Texas 2025 - 89th Regular

Texas Senate Bill SB2642 Compare Versions

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1	1	By: Middleton, Hinojosa of Nueces S.B. No. 2642
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6	6	A BILL TO BE ENTITLED
7	7	AN ACT
8	8	relating to authorized investments by governmental entities.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Section 2256.002, Government Code, is amended by
11	11	adding Subdivision (9-a) to read as follows:
12	12	(9-a) "Qualified manager" means:
13	13	(A) an investment management firm registered:
14	14	(i) under the Investment Advisers Act of
15	15	1940 (15 U.S.C. Section 80b-1 et seq.); or
16	16	(ii) with the State Securities Board;
17	17	(B) a bank, as defined by Section 3, Federal
18	18	Deposit Insurance Act (12 U.S.C. Section 1813); or
19	19	(C) a bank holding company, as defined by Section
20	20	2(a), Bank Holding Company Act of 1956 (12 U.S.C. Section 1841(a)).
21	21	SECTION 2. Section 2256.003(b), Government Code, is amended
22	22	to read as follows:
23	23	(b) In the exercise of its powers under Subsection (a), the
24	24	governing body of an investing entity may contract with a qualified
25	25	manager [an investment management firm registered under the
26	26	Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.) or
27	27	with the State Securities Board] to provide for the investment and
28	28	management of its public funds or other funds under its control. A
29	29	contract made under authority of this subsection may not be for a
30	30	term longer than two years. A renewal or extension of the contract
31	31	must be made by the governing body of the investing entity by order,
32	32	ordinance, or resolution.
33	33	SECTION 3. Section 2256.016, Government Code, is amended to
34	34	read as follows:
35	35	Sec. 2256.016. AUTHORIZED INVESTMENTS: INVESTMENT POOLS.
36	36	(a) An entity may invest its funds and funds under its control
37	37	through an eligible investment pool if the governing body of the
38	38	entity by rule, order, ordinance, or resolution, as appropriate,
39	39	authorizes investment in the particular pool. An investment pool
40	40	shall invest the funds it receives from entities in authorized
41	41	investments permitted by this subchapter. An investment pool may
42	42	invest its funds in money market mutual funds to the extent
43	43	permitted by and consistent with this subchapter and the investment
44	44	policies and objectives adopted by the investment pool.
45	45	(b) To be eligible to receive funds from and invest funds on
46	46	behalf of an entity under this chapter, an investment pool must
47	47	furnish to the investment officer or other authorized
48	48	representative of the entity an offering circular or other similar
49	49	disclosure instrument that contains, at a minimum, the following
50	50	information:
51	51	(1) the types of investments in which money is allowed
52	52	to be invested;
53	53	(2) the maximum average dollar-weighted maturity
54	54	allowed, based on the stated maturity date, of the pool;
55	55	(3) the maximum stated maturity date any investment
56	56	security within the portfolio has;
57	57	(4) the objectives of the pool;
58	58	(5) the size of the pool;
59	59	(6) the names of the members of the advisory board of
60	60	the pool and the dates their terms expire;
61	61	(7) the custodian bank that will safekeep the pool's
62	62	assets;
63	63	(8) whether the intent of the pool is to maintain a net
64	64	asset value of one dollar and the risk of market price fluctuation;
65	65	(9) whether the only source of payment is the assets of
66	66	the pool at market value or whether there is a secondary source of
67	67	payment, such as insurance or guarantees, and a description of the
68	68	secondary source of payment;
69	69	(10) the name and address of the independent auditor
70	70	of the pool;
71	71	(11) the requirements to be satisfied for an entity to
72	72	deposit funds in and withdraw funds from the pool and any deadlines
73	73	or other operating policies required for the entity to invest funds
74	74	in and withdraw funds from the pool;
75	75	(12) the performance history of the pool, including
76	76	yield, average dollar-weighted maturities, and expense ratios;
77	77	[and]
78	78	(13) the pool's policy regarding holding deposits in
79	79	cash; and
80	80	(14) written confirmation in readily visible font and
81	81	positioning on the disclosure that there is no sponsorship
82	82	agreement or royalty paid to any association or organization from
83	83	funds or interest income of the pool.
