By Ellis S.B. No. 1085
74R7743 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, a hospital district,
2-14 and any political subdivision, authority, public corporation, body
2-15 politic, or instrumentality of the State of Texas, and any
2-16 nonprofit corporation acting on behalf of any of those entities.
2-17 (7) "Market value" means the face or par value of an
2-18 investment multiplied by the dollar price of the security.
2-19 (8) <(2)> "School district" means a public school
2-20 district.
2-21 (9) "Investing entity" and "entity" mean an entity
2-22 subject to this chapter and described by Section 2256.003.
2-23 (10) "State agency" means an office, department,
2-24 commission, board, or other agency that is part of any branch of
2-25 state government, an institution of higher education, and any
2-26 nonprofit corporation acting on behalf of any of those entities.
2-27 Sec. 2256.003. Authority to Invest Funds; Entities Subject
3-1 to This Chapter. Each governing body of the following entities may
3-2 purchase, sell, and invest its funds and funds under its control in
3-3 investments authorized under this subchapter in compliance with
3-4 investment policies approved by the governing body and according to
3-5 the standard of care prescribed by Section 2256.006 <2256.005>:
3-6 (1) a local government <municipality>;
3-7 (2) a state agency <a county;>
3-8 <(3) a school district;>
3-9 <(4) a district or authority created under:>
3-10 <(A) Article III, Section 52(b)(1) or (2), of
3-11 the Texas Constitution; or>
3-12 <(B) Article XVI, Section 59, of the Texas
3-13 Constitution;>
3-14 <(5) an institution of higher education;>
3-15 <(6) a hospital district>;
3-16 (3) <(7)> a nonprofit corporation acting on behalf of
3-17 a local government or a state agency <an entity listed in
3-18 Subdivisions (1) through (6)>; or
3-19 (4) 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. SUBCHAPTER NOT APPLICABLE TO PUBLIC
3-25 RETIREMENT SYSTEMS. This subchapter does not apply to a public
3-26 retirement system as defined by Section 802.001.
3-27 Sec. 2256.005. INVESTMENT POLICIES; INVESTMENT OFFICER.
4-1 (a) The governing body of an investing entity shall adopt by rule,
4-2 order, ordinance, or resolution, as appropriate, a written
4-3 investment policy regarding the investment of its funds and funds
4-4 under its control.
4-5 (b) The investment policies must:
4-6 (1) be written;
4-7 (2) primarily emphasize safety of principal and
4-8 liquidity; and
4-9 (3) address investment diversification, yield, and
4-10 maturity and the quality and capability of investment management.
4-11 (c) <(b)> The investment policies may provide that bids for
4-12 certificates of deposit be solicited:
4-13 (1) orally;
4-14 (2) in writing;
4-15 (3) electronically; or
4-16 (4) in any combination of those methods.
4-17 (d) As an integral part of an investment policy, the
4-18 governing body shall adopt a separate written investment strategy
4-19 for each of the funds under its control. Each investment strategy
4-20 must describe the investment objectives for the particular fund
4-21 using the following priorities in order of importance:
4-22 (1) suitability of the investment to the financial
4-23 requirements of the entity;
4-24 (2) safety of principal;
4-25 (3) liquidity;
4-26 (4) marketability of the investment if the need arises
4-27 to liquidate the investment before maturity;
5-1 (5) diversification of the investment portfolio; and
5-2 (6) yield.
5-3 (e) The governing body of an investing entity shall annually
5-4 review its investment policy and investment strategies.
5-5 (f) Each investing entity shall designate, by rule, order,
5-6 ordinance, or resolution, as appropriate, one or more officers or
5-7 employees of the state agency, local government, or investment pool
5-8 to be responsible for the investment of its funds. A person may
5-9 not deposit, withdraw, invest, transfer, or manage in any other
5-10 manner funds of a state agency, local government, or investment
5-11 pool without express written authority of the governing body or
5-12 chief executive officer of the state agency, local government, or
5-13 investment pool, consistent with the investment policy adopted by
5-14 the entity.
