agreement:
8-27 (1) has a defined termination date;
9-1 (2) is secured by obligations described by Section
9-2 2256.006(1);
9-3 (3) is pledged to the entity and deposited with a
9-4 third party selected and <or> approved by the entity; and
9-5 (4) is placed through a primary government securities
9-6 dealer, as defined by the Federal Reserve, or a bank domiciled in
9-7 this state.
9-8 (b) In this section, "repurchase agreement" means a
9-9 simultaneous agreement to buy, hold for a specified time, and sell
9-10 back at a future date obligations described by Section 2256.006(1),
9-11 the principal and interest of which are guaranteed by the United
9-12 States in market value of not less than the principal amount of the
9-13 funds disbursed. The term includes a direct security repurchase
9-14 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 the greater of:
9-17 (1) the stated maturity date of the securities
9-18 delivered by the entity under the reverse security repurchase
9-19 agreement; or
9-20 (2) six months after the date of the reverse security
9-21 repurchase agreement.
9-22 (d) Moneys received by an entity under the terms of a
9-23 reverse security repurchase agreement shall be used to acquire
9-24 additional authorized investments, but the term of the authorized
9-25 investment acquired must mature not later than the expiration date
9-26 stated in the reverse security repurchase agreement.
9-27 Sec. 2256.009. Authorized Investments: Bankers'
10-1 Acceptances. A bankers' acceptance is an authorized investment
10-2 under this subchapter if the bankers' acceptance:
10-3 (1) has a stated maturity of 270 days or fewer from
10-4 the date of its issuance;
10-5 (2) will be, in accordance with its terms, liquidated
10-6 in full at maturity;
10-7 (3) is eligible for collateral for borrowing from a
10-8 Federal Reserve Bank; and
10-9 (4) is accepted by a bank organized and existing under
10-10 the laws of the United States or any state, if the short-term
10-11 obligations of the bank, or of a bank holding company of which the
10-12 bank is the largest subsidiary, are rated not less than A-1 or P-1
10-13 or an equivalent rating by at least one nationally recognized
10-14 credit rating agency.
10-15 Sec. 2256.010. Authorized Investments: Commercial Paper.
10-16 Commercial paper is an authorized investment under this subchapter
10-17 if the commercial paper:
10-18 (1) has a stated maturity of 270 days or fewer from
10-19 the date of its issuance; and
10-20 (2) is rated not less than A-1 or P-1 or an equivalent
10-21 rating by at least:
10-22 (A) two nationally recognized credit rating
10-23 agencies; or
10-24 (B) one nationally recognized credit rating
10-25 agency and is fully secured by an irrevocable letter of credit
10-26 issued by a bank organized and existing under the laws of the
10-27 United States or any state.
11-1 Sec. 2256.011. Authorized Investments: Mutual Funds.
11-2 (a) A no-load money market mutual fund is an authorized investment
11-3 under this subchapter if the mutual fund:
11-4 (1) is regulated by <registered with> the Securities
11-5 and Exchange Commission;
11-6 (2) has a dollar-weighted average stated <portfolio>
11-7 maturity of 90 <120> days or fewer;
11-8 (3) is continuously rated as to investment quality by
11-9 at least two nationally recognized investment rating firms of not
11-10 less than AA or its equivalent <is invested exclusively in
11-11 obligations described by Sections 2256.006 through 2256.010>; and
11-12 (4) includes in its investment objectives the
11-13 maintenance of a stable net asset value of $1 for each share.
11-14 (b) In addition to a no-load money market mutual fund
11-15 permitted as an authorized investment by Subsection (a), a no-load
11-16 mutual fund is an authorized investment under this subchapter if
11-17 the mutual fund:
11-18 (1) is registered with the Securities and Exchange
11-19 Commission;
11-20 (2) has an average weighted maturity of less than two
11-21 years;
11-22 (3) is invested exclusively in obligations described
11-23 by Sections 2256.006(a)(1) and (4) and Section 2256.008; and
11-24 (4) is continuously rated as to investment quality by
11-25 at least two nationally recognized investment rating firms of not
11-26 less than AA or its equivalent.
