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2001-010-RES AFFIRMING COP HAS COMPLIED WITH REQUIREMENTS OF PUBLIC FUNDS INVESTMENT ACT RESOLUTION NO. 2001-010 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PARIS, PARIS, TEXAS, AFFIRMING THAT THE CITY OF PARIS HAS COMPLIED WITH THE REQUIREMENTS OF THE PUBLIC FUNDS INVESTMENT ACT; AMENDING THE CITY'S INVESTMENT POLICY; MAKING OTHER FINDINGS AND PROVISIONS RELATED TO THE SUBJECT; AND PROVIDING AN EFFECTIVE DATE. 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 of the City of Paris 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 13th day of November, 1995, by Resolution No. 95-122, on the 9th day of March, 1998, by Resolution No. 98-036, and on the 11th day of January, 1999, by Resolution No. 99-003; and it is deemed appropriate that such policy be further amended; and, WHEREAS, the amended investment policy and incorporated revisions, a copy 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, PARIS, TEXAS: Section 1. That the findings set out in the preamble to this resolution are hereby in all things approved. Section 2. That the City of Paris has complied with the requirements of the Public Funds Investment Act. Section 3. That the Investment Policy be, and the same is hereby, amended, effective February 12, 2001, to the form shown in Exhibit A, attached hereto. Section 4. That this resolution shall be effecti ve from and after its date of passage. PASSED AND ADOPTED this 12th day of February, 2001. ATTEST: Mattie Cunningham, City Clerk APPROVED AS TO FORM: chenk, City Attorney ~~"~ Michael J. Pfieste, a INVESTMENT POLICY Revised January 2001 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 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 final maturity which exceeds the debt service payment date. Investment strategies for debt service reserve funds shall have as the primary objective lhe ability to generate a dependable revenue stream to the appropriate debt service fund from securities *ith 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 Consolidated Cash Funds 2.1.01 General Fund 2.1.1 0 Water and Sewer Fund 2.1.11 Capital Projects Fund 2.1.12 WW /SS Revenue Bond 2000 Construction Fund 2.1.17 Library Construction Fund 2.1.18 W &S Construction Fund Series 1997 2.1.19 Water Revenue Construction Fund 2.1.20 Special Revenue 2.1.21 Child Safety Fund 2.1.22 Health Department 2.1.26 cm Grant Fund EXHIBIT A' 2.1.40 CO 1993 Construction Fund 2.1.41 Tax & Revenue CO 2000 Construction 2.1.45 Solid Waste Bond Construction Fund 2.1.50 Consolidated Payroll 2.1.70 Employee's Insurance Fund 2.1. 71 Insurance Claims Fund 2.1.72 Library Memorial Fund 2.1.73 1. A. Love Trust Fund 2.1.74 J. P. Poteet Trust Fund 2.1.75 Wilbor-Deshong Trust Fund 2.1.76 Gibbs Memorial 2.1.77 Vaughan Memorial 2.2 Non-Consolidated Cash Funds 2.1.02 Economic Development Fund 2.1.30 Community Development Grant Fund 2.1.50 Revenue Bonds Sinking Fund 2.1.54 CO 1993 1& S Fund 2.1.55 Tax & Revenue CO 2000 I & S 2.1.00 All Other Funds 3.PRUDENCE Investments shall be made with judgement and care--under circumstances then prevailing--which persons of prudence, discretion and intelligence exercise in the management oftheir 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 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 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 financial interests in financial institutions that conduct business within this Jurisdiction, and they shall further disclose any large personal financial/investment positions that could be related to the performance ofthe 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 financial 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 financial institutions and broker/dealers who desire to become qualified bidders for investment transactions must supply the Finance Director with the following: audited financial statement, 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 financial institution and broker/dealer in which the City of Paris invests. 8.0 AUTHORIZED/SUITABLE INVESTMENTS 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. 11.0 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 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 ifthe 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 flowneeds. 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 Fed 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 desk. 