MD
Maryland House Bill HB397

Maryland 2023 Regular Session

Maryland House Bill HB397 Compare Versions

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1- WES MOORE, Governor Ch. 115
21
3-– 1 –
4-Chapter 115
5-(House Bill 397)
62
7-AN ACT concerning
3+EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
4+ [Brackets] indicate matter deleted from existing law.
5+ Underlining indicates amendments to bill.
6+ Strike out indicates matter stricken from the bill by amendment or deleted from the law by
7+amendment.
8+ *hb0397*
89
9-State Investment Portfolio – Investment Thresholds – Alterations
10+HOUSE BILL 397
11+P1 3lr2145
12+ CF SB 153
13+By: Delegate Watson
14+Introduced and read first time: January 26, 2023
15+Assigned to: Appropriations
16+Committee Report: Favorable
17+House action: Adopted
18+Read second time: February 26, 2023
1019
11-FOR the purpose of repealing the limitations on investment in certain commercial paper in
12-which the Treasurer may invest or reinvest certain unexpended or surplus funds;
13-requiring the Treasurer to adopt regulations to establish a State investment policy
14-with certain thresholds; requiring the Treasurer to notify certain officials and
15-governing bodies of certain local government units about the provisions of this Act;
16-and generally relating to the investment portfolio of the State.
20+CHAPTER ______
1721
18-BY repealing and reenacting, with amendments,
19- Article – State Finance and Procurement
20-Section 6–222
21- Annotated Code of Maryland
22- (2021 Replacement Volume and 2022 Supplement)
22+AN ACT concerning 1
2323
24- SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND,
25-That the Laws of Maryland read as follows:
24+State Investment Portfolio – Investment Thresholds – Alterations 2
2625
27-Article – State Finance and Procurement
26+FOR the purpose of repealing the limitations on investment in certain commercial paper in 3
27+which the Treasurer may invest or reinvest certain unexpended or surplus funds; 4
28+requiring the Treasurer to adopt regulations to establish a State investment policy 5
29+with certain thresholds; requiring the Treasurer to notify certain officials and 6
30+governing bodies of certain local government units about the provisions of this Act; 7
31+and generally relating to the investment portfolio of the State. 8
2832
29-6–222.
33+BY repealing and reenacting, with amendments, 9
34+ Article – State Finance and Procurement 10
35+Section 6–222 11
36+ Annotated Code of Maryland 12
37+ (2021 Replacement Volume and 2022 Supplement) 13
3038
31- (a) (1) In this section, “supranational issuer” means an international
32-development institution that:
39+ SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 14
40+That the Laws of Maryland read as follows: 15
3341
34- (i) provides financing, advisory services, or other financial services
35-to the institution’s member countries to achieve the overall goal of improving living
36-standards through sustainable economic growth; and
42+Article – State Finance and Procurement 16
3743
38- (ii) is rated in the highest credit rating category by a nationally
39-recognized statistical rating organization.
44+6–222. 17
4045
41- (2) “Supranational issuer” includes:
46+ (a) (1) In this section, “supranational issuer” means an international 18
47+development institution that: 19
48+ 2 HOUSE BILL 397
4249
43- (i) the World Bank;
4450
45- (ii) the International Finance Corporation;
51+ (i) provides financing, advisory services, or other financial services 1
52+to the institution’s member countries to achieve the overall goal of improving living 2
53+standards through sustainable economic growth; and 3
4654
47- (iii) the Inter–American Development Bank;
55+ (ii) is rated in the highest credit rating category by a nationally 4
56+recognized statistical rating organization. 5
4857
49- (iv) the African Development Bank; and Ch. 115 2023 LAWS OF MARYLAND
58+ (2) “Supranational issuer” includes: 6
5059
51-– 2 –
60+ (i) the World Bank; 7
5261
53- (v) the Asian Development Bank.
