1998-036-RES WHEREAS, CHAPTER 2256 OF TEXAS GOVERNMENT CODE
RESOLUTION NO. 98-036
WHEREAS, Chapter 2256 of the Texas Government Code, commonly known as the
"Public Funds Investment Act," requires the chief financial offer 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 financial 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, and it is deemed
appropriate that such policy be amended; and,
WHEREAS, the amended investment policy and incorporated revisions, the form of which
is attached hereto as Exhibit A, comply with the Public Funds Investment Act, as amended, and
authorize the investment of City funds in safe and prudent investments; NOW, THEREFORE,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PARIS, that the
City of Paris has complied with the requirements of the Public Funds Investment Act; and,
BE IT FURTHER RESOLVED, that the Investment Policy be, and the same is hereby,
amended, effective March 9, 1998, to the form shown in Exhibit A, attached hereto.
PASSED AND ADOPTED this 9th day of MarCh,~.))rt
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Eric S. Clifford, Mayor
ATTEST:
Mattie Cunningham, City Clerk
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
confonning 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 secondary objective is to create a portfolio structure which
will experience minimal volatility during economic cycles. 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 service funds shall have as the primary objective the assurance of investment
liquidity adequate to cover the debt service obligation on the required payment date. Securities purchased
shall not have a stated [mal 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 securities held should not exceed the estimated project or purpose completion date.
2.0 SCOPE
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 General Funds
2.1.2 Water and Sewer Fund
2.1.3 Capital Projects Fund
2.1.4 Library Construction Fund
2.1.5 Water Revenue Construction Fund
2.1.6 Water Construction Fund Series 1997
2.1.7 Child Safety Fund
2.1.8 cm Grant Fund
2.1.9 CO 1993 Construction Fund
2.1.10 Solid Waste Bond Construction Fund
2.1.11 Employee's Insurance Fund
2.1.12 Library Memorial Fund
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,EXHIBiT A
2.1.13 1. A. Love Trust Fund
2.1.14 1. 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 Fun~
2.1.19 CO 1993 1 & S Fund
2.1.20 Contractual Obligation I & S Fund
2.1.21 All Other Funds
3.PRUDENCE
Investments shall be made "~th judgement and care..under circumstances then prevailing..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 mth 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 OBJECTNE
The primary objectives, in priority order, of the City's investment activities shall be:
4.1 SAFEIT': 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 LIQUIDIIT': The City's investment portfolio mll remain sufficiently liquid to enable the City of
meet all operating requirements which might be reasonably anticipated.
4.3 RE1lJRN ON INVESTMENTS: The City's investment portfolio mll be designed mth 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 T'R.AINrnG
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
I
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 within 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
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"
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 inyestment 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 fmancial/investment positions that could be related to the
performance of the City, particularly with regard to the time of purchases and sales~
7.0 AUTHORIZED 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 l5C3-1 (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 statemen~ proof of National Association of Security Dealers
certification, trading resolution, proof of state registration, completed broker/dealer questionnaire if
requested, certification of having read entity's investment policy.
An annual review of the financial 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 AUTHORIZED/SUITABLE lNVESlMENTS
The City of Paris is empowered by statue to invest in the Types of securities authorized by Chapter 2256 of
the Government Code. A copy 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 (DVP) basis. Securities will be held by a third party
custodian designated by the Finance Director and evidenced by safekeeping receipts.
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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 MAXJMUM MA TURlTIES
To the extent possible, the City of Paris will attempt to match its investments with anticipated cash flow
requirements. 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 shall establish an annual process of independent review by an external auditor. This
review will provide internal control by assuring compliance with policies and procedures. '
14.0 PERFORMANCE STANDARDS
The investment portfolio shall 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 shall
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
andretums in theCity 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
desk. '
17.0 INVES1MENTPOLICY 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.
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GENERAL GOVElt'IlYIENT
Ch. 2256
CHAPTER 2256. PUBLIC FUNDS I:NV'ESTMENT
Shon Title.
Definitions.
Authority to Invest Funds; Entities Subject to this Chapter.
Applicability.
Investmem Policies; Invesunent Strategies: Investmem Officer.
Standard of Care.
Investment Training; State Agency Board Members and Officers.
Invesnnent Training; Local Governments.
Authorized Invesnnems: Obli~ations of. or Guaranteed bv Gove:-;unental
w .
Entiti~. .
Authorized Investments: Certificates of Deposit and Share Certificates.
Authorized Investments: Repurchase Agreements.
Authorized Investments: Banker's Acceptances.
Authorized Investments: Comme:cial Paper.
Authorized Investments: Mumal Funds.
Authorized Invesnne.nts for State Agencies: Guannteed Invesnnem Con-
tracts.
AUL~orized Investments: Investment Pools.
Existing Investments.
Re'Oealed.
Raring of Ce=-~ Investment Pools.
Authorized Investments: Instimtions of Higher Education.
Effect of Loss of Required Rating.
E."\pansion of Invesunent AuthOrity.
Internal Managemem ReporiS.
Subchaoter Cwnulative.
Sdecti;n of Authorized Brokers.
Stamtory Compliance.
[S . 2 i ~, 02 - , i ~, 0 ~ 0 d f . ]
ecnons _.)0. I to -..)0. ~ reserve or expanslOn
SUBCHAPTER B. MISCElLAl.NEOUS PROVISIONS
2256.051. Electronic Funds Transfer.
2?~'D~' P' Adi
.,)0. .).. nvate u tor.
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.
2156.05i to 2256.059. Deleted.
[S~ctions 2256.060 to 2256.100 reserved for expansion]
SUBCHAPTER C. PAYMENT FOR AND DElMRY AND DEPOSIT
OF SECURITIES PURCHASED BY STATE [DELETED]
2256.101 te 2256.1 04. Deleted.
Sd:tion
2256.001.
2256.002.
2156.003.
2256.004.
2256.005.
2256.006.
2256.007.
ii.' 008
.._~o. .
,.,~. 009
__,')0. .
'7~' 010
__,)0. .
.,?~' 011
__.)0. .
ii.'Ol"
__.)0. _.
??~'01"
__,)0. ..).
2.,~. 01"
_,)0. ~.
ii.'Ol-
__.)0. ,).
'i~' 016
__,)0. .
??~. 01-
_.,)0. I.
2256.018.
2256.019.
2256.020.
ii~6 0'1
--.) . . .
2.,~. 02i
.=-0. _.
2256.023.
2.,.' 02"
_-'0. -t.
2256.025.
ii.'026
...,)0. .
SUBCHAPTER A. AUTHORIZED INVESTME~1S
FOR GOVERN?vlENT:\L ENTITIES
~crs 1995, i4rh Leg., ch. 402, 9 1 amended ChapTer 2256.
DIsposmON TABLE
Shewing whe:e the subject maner or provisions contJined in former Chapter
2256 may be found in Chapter 2256 as amended by Acts 1995, 74th Leg.. ch.
402. S 1. eff. September 1. 1995.
. ....,~...:p
'.
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
li~'008 "~'Oll
__:>0. . . . . . . . . . . . . . . . . . . . . . . --)0.
2256.009 ......................2256.012
2256.010 ..... .................2256.013
2256.011 ...................... 2256.014
2256.012 ......................2256.020
2256.013 ......................2256.016
2256.014 ................. . . . . . 2256.018
GOVER..l\IMENT CODE
Title 10
Former Amended
Section Section
2256.015 ...................... 2256.024
2256.016 ......................2256.004
2256.051 ...........'...........2256.002
" "6 0'" 2? .., 00"
--" . :>- ...................... _:>0. ,)
"~'0~3 2'-'006
-_)0.:> ...................... _:>0.
2'-'0"4 '1"'00-
_,)0.:> ...................... -_':>0. :>
2'''60''- 2'-'00"
-.) . ,;.) .................. . . " _':>0. "
'')'''0''6 "-'016
-_':>0.,) ...................... -_':>0.
2256.057 ......................2256.023
2256.058 .................. . . . .2256.052
,,-' 0"9 ,,-' 024
--:>O.:J ....,. . . . . , . . . . . . . . . . . --':>0.
2256.101.......................... _
""610' ,i-'0"3
-_:J. -. . . . . . , . . , . . . . . . . . . . . . -_':>0. ;,
2256.103 ...................... 2256.054
2'''6 10 '1-60"-
-,;. 4. . . . . . . . . . . . . . . . . . . . . . _...) . ,),)
Historical and Statutory Notes
F ,:.,.,-, 0 ,., I d th A 199" -4' L ' -, 5-,4...)
ol'17le: ;$ __,)0.1 1. Wll1cn re ate to au cr ClS ,), I Ul e!!.. en. 10. .. ~. .,)Ie, to
rized investments, was de:ived from: coniorm to Acts 1993,-i3rd Leg., cn. 946, 9 1,
added 9 2256.0141. That provision did not
take effect pursuant to Acts 1995, i 4th Leg.. ch,
402, 9 6, which provides that ch. 402 conrrols
ove: cn. i 6 to the extent of a.1Y conflict.
Acts 196i, 60th Leg., p. 915, ch, 401.
Ve:non's Ann.Civ.St an. 6252-52.. 9 1.
Acts 1993, i3rd Leg" cn. 268. S 1.
Cross References
Water districts, ge:le:al fiscal provisions and invesrme:n regulations, see V.T.C.A, Wate: Code
9 49.l5i.