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. VERNON'S TEXAS STATUTES AND CODES ANNOTATED GOVERNMENT CODE TITLE 10. GENERAL GOVERNMENT SUBTITLE F. STATE AND LOCAL CONTRACTS AND FUND MANAGEMENT CHAPTER 2256. PUBLIC FUNDS iNVESTMENT SUBCHAPTER A. AUTHORIZED INVESTMENTS FOR GOVERNMENTAL ENTITIES Copr. @ West Group 2000. All rights reserved. Current through End of 1999 Reg. Sess. * 2256.001. Short Title This chapter may be cited as the Public Funds Investment Acl. Amended by Acts 1995, 74th Leg., ch. 402, ~ I, eff. Sept. I, 1995. <General Materials (OM) - References, Annotations, or Tables> REVISOR'S NOTE 2000 Main Volume The source law refers to 1987, the year in which the source law was enacted. The revised law omits this reference as executed and because the source law has been amended since 1987. HlSTORICAL AND STATUTORY NOTES 2000 Main Volume Sections 6, 9, and II of the 1995 amendatory act provide: "Sec. 6. As provided by Section 1.02, Senate Bill No. 959, Acts of the 74th Legislature, Regular Session, 1995, this Act controls over Senate Bill No. 959 to the extent of any conflict." "Sec. 9. The state auditor shall conduct, or shall hire an independent evaluator to conduct, an assessment of the risks and benefits associated with authorizing entities subject to this chapter to invest in mutual funds other than money market mutual funds, investment pools other than investment pools that function as money market mutual funds, and guaranteed investment contracts. The state auditor shall report these findings to the legislature not later than September 1, 1996. This section expires on September 2, 1996." "Sec. 11. An entity that acquired authorized investment securities under Chapter 2256, Government Code, before the effective date of this Act that are no longer authorized investment securities under that chapter as amended by this Act is not required by this Act to liquidate those securities before the final stated maturity of the investmenl." Prior Laws: Acts 1987, 70th Leg., ch. 889. Vernon's Ann.Civ.SI. arl. 842a-2. * 1. Acts 1993, 73rd Leg., ch. 268, ~ 1. V.T.eA.. Government Code * 2256.001. NOTES OF DECISIONS Delegation of authority 2. Validity 1 Copr. @West2oo1 No Claim to Orig. U.S. Govl. Works EXHIBIT A I 1. Validity Insofar as this article purports to authorize political corporations and political subdivisions to invest public funds in bank-oriented money market mutual funds or other securities of private entities, it conflicts with article III. section 52. of the Texas Constitution. Op.Ally.Gen.1988, No. JM-975. 2,. Delegation of authority The lnterlocal Cooperation Act, article 4413(32c), V.T.eS., does not authorize local governments to delegate to another entity their authority to make investments; nor does article 842a-2. V.T.eS., or article 4413(34c), authorize such delegation. Op.Ally.Gen.1988, No. JM-932. * 2256.002. Definitions in this chapter: (1) "Bond proceeds" means the proceeds from the sale of bonds, notes, and other obligations issued by an entity. and reserves and funds maintained by an entity for debt service purposes. (2) "Book value" means the original acquisition cost of an investment plus or minus the accrued amortization 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 higher education" has the meaning assigned by Section 61.003. Education Code. (5) "Investing entity" and "entity" mean an entity subject to this chapter 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" means a municipality, a county, a school district, a district or authority created under Section 52(b)(1) or (2), Article 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 current 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" means an internally created fund of an investing entity in which one or more institutional accounts of the investing entity are invested. (10) "Qualified representative" means a person who holds a position with a business organization. who is authorized to act on behalf of the business organization. and who is one of the following: Copr. @West200l No Claim to Orig. U.S. Govt. Works (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 committee 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; (C) for an investment pool, the person authorized by the elected official or board with authority to administer the activities of the investment pool to sign the written instrument on behalf of the investment pool; or (D) for an investment management firm registered under the investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.) or, if not subject to registration under that Act, registered with the State Securities Board, a person who is an officer or principal of the investment management firm. (II) "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 agency" means an office, department, commission, board, or other agency that is part of any branch of state government, an institution of higher education, and any nonprofit corporation acting on behalf of any of those entities. Amended by Acts 1995, 74th Leg., ch. 402, ~ 1, eff. Sept. 1, 1995; Acts 1997, 75th Leg., ch. 1421, ~ 1, eff. Sept. 1, 1997; Acts 1999, 76th Leg., ch. 1454, ~ 1, eff. Sept. 1, 1999. <General