5-15 (g) The investing officer of an entity who has a personal
5-16 interest in a person or a substantial interest in a business
5-17 entity, as described by Section 572.005, seeking to sell an
5-18 investment to the entity shall file a statement with the Texas
5-19 Ethics Commission and the governing body of the entity disclosing
5-20 that personal or business interest.
5-21 (h) Subsection (f) does not apply to a state agency, local
5-22 government, or investment pool for which an officer of the entity
5-23 is assigned by law the function of investing its funds.
5-24 (i) An officer or employee of a commission created under
5-25 Chapter 391, Local Government Code, is ineligible to be designated
5-26 as an investment officer under Subsection (f).
5-27 (j) The governing body of an investing entity may specify in
6-1 its investment policy that any investment authorized by this
6-2 chapter is not suitable.
6-3 (k) A written copy of the investment policy shall be
6-4 presented to any person seeking to sell to the entity an authorized
6-5 investment. The person, either in an individual capacity or on
6-6 behalf of the employer of the person, seeking to sell an authorized
6-7 investment shall execute a written instrument substantially to the
6-8 effect that the person has:
6-9 (1) received and thoroughly reviewed the investment
6-10 policy of the entity; and
6-11 (2) certified that reasonable procedures and controls
6-12 have been implemented in an effort to preclude imprudent investment
6-13 activities arising out of investment transactions conducted between
6-14 the entity and the person, either in an individual capacity or on
6-15 behalf of the employer of the person.
6-16 (l) The investment officer of an entity may not buy any
6-17 securities from a person who does not execute and deliver to the
6-18 entity an instrument in substantially the form provided by
6-19 Subsection (k).
6-20 (m) An investing entity, in conjunction with its annual
6-21 financial audit, shall perform a compliance audit of management
6-22 controls on investments and adherence to the entity's established
6-23 investment policies. The entity shall report the results of the
6-24 audit performed under this subsection to the state auditor. The
6-25 state auditor shall compile the results of reports received under
6-26 this subsection and report those results to each regular session of
6-27 the legislature.
7-1 Sec. 2256.006 <2256.005>. Standard of Care. (a)
7-2 Investments shall be made with judgment and care, under prevailing
7-3 circumstances, that a person of prudence, discretion, and
7-4 intelligence would exercise in the management of the person's own
7-5 affairs, not for speculation, but for investment, considering the
7-6 probable safety of capital and the probable income to be derived.
7-7 Investment of funds shall be governed by the following investment
7-8 objectives, in order of priority:
7-9 (1) preservation and safety of principal;
7-10 (2) liquidity; and
7-11 (3) yield.
7-12 (b) In determining whether an investment officer has
7-13 exercised prudence with respect to an investment decision, the
7-14 determination shall be made taking into consideration:
7-15 (1) the investment of all funds, or funds under the
7-16 entity's control, over which the officer had responsibility rather
7-17 than a consideration as to the prudence of a single investment; and
7-18 (2) whether the investment decision was consistent
7-19 with the written investment policy of the entity.
7-20 Sec. 2256.007. INVESTMENT TRAINING; STATE AGENCY BOARD
7-21 MEMBERS AND OFFICERS. (a) Each member of the governing board of a
7-22 state agency and its investing officer shall attend at least one
7-23 training session relating to the person's responsibilities under
7-24 this chapter within six months after taking office or assuming
7-25 duties.
7-26 (b) The governor's office shall provide training under this
7-27 section for members and officers other than members and officers of
8-1 an institution of higher education. The Texas Higher Education
8-2 Coordinating Board shall provide the training for members and
8-3 officers of institutions of higher education.
8-4 (c) Training under this section must include education in
8-5 investment controls, associated risks, potential personal liability
8-6 in investing public funds, and compliance with this chapter.
8-7 Sec. 2256.008. INVESTMENT TRAINING; LOCAL GOVERNMENTS. (a)
8-8 The treasurer, and the chief financial officer if the treasurer is
8-9 not the chief financial officer, shall attend training relating to
8-10 the treasurer's or officer's responsibilities under this chapter
8-11 within 12 months after taking office or assuming duties.
8-12 (b) Training under this section must include education in
8-13 investment controls, associated risks, potential personal liability
8-14 in investing public funds, and compliance with this chapter.