Library References
Investrnem of funds, se~ Brooks, 35 Texas
Practice 9 14.6.
SUBCHAPTER A. AUTHORlZED INVESTMENTS
FOR GOVER..~MENTAL ENTITIES
S 2256.001. Short Title
This chapter may be cited as the Public Funds Investment Act.
Am~nded by Acts 1995, 74th Leg., ch. 402, S 1. eff. Sept 1, 1995.
Historical and Statutory Notes
I
I
I
I
I
1', ~
Sections 6. 9. and 11 of the 1995 amend;uory
aci. provide:
"Sec. 6. As provided by Section 1.02, Senate
Bill No. 959. Ac:.s of the 74th Leg~slatu.re, Regu.
lar Session. 1995. this Act conrrols over Senate
Bill No. 959 to the extent of any conflict"
"Sec. 9. The state auditor shall conduct. or
shall hire an inde:)endem evaluator to conduct.
:m :lSsessmem of the risks and benefitsassociat.
td with authorizing entities subject to this chap.
ter to invest in mutual funds orner than money
market mutual funds, investment. pools other
than investment pools that function as money
market mutual funds. and 2Uarameed invest.
ment contracts. The state a~ditor shall repon
these findings to the legislature not later than
September 1. 1996. This sec:ion expires on
September 2, 1996."
"Sec. 11. An entin' that acouired authorized
investment securities 'under Ch'apter 2156. Gov.
ernment Coae. before Ule effec:ive date of this
. ._....._J...l.~.
GENERAL GOVERNNIE~l'
Ch. 2256
A~t that are no longer authorized investnltnt
:;~curiti~$ under th:lt ch:lptcr :J.S amended by
this Act is not required by this Act to Iiquid:ne
those: securities bdore the 6n:1I st:ned maturirv
of the: invcstmt::ll." .
S 2256.002
Prior Laws:
Acts 198i, 70th Leg., ch. 889.
Vernon's Ann.Civ.Sl art. 8423-2. 9 1.
Acts 1993.' 73rd Leg.. ch. 268. 9 1.
V.T.C.A.. Governmem Code ~ 2256.001.
S 2256.002. Definitions
In this chapter:
(1) "Bond proceeds" means the proceeds from the sale of bonds, notes,
and other obli2:ations issued bv an entitv, and reserves and funds maintained
~ ..
by an entity for debt service purposes.
(2) "Bookvilue" mems the original acquisition cost of an invesrmer1t plus
or minus the accrued amol1ization or accretion.
(3) "Funds" means public funds in the custody of a state age~cy or 10c2.1
government that:
(A) are not required by la~ to be deposited in the state tre:?Sury: and
(B) the investin8: entirv has authorirv to invest.
~. .
(4) "Institution of hi!L~er education" has the mea..T'lin8: assimed bv Section
- .... - ..
61.003, Education Code.
(5) "Investing entity" and "entity." mean an entity subject to this chapte:-
and described bv Section 2256.003.
.
(6) "Investment pool" means an entity created under this code to inves~
public funds jointly on behalf of the entities that participate in the pool 8.nd
\vhose invesunent objectives in orcler of priority are:
(A) preservation and safety of principal;
(B) Uauiditv; and
. .
(C) yield.
. .
(7) "Local ~overnment" means a municioalitv, a county, a school disrric!,
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a disuict 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 nonpro6t
cornoration actin!! on behalf of any of those entities.
. ... .
(8) "Market value" me:ms the curre:!t face or par value of an invesnnent
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" me3.DS an internally created fund of an investing
entity in which one or more institutional accounts of the investing entity are
invested.
(10) "Qualified .representative" me3.ns a pe~son who holds a position with
a business org::miz:ltion, who is authorized to-act on behalf of the business,,,,,,..,
or2::lniz:ltion. ::lnd who is one of the followin~: '.
... ~
< -'. '...."'_..........~....-. ""-'-. ~-'">'.'"-'--'''--''''' "........-
-----'-'-~--.."...,...",.,.'~,l..r'........
S 2256.002
GOVERN~lE~'T 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 Association of Securities Dealers;
(B) for a state or federal bank, a savings bank, or a state or federal credit
union, a member 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
(C) for an investment pool. the person authorized by the elected official
or board with authOrity to administer the activities of the invesunent 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 a~encv" means an office, depanmem, commission, board, or
.. " .
other agency that is pan of any branch of state government, an institution of
higher education. and any nonprofit corporation acting on behalf of any of
those entities.
Amended bv ActS 1995, i4th Le~., en. 402, S 1, err. Seot. 1. 1995; ActS 199i, iSm Le~.,
ch. 1421,S'1. eff. Sept. 1. 199i." . . ..
Acts 199i, i5th Le2., ch. 1421. in sucd. (2),
substituted "original acquisition cost" for "face
or par value", deleted "accrued interest", and
inserted "the accrued"; in subd. (8), insened
"currem", and substituted "net selling price of
the securin' as ouoted b... a recornized marke:
pricing source" for "premium or -discount"; in.
sened new subd. (10); and redesilITlated forme:
subds. (0) to (12) as subds. (I 1) to (13) resoec.
tive!y. .
Section 16 of Acts 199i, i5th Leg., ch. 1421
provides:
"This Act takes effect SeDtember I, 199i, and
applies only to investment activities of a govern.
mental entity subject to Chapter 2256, Govern.
ment Code, that occur on or after that date."
Historical and Statutory Notes
Prior Laws:
Acts 19i9, 66tb Leg., p. 20i 1, en. S 1 O.
Acts 198i, iOth Leg., ch. 889.
Ac:s 1989, ilst Leg., en. 39,g 1.
ActS 1989, i1st Leg., eh. 628, S 1.
Acts 1989, i 1st Leg., en. 693, S 4.
Acts 1989, i 1 5t Leg., ch. i50, 9 1.
Acts 1993, i3rd Leg., ch. 946, S 1.
Vernon's Ann.CiY.Sl am. 8~2a-2. S 2(a),
(c)(4); 4413(34c), S 1.
Acts 1993, i3rc LeZ.,'ch. 268. S 1.
ActS 1995. i4th Leg., cn. i6, 9 5.45(e), m.
V.T.C.A.. Gove:mnem Code SS 2256.002,
,,-. 0-1
-_,)0. ~ .
~ 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 invesnnems authorized under this
subchapter in compliance with invesnnent policies approved by the governing
body and according to the standard of care prescribed by Section 2256.006:
(1) a local government;
(2) a state agency;
(3) a nonprofit corporation acting on behalf of a local gove:nmenr or a
........,....
state agency; or
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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.
9 2256.005
Amended by Acts 1995, i4th Leg., ch, 402, 9 1, eff. S~;)t. 1. 1995.
Prior uws:
Aets 198i. iOth Le:;.. en. 889.
Acts 1989, i1st Leg.. ch, 39. 9 1.
Aets 1989. i1st Leg.. eh. 628. ~S 1. 2.
Aets 1989. i 1st Leg.. e~. 693. 9 4.
Historic:ll and Statutory Notes
Acts 1989. i1st Leg., ch, 750.9 1.
Ve:-:lon's Ann.Civ.St. ~. 84230-2, ~S 2(a),
5(a).
A 109~ -~'L . ')'8~1
c~ , ). IJra eg.. en. _0 .:s .
V.T.C.A.. Gove:nme:lt Code S 2156.003.
9 2256.004. Applicability
This subchapte~ does not apply to:
(1) a public retire:nent system as defined by Section 802.001;
(2) state funds invested as authorized by Section 404.024;
(3) an institution of higher education having total e:J.dowme:lts of at le2.S~
S95 million in book value on N1a.y 1, 1995;
(4) funds invested by the Veterans' Land Board as authorized by Chapte:-
161, 162, or 164, Natural Resources Code; or
Te;ocr of subd. (5) as added by Acrs 199i, i5rh Leg., eh. 505, ~ 24
(5) registry funds deposited with the county or district de:-k under Chapte:-
11 i, Local Gove:nmem Code.
Te.-ocr of subd. (5) as added by Acts 1997, i5rh Leg., ch. 1421, & 2
"
(5) a deferred compe:lsation plan that qualifies under eithe:- Section 401 (k)
or 45i of the Inte~al Reve:lue Code of 1986 (26 V.S.C. Section 1 et seq,.), as
amended.
Amended by Acts 1995, 74th Leg., en. 402. S 1. eff. Se:)t. 1, 1995; Ac:.s 1997, 75th Leg..
ch. 505, 9 24, eff. S~~t.1.1997; ActS 199i, i5th Leg., eh. 1421. 9 2. eft. Sept 1. 1997.
Historical and Statutory Notes
Ae:.s 199i. i5m Leg.. 6. 50S, added subd. (5). Prior Laws:
Acts 199i, iSm Leg., ch. 1421 added subd.
(5), and made othe: nonsubsuntive changes.
For applie:loon provisions of Acts 199i. iSm
Le~.. eh. 1421. see notes followinr! V.T.C.A..
Go;e:nme:n Code 9 2:56.002. -
Ae~ 198i. iOth Leg., eh. 839.
Ve:non's Ann.Civ.St. an. 842a-2. 9 6.
Ae:.s 1993. i3rd Leg.. e~. 268. 9 1.
V.T.C.A.. Gove:nme:n Code S 2156.016.
9 2256.005. Investment Policies; Investment Strategies; Investment Offi.