11-27 (c) An entity is not authorized by this section to:
12-1 (1) invest in the aggregate more than 80 percent of
12-2 its monthly average fund balance, excluding bond proceeds and
12-3 reserves and other funds held for debt service, in money market
12-4 mutual funds described in Subsection (a) or mutual funds described
12-5 in Subsection (b), either separately or collectively; or
12-6 (2) invest its funds or funds under its control,
12-7 excluding bond proceeds and reserves and other funds held for debt
12-8 service, in any one <money market> mutual fund described in
12-9 Subsection (a) or Subsection (b) in an amount that exceeds 10
12-10 percent of the total assets of the <money market> mutual fund.
12-11 Sec. 2256.012. Authorized Investments: Guaranteed
12-12 Investment Contracts. (a) A guaranteed investment contract is an
12-13 authorized investment for bond proceeds under this subchapter if
12-14 the guaranteed investment contract:
12-15 (1) has a defined termination date;
12-16 (2) is secured by obligations described by Section
12-17 2256.006(a)(1), excluding those obligations described by Section
12-18 2256.006(b), in an amount at least equal to the amount of bond
12-19 proceeds invested under the contract;
12-20 (3) is pledged to the entity and deposited with a
12-21 third party selected and approved by the entity; and
12-22 (4) is placed through a primary government securities
12-23 dealer, as defined by the Federal Reserve, a bank domiciled in this
12-24 state, or a provider that is continuously rated as to investment
12-25 quality by at least two nationally recognized investment rating
12-26 firms of not less than AA or its equivalent.
12-27 (b) Bond proceeds, other than bond proceeds representing
13-1 reserves and funds maintained for debt service purposes, may not be
13-2 invested in a guaranteed investment contract with a term of longer
13-3 than five years from the date of issuance of the bonds.
13-4 (c) To be eligible as an authorized investment:
13-5 (1) the governing body of the entity must specifically
13-6 authorize guaranteed investment contracts as an eligible investment
13-7 in the order, ordinance, or resolution authorizing the issuance of
13-8 bonds;
13-9 (2) the entity must receive bids from at least three
13-10 separate providers with no material financial interest in the bonds
13-11 from which proceeds were received;
13-12 (3) the entity must purchase the highest yielding
13-13 guaranteed investment contract for which a qualifying bid is
13-14 received;
13-15 (4) the price of the guaranteed investment contract
13-16 must take into account the reasonably expected drawdown schedule
13-17 for the bond proceeds to be invested; and
13-18 (5) the provider must certify the administrative costs
13-19 reasonably expected to be paid to third parties in connection with
13-20 the guaranteed investment contract. <AUTHORIZED INVESTMENTS:
13-21 COMMON TRUST FUNDS. (a) A qualified common trust fund is an
13-22 authorized investment for the local funds of an institution of
13-23 higher education and for the bond proceeds and reserves and other
13-24 funds held for debt service of a municipality, county, school
13-25 district, or navigation district if the common trust fund:>
13-26 <(1) is owned or administered by a bank domiciled in
13-27 this state;>
14-1 <(2) consists exclusively of assets that are
14-2 obligations described by Sections 2256.006 through 2256.010;>
14-3 <(3) complies with the Internal Revenue Code of 1986
14-4 and applicable federal regulations governing the investment of bond
14-5 proceeds and reserves and other funds held for debt service; and>
14-6 <(4) meets the cash flow requirements and the
14-7 investment needs of the political subdivision or institution.>
14-8 <(b) In this section, "common trust fund" includes a
14-9 comparable investment device.>
14-10 Sec. 2256.013. AUTHORIZED INVESTMENTS: INVESTMENT POOLS.
14-11 (a) An entity may invest its funds and funds under its control in
14-12 an eligible investment pool if the governing body of the entity by
14-13 rule, order, ordinance, or resolution, as appropriate, authorizes
14-14 investment in the particular pool. An investment pool may invest
14-15 the funds it receives from entities in authorized investments
14-16 permitted by this subchapter. An investment pool shall establish
14-17 an advisory board composed of participants in the pool and other
14-18 persons.
