Texas 2015 - 84th Regular

Texas House Bill HB4209 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New	Differences
1	1	84R27319 JJT-F
2	2	By: Capriglione H.B. No. 4209
3	3	Substitute the following for H.B. No. 4209:
4	4	By: Pickett C.S.H.B. No. 4209
5	5
6	6
7	7	A BILL TO BE ENTITLED
8	8	AN ACT
9	9	relating to investment of public funds.
10	10	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	11	SECTION 1. Section 2256.009(a), Government Code, is amended
12	12	to read as follows:
13	13	(a) Except as provided by Subsection (b), the following are
14	14	authorized investments under this subchapter:
15	15	(1) obligations, including letters of credit, of the
16	16	United States or its agencies and instrumentalities;
17	17	(2) direct obligations of this state or its agencies
18	18	and instrumentalities;
19	19	(3) collateralized mortgage obligations directly
20	20	issued by a federal agency or instrumentality of the United States,
21	21	the underlying security for which is guaranteed by an agency or
22	22	instrumentality of the United States;
23	23	(4) other obligations, the principal and interest of
24	24	which are unconditionally guaranteed or insured by, or backed by
25	25	the full faith and credit of, this state or the United States or
26	26	their respective agencies and instrumentalities, including
27	27	obligations that are fully guaranteed or insured by the Federal
28	28	Deposit Insurance Corporation or by the explicit full faith and
29	29	credit of the United States;
30	30	(5) obligations of states, agencies, counties,
31	31	cities, and other political subdivisions of any state rated as to
32	32	investment quality by a nationally recognized investment rating
33	33	firm not less than A or its equivalent; [and]
34	34	(6) bonds issued, assumed, or guaranteed by the State
35	35	of Israel; and
36	36	(7) interest-bearing banking deposits that are
37	37	guaranteed or insured by:
38	38	(A) the Federal Deposit Insurance Corporation or
39	39	its successor; or
40	40	(B) the National Credit Union Share Insurance
41	41	Fund or its successor.
42	42	SECTION 2. Section 2256.010, Government Code, is amended by
43	43	adding Subsection (c) to read as follows:
44	44	(c) An investment in negotiable certificates of deposit
45	45	issued by a bank that has a certificate of deposit rating of at
46	46	least 1 or the equivalent by a nationally recognized credit rating
47	47	agency, or that is associated with a holding company having a
48	48	commercial paper rating of at least A-1, P-1, or the equivalent by a
49	49	nationally recognized credit rating agency, is an authorized
50	50	investment under this subchapter.
51	51	SECTION 3. Section 2256.011, Government Code, is amended by
52	52	adding Subsection (e) to read as follows:
53	53	(e) Section 1371.059(c) applies to the execution of a
54	54	repurchase agreement by an investing entity.
55	55	SECTION 4. Section 2256.014(a), Government Code, is amended
56	56	to read as follows:
57	57	(a) A no-load money market mutual fund is an authorized
58	58	investment under this subchapter if the mutual fund:
59	59	(1) is registered with and regulated by the Securities
60	60	and Exchange Commission;
61	61	(2) provides the investing entity with a prospectus
62	62	and other information required by the Securities Exchange Act of
63	63	1934 (15 U.S.C. Section 78a et seq.) or the Investment Company Act
64	64	of 1940 (15 U.S.C. Section 80a-1 et seq.);
65	65	(3) complies with federal Securities and Exchange
66	66	Commission Rule 2a-7 (17 C.F.R. Section 270.2a-7), promulgated
67	67	under the Investment Company Act of 1940 (15 U.S.C. Section 80a-1 et
68	68	seq.) [has a dollar-weighted average stated maturity of 90 days or
69	69	fewer]; and
70	70	(4) includes in its investment objectives the
71	71	maintenance of a [stable] net asset value determined in accordance
72	72	with federal Securities and Exchange Commission Rule 2a-7 (17
73	73	C.F.R. Section 270.2a-7), promulgated under the Investment Company
74	74	Act of 1940 (15 U.S.C. Section 80a-1 et seq.) [of $1 for each
75	75	share].
76	76	SECTION 5. Section 2256.015, Government Code, is amended by
77	77	adding Subsection (d) to read as follows:
78	78	(d) Section 1371.059(c) applies to the execution of a
79	79	guaranteed investment contract by an investing entity.
