Texas 2023 - 88th Regular

Texas House Bill HB3495 Compare Versions

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1	1	88R7616 JCG/KBB-F
2	2	By: Bonnen H.B. No. 3495
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the investment authority of certain state agencies and
8	8	the confidentiality of certain information related to those
9	9	investments.
10	10	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	11	SECTION 1. Section 404.024, Government Code, is amended by
12	12	amending Subsections (b) and (c) and adding Subsections (c-1) and
13	13	(c-2) to read as follows:
14	14	(b) Subject to Chapter 2270, state funds not deposited in
15	15	state depositories shall be invested by the comptroller in:
16	16	(1) direct security repurchase agreements;
17	17	(2) reverse security repurchase agreements;
18	18	(3) direct obligations of or obligations the principal
19	19	and interest of which are guaranteed by the United States;
20	20	(4) direct obligations of or obligations guaranteed by
21	21	agencies or instrumentalities of the United States government;
22	22	(5) bankers' acceptances that:
23	23	(A) are eligible for purchase by the Federal
24	24	Reserve System;
25	25	(B) do not exceed 270 days to maturity; and
26	26	(C) are issued by a bank whose other comparable
27	27	short-term obligations are rated in the highest short-term rating
28	28	category, within which there may be subcategories or gradations
29	29	indicating relative standing, including such subcategories or
30	30	gradations as "rating category" or "rated," by a nationally
31	31	recognized statistical rating organization, as defined by 15 U.S.C.
32	32	Section 78c;
33	33	(6) commercial paper that:
34	34	(A) does not exceed 365 [270] days to maturity;
35	35	and
36	36	(B) except as provided by Subsection (i), is
37	37	issued by an entity whose other comparable short-term obligations
38	38	are rated in the highest short-term rating category by a nationally
39	39	recognized statistical rating organization;
40	40	(7) contracts written by the treasury in which the
41	41	treasury grants the purchaser the right to purchase securities in
42	42	the treasury's marketable securities portfolio at a specified price
43	43	over a specified period and for which the treasury is paid a fee and
44	44	specifically prohibits naked-option or uncovered option trading;
45	45	(8) direct obligations of or obligations guaranteed by
46	46	the Inter-American Development Bank, the International Bank for
47	47	Reconstruction and Development (the World Bank), the African
48	48	Development Bank, the Asian Development Bank, and the International
49	49	Finance Corporation that have received the highest long-term rating
50	50	categories for debt obligations by a nationally recognized
51	51	statistical rating organization;
52	52	(9) bonds issued, assumed, or guaranteed by the State
53	53	of Israel;
54	54	(10) obligations of a state or an agency, county,
55	55	city, or other political subdivision of a state;
56	56	(11) mutual funds secured by obligations that are
57	57	described by Subdivisions (1) through (6) or by obligations
58	58	consistent with Rule 2a-7 (17 C.F.R. Section 270.2a-7), promulgated
59	59	by the Securities and Exchange Commission, including pooled funds:
60	60	(A) established by the Texas Treasury
61	61	Safekeeping Trust Company;
62	62	(B) operated like a mutual fund; and
63	63	(C) with portfolios consisting only of
64	64	dollar-denominated securities;
65	65	(12) foreign currency for the sole purpose of
66	66	facilitating investment by state agencies that have the authority
67	67	to invest in foreign securities;
68	68	(13) asset-backed securities, as defined by the
69	69	Securities and Exchange Commission in Rule 2a-7 (17 C.F.R. Section
70	70	270.2a-7), that are rated at least A or its equivalent by a
71	71	nationally recognized statistical rating organization and that
72	72	have a weighted-average maturity of five years or less; and
73	73	(14) corporate debt obligations that are rated at
74	74	least A or its equivalent by a nationally recognized statistical
75	75	rating organization and mature in five years or less from the date
76	76	on which the obligations were "acquired," as defined by the
77	77	Securities and Exchange Commission in Rule 2a-7 (17 C.F.R. Section
78	78	270.2a-7).
79	79	(c) Investments in direct security repurchase agreements
80	80	and reverse security repurchase agreements may be:
81	81	(1) placed through [made with] state or national banks
82	82	doing business in this state or with primary dealers as approved by
83	83	the Federal Reserve System; or
84	84	(2) made directly with a state agency with the
85	85	authority to invest in repurchase agreements.
86	86	(c-1) For purposes of Subsection (c), "state agency" means:
87	87	(1) an office, department, commission, board, or
88	88	agency that is part of any branch of state government;
89	89	(2) an institution of higher education as defined by
90	90	Section 61.003, Education Code; or
91	91	(3) a nonprofit corporation acting on behalf of an
92	92	entity described by Subdivision (1) or (2).