8-15 Sec. 2256.009 <2256.006>. Authorized Investments:
8-16 Obligations of, or Guaranteed by, Governmental Entities. (a)
8-17 Except as provided by Subsection (b), the <The> following are
8-18 authorized investments under this subchapter:
8-19 (1) obligations of the United States or its agencies
8-20 and instrumentalities;
8-21 (2) direct obligations of this state or its agencies;
8-22 (3) collateralized mortgage obligations directly
8-23 issued by a federal agency or instrumentality of the United States,
8-24 the underlying security for which is guaranteed by an agency or
8-25 instrumentality of the United States;
8-26 (4) other obligations, the principal and interest of
8-27 which are unconditionally guaranteed or insured by, or backed by
9-1 the full faith and credit of, this state or the United States or
9-2 its instrumentalities, including bonds issued, assumed, or
9-3 guaranteed by the State of Israel; and
9-4 (5) obligations of states, agencies, counties, cities
9-5 and other political subdivisions of any state rated as to
9-6 investment quality by a nationally recognized investment rating
9-7 firm not less than A or its equivalent.
9-8 (b) The following are not authorized investments under this
9-9 section:
9-10 (1) obligations whose payment represents the coupon
9-11 payments on the outstanding principal balance of the underlying
9-12 mortgage-backed security collateral and pays no principal;
9-13 (2) obligations whose payment represents the principal
9-14 stream of cash flow from the underlying mortgage-backed security
9-15 collateral and bears no interest;
9-16 (3) collateralized mortgage obligations that have a
9-17 stated final maturity date of greater than 10 years; and
9-18 (4) collateralized mortgage obligations the interest
9-19 rate of which is determined by an index that adjusts opposite to
9-20 the changes in a market index.
9-21 Sec. 2256.010 <2256.007>. Authorized Investments:
9-22 Certificates of Deposit. A certificate of deposit is an authorized
9-23 investment under this subchapter if the certificate of deposit is
9-24 issued by a state or national bank domiciled in this state or a
9-25 savings and loan association domiciled in this state and is:
9-26 (1) guaranteed or insured by the Federal Deposit
9-27 Insurance Corporation or its successor;
10-1 (2) secured by obligations that are described by
10-2 Section 2256.009(a) <2256.006>, including mortgage backed
10-3 securities directly issued by a federal agency or instrumentality
10-4 that have a market value of not less than the principal amount of
10-5 the certificates, but excluding those mortgage backed securities of
10-6 the nature described by Section 2256.009(b); or
10-7 (3) secured in any other manner and amount provided by
10-8 law for deposits of the investing entity.
10-9 Sec. 2256.011 <2256.008>. Authorized Investments:
10-10 Repurchase Agreements. (a) A fully collateralized repurchase
10-11 agreement is an authorized investment under this subchapter if the
10-12 repurchase agreement:
10-13 (1) has a defined termination date;
10-14 (2) is secured by obligations described by Section
10-15 2256.009(a)(1) <2256.006(1)>;
10-16 (3) is pledged to the entity and deposited with a
10-17 third party selected and <or> approved by the entity; and
10-18 (4) is placed through a primary government securities
10-19 dealer, as defined by the Federal Reserve, or a bank domiciled in
10-20 this state.
10-21 (b) In this section, "repurchase agreement" means a
10-22 simultaneous agreement to buy, hold for a specified time, and sell
10-23 back at a future date obligations described by Section
10-24 2256.009(a)(1) <2256.006(1)>, the principal and interest of which
10-25 are guaranteed by the United States in market value of not less
10-26 than the principal amount of the funds disbursed. The term
10-27 includes a direct security repurchase agreement and a reverse
11-1 security repurchase agreement.
11-2 (c) Notwithstanding any other law, the term of any reverse
11-3 security repurchase agreement may not exceed the greater of:
11-4 (1) the stated maturity date of the securities
11-5 delivered by the entity under the reverse security repurchase
11-6 agreement; or
11-7 (2) six months after the date of the reverse security
11-8 repurchase agreement.
