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1999-003-CHAPTER 2256 OF THE TEXAS GOVERNMENT CODE, PUBLIC FUND INVESTMENT ACT RESOLUTION NO. 99-003 WHEREAS, Chapter 2256 of the Texas Govermnent Code, commonly known as the "Public Funds Investment Act," requires the chief financial officer of the City to attend investment training; and, WHEREAS, the City of Paris approves of the investment training course sponsored by the Texas Municipal League or any other independent source; and, WHEREAS, the chief fmancial officer has attended an investment training course sponsored by the Texas Municipal League or other independent source, as required by the Public Funds Investment Act; and, WHEREAS, the Public Funds Investment Act requires the City to adopt an investment policy by rule, order, ordinance, or resolution; and, WHEREAS, the City Council of the City of Paris did heretofore, on the 12th day of February, 1990, in Resolution No. 90-009, adopt an investment policy, which was amended on the 9th day of March, 1998, by Resolution No. 98-036, to comply with the Public Funds Investment Act; and, WHEREAS, the City Council of the City of Paris has reviewed the current Investment Policy for the City of Paris, attached hereto as Exhibit A, and it is deemed appropriate that the City Council affirm their agreement to the same; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PARIS, that the Investment Policy of the City of Paris, attached hereto as Exhibit A, be, and the same is hereby, approved, affirmed, and found to be in compliance with the requirements of the Public Funds Investment Act. PASSED AND ADOPTED this 11th day of January, 1999. {J Charles H. Neeley, Mayor ATTEST: Mattie Cunningham, City Clerk APPROVED AS TO FORM: scottP.2~~ INVESTMENT POLICY 1.0 POLICY AND INVESTMENT STRATEGY . . It is the policy of the City of Paris to invest public funds in a manner which will provide the highest investment return with the maximum security while meeting the daily cash flow demands of the entity and conforming to all state and local statutes governing the investment of public funds. . Investment strategies for operating funds have as their primary objective to assure that anticipated flows are matched with adequate investment liquidity. The seeondary objeetive is to create a portfolio strueture whieh will experienee minimal volatility during eeonomic eyeles. This may be accomplished by purchasing high quality, short to medium securities which will complement each other in a laddered maturity structure. The dollar weighted average maturity target will be 365 days or less. Investment strategies for debt serviee funds shall have as the primary objective the assurance of investment liquidity adequate to cover the debt service obligation on the rcquired payment date. Securities purchased shall not have a stated final maturity which exceeds the debt service payment date. Investment strategies for debt service reserve funds shall have as the primary objective the ability to generate a dependable revenue stream to the appropriate debt service fund from securities with a low degree of volatility. Securities should be of high quality and consistent with bond ordinance requirements. Short to medium maturities generally meet these requirements. Investment strategies for special projects or special purpose funds will have as their primary objective to assure that anticipated cash flows are matched with adequate investment liquidity. The stated final maturity dates of seeurities held should not exceed the estimated project or purpose completion date. 2.0 SCOPE J This investment policy applies to the funds listed below. These funds are accounted for in the City's Comprehensive Annual Financial Report. 2.1 Funds 2.1.1. 2.1.2 2.1.3 2.1.4 2.1.5 2.1.6 2.1.7 2.1.8 2.1.9 2.1.1 0 2.1.1 I 2.1.12 , General Funds Water and Sewer Fund Capital Projects Fund Library Construction Fund Water Revenue Construetion Fund Water Construction Fund Series 1997 Child Safety Fund cm Grant Furd CO 1993 Construction Fund . Solid Waste Bond Construction Fund Employee's Insurance Fund Library Memorial Fund . -......... -...F- ,EXHIBiT A 2.1.13 J. A. Love Trust Fund 2.1.14 J. P. Poteet Trust Fund 2.1.15 Wilbor-Deshong Trust Fund 2.1.16 Economic Development Fund 2.1.17 Community Development Grant Fund 2.1.18 Revenue Bonds Sinking Fund 2.1.19 CO 1993 i & S Fund . 2.1.20 Contractual Obligation I & S Fund 2.1.21 All Other Funds 3.PRUDENCE . Investments shall be made with judgement and care-under circumstances then prevai1ing--which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. 3.1 The standard of prudence to be used by investment officials shall be the "prudent person" standard and shall be applied in the context of managing an overall portfolio. Investment officers acting in accordance with written procedures and the investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse. developments. 4.0 OBJECTIVE The primary objectives, in priority order, of the City's investment activities shall be: 4.1 SAFETY: Safety of principal is the foremost objective of the investment program. Investments of . the City shall be undertaken in a manner that seeks to insure the preservation of capital in the overall portfolio. To attain this objective, diversification is required in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio. ~ 4.2 LIQUIDITY: The City's investment portfolio will remain sufficiently liquid to enable the City of meet all operating requirements which might be reasonably anticipated. 4.3 RETURN ON INVESTMENTS: The City's investment portfolio will be designed with the objective of attaining a rate of return throughout budgetary and economic cycles, commensurate with the City's investment risk constraints and the cash flow characteristics of the portfolio. 5.0 DELEGATION OF AUTHORITY AND TRAINING Authority to manage the City's investment program is derived from the City's charter and reconfirmed by adoption of this policy by the City Council. Management responsibility for the investment program is hereby delegated to the Director of Finance who shall be responsible for all transactions undertaken. The Finance Director may utilize appropriate staff personnel to assist in this area when necessary. Procedures and controls to regulate the details of the investment program may be developed by the Finance Director as. needed. The investment officer shall attend at least one training session relating to the officer's responsibility under the Act \vithin 12 months of assuming duties and complete at least 10 hours of training every two years thereafter. Such training shall be provided by any independent source outside the City such '. --r , as the Texas Municipal League or the Government Finance Officers Association. 6.0 CONFLICTS Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Employees and investment officials shall disclose to the City Manager any material fmancial interests in financial institutions that conduct business within this Jurisdiction, and they shall further disclose any large personal fmanciaVinvestment positions that could be related to the performance of the City, particularly with regard to the time of purchases and sales: 7.0 AUTIIORIZED FINANCIAL DEALERS AND INSTITUTIONS The Finance Director will maintain a list of fmancial institutions authorized to provide investment services. In addition, a list will also be maintained of approved security broker/dealers who are authorized to provide investment services in the State of Texas. These may include primary dealers or regional dealers that quality under Securities & Exchange Commission Rule 15C3-1 (uniform net capital rule). No public deposit shall be made except in a qualified public depository as established by state law. All fmancial institutions and broker/dealers who desire to become qualified bidders for investment transactions must supply the Finance Director with the following: audited fmancial statement, proof of National Association of Security Dealers certification, trading resolution, proof of state registration, completed broker/dealer questiormaire if requested, certification of having read entity's investment policy. An annual review of the fmancial condition and registrations of qualified bidders will be conducted by the Finance Director. A current audited financial statement is required to be on file for each fmancial institution and broker/dealer in which the City of Paris invests. 8.0 AUTIIORIZED/SUITABLE INVESlMENTS J The City of Paris is empowered by statue to invest in the Types of securities authorized by Chapter 2256 of the Government Code. A eopy is attached as exhibit A. 9.0 COLLATERALIZATION Collateralization will be required on two types of investments: certificates of deposit and repurchase (and. reverse) agreements. In order to anticipate market changes and provide a level of security for all funds, the collateralization level will be 100% of market value of principal and accrued interest. The City of Paris chooses to limit collateral to the extent it is limited by Article 105 Revised Civil Statues of Texas. Collateral will always be held by an independent third party with whom the entity has a current custodial agreement. A clearly marked evidence of ownership (safekeeping receipt) must be supplied to the entity and retained. The right of collateral substitution is granted. 10.0 SAFEKEEPING AND CUSTODY , All security transactions, including collateral for repurchase agreements, entered into by the City of Paris shall be conducted on a delivery-versus-payment (OVP) basis. Securities will be held by a third party custodian designated by the Finance Director and evidenced by safekeeping receipts. , , :.-.J- I 1.0 DIVERSIFICATION The City of Paris will diversify its investments by security type and institution. With the exception of obligations of the United States or its agencies and authorized pools, no more than 50% of the City of Paris total investment portfolio will be invested in a single financial institution' with the exception of its local depository. 