I
cer
(a) The governing body of an investing e:1tiry shall adopt by rule, ord~:-,
ordinance, or resolution, as appr.opriate, a v.rnne:l investme:lt policy regarding
the investment of its funds and funds W1der its control.
(b) The investment policies must:
..........~~....
S 2256.005
GOVERN;VIENl COnE
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:
(A) a list of the types of authorized investments LT'l which the investing
entity's funds may be invested;
J'
(B) the maumum allowable slated 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 ponfolio;
(D) methods to monitor the market price of investmentS acquired with
public funds; and
(E) a requirement for senlemem of all transactions, except investment
pool funds and mutual funds, on a delivery versus payment basis.
(c) The L.'1vesnne:lt policies may pro\~~e that bids for cenificates of deposit
be solicited:
(1) orallv;
.-
(?) . . .
- m wnung;
(3) electronically; or
(4) in anv combination of those methods.
"
(ci) As an integral pan of an investment policy, the governing body $hall
adopt a separate wrinen investment strategy for each of the funds or group of
funds under itS control. Each investment'strate~' must describe the invest-
.... '
ment objectives for the parJcular fund using the following priorities- in order of
imDonance:
(1) unde:sranding 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 ~oveming bodv of an investing entity shall review itS invesnnent
policy and - invesnn;m sU:ategies not less lhan ~TJually. Tne governing body
shall adopt a wrinen instnlment 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 invesnnent strategies.
(f) E:lch investing entity shall designate, by rule, orde~,...9rdinance, or resolu-
tion. as appropriate, one or more officers or employees of the state agency,
.- ......
. ....--"""
--.,"-'
GE~ERA.L GUvIR..~~lE~T
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 until
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 circumstances, 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 (D 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 investinp: its funds.
'"
Te;rt of subsec. (h) as amended by Acts 1997, 75th Leg., ch. 685,9 1
S 2256.005
.,
...
~ 2256.005
....._-_.
GOVERt~MENT CODE
Title 10
(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 detennine that they
are in compliance with the investment policy. The qualified representative of
the business or~anization offering to engage in an invesunent transaction with
w _ _ w
an investing entity shall execute a written 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 effon to preclude investment transactions
conducted between the entity and the organization that are not authorized by
the entity's investment 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'estment 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 h'1strume!lt 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 uncle:: '
this subsection and annually repon those results to the legislative audit commit-
tee.
Amended by Acts 1995, 74th Leg., ch. 402, S 1, eff. Sept. 1, 1995; Acts 1997, 75r.h Leg.,
ch, 685, 9 1. eff. Sept 1. 1997; Acts 1997, 75th Leg., eh. 1421. 9 3, eff. Sept 1, 1997.
ActS 1997, 75th Leg.. ch. 685, rewrote subsec.
(h), which previously read:
"An officer or employee of a commission ere.
ated under Chapter 391. LoC3l Government
Code. is ineligible to be designated as an invesi.
mem officer under Subsection m ."
Acts 1997, 75th Leg., en. 1421. in subsee. (b),
in subd. (4), in par. (C), substiruted "dollar-
we:!!nted ave~e" for "ave:alZe dollar-weilZht-
cd"~ added p~, (D) and (E),-and made other
nonsubsumive changes: in sub~ec. (d), insened
"or gToup of funds"; in subsec. (e), insened
''The I!overnine bodv shall adoDt a wrinen in.
strum~m bv rule, o~der, ordin~nce, or resolu.
tion staring- that it has reviewed the invesiJIlem
polic)' and invesonem strategies and that the
wrinen instrument so adopted shall record any
Historical and Statutory Notes
changes made to either the investmem policy or
investment Stratecies."; in subsec. (f), deleted ".
Unless otherwisewauthorized by law, a person
may not deposit, withdraw, invest. transfer, or
mana2e in an\' other manner funds of a state
agen~', local 'government. or invesnnem pool
without exoress wrinen authoritv of the ~OVe:-.1.
in'! bodv, ~hief executive officer~ or chief finan-
c:31 officer of the state agency, local govern-
mem, or investment pool. ", dele~ed "deposit.
withdraw,", deleted ", transfer. or manage",
and inserted "In the administration of the
duties of an investment officer. the person des-
ilmated as investment officer shall exercise the
j~dgment and care, under prevailing circum-
stances. that a prude:n person would exercise in
the manageme:1t of-0e pe:-son's own aff:1iI'S.
Unless authorized oy law, a pe:son ID2Y not
......'-'1..........
'.
GENERAL GOVERNMENT
Ch. 2256
deposit. withdraw. .transfer, or manage in any
other mOlnner the funds of the inve:;ting entity.";
in suosec. (h). insened "for any investing enuty
other than for that commission"; in subsec. 0).
substituted "a business orl!JnizOluon offering to
engage in an investment u.:msaction with"wfor
"an entity seeking to sell an investmemto",
inse:1ed "For purposes of this subsection. an
investme:1t officer has a personal business rela.
tionship with a business organization if:", and
added subds. (1) to (3); in subsec. (k), substinlt.
ed "offering to engage in ::m invesnnent tr::msac.
tion with an investing entity" for "seeking to
sell to the entity an authorized investmem",
inserted "Fo'r purposes of this subsection. a
business organization includes investment
pools. Nothing in this subsection relieves the
investing entiry of the responsibility for monitor.
ing the invesunents made by the investing ~mity
to de~e:1I1ine that they are in compliance with
the invesunent policy.", substituted "qualified
represemative" for "registered principal", sub.
stituted "offering to engage in an investmem
transaction with an investinl! emir.... for- "se~k.
ing to sell an authorized in~esune.:1t", inserted
"in a form acceotable to the investin~ entity and
the business organization", substinned :'busi.
ness organization" for "registered principal". in
subd. (I). de!e:ed "thoroughly", in subd. (2),
92256.006
insened "business", deleted "imprudent invest-
ment activities arising out of', and insened
"that are not authorized by the entiry's invest.
ment policy; except to the extent that this autho.
riz:lrion is dependent on an analysis of the
makeup of the entiry's entire podolio or re-
quires an interpretation of subjtctive investment
standards"; and in sUDsec. (l), substituted "ac.
quire or othel"\Vise obtain any authorized invest-
ment described in the investment policy of the
investing entity" for "buy any securities", and
substituted "the instr..unem required" for "an
insrrume:1t in substantially the form provided",
For application provisions of Acts 199i, iSth
Leg., cll. 1421, see notes following V.T.C.A..
Gove:nme:1t Code 9 2256.002.
Prior Laws:
Ac';S 19i9, 66th leg.. p. 20i!, ch. 810.
Ac:.s 198i, iOth Leg., ch, 889.
Ac:s 1989. ilst Leg.. en. 623, 9 2.
A. 1089 -1 L . '9~ ~ , ..
c:.s _ ,I st eg.. cn. 0 ". ~ _, ".
Ve:-non's Ann.CiV.SL ar-.5. 8423,-2. 9 5;
4413(3~c). ~g 2(2.), (hi, 3(20). (b).
Acts 1993. i3rd Leg.. ch. 268. S 1.
V.T.C.A" Governme:1t Code g~ 2256.004,
,,~. O~, 2'-' 00-' 'i~' O-~
__':0. ~_. _':0. :-t, __~O. ::.:.
Notes of Decisions
sure: to invest those rl.!..1ds in accordance with
Public Funds Invest::lem Act. Op.Arry.Ge:1.
1992, No. DM-96.
, Person responsible 1
1. Person responsible
Commissioners coun may desilffiate which
county funds are to be invesied and direct tre:l.
~ 2256.006. Standard of Care
(a) Investments shall be made with judgment 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 capital and the probable
income to be derived. Investment of funds shall be Q:overned bv the following:
... " ...
investment objectives, in order of priority:
(1) preservation and safety of principal:
(2) liquidity; and
(3) yield.
(b) In determining whether an investment officer has exercised prudence
with respect to an investment decision. the derem1ination shall be made taking
into consideration:
(1) the investment of all funds, or funds under the e:lBtv's control. over
"
which the officer had responsibility rather than a consideration as to the""" ;,.,
prudence of a single investment; and
...---~..
g 2256.006
GOVER.'IMENT CODE
Title 10
(2) whether the investment decision was consistent with the \\Tinen invest.
mem policy of the entity.
Amended by Acts 1995, i4th Leg., ch. 402, SI, eff. Sept. 1, 1995.
Historical and Statutory Notes
Prior Laws: Acts 1993, 73rd Leg.. ch. 268, S 1.
Acts 1979, 66th Leg.. p. 2071. ch. 810. Vernon's. Ann.eiv.St. ans. 8423-2, S 4;
Acts 1987, iOth Leg.. ch. 889. 4413(34c), S 6(a).
Acts 1989, i1si Leg.. ch. 693. S 2. V.T.e.A.. Government Code S 2256.005.
S 2256.00i. Investment Training; State Agency Board Members and Offi.
cers
(a) Each member of the f!oveminf! board of a state af!encY and its investment
'-' v .... ..
officer shall attend at least one training session relating to the person's
responsibilities under this chapter within six months after taking office or
. ,.
assummg aunes.
(b) The Texas Higher Education Coordinating Board shall provide the train.
ing UL10er this section.
(c) Trainin2: under this section must include education in investment con.
troIs, security. risks, srrate2V risks, market risks, and compliance with this
." --. .
chapter.
