By: Ellis, et al. S.B. No. 59
A BILL TO BE ENTITLED
AN ACT
1-1 relating to removal of restrictions on investment of certain funds
1-2 in businesses doing business in South Africa.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 404.024, Government Code, is amended to
1-5 read as follows:
1-6 Sec. 404.024. Authorized Investments. (a) The board may
1-7 determine and designate the amount of state funds to be deposited
1-8 in time deposits in state depositories. The treasurer shall
1-9 recommend to the board a maximum limit for state funds deposited by
1-10 the treasurer at approved state depositories. The percentage of
1-11 state funds to be deposited in state depositories shall be based on
1-12 the interest rates available in competing investments, the demand
1-13 for funds from Texas banks, and the state's liquidity requirements.
1-14 The treasurer shall provide periodic investment reports to the
1-15 board.
1-16 (b) State funds not deposited in state depositories shall be
1-17 invested by the treasurer in:
1-18 (1) direct security repurchase agreements;
1-19 (2) reverse security repurchase agreements;
1-20 (3) direct obligations of or obligations the principal
1-21 and interest of which are guaranteed by the United States;
1-22 (4) direct obligations of or obligations guaranteed by
1-23 agencies or instrumentalities of the United States government;
1-24 (5) bankers' acceptances that:
2-1 (A) are eligible for purchase by the Federal
2-2 Reserve System;
2-3 (B) do not exceed 270 days to maturity; and
2-4 (C) are issued by a bank that has received the
2-5 highest short-term credit rating by a nationally recognized
2-6 investment rating firm;
2-7 (6) commercial paper that:
2-8 (A) does not exceed 270 days to maturity; and
2-9 (B) except as provided by Subsection (h) <(j)>,
2-10 has received the highest short-term credit rating by a nationally
2-11 recognized investment rating firm;
2-12 (7) contracts written by the treasury in which the
2-13 treasury grants the purchaser the right to purchase securities in
2-14 the treasury's marketable securities portfolio at a specified price
2-15 over a specified period and for which the treasury is paid a fee
2-16 and specifically prohibits naked-option or uncovered option
2-17 trading; <and>
2-18 (8) direct obligations of or obligations guaranteed by
2-19 the Inter-American Development Bank, the International Bank for
2-20 Reconstruction and Development (the World Bank), the African
2-21 Development Bank, the Asian Development Bank, and the International
2-22 Finance Corporation that have received the highest credit rating by
2-23 a nationally recognized investment rating firm; and
2-24 (9) bonds issued, assumed, or guaranteed by the State
2-25 of Israel.
2-26 (c) Investments in direct security repurchase agreements and
2-27 reverse security repurchase agreements may be made with state or
3-1 national banks domiciled in this state or with primary dealers as
3-2 approved by the Federal Reserve System.
3-3 (d) The board may contract with a depository for the payment
3-4 of interest on time or demand deposits at a rate not to exceed a
3-5 rate that is lawful under an Act of Congress and rules and
3-6 regulations of the board of governors of the Federal Reserve
3-7 System, the board of directors of the Federal Deposit Insurance
3-8 Corporation, the Federal Savings and Loan Insurance Corporation,
3-9 and the Federal Home Loan Banking Board.
3-10 (e) Not more than 20 percent of the aggregate funds on
3-11 deposit in financial institutions at any time may be in depository
3-12 institutions other than banks.
3-13 (f) The treasurer may invest the gross proceeds from
3-14 obligations of this state or any agency of this state in:
3-15 (1) obligations of a state or an agency, county, city,
3-16 or other political subdivision of a state; and
3-17 (2) mutual funds composed of obligations described by
3-18 Subdivision (1).
3-19 (g) To the extent practicable, the treasurer shall give
3-20 first consideration to Texas banks when investing in direct
3-21 security repurchase agreements.
