81R15672 T

By: Truitt H.B. No. 3607

A BILL TO BE ENTITLED

AN ACT

relating to the amendment of Chapter 2256, Texas Government Code.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Chapter 2256, Texas Government Code is amended by amending Subsection 2256.005(b) to read as follows:

(b) The investment policies must:

(1) be written;

(2) primarily emphasize safety of principal and liquidity;

(3) address investment diversification, yield, and maturity and the quality and capability of investment management; and

(4) include:

(A) a list of the types of authorized investments in which the investing entity's funds may be invested;

(B) the maximum allowable stated maturity of any individual investment owned by the entity;

(C) for pooled fund groups, the maximum dollar-weighted average maturity allowed based on the stated maturity date for the portfolio;

(D) methods to monitor the market price of investments acquired with public funds; [and]

(E) a requirement for settlement of all transactions, except investment pool funds and mutual funds, on a delivery versus payment basis[.]; and

(F) procedures to monitor rating changes in investments acquired with public funds and the liquidation of such investments consistent with the provisions of Section 2256.021.

SECTION 2. Chapter 2256, Texas Government Code is amended by adding Subsection 2256.007(e) and (f) to read as follows:

(e) For purposes of this section, references to a two-year period shall coincide with the fiscal year of the state.

(f) For purposes of this section, an independent source shall mean any organization other than a business organization offering to engage in an investment transaction with an investing entity.

SECTION 3. Chapter 2256, Texas Government Code is amended by adding Subsection 2256.008 (f) and (g) to read as follows:

(f) For purposes of this section, an independent source shall mean any organization other than a business organization offering to engage in an investment transaction with an investing entity.

(g) For purposes of this section, references to a two-year period shall coincide with the fiscal year of the investing entity.

SECTION 4. Chapter 2256, Texas Government Code is amended by amending Subsection 2256.009(a)(4) to read as follows:

(4) other obligations, the principal and interest of which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, this state or the United States or their respective agencies and instrumentalities, including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation or by the explicit full faith and credit of the United States;

SECTION 5. Chapter 2256, Texas Government Code is amended by adding Section 2256.010(c) to read as follows:

(c) In addition to the authority to invest funds in certificates of deposit under Subsections (a) and (b), an investment in certificates of deposit is an authorized investment under this subchapter if made in accordance with the following conditions:

(1) the funds are invested by an investing entity through a broker that is selected and approved by the investing entity as required by Section 2256.025;

(2) the broker selected by the investing entity under Subdivision (1) arranges for the deposit of the funds in certificates of deposit in one or more federally insured depository institutions, wherever located, for the account of the investing entity; and

(3) the full amount of the principal and accrued interest of each of the certificates of deposit is insured by the United States or an instrumentality of the United States.

SECTION 6. Chapter 2256, Texas Government Code is amended by amending Section 2256.013 to read as follows:

Sec. 2256.013. AUTHORIZED INVESTMENTS: COMMERCIAL PAPER. (a) Except as provided in subsection (b) of this section, commercial [Commercial] paper is an authorized investment under this subchapter if the commercial paper:

(1) has a stated maturity of 270 days or fewer from the date of its issuance; and

(2) is rated not less than A-1 or P-1 or an equivalent rating by at least:

(A) two nationally recognized credit rating agencies; or

(B) one nationally recognized credit rating agency and is fully secured by an irrevocable letter of credit issued by a bank organized and existing under the laws of the United States or any state.

(b) An investing entity may not acquire commercial paper that is exempted from registration under federal securities law by Section 4(2) of the Securities Act of 1933.

SECTION 7. Chapter 2256, Texas Government Code is amended by amending Section 2256.016(a), (c) and (f) and adding Section 2256.016(i), (j) and (k) to read as follows:

(a) An entity may invest its funds and funds under its control through an eligible investment pool if the governing body of the entity by rule, order, ordinance, or resolution, as appropriate, authorizes the investment in the particular pool. An investment pool shall invest the funds it receives from entities in authorized investments permitted by this subchapter. An investment pool may invest its funds in money market mutual funds to the extent permitted and consistent with this subchapter and the investment policies and objectives adopted by the investment pool.