12.0 MAXIMUM MATURITIES To the extent possible, the City of Paris will attempt to match its investments with anticipated cash flow rcquirements. Unless matched to a specific cash flow, the City of Paris will not directly invest in securities maturing more than 10 years from the date of purchase. However, the City of Paris may collateralize its repUrchase agreements using longer-dated investments not to exceed 15 years to maturity. Reserve funds may be invested in securities exceeding 10 years if the maturity of such investments are made to coincide as nearly as practicable with the. expected use of the funds. 13.0 INTERNAL CONTROL The Finance Director shaH establish an annual process of independent review by an external auditor. This review wiH provide internal control by assuring compliance with policies and procedures. . 14.0 PERFORMANCE STANDARDS The investment portfolio shaH be designed with the objective of obtaining a rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints and the cash flow needs. 14.1 MARKET YIELD (BENCHMARK): The City of Paris investment strategy is active. Given this strategy, the basis used by the Finance Director to determine whether market yields are being achieved shaH be the six-month U.S. Treasury Bill and the Average F,ed Funds rate. 15.0 REPORTING ; The Finance Director is charged with the responsibility of including a market report on investment activity and. returns in the. City of Paris' Financial Report. Reports must include all information required by Section 2256.023 of the statute. 16.0 The market price of acquired investments shall be monitored by using information found in the Wall Street Journal and/or through Bloomberg Information Services, and/or through a securities dealer's trading de~ . . .. ".~" 17.0 INVESTMENT POLICY ADOPTION The City of Paris investment policy shall be adopted by resolution of the City Council. The policy shall be reviewed and re-adopted annually by the City Council and any modifications made thereto must be approved. by the City Council. . .' ..-~ I - GENERAL GOVER.l'lME.:'IT. Ch. 2256 CHAPTER 2256. PUl3LIC FUNDS INVESTMENT Shon: Title. Definitions. Authorirv to Invest Funds: Entities Subject to this Chapter. Applicability. Investment Policies: Investment Strategies: Investment Officer. Standard of Care. Investment Training; State Agency Board Members and Officers. Investment Training; Local GovernmentS. Authorized InvestmentS: Oblieations of. or Guaranteed bv Governmental Entities. - . . Authorized InvestmentS: Certificates of Deposit and Share Certificates. Authorized Investments: Repurchase AgreementS. Authorized Investments: Banker's Acceptances. Authorized InvesrmentS: Commercial PaDer. Aut.~orized Investments: Mutual Funds. . Authorized Investme'ntS for State Agencies: Guaranteed lnvestIIle:lt Con- tractS. Authorized Investments: Invesrment Pools. E.-cisting IDvesrmentS. Renealed. Rarlne of Ce:-..ain Investment Pools. Authorized InvesnnentS: Institutions of Hieher Education. Effect of Loss of Required Rating. - E.wansion of Investment Authorirv. Internal Management Repor.s. . SubchaDter Cumulative. Sdection of Authorized Brokers. Statutory Compliance. [S . 2' -. 02- ,,-. 0-0 d f . ] eClJons _:>0. i to __:>0.: reserve or expansion SUBCHAPTER B. MISCELL~'lEOUS PROVISIONS 2256.051. Electronic Funds Transfer. 2256.052. Private Auditor. 2256.053. Pavrnent for Securities Purchased bv State. 2256.054. De1iverv of Securities Purchased bv'State. 2256.055. Deposit of Securities Purchased by State. 2256.056. Compliance With Other Laws. 2256.057 to 2256.059. Deleted. [Sections 2256.060 to 2256.100 reserved for e:q>ansion] SUBCHAPTER C. PAYMENT FOR AND DELIVERY AND DEPOSIT OF SECURITIES PURCHASED BY STATE [DELETED] 2256.101 to 2256.104. Deleted. ~ctS 1995. 74ch Leg.. ch. 402. S 1 amended Chapter 2256. DISPosmON TABLE Showing where the subject maner of provisions contained in former Chapter 2256 may be found in Chapter 2256 as amended by ActS 1995, 74th Leg.. ch. 402. 9 1. eff. September L 1995. Section 2256.001. 2256.002. 2256.003. 2256.004. 2256.005. 2256.006. 2256.007. 2256.008. 2256.009. 2256.010. 2256.011. 2256.012. 2256.013. 2256.014. 2256.015. 2256.016. 2256.017. 2256.018. 2256.019. 2256.020. 2256.021- 2256.022. 2256.023. 2256.024. 2256.025. 2256.026. ~ SUBCHAPTER A. AUTHORlZED INVESTMEN'TS FOR GOVERNi'vlENTAL ENTITIES J , . ~ . "'+ - Former Amended Section Section 2256.001 ...................... 2256.001 2256.002 ......................2256.002 2256.003 ...................... 2256.003 2256.004 ......................2256.005 2256.005..............:.......2256.006 2256.006 ...................... 2256.009 2256.007 ......................2256.010 2256.008 ......................2256.011 2256.009 ...................:..2256.012 2256.010 ...................... 2256.013 2256.011 ......................2256.014 . 2256.012 ...................... 2256.020 2256.D13 ......................2256.016 2256.014...................... 2256.018 . GOVERNMENT CODE Title 10 Former Amended Section Section 2256.015 ......................2256.024 2256.016 ......................2256.004 2256.051 ..........:........... 2256.002 2256.052 ...................... 2256.005 2256.053 '" ....................2256.006 2256.054 ............... . . . . . . . 2256.005 2256.055 ......................2256.005 2256.056 ..................:...2256.016 2256.057 ............... . . . . . . . 2256.023 2256.058 .................. . . . . 2256.052 2256.059 .................. . . . . 2256.024 2256.101 .......................... _ 2256.102 ......................2256.053 2256.103 ...................... 2256.054 2256.104 ................ . . . . . . 2256.055 Historical and Statutory Notes Former 9 2256.101. which rdated to autho- Ac-.s 1995. 74th Le!!.. ch. 76. !i 5.45ie). to rized investments. .....as de:ived from: conform to Acts 1993:73rd Leg.. ch. 946. 9 1. added 9 2256.0141. That provision did not take effect pursuant to Acts 1995. 74th Leg.. ch. 402. 9 6. which provides that cll. 402 cono-ols over ch. 76 to the extent of a.')y COnfliCI. Acts 1967. 60th Leg.. p. 915. ch. 401. Vernon's Ann.Ci\'.SL an. 6252-5... 9 I. ActS 1993. i3rd Leg.. ch. 268. 9 1. Cross References Water districts. ge:>eral fiscal provisions and investme:>t regulations. see V.T.C_.\.. Water Code 9 49.157. Library References In\'estl"nent of funds. see Brooks. 35 Texas Practice 9 14.6. ; SUBCHAPTER J\. AUTHORIZED INVESTMENTS FOR GOVER.II.lMENTAL ENTITIES g 2256.001. Short Title This chapter may be cited as the Public Funds Investment J\CL Amended by Acts 1995. .74th Leg.. ch. 402. 9 1. eff. SCpL 1.1995. Historical and Statutory Notes \ , Sections 6, 9. and 11 of the 1995 amendatorY act provide: . "Sec. 6. As provided by Section 1.02. Senate Bill No. 959. ActS of the 74th Legislature. Regu. lar Session. 1995. this Act controlS OVer Senate Bill No. 959 to the cxtent of any conlliCL" "Sec. 9. The state auditor shall conduct. or shall hire an independent evaluator to conduct. an :lSsessment of the risks and benefits .associat. .d with authorizing entities subject to this chap- ter to invest in mutual funds otner than mone" market mutual funds. investment. pools other than investment pools. that function as money market mutual funds. and euaranteed. invest. ment contractS. The state ai'1ditor shall repon these findings to the legislature not later than September I. 1996. This section e:tpires on September 2. 1996:' "Sec. 11. An .entit\' that acouired authorized invesunent securities 'under Ch'apter 2256. Gov- ernment Code;.'beiorc Ule effective date of this , . --J.. GENERAL GOVERNMEl\I'T Ch. 2256 S 2256.002 Act that are no longer authorized invesunent s"curiti"s und"r th:ll chapter as amended by this Act is not required by this Act to liquidate those securities before the final st.:lted maturirv of the: invcstmt::lt." . Prior Laws: Acts 198;. 70th Leg.. ch. 889. Vernon's Ann.Civ.St. an. 8423-2. ~ 1. Acts 1993: 73rd Leg.. ch. 268, ~ 1. V.T.C.A.. Government Code!i 2256.00 I. ~ 2256.002. Definitions In this chapter: (1) "Bond proceeds" means the proceeds from the sale of bonds. notes, and other obligations issued bv an entity. and resenoes and funds maintained by an entity fo;debt service p~rposes. . (2) "Book\,alue" me:ms the original acquisition cost oEan investment plus or minus the accrued amonization or accretion. (3) "Funds" means public funds in the custody of a state agency or local government that: (A) are not required by law to be deposited in the state treasury; and (B) the investing entity has authority to invest. (4) "Institution of hi~her education" has the mea..Tling assigned by Section 61.003, Education Code. (5) "Investing entity" and "entity." mean an entity subject to this chapte:- and described by Section 2256.003. (6) "Investment pool" means an entity created under this code to invest public funds jointly on behalf of the entities that participate in the pool and whose investment objectives in order of priority are: (A) preservation and safety of principal; (B) liquidity; and (C) yield. (7) "Local government" me:ms a municiDalitv. a county, a school district. - ...... a district or authority created under Section 52(b)(1) or (2). Aniele III; or Section 59. Article XVI. Texas Constitution. a fresh water supply district. a hospital district. and any political subdivision. authority, public corporation, body politic. or instrumentality of the State of Texas. and any nonprofit corporation acting on behalf of any of those entities. (8) "Market value" means the curre::lt face or par value' of an investment multiplied by the net selling price of the security as quoted by a recognized market pricing source quoted on the valuation date. (9) "Pooled' fund group" me:ms an internally created fund of an investing entity in whieh one or more institutional accounts of the investing entity'are invested. (10) "Qualified .representative" means a person who holds a position with a business org:miz:ltion, who is authorized to-act on behalf of the business,.,;:.- or2:J.niz:ltion, :md who is one of the following: - . - " . - ..~_. . - .~ --..