11-9 (d) Moneys received by an entity under the terms of a
11-10 reverse security repurchase agreement shall be used to acquire
11-11 additional authorized investments, but the term of the authorized
11-12 investment acquired must mature not later than the expiration date
11-13 stated in the reverse security repurchase agreement.
11-14 Sec. 2256.012 <2256.009>. Authorized Investments: Bankers'
11-15 Acceptances. A bankers' acceptance is an authorized investment
11-16 under this subchapter if the bankers' acceptance:
11-17 (1) has a stated maturity of 270 days or fewer from
11-18 the date of its issuance;
11-19 (2) will be, in accordance with its terms, liquidated
11-20 in full at maturity;
11-21 (3) is eligible for collateral for borrowing from a
11-22 Federal Reserve Bank; and
11-23 (4) is accepted by a bank organized and existing under
11-24 the laws of the United States or any state, if the short-term
11-25 obligations of the bank, or of a bank holding company of which the
11-26 bank is the largest subsidiary, are rated not less than A-1 or P-1
11-27 or an equivalent rating by at least one nationally recognized
12-1 credit rating agency.
12-2 Sec. 2256.013 <2256.010>. Authorized Investments:
12-3 Commercial Paper. Commercial paper is an authorized investment
12-4 under this subchapter if the commercial paper:
12-5 (1) has a stated maturity of 270 days or fewer from
12-6 the date of its issuance; and
12-7 (2) is rated not less than A-1 or P-1 or an equivalent
12-8 rating by at least:
12-9 (A) two nationally recognized credit rating
12-10 agencies; or
12-11 (B) one nationally recognized credit rating
12-12 agency and is fully secured by an irrevocable letter of credit
12-13 issued by a bank organized and existing under the laws of the
12-14 United States or any state.
12-15 Sec. 2256.014 <2256.011>. Authorized Investments: Mutual
12-16 Funds. (a) A no-load money market mutual fund is an authorized
12-17 investment under this subchapter if the mutual fund:
12-18 (1) is regulated by <registered with> the Securities
12-19 and Exchange Commission;
12-20 (2) has a dollar-weighted average stated <portfolio>
12-21 maturity of 90 <120> days or fewer;
12-22 (3) is continuously rated as to investment quality by
12-23 at least two nationally recognized investment rating firms of not
12-24 less than AA or its equivalent <is invested exclusively in
12-25 obligations described by Sections 2256.006 through 2256.010>; and
12-26 (4) includes in its investment objectives the
12-27 maintenance of a stable net asset value of $1 for each share.
13-1 (b) An entity is not authorized by this section to:
13-2 (1) invest in the aggregate more than 80 percent of
13-3 its monthly average fund balance, excluding bond proceeds and
13-4 reserves and other funds held for debt service, in money market
13-5 mutual funds described in Subsection (a); or
13-6 (2) invest its funds or funds under its control,
13-7 excluding bond proceeds and reserves and other funds held for debt
13-8 service, in any one <money market> mutual fund described in
13-9 Subsection (a) in an amount that exceeds 10 percent of the total
13-10 assets of the <money market> mutual fund.
13-11 <Sec. 2256.012. AUTHORIZED INVESTMENTS: COMMON TRUST FUNDS.
13-12 (a) A qualified common trust fund is an authorized investment for
13-13 the local funds of an institution of higher education and for the
13-14 bond proceeds and reserves and other funds held for debt service of
13-15 a municipality, county, school district, or navigation district if
13-16 the common trust fund:>
13-17 <(1) is owned or administered by a bank domiciled in
13-18 this state;>
13-19 <(2) consists exclusively of assets that are
13-20 obligations described by Sections 2256.006 through 2256.010;>
13-21 <(3) complies with the Internal Revenue Code of 1986
13-22 and applicable federal regulations governing the investment of bond
13-23 proceeds and reserves and other funds held for debt service; and>
13-24 <(4) meets the cash flow requirements and the
13-25 investment needs of the political subdivision or institution.>
13-26 <(b) In this section, "common trust fund" includes a
13-27 comparable investment device.>
14-1 Sec. 2256.015 <2256.013>. AUTHORIZED INVESTMENTS:
14-2 INVESTMENT POOLS. (a) An entity may invest its funds and funds
14-3 under its control in an eligible investment pool if the governing
14-4 body of the entity by rule, order, ordinance, or resolution, as
14-5 appropriate, authorizes investment in the particular pool. An
14-6 investment pool may invest the funds it receives from entities in
14-7 authorized investments permitted by this subchapter. An investment
14-8 pool shall establish an advisory board composed of participants in
14-9 the pool and other persons.