(c) To maintain eligibility to receive funds from and invest funds on behalf of an entity under this chapter, an investment pool must furnish to the investment officer or other authorized representative of the entity:

(1) investment transaction confirmations; and

(2) a monthly report that contains, at a minimum, the following information:

(A) the types and percentage breakdown of securities in which the pool is invested;

(B) the current average dollar-weighted maturity, based on the stated maturity date, of the pool;

(C) the current percentage of the pool's portfolio in investments that have stated maturities of more than one year;

(D) the book value versus the market value of the pool's portfolio, using amortized cost valuation;

(E) the size of the pool;

(F) the number of participants in the pool;

(G) the custodian bank that is safekeeping the assets of the pool;

(H) a listing of daily transaction activity of the entity participating in the pool;

(I) the yield and expense ratio of the pool, including a statement regarding how yield is calculated;

(J) the portfolio managers of the pool; and

(K) any changes or addenda to the offering circular.

(f) To be eligible to receive funds from and invest funds on behalf of an entity under this chapter, a public funds investment pool created to function as a money market fund mutual fund must mark its portfolio to market daily, and, to the extent reasonably possible, stabilize at a $1 net asset value. If the ratio of the market value of the portfolio divided by the book value of the portfolio is less than 0.995 or greater than 1.005, portfolio holdings shall be sold as necessary to maintain the ratio between 0.995 and 1.005. In addition to the requirements of its investment policy, a public funds investment pool created to function as a money market mutual fund shall report yield to its investors in accordance with subsection (e) of 17 C.F.R. Section 230.482, promulgated by the federal Securities and Exchange Commission or any successor agency.

(i) If the investment pool operates an Internet website, the information described in subsections (b), (c) and (f) of this section must be posted on the website.

(j) To maintain eligibility to receive funds and investment funds from an entity under this chapter, an investment pool must furnish to each entity an annual audited financial statement of the investment pool in which the entity has funds invested.

(k) If an investment pool offers fee breakpoints based on fund balances invested, in advertising investment rates the investment pool must include either all levels of return based on the breakpoints provided or state the lowest possible level of return based on the smallest level of funds invested.

SECTION 8. Section 2256.019, Texas Government Code, is repealed.

SECTION 9. Chapter 2256, Texas Government Code is amended by adding Section 2256.0202 to read as follows:

Sec. 2256.0202. AUTHORIZED INVESTMENTS; FUNDS FROM MANAGEMENT AND DEVELOPMENT OF MINERAL RIGHTS.

(a) In addition to the investments authorized by this subchapter, a local government may invest funds received by the local government from leases and contracts executed for the management and development of lands owned by the local government and leased for oil, gas, and other mineral development in any investment authorized under powers granted under Subtitle B, Title 9, Property Code (Texas Trust Code).

(b) Funds invested by a local government in accordance with powers granted by the Texas Trust Code shall be segregated and accounted for separately from other funds of the local government.

SECTION 10. Chapter 2256, Texas Government Code is amended by amending Section 2256.023(b) to read as follows:

(b) The report must:

(1) describe in detail the investment position of the entity on the date of the report;

(2) be prepared jointly by all investment officers of the entity;

(3) be signed by each investment officer of the entity;

(4) contain a summary statement[, prepared in compliance with generally accepted accounting principles,] of each pooled fund group that states the:

(A) beginning market value for the reporting period;

(B) [additions and changes to the market value during the period] ending market value for the period; and

[(D)] (C) fully accrued interest for the reporting period;

(5) state the book value and market value of each separately invested asset at the [beginning and] end of the reporting period by the type of asset and fund type invested;

(6) state the maturity date of each separately invested asset that has a maturity date;

(7) state the account or fund or pooled group fund in the state agency or local government for which each individual investment was acquired; and

(8) state the compliance of the investment portfolio of the state agency or local government as it relates to:

(A) the investment strategy expressed in the agency's or local government's investment policy; and

(B) relevant provisions of this chapter.

SECTION 11. EFFECTIVE DATE. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2009.