(d) An iLvesnnent officer shall attend a training session not less than once in
a rwo.year period and may receive training from a.T'lY independent source
approved by. t~e governing body of the state agency. The invesnnem officer
shall prepare :J. report on this subchapter and deliver the repon to the
~o\'ernin2: bodv of the state a2:ency not later than the 180th day after the last
w .... _ v ." ..
day of each rerular session of the leg:islature.
.... ..
Amended by Acts 1995, i4th Leg., ch. 402, S 1. eff. Sept. 1, 1995; Acts 1997, i5m Leg.,
ch. i3, S 1, efL May 9,1997; Acts 1997, i5th Leg., ch. 1421. S 4, eff. Se?t. 1. 199i.
Historical and Statutory Notes
Section 7 of the 1995 amendatory act pro.
vides:
"Each member of a governing board and
t::lch investment officer who is in office or who
has assumed duties on September 1. 1995, and
who would be required by S~stion 2256.00i(aJ,
Goverrunent Coae. as amended bv this Act. to
ancnd investmc:'lt tr.lining within six months
aner cling office or ~suming duties shall at.
tend at leac;t one training session relating to the
person's responsibilities under Chapter 2256.
Government Code. that meets the requirements
of that section not later than March 1. 1996."
~', ....
Acts 199i. iSm Leg.. ch. i3 rev.TOl.e suosec.
(b), which previously read:
''The governor's office shall provide training
under this section for me=noers and offic~rs
othe:- than members and officers of an institu.
tion of hi!!he: education. The Texas Hil!ner
Education Coorciinating Boar9 shall provid; the
training for members and officers of institutions
of higher education."
Acts 1997, i5th Leg.. cn. 1421 addtd subsec.
(d).
For appliotion pro\isions of Acts 199i. i5t.h
Le!Z.. ch. 1421. see- notes followinl! V.le.A..
Go~emment Coae S 2256.002. -
--
_.
GENERAl GOVERNMENT S 2256.009
Ch. 2256
9 2256.008. Investment Training; Local Governments
(a) The treasurer, the chief financial officer if the treasurer is not the chief
fin::mcial officer, and the investment officer of a local Q:overnment shall:
..
(I) attend' at least one' traininf! session rebtinf! to the treasurer's or
.. ...
office:'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
bv the Q:overninsr body of the local f!ovemmenr or a desisrnared investme:1t
. '- ..... y -
cor:nmirree advising the investment officer as provided for in L~e investment
policy of the local government.
(b) Training under this section must include education in investment con.
troIs. security risks, strate2'\' risks, market risks, and comDlbnce with this
. IW., .
chapte~.
Amended bv Acts 1995, i4m Le2:., ch: 402, S 1. ~ff. S~:)t. 1. 1995; Acts 199i, 75th Lez..
ch.1421.(S,eff.Sept.1,199i.- . -
"E3C~ rrC3.Sure:. chief financial officer. and
investment officer who is in office or who ha.'i
:.L~sumed duties on Septe:nbe: 1. 1995, and who
would be required by S~ction 2256.00B{a). Gqv.
emmem Code, as ::r.mended bv this Act. to at.
tcnd investment training withi~ 12 months after
~king office or assuming dutic:s shall attend at
least one: training session relating to the: pt:r.
Historical and Statutory Notes
St:ction g of the 1995 ame:lcl:ltory act pro. son's respor.sibHities uncle: Chaple: 2256. Gov.
vides: ei.lme:1t Coae. that mc:e:.s the require:ne:1ts or
that section not l.lter than S~i)te:nbe: 1. 199i."
Ac!.S 199i. i5th Le~.. ch, 1~21. in subsec. (~;.
inse:1ed subdivision desil?nator "( 1 t. sUDsLitut.
ed ., subchapter" for" chapter". add~ci sued. (2 J.
~d made othe: nonsubst'?ntivc: ch:l.ng~.
For application pro\isions of Acts 199i. i5ln
Lc:!!.. ch, 1421. see notes followin2 V.T.C..j...
G- C '~i"-'OOi -
ove:nme:ll oae:l __;0. _.
-
.,
S 2256.009. Authorized Investments: Obligations of, or Guaranteed by
Governmental Entities
(a) E"{cept as provided by Subsection (b), the following are authorized
inves~"Ilents under this subchapter:
(1) oblisrations of the United States or its alZencies and instrumentalities;
... ..
(2) direct obligations of this state or its agencies a..'1d instrumentalities;
(3) collateralized mUI1srClsre oblisrarions directlv issued by a federal asre:1CV
""--..... . . -.
or instrumentality of the United States, the underlying security for which is
guaranteed by an agency or instrumentality of the United States;
(4) other obligations, the princip:d and interest of which are unconditional-
Iv ~aranteed or insured bv, or backed by the full faith and credit of, this
. .... ..
state or the United States or their respective age~cies and instrumentalities;
and
(5) oblig:ltions of states, agencies. counties, cities, and other politic:).l
subdivisions of any state rated as to investment quality by a nationally '._~..,
reco~!1ized investment ratinf! firm not less thi:lD A or its eauivalent.
- ... .
S 2256.009
GOVER'\:\1EN"T CODE
Title 10
(b) The following are not authorized investments under this section:
(1) obligations whose payment represents the coupon payments on the
outstanding principal balance of the underlying mortgage-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 stated final maturity
W' ..... ... "
date of greater than 10 years; and
(4) collateralized mongage obligations the interest rate of which is deter-
... ... ...
mined by an index that adjusts opposite to the changes in a market index.
lunended bv Acts 1995, i4th Le~., ch. 402, S 1, eff. Seot. 1. 1995.
. - .
Historical and Statutory Notes
Section 6 of the 1995 ame:ld:nory act pro.
..ides:
"As provided by Section 1.02. Se:late Bill No. .
959, [ch. i6] Acts of the 74th Legislature, Regu.
l2J' Session, 1995. this ACt controls over Se:late
Bill No. 959 to the e:\te:lt of any conllic:."
Acts 1989. i1st Leg.. ch. 628. 9 1.
Acts 1989, i1st Leg., ch. 693. S 4.
Ac~ 1989. i1st Leg.. en. iSO. 9 1.
Acts 1993, i3rd Leg., ch. 9t.6. S 1.
V . A C' . S 8 .., ., r.. ., ( )
ernon S r\nn. 1\. t. an. ..._a-_. ~ _ a .
Acts 1993. i3rd Lt:g., eh. 268. S 1.
Acts 1993. i3rd Leg.. ch. 820. 9 2.
ActS] 995. 74th Leg.. ch. 76. S 5.45(a), (f).
Acts 1995, i4th Leg.. cn. 402. S 5.
V.T.C.A.. Government Code ~ 2256.006.
Prior Laws:
ActS 1987, 70th Leg., ch. 889.
Acts 1989. 71st Leg., ch. 39. S 1.
S 2256.010. Authorized Investments:.. Certificates of Deposit and Share
Certificates
A cenificate 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:
(1) 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 bv a federal agency or
- ... ""'" fI1. ""'" .,
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 ,by 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!Z., ch. 32. 9 1. eff. Aori128. 1995; Acts 1995, 74th Leg.,
ch. 402, S i, eff. Sept. I, 1995;wActs 1997. 75th Leg., ch. 14"1"1, 9 6, en. Sept.!. 1997. ,~."..',I"
GE.:\iERAL GOV.t.R..~ME~l'
Ch, 2256
~ 2256.U 11
HistoriCJ.l and Statutory Notes
Acts 1995. 74th Leg., ch, 32. in the section
ht::luing. added "and share cenificJtes"; in the
introductory par.lgr.lph. insened "or share cer.
tilk:ll~", following "the cenificJte", deleted "of
d~posit". and inserted ", or a state or feder:J
credil union domiciled in this stale"; and in
subd. (1), added "or the National Credit Union
Sh:l;"~ InsurJnce Fund or its successor".
Acts 1997, 75th Leg., ch, 1421. in the intra.
ductory 1::mguJge, substituted "bank" for "and
lo:m associ:l[ion".
For applic:ltion provisions of Acts 1997. 75th
Leg., ch, 1421. see notes following V.le.A..
Government Cod~ 9 2256.002.
Prior Laws:
Acts 1987, 70th Le!!.. ch. 339.
Acts 1989, ilst Leg., ch, 39, ~ 1.
Acts 1989, ilst Leg.. ch, 625. 9 1.
Acts 1989, ilst Leg.. ch, 693.9 4.
Acts 1989. ilst Leg., ch. i50, S 1.
Vernon's Ann.Civ.St. an. 8'+23-2, 9 2(a).
Acts 1993. i3rd Leg.. ch. 268, 9 1.
V.T.C.A., Government Code ~ 2256.007.
S 2256.011. Authorized Investments: Repurchase .~OTeeme!lts
(a) A fully collateralized repurchase agreeme~t is an authorized inVeSi:ille~t
under this subchapter if the repurchase agreeme~t:
(1) has a defined termination date;
(2) is secured by obligations described by Section 2256.009(a)(1); 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 invesIUle:n
is mLlde with the entity or with a third party selected and approved by the
entity; a..'1d
(4) is placed through. a primary govemme::n securities dealer, as defined by
the Federal Reserve, or a financial institution doing business in this SLate.
(b) In this section, "repurchase agreement" means a simultaneous agree-
me~t to buy, hold ror a sDecified time, and sell back at a future date obli2'arions
. . " ~
described by Section 2256.009(a)(1), at a marker value at the time the funds are
disbursed of not less than the principal amount of the funds disbursed. The
term includes a direct security repurchase agreement an~ a reverse security
repurchase agreement.