93	93	(c-2) Notwithstanding any other law, the term of any reverse
94	94	security repurchase agreement made by the comptroller may not
95	95	exceed 90 days after the date the reverse security repurchase
96	96	agreement is delivered. Money received by the comptroller under
97	97	the terms of a reverse security repurchase agreement may be used to
98	98	acquire additional authorized investments, but the term of the
99	99	authorized investments acquired must mature not later than the
100	100	expiration date stated in the reverse security repurchase
101	101	agreement.
102	102	SECTION 2. Section 825.103(d), Government Code, is amended
103	103	to read as follows:
104	104	(d) Notwithstanding any other law, the retirement system
105	105	has exclusive authority over the purchase of goods and services
106	106	using money other than money appropriated from the general revenue
107	107	fund, including specifically money from trusts under the
108	108	administration of the retirement system, and Subtitles [Subtitle] D
109	109	and F, Title 10, do [does] not apply to the retirement system with
110	110	respect to that money. The retirement system shall acquire goods or
111	111	services by procurement methods approved by the board of trustees
112	112	or the board's designee. For purposes of this subsection, goods and
113	113	services include all professional and consulting services and
114	114	utilities as well as supplies, materials, equipment, skilled or
115	115	unskilled labor, and insurance. The comptroller shall procure
116	116	goods or services for the retirement system at the request of the
117	117	retirement system, and the retirement system may use the services
118	118	of the comptroller in procuring goods or services.
119	119	SECTION 3. Section 825.301(a), Government Code, is amended
120	120	to read as follows:
121	121	(a) The board of trustees shall invest and reinvest assets
122	122	of the retirement system without distinction as to their source in
123	123	accordance with Section 67, Article XVI, Texas Constitution. For
124	124	purposes of the investment authority of the board of trustees under
125	125	Section 67, Article XVI, Texas Constitution, "securities" includes
126	126	any investment instrument within the meaning of the term as defined
127	127	by Section 4001.068, 15 U.S.C. Section 77b(a)(1), or 15 U.S.C.
128	128	Section 78c(a)(10), any derivative instrument, and any other
129	129	instrument commonly used by institutional investors to manage
130	130	institutional investment portfolios. An interest in a limited
131	131	partnership or investment contract is considered a security without
132	132	regard to the number of investors or the control, access to
133	133	information, or rights granted to or retained by the retirement
134	134	system. Any instrument or contract intended to manage transaction
135	135	or currency exchange risk in purchasing, selling, or holding
136	136	securities is considered to be a security. Subject to Section
137	137	825.3013, an interest in a title-holding entity is considered a
138	138	security. Investment decisions are subject to the standard provided
139	139	in the Texas Trust Code by Section 117.004(b), Property Code.
140	140	SECTION 4. Section 825.3012(b), Government Code, is amended
141	141	to read as follows:
142	142	(b) Notwithstanding any provision of Section 825.301, the
143	143	board of trustees shall determine the maximum percentage [not more
144	144	than 10 percent] of the value of the total investment portfolio of
145	145	the retirement system that may be invested in hedge funds.
146	146	SECTION 5. Subchapter D, Chapter 825, Government Code, is
147	147	amended by adding Sections 825.3013 and 825.3014 to read as
148	148	follows:
149	149	Sec. 825.3013. TITLE-HOLDING ENTITIES; INVESTMENTS IN REAL
150	150	PROPERTY. (a) The retirement system may form a title-holding
151	151	entity for the purpose of investing the retirement system's assets
152	152	in real property. The title-holding entity must be:
153	153	(1) wholly owned and controlled by the system; and
154	154	(2) exempt from taxation under Section 501(a),
155	155	Internal Revenue Code of 1986, as an organization described by
156	156	Section 501(c) of that code.
157	157	(b) Subject to Subsection (a)(2), a title-holding entity
158	158	formed under this section may hold title to real property jointly
159	159	with another person.
160	160	(c) The board of trustees shall adopt policies for the
161	161	governance, management, and reporting for a title-holding entity
162	162	formed under this section.
163	163	(d) The following persons may not be employed by, receive
164	164	compensation from, be a party to a contract with or a direct or
165	165	indirect financial beneficiary of a contract with, or hold a direct
166	166	or indirect interest in a title-holding entity formed by the
167	167	retirement system under this section:
168	168	(1) a trustee or employee of the system; or
169	169	(2) a relative of a trustee or employee of the system
170	170	within the second degree of consanguinity or affinity, as
171	171	determined under Chapter 573.
172	172	(e) Chapter 551 and Subtitles D and F, Title 10, do not apply
173	173	to a title-holding entity formed under this section.
