1-1 By: Ellis S.B. No. 59
1-2 (In the Senate - Filed November 15, 1994; January 11, 1995,
1-3 read first time and referred to Committee on International
1-4 Relations, Trade, and Technology; January 25, 1995, reported
1-5 favorably by the following vote: Yeas 8, Nays 0; January 25, 1995,
1-6 sent to printer.)
1-7 A BILL TO BE ENTITLED
1-8 AN ACT
1-9 relating to removal of restrictions on investment of certain funds
1-10 in businesses doing business in South Africa.
1-11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-12 SECTION 1. Section 404.024, Government Code, is amended to
1-13 read as follows:
1-14 Sec. 404.024. Authorized Investments. (a) The board may
1-15 determine and designate the amount of state funds to be deposited
1-16 in time deposits in state depositories. The treasurer shall
1-17 recommend to the board a maximum limit for state funds deposited by
1-18 the treasurer at approved state depositories. The percentage of
1-19 state funds to be deposited in state depositories shall be based on
1-20 the interest rates available in competing investments, the demand
1-21 for funds from Texas banks, and the state's liquidity requirements.
1-22 The treasurer shall provide periodic investment reports to the
1-23 board.
1-24 (b) State funds not deposited in state depositories shall be
1-25 invested by the treasurer in:
1-26 (1) direct security repurchase agreements;
1-27 (2) reverse security repurchase agreements;
1-28 (3) direct obligations of or obligations the principal
1-29 and interest of which are guaranteed by the United States;
1-30 (4) direct obligations of or obligations guaranteed by
1-31 agencies or instrumentalities of the United States government;
1-32 (5) bankers' acceptances that:
1-33 (A) are eligible for purchase by the Federal
1-34 Reserve System;
1-35 (B) do not exceed 270 days to maturity; and
1-36 (C) are issued by a bank that has received the
1-37 highest short-term credit rating by a nationally recognized
1-38 investment rating firm;
1-39 (6) commercial paper that:
1-40 (A) does not exceed 270 days to maturity; and
1-41 (B) except as provided by Subsection (h) <(j)>,
1-42 has received the highest short-term credit rating by a nationally
1-43 recognized investment rating firm;
1-44 (7) contracts written by the treasury in which the
1-45 treasury grants the purchaser the right to purchase securities in
1-46 the treasury's marketable securities portfolio at a specified price
1-47 over a specified period and for which the treasury is paid a fee
1-48 and specifically prohibits naked-option or uncovered option
1-49 trading; <and>
1-50 (8) direct obligations of or obligations guaranteed by
1-51 the Inter-American Development Bank, the International Bank for
1-52 Reconstruction and Development (the World Bank), the African
1-53 Development Bank, the Asian Development Bank, and the International
1-54 Finance Corporation that have received the highest credit rating by
1-55 a nationally recognized investment rating firm; and
1-56 (9) bonds issued, assumed, or guaranteed by the State
1-57 of Israel.
1-58 (c) Investments in direct security repurchase agreements and
1-59 reverse security repurchase agreements may be made with state or
1-60 national banks domiciled in this state or with primary dealers as
1-61 approved by the Federal Reserve System.
1-62 (d) The board may contract with a depository for the payment
1-63 of interest on time or demand deposits at a rate not to exceed a
1-64 rate that is lawful under an Act of Congress and rules and
1-65 regulations of the board of governors of the Federal Reserve
1-66 System, the board of directors of the Federal Deposit Insurance
1-67 Corporation, the Federal Savings and Loan Insurance Corporation,
1-68 and the Federal Home Loan Banking Board.
2-1 (e) Not more than 20 percent of the aggregate funds on
2-2 deposit in financial institutions at any time may be in depository
2-3 institutions other than banks.
2-4 (f) The treasurer may invest the gross proceeds from
2-5 obligations of this state or any agency of this state in:
2-6 (1) obligations of a state or an agency, county, city,
2-7 or other political subdivision of a state; and
2-8 (2) mutual funds composed of obligations described by
2-9 Subdivision (1).
2-10 (g) To the extent practicable, the treasurer shall give
2-11 first consideration to Texas banks when investing in direct
2-12 security repurchase agreements.