(c) Non.vithstandin2' anv other law, the term of any reverse security reDur-
...., . .,.. .
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 secUIity
repurchase agreement shall be used to acquire additional authorized invest-
ments, but the term of the authorized invesnnents acauired must mature not
.
later than the expirLltion date stated in the reverse security repurchase agree-
me~t.
Am~ndeci by Acts 1995, i4th Leg.. ch, 402. 9 1. eff. Sqt. 1. 1995.
Historical and Statutory Notes
Sedan 6 of the 1995 amendJtory act pro-
videS:
"As provided by Section 1.02. Senate Bill No.
959. [ch, i6j Acts of the i4th Legislarure. Regu.
."..~
......-.-.......-'_......_..._-~,.........,.,----_...., ""'0- ..' .".'......'
lar S~ssion. 1995. this Act controls ove:- S~:1:lte
Bill No. 959 to the extent of any conflic:,"
. . .....:~/.::;.:;...
..,'.J~':';"~~':"i./Lf!ir.i'-';"Jl..'t~I.l~f:"!W1.'iI\~';i'J.\lilld~~'Ultd'~;rilkI:",~.u~,-.~tl~W.j'~~'~li~~~t~i:~;'\)l.\~furati'~~~~aJJ:J'~'U.":'i~i'~~;~::~Ii,"lf\fJL~j:;'~U'h..),~l,jk'\Jf(i;.1i4tirA;!i,/~~i1.).a')!}irI)j'i~""l'~~,...,.......,.,.....:,.~j
S 2256.011
GOVERNME~'T CODE
Title 10
Prior Laws:
Acts 198i, 70th Leg.. ch. 889.
Acts 1989. 71st Leg.. ch. 39. 9 1.
Acts 1989. 71st Leg., ch. 628.9 1.
Acts 1989, i1st Leg.. ch. 693, 9 4
Acts 1989, 71st Lesr,. ch. 750. S 1.
Acts 1993. i3rd Le-2.. ch, 946. 9 1.
Yernon's Ann.Civ.St. an. 842a-2. S 2(a), (c).
Acts 1993, i3rd Leg.. ch, 268. 9 1.
Acts 1995. 74th Leg.. ch. 76. S 5.45(b), m.
Y.T.C.A.. Governm~nt Code 9 2256.008.
S 2256.012. Authorized Investments: Banker's Acceptances
A bankers' acceptance is an authorized investment under this subchapter if
the bankers' acceptance:
(1) h2S a stated maturity of 2iO days or fewer from the date of its issuance:
(2) will be, in accordance with its tenns, liquidated in full at maturity;
(3) is elig:ible for collateral for bOITowinsz from a Federal Reserve Bank;
- -
and
(4) is accepted by a bank organized and existing under the laws of the
United States or any state, if the shon-term obli2'2.tions of the bank, or of a
. -
bank holding company.of which the bank is the largest subsidial')', are rated
not less than A-lor P-l or an equivalent r2.ting by at least one nationally
recognized credit rating 3.gency.
Amended bv Acts 1995, 74th Lel!., ch. 402. S 1. eff. Sent. 1. 1995.
. - .
Acts 198i. iOth Leg.. ch. 889.
Acts 1989, i1st Leg.. ch. 39, 9 1.
Acts 1989. i1st Leg.. ch. 628. S 1.
Historical and Statutory Notes
Acts 1989. i 1st Lez., ch, 693, S 4.
Aci.S 1989, i 1st Le2.. ch. iSO. S .}.
Ve:71on's Ann.Ci\'.St. art. 842a-2. 9 2(a), (c).
.. Acts 1993. i3rd Le2.. ch. 26B. 9 1.
V.T.C.A.. Go\'ernme:1t Code 9 2256.009.
Prior Laws:
~ 2256.013. Authorized Investments: Commercial Paper
Commercial paper is an authorized investment under this subchapter if the
commercial paper:
(1) h2S a stated maturity of 270 days or fewer from the date of its issuance;
. .
and
(2) is rated not less than A-lor P-I or an eouivalent rating: bv at least:
. - .
(A) two nationally recognized credit rating agencies; or
(B) one nationally recognized credit rating agency and is fully secured by
an irrevocable letter of credit issued bv a bank or2:anized and existing:
. - -
under the laws of the United States or any state.
Amended by Acts 1995, 74th Leg., ch, 402. S 1. eff. Sept. 1. 1995.
Acts 19Si. iOth Leg.. ch. 889.
Acts 1989. ilst Leg.. ch. 39, S 1.
Acts 1989. ilst Leg.. ch. 623. S 1.
Historical and Statutory Notes
Acts 1989, i 1 st Le2:.. ch. 693. S 4.
Acts 1989, i1st Le2.. ch. i50. S 1.
Yernon's Ann.C-h'.Sl. an. 8423-2. S 2(a).
Acts 1993. i3rd Le!!.. ch. 268. 9 1.
V.lC.A.. Governmem Code 9 2256.010:
, --..........--
Prior Laws:
GENERAL GOVERNMENT
Ch. 1256
~ 2256.014. Authorized Investments: Mutual Funds
S 2256.014
(J) A no-load money market mutual fund is an authorized investment under
tr.is subch~pter if the mutual fund:
(1) is rezistered with and rerulated bv the Securities and Exchan~e Com-
- w _ _
mISSIOn;
(2) provides the investing entity with a prospectus and other inIormation
n:quired by the Securities Exchange Act of 1934 (15 D.S.C. Se'ction iSa et
seq.) or the Investment Company Act of 1940 (15 D.S.C. Section 80a-1 et
se~.);
(3) has a dollar-weighted average stated maturity of 90 days or fewer; ana
-..... .,.
(4) includes in its investment objectives the maintenance of a stabie net
asset v2.1ue of S 1 for each share.
(b) In addition to a no-load money market mutual fund pemlined as ;:m
3.l1lhoriz~d investment in Subsection (a), a no-load mutual fund is an authorized
investment under this subchapter if the murnal fund:
(1) is registered with the Securities and Exchange Co~rnission;
... ...
(2) has an average weighted maturity of less than two vem;
. -- w .,. ttI
(3) is invested exclusively in obligations approved by this subchapter;
( 4) is continuously rated as to investment Qualirv bv at least one nationallv
. .. .,. .
reco~!lized investment rating firm of not less than A.A..A or its equivalent; anci
(5) confol1ns to the requirementS set fonh in Sections 2256.016(b) and (c)
rdc.ting to t~e eligibility of invesnne:1t pools to receive and invest fu..11ds of
investing entities.
(c) An entirv is not authorized bv this section to:
. .
(1) invest in the aggregate more than 80 percent of its mom.hly average
fJnd bal:lnce, 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 collectively;
(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
d~bt service, in murnal funds described in Subsection (b);
(3) invest :lny ponion of bond proceeds, reserves and funds held for debt
se:-vice, in mutual funds described in Subsection (b); or
(4) bvest its funds or funds under its conrrol. including bond proceeds and
rc:)~rves and other funds held for debt service, in anyone mutual fund
dt:::)crib~d in Subsection (a) or (b) in an amount that exceeds 10 percent of the
toW :lSsets of the mutual fund.
,f
Amcncl~d b\' Acts 1995, i4th Le~.. ch. 402. S 1. eff. S~~t. 1. 1995: Acts 199i. i5th L~~..
ch.I~21.~'7.df.S~?t.1.199i.- . - _......~..
?...~
"'",:,~., r'~ ""'-',""l' .....,~~, rr., ~1" \".., ,.,,~
, T
, ........".......--."'.... ,".'M .'.M......._.... .
~ 2256.014
GOVERNMENT CODE
Title 10
Historical and Statutory Notes
Section 6 of the 1995 amend:nory act pro- For application provisions of Acts 1997. 75th
vides: Leg., ch. 1421. see notes following V.lC.A.,
Government Code 9 2256.002.
Notes of Decisions
invest their funds and funds under their control
in mutual funds holding only adjustable rate
mongages tbat obligate United States agencies
provided thaI the mutual fund complies witb
section 2(d) of tbe act, and provided that the
entit\. invests no more of its money in the mutu-
al fund than section 2(d) permits. - Op.Atry.Ge:l.
1993, No. DM-202.
"As provided by Section 1.02, Senate Bill No.
959. [ch. 76] Acts of the 74th Legislature. Regu-
lar Sc:ssion. 1995, this Act controls over Senate
Bill No. 959 to the 'extent of any conflict."
Acts 1997. 75th Leg.. ch. 1421, in subsec. (a).
in subd. (1), ihserted "registered with and",
added new subd. (2), and redesignated fonner
subds. (2) and (3) as subds. (3) and (4). respec-
tivelv.
"
Type of seCurities 1
I. Type of sec-Jrities
The Public Funds Investment Act. V.T.C.S.
anicle 842a-2, authorizes cities. counties,' and
certain other public and nonprofit entities to
Prior Laws:
Acts 198i, iOth Leg., ch. 889.
ActS 1989, 715t Leg., ch. 628, 9 1.
Acts 1991, i2nd Leg., ch. 732,9 1.
Acts 1993. i3rd Leg.. ch. 946. 9 1.
Vernon's Ann.CiV.SL an 842a-2. 9 2(c). (d).
Acts 1993, i3rd Leg., ch. 26B, 9 1.