---... . .' S 2256.002 GOVERNMEN-r CODE Title 10 (A) for a business organization doing business that is regulated by or registered with a securities commission, a person who is registered under the rules of the National A.ssociation of Securities Dea4ers; (B) for a state or federal bank, a savin~s bank, or a state or federal credit union, a membez: of the loan comminee for the bank or branch of the bank or a person authorized by corporate resolution to act on behalf of and bind the banking institution; or ee) for an investment pool. the person authorized by the elected official or board with authoriry to administer the activities of the investment pool to sign the wrinen instrument on behalf of the investment pool. (11) "School district" means a public school district. (12) "Separately invested asset". means an account or fund of a state agency or local government that is not invested in a pooled fund group. (13) "State al!'encv" means an office, department, commission, board, or other agency th;t is 'pan of any branch of s~ate government, an institution of higher education, and any nonprofit Corporation acting on behalf of any of those entities. __0-: Amended bv Acts 1995, 74th Lee:., ch. 402, S I, eff. Seot. 1. 1995; Acts 1997, 75th Le~.. cn. 1421, S '1, eff. Sept. I, 1997.- . _ Historical and Statutory Notes Acts 1997, 75th Leg.. ch. 1421. in subd. (2), substituted "origi.nal acquisition cost" for "face or par value", deleted "accrued interest", and inserted "the accrued"; in subd. (8). inserted "current", and substituted "net selling price of the secunn' as ouoted bv a recornized market pricing source" for "premium or discount"; in. serted new subd. (10); and redesirnated forme~ subds. (10) to (12) as subds. (II) to (13) resoec- tive!)Oo . Section 16 of Acts 1997, 75th Leg.. cn. 1421 provides: . "This Act takes effect September I, 1997. and applies only to investment activities of a govern- mental entity subject to Chapter 2256. Govern. ment Code. that oecur on or after that date." Prior Laws: Acts 1979. 66th Leg.. p. 2071. cn. 810. Acts 1987. 70th Leg.. ch. 889. Ac!.S 1989, 71st Lez.. cn. 39:2 1. Acts 1989, 71st Le;.. ch. 628. S 1. Acts 1989. 71st Le;.. cn. 693. S 4. Acts 1989. 71st Le;.. ch. 750. S 1. Acts 1993. 73rd Le-g.. ch. 946. S 1. Vernon's Ann.Civ.St. arts. 842a-2. S 2(al. (C)(4): 4413(34c).2 1. Acts 1993. 73rd Leg..'ch. 268. S 1. Acts 1995. 74th Leg.. cn. 76. S 5.45(e). m. V.T.C.A.. Gove:mnent Code 2S 2256.002. 2256.051. J ~ 2256.003. Authority to Invest Funds; Entities Subject to this Chapter . Each governing body of the follOWing entities may purchase, sell, and invest its funds and funds under its control in investments authorized under this subchapter in compliance with investment policies approved by the go.....erning body and according to the standard of care prescribed by Section 2256.006: (1) a local government; (2) a state agency; (3) a nonprofit state agency; or . , corporation acting on behalf of a local gove::nrnent or a -" ..., ~J:_ c GENERAL GOVER."iME!'<! Ch. 2256 (4) an investment pool acting on behalf of two or more local governments, st:lte agencies, or a combination of those entities. S 2256.005 Amended by Acts 1995, 74th Leg., eh. 402, 9 1, eff. S~pt. I. 1995. . Historic} and Statutory Notes Prior L:lws: Acts 1987. 70th Le;:.. ch. 889. Acts 1989. 71st Le:z.. ch. 39. ~ I. Acts 1989. 71st Leg.. ch. 628. g!i I. 2. Acts 1989. 71s[ Leg., ch. 693. ~ 4. Acts 1989. 71st Leg.. ch. i50. ~ I. Ve:.lon's Ann.Civ.St. =. 8423-2. !Hi 2(a), S(a). Acts 1993. i3rd Le!!.. ch. 268.!i I. V.T.C.A.. Gove:nm~:lt Cod. !i 2256.003. ~ 2256.004. Applicability . This subchapte:- does not apply to: (1) a public retire:nent system as defined by Section 802.001; (2) st2.te funds invested as authorized by Section 404.024; (3) 2.n instirution of higher education having toul endowments of at least 595 million in book value on May 1. 1995; (4) funds invested by the Veterans' Land Board as 2.uthorized by Chapte:- 161. 162, or 164, Natural Resources Code; or Te;tr of subd. (5) as added by.A.crs 1997, 75rh Leg., en. 50S, 9 24 (5) recistrV funds deDosited wiL!:l the counN or district Cle:-k under Chame:- 117, Lo;2.1 Gove:-nmen~ Code. . . . Te:tr of subd. (5) as added by Aers 1997, 75rh Leg., en. 1421,9 2 (5) a deferred compensation plan that qualifies uncie:- eiL!:le:- Section 401(k) or 457 of the Imemal Reve::!ue Code of 1986 (26 U.S.C. Section 1 et seq.), as amended. Amended by Acts 1995, 74th Leg.. en. 402,!i 1. eff. Se;:>t. I, 1995; Aets 1997, 75m Leg.. ch. 505.!i 24, eff. Se,:>t. 1. 1997; Acts 1997, 75m Leg.. ch. 1421.!i 2, eff. Sept. 1. 1997. .; Histori=! and Statutory Notes Acts 1997, 75th Leg.. 6. 505. added sucd. (5). Prior Laws: Acts 1997, 75th Leg.. ch. 1-l21 added subd. A 198- -Oth L h 889 d d th b h cts I, I .7.. c. . . (5), an ma. 0 e:' nonsu suntiv. c anges. !i V.,-"on's Ann.Civ.St. art. 842a-2. 6. For appIic:uion provisions of Acts 1997, 75th A 199' -. d L h '68 < I h f II Cts 0, lor eg.. c.... ., . L.!!.. c. 1421. see notes 0 owin" V.T.C.A.. VTC' G Cd < 2'< 016 G C d !i ,"<. 002 . . ....... ove:nme:lt 0 e, _~6. . ove:nme:lt 0 e __~ 0.. - ~ 2256.005. Investment Policies; Investment Strategies; Investment om- . , cer : (a) The governing body of an investing entiry shall adopt by rule, ord~:-, ordinance, or resolution, as appropriate, a written investment policy regarding the investment of..its funds and funds unde:- its control. , (b) The investment policies must: . --F- ;- ~ 2256.005 GOVERNl'.-IEi'-l'T CODE Title 10 " (l) be wrinen; (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: (M a list of the types of authorized investments L'l which ~e investing entity's funds mav be invested; (B) the ma"'Cim~~ allowable stated maturity of any individual investment owned by the entity; (C) for pooled fund groups, the maximum dollar-weighted average matu- rity 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 senJement of all transactions, except. investment pool funds and mutual funds, on a delivery versus payment basis. (c) The invesnnem policies may provi~e that bids for certificates of deposit be solicited: (1) orallv; (') . . . - In wnun~; (3) electronically; or (4) in anv combination of those methods. (d) As an integral pan: of an investment policy, the governing body shall adopt a separate wrinen investment strategy for each of the funds or group of funds under its control. Each investmenr.strateSlv must describe the invest- ment objectives for the particular fund using the f~ijowing priorities in order of imponance: (1) understanding of the suitability of .the investment to the financial. requirements of the entity; (2) preservation and safety of principal; (3) liquidity: (4) marketability of the investment if the need arises to liquidate the investment before maturity; (5) diversification of the investment portfolio; and (6) yield. (e) The !1:overnin!1: bodv of an investin!1: entity shall review its investment policyand-investm~nt sO:ategies not less than ~'lually. The governing body shall adopt a wrinen instrUment by rule, order, ordinance, or resolution stating that it has reviewed the investment policy and investment strategies and that the wrinen instrument so adopted shall record any changes made to either. the investment policy or investment strategies. (f) E:lch investing entity shall designate, by rule, .0rdeI:Jlrdinance. or resolu- tion. as appropriate. one or more officers or employees of the state agency, J . ~..- . --J- : .a .- GE'iERAL GOVER..'i:\<lE:'-iT ::i 2256.005 Ch. 2256 local government, or investment pool as investment officer to be responsible for the investment of its funds consistent with the investment policy adopted by the entity. Authority granted to a person to invest an entity's funds is effective umil rescinded by the investing entity or until termination of the person's employ- ment by the investing entity. In the administration of the duties of an investment officer, the person designated -as investment officer shall exercise the judgment and care, under preVailing circumsumces, that a prudent person would exercise in the management of the person's own affairs. Unless autho- rized by law, a person may not deposit, withdraw, transfer, or manage in any other manner the funds of the investing entity. (g) Subsection (f) does not apply to a state agency, local government, or investment pool for which an officer of the entity is assigned by law the function of investing its funds. Te.,,! of subsec. (h) as amended by Acts 1997, 75rh Leg., ch. 685, S 1 (h) An officer or employee of a commission created under Chapter 391, Local Gove:-nment Code, is ineligible to be an investment officer for the c9mmission under Subsection (f) if the officer or emolovee is an inves1:ment officer desie:nat- . .. . - ed under Subsection (f) for another local government. Te.,,! of subsec. (h) as amended by Acrs 1997, 75rh Leg., ch. 1421, S 3 (h) A.Tl officer or employee of a commission created under Chap1:er 391, Local Government Code, is ineligible to be designated as an invesnnent officer unde:- Subsection (f) for any investing entity other than for that commission. (i) An investment officer of an entity who has a personal business relation- ship with a business organization offering to engage in an investment transac- tion with the en~ty shall file a statement disclosing that personal business ..l interest. An invesnnent officer who is related within the second degree by affinity or consan!!:Uinitv, as determined under Chaoter 573, to an individual see!ci.n"e: to sell ~ inv~rment to the investinent dfficer's entity shall file a statem~m disclosing that relationship. A statement required und~r this subsec- tion must be filed with the Texas Ethics Commission and the governing body of the entity. For purposes of this subsection, an investment officer has a personal business relationship with a business organization if: (l) the invesrment officer owns 10 percent or more of the voting stock or shares of the business ore:anization or owns 55,000 or more of the fair market value of the business organization; (2) Eimc:ls" received by the investment officer from the business. organization exceed 10 percent. of the invesrmem officer's gross income for the previous year; or (3) the investment officer has acouired from the business ore:anization during the previous year invesrments ~ith a book value of 52,500 0; more for. the personal account of the investment officer. (j) The governing body of an investing entity may speciiy in its investment . policy that any investment authorized by this chapter is not suitable. ..--: - I ,... _0.