Materials (GM) - References, Annotations, or Tables> REVISOR'S NOTE 2000 Main Volume The definition of "school district" is added to the revised law for drafting convenience. HISTORICAL AND STATUTORY NOTES 2000 Main Volume Acts 1997, 75th Leg., ch. 1421, in subd. (2), substituted "original 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 security as quoted by a recognized market pricing source" for "premium or discount"; inserted new subd. (10); and redesignated former subds. (10) to (12) as subds. (11) to (13) respectively. Section 16 of Acts 1997, 75th Leg., ch. 1421 provides: "This Act takes effect September 1, 1997, and applies only to investment activities of a governmental entity subject to Chapter 2256, Government Code, that occur on or after that date." Acts 1999, 76th Leg., ch. 1454, in subd. (10) added par. (D). Prior Laws: Acts 1979, 66th Leg., p. 2071, ch. 810. Acts 1987, 70th Leg., ch. 889. Acts 1989, 71stLeg., ch. 39, ~ 1. Acts 1989, 71st Leg., ch. 628, ~ 1. Acts 1989, 71st Leg., ch. 693, ~ 4. Copr. @West2001 No Claim to Orig. U.S. Govt. Works Acts 1989, 71st Leg., ch. 750, ~ 1. Acts 1993, 73rd Leg., ch. 946, ~ 1. Vernon's Ann.Civ.St. arts. 842a-2. ~ 2(a). (c)(4); 4413(34c), ~ 1. Acts 1993, 73rd Leg., ch. 268, ~ 1. Acts 1995, 74th Leg., ch. 76, ~ 5.45(e), (t). V.T.CA. Government Code ~~ 2256.002. 2256.051. NOTES OF DECiSIONS Public funds 1 1. Public funds The Public Funds Investment Act. Government Code chapter 2256, subchapter A, applies only to certain public funds. Public funds are those funds belonging to the state or a political subdivision that the state has collected in accordance with a general law and that will be used to serve the public interest generally. A governmental entity may invest under the act only public funds that, among other things, the entity is authorized to invest by a statute other than the act. Op.Atty.Gen.1998, No. DM-489. The Commissioner of Banking may not invest under the act [the Public Funds Investment Act, Government Code chapter 2256, subchapter A] funds of a liquidated, uninsured bank or a trust company in conservatorship because the funds are not public funds. Likewise, the Commissioner may not invest under the act funds of a liquidated perpetual-care cemetery. The Commissioner may not invest under the act seized prepaid-funeral-contract funds. nor may the Commissioner invest under the act money in the prepaid-funeral-contract guaranty fund. Finally, the Commissioner may not invest travel-advance funds under the act because the Commissioner does not have the statutory authority to do so. Op.Atty.Gen.1998, No. DM-489. ~ 2256.003. Authoritv to Invest Funds; Entities Subiect to This Chapter (a) 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 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 government or a state agency; or (4) an investment pool acting on behalf of two or more local governments, state agencies, or a combination of those entities. (b) in the exercise of its powers under Subsection (a), the governing body of an investing entity may contract with an investment management firm registered under the Investment Advisers Act of 1940 (15 U.S.c. Section 80b-1 et seq.) or with the State Securities Board to provide for the investment and management of its public funds or other funds under its control. A contract made under authority of this subsection may not be for a term longer than two years. A renewal or extension of the contract must be made by the governing body of the investing entity by order, ordinance. or resolution. (c) This chapter does not prohibit an investing entity or investment officer from using the entity's employees or the services of a contractor of the entity to aid the investment officer in the execution of the officer's duties under this chapter. Amended by Acts 1995, 74th Leg., ch. 402. ~ 1, eff. Sept. 1, 1995; Acts 1999. 76th Leg., ch. 1454. ~ 2, eff. Sept. 1, 1999. Copr. @West2oo1 No Claim to Orig. U.S. Govt. Works <General Materials (GM) - References, Annotations, or Tables> HISTORICAL AND STATUTORY NOTES 2000 Main Volume Acts 1999. 76th Leg., ch. 1454 designated subsec. (a); and added subsecs. (b) and (c). Prior Laws: Acts 1987, 70th Leg., ch. 889. Acts 1989, 71stLeg., ch. 39, ~ 1. Acts 1989, 71stLeg., ch. 628, ~~ 1,2. Acts 1989, 71stLeg., ch. 693, ~ 4. Acts 1989, 71stLeg., ch. 750, ~ 1. Vernon's Ann.Civ.St. art. 842a-2, ~~ 2(a). 