14-19 (b) To be eligible to receive funds from and invest funds on
14-20 behalf of an entity under this chapter, an investment pool must
14-21 furnish to the investment officer or other authorized
14-22 representative of the entity an offering circular or other similar
14-23 disclosure instrument that contains, at a minimum, the following
14-24 information:
14-25 (1) the types of investments in which money is allowed
14-26 to be invested;
14-27 (2) the maximum average dollar-weighted maturity
15-1 allowed, based on the stated maturity date, of the pool;
15-2 (3) the maximum stated maturity date any investment
15-3 security within the portfolio has;
15-4 (4) the objectives of the pool;
15-5 (5) the size of the pool;
15-6 (6) the names of the members of the advisory board of
15-7 the pool and the dates their terms expire;
15-8 (7) the custodian bank that will safekeep the pool's
15-9 assets;
15-10 (8) whether the intent of the pool is to maintain a
15-11 net asset value of one dollar and the risk of market price
15-12 fluctuation;
15-13 (9) whether the only source of payment is the assets
15-14 of the pool at market value or whether there is a secondary source
15-15 of payment, such as insurance or guarantees, and a description of
15-16 the secondary source of payment;
15-17 (10) the name and address of the independent auditor
15-18 of the pool;
15-19 (11) the requirements to be satisfied for an entity to
15-20 deposit funds in and withdraw funds from the pool and any deadlines
15-21 or other operating policies required for the entity to invest funds
15-22 in and withdraw funds from the pool; and
15-23 (12) the performance history of the pool, including
15-24 yield, average dollar-weighted maturities, and expense ratios.
15-25 (c) To maintain eligibility to receive funds from and invest
15-26 funds on behalf of an entity under this chapter, an investment pool
15-27 must furnish to the investment officer or other authorized
16-1 representative of the entity:
16-2 (1) investment transaction confirmations; and
16-3 (2) a monthly report that contains, at a minimum, the
16-4 following information:
16-5 (A) the types and percentage breakdown of
16-6 securities in which the pool is invested;
16-7 (B) the current average dollar-weighted
16-8 maturity, based on the stated maturity date, of the pool;
16-9 (C) the current percentage of the pool's
16-10 portfolio in investments that have stated maturities of more than
16-11 one year;
16-12 (D) the carrying value versus the market value
16-13 of the pool's portfolio, using amortized cost valuation;
16-14 (E) the size of the pool;
16-15 (F) the number of participants in the pool;
16-16 (G) the custodian bank that is safekeeping the
16-17 assets of the pool;
16-18 (H) a listing of daily transaction activity of
16-19 the entity participating in the pool;
16-20 (I) the yield and expense ratio of the pool;
16-21 (J) the portfolio managers of the pool; and
16-22 (K) any changes or addenda to the offering
16-23 circular.
16-24 (d) An entity by contract may delegate to an investment pool
16-25 the authority to hold legal title as custodian of investments
16-26 purchased with its local funds.
16-27 (e) In this section, "yield" shall be calculated in
17-1 accordance with regulations governing the registration of open-end
17-2 management investment companies under the Investment Company Act of
17-3 1940, as promulgated from time to time by the federal Securities
17-4 and Exchange Commission. <BIDS FOR COMMON TRUST FUND INVESTMENTS.
17-5 (a) An institution of higher education or a municipality, county,
17-6 school district, or navigation district may invest in a common
17-7 trust fund under Section 2256.012 only after soliciting orally or
17-8 in another manner competitive bids from at least three banks.>
17-9 <(b) The solicitations for bids required by Subsection (a)
17-10 for a county shall be made only to banks located in the county
17-11 unless there are fewer than three banks available for the
17-12 investment located in the county; in which case, the solicitations
17-13 shall be made to each bank in the county and, as necessary to
17-14 complete the solicitations, to banks located in this state.>
17-15 <(c) The solicitations for bids required by Subsection (a)
17-16 for a municipality or a school district shall be made only to banks
17-17 located in the municipality or school district unless there are
17-18 fewer than three banks available for the investments located in the
17-19 municipality or school district; in which case, the solicitations
17-20 shall be made to each bank in the municipality or school district
17-21 and, as necessary to complete the solicitations, to banks in a
17-22 county in which the municipality or school district is located. If
17-23 there are fewer than three banks available for investments in the
17-24 municipality or school district and in the counties in which the