- GOVER..''IlMENT CODE Title 1 0 (k) A wrinencopy of the investment policy shall be presented to any person offering to engage in an investment transaction with an investing entity. For purposes of this subsection. a business organization includes investment pools. Nothing in this subsection relieves the investing entity of'the responsibility for monitoring the investments made by the investing entity to deternline that they are in compliance with the investment policy. The qualified representative of the business organization offering to engage in an investment transaction with - - - - . an investing entity shall execute a wrinen instrument in a form acceptable. to the investing entity and the business organization substantially to the effect that the business organization has: (1) received and reviewed the investment policy of the. entity; and (2) acknowledged that the business organization has implemented reason- able procedures and controls in an effort to preclude investment transactions conducted between the entity and the organization that are not authorized by the entity's invesrment policy. except to the extent that this authorization is dependent on an analysis of the makeup of the entity's entire portfolio or requires an interpretation of subjective inv'esnnent standards. (l) The investment officer of an entitY may not acquire or othe:-v.ise obtain any authorized investment described in the investment policy of the investing entity from a person who has not delivered to the entity the instrument required by Subsection (k). (m) An investing entity, in conjunction with its annual financial audit, shall perform. a compliance audit of management controls on investments and adherence to the entity.'s established investment policies. State agencies shall report the results of the audit performed under this .subsection to .the state auditor. The state auditor shall compile the results of reports received under this subsection and annually report those results to the legislative audit conimit- tee. s 2?-6 00- ::; -;). ;) ---. J Amended by Acts 1995, i4ili Leg.. ch. 402. 9 1. eff. Sept. 1. 1995; Acts 1997, 75th Leg.. ch.685.9 1. eff. Sept. 1. 1997; Acts 1997, 75th Leg.. ch. 1421. 93. eff.Sept. 1. 1997. Historical and Statutory Notes ActS 1997. 75th Leg.. ch. 685. rc"TO'C subsec. (h). which previously read: "An officer or employee of a commission cre. a'ed under Chao,er 391. Local Government Code. is indistibl~ '0 be desirna,ed as an invest. men' officer ,mder Subsection (I) ." ActS 1997. 75th Leg.. ch. 1421. in subsec. (b). in subd. (4). in par. (C). substinned "dollar- weigh'ed average" for "ave:-age dollar.weigh,. ed". added pan. (D) and (E). and made other nonsubstantive changes; in sub:lec. (d). inserted "or group of. funds": in suosec. (e). inserted 'The governing body shall adopt a wrinen in- strument bv rule. order. ordinance. or rcsolu- 'ionsuting'that it has reviewed the investment polic~' and investmen, str.1,egies and that the wrinen instrument so adop,ed shall record any changes made to either the invescDe:n policy or investmen' stratecies."; in subsce. (I). deleted ". Unless othenvise- authorized by law. a person may not deposit. withdraw. invest. transfer, or mana"e in any other manner funds of a state agenc).. local 'government. or investment pool without express wrinen authority of the gove:-n- ing body. chief executive officer. or chief finan- cial officer of the state agen<=:,'. local govern- ment. or invesonent pool.... deleted "deposit. withdraw.... deleted ". tr:lnsfer. or manage", and insened "In the administration of the duties of an investIIlent officer. the person des- i"naled as invcsunent officer shall exen:ise the judgment and care. under prevailing circum- stances. tha' a prudent person would exercise in the mana"ement of the person' s own affairs. Unless authoi-ized bylaw. a person may not _.J Notes of Decisions sure:- to invest those f~,cis in accordance with Public Funds lnves=ent Act. Op..oUty.Gen. 1992. No. DM-96. I - GENERAL GOVERNMENT Ch. 2256 deposit. withdrOlw. .tnlnsf<r, or mOlnag< in any or.her mOlnn<r r.he funds of the investing <ntily."; in subsec. (h). inserted "for any investing entity or.h<r r.han for r.hat commission": in subs<c. (i). substituted "a business org,nizOltion offering to engage in an invesunent tr::ms:lction with" for .'an entity seeking to sell an investment ~to". insen<d "For purposes of r.his subsection. an inveslme:1l officer has ol personal business rela. tionship wir.h a business organizOltion if:", and added subds. (I) to (3): in subs<c. (k). substirut- cd "offering to eng01ge in :10 investment tr:lnsac- tion with an investing entity" for "seeking to sell to r.he entity an aur.horiz<d investment", insened "For p;'rposes of r.his subsection. a business organization inc1udos investment pools. Nothing in r.his subs<ction relieves r.h< investing entity of r.h< responsibility for monitor- ing the inveStmenLS made by r.he investing entity to de:e:-rnine r.hat r.hey are in compliance with r.he investment polic)',", substirut<d "quo.lified representative" for "registered principal", sub- stituted "offering to engage in an investment transac::ion with an investine entity" for- "seek. ing to sell an authorized in;estment", insenod "in a form acceptable to r.he investing entity and r.he business oreanization", substirut<d "busi. ness organization" for "regisl<red principal". in subd. (J " deleted "thoroughly", in subd. (2). . Person responsible 1 1. Pe:-:son responsible Commissioners coun may designate which county funds are to be invested and direct Ir<". . 9 2256.006 inserted "business", deleted "imprudent invest- ment activities arising out or', and inserted "r.hat are not aur.horized by the entity's invest- me'll policy: except to the extent that this autho- rintion is dependent on an analysis of the m:>.keup of the entity's entire porJolio or re- quires an interpretation of subjective investment standards"; and in subsec. (/), substiruted "ac. quire or otherwise obtain any authorized invest- ment described in the investment policy of r.he investing entity" for "buy any securities", and substiruted ..the insrr.unent required" for "Oln instrUment in substantially r.he form provided". For applic:>.tion pro';sions of AcLS 1997, 75r.h Leg., ch. 1421, see notes following V.T.C.A.. Gove:nm<nt Code g 2256.002. Prior uws: Ac:s 1979, 66th L~~.. p. 2071. ch. 810. Ac:s 1987. 70th Le2.. ch. BS9. Acts 1989, 71st Le;.. en. 628. g 2. Acts 1989, 71st Leg.. cn. 693, gg 2,3. Vemon's Ann.Civ.SL. ar..s. 8423-2. ~ 5; 4413(3':c), ~g 2(2.1, (b), 3(2.), (b). AcLS 1993, 73rd Le2.. ch. 268. g 1. V.T.C.A.. Gove,m;,ent Code gg 2256.004. 2256.052,2256.0054, 2256.055. J ~ 2256.006. Standard of Care (a) Investments shall be made with judg,uent and care, under prevailing circumstances, . that a person of prudence, discretion, and intelligence would exercise in the management of the person's own affairs, not for speculation, but for investment, considering the probable safety of capit.al and the probable income to be derived. Investment of funds shall be governed bv the following investment objectives, in order of priority: - . - (1) preservation and safety of principal: (2) liquidity; and (3) yield. (b) In detennhling whether an investment officer has exercised prude:1ce with respect to an investment decision. the determination shall be made taking into consideration: . (I) the investment of all funds, or funds under the enr:ity's control, over which the officer had responsibility rather than a consideration as to the ~-;.. prudence of a single investment: and : .---... S 2256.006 '. GOVER.~MENT CODE Title 10 (2) whether the investment decision was consistent with the wrinen invest- ment policy of the entity. , Amended by Acts 1995. 74th Leg.. ch. 402. S.I, eff. Sept. 1. 1995. Historical and Statutory Notes Prior I.:lws: Acts 1993. 73rd Le2.. ch. 268,~ 1. Acts 1979. 66th Le!!.. p. 2071. ch. 810. Vernon's Ann.Ci';:SL ar.s. 842~-2, ~ 4; Acts 1987. 70th Lee.. ch. 889.. 4413(34c). ~ 6(a). ActS 1989, 71sl LeS.. ch. 693. ~ 2. V.T.C.A.. Govemment Code ~ 2256.005. S 2256.007. Investment Training; State Agency Board Members and Offi- cers (a) Each member of the governing board of a state agency and its investment officer shall anend at least one training session relating to the person's responsibilities under this chapter within six months after taking office or assuming duties. (b) The Texas Higher Education Coordinating Board shall provide the train- ing under this section. (c) Training under this section must include education in investment con- trols, security risks, strategy risks. market risks, and compliance with this chapter. (d) An iLvestment officer shall attend a training session not less than once 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. Amended by Acts 1995, 74th Leg., ch. 402, S I, eEf. Sept. 1, 1995; Acts 1997. 75th Leg.. ch. 73, S 1, eff. May 9, 1997; Acts 1997. 75th Leg.. ch. 1421, S 4, eff. Se;n. 1, 1997. Historical and Statutory Notes Section 7 of the 1995 amendatory act pro- Acts 1997, 75th Leg.. ch. 73 re"Tote subsec. vides: (b 1. which previously read: 'The governor's office shall provide training under this sec:ion for memben and officers othe~ than memben and officen of an instiLu, tion of hi!!he~ education. The Te:tas Higher EducaLion Coorciinating Boar;! shall provide the training for members and officer; of institutions of higher education." .. Acts 1997, 75th Leg.. cn. 1421 added subsec. (dJ. For application provisions of Acts 1997. 75th Le2.. ch. 1421. see-notes followinl! V.T.C.A.. Government Code ~ 2256.002. - ., "Each member of a governing board and t::lch investment officer \,.ho is in office or who has assumed duties on September 1. 