5(a). Acts 1993, 73rd Leg., ch. 268, ~ 1. V.T.eA., Government Code ~ 2256.003. LIBRARY REFERENCES 2000 Main Volume Municipal Corporations €;= 884. States €;= 124. WESTLA W Topic Nos. 268, 360. C.J.S. Municipal Corporations ~ 1881. C.J.S. States ~ 225. Texts and Treatises 2 Texas Jur 3d, Admin L ~ 19. NOTES OF DECISIONS Public funds 1 1. Public funds The Public Funds Investment Act, Government Code chapter 2256, subchapter A, applies only to certain public funds. Public funds are those funds belonging to the state or a political subdivision that the state has collected in accordance with a general law and that will be used to serve the public interest generally. A governmental entity may invest under the act only public funds that, among other things, the entity is authorized to invest by a statute other than the act. Op.Atty.Gen.1998, No. DM-489. The Commissioner of Banking may not invest under the act [The Public Funds Investment Act, Government Code chapter 2256, subchapter A] funds of a liquidated, uninsured bank or a trust company in conservatorship because the funds are not public funds. Likewise, the Commissioner may not invest under the act funds of a liquidated perpetual-care cemetery. The Commissioner may not invest under the act seized prepaid-funeral-contract funds, nor may the Commissioner invest under the act money in the prepaid-funeral-contract guaranty fund. Finally, the Commissioner may not invest travel-advance funds under the act because the Commissioner does not have the statutory authority to do so. Op.Atty.Gen.1998, No. DM-489. ~ 2256.004. Aoolicabilitv (a) This subchapter does not apply to; (1) a public retirement system as defined by Section 802.001; Copr. @ West 2001 No Claim to Orig. U.S. Govt. Works (2) state funds invested as authorized by Section 404.024; (3) an institution of higher education having total endowments of at least $95 million in book value on May I, 1995; (4) funds invested by the Veterans' Land Board as authorized by Chapter 161, 162, or 164, Natural Resources Code; (5) registry funds deposited with the county or district clerk under Chapter 117, Local Government Code; or (6) a deferred compensation plan that qualifies under either Section 401(k) or 457 of the Internal Revenue Code of 1986 (26 u.s.e Section I et seq.), as amended. (b) This subchapter does not apply to an investment donated to an investing entity for a particular purpose or under terms of use specified by the donor. Amended by Acts 1995, 74th Leg., ch. 402, ~ I, eff. Sept. I, 1995; Acts 1997, 75th Leg., ch. 505, ~ 24, eff. Sept. I, 1997; Acts 1997, 75th Leg., ch. 1421, ~ 2, eff. Sept. I, 1997; Acts 1999, 76th Leg., ch. 62, ~ 8.21, eff. Sept. I, 1999; Acts 1999, 76th Leg., ch. 1454, ~ 3, eff. Sept. I, 1999. <General Materials (GM) - References, Annotations, or Tables> REVISOR'S NOTE 2000 Main Volume The source law refers to Section 12.001(2), Title 1I0B, Revised Statutes. That statute was codified in 1989 as Section 802.001(2) of this code, and renumbered in 1991 as Section 802.001(3) of this code. The revised law refers to that section. HISTORICAL AND STATUTORY NOTES 2000 Main Volume Acts 1997, 75th Leg., ch. 505, added subd. (5). Acts 1997, 75th Leg., ch. 1421 added subd. (5), and made other nonsubstantive changes. For application provisions of Acts 1997. 75th Leg., ch. 1421, see notes following V.T.C.A., Government Code ~ 2256.002. Acts 1999, 76th Leg., ch. 62 renumbered the subd. (5) added by Acts 1997, 75th Leg., ch. 1421, as subd. (6). Acts 1999, 76th Leg., ch. 1454 designated subsec. (a), also renumbered former subd. (5), as added by Acts 1997, 75th Leg., ch. 1421, as subd. (6); and added subsec. (b). Prior Laws: Acts 1987, 70th Leg., ch. 889. Vernon's Ann.Civ.St. art. 842a-2. ~ 6. Acts 1993, 73rd Leg., ch. 268, ~ 1. V.T.eA.. Government Code ~ 2256.016. ~ 2256.005. Investment Policies; Investment Strategies; Investment Officer (a) The governing body of an investing entity shall adopt by rule. order, ordinance. or resolution, as appropriate, a written investment policy regarding the investment of its funds and funds under its control. Copr. @West2oo1 No Claim to Orig. U.S. Govt. Works (b) The investment policies must: (I) be written; (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 in which the investing entity's funds may be invested; (B) the maximum allowable stated maturity of any individual investment owned by the entity; (C) for pooled fund groups, the maximum dollar-weighted average maturity 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 settlement of all transactions, except investment pool funds and mutual funds, on a delivery versus payment basis. (c) The investment policies may provide that bids for certificates of deposit be solicited: (I) orally; (2) in writing; (3) electronically; or (4) in any combination of those methods. (d) As an integral pan of an investment policy, the governing body shall adopt a separate written investment strategy for each of the funds or group of funds under its control. Each investment strategy must describe the investment objectives for the particular fund using the following priorities in order of importance: (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 