84	84	(c) To maintain eligibility to receive funds from and invest
85	85	funds on behalf of an entity under this chapter, an investment pool
86	86	must furnish to the investment officer or other authorized
87	87	representative of the entity:
88	88	(1) investment transaction confirmations; and
89	89	(2) a monthly report that contains, at a minimum, the
90	90	following information:
91	91	(A) the types and percentage breakdown of
92	92	securities in which the pool is invested;
93	93	(B) the current average dollar-weighted
94	94	maturity, based on the stated maturity date, of the pool;
95	95	(C) the current percentage of the pool's
96	96	portfolio in investments that have stated maturities of more than
97	97	one year;
98	98	(D) the book value versus the market value of the
99	99	pool's portfolio, using amortized cost valuation;
100	100	(E) the size of the pool;
101	101	(F) the number of participants in the pool;
102	102	(G) the custodian bank that is safekeeping the
103	103	assets of the pool;
104	104	(H) a listing of daily transaction activity of
105	105	the entity participating in the pool;
106	106	(I) the yield and expense ratio of the pool,
107	107	including a statement regarding how yield is calculated;
108	108	(J) the portfolio managers of the pool; [and]
109	109	(K) any changes or addenda to the offering
110	110	circular; and
111	111	(L) written confirmation in readily visible font
112	112	and positioning on the disclosure that there is no sponsorship
113	113	agreement or royalty paid to any association or organization from
114	114	funds or interest income of the pool.
115	115	(d) An entity by contract may delegate to an investment pool
116	116	the authority to hold legal title as custodian of investments
117	117	purchased with its local funds.
118	118	(e) In this section, for purposes of an investment pool for
119	119	which a $1.00 net asset value is maintained, "yield" shall be
120	120	calculated in accordance with regulations governing the
121	121	registration of open-end management investment companies under the
122	122	Investment Company Act of 1940, as promulgated from time to time by
123	123	the federal Securities and Exchange Commission.
124	124	(f) To be eligible to receive funds from and invest funds on
125	125	behalf of an entity under this chapter:
126	126	(1) a public funds investment pool that uses amortized
127	127	cost or fair value accounting must mark its portfolio to market
128	128	daily; [and]
129	129	(2) if the investment pool uses amortized cost:
130	130	(A) the investment pool must, to the extent
131	131	reasonably possible, stabilize at a $1.00 net asset value, when
132	132	rounded and expressed to two decimal places;
133	133	(B) the governing body of the investment pool
134	134	must, if the ratio of the market value of the portfolio divided by
135	135	the book value of the portfolio is less than 0.995 or greater than
136	136	1.005, take action as the body determines necessary to eliminate or
137	137	reduce to the extent reasonably practicable any dilution or unfair
138	138	result to existing participants, including a sale of portfolio
139	139	holdings to attempt to maintain the ratio between 0.995 and 1.005;
140	140	and
141	141	(C) the investment pool must, in addition to the
142	142	requirements of its investment policy and any other forms of
143	143	reporting, report yield to its investors in accordance with
144	144	regulations of the federal Securities and Exchange Commission
145	145	applicable to reporting by money market funds; and
146	146	(3) an investment pool must invest at least 35 percent
147	147	of the pool's funds with an authorized investment described by
148	148	Sections 2256.009(a)(7) or (8) or 2256.010 in a bank located in this
149	149	state.
150	150	(g) To be eligible to receive funds from and invest funds on
151	151	behalf of an entity under this chapter, a public funds investment
152	152	pool must have an advisory board composed:
153	153	(1) equally of participants in the pool and other
154	154	persons who do not have a business relationship with the pool and
155	155	are qualified to advise the pool, for a public funds investment pool
156	156	created under Chapter 791 and managed by a state agency; or
157	157	(2) of participants in the pool and other persons who
158	158	do not have a business relationship with the pool and are qualified
159	159	to advise the pool, for other investment pools.
160	160	(h) To maintain eligibility to receive funds from and invest
161	161	funds on behalf of an entity under this chapter, an investment pool
162	162	must be continuously rated no lower than AAA or AAA-m or at an
163	163	equivalent rating by at least one nationally recognized rating
164	164	service.
165	165	(i) If the investment pool operates an Internet website, the
166	166	information in a disclosure instrument or report described in
167	167	Subsections (b), (c)(2), and (f) must be posted on the website.
168	168	(j) To maintain eligibility to receive funds from and invest
169	169	funds on behalf of an entity under this chapter, an investment pool
170	170	must make available to the entity an annual audited financial
171	171	statement of the investment pool in which the entity has funds
172	172	invested.
173	173	(k) If an investment pool offers fee breakpoints based on
174	174	fund balances invested, the investment pool in advertising
175	175	investment rates must include either all levels of return based on
176	176	the breakpoints provided or state the lowest possible level of
177	177	return based on the smallest level of funds invested.
178	178	(l) The annual audit under Section 2256.016(j) shall be
179	179	posted on the publicly accessible internet website of the
180	180	investment pool and on the comptroller's internet website.
181	181	(m) To be eligible to receive funds from and invest funds on
182	182	behalf of an entity under this chapter, a public funds investment
183	183	pool is prohibited from:
184	184	(1) entering into a royalty or sponsorship agreement
185	185	with an association or organization; and
186	186	(2) paying a royalty or sponsorship from funds or
187	187	interest income available to the pool.
188	188	SECTION 4. This Act takes effect September 1, 2026.