ActS 1995, 74th Leg., ch. i6. S 5.45(c), (f).
V.T.C.A., Government Code 9 2256.011.
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 Droceeds under this subchaDter if the EUaranteed invesnne:lt
...... . w
contract:
(1) has a defined termination date; ..
(2) is secured bv obli2:ations described by Section 2256.009(a)(1), 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 a tenn 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 qualif:ving bid is received; _'
I ~
."~...."._".... ..,
...."..........
GENERAL GOVERNMENf
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 '
(5) the provider must ~enify the administrative costs reasonably expected
to be paid to third panies in connection with the guaranteed investment
Contract.
S 2256.016
Amended by Acts 1995. 74th Leg., ch. 402. S 1. eff. Sept. I, 1995; Acts 1997, 75th Leg.,
ch. 1421, 9 8, eff. S~pt. 1, 1997. '
Historical and Statutory Notes
Ac!.S 199i, i5lh Leg.. ch. 1421. in Lhe section' For applic:ltion provisions of Ac!.S ! 99i. i5th
heading, inserted "for State Agencies". Lel!.. ch. 1421. see notes following V.T.e.A..
Gove:-i1me:u Code 9 2250.002. -
S 2256.016. Authorized Investments: Investment Pools
(a) An entity may invest its funds and funds under its control through an
eligible investment pool if !:he governing body of the entity by rule, order,
ordinance, or resolution, as appropriate, authorizes investme:1t in the panicular
pool. An investment pool shall invest the funds it receives from entities in
authorized investments pennined by this subchapter.
(b) To be eligible to receive funds from and invest funds on behalf of an
entity under this chapter, an in'vestment pool must furnish to the investment
officer or other authorized representative of the entity an offering circular or
other similar disclosure insrrumem that contains, at a minimum. the foHowing
information:
(1) the types of invesnnents in which money is allowed to be invested;
(2) the ma\imum average dollar-weighted maturity allowed, based on the
stated maturity date, of the pool;
(3) the ma'ilinum stated maturity date any invesrment security within the
portfolio has;
(4) the objectives of the pool;
(5) the size of the pool;
(6) the names of the members of me advisory board of the pool and the
dates their tenns expire;
(i) the custodian bank that will safekeep the pool's asser.s;
(8) whether the intent of the pool is to maintain a ne~ asset value or one
dollar and the risk of market price fluctuation; ,
(9) whether the only source of payment is the assets of the pool at marke~
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 anentitv to de:Josit funds in and ..~
-. .
withdraw funds from the pool and any de:ldlines or other operating policies
,
!
I
I -
.,
"
S 2256.016 GOVERNME~l' CODE
Title 10
required for the entity to invest funds in and withdraw funds from the pool;
and
(12) the performance history of the pool. including yield, ave:-age dollar-
weighted maturities, and exoense ratios.
~ .
(c) To m:J.intain eligibilitv to receive funds from and invest funds on behalf of
,~ .-
an entit)' under this chapter, an investment pool must furnish to the investment
officer or other authorized representative of the entity:
(1) 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 poruolio in investmems thtn
have stated maturities of more than one vear;
"
(D) the book value versus the market value of l~e pool's poruolio. using
amornzed cost valuation;
(E) the size of the pool;
(F) the number of participants in the pool;
(G) the custodian bank that is safekeeping the assets of L~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 offerin!! circular.
... - .,
(d) An entity by contract may delegate to an investment pool the authority to
hold legal title 2.S 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 invesnne:lt companies
under the Investment Company Act of 1940, as promulgated from time to time
bv the federal Securities and Exchange Commission.
~ ~
(D To be eligible to receive funds from and invest funds on behalf of an entity
under this chapter, a public funds invesnne:lt pool created to function 2.S a
money market mutual fund must mark its pornolio to market daily, and, to the
extent reasonably possible, stabilize at a S 1 net asset value. If the ratio of the
market value of the portfolio divided by the book value of the portfolio is less
than 0.995 or greater than 1.005, porrfolio 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:
"".'~lIiol""
....
l'>""f
\ .. '~""~,~"'-\jr.,~,;>,,,,'~NIl'"Ji''"':"I'' .~~l'I"~~~"'~''"~'~''''''m,<''rr''l;~':'''f ...."'"T1' .. .~
GENERU GOVER~~IE~l'
Ch. 2256
(1) equally of panicipants in the pool and other persons who do not have a
business relationship with the pool and are qualifie~ to advise the pool, for a
public funds investment pool created under Chapter 791 and managed by a
state a2:encv; or
... .
.-""....
S 2256.017
(2) of participants i~ 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 eli2:ibilirv to receive funds from and invest funds on behalf of
... .
an entity under this chapter, an investment pool must be continuously rated no
lower than AAA or AAA.-m or at an equivalent rating by at least one nationally
recornized ratin2: service.
... ...
Amended by Acts 1995, i4th Leg., ch, 402, 9 1. eft. Sept. 1, 1995: Acts 1997, iSm Leg..
ch, 1421, S 9, eft. Sept. 1. 199i.
Historical and Statutory Notes
ActS 1997. 75th leg.. cn. 1421 added subsecs. Ac~ 1989, i1s! Leg.. ch, 693. 9 2.
(0 LO (h). Acrs 1993, 73rd Leg., ch, 946, S 1.
For application provisions of ActS 1997. i5th Vernon's Ann.CiV.SL a:-..s. 8423.-2, 9 3(a) to
Lc2., ch. 1421. see notes followin2 V.le.A.. (c). (e) to (g); 4413(3~c). 9 6(b).
Go~'ernme:1t Code 9 2256.002. W Ac~ 1995. 74th Leg.. ch, i6. 9 5.45(e), (f).
Acts 1995. 74th Leg.. cn. 402. S 5.
Acts 1993, 73rd Le2.. cn. 268. 9 1.
V.T.C.A.. Gove~em Code S9 2156.013,
2.,-. 0.'
_.)0. ::0.
Prior Laws:
Ac:.s 19i9. 66th Leg., p. 20il, ch, 810.
ACtS'198i. iOth Leg.. ch, 889.
S 2256.017. Existing Investments
An entity is not required to liquidate investments that were authorized
investments at the time of purchase.
Added by Acts 1995, i4th'Leg., ch. i6, 9 5.46(a), eff. Sept. 1. 1995: Acts 1995, i4th Leg.,
ch, 402. S 1. eft. Sept. 1. 1995. Amended by Acts 199i, iSth Leg., ch. 1421, S 10. err.
Sept 1. 199i.
Historical and Statutory Notes
,
.,
ActS 1995. 74th Leg.. ch. i 6, 9 5,46(a): to
conform to Acts 1993. 73rd Leg., c.h. 946. S 1,
added 9 2256.017. That provision did not take
effec: pursuant to Acts 1995. 74th Leg.. ch, 402.
9 6. which provides:
"As provided by Section 1.02. Sc:naLe Bill No.
959, [ch. 76] ActS of the i4th Legislature. Regu.
br St:ssion. 1995, this Act controls over Senate
Bill No. 959 to the extent of any conflict."
ActS 199i, 75th Leg.. ch, 1421. in the section
he~ding. substituted "E.'tisting InveslIne:1ts" for
"Portfolio of Ceruin Invesunem Pools", and
rewrote the sed on. which previously reJd:
":\ public funds invesonent pool creJted to
func:ion as J money market mutual fund must
mJrk its ponfoHo to market dJily and. to the
. .
r"'~",''''
exte::n reasonably possible, stabilize at a S 1 Di:~
asset value. If the ratio of the market value of
the portfolio divided by the book value of the
pO'rUolio is less than 0.995 or greater than
1.005, portfolio holdings shall be sold as neces-
sary to maintain the ratio berwee:1 0.995 and
1.005. "
For applic:ltion provisions of ActS 199i, 75ul
Leg.. ch. 1421. see notes following Y.T. C.A.,
Government Code 9 2256.002.
Prior uws:
ActS 1993. i3rd Le2.. CJ. 858. 9 1.
Yernon's Ann.Civ.SwL art. 842J.-2. 9 2(e).
Acts 1-995. i4th Leg.. CJ. 76. 9 5,46(b).
",",'"
" -' '~ ,,-,"
S 2256.018
Repealed
uOVElt'i:ME~l' CODE
Title 10
S 2256.018. Repealed by Acts 199i, iSth Leg., ch. 1421, 9 IS, elf. Sept. 1,
1997
Historical and StatutorY Notes
The repe:lled section. providing for an ad\:iso. Acts 1993. i3rd Leg.. ch. 26S. S 1.
ry hoard 01 invesune~t pools. was de:ived from: Acts 1995. 74th Le2.. ch. 76. ! 5,45(e). (0.
AClS 19 ~7. 79th Leg.. c~. 8 ~ 9. V. T. C.A.. Gove:1lm~nt Code S 2256.0 14( d).
Ae:.s ]9:-,. IJrd ~eg.. en. 9"10.9 1. _ Ae:.s 199:. i4th Lee.. ch. 402. S 1.
Ve:-non s Ann.el\'.Sl. an. 842a-l. S9 2(eJ. ::
3(D.
S 2256.019. Rating of Certain Investment Pools
A public funds investment pool must be continuously rated no lower than
A_!t.~ or A';'~-m or at an eouivalent ratinE: bv at le::..s'L one nationalh' recomized
.. ..... . . w
r2.tin2' service or no lower than investment 2'rade bv at le2.St one nationally
reco8Iized ratin2: service with a wei!1hted ave~a!1e m2lUrilV no P:!'e~te: than 90
.... ...... ...
davs.