14-10 (b) To be eligible to receive funds from and invest funds on
14-11 behalf of an entity under this chapter, an investment pool must
14-12 furnish to the investment officer or other authorized
14-13 representative of the entity an offering circular or other similar
14-14 disclosure instrument that contains, at a minimum, the following
14-15 information:
14-16 (1) the types of investments in which money is allowed
14-17 to be invested;
14-18 (2) the maximum average dollar-weighted maturity
14-19 allowed, based on the stated maturity date, of the pool;
14-20 (3) the maximum stated maturity date any investment
14-21 security within the portfolio has;
14-22 (4) the objectives of the pool;
14-23 (5) the size of the pool;
14-24 (6) the names of the members of the advisory board of
14-25 the pool and the dates their terms expire;
14-26 (7) the custodian bank that will safekeep the pool's
14-27 assets;
15-1 (8) whether the intent of the pool is to maintain a
15-2 net asset value of one dollar and the risk of market price
15-3 fluctuation;
15-4 (9) whether the only source of payment is the assets
15-5 of the pool at market value or whether there is a secondary source
15-6 of payment, such as insurance or guarantees, and a description of
15-7 the secondary source of payment;
15-8 (10) the name and address of the independent auditor
15-9 of the pool;
15-10 (11) the requirements to be satisfied for an entity to
15-11 deposit funds in and withdraw funds from the pool and any deadlines
15-12 or other operating policies required for the entity to invest funds
15-13 in and withdraw funds from the pool; and
15-14 (12) the performance history of the pool, including
15-15 yield, average dollar-weighted maturities, and expense ratios.
15-16 (c) To maintain eligibility to receive funds from and invest
15-17 funds on behalf of an entity under this chapter, an investment pool
15-18 must furnish to the investment officer or other authorized
15-19 representative of the entity:
15-20 (1) investment transaction confirmations; and
15-21 (2) a monthly report that contains, at a minimum, the
15-22 following information:
15-23 (A) the types and percentage breakdown of
15-24 securities in which the pool is invested;
15-25 (B) the current average dollar-weighted
15-26 maturity, based on the stated maturity date, of the pool;
15-27 (C) the current percentage of the pool's
16-1 portfolio in investments that have stated maturities of more than
16-2 one year;
16-3 (D) the carrying value versus the market value
16-4 of the pool's portfolio, using amortized cost valuation;
16-5 (E) the size of the pool;
16-6 (F) the number of participants in the pool;
16-7 (G) the custodian bank that is safekeeping the
16-8 assets of the pool;
16-9 (H) a listing of daily transaction activity of
16-10 the entity participating in the pool;
16-11 (I) the yield and expense ratio of the pool;
16-12 (J) the portfolio managers of the pool; and
16-13 (K) any changes or addenda to the offering
16-14 circular.
16-15 (d) An entity by contract may delegate to an investment pool
16-16 the authority to hold legal title as custodian of investments
16-17 purchased with its local funds.
16-18 (e) In this section, "yield" shall be calculated in
16-19 accordance with regulations governing the registration of open-end
16-20 management investment companies under the Investment Company Act of
16-21 1940, as promulgated from time to time by the federal Securities
16-22 and Exchange Commission. <BIDS FOR COMMON TRUST FUND INVESTMENTS.
