EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
[Brackets] indicate matter deleted from existing law.
Underlining indicates amendments to bill.
Strike out indicates matter stricken from the bill by amendment or deleted from the law by
amendment.
*hb0397*
HOUSE BILL 397
P1 3lr2145
CF SB 153
By: Delegate Watson
Introduced and read first time: January 26, 2023
Assigned to: Appropriations
Committee Report: Favorable
House action: Adopted
Read second time: February 26, 2023
CHAPTER ______
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
2 HOUSE BILL 397
(i) provides financing, advisory services, or other financial services 1
to the institution’s member countries to achieve the overall goal of improving living 2
standards through sustainable economic growth; and 3
(ii) is rated in the highest credit rating category by a nationally 4
recognized statistical rating organization. 5
(2) “Supranational issuer” includes: 6
(i) the World Bank; 7
(ii) the International Finance Corporation; 8
(iii) the Inter–American Development Bank; 9
(iv) the African Development Bank; and 10
(v) the Asian Development Bank. 11
(b) (1) [The] SUBJECT TO PARAGRAPH (2) OF THIS SUBSECTION , THE 12
Treasurer may invest or reinvest unexpended or surplus money over which the Treasurer 13
has custody in: 14
[(1)] (I) an obligation for which the United States has pledged its faith 15
and credit for the payment of the principal and interest; 16
[(2)] (II) an obligation that a federal agency or a federal instrumentality 17
has issued in accordance with an act of Congress; 18
[(3)] (III) an obligation issued and unconditionally guaranteed by a 19
supranational issuer denominated in United States dollars and eligible to be sold in the 20
United States; 21
[(4)] (IV) a repurchase agreement collateralized in an amount not less 22
than 102% of the principal amount by an obligation of the United States, its agencies or 23
instrumentalities, provided the collateral is held by a custodian other than the seller 24
designated by the buyer; 25
[(5)] (V) bankers’ acceptances guaranteed by a financial institution with 26
a short–term debt rating in the highest letter and numerical rating by at least one 27
nationally recognized statistical rating organization as designated by either the United 28
States Securities and Exchange Commission or the Treasurer; 29
[(6)] (VI) with respect to amounts treated by the Internal Revenue Service 30
as bond sale proceeds only, bonds, notes, or other obligations of investment grade in the 31
highest quality letter and numerical rating by at least one nationally recognized statistical 32 HOUSE BILL 397 3
rating organization as designated by the United States Securities and Exchange 1
Commission issued by or on behalf of this or any other state or any agency, department, 2
county, municipal or public corporation, special district, authority, or political subdivision 3
thereof, or in any fund or trust that invests only in securities of the type described in this 4
item; 5
[(7)] (VII) commercial paper that has received the highest letter and 6
numerical rating by at least two nationally recognized statistical rating organizations as 7
designated by the United States Securities and Exchange Commission[, provided that such 8
commercial paper may not exceed 10% of the total investments made by the Treasurer 9
under this subsection]; 10
[(8)] (VIII) money market mutual funds that: 11
[(i)] 1. are registered with the Securities and Exchange 12
Commission under the Investment Company Act of 1940, 15 U.S.C. § 80a–1 et seq., as 13
amended; 14
[(ii)] 2. are operated in accordance with Rule 2A –7 of the 15
Investment Company Act of 1940, 17 C.F.R. § 270.2A–7, as amended; and 16
[(iii)] 3. have received the highest possible rating from at least one 17
nationally recognized statistical rating organization as designated by the United States 18
Securities and Exchange Commission; and 19
[(9)] (IX) any investment portfolio created under the Maryland Local 20
Government Investment Pool defined under §§ 17–301 through 17–309 of the Local 21
Government Article of the Code that is administered by the Office of the State Treasurer. 22
(2) INVESTMENTS MADE UNDE R PARAGRAPH (1) OF THIS 23
SUBSECTION SHALL BE IN ACCORDANCE WITH T HE THRESHOLDS ESTABL ISHED IN 24
REGULATIONS ADOPTED UNDER SUBSECTION (G) OF THIS SECTION. 25
(c) The Treasurer may sell, redeem, or exchange an investment or reinvestment 26
made under this section in accordance with the limitations of this section. 27
(d) Subject to § 2–1257 of the State Government Article, the Treasurer shall 28
report by January 3 of each year to the General Assembly on investment activities for 29
unexpended or surplus money over which the Treasurer has custody which have been 30
conducted during the previous fiscal year. At a minimum, the report shall specify for 31
General Fund investments and all other investments: 32
(1) the inventory of investments with maturity dates and the book and 33
market value as of June 30; 34