A', 'b\.' T 190:: -".LL!] h "'0' t:. r:S '09- ~ "b ~ 109-
aaea ACtS , w. hul e_.. Cl.. ~ _, ::l' 1, ea. cOt. 1. L ,). r..I:iJe:laea y :~cr.s , '.
75th Le2.. ch. 1421. S 11. eft Se:>t. 1. 1997. .
.. .
Ac:.s 199i. i31h Les:.. eh. 1421 inse:1ed "or no
lowe:- than investrne:1t ~r2cie bv at least one
nationallv reeo!!nizec r;tin g se:"\'ice \.Vit.~ a
\~'e:g~ted' a\'e:-~ie maru:iry n-o greale:- th2.:1 90
cavs .
Historical and Statutorv Notes
.
For applic~rion provisions of Ae:.s 1997, i5L1
Leg., eh. 1421. see notes following V.T.C..-\..
- -
Gore:-:lme:1t Code S 2~56.002.
S 2256.020. Authorized Investments: Institutions of Hi~her Education
In addition to the authori..zed invesu-ne'!lts permitted by wJs subchapte~, 2.n
institution of higher education may purchase, sell, and invest its funds and
funds under its control in the following:
(1) cash mana2'ement and fixed income .funds 5Donsored bv or2'anizations
exempt from fed~ra.1 income ta\anon unde~ Sectio~ 501 (f), Ir{tern~ Revenue
Code of 1986 (26 D.S.C. Se:tion 501(f));
(2) ne2:otiable cenmcates of deDosit issued bv a bank that has a certificate
of deposit rating of at least 1 '0; the equivalent by a nationally recognized
credit ratin2' a2'encv or that is associated with a holdinE: comDanv havin2' a
""'''' .. ... ... ....
commercial paper raring of at least A-I, P-I, or the equivalent by a national-
ly recognized credit rating agency; and
(3) corporate bonds, debentures. or simiJardeot obligations rated by a
nationally recomized investment ratinE: Finn in one of the tvvo hi2:hes! lonE:-
' .. ... . "'..
tem ratin2' cate2'ones, without rezard to 2'!'adations within those catezories.
...... .... ...
Added bv ActS 1995, 74th Lez.. ch. 401. 9 1. eff. Se:>t. 1. 1995.
. ... .
Aets 1987. iOth Le;.. e~. 889.
080 -] L '. ., Q ;. 1
Ae:..s L.. I St eg.. en. o.....;j .
Ae:s 1989. i ]st Le;.. en. i50. S 1.
HistoriQ} and Statutory Notes
Acts 1993. i3ra Le!!.. en. 946. 9 1.
Ver;')on's Ar.:1.Civ.Swr. an. 842:1-2. 9 2(b),
Ac:..s 1993. i3rci..Leg.. en. 268. 9 1.
Ae:.s 1995. i4th Lel!.. en. i6. 9 5,4S(d). (D.
V.T.e.A.. GoVe:':1me:ll Code S 2256.012.
.. ....-_..-
Prior bws:
GENERAl GOVERNMENT S 2256.023 .
Ch. 2256
S 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.
...
Added by Acts 1995, 74th Leg.. ch. 402. 9 1, eff. Sept 1, 1995.
S 2256.022. Expansion of Investment Authority
Expansion of investment authOrity granted by this chapter shall require a risk
assessment by the state auditor or perfonned at the direction of the state
auditor.
Added by Acts 1995, i4th Leg., ch. 402, 9 1, eff. Sept 1, 1995.
g 2256.023. Internal Management Reports
(a) Not less than quanerly, the investment officer shall prepare and submit to
the governing bodv of the entitY a wrinen reoon of inves'tTIlem transactions for
.... .. - . .
all funds covered by this chapter for l~e preceding reporting period.
(b) The repOI1 must:
(1) describe in detail the investment positi~n 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 invesnnent officer of the entity;
(4) contain a summary statement, prepared in compliance with gener-dly
accepted accounting principles," or each pooled fund group that states the:
(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 separately 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;
(i) 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 porJolio of the state agency or
local 2'overnment as it relates to:
...
(A) the investment strategy expressed in the agency's or local govern-
ment's invesnnem policy; and
(B) relevant provisions of this chapter.
(c) The repOI1 shall be presented not less than quarterly to the governing
body and the chief executive officer of the entity within a reasonable time afte~.___
the end of the period. --
S 2256.U23 GOVER,,\;\lE:\jT CODE
Title 10
(d) . If an entity invests in other than money market mutual funds, investment
pools or accountS offered by its depository bank in the fonn of cenmcates .of
deposit. or money market accounts or similar accounts. the reports prepared by
the investment officers under this section shall be formaJJv reviewed at leas!
annually by an independent auditor, and the result of the review shall be
reponed to the governing body by that auditor.
Added by Acts 1995. 74th Leg.. ch. 402. S I. e ff. Sept. 1. 1995. Amen ded by Acts 199 i.
75th Leg., ch.1421. 9 12. eff. Sept. 1. 1997.
Historical and Statutory Notes
Acts 199i, 75th Lez., ch. 1421. in subsec. (b), Prior Laws:
in subd. (4), insened -:', prepared in compliance
with generally accej:Hed accounting principles,",
added p<lr. (D), and made other nonsubstantive
chang~s: and added subsee. (d).
For application provisions of ActS 1997. 75th
L~!!.. eh. 14~ 1. see notes following V.T.C.A.,
Go~ernme:lt Code 9 2156.002. w
ActS 1979, 66th Leg.. p. 20i1. eh. 810.
Vernon's Ann.Ch'.St. an. 4413(3~c). 9 4.
Ac:.s 1993. i3rd Ltg.. ch. 268. ~ 1.
V.T.C.A.. Govei.'lme:u Code S 2256.05i.
S 2256.024. Subchapter Cumulative
(a) The authOrity granted by this subchapter is in addition to mat granted by
other law. Except as provided by Subsection (b), this subchapter does not:
(1) prohibit an investment specifically authorized by other law; or
(2) authorize an investment specifically prohibited by other law.
(b) Except with respect to those investing entities desctibed in Subsection (c),
a securitv described in Section 2256.009(b) is not an authorized invest..rne:lt for
a state a;encv. a local ~overnment. or another investin~ e:ltirv. notwithStandin~
-.... .......
any other provision of this chapter or other law to the conrrary.
(c) Mongage pass-through cerJncates and individual mongage loans that
may constitute an investment described in Section 2256.009(b) are autboriztd
inv~st.lnents with respect to the housing bond programs operated by:
(1) the Texas Depamnenr of Housing and Commwjty 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. 1, 1995.
Prior uws:
ActS 19i9. 66th Leg.. p. 20i I, ch. 810.
Acts 1987. 70th Le~.. ch. 389.
Vernon's Ann.Ch7.St arts. 8423-2. S 7:
4413(34c). 9 7.
Historical and Statutory Notes
Acts 1993. i3rci L~g.. ch, 268. 9 1.
V.le.A.. (jo\'e:-nmC::ll Code 99 2256.015.
,j-' 059
--.)0. .
S 2256.025. Selection of Authorized Brokers
The governing body of an entity subject to this sub'chapter or the designmed
investment comminee of the entity shall. at le:lst annually, re\;ew, revise. and ...~....~
t'<~
GENERAL GOVf:.RNME~l'
eh. 2256
adopt a list of qualified brokers th:lt are authorized to engage in investment
transactions with the emirv.
~ 2?" 6 0"'::
~ _~ . :J.J
Added by Acts 199i, 75th Leg., ch. 1421, S 13, eff. S~pt. 1. 199i.
~istorical and Statutory Notes
For J?plic:ltion provisions of Acts 199i, i5lh
Leg.. ch. 1421. see notes followinl! V.T.C.A..
Go~emmt:nt Code 9 2256.002. -
S 2256.026. Statutory Compliance
All invesnnems made by entities must comply with this subchapter and all
federal, state, and local statutes, rules, or regulations.
Added by Acts 199i, iSm Leg., ch. 1421, g 13, eff. Sept. 1. 199i.
Historical and Statutory Notes
For :?pplication provisions of Acts 199i. iSlh
Leg.. eh. 1421, see notes following V.IC.A..
Gove:nme:lt Code 9 2256.002.
[$ . 2? .., O? - ? i .. 6 0" 0 de. ]
ecnons _~O. _, to __J .:; reserve lor expanSlOn
SUBCHAPTER B. MISCELL~\lEOUS PROVISIONS
S 2256.051. Electronic Funds Transfer
Anv locale:overnment mav use el~ctronic means to transfer or invest all funds
.... .
collected or conrrolled by the local government.
Amended by Acts 1995, i 4th Leg., ch. 402. S 1. eff. S~pt. 1, ! 995.
S 2256.052. Private Auditor
Not\Vithsranding any other law, a sute agency shall employ a private auditor
if authorized by the legislative audit comminee either on the committee's
initiative or on reauest of the ~oveming bodv of the a2:encv.
.. ..., -. ......
Amended by Acts 1995, i4th Leg., ch. 402. 9 1. eff. Sept. 1, 1995.
Prior Laws:
Ac~ 19i9, 66th L~g.. p. 20i1. ch. 310.
Vernon's Ann.Civ.;SL art 4413(34c), 9 5.