governing body of an investing entity shall review its investment policy and investment strategies not less than annually. The governing body shall adopt a written instrument by rule, order, ordinance, or resolution stating that it has reviewed the investment policy and investment strategies and that the written instrument so adopted shall record any changes made to either the investment policy or investment strategies. (f) Each investing entity shall designate. by rule, order, ordinance, or resolution, as appropriate. one or more Copr. @ West 2001 No Claim to Orig. U.S. Govt. Works officers or employees of the state agency, 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. If the governing body of an investing entity has contracted with another investing entity to invest its funds, the investment officer of the other investing entity is considered to be the investment officer of the first investing entity for purposes of this chapter. Authority granted to a person to invest an entity's funds is effective until rescinded by the investing entity, until the expiration of the officer's term or the termination of the person's employment by the investing entity, or if an investment management firm, until the expiration of the contract with 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, but the governing body of the investing entity retains ultimate responsibility as fiduciaries of the assets of the entity. Unless authorized by law, a person may not deposit, withdraw, transfer, or manage in any other manner the funds of the investing entity. (g) Subsection (I) 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. <Text of subsec. (h) as amended by Acts 1997, 75th Leg., ch. 685, ~ 1> (h) An officer or employee of a commission created under Chapter 391, Local Government Code, is ineligible to be an investment officer for the commission under Subsection (t) if the officer or employee is an investment officer designated under Subsection (I) for another local government. <Text of subsec. (h) as amended by Acts 1997, 75th Leg., ch. 1421, ~ 3> (h) An officer or employee of a commission created under Chapter 391, Local Government Code, is ineligible to be designated as an investment officer under Subsection (t) for any investing entity other than for that commission. (i) An investment officer of an entity who has a personal business relationship with a business organization offering to engage in an investment transaction with the entity shall file a statement disclosing that personal business interest. An investment officer who is related within the second degree by affinity or consanguinity, as determined under Chapter 573, to an individual seeking to sell an investment to the investment officer's entity shall file a statement disclosing that relationship. A statement required under this subsection 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: (1) the investment officer owns 10 percent or more of the voting stock or shares of the business organization or owns $5,000 or more of the fair market value of the business organization; (2) funds received by the investment officer from the business organization exceed 10 percent of the investment officer's gross income for the previous year; or (3) the investment officer has acquired from the business organization during the previous year investments with a book value of $2,500 or more for the personal account of the investment officer. (j) The governing body of an investing entity may specify in its investment policy that any investment authorized by this chapter is not suitable. (k) A written copy of the investment policy shall be presented to any person offering to engage in an investment transaction with an investing entity or to an investment management firm under contract with an investing entity to invest or manage the entity's investment portfolio. For purposes of this subsection, a business organization includes investment pools and an investment management firm under contract with an investing entity to invest or manage the entity's investment portfolio. Nothing in this subsection relieves the investing entity of the responsibility for monitoring the investments made by the investing entity to determine 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 written instrument in a form acceptable to the investing entity and the business organization substantially to the effect that the business organization has: Copr. @West2001 No Claim to Olig. U.S. Govt. Works (1) received and reviewed the investment policy of the entity; and (2) acknowledged that the business organization has implemented reasonable 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 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 investment standards. (I) The investment officer of an entity may not