16-23 (a) An institution of higher education or a municipality, county,
16-24 school district, or navigation district may invest in a common
16-25 trust fund under Section 2256.012 only after soliciting orally or
16-26 in another manner competitive bids from at least three banks.>
16-27 <(b) The solicitations for bids required by Subsection (a)
17-1 for a county shall be made only to banks located in the county
17-2 unless there are fewer than three banks available for the
17-3 investment located in the county; in which case, the solicitations
17-4 shall be made to each bank in the county and, as necessary to
17-5 complete the solicitations, to banks located in this state.>
17-6 <(c) The solicitations for bids required by Subsection (a)
17-7 for a municipality or a school district shall be made only to banks
17-8 located in the municipality or school district unless there are
17-9 fewer than three banks available for the investments located in the
17-10 municipality or school district; in which case, the solicitations
17-11 shall be made to each bank in the municipality or school district
17-12 and, as necessary to complete the solicitations, to banks in a
17-13 county in which the municipality or school district is located. If
17-14 there are fewer than three banks available for investments in the
17-15 municipality or school district and in the counties in which the
17-16 municipality or school district is located, the solicitations shall
17-17 be made to each bank in the municipality or school district and in
17-18 the counties in which the municipality or school district is
17-19 located, and, as necessary to complete the solicitations, to banks
17-20 located in this state.>
17-21 <(d) This section applies to a nonprofit corporation acting
17-22 on behalf of a municipality, county, or school district as it
17-23 applies to the municipality, county, or school district.>
17-24 Sec. 2256.016 <2256.014>. AUTHORIZED INVESTMENTS:
17-25 INSTITUTIONS OF HIGHER EDUCATION. In addition to the authorized
17-26 investments permitted by this subchapter, an institution of higher
17-27 education may purchase, sell, and invest its funds and funds under
18-1 its control in the following:
18-2 (1) cash management and fixed income funds sponsored
18-3 by organizations exempt from federal income taxation under Section
18-4 501(f), Internal Revenue Code of 1986 (26 U.S.C. Section 501(f));
18-5 (2) negotiable certificates of deposit issued by a
18-6 bank that has a certificate of deposit rating of at least 1 or the
18-7 equivalent by a nationally recognized credit rating agency or that
18-8 is associated with a holding company having a commercial paper
18-9 rating of at least A-1, P-1, or the equivalent by a nationally
18-10 recognized credit rating agency; and
18-11 (3) corporate bonds, debentures, or similar debt
18-12 obligations rated by a nationally recognized investment rating firm
18-13 in one of the two highest long-term rating categories, without
18-14 regard to gradations within those categories. <BANK UNWILLING TO
18-15 BID; PRESUMPTION. A governmental entity or nonprofit corporation
18-16 that is notified by a bank that the bank is unable or unwilling to
18-17 bid for investments under Section 2256.012 may presume that the
18-18 bank continues to be unable or unwilling to bid for investments
18-19 until the bank in writing notifies the entity otherwise.>
18-20 Sec. 2256.017. INTERNAL MANAGEMENT REPORTS. (a) At least
18-21 quarterly, the investment officer shall prepare and submit to the
18-22 governing body of the entity a written report of the entity's local
18-23 funds investment transactions for the preceding reporting period.
18-24 (b) The report must:
18-25 (1) describe in detail the investment position of the
18-26 entity on the date of the report;
18-27 (2) be prepared jointly by all investment officers of
19-1 the entity;
19-2 (3) be signed by each investment officer of the
19-3 entity;
19-4 (4) state the carrying value of each individual
19-5 investment as of the date of the report;
19-6 (5) state the market value of each individual
19-7 investment as of the date of the report;
19-8 (6) state the maturity date of each individual
19-9 investment;
19-10 (7) state the account or fund in the state agency or
19-11 political subdivision for which each individual investment was
19-12 acquired;
19-13 (8) state the compliance of the investment portfolio
19-14 of the state agency or political subdivision as it relates to the
19-15 investment strategy expressed in the agency's or political
19-16 subdivision's investment policy; and
19-17 (9) state the name or names of the persons from whom
19-18 each individual investment was acquired.
19-19 (c) The report shall be delivered to the governing body and
19-20 the chief executive officer of the entity.
19-21 Sec. 2256.018 <2256.015>. SUBCHAPTER CUMULATIVE. The
19-22 authority granted by this subchapter is in addition to that granted
19-23 by other law. This subchapter does not:
19-24 (1) prohibit an investment specifically authorized by
19-25 other law; or
19-26 (2) authorize an investment specifically prohibited by
19-27 other law.