2-13 (h) <The treasurer may not use state funds to invest in or
2-14 purchase obligations of a private corporation or other private
2-15 business entity doing business in the Republic of South Africa
2-16 unless the corporation or other entity:>
2-17 <(1) has:>
2-18 <(A) adopted the Statement of Principles for
2-19 South Africa as they existed in 1987, as described in the >þLReport on
2-20 the Signatory Companies to the Statement of Principles for South
2-21 Africaää< published by Arthur D. Little, Inc., Cambridge,
2-22 Massachusetts, and has obtained a performance rating in Category 1
2-23 or 2 of the Statement of Principles for South Africa rating system
2-24 as determined by Arthur D. Little, Inc.; or>
2-25 <(B) agreed to the Code of Conduct that is
2-26 enforced by the United States Department of State under Section
2-27 208, Comprehensive Anti-Apartheid Act of 1986 (Pub. L. No. 99-440)
2-28 and has received a rating of "Making Satisfactory Progress"; and>
2-29 <(2) does not supply strategic products or services
2-30 for use by the government, military, or police of the Republic of
2-31 South Africa.>
2-32 <(i) For the purposes of Subsection (h) of this section:>
2-33 <(1) "Doing business in the Republic of South Africa"
2-34 means conducting or performing manufacturing, assembly, or
2-35 warehousing operations within the Republic of South Africa or, if a
2-36 bank or other financial institution, lending money to the
2-37 government of the Republic of South Africa or any of its agencies
2-38 or instrumentalities.>
2-39 <(2) "Strategic products or services" means articles
2-40 designated as arms, ammunition, or implements of war as provided by
2-41 22 Code of Federal Regulations Part 121 or data processing
2-42 equipment or computers sold for military or police use or for use
2-43 in connection with restrictions on travel within the Republic of
2-44 South Africa by residents of that country.>
2-45 <(j)> The treasurer may not use state funds to invest in or
2-46 purchase obligations of a private corporation or other private
2-47 business entity doing business in Northern Ireland unless the
2-48 corporation or other entity:
2-49 (1) adheres to fair employment practices; and
2-50 (2) does not discriminate on the basis of race, color,
2-51 religion, sex, national origin, or disability.
2-52 (i) <(k)> Notwithstanding Subsection (b)(6)(B) <(a)(6)(B)>,
2-53 the treasurer may purchase commercial paper with a rating lower
2-54 than the rating required by that subsection to provide liquidity
2-55 for commercial paper issued by the treasurer or an agency of the
2-56 state.
2-57 SECTION 2. Section 161.173, Natural Resources Code, is
2-58 amended to read as follows:
2-59 Sec. 161.173. INVESTMENT OF MONEY IN FUND. (a) Money
2-60 <Except as limited by Subsection (b) of this section, money> in the
2-61 fund that is not immediately committed to paying principal of and
2-62 interest on the bonds, to the purchase of land, or to the payment
2-63 of expenses as provided in this chapter may be invested in:
2-64 (1) direct security repurchase agreements and reverse
2-65 security repurchase agreements made with state or national banks
2-66 domiciled in this state or with primary dealers as approved by the
2-67 Federal Reserve System;
2-68 (2) direct obligations of or obligations the principal
2-69 and interest of which are guaranteed by the United States;
2-70 (3) direct obligations of or obligations guaranteed by
3-1 the Federal Home Loan Banks, the Federal National Mortgage
3-2 Association, the Federal Farm Credit System, the Student Loan
3-3 Marketing Association, the Federal Home Loan Mortgage Corporation,
3-4 or a successor organization to one of those organizations;
3-5 (4) bankers' acceptances that:
3-6 (A) are eligible for purchase by members of the
3-7 Federal Reserve System;
3-8 (B) do not exceed 270 days to maturity; and
3-9 (C) are issued by a bank that has received the
3-10 highest short-term credit rating by a nationally recognized
3-11 investment rating firm;
3-12 (5) commercial paper that:
3-13 (A) does not exceed 270 days to maturity; and
3-14 (B) has received the highest short-term credit
3-15 rating by a nationally recognized investment rating firm;
3-16 (6) contracts written by the board in which the board
3-17 grants the purchaser the right to purchase securities in the
3-18 board's marketable securities portfolio at a specified price over a
3-19 specified period and for which the board is paid a fee and
3-20 specifically prohibits naked-option or uncovered option trading;
3-21 (7) obligations of a state or an agency, county, city,
3-22 or other political subdivision of a state and mutual funds composed
3-23 of these obligations;
3-24 (8) an investment instrument, obligation, or other
3-25 evidence of indebtedness the payment of which is directly or
3-26 indirectly guaranteed by the full faith and credit of the United
3-27 States;
3-28 (9) an investment, account, depository receipt, or
3-29 deposit that is fully:
3-30 (A) insured by the Federal Deposit Insurance
3-31 Corporation, the Federal Savings and Loan Insurance Corporation, or
3-32 a successor organization to one of those organizations; or
3-33 (B) secured by securities described by
3-34 Subdivision (2), (3), or (8) of this subsection;
3-35 (10) a collateralized mortgage obligation fully
3-36 secured by securities or mortgages issued or guaranteed by the
3-37 Government National Mortgage Association (GNMA) or any entity
3-38 described by Subdivision (3) of this subsection;
3-39 (11) a security or evidence of indebtedness issued by
3-40 the Farm Credit System Financial Assistance Corporation, the
3-41 Private Export Funding Corporation, or the Export-Import Bank; and
3-42 (12) any other investment authorized for investment of
3-43 state funds by the treasurer under Section 404.024, Government
3-44 Code.