3-22 (h) <The treasurer may not use state funds to invest in or
3-23 purchase obligations of a private corporation or other private
3-24 business entity doing business in the Republic of South Africa
3-25 unless the corporation or other entity:>
3-26 <(1) has:>
3-27 <(A) adopted the Statement of Principles for
4-1 South Africa as they existed in 1987, as described in the >þLReport on
4-2 the Signatory Companies to the Statement of Principles for South
4-3 Africaää< published by Arthur D. Little, Inc., Cambridge,
4-4 Massachusetts, and has obtained a performance rating in Category 1
4-5 or 2 of the Statement of Principles for South Africa rating system
4-6 as determined by Arthur D. Little, Inc.; or>
4-7 <(B) agreed to the Code of Conduct that is
4-8 enforced by the United States Department of State under Section
4-9 208, Comprehensive Anti-Apartheid Act of 1986 (Pub. L. No. 99-440)
4-10 and has received a rating of "Making Satisfactory Progress"; and>
4-11 <(2) does not supply strategic products or services
4-12 for use by the government, military, or police of the Republic of
4-13 South Africa.>
4-14 <(i) For the purposes of Subsection (h) of this section:>
4-15 <(1) "Doing business in the Republic of South Africa"
4-16 means conducting or performing manufacturing, assembly, or
4-17 warehousing operations within the Republic of South Africa or, if a
4-18 bank or other financial institution, lending money to the
4-19 government of the Republic of South Africa or any of its agencies
4-20 or instrumentalities.>
4-21 <(2) "Strategic products or services" means articles
4-22 designated as arms, ammunition, or implements of war as provided by
4-23 22 Code of Federal Regulations Part 121 or data processing
4-24 equipment or computers sold for military or police use or for use
4-25 in connection with restrictions on travel within the Republic of
4-26 South Africa by residents of that country.>
4-27 <(j)> The treasurer may not use state funds to invest in or
5-1 purchase obligations of a private corporation or other private
5-2 business entity doing business in Northern Ireland unless the
5-3 corporation or other entity:
5-4 (1) adheres to fair employment practices; and
5-5 (2) does not discriminate on the basis of race, color,
5-6 religion, sex, national origin, or disability.
5-7 (i) <(k)> Notwithstanding Subsection (b)(6)(B) <(a)(6)(B)>,
5-8 the treasurer may purchase commercial paper with a rating lower
5-9 than the rating required by that subsection to provide liquidity
5-10 for commercial paper issued by the treasurer or an agency of the
5-11 state.
5-12 SECTION 2. Section 161.173, Natural Resources Code, is
5-13 amended to read as follows:
5-14 Sec. 161.173. INVESTMENT OF MONEY IN FUND. (a) Money
5-15 <Except as limited by Subsection (b) of this section, money> in the
5-16 fund that is not immediately committed to paying principal of and
5-17 interest on the bonds, to the purchase of land, or to the payment
5-18 of expenses as provided in this chapter may be invested in:
5-19 (1) direct security repurchase agreements and reverse
5-20 security repurchase agreements made with state or national banks
5-21 domiciled in this state or with primary dealers as approved by the
5-22 Federal Reserve System;
5-23 (2) direct obligations of or obligations the principal
5-24 and interest of which are guaranteed by the United States;
5-25 (3) direct obligations of or obligations guaranteed by
5-26 the Federal Home Loan Banks, the Federal National Mortgage
5-27 Association, the Federal Farm Credit System, the Student Loan
6-1 Marketing Association, the Federal Home Loan Mortgage Corporation,
6-2 or a successor organization to one of those organizations;
6-3 (4) bankers' acceptances that:
6-4 (A) are eligible for purchase by members of the
6-5 Federal Reserve System;
6-6 (B) do not exceed 270 days to maturity; and
6-7 (C) are issued by a bank that has received the
6-8 highest short-term credit rating by a nationally recognized
6-9 investment rating firm;
6-10 (5) commercial paper that:
6-11 (A) does not exceed 270 days to maturity; and
6-12 (B) has received the highest short-term credit
6-13 rating by a nationally recognized investment rating firm;
6-14 (6) contracts written by the board in which the board
6-15 grants the purchaser the right to purchase securities in the
6-16 board's marketable securities portfolio at a specified price over a
6-17 specified period and for which the board is paid a fee and
6-18 specifically prohibits naked-option or uncovered option trading;
6-19 (7) obligations of a state or an agency, county, city,
6-20 or other political subdivision of a state and mutual funds composed
6-21 of these obligations;
6-22 (8) an investment instrument, obligation, or other
6-23 evidence of indebtedness the payment of which is directly or
6-24 indirectly guaranteed by the full faith and credit of the United
6-25 States;
6-26 (9) an investment, account, depository receipt, or
6-27 deposit that is fully:
7-1 (A) insured by the Federal Deposit Insurance
7-2 Corporation, the Federal Savings and Loan Insurance Corporation, or
7-3 a successor organization to one of those organizations; or
7-4 (B) secured by securities described by
7-5 Subdivision (2), (3), or (8) of this subsection;
7-6 (10) a collateralized mortgage obligation fully
7-7 secured by securities or mortgages issued or guaranteed by the
7-8 Government National Mortgage Association (GNMA) or any entity
7-9 described by Subdivision (3) of this subsection;
7-10 (11) a security or evidence of indebtedness issued by
7-11 the Farm Credit System Financial Assistance Corporation, the
7-12 Private Export Funding Corporation, or the Export-Import Bank; and
7-13 (12) any other investment authorized for investment of
7-14 state funds by the treasurer under Section 404.024, Government
7-15 Code.
