EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
[Brackets] indicate matter deleted from existing law.
*hb0397*
HOUSE BILL 397
P1 3lr2145
CF SB 153
By: Delegate Watson
Introduced and read first time: January 26, 2023
Assigned to: Appropriations
A BILL ENTITLED
AN ACT concerning 1
State Investment Portfolio – Investment Thresholds – Alterations 2
FOR the purpose of repealing the limitations on investment in certain commercial paper in 3
which the Treasurer may invest or reinvest certain unexpended or surplus funds; 4
requiring the Treasurer to adopt regulations to establish a State investment policy 5
with certain thresholds; requiring the Treasurer to notify certain officials and 6
governing bodies of certain local government units about the provisions of this Act; 7
and generally relating to the investment portfolio of the State. 8
BY repealing and reenacting, with amendments, 9
Article – State Finance and Procurement 10
Section 6–222 11
Annotated Code of Maryland 12
(2021 Replacement Volume and 2022 Supplement) 13
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 14
That the Laws of Maryland read as follows: 15
Article – State Finance and Procurement 16
6–222. 17
(a) (1) In this section, “supranational issuer” means an international 18
development institution that: 19
(i) provides financing, advisory services, or other financial services 20
to the institution’s member countries to achieve the overall goal of improving living 21
standards through sustainable economic growth; and 22
(ii) is rated in the highest credit rating category by a nationally 23
recognized statistical rating organization. 24 2 HOUSE BILL 397
(2) “Supranational issuer” includes: 1
(i) the World Bank; 2
(ii) the International Finance Corporation; 3
(iii) the Inter–American Development Bank; 4
(iv) the African Development Bank; and 5
(v) the Asian Development Bank. 6
(b) (1) [The] SUBJECT TO PARAGRAPH (2) OF THIS SUBSECTION , THE 7
Treasurer may invest or reinvest unexpended or surplus money over which the Treasurer 8
has custody in: 9
[(1)] (I) an obligation for which the United States has pledged its faith 10
and credit for the payment of the principal and interest; 11
[(2)] (II) an obligation that a federal agency or a federal instrumentality 12
has issued in accordance with an act of Congress; 13
[(3)] (III) an obligation issued and unconditionally guaranteed by a 14
supranational issuer denominated in United States dollars and eligible to be sold in the 15
United States; 16
[(4)] (IV) a repurchase agreement collateralized in an amount not less 17
than 102% of the principal amount by an obligation of the United States, its agencies or 18
instrumentalities, provided the collateral is held by a custodian other than the seller 19
designated by the buyer; 20
[(5)] (V) bankers’ acceptances guaranteed by a financial institution with 21
a short–term debt rating in the highest letter and numerical rating by at least one 22
nationally recognized statistical rating organization as designated by either the United 23
States Securities and Exchange Commission or the Treasurer; 24
[(6)] (VI) with respect to amounts treated by the Internal Revenue Service 25
as bond sale proceeds only, bonds, notes, or other obligations of investment grade in the 26
highest quality letter and numerical rating by at least one nationally recognized statistical 27
rating organization as designated by the United States Securities and Exchange 28
Commission issued by or on behalf of this or any other state or any agency, department, 29
county, municipal or public corporation, special district, authority, or political subdivision 30
thereof, or in any fund or trust that invests only in securities of the type described in this 31
item; 32
HOUSE BILL 397 3
[(7)] (VII) commercial paper that has received the highest letter and 1
numerical rating by at least two nationally recognized statistical rating organizations as 2
designated by the United States Securities and Exchange Commission[, provided that such 3
commercial paper may not exceed 10% of the total investments made by the Treasurer 4
under this subsection]; 5
[(8)] (VIII) money market mutual funds that: 6
[(i)] 1. are registered with the Securities and Exchange 7
Commission under the Investment Company Act of 1940, 15 U.S.C. § 80a–1 et seq., as 8
amended; 9
[(ii)] 2. are operated in accordance with Rule 2A –7 of the 10
Investment Company Act of 1940, 17 C.F.R. § 270.2A–7, as amended; and 11
[(iii)] 3. have received the highest possible rating from at least one 12
nationally recognized statistical rating organization as designated by the United States 13
Securities and Exchange Commission; and 14
[(9)] (IX) any investment portfolio created under the Maryland Local 15
Government Investment Pool defined under §§ 17–301 through 17–309 of the Local 16
Government Article of the Code that is administered by the Office of the State Treasurer. 17
(2) INVESTMENTS MADE UNDE R PARAGRAPH (1) OF THIS 18
SUBSECTION SHALL BE IN ACCORDANCE WITH T HE THRESHOLDS ESTABL ISHED IN 19
REGULATIONS ADOPTED UNDER SUBSECTION (G) OF THIS SECTION. 20
(c) The Treasurer may sell, redeem, or exchange an investment or reinvestment 21
made under this section in accordance with the limitations of this section. 22