3-45 (b) <The board may not invest in or purchase obligations of
3-46 a private corporation or other private business entity doing
3-47 business in the Republic of South Africa unless the corporation or
3-48 other entity:>
3-49 <(1) has:>
3-50 <(A) adopted the Statement of Principles for
3-51 South Africa as they existed in 1987, as described in the Report on
3-52 the Signatory Companies to the Statement of Principles for South
3-53 Africa published by Arthur D. Little, Inc., Cambridge,
3-54 Massachusetts, and has obtained a performance rating in Category 1
3-55 or 2 of the Statement of Principles for South Africa rating system
3-56 as determined by Arthur D. Little, Inc.; or>
3-57 <(B) agreed to the Code of Conduct that is
3-58 enforced by the United States Department of State under Section
3-59 208, Comprehensive Anti-Apartheid Act of 1986 (Pub. L. No. 99-440)
3-60 and has received a rating of "Making Satisfactory Progress"; and>
3-61 <(2) does not supply strategic products or services
3-62 for use by the government, military, or police of the Republic of
3-63 South Africa.>
3-64 <(c)> In this section:
3-65 (1) "Direct security repurchase agreement" means an
3-66 agreement under which the board buys, holds for a specified time,
3-67 and then sells back any of the following securities, obligations,
3-68 or participation certificates:
3-69 (A) United States government securities;
3-70 (B) direct obligations of or obligations the
4-1 principal and interest of which are guaranteed by the United
4-2 States;
4-3 (C) direct obligations of or obligations
4-4 guaranteed by the Federal Home Loan Banks, the Federal National
4-5 Mortgage Association, the Federal Farm Credit System, the Student
4-6 Loan Marketing Association, the Federal Home Loan Mortgage
4-7 Corporation, or a successor organization to one of those
4-8 organizations; or
4-9 (D) any other investment instrument, obligation,
4-10 or other evidence of indebtedness the payment of which is directly
4-11 or indirectly guaranteed by the full faith and credit of the United
4-12 States.
4-13 (2) <"Doing business in the Republic of South Africa"
4-14 means conducting or performing manufacturing, assembly, or
4-15 warehousing operations within the Republic of South Africa and for
4-16 a bank or other financial institution, lending money to the
4-17 government of the Republic of South Africa or any of its agencies
4-18 or instrumentalities.>
4-19 <(3)> "Market value" means the fair and reasonable
4-20 prevailing price at which a security is being sold on the open
4-21 market at the time of the appraisement of the security by the
4-22 board.
4-23 (3) <(4)> "Reverse security repurchase agreement"
4-24 means an agreement under which the board sells and after a
4-25 specified time buys back any of the securities, obligations, or
4-26 participation certificates listed in Paragraphs (A) through (D) of
4-27 Subdivision (1) of this subsection.
4-28 <(5) "Strategic products or services" means articles
4-29 designated as arms, ammunition, or implements of war as provided by
4-30 22 Code of Federal Regulations Part 121 or data processing
4-31 equipment or computers sold for military or police use or for use
4-32 in connection with restriction on travel within the Republic of
4-33 South Africa by residents of that country.>
4-34 SECTION 3. Section 59.016, Agriculture Code, is amended to
4-35 read as follows:
4-36 Sec. 59.016. INVESTMENTS. (a) The authority shall give
4-37 timely instruction to the board of the dates on which principal on
4-38 bonds matures and interest becomes payable. The board shall
4-39 administer the fund accordingly.