7-16 (b) <The board may not invest in or purchase obligations of
7-17 a private corporation or other private business entity doing
7-18 business in the Republic of South Africa unless the corporation or
7-19 other entity:>
7-20 <(1) has:>
7-21 <(A) adopted the Statement of Principles for
7-22 South Africa as they existed in 1987, as described in the Report on
7-23 the Signatory Companies to the Statement of Principles for South
7-24 Africa published by Arthur D. Little, Inc., Cambridge,
7-25 Massachusetts, and has obtained a performance rating in Category 1
7-26 or 2 of the Statement of Principles for South Africa rating system
7-27 as determined by Arthur D. Little, Inc.; or>
8-1 <(B) agreed to the Code of Conduct that is
8-2 enforced by the United States Department of State under Section
8-3 208, Comprehensive Anti-Apartheid Act of 1986 (Pub. L. No. 99-440)
8-4 and has received a rating of "Making Satisfactory Progress"; and>
8-5 <(2) does not supply strategic products or services
8-6 for use by the government, military, or police of the Republic of
8-7 South Africa.>
8-8 <(c)> In this section:
8-9 (1) "Direct security repurchase agreement" means an
8-10 agreement under which the board buys, holds for a specified time,
8-11 and then sells back any of the following securities, obligations,
8-12 or participation certificates:
8-13 (A) United States government securities;
8-14 (B) direct obligations of or obligations the
8-15 principal and interest of which are guaranteed by the United
8-16 States;
8-17 (C) direct obligations of or obligations
8-18 guaranteed by the Federal Home Loan Banks, the Federal National
8-19 Mortgage Association, the Federal Farm Credit System, the Student
8-20 Loan Marketing Association, the Federal Home Loan Mortgage
8-21 Corporation, or a successor organization to one of those
8-22 organizations; or
8-23 (D) any other investment instrument, obligation,
8-24 or other evidence of indebtedness the payment of which is directly
8-25 or indirectly guaranteed by the full faith and credit of the United
8-26 States.
8-27 (2) <"Doing business in the Republic of South Africa"
9-1 means conducting or performing manufacturing, assembly, or
9-2 warehousing operations within the Republic of South Africa and for
9-3 a bank or other financial institution, lending money to the
9-4 government of the Republic of South Africa or any of its agencies
9-5 or instrumentalities.>
9-6 <(3)> "Market value" means the fair and reasonable
9-7 prevailing price at which a security is being sold on the open
9-8 market at the time of the appraisement of the security by the
9-9 board.
9-10 (3) <(4)> "Reverse security repurchase agreement"
9-11 means an agreement under which the board sells and after a
9-12 specified time buys back any of the securities, obligations, or
9-13 participation certificates listed in Paragraphs (A) through (D) of
9-14 Subdivision (1) of this subsection.
9-15 <(5) "Strategic products or services" means articles
9-16 designated as arms, ammunition, or implements of war as provided by
9-17 22 Code of Federal Regulations Part 121 or data processing
9-18 equipment or computers sold for military or police use or for use
9-19 in connection with restriction on travel within the Republic of
9-20 South Africa by residents of that country.>
9-21 SECTION 3. Section 59.016, Agriculture Code, is amended to
9-22 read as follows:
9-23 Sec. 59.016. INVESTMENTS. (a) The authority shall give
9-24 timely instruction to the board of the dates on which principal on
9-25 bonds matures and interest becomes payable. The board shall
9-26 administer the fund accordingly.