20-1 <Sec. 2256.016. SUBCHAPTER NOT APPLICABLE TO RETIREMENT
20-2 SYSTEMS. This subchapter does not apply to a public retirement
20-3 system as defined by Section 802.001.>
20-4 SUBCHAPTER B. MISCELLANEOUS PROVISIONS
20-5 <INVESTMENT OF LOCAL FUNDS>
20-6 Sec. 2256.051. ELECTRONIC FUNDS TRANSFER. Any local
20-7 government may use electronic means to transfer or invest ad
20-8 valorem taxes collected on behalf of the local government, as well
20-9 as pursuant to a contract with other local governments.
20-10 <Sec. 2256.051. ><Definitions><. In this subchapter:>
20-11 <(1) "Investment pool" means an entity created under
20-12 Chapter 791 to invest public funds of two or more local
20-13 governments.>
20-14 <(2) "Local funds" means public funds in the custody
20-15 of a state agency or political subdivision that:>
20-16 <(A) are not required by law to be deposited in
20-17 the state treasury; and>
20-18 <(B) the agency or subdivision has authority to
20-19 invest.>
20-20 <(3) "Political subdivision" means a county,
20-21 municipality, or special purpose district.>
20-22 <(4) "State agency" means an office, department,
20-23 commission, board, other agency, institution of higher education,
20-24 or river authority that is part of any branch of state government.>
20-25 <Sec. 2256.052. ><Rules Governing Investment><. Each state
20-26 agency or political subdivision shall adopt rules governing the
20-27 investment of its local funds, including rules specifying the scope
21-1 of authority of officers and employees designated to invest local
21-2 funds.>
21-3 <Sec. 2256.053. ><Investment Rate of Return><. A state agency,
21-4 political subdivision, or investment pool shall invest its local
21-5 funds in investments that:>
21-6 <(1) yield the highest possible rate of return;>
21-7 <(2) protect the principal; and>
21-8 <(3) are consistent with the operating requirements of
21-9 the agency, subdivision, or pool as determined by the governing
21-10 body.>
21-11 <Sec. 2256.054. ><Designation of Investment Officer><.
21-12 (a) Each state agency or political subdivision shall designate, by
21-13 rule, order, ordinance, or resolution, one or more officers or
21-14 employees of the agency, subdivision, or investment pool to be
21-15 responsible for the investment of its local funds.>
21-16 <(b) Subsection (a) does not apply if an officer of the
21-17 agency or subdivision is assigned by law the function of investing
21-18 its local funds.>
21-19 <(c) An officer or employee of a commission created under
21-20 Chapter 391, Local Government Code, is ineligible to be designated
21-21 as an investment officer under Subsection (a).>
21-22 <Sec. 2256.055. ><Express Authority Required><. A person may
21-23 not deposit, withdraw, invest, transfer, or manage in any other
21-24 manner local funds of a state agency or political subdivision
21-25 without express written authority of the governing body or chief
21-26 executive officer of the agency or subdivision.>
21-27 <Sec. 2256.056. ><Legal Title in Investment Pool><. A political
22-1 subdivision by contract may delegate to an investment pool the
22-2 authority to hold legal title as custodian of investments purchased
22-3 with its local funds.>
22-4 <Sec. 2256.057. ><Internal Management Reports><. (a) At least
22-5 annually, the investment officer of a state agency or political
22-6 subdivision shall prepare a written report of the agency's or
22-7 subdivision's local funds investment transactions for the preceding
22-8 year.>
22-9 <(b) The report must:>
22-10 <(1) describe in detail the investment position of the
22-11 agency or subdivision on the date of the report;>
22-12 <(2) be prepared jointly by all investment officers of
22-13 the agency or subdivision; and>
22-14 <(3) be signed by each investment officer of the
22-15 agency or subdivision.>
22-16 <(c) The report shall be delivered to the governing body and
22-17 the chief executive officer of the agency or subdivision.>
22-18 Sec. 2256.052 <2256.058>. PRIVATE AUDITOR. Notwithstanding
22-19 any other law, a state agency shall employ a private auditor if
22-20 authorized by the legislative audit committee on the committee's
22-21 initiative or on request of the governing body of the agency.