17-25 municipality or school district is located, the solicitations shall
17-26 be made to each bank in the municipality or school district and in
17-27 the counties in which the municipality or school district is
18-1 located, and, as necessary to complete the solicitations, to banks
18-2 located in this state.>
18-3 <(d) This section applies to a nonprofit corporation acting
18-4 on behalf of a municipality, county, or school district as it
18-5 applies to the municipality, county, or school district.>
18-6 Sec. 2256.014. AUTHORIZED INVESTMENTS: INSTITUTIONS OF
18-7 HIGHER EDUCATION. In addition to the authorized investments
18-8 permitted by this subchapter, an institution of higher education
18-9 may purchase, sell, and invest its funds and funds under its
18-10 control in the following:
18-11 (1) cash management and fixed income funds sponsored
18-12 by organizations exempt from federal income taxation under Section
18-13 501(f), Internal Revenue Code of 1986 (26 U.S.C. Section 501(f));
18-14 (2) negotiable certificates of deposit issued by a
18-15 bank that has a certificate of deposit rating of at least 1 or the
18-16 equivalent by a nationally recognized credit rating agency or that
18-17 is associated with a holding company having a commercial paper
18-18 rating of at least A-1, P-1, or the equivalent by a nationally
18-19 recognized credit rating agency; and
18-20 (3) corporate bonds, debentures, or similar debt
18-21 obligations rated by a nationally recognized investment rating firm
18-22 in one of the two highest long-term rating categories, without
18-23 regard to gradations within those categories. <BANK UNWILLING TO
18-24 BID; PRESUMPTION. A governmental entity or nonprofit corporation
18-25 that is notified by a bank that the bank is unable or unwilling to
18-26 bid for investments under Section 2256.012 may presume that the
18-27 bank continues to be unable or unwilling to bid for investments
19-1 until the bank in writing notifies the entity otherwise.>
19-2 Sec. 2256.015. INTERNAL MANAGEMENT REPORTS. (a) At least
19-3 monthly, the investment officer shall prepare and submit to the
19-4 governing body of the entity a written report of the entity's local
19-5 funds investment transactions for the preceding reporting period.
19-6 (b) The report must:
19-7 (1) describe in detail the investment position of the
19-8 entity on the date of the report;
19-9 (2) be prepared jointly by all investment officers of
19-10 the entity;
19-11 (3) be signed by each investment officer of the
19-12 entity;
19-13 (4) state the carrying value of each individual
19-14 investment as of the date of the report;
19-15 (5) state the market value of each individual
19-16 investment as of the date of the report;
19-17 (6) state the maturity date of each individual
19-18 investment;
19-19 (7) state the account or fund in the state agency or
19-20 political subdivision for which each individual investment was
19-21 acquired;
19-22 (8) state the compliance of the investment portfolio
19-23 of the state agency or political subdivision as it relates to the
19-24 investment strategy expressed in the agency's or political
19-25 subdivision's investment policy; and
19-26 (9) state the name or names of the persons from whom
19-27 each individual investment was acquired.
20-1 (c) The report shall be delivered to the governing body and
20-2 the chief executive officer of the entity.
20-3 Sec. 2256.016. SUBCHAPTER CUMULATIVE. The authority granted
20-4 by this subchapter is in addition to that granted by other law.
20-5 This subchapter does not:
20-6 (1) prohibit an investment specifically authorized by
20-7 other law; or
20-8 (2) authorize an investment specifically prohibited by
20-9 other law.
20-10 Sec. 2256.017 <2256.016>. SUBCHAPTER NOT APPLICABLE TO
20-11 RETIREMENT SYSTEMS. This subchapter does not apply to a public
20-12 retirement system as defined by Section 802.001.
20-13 SUBCHAPTER B. MISCELLANEOUS PROVISIONS
20-14 <INVESTMENT OF LOCAL FUNDS>
20-15 Sec. 2256.051. PRIVATE AUDITOR. Notwithstanding any other
20-16 law, a state agency shall employ a private auditor if authorized by
20-17 the legislative audit committee on the committee's initiative or on
20-18 request of the governing body of the agency.
20-19 Sec. 2256.052. PAYMENT FOR SECURITIES PURCHASED BY STATE.
20-20 The comptroller, the state treasurer, or the disbursing officer of
20-21 an agency that has the power to invest assets directly may pay for
20-22 authorized securities purchased from or through a member in good
20-23 standing of the National Association of Securities Dealers or from
20-24 or through a national or state bank on receiving an invoice from
20-25 the seller of the securities showing that the securities have been
20-26 purchased by the board or agency and that the amount to be paid for
20-27 the securities is just, due, and unpaid.