1995. and who would be reouired bv Section 2256.007(a), . . .. I Government Code, as amended by this Act, to anend .invesone:ll training within si:t months aner win!; office or :lSsuming duties shaU at. lend al leaCit one: training session relating to the penon's responsibilities under Chapter 2:!56. Government Code, that meets the requirements of that section not later than March I. 1996:' ..l . . --J- ~. .. GEl'lERAL GOVERNML'IT Ch. 2256 ~ 2256.008. Investment Training; Loc.a.l Governments (a) The treasurf'r, the chief financial officer if the treasurer is not the. ~hief financial officer, and the investment officer of a local government shall: (I) attend' at least on~' training session relating to the treasurer's or officer's responsibilities under this subchapter within 12 months after taking office or assuming duties; and ' (2) attend an investment training session not less than once in a two-year period and receive not less than 10 hcurs of instruction relating to investment responsibilities under this subchapter from an independent source approved by the gov~rning body of the local government or a designated investme:lt cornminee advising the investment officer as provided for in Ll-je investment policy of the local government. (b) Training under this section must include education in investment con- trols. security. risks, su-ategy risks, market risks, and compli::mce with this chapter. S 2256.009 Amc:ncied bv Acts 1995, i4th Leg., ch: 402, S 1. df. Sc:?t. I, 1995; Acts 199i, 75th Le~.. ch. 1421. S '5, eff. Sept. 1. 199i.- "Eac!> O"e3.Sure~. chief financial oflice~. and invesunent officer who is in office or who h:L~ ,,-..umed duties on 5eDte:nbe~ 1. 1995. and who would be required by'S"ction 2256.008(3), Gov. ernment Code. as :lIDended bv this Act. to at. lend investment trainin!! withi~ 12 months afte~ uking office or assumi;;g duti"s shall attend at least on" =ining .session relating to the per. Historical and Statutory Notes amend:ltory act pro. son's responsibiiities unde:" Ch2.pte:- 22':6, Gov. e:-:lme:lt Coae. that mc:e:.s the reouire:ne:"1ts of that section not l;lte~ than Se?le:nbe~ 1. 199;," Ac!S 199;. 7~th Le~.. ch. 1':21. in subsec. IOli. inse:1ed subdivision desien2.tor U( 1 r'. suo~du!t. cd "subchapter" for "chapler". added subd. (2 l. :LnQ m2.de otne:- nOn.5ubsunu\'t: ch:mg~. For application pro\isions of Acts 199;. ;~th LeI!.. ch. 1421. se: not:s followin!! V.T.e.A.. G()~'e:nme:Jt Code 9 22~6.002. - J S"ction 8 of the 199~ vi des: ... S 2256.009. Authorized Investments: Obligations of. or Guaranteed by Governmental Entities (a) Except as provided by Subsection (b), the following are authorized inyesu.-nents under this subchapter: (1) obligations of the United States or its agencies and instrumentalities; (2) direct obligations of this state or its agencies a.'ld instrumentalities; (3) collateralized murtga!!:e obligations directlv issued bv a federal :l!Ze:1CV or insn:umemality of the -U;Uted States, the und'erlying se~uIiry for which is guaranteed by an agency or instrumemality of the United States; . (4) other obligations, the principal and interest of which are unconditional- Iv !2:Uaranteed or insured by, or backed by the full faith and credit of, this. s-t:l.~e or the United States ;r their respective agencies and instrUm~ntaJities; and. . (5). ~b.ligation$ of states. agencies. c?,untie::... cities, ?nd othe.r. P?liti~aJ ....J.- subdlV1s10ns of any state rated as to Investment quahry by a natlonally _ recognized investment ratin!!: firm not less than A or its eouivalent. - - . S 2256.009 GOVER."';:::\1EN'T CODE Title 1 0 -~... (b) The following are not authorized investments under this section: (I) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mOl,Lgage-backed security collateral and pays no principal; . (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no inter- est; (3) collateralized mortgage obligations that have a s,ated final maturity date of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is deter- mined by an index that adjusts opposite to the changes in a market index. Amended by Acts 1995, 74th Leg., ch. 402, S J, eff. Sept. 1. J 995. Historical and Statutory Notes Prior Laws: Acts 1987, 70th Leg.. ch. 889. Acts 1989, 71st Leg.. ch. 39, S 1. Acts 1989. 71s< Le~.. ch. 628. S 1. Acts 1989, 71st Le;.. ch. 693. S 4. Acts 1989, 71st Leg.. cn. 750. S 1. Acts 1993, i3rd Leg.. ch. 946. S 1. Vernon's Ann.Civ.St. an. 842a-2. S 2(a). Acts 1993. i3rd Leg.. ch. 268. S 1. Acts 1993. i3rd LeI!.. ch. 820. S 2. Acts 1995. 74th Le;.. ch. 76. S 5.45(a). (f). Acts 1995. 74th Le~.. cn. 402. S 5. V.T.C.A.. Govemrn~nt Code 2 2256.006. Section 6 of the 1995 amencbtof)' act pro. ,ides: "As provided by Section 1.02, Senate Bill No.' 959. [ch. 76] Acts of the 74th Legis1amre. Regu. lar Session, 1995, this Act controls over Senate Bill No. 959 to the e"te:ll of any conflic~" S 2256.010. Authorized Investments: Certificates of Deposit and Share Certificates .. .l A certificate of deposit is an authorized investment under this subchapter if the certificate is issued by a state or national bank domiciled in this state, a savings bank domiciled in this state, or a state or federal credit union domiciled in this state and is: . (I) guaranteed or insured by the Federal Deposit Insurance Corporation or its successor or the National Credit Union Share Insurance Fund or its successor; (2) secured by obligations that are described by Section 2256.009(a), including mortgage backed securities directly issued by a federal agency or instrUmentality that have a market value of not less than the principal amount of the certificates, but excluding those mortgage backed securities of the nature described py Section 2256.009(b); or (3) secured in any other manner and amount provided by law for deposits of the investing entity. . Amended bv Acts 1995, 74th Le!!., ch. 32. S 1. eff. Aoril 28, 1995: Acts 1995, 74th Leg.. ch. 402, !i i, eff. Sept. 1. 1995:- Acts 1997. 75th Leg;,' ch. 14'~1. S 6, eff. Sept. 1. J 997. _..J.. I -- - GE.:\i."ERAL GOVER."iME.:\i."T Ch. 2256 :12256.lJl1 Historic:ll and Statutory Notes ActS 1995. 7.:th Leg.. ch. 32. in the section For application provisions of ActS 1997. 75th beauing. addetl "and share certiEic:ltos"; in the Leg.. ch. 1421. see notes following V.T.e.\... imroductory paragraph. inserted "or share cer. Government Code 9 2256.002. till~ate". following "the certificate". deleted "of Prior Laws: ' deposit". and insened ", or a state or federal A 1987 70th L h SSo ctS , ell.. c. . . eredit union domiciled in this state"; and in A 1989 -I L h -9 < 1 CtS ,/steg..c.~.,. subd. OJ, added "or the N:>.tional Credit Union ActS 1989. 71st Leg.. ch. 628. 9 1. Share Insurance Fund or itS successor". ActS 1989, 71st Leg.. ch. 693. 94. Acts 1989. 71st Leg.. ch. 750.3 1. Vernon's Ann.Civ.SL an. S413-2. 9 2(a). ACtS 1993. 73rd Leg.. ch. 268, 9 1. V.T.C.A.. Government Code 3 2256.007. Acts 1997, 75th Leg.. ch. 1421. in the intro. ductory lanlruage, substituted "bank" for "and lo~n :LSsod.:uion". ~ 2256.011. Authorized Investments: Repurchase Agreements (a) A fully collateralized repurchase agreemem is an authorized inves;:me:lt under this subchapter if the repurchase agreement: (I) has a defined termination date; (2) is secured by obligations described by Section 2256.009(a)(!); and (3) requires the securities being purchased by the entity to be pledged to the entity, held in the entity's name, and deposited at the time the inves;:me:1t is made with the entity or with a third par.:y selected and approved by the emity; a."'1d (4) is placed through. a primary governme:1t securities dealer. as defined by the Federal Reserve, or a financial institution doing bus mess in this SLate. (b) In this section, "repurchase agreement" means a simultaneous agree- me:1t to buv. hold for a specified time. and sell back at a furore date oblie-ations described bv Section 2256.009(a)(!),'at a market value at the time the ru;ds are disbursed ;r not less than the principal amount of the funds disbursed. The term includes a direct security repurchase agreement and a reverse security repurchase agreement. (c) Notwithstanding any other law, the term of any reverse security repur- chase agreement may not exceed 90 days after the date the reverse security repurchase agreement is delivered. (d) Money received by an entity under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized invest- ments, but the term of the authorized investments acauired must marore not later than the expiration date stated in the reverse sec~ty repurchase agree~ me:1t. J Amended by Acts 1995. 74th Leg.. ch. 402. 9 1. eff. Se?L I, 1995. ,. , Historic:U and Statutory Notes ! j :1 c , .1 'I Sec:ion 6 of the 1995 amendatory ~ct pro- ,'ides: .. As provided by Section 1.02. Senate Bill No. 959. [ch. 76j Acts of the 74th Legisbture. Regu- lar Session. 1995. this Act controls ove~ Sen~te Bill No. 959 to the e:'ttent of any conflic:." .-.4-- -. ...~...'~"., >I',. . ....,... ..~..""..........w._....,.>.-*-.}~............l..... _.....,.,~.'..'''''1..- .':;.I'4;rJi...... " ., .....l...:'t?o\ll'....:o'IO.~~~lI\h.'tO!~.\''-'''<.,...'{.l...,Jto.A~'_......~......._....,...''''.,.'oI\~,\""'r.,~r"~1"',.~.., ,.~....' . .~ . S 2256.011 GOVERNMENT CODE TItle 10 ACts 1987. 70th Leg.. ch. 889. Acts 1989. 71st Leg.. ch. 39. 9 1. Acts 1989. 71s1 Leg.. eh. 628. 9 1. Acts 1989. 71st Leg.. eh. 693, 94 Acts 1989. 71st Leg.. ch. 750. 9 1. Aels 1993. 73rd Leg.. ch. 946. 9 1. Vernon's Ann.Civ.St. art. 842a-2. 9 2(a). (c). Am 1993. i3rd Leg.. ch. 268. 9 1. Acts 1995, 74th Leg.. eh. 76. 9 5.45(b), (I). V.T.C.A.. Government Code 9 2256.008. Prior Laws: S 2256.012. Authorized Investments: Banker's Acceptances' . J\ bankers' acceptance is an authorized investment under this subchapter if the bankers' acceptance: (I) h2.S a stated maturity of 270 days or fewer from the date of its issuance: (2) will be. in accordance with its terms. liquidated in full at maturity; (3) is eligible for collateral for borrowing from a Federal Reserve Bank; and (4) is accepted by a bank organized and existing under the laws of the United States or anv state. if the shon:-term obli2"ations of the ba.'1k. or of a bank holding comp~y.of which the bank is the i;'rgest subsidiary. are rated not less than A-lor P-l or an equivalent rating by at least one nationally recognized credit rating ~gency. Amended by Acts 1995. 74th Le~.. ch. 402. 9 1. eff. Sept. 1. 1995. Acts 198i, iOth Leg.. ch. 889. Acts 1989. ilst Leg.. ch. 39. 9 I. Acts 1989. ilst Leg.. eh. 628, 9 1. Historical and Statutory Notes Acts 1989. i 1st Leg.. ch. 693. 9 4. Acts 1989. i 1st Lei!.. ch. iSO. !i .1. Vemon's Ann.Ch'.St. art. 842a-2.!i 2(a). (el. ., Acts 1993. i3rd Le2.. ch. 268. 