9-27 (b) Money <Except as provided by Subsection (c) of this
10-1 section, money> in the fund that is not immediately committed to
10-2 paying principal of and interest on the bonds or to paying expenses
10-3 as provided by Section 59.015 of this code may be invested by the
10-4 board in:
10-5 (1) a direct security repurchase agreement or reverse
10-6 security repurchase agreement made with a state or national bank
10-7 domiciled in this state or with a primary dealer approved by the
10-8 federal reserve system;
10-9 (2) a direct obligation of or obligation the principal
10-10 and interest of which are guaranteed by the United States
10-11 government;
10-12 (3) a direct obligation of or obligation guaranteed by
10-13 the Federal Home Loan Banks, the Federal National Mortgage
10-14 Association, the Federal Farm Credit System, the Student Loan
10-15 Marketing Association, the Federal Home Loan Mortgage Corporation,
10-16 or a successor to one of those organizations;
10-17 (4) a bankers' acceptance that:
10-18 (A) is eligible for purchase by a member of the
10-19 federal reserve system;
10-20 (B) matures in 270 days or less; and
10-21 (C) is issued by a bank that has received the
10-22 highest short-term credit rating by a nationally recognized
10-23 investment rating firm;
10-24 (5) commercial paper that:
10-25 (A) matures in 270 days or less; and
10-26 (B) has received the highest short-term credit
10-27 rating by a nationally recognized investment rating firm;
11-1 (6) a contract that is written by the board in which
11-2 the board grants the purchaser the right to purchase securities in
11-3 the board's marketable securities portfolio at a specified price
11-4 over a specified period and for which the board is paid a fee and
11-5 that specifically prohibits naked-option or uncovered option
11-6 trading;
11-7 (7) an obligation of a state or of an agency, county,
11-8 city, or other political subdivision of a state or a mutual fund
11-9 composed of those obligations;
11-10 (8) an investment instrument, obligation, or other
11-11 evidence of indebtedness the payment of which is directly or
11-12 indirectly guaranteed by the full faith and credit of the United
11-13 States government;
11-14 (9) an investment, account, depository receipt, or
11-15 deposit that is fully:
11-16 (A) insured by the Federal Deposit Insurance
11-17 Corporation or a successor to that organization; or
11-18 (B) secured by a security described by
11-19 Subdivision (2), (3), or (8) of this subsection;
11-20 (10) a collateralized mortgage obligation fully
11-21 secured by securities or mortgages issued or guaranteed by the
11-22 Government National Mortgage Association (GNMA) or any entity
11-23 identified by Subdivision (3) of this subsection;
11-24 (11) a security or evidence of indebtedness issued by
11-25 the Farm Credit System Financial Assistance Corporation, the
11-26 Private Export Funding Corporation, or the Export-Import Bank; and
11-27 (12) any other investment authorized for investment of
12-1 state funds by the state treasurer under Section 404.024,
12-2 Government Code.
12-3 (c) <The board may not invest in or purchase obligations of
12-4 a private corporation or other private business entity doing
12-5 business in the Republic of South Africa unless the corporation or
12-6 other entity:>
12-7 <(1) has:>
12-8 <(A) adopted the Statement of Principles for
12-9 South Africa as they existed in 1987, as described in the >þLReport on
12-10 the Signatory Companies to the Statement of Principles for South
12-11 Africaää< published by Arthur D. Little, Inc., Cambridge,
12-12 Massachusetts, and has obtained a performance rating in Category 1
12-13 or 2 of the Statement of Principles for South Africa rating system
12-14 as determined by Arthur D. Little, Inc.; or>
12-15 <(B) agreed to the Code of Conduct that is
12-16 enforced by the United States Department of State under Section
12-17 208, Comprehensive Anti-Apartheid Act of 1986 (Pub. L. No. 99-440)
12-18 and has received a rating of "Making Satisfactory Progress"; and>
12-19 <(2) does not supply strategic products or services
12-20 for use by the government, military, or police of the Republic of
12-21 South Africa.>
12-22 <(d)> In this section:
12-23 (1) "Direct security repurchase agreement" means an
12-24 agreement under which the board buys, holds for a specified time,
12-25 and then sells back any of the following securities, obligations,
12-26 or participation certificates:
12-27 (A) a United States government security;
13-1 (B) a direct obligation of or an obligation the
13-2 principal and interest of which are guaranteed by the United States
13-3 government;
13-4 (C) a direct obligation of or an obligation
13-5 guaranteed by the Federal Home Loan Banks, the Federal National
13-6 Mortgage Association, the Federal Farm Credit System, the Student
13-7 Loan Marketing Association, the Federal Home Loan Mortgage
13-8 Corporation, or a successor to one of those organizations; or
13-9 (D) any other investment instrument, obligation,
13-10 or other evidence of indebtedness the payment of which is directly
13-11 or indirectly guaranteed by the full faith and credit of the United
13-12 States government.