4-40 (b) Money <Except as provided by Subsection (c) of this
4-41 section, money> in the fund that is not immediately committed to
4-42 paying principal of and interest on the bonds or to paying expenses
4-43 as provided by Section 59.015 of this code may be invested by the
4-44 board in:
4-45 (1) a direct security repurchase agreement or reverse
4-46 security repurchase agreement made with a state or national bank
4-47 domiciled in this state or with a primary dealer approved by the
4-48 federal reserve system;
4-49 (2) a direct obligation of or obligation the principal
4-50 and interest of which are guaranteed by the United States
4-51 government;
4-52 (3) a direct obligation of or obligation guaranteed by
4-53 the Federal Home Loan Banks, the Federal National Mortgage
4-54 Association, the Federal Farm Credit System, the Student Loan
4-55 Marketing Association, the Federal Home Loan Mortgage Corporation,
4-56 or a successor to one of those organizations;
4-57 (4) a bankers' acceptance that:
4-58 (A) is eligible for purchase by a member of the
4-59 federal reserve system;
4-60 (B) matures in 270 days or less; and
4-61 (C) is issued by a bank that has received the
4-62 highest short-term credit rating by a nationally recognized
4-63 investment rating firm;
4-64 (5) commercial paper that:
4-65 (A) matures in 270 days or less; and
4-66 (B) has received the highest short-term credit
4-67 rating by a nationally recognized investment rating firm;
4-68 (6) a contract that is written by the board in which
4-69 the board grants the purchaser the right to purchase securities in
4-70 the board's marketable securities portfolio at a specified price
5-1 over a specified period and for which the board is paid a fee and
5-2 that specifically prohibits naked-option or uncovered option
5-3 trading;
5-4 (7) an obligation of a state or of an agency, county,
5-5 city, or other political subdivision of a state or a mutual fund
5-6 composed of those obligations;
5-7 (8) an investment instrument, obligation, or other
5-8 evidence of indebtedness the payment of which is directly or
5-9 indirectly guaranteed by the full faith and credit of the United
5-10 States government;
5-11 (9) an investment, account, depository receipt, or
5-12 deposit that is fully:
5-13 (A) insured by the Federal Deposit Insurance
5-14 Corporation or a successor to that organization; or
5-15 (B) secured by a security described by
5-16 Subdivision (2), (3), or (8) of this subsection;
5-17 (10) a collateralized mortgage obligation fully
5-18 secured by securities or mortgages issued or guaranteed by the
5-19 Government National Mortgage Association (GNMA) or any entity
5-20 identified by Subdivision (3) of this subsection;
5-21 (11) a security or evidence of indebtedness issued by
5-22 the Farm Credit System Financial Assistance Corporation, the
5-23 Private Export Funding Corporation, or the Export-Import Bank; and
5-24 (12) any other investment authorized for investment of
5-25 state funds by the state treasurer under Section 404.024,
5-26 Government Code.
5-27 (c) <The board may not invest in or purchase obligations of
5-28 a private corporation or other private business entity doing
5-29 business in the Republic of South Africa unless the corporation or
5-30 other entity:>
5-31 <(1) has:>
5-32 <(A) adopted the Statement of Principles for
5-33 South Africa as they existed in 1987, as described in the >þLReport on
5-34 the Signatory Companies to the Statement of Principles for South
5-35 Africaää< published by Arthur D. Little, Inc., Cambridge,
5-36 Massachusetts, and has obtained a performance rating in Category 1
5-37 or 2 of the Statement of Principles for South Africa rating system
5-38 as determined by Arthur D. Little, Inc.; or>
5-39 <(B) agreed to the Code of Conduct that is
5-40 enforced by the United States Department of State under Section
5-41 208, Comprehensive Anti-Apartheid Act of 1986 (Pub. L. No. 99-440)
5-42 and has received a rating of "Making Satisfactory Progress"; and>
5-43 <(2) does not supply strategic products or services
5-44 for use by the government, military, or police of the Republic of
5-45 South Africa.>
5-46 <(d)> In this section:
5-47 (1) "Direct security repurchase agreement" means an
5-48 agreement under which the board buys, holds for a specified time,
5-49 and then sells back any of the following securities, obligations,
5-50 or participation certificates:
5-51 (A) a United States government security;
5-52 (B) a direct obligation of or an obligation the
5-53 principal and interest of which are guaranteed by the United States
5-54 government;
5-55 (C) a direct obligation of or an obligation
5-56 guaranteed by the Federal Home Loan Banks, the Federal National
5-57 Mortgage Association, the Federal Farm Credit System, the Student
5-58 Loan Marketing Association, the Federal Home Loan Mortgage
5-59 Corporation, or a successor to one of those organizations; or
5-60 (D) any other investment instrument, obligation,
5-61 or other evidence of indebtedness the payment of which is directly
5-62 or indirectly guaranteed by the full faith and credit of the United
5-63 States government.