22-22 <Sec. 2256.059. ><Effect of Other Law><. This subchapter does
22-23 not:>
22-24 <(1) prohibit an investment specifically authorized by
22-25 other law; or>
22-26 <(2) authorize an investment specifically prohibited
22-27 by other law.>
23-1 <SUBCHAPTER C. PAYMENT FOR AND DELIVERY AND DEPOSIT
23-2 OF SECURITIES PURCHASED BY STATE>
23-3 <Sec. 2256.101. ><Authorized Investments; Application of
23-4 Income><. (a) A board or agency of the state that may direct the
23-5 investment of funds of the board or agency may invest those funds
23-6 in:>
23-7 <(1) direct obligations of the United States;>
23-8 <(2) obligations the principal and interest of which
23-9 are guaranteed by the United States;>
23-10 <(3) direct obligations of or participation
23-11 certificates guaranteed by:>
23-12 <(A) a farm credit bank;>
23-13 <(B) the Federal National Mortgage Association;>
23-14 <(C) a federal home loan bank; or>
23-15 <(D) a bank for cooperatives;>
23-16 <(4) certificates of deposit of a bank or trust
23-17 company, the deposits of which are fully secured by a pledge of
23-18 securities described by Subdivisions (1) through (3);>
23-19 <(5) other securities made eligible for investment by
23-20 other law or the constitution; or>
23-21 <(6) a combination of securities described by
23-22 Subdivisions (1) through (5).>
23-23 <(b) The board or agency shall direct the application of
23-24 income from investments under this section.>
23-25 Sec. 2256.053 <2256.102>. PAYMENT FOR SECURITIES PURCHASED
23-26 BY STATE. The comptroller, the state treasurer, or the disbursing
23-27 officer of an agency that has the power to invest assets directly
24-1 may pay for authorized securities purchased from or through a
24-2 member in good standing of the National Association of Securities
24-3 Dealers or from or through a national or state bank on receiving an
24-4 invoice from the seller of the securities showing that the
24-5 securities have been purchased by the board or agency and that the
24-6 amount to be paid for the securities is just, due, and unpaid.
24-7 Sec. 2256.054 <2256.103>. DELIVERY OF SECURITIES PURCHASED
24-8 BY STATE. A security purchased under Section 2256.053 <2256.102>
24-9 may be delivered to the state treasurer, a bank, or the board or
24-10 agency investing its funds. The delivery shall be made under
24-11 normal and recognized practices in the securities and banking
24-12 industries, including the book entry procedure of the Federal
24-13 Reserve Bank.
24-14 Sec. 2256.055 <2256.104>. DEPOSIT OF SECURITIES PURCHASED BY
24-15 STATE. At the direction of the state treasurer or the agency, a
24-16 security purchased under Section 2256.053 <2256.102> may be
24-17 deposited in trust with a bank or federal reserve bank or branch
24-18 designated by the treasurer, whether in or outside the state. The
24-19 deposit shall be evidenced by a trust receipt of the bank with
24-20 which the securities are deposited.
24-21 SECTION 2. Section 1, Chapter 181; Section 1, Chapter 858;
24-22 and Section 1, Chapter 946, Acts of the 73rd Legislature, Regular
24-23 Session, 1993, are repealed.
24-24 SECTION 3. This Act takes effect September 1, 1995.
24-25 SECTION 4. An entity that acquired authorized investment
24-26 securities under Chapter 2256, Government Code, before the
24-27 effective date of this Act that are no longer authorized investment
25-1 securities under that chapter as amended by this Act is not
25-2 required by this Act to liquidate those securities before the final
25-3 stated maturity of the investment.
25-4 SECTION 5. The importance of this legislation and the
25-5 crowded condition of the calendars in both houses create an
25-6 emergency and an imperative public necessity that the
25-7 constitutional rule requiring bills to be read on three several
25-8 days in each house be suspended, and this rule is hereby suspended.