(d) Subject to § 2–1257 of the State Government Article, the Treasurer shall 23
report by January 3 of each year to the General Assembly on investment activities for 24
unexpended or surplus money over which the Treasurer has custody which have been 25
conducted during the previous fiscal year. At a minimum, the report shall specify for 26
General Fund investments and all other investments: 27
(1) the inventory of investments with maturity dates and the book and 28
market value as of June 30; 29
(2) the net income earned; 30
(3) the percentage share of each category of investment in the portfolio; and 31
(4) any sale of investments prior to the maturity date. 32
(e) An investment made pursuant to this section shall be made: 33 4 HOUSE BILL 397
(1) with the care, skill, prudence, and diligence under the circumstances 1
then prevailing that a prudent person acting in a like capacity and familiar with such 2
matters would use in the conduct of an enterprise of a like character and with like aims; 3
(2) in a manner designed to reasonably match the anticipated cash flow of 4
the State so that sufficient funds are available to pay obligations upon proper presentation 5
for payment; 6
(3) so that a reasonable amount of cash or cash equivalents is available for 7
unanticipated cash needs; 8
(4) with due regard for minimizing risk while maximizing return; 9
(5) using competitive purchasing practices except when impractical; 10
(6) in accordance with a written investment policy; 11
(7) so that the securities and collateral may continue to be priced on a 12
market to market basis; and 13
(8) to avoid the enhancement of the personal financial position of the 14
Treasurer or any employee of the Treasurer who has responsibilities for such investments. 15
(f) (1) (i) Consistent with minority business purchasing standards 16
applicable to units of State government under this article and consistent with the fiduciary 17
duties of the Treasurer, the Treasurer shall attempt to use to the greatest extent feasible 18
minority business enterprises for brokerage and investment management services under 19
this section. 20
(ii) For purposes of this subsection, brokerage and investment 21
management services shall include services relating to all allocated asset classes as 22
described in subsection (b) of this section. 23
(2) (i) To assist the Treasurer in achieving the goal described under 24
paragraph (1) of this subsection, the Treasurer shall undertake measures to remove any 25
barriers that limit full participation by minority business enterprises in brokerage and 26
investment management services opportunities afforded under this section. 27
(ii) The measures undertaken by the Treasurer shall include the use 28
of a wide variety of media, including the Treasurer’s website, to provide notice to a broad 29
and varied range of potential providers about the brokerage and investment management 30
services opportunities afforded by the Treasurer. 31
(3) In conjunction with the Governor’s Office of Small, Minority, and 32
Women Business Affairs, the Treasurer shall develop guidelines to assist in identifying and 33
evaluating qualified minority business enterprises in order to help the Treasurer achieve 34 HOUSE BILL 397 5
the objective for greater use of minority business enterprises for brokerage and investment 1
management services under this section. 2
(4) On or before September 1 each year, the Treasurer shall submit a report 3
to the Governor’s Office of Small, Minority, and Women Business Affairs and, subject to § 4
2–1257 of the State Government Article, the General Assembly on: 5
(i) the identity of the minority business enterprise brokerage and 6
investment management services firms used by the Treasurer in the immediately 7
preceding fiscal year; 8
(ii) the percentage and dollar value of the assets under the custody 9
of the Treasurer that are under the investment control of minority business enterprise 10
brokerage and investment management services firms for each allocated asset class; and 11
(iii) the measures the Treasurer undertook in the immediately 12
preceding fiscal year in accordance with paragraph (2)(ii) of this subsection. 13
(G) (1) THE TREASURER SHALL ADOPT REGULATIONS THAT EST ABLISH A 14
STATE INVESTMENT POLI CY. 15
(2) THE STATE INVESTMENT POLI CY SHALL SPECIFY THR ESHOLDS 16
FOR THE MAXIMUM INVE STMENT IN EACH ASSET CLASS AUTHORIZED UND ER THIS 17
SECTION. 18
SECTION 2. AND BE IT FURTHER ENACTED, That prior to the effective date of 19
this Act, the Treasurer shall: 20
(1) notify in writing the chief executive and governing body of each local 21
governmental unit required to have a local investment policy under § 17–205 of the Local 22
Government Article of the changes contained in this Act; and 23
(2) provide the local government with an opportunity to review, revise, and 24
report any changes in the local investment policies to the Treasurer, as appropriate. 25
SECTION 3. AND BE IT FURTHER ENACTED, That the Treasurer shall adopt the 26
regulations required under Section 1 of this Act on or before December 1, 2023. 27
SECTION 4. AND BE IT FURTHER ENACTED, That this Act shall take effect June 28
1, 2023. 29