13-13 (2) <"Doing business in the Republic of South Africa"
13-14 means conducting or performing manufacturing, assembly, or
13-15 warehousing operations in the Republic of South Africa or, in the
13-16 case of a bank or other financial institution, lending money to the
13-17 government of the Republic of South Africa or any of its agencies
13-18 or instrumentalities.>
13-19 <(3)> "Market value" means the fair and reasonable
13-20 prevailing price at which a security is being sold on the open
13-21 market at the time of the appraisement of the security by the
13-22 board.
13-23 (3) <(4)> "Reverse security repurchase agreement"
13-24 means an agreement under which the board sells and after a
13-25 specified time buys back any of the securities, obligations, or
13-26 participation certificates listed by Subdivision (1) of this
13-27 subsection.
14-1 <(5) "Strategic products or services" means articles
14-2 designated as arms, ammunition, or implements of war as provided by
14-3 22 C.F.R. Part 121 or data processing equipment or computers sold
14-4 for military or police use or for use in connection with
14-5 restriction on travel in the Republic of South Africa by residents
14-6 of that country.>
14-7 SECTION 4. Section 27, Texas Local Fire Fighters Retirement
14-8 Act (Article 6243e, Vernon's Texas Civil Statutes), is amended to
14-9 read as follows:
14-10 Sec. 27. INVESTMENT OF ASSETS. (a) A board of trustees
14-11 established under this Act shall keep a sufficient amount of cash
14-12 on hand to make payments as they become due under the retirement
14-13 system. If a board determines that the fund of its retirement
14-14 system contains an amount in excess of the amount needed to make
14-15 payments as they become due, the board may invest any portion of
14-16 the excess in:
14-17 (1) bonds or other interest-bearing obligations and
14-18 securities of the United States, the state, or a political
14-19 subdivision of the state;
14-20 (2) shares and share accounts of savings and loan
14-21 associations to the extent that the shares and share accounts are
14-22 insured by the Federal Savings and Loan Insurance Corporation;
14-23 (3) first-lien real estate mortgage securities insured
14-24 by the Federal Housing Administration;
14-25 (4) bonds of companies incorporated within the United
14-26 States;
14-27 (5) common and preferred stocks of companies
15-1 incorporated within the United States that, unless the stocks are
15-2 bank or insurance stocks, are listed on an exchange registered with
15-3 the Securities and Exchange Commission or its successor;
15-4 (6) guaranteed investment contracts offered by
15-5 insurance companies;
15-6 (7) money market funds;
15-7 (8) mutual funds and other pooled funds;
15-8 (9) international stocks traded as American depository
15-9 receipts; and
15-10 (10) over-the-counter stocks.
15-11 (b) In making investments for a retirement system, its board
15-12 of trustees shall exercise the judgment and care, under the
15-13 circumstances prevailing at the time of the investment, that
15-14 persons of ordinary prudence, discretion, and intelligence exercise
15-15 in the management of their own affairs, not in speculation but when
15-16 making a permanent disposition of their funds, considering the
15-17 probable income from the disposition and the probable safety of
15-18 their capital.
15-19 (c) At any particular time, not more than 60 percent of the
15-20 book value of the assets of a fund may be invested in corporate
15-21 stocks. A board of trustees established under this Act may not
15-22 invest in the stock or bonds of one corporation more than five
15-23 percent of the book value of the assets of a fund. A retirement
15-24 system may not own more than five percent of the voting stock of
15-25 one corporation.
15-26 (d) <After August 31, 1991, a board of trustees established
15-27 under this Act may not acquire an investment in a bank or other
16-1 financial institution that directly or through a subsidiary has a
16-2 loan outstanding to the government of the Republic of South Africa
16-3 or to an instrumentality of that government.>
16-4 <(e)> A board of trustees established under this Act shall
16-5 adopt a written investment policy stating how assets of the
16-6 retirement system that it administers may be invested.
16-7 SECTION 5. The importance of this legislation and the
16-8 crowded condition of the calendars in both houses create an
16-9 emergency and an imperative public necessity that the
16-10 constitutional rule requiring bills to be read on three several
16-11 days in each house be suspended, and this rule is hereby suspended,
16-12 and that this Act take effect and be in force from and after its
16-13 passage, and it is so enacted.