62+ (ii) the International Finance Corporation; 8
5463
55- (b) (1) [The] SUBJECT TO PARAGRAPH (2) OF THIS SUBSECTION , THE
56-Treasurer may invest or reinvest unexpended or surplus money over which the Treasurer
57-has custody in:
64+ (iii) the Inter–American Development Bank; 9
5865
59- [(1)] (I) an obligation for which the United States has pledged its faith
60-and credit for the payment of the principal and interest;
66+ (iv) the African Development Bank; and 10
6167
62- [(2)] (II) an obligation that a federal agency or a federal instrumentality
63-has issued in accordance with an act of Congress;
68+ (v) the Asian Development Bank. 11
6469
65- [(3)] (III) an obligation issued and unconditionally guaranteed by a
66-supranational issuer denominated in United States dollars and eligible to be sold in the
67-United States;
70+ (b) (1) [The] SUBJECT TO PARAGRAPH (2) OF THIS SUBSECTION , THE 12
71+Treasurer may invest or reinvest unexpended or surplus money over which the Treasurer 13
72+has custody in: 14
6873
69- [(4)] (IV) a repurchase agreement collateralized in an amount not less
70-than 102% of the principal amount by an obligation of the United States, its agencies or
71-instrumentalities, provided the collateral is held by a custodian other than the seller
72-designated by the buyer;
74+ [(1)] (I) an obligation for which the United States has pledged its faith 15
75+and credit for the payment of the principal and interest; 16
7376
74- [(5)] (V) bankers’ acceptances guaranteed by a financial institution with
75-a short–term debt rating in the highest letter and numerical rating by at least one
76-nationally recognized statistical rating organization as designated by either the United
77-States Securities and Exchange Commission or the Treasurer;
77+ [(2)] (II) an obligation that a federal agency or a federal instrumentality 17
78+has issued in accordance with an act of Congress; 18
7879
79- [(6)] (VI) with respect to amounts treated by the Internal Revenue Service
80-as bond sale proceeds only, bonds, notes, or other obligations of investment grade in the
81-highest quality letter and numerical rating by at least one nationally recognized statistical
82-rating organization as designated by the United States Securities and Exchange
83-Commission issued by or on behalf of this or any other state or any agency, department,
84-county, municipal or public corporation, special district, authority, or political subdivision
85-thereof, or in any fund or trust that invests only in securities of the type described in this
86-item;
80+ [(3)] (III) an obligation issued and unconditionally guaranteed by a 19
81+supranational issuer denominated in United States dollars and eligible to be sold in the 20
82+United States; 21
8783
88- [(7)] (VII) commercial paper that has received the highest letter and
89-numerical rating by at least two nationally recognized statistical rating organizations as
90-designated by the United States Securities and Exchange Commission[, provided that such
91-commercial paper may not exceed 10% of the total investments made by the Treasurer
92-under this subsection];
84+ [(4)] (IV) a repurchase agreement collateralized in an amount not less 22
85+than 102% of the principal amount by an obligation of the United States, its agencies or 23
86+instrumentalities, provided the collateral is held by a custodian other than the seller 24
87+designated by the buyer; 25
9388
94- [(8)] (VIII) money market mutual funds that:
89+ [(5)] (V) bankers’ acceptances guaranteed by a financial institution with 26
90+a short–term debt rating in the highest letter and numerical rating by at least one 27
91+nationally recognized statistical rating organization as designated by either the United 28
92+States Securities and Exchange Commission or the Treasurer; 29
9593
96- [(i)] 1. are registered with the Securities and Exchange WES MOORE, Governor Ch. 115
94+ [(6)] (VI) with respect to amounts treated by the Internal Revenue Service 30
95+as bond sale proceeds only, bonds, notes, or other obligations of investment grade in the 31
96+highest quality letter and numerical rating by at least one nationally recognized statistical 32 HOUSE BILL 397 3
9797
98-– 3 –
99-Commission under the Investment Company Act of 1940, 15 U.S.C. § 80a–1 et seq., as
100-amended;
10198
102- [(ii)] 2. are operated in accordance with Rule 2A –7 of the
103-Investment Company Act of 1940, 17 C.F.R. § 270.2A–7, as amended; and
99+rating organization as designated by the United States Securities and Exchange 1
100+Commission issued by or on behalf of this or any other state or any agency, department, 2
101+county, municipal or public corporation, special district, authority, or political subdivision 3
102+thereof, or in any fund or trust that invests only in securities of the type described in this 4
103+item; 5
104104
105- [(iii)] 3. have received the highest possible rating from at least one
106-nationally recognized statistical rating organization as designated by the United States
107-Securities and Exchange Commission; and
105+ [(7)] (VII) commercial paper that has received the highest letter and 6
106+numerical rating by at least two nationally recognized statistical rating organizations as 7
107+designated by the United States Securities and Exchange Commission[, provided that such 8
108+commercial paper may not exceed 10% of the total investments made by the Treasurer 9
109+under this subsection]; 10
108110
109- [(9)] (IX) any investment portfolio created under the Maryland Local
110-Government Investment Pool defined under §§ 17–301 through 17–309 of the Local
111-Government Article of the Code that is administered by the Office of the State Treasurer.