21-1 Sec. 2256.053. DELIVERY OF SECURITIES PURCHASED BY STATE. A
21-2 security purchased under this chapter may be delivered to the state
21-3 treasurer, a bank, or the board or agency investing its funds. The
21-4 delivery shall be made under normal and recognized practices in the
21-5 securities and banking industries, including the book entry
21-6 procedure of the Federal Reserve Bank.
21-7 Sec. 2256.054. DEPOSIT OF SECURITIES PURCHASED BY STATE. At
21-8 the direction of the state treasurer or the agency, a security
21-9 purchased under this chapter may be deposited in trust with a bank
21-10 or federal reserve bank or branch designated by the treasurer,
21-11 whether in or outside the state. The deposit shall be evidenced by
21-12 a trust receipt of the bank with which the securities are
21-13 deposited.
21-14 Sec. 2256.055. ELECTRONIC FUNDS TRANSFER. Any local
21-15 government may use electronic means to transfer or invest ad
21-16 valorem taxes collected on behalf of the local government, as well
21-17 as pursuant to a contract with other local governments.
21-18 <Sec. 2256.051. ><Definitions><. In this subchapter:>
21-19 <(1) "Investment pool" means an entity created under
21-20 Chapter 791 to invest public funds of two or more local
21-21 governments.>
21-22 <(2) "Local funds" means public funds in the custody
21-23 of a state agency or political subdivision that:>
21-24 <(A) are not required by law to be deposited in
21-25 the state treasury; and>
21-26 <(B) the agency or subdivision has authority to
21-27 invest.>
22-1 <(3) "Political subdivision" means a county,
22-2 municipality, or special purpose district.>
22-3 <(4) "State agency" means an office, department,
22-4 commission, board, other agency, institution of higher education,
22-5 or river authority that is part of any branch of state government.>
22-6 <Sec. 2256.052. ><Rules Governing Investment><. Each state
22-7 agency or political subdivision shall adopt rules governing the
22-8 investment of its local funds, including rules specifying the scope
22-9 of authority of officers and employees designated to invest local
22-10 funds.>
22-11 <Sec. 2256.053. ><Investment Rate of Return><. A state agency,
22-12 political subdivision, or investment pool shall invest its local
22-13 funds in investments that:>
22-14 <(1) yield the highest possible rate of return;>
22-15 <(2) protect the principal; and>
22-16 <(3) are consistent with the operating requirements of
22-17 the agency, subdivision, or pool as determined by the governing
22-18 body.>
22-19 <Sec. 2256.054. ><Designation of Investment Officer><.
22-20 (a) Each state agency or political subdivision shall designate, by
22-21 rule, order, ordinance, or resolution, one or more officers or
22-22 employees of the agency, subdivision, or investment pool to be
22-23 responsible for the investment of its local funds.>
22-24 <(b) Subsection (a) does not apply if an officer of the
22-25 agency or subdivision is assigned by law the function of investing
22-26 its local funds.>
22-27 <(c) An officer or employee of a commission created under
23-1 Chapter 391, Local Government Code, is ineligible to be designated
23-2 as an investment officer under Subsection (a).>
23-3 <Sec. 2256.055. ><Express Authority Required><. A person may
23-4 not deposit, withdraw, invest, transfer, or manage in any other
23-5 manner local funds of a state agency or political subdivision
23-6 without express written authority of the governing body or chief
23-7 executive officer of the agency or subdivision.>
23-8 <Sec. 2256.056. ><Legal Title in Investment Pool><. A political
23-9 subdivision by contract may delegate to an investment pool the
23-10 authority to hold legal title as custodian of investments purchased
23-11 with its local funds.>
23-12 <Sec. 2256.057. ><Internal Management Reports><. (a) At least
23-13 annually, the investment officer of a state agency or political
23-14 subdivision shall prepare a written report of the agency's or
23-15 subdivision's local funds investment transactions for the preceding
23-16 year.>
23-17 <(b) The report must:>
23-18 <(1) describe in detail the investment position of the
23-19 agency or subdivision on the date of the report;>
23-20 <(2) be prepared jointly by all investment officers of
23-21 the agency or subdivision; and>