9 I. V.T.C.A.. Go\'ernment Code 9 2256.009. J Prior Laws: S 2256.013. Authorized Investments: Commercial Paper Commercial paper is an authorized investment under this subchapter if the commercial paper: (1) h2.S a stated maturity of 270 days or fewer from the date of its issuance; and (2) is rated not less than J\-l or P-l or an equivalent rating by at least: (A) two nationally recognized credit rating agencies; or (B) one nationally recognized creclit rating agency and is fully secured by an irrevocable letter of creclit issued bv a bank or2"anized and existin2" - - - under the laws of the United States or any state. Amended by Acts 1995. 74th Leg.. ch. 402. 9 1. eff. Sept. 1. 1995. , .:' Acts 1967. iOth Leg.. ch. 889. ActS 1989. itst Leg.. eh. 39.!i 1. Acts 1989. ilst Leg.. ch. 628.!i 1. Historical and Statutory Notes Acts 1989. i 1st Leg.. ch. 693. 9 4. Acts 1989. 71st Le~.. ch. i50. 9 1. Vernon',s ,Ann.C-n-.St. art. 8423-2. ~ 2(al. Acts 1993. i3rd Le2.. cn. 268. ~ 1. V,T.C.A.. Governme:Jt Code!i 2256.010: . ---J:- Prior Laws: .~. GENERAL GOVERNMENT Ch. 2256 ~ 2256.014. Authorized Investments: Mutual Funds ~ 2256.014 (a) A no-load money market mutual fund is an authorized investment under tl:is subchapter if the mutual fund: (1) is rezistered with and regulated bv the Securities and E'tchanze Com- - -... - mission: . (2) provides the investing entity with a prospectus anc\ other information n:quired by the S~curities Exchange Act of 1934 (15 U.S.C. Section 78a et sc:q.) or the Investment Company Act of 1940 (15 U.S.C. Section 80a-l et seq.J: (3) has a dollar.weighted average stated maturity of 90 days or fewer: and . (4) includes in its investment objectives the maintena..,ce of a stabie net asset value of S I for each share. (bl In addition to a no-load money market mutual fund permitted as an 2.mhorizc:d investment in Subsection (a), a no-load mutual fund is an authorized in\'estment under this subchapter if the mutual fund: (1) is registered with the Securities and Exchange Com..rnission: (2) has an average weighted maturity of less than two ye:;.rs: (3) is invested exclusively in obligations approved by this subchapter; (4) is continuously rated as to investment quality by at least one nationally reco~!lized investment rating firm of not less than ~ or its equivalent: anc. (5) conforms to the requirements set forth in Sections 2256.016(b) and (c) rdating to Ll].e eligibility of invesrment pools to receive and invest funds of investing entities. (cl An entity is not authorized by this section to: (I) invest in the aggregate more than 80 percent of its monthly average fund b3.lance, excluding bond proceeds and reserves and other funds held for debt service. in money market mutual funds described in Subsection (a) or mutual funds described in Subsection (b). either separately or collecti.....ely; (2) invest in the aggregate more than 15 percent of its monthly average fund balance. excluding bond proceeds and reserves and other funds held for debt service. in mutual funds described in Subsection (b); (3) invest any portion of bond proceeds. reserves and funds held for debt se~ice. in mutual funds described in Subsection (b); or (4) bvest its funds or funds under its conrrol. including bond proceeds and rcser"ves and other funds held for debt service. in anyone mutual fund described in Subsection (a) or (b) in an amount that exceeds 10 percent of the total assets of the mutual fund. J , Amended by Acts 1995. 74th Leg.. ch. 402. 9 I. eff. Se?t. I. 1995: Acts 1997. 75th L;:g.. ch. 1421. 9 7. eff. Sqt. I. 1997. . --J.- -. ~ 2256.014 GOVERL"J:MENT CODE Title 1 0 Section 6 of the 1995 vides: Historical and Statutory Notes amcndatory act pro- For application provisions of Acts 1997. 75th Leg.. ch. 1421. see notes following V.T.C_..... Government Code S 2256.002. , Notes of Decisions invest thcir funds and funds under their control in mutual funds holding only adjustable rate mortgages that obligate United States agencies provided that the mutual fund eomplies with section 2(d) of the act. and provided that the cnrit'\' invests no more of its money in the mutu- al fu~d than section 2(d) pe:mits.' Op.Atry.Ge:l. 1993. No. DM-202. S 2256.015. Authorized Investments for State Agencies: Guaranteed In- vestment Contracts (a) A guaranteed investment contract is an authorized investment for state a!!encies for bond oroceeds under this subchaoter if the guaranteed invesnnem -.. .. -. contract: (1) has a defined termination date; . (2) is secured by obligations described by Section 2256.009(a)(I). exclud- ing those obligations described by Section 2256.009(b), in an amount at least equal to the amount of bond proceeds invested under the contract; and (3) is pledged to the entity and deposited with the entity or with a. third party selected and approved by the entity. (b) Bond proceeds, other than bond proceeds representing reserves and funds maintained for debt service purposes. may not be invested under this subchapter in a guaranteed investment contract with atenn of longer than five years from the date of issuance of the bonds. (c) To be eligible as an authorized investment: (1) the governing body of the entity must specifically authorize guaranteed. investment contracts as an eligible investment in the order. ordinance, or resolution authorizing the issuance of bonds: (2) the entity must'receive bids from at least three separate providers with no material financial interest in the bonds from which proceeds were received: (3) the entity must purchase the highest yielding guaranteed. investment contract for which a qualifying bid is received;, "A5 provided by Section 1.02. Senate Bill No. 959. (eh. 76] Acts of the 74th Legislature. Regu. 13r Session. 1995. this Act controls over Senate Bill No. 959 to the .e:ctent of any connie.." Acts 1997. 75th Leg.. ch. 1421. in subsec. (a). in subd. (I). inserted "registered with and". added new subd. (2). and redesignated fonner subds. (2) and (3) as subds. (3) and (4). respec. tively. Type of securities 1 1. Type of sec-.uitles The Public Funds Investment Act. V.T.C.S. anicle 842a-2. authorizes cities. counties.' and cenai:l other public and nonprofit e:ltities to . Prior Laws: Acts 1987. 70th Leg.. ch. 889. Acts 1989. 71st Leg.. ch. 628. S 1. Acts 1991. nnd Leg.. ch. 732. S 1. Acts 1993. 73rd Le2" ch. 946. S 1. Vernon's Ann.Civ.S.. an. 8'42a-2. S 2(c). (d). Acts 1993. 73rd Leg.. ch. 268. S 1. Acts 1995. 74th Le!!.. ch. 76. S 5.4S(c). CO. V.T.C.A.. Gove:-nm;;nt Code S 2256.011. .l . ---r GENERAL GOVER..'IMENf Ch. 2256 (4) the price of the guaranteed investment contract must take into account the reasonably expected drawdown schedule for the bond proceeds to be invested; and I (5) the provider must certify the administrative costs reaSonably expected to be paid to third parties in connection with the guaranteed investment contract. ~ 2256.016 Amended by Acts 1995. 74th Leg.. ch. 402.9 I. eff. Sept. I. 1995: Acts 1997. 75th Leg.. ch. 142 1.9 8. eff. Sept. I. J 997. . Historical and Starutory Notes ActS 199i. i5lh Leg.. ch. 1421. in the section' For application provisions of ActS !99i. i5th heading. inserted "for Slate Agencies". Leg.. ch. 1421. see notes following V.T.C.A.. Govemme:lt Code !i 2256.002. 9 2256.016. Authorized Investments: Investment Pools (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, authorizesinvestme:n in the particular pool. An investment pool shall invest the funds it receives from entities in authorized investments permined by this subchapter. (b) To be eligible to receive funds from and invest func.s on behalf of an entity under this chapter. an investment pool must furnish to the investment officer or other authorized representative of the entity an offering circular or other similar disclosure instrument that contains. at a minimum. the following information: (L) the types of investments in which money is allowed to be invested; (2) the ma-dmum average dollar-weighted maturity allowed. based on the stated maturity date, of the pool; (3) the. ma-dmum stated maturity date any investment security within the portfolio has; (4) the objectives of the pool; (5) the size of the pool; (6) the names of the members of the advisory board of the pool and the dates their terms expire; (7) the custodian bank that will safekeep the pool's assets; (8) whether the intent of the pool is to maintain a net asset value of one dollar and the. risk of market price fluctuation: (9) whether the only source of payment is the assets of the pool at market value or whether there is a secondary source of paYment, such as insurance or guarantees. and a description of the secondary source of payment; (10) the name and address of the independent auditor of the pool; . (11) the requirements to be satisfied for. anentirv to de:Josit funds in and ~~ withdr:lw funds from the pool and any de:ldlines o~ other" operating policies - J . --.' ~ 2256.016 GOVERNME"-t"T CODE Title 1 0 required for the entity to invest funds in and withdraw funds from the pool; and (12) the performance history of the pool. includif!g yield, ave:-age dollar- weiE:hted maturities. and exoense ratios. . - . ., (c) To m:J.intain. 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 represenI2.tive of the entity: (l) investment transaction confirmations; and (2) a monthly report that contains, at a minimum. the following informa- tion: (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 muket value of t.~e pool's portfolio. using amornzed cost valuation; (E) the size of the pool; (F) the numbe:- of participants in the pool; (G) the custodian bank that is safekeeping the assets of t.~e pool; (H) a listing of daily transaction activity of the entity participating in the pool; . (I) the yield and expense ratio of th.e pool; . . (J) the portfolio managers of the pool; and (K) any changes or addenda to the offering circular. (d) An entity by contract may delegate to an investment pool the authority to hold legal title as custodian of investments purchased with its local funds. (e) In this section. "yield" shall be calculated in accordance with regulations governing the registration of open-end management invesnnent companies under the Investment Company Act of 1940. as promulgated from time to time by the federal Securities and Exchange Commission. (0 To be eligible to receive funds from and invest funds on behalf of an entity under this chapter, a public funds investme:lt 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 S 1 net asset value. If the ratio of t..'1e muket 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. (g) To be eligible to receive funds from and invest funds on behalf of an entity under this chapter, a public funds investment pool must have an advisory board composed: .. l , . J . ._.