111+ [(8)] (VIII) money market mutual funds that: 11
112112
113- (2) INVESTMENTS MADE UNDE R PARAGRAPH (1) OF THIS
114-SUBSECTION SHALL BE IN ACCORDANCE WITH T HE THRESHOLDS ESTABL ISHED IN
115-REGULATIONS ADOPTED UNDER SUBSECTION (G) OF THIS SECTION.
113+ [(i)] 1. are registered with the Securities and Exchange 12
114+Commission under the Investment Company Act of 1940, 15 U.S.C. § 80a–1 et seq., as 13
115+amended; 14
116116
117- (c) The Treasurer may sell, redeem, or exchange an investment or reinvestment
118-made under this section in accordance with the limitations of this section.
117+ [(ii)] 2. are operated in accordance with Rule 2A –7 of the 15
118+Investment Company Act of 1940, 17 C.F.R. § 270.2A–7, as amended; and 16
119119
120- (d) Subject to § 2–1257 of the State Government Article, the Treasurer shall
121-report by January 3 of each year to the General Assembly on investment activities for
122-unexpended or surplus money over which the Treasurer has custody which have been
123-conducted during the previous fiscal year. At a minimum, the report shall specify for
124-General Fund investments and all other investments:
120+ [(iii)] 3. have received the highest possible rating from at least one 17
121+nationally recognized statistical rating organization as designated by the United States 18
122+Securities and Exchange Commission; and 19
125123
126- (1) the inventory of investments with maturity dates and the book and
127-market value as of June 30;
124+ [(9)] (IX) any investment portfolio created under the Maryland Local 20
125+Government Investment Pool defined under §§ 17–301 through 17–309 of the Local 21
126+Government Article of the Code that is administered by the Office of the State Treasurer. 22
128127
129- (2) the net income earned;
128+ (2) INVESTMENTS MADE UNDE R PARAGRAPH (1) OF THIS 23
129+SUBSECTION SHALL BE IN ACCORDANCE WITH T HE THRESHOLDS ESTABL ISHED IN 24
130+REGULATIONS ADOPTED UNDER SUBSECTION (G) OF THIS SECTION. 25
130131
131- (3) the percentage share of each category of investment in the portfolio; and
132+ (c) The Treasurer may sell, redeem, or exchange an investment or reinvestment 26
133+made under this section in accordance with the limitations of this section. 27
132134
133- (4) any sale of investments prior to the maturity date.
135+ (d) Subject to § 2–1257 of the State Government Article, the Treasurer shall 28
136+report by January 3 of each year to the General Assembly on investment activities for 29
137+unexpended or surplus money over which the Treasurer has custody which have been 30
138+conducted during the previous fiscal year. At a minimum, the report shall specify for 31
139+General Fund investments and all other investments: 32
134140
135- (e) An investment made pursuant to this section shall be made:
141+ (1) the inventory of investments with maturity dates and the book and 33
142+market value as of June 30; 34
136143
137- (1) with the care, skill, prudence, and diligence under the circumstances
138-then prevailing that a prudent person acting in a like capacity and familiar with such
139-matters would use in the conduct of an enterprise of a like character and with like aims;
144+ (2) the net income earned; 35 4 HOUSE BILL 397
140145
141- (2) in a manner designed to reasonably match the anticipated cash flow of
142-the State so that sufficient funds are available to pay obligations upon proper presentation
143-for payment;
144- Ch. 115 2023 LAWS OF MARYLAND
145146
146-– 4 –
147- (3) so that a reasonable amount of cash or cash equivalents is available for
148-unanticipated cash needs;
149147
150- (4) with due regard for minimizing risk while maximizing return;
148+ (3) the percentage share of each category of investment in the portfolio; and 1
151149
152- (5) using competitive purchasing practices except when impractical;
150+ (4) any sale of investments prior to the maturity date. 2
153151
154- (6) in accordance with a written investment policy;
152+ (e) An investment made pursuant to this section shall be made: 3
155153
156- (7) so that the securities and collateral may continue to be priced on a
157-market to market basis; and
154+ (1) with the care, skill, prudence, and diligence under the circumstances 4
155+then prevailing that a prudent person acting in a like capacity and familiar with such 5
156+matters would use in the conduct of an enterprise of a like character and with like aims; 6
158157
159- (8) to avoid the enhancement of the personal financial position of the
160-Treasurer or any employee of the Treasurer who has responsibilities for such investments.