23-22 <(3) be signed by each investment officer of the
23-23 agency or subdivision.>
23-24 <(c) The report shall be delivered to the governing body and
23-25 the chief executive officer of the agency or subdivision.>
23-26 <Sec. 2256.058. ><Private Auditor><. Notwithstanding any other
23-27 law, a state agency shall employ a private auditor if authorized by
24-1 the legislative audit committee on the committee's initiative or on
24-2 request of the governing body of the agency.>
24-3 <Sec. 2256.059. ><Effect of Other Law><. This subchapter does
24-4 not:>
24-5 <(1) prohibit an investment specifically authorized by
24-6 other law; or>
24-7 <(2) authorize an investment specifically prohibited
24-8 by other law.>
24-9 <SUBCHAPTER C. PAYMENT FOR AND DELIVERY AND DEPOSIT
24-10 OF SECURITIES PURCHASED BY STATE>
24-11 <Sec. 2256.101. ><Authorized Investments; Application of
24-12 Income><. (a) A board or agency of the state that may direct the
24-13 investment of funds of the board or agency may invest those funds
24-14 in:>
24-15 <(1) direct obligations of the United States;>
24-16 <(2) obligations the principal and interest of which
24-17 are guaranteed by the United States;>
24-18 <(3) direct obligations of or participation
24-19 certificates guaranteed by:>
24-20 <(A) a farm credit bank;>
24-21 <(B) the Federal National Mortgage Association;>
24-22 <(C) a federal home loan bank; or>
24-23 <(D) a bank for cooperatives;>
24-24 <(4) certificates of deposit of a bank or trust
24-25 company, the deposits of which are fully secured by a pledge of
24-26 securities described by Subdivisions (1) through (3);>
24-27 <(5) other securities made eligible for investment by
25-1 other law or the constitution; or>
25-2 <(6) a combination of securities described by
25-3 Subdivisions (1) through (5).>
25-4 <(b) The board or agency shall direct the application of
25-5 income from investments under this section.>
25-6 <Sec. 2256.102. ><Payment for Securities Purchased by State><.
25-7 The comptroller, the state treasurer, or the disbursing officer of
25-8 an agency that has the power to invest assets directly may pay for
25-9 authorized securities purchased from or through a member in good
25-10 standing of the National Association of Securities Dealers or from
25-11 or through a national or state bank on receiving an invoice from
25-12 the seller of the securities showing that the securities have been
25-13 purchased by the board or agency and that the amount to be paid for
25-14 the securities is just, due, and unpaid.>
25-15 <Sec. 2256.103. ><Delivery of Securities Purchased by State><.
25-16 A security purchased under Section 2256.102 may be delivered to the
25-17 state treasurer, a bank, or the board or agency investing its
25-18 funds. The delivery shall be made under normal and recognized
25-19 practices in the securities and banking industries, including the
25-20 book entry procedure of the Federal Reserve Bank.>
25-21 <Sec. 2256.104. ><Deposit of Securities Purchased by State><.
25-22 At the direction of the state treasurer or the agency, a security
25-23 purchased under Section 2256.102 may be deposited in trust with a
25-24 bank or federal reserve bank or branch designated by the treasurer,
25-25 whether in or outside the state. The deposit shall be evidenced by
25-26 a trust receipt of the bank with which the securities are
25-27 deposited.>
26-1 SECTION 2. Section 1, Chapter 181; Section 1, Chapter 858;
26-2 and Section 1, Chapter 946, Acts of the 73rd Legislature, Regular
26-3 Session, 1993, are repealed.
26-4 SECTION 3. This Act takes effect September 1, 1995.
26-5 SECTION 4. An entity that acquired authorized investment
26-6 securities under Chapter 2256, Government Code, before the
26-7 effective date of this Act that are no longer authorized investment
26-8 securities under that chapter as amended by this Act is not
26-9 required by this Act to liquidate those securities before the final
26-10 stated maturity of the investment.
26-11 SECTION 5. The importance of this legislation and the
26-12 crowded condition of the calendars in both houses create an
26-13 emergency and an imperative public necessity that the
26-14 constitutional rule requiring bills to be read on three several
26-15 days in each house be suspended, and this rule is hereby suspended.