81R15700 MTB-F
By: Truitt H.B. No. 3607
Substitute the following for H.B. No. 3607:
By: Truitt C.S.H.B. No. 3607
A BILL TO BE ENTITLED
AN ACT
relating to authorized investments for governmental entities.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 2256.005(b), Government Code, is amended
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. Section 2256.007(d), Government Code, is amended
to read as follows:
(d) An investment officer shall attend a training session
not less than once each state fiscal biennium [in a two-year period]
and may receive training from any independent source approved by
the governing body of the state agency. The investment officer
shall prepare a report on this subchapter and deliver the report to
the governing body of the state agency not later than the 180th day
after the last day of each regular session of the legislature.
SECTION 3. Sections 2256.008(a) and (b), Government Code,
are amended to read as follows:
(a) Except as provided by Subsections (b) and (e), the
treasurer, the chief financial officer if the treasurer is not the
chief financial officer, and the investment officer of a local
government shall:
(1) attend at least one training session from an
independent source approved by the governing body of the local
government or a designated investment committee advising the
investment officer as provided for in the investment policy of the
local government and containing at least 10 hours of instruction
relating to the treasurer's or officer's responsibilities under
this subchapter within 12 months after taking office or assuming
duties; and
(2) except as provided by Subsections (b) and (e),
attend an investment training session not less than once each state
fiscal biennium [in a two-year period] and receive not less than 10
hours of instruction relating to investment responsibilities under
this subchapter from an independent source approved by the
governing body of the local government or a designated investment
committee advising the investment officer as provided for in the
investment policy of the local government.
(b) An investing entity created under authority of Section
52(b), Article III, or Section 59, Article XVI, Texas Constitution,
that has contracted with an investment management firm under
Section 2256.003(b) and has fewer than five full-time employees or
an investing entity that has contracted with another investing
entity to invest the entity's funds may satisfy the training
requirement provided by Subsection (a)(2) by having an officer of
the governing body attend four hours of appropriate instruction
each state fiscal biennium [in a two-year period]. The treasurer or
chief financial officer of an investing entity created under
authority of Section 52(b), Article III, or Section 59, Article
XVI, Texas Constitution, and that has fewer than five full-time
employees is not required to attend training required by this
section unless the person is also the investment officer of the
entity.
SECTION 4. Section 2256.009(a), Government Code, is amended
to read as follows:
(a) Except as provided by Subsection (b), the following are
authorized investments under this subchapter:
(1) obligations, including letters of credit, of the
United States or its agencies and instrumentalities;
(2) direct obligations of this state or its agencies
and instrumentalities;
(3) collateralized mortgage obligations directly
issued by a federal agency or instrumentality of the United States,
the underlying security for which is guaranteed by an agency or
instrumentality of the United States;
(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;
(5) obligations of states, agencies, counties,
cities, and other political subdivisions of any state rated as to
investment quality by a nationally recognized investment rating
firm not less than A or its equivalent; and
(6) bonds issued, assumed, or guaranteed by the State
of Israel.
SECTION 5. Section 2256.010, Government Code, is amended by
adding Subsection (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 from a list adopted 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. Section 2256.016, Government Code, is amended by
amending Subsections (a), (c), and (f) and adding Subsections (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 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 by 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 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 and any other
forms of reporting, a public funds investment pool created to
function as a money market mutual fund shall report yield to its
investors in accordance with 17 C.F.R. Section 230.482(e),
promulgated by the federal Securities and Exchange Commission.
(i) If the investment pool operates an Internet website, the
information in a disclosure instrument or report described in
Subsections (b), (c)(2), and (f) must be posted on the website.
(j) To maintain eligibility to receive funds from and invest
funds on behalf of an entity under this chapter, an investment pool
must make available to the 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, the investment pool in advertising
investment rates 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 7. Section 2256.019, Government Code, is amended to
read as follows:
Sec. 2256.019. RATING OF CERTAIN INVESTMENT POOLS. A
public funds investment pool must be continuously rated no lower
than AAA or AAA-m or at an equivalent rating by at least one
nationally recognized rating service [or no lower than investment
grade by at least one nationally recognized rating service with a
weighted average maturity no greater than 90 days].
SECTION 8. Subchapter A, Chapter 2256, 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
other 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 that
are 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
Subsection (a) shall be segregated and accounted for separately
from other funds of the local government.
SECTION 9. Section 2256.023(b), Government Code, is amended
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;
[(C)] ending market value for the period; and
(C) [(D)] 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 10. 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.