158+ (2) in a manner designed to reasonably match the anticipated cash flow of 7
159+the State so that sufficient funds are available to pay obligations upon proper presentation 8
160+for payment; 9
161161
162- (f) (1) (i) Consistent with minority business purchasing standards
163-applicable to units of State government under this article and consistent with the fiduciary
164-duties of the Treasurer, the Treasurer shall attempt to use to the greatest extent feasible
165-minority business enterprises for brokerage and investment management services under
166-this section.
162+ (3) so that a reasonable amount of cash or cash equivalents is available for 10
163+unanticipated cash needs; 11
167164
168- (ii) For purposes of this subsection, brokerage and investment
169-management services shall include services relating to all allocated asset classes as
170-described in subsection (b) of this section.
165+ (4) with due regard for minimizing risk while maximizing return; 12
171166
172- (2) (i) To assist the Treasurer in achieving the goal described under
173-paragraph (1) of this subsection, the Treasurer shall undertake measures to remove any
174-barriers that limit full participation by minority business enterprises in brokerage and
175-investment management services opportunities afforded under this section.
167+ (5) using competitive purchasing practices except when impractical; 13
176168
177- (ii) The measures undertaken by the Treasurer shall include the use
178-of a wide variety of media, including the Treasurer’s website, to provide notice to a broad
179-and varied range of potential providers about the brokerage and investment management
180-services opportunities afforded by the Treasurer.
169+ (6) in accordance with a written investment policy; 14
181170
182- (3) In conjunction with the Governor’s Office of Small, Minority, and
183-Women Business Affairs, the Treasurer shall develop guidelines to assist in identifying and
184-evaluating qualified minority business enterprises in order to help the Treasurer achieve
185-the objective for greater use of minority business enterprises for brokerage and investment
186-management services under this section.
171+ (7) so that the securities and collateral may continue to be priced on a 15
172+market to market basis; and 16
187173
188- (4) On or before September 1 each year, the Treasurer shall submit a report
189-to the Governor’s Office of Small, Minority, and Women Business Affairs and, subject to §
190-2–1257 of the State Government Article, the General Assembly on:
174+ (8) to avoid the enhancement of the personal financial position of the 17
175+Treasurer or any employee of the Treasurer who has responsibilities for such investments. 18
191176
192- (i) the identity of the minority business enterprise brokerage and WES MOORE, Governor Ch. 115
177+ (f) (1) (i) Consistent with minority business purchasing standards 19
178+applicable to units of State government under this article and consistent with the fiduciary 20
179+duties of the Treasurer, the Treasurer shall attempt to use to the greatest extent feasible 21
180+minority business enterprises for brokerage and investment management services under 22
181+this section. 23
193182
194-– 5 –
195-investment management services firms used by the Treasurer in the immediately
196-preceding fiscal year;
183+ (ii) For purposes of this subsection, brokerage and investment 24
184+management services shall include services relating to all allocated asset classes as 25
185+described in subsection (b) of this section. 26
197186
198- (ii) the percentage and dollar value of the assets under the custody
199-of the Treasurer that are under the investment control of minority business enterprise
200-brokerage and investment management services firms for each allocated asset class; and
187+ (2) (i) To assist the Treasurer in achieving the goal described under 27
188+paragraph (1) of this subsection, the Treasurer shall undertake measures to remove any 28
189+barriers that limit full participation by minority business enterprises in brokerage and 29
190+investment management services opportunities afforded under this section. 30
201191
202- (iii) the measures the Treasurer undertook in the immediately
203-preceding fiscal year in accordance with paragraph (2)(ii) of this subsection.