174	174	Sec. 825.3014. CONFIDENTIALITY OF RECORDS RELATED TO
175	175	TITLE-HOLDING ENTITIES. (a) Notwithstanding any other law other
176	176	than this section, all information that relates to a title-holding
177	177	entity formed under Section 825.3013 is confidential and excepted
178	178	from disclosure under Section 552.021, including information
179	179	relating to:
180	180	(1) a pre-due diligence or post-due diligence review,
181	181	audit, or investigation;
182	182	(2) the formation of a title-holding entity under
183	183	Section 825.3013; or
184	184	(3) a potential purchase of real property by a
185	185	title-holding entity, regardless of whether the purchase is
186	186	completed.
187	187	(b) The following information as it relates to a
188	188	title-holding entity formed under Section 825.3013 is public
189	189	information under Chapter 552:
190	190	(1) the title-holding entity's certificate of
191	191	formation or comparable instrument issued by a foreign
192	192	jurisdiction;
193	193	(2) the date or dates on which the title-holding
194	194	entity purchased or sold an interest in real property;
195	195	(3) information relating to the title-holding entity's
196	196	qualification for the federal income tax exemption required under
197	197	Section 825.3013(a)(2);
198	198	(4) the name and location, including the physical
199	199	address, city, state, and country, of any real property in which the
200	200	title-holding entity has an interest;
201	201	(5) as shown in the meeting minutes of the board of
202	202	trustees, each recusal by a member of the board in connection with a
203	203	deliberation or action relating to the title-holding entity, any
204	204	real property in which the entity has an ownership interest, or a
205	205	lease or contract with the title-holding entity;
206	206	(6) the name of each employer or business entity owned
207	207	wholly or partly by the relative of a member of the board of
208	208	trustees or a retirement system employee, within the second degree
209	209	of consanguinity or affinity under Chapter 573, that is a
210	210	prospective party to a transaction or contract with the
211	211	title-holding entity, including a contract that is:
212	212	(A) a real property purchase and sale agreement;
213	213	(B) for goods or services; or
214	214	(C) a lease agreement, including a ground lease
215	215	agreement;
216	216	(7) the name of the business entity or employer
217	217	described by Subdivision (6) as stated in the business entity's or
218	218	employer's certificate of formation or comparable instrument;
219	219	(8) copies of income tax returns filed by the
220	220	title-holding entity, except information in the returns relating to
221	221	indebtedness, tax basis, and gains or losses realized on the sale or
222	222	other disposition of real property by the title-holding entity;
223	223	(9) if the system or a state agency is a tenant of real
224	224	property owned by the title-holding entity:
225	225	(A) the name of that tenant;
226	226	(B) the name and address of the property; and
227	227	(C) the financial returns to the system from
228	228	investing in the property; and
229	229	(10) if applicable, the name of any joint owner of real
230	230	property a title-holding entity has an ownership interest in and
231	231	the percentage of the property owned by a joint owner.
232	232	(c) Except as provided by this subsection, this section
233	233	applies to information regardless of whether the title-holding
234	234	entity disposes of the entity's interest in real property or an
235	235	asset if the information is inextricably intertwined with another
236	236	interest in real property or other assets owned by the
237	237	title-holding entity. The final sale documentation of the disposed
238	238	real property or other asset is public information under Chapter
239	239	552.
240	240	(d) This section does not prohibit the retirement system or
241	241	any person from asserting that any information described by this
242	242	section is confidential or exempt from disclosure under Section
243	243	552.021 or other law. Notwithstanding any other law, if the
244	244	retirement system discloses information described by Subsection
245	245	(a) to a person, the disclosure does not:
246	246	(1) waive or affect the confidentiality of information
247	247	relating to any other title-holding entity; or
248	248	(2) waive the retirement system's right to assert
249	249	exceptions to disclosure of the information in the future.
250	250	SECTION 6. Section 2270.0004, Government Code, is amended
251	251	to read as follows:
252	252	Sec. 2270.0004. INAPPLICABILITY OF CERTAIN REQUIREMENTS
253	253	INCONSISTENT WITH OTHER LAW OR FIDUCIARY RESPONSIBILITIES AND
254	254	RELATED DUTIES. An investing entity described by Section
255	255	2270.0001(7)(B) or (C) is not subject to a requirement of this
256	256	chapter:
257	257	(1) if applicable, to the extent prescribed by Section
258	258	825.103(d); or
259	259	(2) if the entity determines that the requirement
260	260	would be inconsistent with the entity's fiduciary responsibility
261	261	with respect to the investment of entity assets or other duties
262	262	imposed by law relating to the investment of entity assets,
263	263	including the duty of care established under Section 67, Article
264	264	XVI, Texas Constitution.
265	265	SECTION 7. This Act takes effect immediately if it receives
266	266	a vote of two-thirds of all the members elected to each house, as
267	267	provided by Section 39, Article III, Texas Constitution. If this
268	268	Act does not receive the vote necessary for immediate effect, this
269	269	Act takes effect September 1, 2023.