Historical and StatutO1\' Notes
~
Aets 1993, i3rd Leg., eb. 268, S 1.
V.T.C.A.. Government Code S 2256.058.
.
<
g 2256.053. Payment for S~curities Purchased by State
The comprroller or the disbursing officer of an agency that has the power to
invest assets directly may pay for aumorized-secunties purchased from or-"~':"
.'
S 2256.053
GOVER\lMENT CODE
Title 10
through a member in good standing of the National Association of Securities
Dealers or from or throUf!h a national or state bank on receivinf! 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. A 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 1997, 75th Leg.,
ch, 1423,9 8.67, eff. Sept 1, 1997.
Historical and Statutory Notes
"( 1) the abolished requirement to appoint a
first assistant under Chapter 404. Governme:n
Code; and .
"(2) maners reIatin2 to a bond recuired of
the comptroller or an ;mployee of the c'omprrol.
ler.
"Sec. 22.03. (a) Except as provided by Sub.
section (b) of this section, if another law enact.
ed bv the i5th Le2!slarure. Rerolar Session.
199i: that is intenled in whole-or in pa:1 to
mah a substantive change to the law conflicts
with this Act, the othe: law controls.
"Co) This Act controls ove: anothe: law enact.
ed bv the iSth Le~.slature, Rerolar Session,
199i: with regard to~ - .
"(1) t~e abolished require~ent to appoint a
first assistant under Chapte: 404, Govenunent
Code; and
"(2) matters relating to a bond required of
t~e comptroller or an employee of the comptiol-
I ..
er.
Acts 1997, iSth Leg., ch. 1423 made conform.
ing amendments to reflect the abolishment of
the office of the state treasurer.
Sections 22.01 to 22.03 of ActS 199i, iSth
Leg., ch. 1423 provide:
"Se::. 21.01. The purpose of this Act is to
conform the statutes to reflect the abolishment
of the office of state treasure:-.
"Sec. 22.02. (a) This Act does not revi,ve a
fund or account that was abolished or consoli.
dated in accor6nce with Section 403.094, Gov.
ern.TIlem Code, as added by Chapter 4, Acts of
the 72nd Legi.slarure, 1st Called Session, 1991.
or in accordance ~ith other law.
"(b) This Act does not revive a dedication of
money for a particular purpose that was abol.
ished in accordance with Section 403.094, Gov.
ernment Code, as added bv Chamer 4, ActS or
the nnd Lezi.slarure. 1st Called 'Session. 1991,
or in accord~ce with other law.
"(c) This Act does not of itSelf. imoose a new
power or duty on the comptroller,' trar.sfer 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:
Prior Laws:
Acts 196i, 60th Leg., p. 915, ch. 401.
ActS 1979, 66th Leg., p. 310. ch, 143, S 1.
Vernon's Ann.Civ.St an. 6252-5a, S 2.
Acts 1993, 73rd Leg., ch. 268, 9 1.
V.lC.A.. Government Code 9 2256.1 02.
S 2256.054. Delivery of Securities Purchased by State
A 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 industries,
including the book entry procedure of the Federal Rese!"Ve Bank.
Amended by Acts 1995, i4th Leg., ch. 402, S -1, eff. Sept. 1, 1995; Acts 199i, 75th Leg..
ch. 1423, S 8.68, eff. Sept 1, 199i.
Historical and Statutory Notes
ActS 1997, iSth Leg.. cn. 1423 made conform- Prior Laws:
ing amendments to reflect the abolishment of Acts 196 i, 60th Leg.. p. 915. ch. 40 I.
the office of the state tre:!.Surer. Acts 19i9, -bOth Leg.. p. 310. ch. 143, S 1. ".7_._"
~<';"<""""'-i....~~ ,.
,. . "'''~hiMlMdH..~':~'~iA~~iM~~L1~t!~lJt&:'iIS~',~~, ';'''iWo>''~''''';:'o.l~
GENERAL GOVERNMENT
Ch. 2256
Vernon's Ann.Civ.SL an. 6252-Sa, 9 2.
Acts 1993. 73rd Leg.. ch. 268. 9 1.
V.T.C.A.. Government Code 9 2256.103.
~~ 2256.057 to 2256.059
Deleted
~ 2256.055. Deposit of Securi~es Purchased by State
At 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.
.
Arne!lded by AC!5 1995, i4th Leg., ch. 402, 9 1, eff. Sept. 1. 1995; ActS 199i, iSm Leg..
ch. 1423,9 8.69, eff. SeD!. 1, 199i. '
.
Historical and Statutory Notes
Acts 199i. iSth Lel!.. ch. 1423 made coniorm.
in2: ame:1drnents to -reRect the abolishment of
the office of the state tre2.Sure:.
ACiS 19i9, 66th Leg., p. 310. ch. 143. S 2.
V . A C' S ,.,..,. ~ ~
ernon s Ann. IV. L art O_~_-;:):l. ::I ).
Acts 1993. i3rd Leg.. ch. 26S. S 1.
VTC~G C'!;??::;'10"
. . .."\., nvernrne:lt oce:l ___ o. -.
P:ior uws:
Acts 196i, 60th L~g.. p. 915. ch. 401.
'*
S 2256.056. Comoliance With Other Laws
..
Notwithstanding any other law, a municipality with a population of less t..~2...T)
50,000 may not issue for any purpose or cause to be issued in its behalf any
installment sale obligation or lease-purchase obligation having the principc.l
amount of S 1 million or more without complying with the provisions of Section
3.002, Chapter 53, Acts of the 70th Legislature, 2nd Called Session, 1987
(Article 717k-S, Vernon's Texas Civil Statutes), re2:ardless of whethe:- the
'"'
obligation was issued individually or in a series of related transactions, or
whether the obli2:ation was issued with no recourse to the local !!ovemme!lt.
'"' '"'
Added by Acts 199i, iSm Leg., ch. 1421, S' 14, en. Sept. 1, 199i.
. - .
Historical and Statutory Notes
For appliotion provisions of Acts 1997, 75th
Leg., ch. 1421. see notes following V.le)...,
Governme:lt Code S 2.256.002.
99 2256.05i to 2256.059. Deleted by Acts 1995, 74th leg., ch. 402, S 1,
eff. Sept 1,1995,
[Sections 2256.060 to 2256.1 00 reserved for expansion]
.--
~s 2256.101 to 2256. J lJ4
Deleted
GOVERJ'i;VIE~l CODE
Title 10
SUBCHAPTER C. PAYMENT FOR AND DELIVERY AND DEPOSIT
OF SECURITIES PURCHASED BY STATE [DELETED]
SS 2256.1 01 to 2256.1 04. Deleted by Acts 1995, 74th Leg., ch. 402, 9 1.
eff. Sept. 1, 1995
Section
?i"- 001
--':;; /. .
2257.002.
?I"" 00'"
--':;; /. -':;;.
, I"" 00"
--':;;1. J.
2257.004.
'1"7 00"
--':;;. ':;;.
CHAPTER 2257. COLLATERAL FOR PUBLIC FUNDS
SUBCHAPTER A. GENERAL PROVISIONS
Shon Title.
Definitions.
Hi~h-Risk Monsz2.sze Securitv.
Ch~pter Not Appli~able to Deferred Compensation Plans.
ConfliCt With Other Law.
Contract Governs Leszal Action.
[Sections 2257.006 to 2257.020 reserved for e~pansion]
SUBCHAPTER B. DEPOSITORY; SECURITY FOR DEPOSIT OF PUBLIC FUNDS
225i.021. Collateral Required.
2257.022. Amount of Collateral.
Ij"" 0'" C 11 al P I
--,) I. _J. 0 ater 0 icy.
2257.024. Contract for Securin~ Deposit of Public Funds.
2257.025. Records of Depository. .
2257.026. Chansze in Amount or Activitv of DeDosits of Public Funds.
[S;ctions 2251.027 to 225"7.040 . reserved for expansion]
SUBCHAPTER C. CUSTODLA...t\]; PERMlITED INSTITUTION
, I ".. 04 1
__':;; I. . .
'1"- 04'
--;) , , -.
, I -.. 043
--':;; /. .
2257.044.
??".. 04-
--':;; /. ,).
? I -.. 046
--':;; /. . .
Ij"" 04-
__,) I. / .
??"- 048
__) I. .
2257.061.
??-- 062
--':;;/. .
?i-'" 06"
-..,) I. J.
?/-- 064
-_)/. .
Deposit of Securities With Custodian.
Deposit of Securities With Permined Institution.
Depositorv as Custodian or Permined Institution.
C~todiaz{ as Bailee.
Receipt of Securiry by Custodian.
Books and Records of Custodian; Inspection.
Books and Records of Permined Institution.
Attachment and Perfection of Security Interest.
[Sections 2257.049 to 2257.060 ~eserved for expansion]
SUBCHAPTER D. AUDITS AND E:X.-L1v1INATIONS; PENAlTIES
Audits and Examinations.
Penalties.
Mitigating Circumstances.
Reinstatem en 1.
[Sections 2257.065 to 2257.080 reserved for expansion]
SUBCHAPTER E. E\:EMPT INSTITUTIONS
225i.081. Definition.
2257.082. Funds of Exempt Institution.
225i.D83. . Invesnnem; Selection of Depository.
Cross References
Water distric:s. generai fiscal provisions and depository regulations. see V.T.C.A.. Water Code
9 49.156.