80	80	SECTION 6. Sections 2256.016(b), (f), and (h), Government
81	81	Code, are amended to read as follows:
82	82	(b) To be eligible to receive funds from and invest funds on
83	83	behalf of an entity under this chapter, an investment pool must
84	84	furnish to the investment officer or other authorized
85	85	representative of the entity an offering circular or other similar
86	86	disclosure instrument that contains, at a minimum, the following
87	87	information:
88	88	(1) the types of investments in which money is allowed
89	89	to be invested;
90	90	(2) the maximum average dollar-weighted maturity
91	91	allowed, based on the stated maturity date, of the pool;
92	92	(3) the maximum stated maturity date any investment
93	93	security within the portfolio has;
94	94	(4) the objectives of the pool;
95	95	(5) the size of the pool;
96	96	(6) the names of the members of the advisory board of
97	97	the pool and the dates their terms expire;
98	98	(7) the custodian bank that will safekeep the pool's
99	99	assets;
100	100	(8) whether the intent of the pool is to maintain a net
101	101	asset value of one dollar and the risk of market price fluctuation;
102	102	(9) whether the only source of payment is the assets of
103	103	the pool at market value or whether there is a secondary source of
104	104	payment, such as insurance or guarantees, and a description of the
105	105	secondary source of payment;
106	106	(10) the name and address of the independent auditor
107	107	of the pool;
108	108	(11) the requirements to be satisfied for an entity to
109	109	deposit funds in and withdraw funds from the pool and any deadlines
110	110	or other operating policies required for the entity to invest funds
111	111	in and withdraw funds from the pool; [and]
112	112	(12) the performance history of the pool, including
113	113	yield, average dollar-weighted maturities, and expense ratios; and
114	114	(13) the pool's policy regarding holding deposits in
115	115	cash.
116	116	(f) To be eligible to receive funds from and invest funds on
117	117	behalf of an entity under this chapter, a public funds investment
118	118	pool created to function as a money market mutual fund must mark its
119	119	portfolio to market daily, and, to the extent reasonably possible,
120	120	stabilize at a $1 net asset value. If the ratio of the market value
121	121	of the portfolio divided by the book value of the portfolio is less
122	122	than 0.995 or greater than 1.005, the governing body of the public
123	123	funds investment pool shall take action as the body determines
124	124	necessary to eliminate or reduce any dilution or unfair result to
125	125	existing participants, including a sale of portfolio holdings to
126	126	attempt [shall be sold as necessary] to maintain the ratio between
127	127	0.995 and 1.005. In addition to the requirements of its investment
128	128	policy and any other forms of reporting, a public funds investment
129	129	pool created to function as a money market mutual fund shall report
130	130	yield to its investors in accordance with regulations of the
131	131	federal Securities and Exchange Commission applicable to reporting
132	132	by money market funds.
133	133	(h) To maintain eligibility to receive funds from and invest
134	134	funds on behalf of an entity under this chapter, an investment pool
135	135	must be continuously rated no lower than the highest liquidity
136	136	rating given to United States Treasury obligations [AAA or AAA-m or
137	137	at an equivalent rating] by at least one nationally recognized
138	138	rating service.
139	139	SECTION 7. Section 2256.019, Government Code, is amended to
140	140	read as follows:
141	141	Sec. 2256.019. RATING OF CERTAIN INVESTMENT POOLS. A
142	142	public funds investment pool must be continuously rated no lower
143	143	than the highest liquidity rating given to United States Treasury
144	144	obligations [AAA or AAA-m or at an equivalent rating] by at least
145	145	one nationally recognized rating service.
146	146	SECTION 8. Subchapter A, Chapter 2256, Government Code, is
147	147	amended by adding Section 2256.0206 to read as follows:
148	148	Sec. 2256.0206. AUTHORIZED INVESTMENTS: HEDGING
149	149	TRANSACTIONS. (a) In this section:
150	150	(1) "Eligible entity" means a state agency or
151	151	political subdivision that is an issuer as defined by Section
152	152	1371.001.
153	153	(2) "Hedging" means acting to protect against economic
154	154	loss due to price fluctuation of an investment by entering into an
155	155	offsetting position in a related security or by using a financial
156	156	agreement.
157	157	(b) This section prevails to the extent of any conflict
158	158	between this section and an eligible entity's municipal charter, if
159	159	applicable.
160	160	(c) The governing body of an eligible entity shall establish
161	161	its policy regarding hedging transactions.
162	162	(d) An eligible entity may enter into hedging contracts and
163	163	related security and insurance agreements related to commodities
164	164	investments used in the general operations of an eligible entity or
165	165	used in connection with the acquisition or construction of a
166	166	capital project by the eligible entity. A hedging transaction must
167	167	comply with the regulations of the federal Commodity Futures
168	168	Trading Commission and the federal Securities and Exchange
169	169	Commission.
170	170	(e) An eligible entity may credit any amount the entity
171	171	receives under a hedging contract or agreement against expenses
172	172	associated with a commodity purchase.
173	173	(f) An eligible entity's payment under a hedging contract or
174	174	agreement may be considered to be:
175	175	(1) an operation and maintenance expense of the
176	176	eligible entity;
177	177	(2) an acquisition expense of the eligible entity; or
178	178	(3) a construction expense of the eligible entity.
179	179	SECTION 9. The changes in law made by this Act apply only to
180	180	authorized investments of public funds governed by Chapter 2256,
181	181	Government Code, as amended by this Act, that are made on or after
182	182	the effective date of this Act. An authorized investment of public
183	183	funds made before the effective date of this Act is governed by the
184	184	law in effect immediately before that date, and that law is
185	185	continued in effect for that purpose.
186	186	SECTION 10. This Act takes effect immediately if it
187	187	receives a vote of two-thirds of all the members elected to each
188	188	house, as provided by Section 39, Article III, Texas Constitution.
189	189	If this Act does not receive the vote necessary for immediate
190	190	effect, this Act takes effect September 1, 2015.