(2) the net income earned; 35 4 HOUSE BILL 397
(3) the percentage share of each category of investment in the portfolio; and 1
(4) any sale of investments prior to the maturity date. 2
(e) An investment made pursuant to this section shall be made: 3
(1) with the care, skill, prudence, and diligence under the circumstances 4
then prevailing that a prudent person acting in a like capacity and familiar with such 5
matters would use in the conduct of an enterprise of a like character and with like aims; 6
(2) in a manner designed to reasonably match the anticipated cash flow of 7
the State so that sufficient funds are available to pay obligations upon proper presentation 8
for payment; 9
(3) so that a reasonable amount of cash or cash equivalents is available for 10
unanticipated cash needs; 11
(4) with due regard for minimizing risk while maximizing return; 12
(5) using competitive purchasing practices except when impractical; 13
(6) in accordance with a written investment policy; 14
(7) so that the securities and collateral may continue to be priced on a 15
market to market basis; and 16
(8) to avoid the enhancement of the personal financial position of the 17
Treasurer or any employee of the Treasurer who has responsibilities for such investments. 18
(f) (1) (i) Consistent with minority business purchasing standards 19
applicable to units of State government under this article and consistent with the fiduciary 20
duties of the Treasurer, the Treasurer shall attempt to use to the greatest extent feasible 21
minority business enterprises for brokerage and investment management services under 22
this section. 23
(ii) For purposes of this subsection, brokerage and investment 24
management services shall include services relating to all allocated asset classes as 25
described in subsection (b) of this section. 26
(2) (i) To assist the Treasurer in achieving the goal described under 27
paragraph (1) of this subsection, the Treasurer shall undertake measures to remove any 28
barriers that limit full participation by minority business enterprises in brokerage and 29
investment management services opportunities afforded under this section. 30
(ii) The measures undertaken by the Treasurer shall include the use 31
of a wide variety of media, including the Treasurer’s website, to provide notice to a broad 32 HOUSE BILL 397 5
and varied range of potential providers about the brokerage and investment management 1
services opportunities afforded by the Treasurer. 2
(3) In conjunction with the Governor’s Office of Small, Minority, and 3
Women Business Affairs, the Treasurer shall develop guidelines to assist in identifying and 4
evaluating qualified minority business enterprises in order to help the Treasurer achieve 5
the objective for greater use of minority business enterprises for brokerage and investment 6
management services under this section. 7
(4) On or before September 1 each year, the Treasurer shall submit a report 8
to the Governor’s Office of Small, Minority, and Women Business Affairs and, subject to § 9
2–1257 of the State Government Article, the General Assembly on: 10
(i) the identity of the minority business enterprise brokerage and 11
investment management services firms used by the Treasurer in the immediatel y 12
preceding fiscal year; 13
(ii) the percentage and dollar value of the assets under the custody 14
of the Treasurer that are under the investment control of minority business enterprise 15
brokerage and investment management services firms for each allocated asset class; and 16
(iii) the measures the Treasurer undertook in the immediately 17
preceding fiscal year in accordance with paragraph (2)(ii) of this subsection. 18
(G) (1) THE TREASURER SHALL ADOPT REGULATIONS THAT EST ABLISH A 19
STATE INVESTMENT POLI CY. 20
(2) THE STATE INVESTMENT POLI CY SHALL SPECIFY THR ESHOLDS 21
FOR THE MAXIMUM INVE STMENT IN EACH ASSET CLASS AUTHORIZED UND ER THIS 22
SECTION. 23
SECTION 2. AND BE IT FURTHER ENACTED, That prior to the effective date of 24
this Act, the Treasurer shall: 25
(1) notify in writing the chief executive and governing body of each local 26
governmental unit required to have a local investment policy under § 17–205 of the Local 27
Government Article of the changes contained in this Act; and 28
(2) provide the local government with an opportunity to review, revise, and 29
report any changes in the local investment policies to the Treasurer, as appropriate. 30
SECTION 3. AND BE IT FURTHER ENACTED, That the Treasurer shall adopt the 31
regulations required under Section 1 of this Act on or before December 1, 2023. 32
SECTION 4. AND BE IT FURTHER ENACTED, That this Act shall take effect June 33
1, 2023. 34 6 HOUSE BILL 397
Approved:
________________________________________________________________________________
Governor.
________________________________________________________________________________
Speaker of the House of Delegates.
________________________________________________________________________________
President of the Senate.