~L ~ 2256.017 GENERU GOVER'iiVIEJ\t"T Ch. 2256 (I) equally of panicipams in the pool and other persons who do not have a business relationship with the pool and are qualified to advise the pool. for a public funds investment pool created under Chapter 791 and managed by a state agency; or I (2) of particip<U1ts in the pool and other persons who do not have a business relationship with the pool and are qualified to advise the pool. for other investment pools. (h) To maintain eligibility to receive funds from and invest funds on behalf of an entity under this chapter. an invesnnent pool must be continuously rated no lower than AAA or AA!J,,-m or at an equivalent rating by at least one nationally recognized rating service. ....--...~. Amended bv Acts 1995. 74th Le!!.. ch. 402. 9 I. eff. Sept. I. 1995; Acts 1997. 75th Leg.. ch. 1421.9 '9. eff. Sept. I. 1997.- Historical and Statutory Notes Acts 1997. 75th 1e7.. cll. 1421 added subsec.s. Acts 1989. 71st Le2.. ch. 693. ~ 2. 10 '0 (h). - Acts 1993. 73rd L;2.. ch. 946. ~ 1. For application provisions of Acts 1997. 75th Vernon's Ann.Civ.St. c-.s. 842..-2. ~ 3(a) to . Le!!.. ch. 1421. see notes followin2 V.T.C...... (el. (e) to (g); 4413(34c). ~ 6(b). Go~'emme:n Code ~ 2256.002. - Acts 1995. 74th Leg.. c!t. 76. ~ 5.45(e). (0. Acts 1995. 74th Le2.. ch. 402.~ 5. Acts 1993. 73rd Le2.. cn. 268. ~ 1. V.T.C.A.: Gove~ent Code ~9 2256.013. 2256.056. Prior uws: Acts 1979. 66t.1, Leg.. p. 2071. ch. 810. Acts' 1987. 70th Leg.. cll. 889. 9 2256.017. Existing Investments An entity is not required to liquidate investments that were authorized J investments at the time of purchase. Added by Acts 1995. 74th. Leg.. ch. 76. 9 5.46(a). eff. Sept. 1. 1995: Acts 1995. 74th Leg.. ch. 402. 9 1. eff. Sept. 1. 1995. Amended by Acts 1997. 75th Leg.. ch. 1421.9 10. err. Sept. 1. 1997. Historical and Statutory Notes .' Acts 1995. 74th Leg.. ch. 76. ~ 5.46(a); to conform to Acts 1993. 73rd Leg.. c..... 946. ~ I. added ~ 2256.017. That provision did not take effect pursuant to Acts 1995. 74th Leg.. ch. 402. ~ 6. which provides: "As provided by Se<:tion 1.02. Sena,e Bill No. 959. [ch. 761 Acts of the 74th Legislature. Regu. lar S.:ssion. 1995. this Act contrOls over Senate Bill No. 959 to the e:ttent of any conflict:' Acts 1997. 75th Leg.. ch. 1421. in the section he:,ding. substituted "E.,isting Invescne:m" for "Portfolio of Ceruin Invesunem Pools". and rewrote the sec:ion. whic!t previously read: "A public funds invesunent pool cre:ued to func:.ion as :l money market mutual fund must mark iu portfolio io market daily and. to the e:<tellt re:lSonably possible. stabili:ze at a SIDe: asset value. If the ratio of the market value of the portfolio divided by the book value of the po.rtfolio is less than 0.995 or greater th:m 1.005. portfolio holdings shall be sold as neces- sary to maintain the ratio between 0.995 and 1.005:' For application provisions of Acts 1997. 75th Leg.. c!t. 1421. see notes following V.T.C.A.. Government Code !i 22~6.002. . Prior uws: Acts 1993. 73rd Leg.. c!t. 858. ~ I.tVernon's Ann.Civ.St. an. 842a-2. ~ 2(e). 'Acts 1.9-95. 74th Leg.. c!t. 76. ~ 5A6(b). -_~k. -- -" ~ 2256.018 Repe:lled GOVER.~l\1E~-r CODE Title 10 9 2256.018. Repealed by Acts 1997, 75th Leg.. ch. 1421, ~ 15. eff. Sept. 1. 1997 Historical and Starutorv Notes The repe:l!ed section. pro\'iding for an ad,:iso. Ac~ 1993. 73~d Leg.. ch. 26S. g 1. ry board oluwesunent pools. was de:'ived from: Acts 1995. 74th Le!!.. ch. 76. ~ 5.45(e). CO. Acts 19~7. 70th Leg.. c~. 889. V.T.C.A.. Gove:-nm~nt Code S 2256.014(d). Acts ]9.~. 73rd Leg.. cn. 946.9 1. Acts 100: -'th Lea ch 40' 9 1 Vemon's Ann.Ch'.St. an. 842a-2. S9 2(e). '.-. h ".... -. . 3(0. S 2256.019. Rating of Certain Investment Pools A public funds investment pool must be continuously rated no lower than fi..AA. or AA.A-m or at an eouivalent rating bv at le2.SL one nationalh' recomized rating service or no lowe'r than invest.';e~t grade bv at least o';e nationally recosinized rating service with a weighted ave;age maturirv no gre::.ter than 90 davs~ - - - .- A. . db' , T 190:; -...L L" h '0'" r: 5 109-' ,. b' 109- aae \ nCtS '_. /"Wl e_.. c..., _.:; I. e". eDt. 1. , :>. r..me:1aea y...crs , /. 75th Leg.. ch. 1421. S 11. efCSe?t. 1. 1997. . Historical and Starutory Notes Acts 1997. 75th Le!!.. ch. !421 inse:-ted "or no For aooiic:nion provisions of Acts 1997. 75t., lowe: than invesune:'ll grade by at least one Le!!.. ch: g21. see notes followine V.T.C.A.. nat.i~naqy recognizee r:'ting se:-,'ice with a Go~'e~me:ll Code 9 2256.002. - we:2:1tea ave:-:l2e matu:"lt'v no ~!"ez.te:- than 90 cays". - -- S 2256.020. Authorized Investments: Institutions of ~igher Education In addition to the authorized inveSL"ne'nts permitted by !pis subchapter. an institution of higher education may purchase. sell. and invest its funds and funds under its control in the following: . - (1) cash management and 'fi;"{ed income .funds sDonsored bv organizations exempt from fed;ral income ta;"{ation under Sectio~ 501(f). I;tern~ Revenue Code of 1986 (26 U.S.C. Section SOl(f)); (2) negotiable certificates or deDOsit issued bv a bank that has a certificate of deposit rating of at le2.St r 'or the equivaleilt by a nationally recognhed credit rating agency or that is associated with a holding companv having a commercial-paper ;ating of at le2.St J\-1. P-l, or the equf~alent-by.a national- ly recognized credit rating agency; and (3) corporate boncls. debentures. or similar debt obligations rated by a nationallv recosmized investment rating firm in one of the two highest long- term rating cat~gories. without re~ard -to gradations within those categories. - - - . - .- Added by Acts 1993. 74th Leg.. ch. 402. 9 1. eff.Se?t. 1. 1993. J , , ActS 1987. 70th Le:!.. clL. 889. 1080 -1 L - . ',q. 1 Ac~ .. _.' 51 e!!.. en. 0.. -.:::s . Ac:s 1989. 71$1 Le;~. cn. 750. ~ 1. Historic:t1 and Statutory Notes Acts 1993. 7::rd Leg.. cn. 946. 9 1. Vo",on's Ann.Civ.SL an. 8423-2. ~ 2(b). Acts 1993. 7::rdug.. cn. 268. 9 1. Ac:s 1995. 7eth L02.. en. 76. 9 5.45(d). (I). V.T.C.A.. Gove~me:n Code 9 2256.012. .--+ Prior L.3ws: GENERAl.. GO'lERN'MENT Ch. 2256 9 2256.021. Effect of Loss of Required Rating An investment that requires a minimum rating under this subchapter' does not qualify as an authorized investment during the period the investment does not have the minimum rating. An entity shall take all prudent measures that are consistent with its investment policy to liquidate an investment that does not have the minimum rating. 92256.023 ' .. Added by Acts 1995. 74th Leg.. ch. 402. 9 1. eff. Sept. 1. 1995. 9 2256.022. Expansion of Investment Authority Expansion of investment authority granted by this chapter shall require a risk assessment by the state auditor or performed at the direction of the state auditor. Added by Acts 1995. 74th Leg.. ch. 402, 9 I, eff. Sept. 1. 1995. 9 2256.023. Internal Management Reports (a) Not less than quanerly, the investment officer shall prepare and submit to the goveming bodv of the entitY a wrinen reoort of investlnent transactions for all funds cov~red by this chapt~r for the prec~ding reporting period. (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: J (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 (D) fully accrued interest for the reporting period; (5) state the book value and market value of each separatelv 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 govern- ment's investment policy; and (B) relevant provisions of this chapter. (c) The report shall be presented not less than quarcedy to the governing bodv and the chief executive officer of the entity within a reasonable time after:...-J:.. the ~nd of the period." '- ". ~ 2256.U23 GOVER,\;1\lE)'"T CODE -.~-'" Title 1 0 (d).If an entity invests in other than money market mutual funds. invesunent pools or accounts offered by its depository bank in the fonn of cenificates -of deposit. or money market accounts or similar accounts. the reports prepared by the invesunent officers under this section shall be formallv reviewed at least annually by an independent auditor. and the result of the review sh;"ll be reponed to the governing body by that auditor. Added by Acts 1995. 74th Leg.. ch. 402. 9 1. efE. Sept. 1. 1995. Amen~ed by Acts 1997, 75th Leg.. ch. 1421. 9 12. eff. Sept. I, 1997. Historical and Statutory NOles Acts 1997. 75th Leg.. ch. 1421. in subsec. (hJ. Prior Laws: in subd. (4). inserted ", prepared in compli~nce with gene:-ally acce;:lled accounting principles:', added p~r. (D). and made other nonsubsumtive changes; and added subsec. (d). For ~pplication pro\'isions of ActS 1997. 75lh Leg.. ch. 1411. see notes following V.T.C.A.. Government Code !i 2256.002. ActS 1979, 66th Leg.. p. 2071. ch. 810. Vernon's Ann.Ch'.SI. art. 4-1 13r3':c). !i 4. Acts 1993, 73rd Leg.. ch. 268,!! I. V.T.C.A.. Govemme:ll Code 9 1256.057. g 2256.024. Subchapter Cwnulative (a) The authority granted by this subchapter is in addition to that !;l.:'.11ted by other law. Except as provided by Subsection (b), this subchapter does not: (1) prohibit an invesunent specifically authorized by other law; or (2) authorize an invesnnent specifically prohibited by other law. (b) Except wiLl) respect to those investing entities described in Subsection (c), a securirv described in Section 2256.009(b) is not a..'l authorized investme:lt for a state agencv, a local government, or another investing emirv. notwithstanding any othe; pr~vision of this chapter or other law to the c"Omrary. (c) Mortgage pass-through certificates and individual mon:gage loans that mav constitute an investment described in Section 2256.009(b) are authorizf::d inv~stments with respect to the housing bond programs operated by:. (I) the Texas Department of Housing and Community Affairs or a nonprof- it corporation created to act on its behalf; (2) an entity created under Chapter 392. Local Government Code; or (3) an entity created under Chapter 394. Local Government Code. Added by Acts 1995. 