192+ (ii) The measures undertaken by the Treasurer shall include the use 31
193+of a wide variety of media, including the Treasurer’s website, to provide notice to a broad 32 HOUSE BILL 397 5
204194
205- (G) (1) THE TREASURER SHALL ADOPT REGULATIONS THAT EST ABLISH A
206-STATE INVESTMENT POLI CY.
207195
208- (2) THE STATE INVESTMENT POLICY SH ALL SPECIFY THRESHOL DS
209-FOR THE MAXIMUM INVE STMENT IN EACH ASSET CLASS AUTHORIZED UND ER THIS
210-SECTION.
196+and varied range of potential providers about the brokerage and investment management 1
197+services opportunities afforded by the Treasurer. 2
211198
212- SECTION 2. AND BE IT FURTHER ENACTED, That prior to the effective date of
213-this Act, the Treasurer shall:
199+ (3) In conjunction with the Governor’s Office of Small, Minority, and 3
200+Women Business Affairs, the Treasurer shall develop guidelines to assist in identifying and 4
201+evaluating qualified minority business enterprises in order to help the Treasurer achieve 5
202+the objective for greater use of minority business enterprises for brokerage and investment 6
203+management services under this section. 7
214204
215- (1) notify in writing the chief executive and governing body of each local
216-governmental unit required to have a local investment policy under § 17–205 of the Local
217-Government Article of the changes contained in this Act; and
205+ (4) On or before September 1 each year, the Treasurer shall submit a report 8
206+to the Governor’s Office of Small, Minority, and Women Business Affairs and, subject to § 9
207+2–1257 of the State Government Article, the General Assembly on: 10
218208
219- (2) provide the local government with an opportunity to review, revise, and
220-report any changes in the local investment policies to the Treasurer, as appropriate.
209+ (i) the identity of the minority business enterprise brokerage and 11
210+investment management services firms used by the Treasurer in the immediatel y 12
211+preceding fiscal year; 13
221212
222- SECTION 3. AND BE IT FURTHER ENACTED, That the Treasurer shall adopt the
223-regulations required under Section 1 of this Act on or before December 1, 2023.
213+ (ii) the percentage and dollar value of the assets under the custody 14
214+of the Treasurer that are under the investment control of minority business enterprise 15
215+brokerage and investment management services firms for each allocated asset class; and 16
224216
225- SECTION 4. AND BE IT FURTHER ENACTED, That this Act shall take effect June
226-1, 2023.
217+ (iii) the measures the Treasurer undertook in the immediately 17
218+preceding fiscal year in accordance with paragraph (2)(ii) of this subsection. 18
227219
228-Approved by the Governor, April 24, 2023.
220+ (G) (1) THE TREASURER SHALL ADOPT REGULATIONS THAT EST ABLISH A 19
221+STATE INVESTMENT POLI CY. 20
222+
223+ (2) THE STATE INVESTMENT POLI CY SHALL SPECIFY THR ESHOLDS 21
224+FOR THE MAXIMUM INVE STMENT IN EACH ASSET CLASS AUTHORIZED UND ER THIS 22
225+SECTION. 23
226+
227+ SECTION 2. AND BE IT FURTHER ENACTED, That prior to the effective date of 24
228+this Act, the Treasurer shall: 25
229+
230+ (1) notify in writing the chief executive and governing body of each local 26
231+governmental unit required to have a local investment policy under § 17–205 of the Local 27
232+Government Article of the changes contained in this Act; and 28
233+
234+ (2) provide the local government with an opportunity to review, revise, and 29
235+report any changes in the local investment policies to the Treasurer, as appropriate. 30
236+
237+ SECTION 3. AND BE IT FURTHER ENACTED, That the Treasurer shall adopt the 31
238+regulations required under Section 1 of this Act on or before December 1, 2023. 32
239+
240+ SECTION 4. AND BE IT FURTHER ENACTED, That this Act shall take effect June 33
241+1, 2023. 34 6 HOUSE BILL 397
242+
243+
244+
245+
246+
247+
248+Approved:
249+________________________________________________________________________________
250+ Governor.
251+________________________________________________________________________________
252+ Speaker of the House of Delegates.
253+________________________________________________________________________________
254+ President of the Senate.