5-64 (2) <"Doing business in the Republic of South Africa"
5-65 means conducting or performing manufacturing, assembly, or
5-66 warehousing operations in the Republic of South Africa or, in the
5-67 case of a bank or other financial institution, lending money to the
5-68 government of the Republic of South Africa or any of its agencies
5-69 or instrumentalities.>
5-70 <(3)> "Market value" means the fair and reasonable
6-1 prevailing price at which a security is being sold on the open
6-2 market at the time of the appraisement of the security by the
6-3 board.
6-4 (3) <(4)> "Reverse security repurchase agreement"
6-5 means an agreement under which the board sells and after a
6-6 specified time buys back any of the securities, obligations, or
6-7 participation certificates listed by Subdivision (1) of this
6-8 subsection.
6-9 <(5) "Strategic products or services" means articles
6-10 designated as arms, ammunition, or implements of war as provided by
6-11 22 C.F.R. Part 121 or data processing equipment or computers sold
6-12 for military or police use or for use in connection with
6-13 restriction on travel in the Republic of South Africa by residents
6-14 of that country.>
6-15 SECTION 4. Section 27, Texas Local Fire Fighters Retirement
6-16 Act (Article 6243e, Vernon's Texas Civil Statutes), is amended to
6-17 read as follows:
6-18 Sec. 27. INVESTMENT OF ASSETS. (a) A board of trustees
6-19 established under this Act shall keep a sufficient amount of cash
6-20 on hand to make payments as they become due under the retirement
6-21 system. If a board determines that the fund of its retirement
6-22 system contains an amount in excess of the amount needed to make
6-23 payments as they become due, the board may invest any portion of
6-24 the excess in:
6-25 (1) bonds or other interest-bearing obligations and
6-26 securities of the United States, the state, or a political
6-27 subdivision of the state;
6-28 (2) shares and share accounts of savings and loan
6-29 associations to the extent that the shares and share accounts are
6-30 insured by the Federal Savings and Loan Insurance Corporation;
6-31 (3) first-lien real estate mortgage securities insured
6-32 by the Federal Housing Administration;
6-33 (4) bonds of companies incorporated within the United
6-34 States;
6-35 (5) common and preferred stocks of companies
6-36 incorporated within the United States that, unless the stocks are
6-37 bank or insurance stocks, are listed on an exchange registered with
6-38 the Securities and Exchange Commission or its successor;
6-39 (6) guaranteed investment contracts offered by
6-40 insurance companies;
6-41 (7) money market funds;
6-42 (8) mutual funds and other pooled funds;
6-43 (9) international stocks traded as American depository
6-44 receipts; and
6-45 (10) over-the-counter stocks.
6-46 (b) In making investments for a retirement system, its board
6-47 of trustees shall exercise the judgment and care, under the
6-48 circumstances prevailing at the time of the investment, that
6-49 persons of ordinary prudence, discretion, and intelligence exercise
6-50 in the management of their own affairs, not in speculation but when
6-51 making a permanent disposition of their funds, considering the
6-52 probable income from the disposition and the probable safety of
6-53 their capital.
6-54 (c) At any particular time, not more than 60 percent of the
6-55 book value of the assets of a fund may be invested in corporate
6-56 stocks. A board of trustees established under this Act may not
6-57 invest in the stock or bonds of one corporation more than five
6-58 percent of the book value of the assets of a fund. A retirement
6-59 system may not own more than five percent of the voting stock of
6-60 one corporation.
6-61 (d) <After August 31, 1991, a board of trustees established
6-62 under this Act may not acquire an investment in a bank or other
6-63 financial institution that directly or through a subsidiary has a
6-64 loan outstanding to the government of the Republic of South Africa
6-65 or to an instrumentality of that government.>
6-66 <(e)> A board of trustees established under this Act shall
6-67 adopt a written investment policy stating how assets of the
6-68 retirement system that it administers may be invested.
6-69 SECTION 5. The importance of this legislation and the
6-70 crowded condition of the calendars in both houses create an
7-1 emergency and an imperative public necessity that the
7-2 constitutional rule requiring bills to be read on three several
7-3 days in each house be suspended, and this rule is hereby suspended,
7-4 and that this Act take effect and be in force from and after its
7-5 passage, and it is so enacted.
7-6 * * * * *