74th Leg.. ch. 402, 9 1. eff. Sept. I. 1995. J Prior Laws: ActS 1979. 66th Leg.. p. 2071. ch. 810. ActS 1987, 70th Le".. ch. 889. Vernon's Ann.Ch7.SI. artS. 8':23-2. ~13(34c).!i 7. Historical and Statutory Notes ActS 1993, 73rd Leo:.. cll. 268. !i V.T.C.A.. (;ove:-nme:n Code 2256.059. 1. s!i 22':6.015. !i 7: , S 2256.025. Selection of Authorized Brokers The governing body of an entity subject to this sub'chapter or the design.ned . investment comminee of the entirv shall, at least nnnuallv. re\iew, revise. and . ..",- . ......):- ~ -.. .- GENERAL GOVERNMEI'It'T eh. 2256-- adopt a list of qualified brokers that are authorized to engage in invesnnent transactions with the entity. ~ 2256.053 Added by Acts 1997. 75th Leg.. ch. 1421. S 13. eff. S~pt. 1. 1997. ~istoric:>.l and Statutory Notes for :lpplic:uion provisions of Acts 199i. i5th Leg.. ch. 1421. see notes following V.T.CA. Gove:nrnent Code !i 2256.002. 9 2256.026. Statutory Compliance All invesnnents made by entities must comply with this subchapter and all federal, state. and local statutes. rules, or regulations. Added by Acts 1997. 75th l~g.. ch. 1421,9 13. eff. S~pt. 1. 1997. Historical and Statutory Notes For o.pplic3uon provisions of Acts 199i. i5th Leg.. ch. 1421. see notes following y.T.C.A.. Gove",me:n Code !i 22S6.002. [S . 2?~6 O?- n-60-0 ecnons _~ . _I to __:> . ::: reserved for expansion] SUBCHJ\PTER B. MISCELL:\NEOUS PROVISIONS ~ 2256.051. Electronic Funds Transfer Any local government may use ei~ctronic means to transfer or invest all funds .A collected or controlled by the local government. Amended by Acts 1995. 74th leg.. ch. 402. 9 1. eff. Sept; 1. 1995. ~ 2256.052. Private Auditor Notwithstanding any other law. a sote agency shall employ a private auditor if authorized by the legislative audit committee either on the committee's initiative or on request of the governing body of the agency. Amended by Acts 1995. 74th leg.. ch. 402. 9 1. eff. Sept. 1. 1995. Prior uws: Ac:s 19i9. 66th Leg.. p. 20i!. ch. 810. Vernon's Ann.Civ.St. art. 4413(34<:1,!i 5. o Historical and Statutory Notes Acts 1993. 73rd Leg.. cll. 268.!i I. V.T.C.A.. Government Code!i 2256.058. , S 2256.053. Pavment for Securities Purchased bv St:lte - - .' The comptroller or the disbursing officer of an agency that has the power to invest assets directly may pay for authorized-securities purchased from or--.s- !j 2256.053 GOVER1'lMENT CODE Title 10 through a member in good standing of the National Association of Securities Dealers or from or through a national or state bank on receiving an invoice from the seller of the securities showing that the securities have been purchased by the board or agency and that the amount to be paid for the securities is just, due, and unpaid. J\ purchase of securities may not be made at a price that exceeds the existing market value of the securities. Amended by Acts 1995, 74th Leg., ch. 402. 9 1. eff. Sept. 1. 1995: Acts] 997. 75th Leg.. ch. ]423,9 8.67. eff. Sept. ]. ] 997. Historlc:al and Statutory Notes Ac-.s 1997, 75th Leg.. ch. 1423 made eonform- ing amendments to reflect the abolishment of the office of the state tre2.SUrer. Sections 22.01 to 22.03 of Acts 1997, 75th Leg.. ch. J 423 provide: "Sec. 22.01. The purpose of this Act is to conform the statutes to reflect the abolishmem of the office of state treasure~. "Sec. 22.02. (a) This Act does not revive a fund or account that was abolished or consoli- dated in accordance with Section 403.094, Gov. emment Code, as added by Chapter 4, Acts of the 72nd Le2i.slarure, JSt Called Session. 1991. or in accord';:nce ",ith other law. "(h) This Act does not revive a dedication of money for a pa.....,;cular purpose that was abol. ished in accordance with Section 403.094. Gov- ernment Code. as added bv Chaoter 4, Acts of the 72nd Le2i.s]arure. 1st Called'Se>>ion. 1991, or in accord~ce wit.l, other law. "(c) This Act does not. of itselI. imoose a new power or duty on the comptroller,' trar.sfe~ a power or duty to or from the comptroller. reo create a power or duty no longer possessed or performed by the comptroller, or abolish a pow. . er or duty possessed or performed by the comp- troller, except with regard to: "0) the abolished requirement to appoint a first assistant under Chapter 404, Govemmem Code: and . "(2) maners relating to a bond required of the comptrolle~ or an emplo~'ee of the comptrol. ler. "Sec. 22.03. (a) Except as provided by Sub- seclion (b) of this section, if another law enaCI- ed bv the 75th Leldslarure. Re!!Ular Session, 1997: that is intended in whole -or in pa:-t 10 make a substantive chan!!e to the law conflicts ....ith this Act. the othe~ la~ controls. "(h) This Act controls oVe~ another law enact- ed bv the 75th Le"';.slature, Re!!Ular Session, 1997: with re"ard to~ - . "0) the abolished require="ent 10 appoint a first assistant under Chapte~ 404, Govern.lnent Code; and "(2) maners relating to a bond required of Ll,e ,~omptrolle~ or an employee of the comptrOl- le~. J Prior Laws: Acts 1967, 60th Leg.. p. 915, ch. 401. Acts 1979. 66th Leg.. p. 310. ch. 143,9 1. . Vernon's Ann.Civ.SL art.. 6252-5a. 9 2. Acts 1993, 73rd Leg.. ch. 268, 9 1. V.T.C.A.. Government Code 9 2256.J02. S 2256.054. Delivery of Securities Purchased by State J\ security purchased under this chapter may be delivered to the comptroller. a bank, or the board or agency investing its funds. The delivery shall be made under nonnal and recognized practices in the securities and banking indusnies, including the book entry procedure of the Federal Reserve Bank. Amended by Acts ]995, 74th Leg.. ch. 402, 9,1, eff. Sept. ], ]995; Acts ]997. 75th Leg.. , ch. 1423,9 8.68, eff. Sept. ], ]997. Historlc:al and Statutory Notes Acts 1997. 75th Leg.. ch. 1423 made conform- Prior Laws: ing amendments to reflect the abolishment of Acts t967, 60th Leg.. p. 915. ch. 401. the office of the state trC:lSurer. Acts, 1979, -b6th Leg.. p. 310, ch. 143,9 !. . , "".,4- -- ~~-"""'t''''''Jl~_l-'U'~~~l''~t',~~~\~,' ~. ,..i.~l..i. GENERAL GOVERl'IMENT Ch. 2256 Vernon's Ann.Civ.SL an. 6252-5a. 9 2. Acts 1993. 73rd Lcg., ch. 268. 9 1. V.T.C.A.. Government Code 9 2256.103. ~~ 2256.0Si to 2256.059 Deleted 9 2256.055. Deposit of Securities Purchased by State l\t the direction of the comptroller or the agency, a security purchased unde:- this chapter may be deposited in trust with a bank or federal reserve bank or branch designated by the comptroller, whether in or outside the state. The deposit shall be held in the entity's name as evidenced by a trust receipt of the bank with which the securities are deposited. Amended by ActS 1995. 74th Leg.. ch. 402. 9 I. eff. Sept. I. 1995: ActS 1997. 75th Leg.. ch. 1423.9 8.69, eft. Sept. I, ] 997. Historical and Statutory Notes ACts 1997. 75th Lee.. ch. 1423 made conform. ing amendmenlS to -reflect the abolishment of the office of the State tre:lSurer. Acts 1979. 66th Leg.. p. 310. ch. 143. S 2. Vernon's Ann.Civ.St. a:.r.... 6252-5:1.. S 3. Acts 1993. 73rd Leg.. ch. 26S. 9 1. V.T.C.A.. Gnve:=nent Code 9 2256.10~. P:ior uws: Acts 1967. 60th Leg.. p. 915. ch. 401. . . S 2256.056. Compliance With Other Laws Notwithstanding any other law, a municipality with a population of less tha!l 50,000 may not issue for any purpose or cause to be issued in its behalf a!lY installment sale obligation or lease-purchase obligation having the principal J amount of S 1 million or more without complying with the prOvisions of Section 3.002, Chapter 53, Acts of the 70th Legislarure, 2nd Called Session. 1987 (Article 717k-S. Vernon's 1:exas Civil Statutes), regardless of whethe:- tho:: obligation was issued individually or in a series of related transactions, or whether the obligation was issued with no recourse to the local government. Added by Acts 1997. 75th Leg.. ch. 1421,9. 14, eff. Sept. I, 1997. Historical and Statutory Notes For applic:llion provisions of ActS 1997. 75th Leg.. ch. 1421. see notes following V.T.C.\.. Government Code 9 2256.002. SS 2256.057 to 2256.059. Deleted by Acts 1995, 74th Leg.. ch. 402. 9 1. eff. Sept. 1. 1995. [Sections 2256.060 to 2256.100 reserved for expansion) , ...-+ .--. :i:i 2256.101 to 2256.10.. Deleted GOVER..\1;Vll~:~"T CODE TItle 10 SUBCHAPTER C. PAYMENT FOR AND DELIVERY AND DEPOSIT OF SECURITIES PURCHl\SED BY SHTE [DELETED] ~S 2256.101 to 2256.104. Deleted by Acts 1995,,74th Leg., ch. 402, 9 1, eff. Sept. 1. 1995 CH.-U>TER 2257. COLLATERAL FOR PUBLIC-FUNDS Section 2257.001. 2257.002. 2257.0025. 2257.003. 2257.004. 2257.005. SUBCHAPTER A. GENERAL PROVISIONS Shon Title. Definitions. Hieh-Risk Mom~a2e Security. Chapter Not Applicable to Deferred Compensation Plans. Conflict With Other Law. Contract Governs Le2al Action. [Sections 2257.006 to 2257.020 reserved for e:>pansion] SUBCHAPTER B. DEPOSITORY; SECURITY FOR DEPOSIT OF PUBLIC FUNDS 2257.021. Collateral Reauired. 2257.022. Amount of Coilateral. 2257.023. Collateral Policv. 2257.024. Contract for Securin2 DeDosit of Public Funds. 2257.025. Records of Depository. . 2257.026. Cha.'1ge in Amount or Activity of Deposits of Public Funds. [Sections 225'1.027 to 2257.040 reser-'ed for expansion] SUBCHAPTER C. CUSTODLt,,!\l; PERMITTED INSTITUTION Cross References Water disuic:s. eene...! fisc:ll provisions and depository regulations. see V.T.C."'.. Wau:r Code ~ 49.156. - 2257.041. 2257.042. 2257.043. 2257.044. 2257.045. 2257.046. 2257.047. 2257.048. 2257.061. 2257.062. 2257.063. 2257.064. 2257.081. 2257.082. 2257.083. " Deposit of Securities With Custodian. Deposit of Securities With Permined Instirution. Deoositorv as Custodian or Pennined Instirution. CuStodian as Bailee. Receipt of Security by Custodian. Books and Records of Custodian; Insoection. Books and Records of Permined Instirotion. Anachment and Perfection of Security Interest. [Sections 2257.049 to 2257.060 reserved for expansion] SUBCHAPTER D. AUDITS AND E.x'-L1>,lINATIONS; PENALTIES J Audits and Examinations. Penalties. Mitigating Circumstances. Reinstatement. [Sections 2257.065 to 2257.080 reserved for expansion] SUBCHAPTER E. E.'CEMPT INSTITUTIONS Definition. Funds of Exempt Instirution. Investment; Selection of Depository.. ; :.}~ , ""'J