Virginia House Bill HB356

Virginia 2024 Regular Session

• Introduced: 1/5/24
• Refer: 1/5/24
• Refer: 1/30/24
• Report Pass: 2/2/24
• Engrossed: 2/7/24
• Refer: 2/9/24
• Report Pass: 2/21/24
• Enrolled: 2/28/24
• Chaptered: 3/14/24
• Passed: 3/14/24

Caption

Investment of public funds; qualified public entity allowed to invest in asset-backed securities.

Impact

This legislation represents a significant shift in how public entities can manage their investment portfolios. By allowing investments in asset-backed securities, the bill opens the door for qualified public entities to engage in more varied financial strategies. Such investments could enhance financial performance but also raise questions about the associated risks. The ability to invest in these securities underlines a proactive approach in adapting to modern investment landscapes for public funds that could lead to better resource allocation.

Summary

House Bill 356 aims to amend the Code of Virginia to allow qualified public entities, which include state agencies and institutions, to invest their funds in asset-backed securities. This investment must comply with certain conditions, including a maximum duration of five years and the requirement that securities are unconditionally guaranteed by the federal government or rated at least AAA or Aaa by two recognized rating agencies. The bill seeks to diversify investment strategies for public funds and potentially increase returns while maintaining necessary safeguards.

Sentiment

The general sentiment regarding HB356 appears to be favorable, particularly among financial advisors and stakeholders in the public finance sector. Proponents argue that the move will lead to improved returns on public investments while ensuring that funds are managed within a robust regulatory framework. However, some caution has been expressed concerning potential risks associated with investing in asset-backed securities, emphasizing the need for thorough oversight and professional management skills among public entities.

Contention

One of the notable points of contention surrounding the bill revolves around the adequacy of protections in place for public funds. Critics may raise concerns about whether qualified public entities possess the necessary expertise to handle more complex investment vehicles like asset-backed securities. Additionally, there's potential debate regarding the impacts on local financial ecosystems and the implications of shifting investment practices on state versus local governance.