acquire or otherwise 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 other than a state agency, 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. (n) Except as provided by Subsection (0), at least once every two years a state agency shall arrange for a compliance audit of management controls on investments and adherence to the agency's established investment policies. The compliance audit shall be performed by the agency's internal auditor or by a private auditor employed in the manner provided by Section 321.020. Not later than January 1 of each even-numbered year, a state agency shall report the results of the most recent audit performed under this subsection to the state auditor. A state agency also shall report to the state auditor other information the state auditor determines necessary to assess compliance with laws and policies applicable to state agency investments. A report under this subsection shall be prepared in a manner the state auditor prescribes. (0) The audit requirements of Subsection (n) do not apply to assets of a state agency that are invested by the comptroller under Section 404.024. Amended by Acts 1995, 74th Leg., ch. 402, ~ I, eff. Sept. I, 1995; Acts 1997, 75th Leg., ch. 685, ~ 1, eff. Sept. I, 1997; Acts 1997. 75th Leg.. ch. 1421, ~ 3, eff. Sept. 1, 1997; Acts 1999, 76th Leg.. ch. 1454, ~ 4, eff. Sept. 1, 1999. <General Materials (GM) - References, Annotations, or Tables> HISTORICAL AND STATUTORY NOTES 2000 Main Volume Acts 1997, 75th Leg., ch. 685, rewrote subsec. (h), which previously read: "An officer or employee of a commission created under Chapter 391, Local Government Code, is ineligible to be designated as an investment officer under Subsection (f) ." Acts 1997, 75th Leg., ch. 1421, in subsec. (b), in subd. (4), in par. (C), substituted "dollar-weighted average" for "average dollar-weighted", added pars. (0) and (E), and made other nonsubstantive changes; in subsec. (d), inserted "or group of funds"; in subsec. (e), inserted "The governing body shall adopt a written instrument by rule, order, ordinance, or resolution stating that it has reviewed the investment policy and investment strategies and that the written instrument so adopted shall record any changes made to either the investment policy or investment strategies."; in subsec. (f), deleted ". Unless otherwise authorized by law, a person may not deposit, withdraw, invest, transfer, or manage in any other manner funds of a state agency, local government, or investment pool without express written authority of the governing body, chief executive officer, or chief financial officer of the state agency, local government, or investment pool,", deleted "deposit, withdraw,", deleted ", transfer, or manage", and inserted "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 authorized by law, a person may not deposit, withdraw, transfer, or manage in any other manner the funds of the investing entity."; in subsec. (h), inserted "for any investing entity other than for that commission"; in subsec. (i), substituted "a business organization offering to engage in an investment transaction with" for "an entity seeking to sell an investment to", inserted "For purposes of this Copr. @West2001 No Claim to Orig. U.S. Govt. Works subsection, an investment officer has a personal business relationship with a business organization if:", and added subds. (1) to (3); in subsec. (k), substituted "offering to engage in an investment transaction with an investing entity" for "seeking to sell to the entity an authorized investment", inserted "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 determine that they are in compliance with the investment policy.", substituted "qualified representative" for "registered principal", substituted "offering to engage in an investment transaction with an investing entity" for "seeking to sell an authorized investment", inserted "in a form acceptable to the investing entity and the business organization", substituted "business organization" for "registered principal", in subd. (I), deleted "thoroughly", in subd. (2), inserted "business", deleted "imprudent investment activities arising out of', and inserted "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 investment standards"; and in subsec. (1), substituted "acquire or otherwise obtain any authorized investment described in the investment policy of the investing entity" for "buy any securities", and substituted "the instrument required" for "an instrument in substantially the form provided". For application provisions of Acts 1997, 75th Leg., ch. 1421, see notes following V.T.eA.. Government Code ~ 2256.002. Acts 1999, 76th Leg., ch. 1454, in subsec. (I), inserted the second sentence, in the third sentence, inserted "the expiration of the officer's term or the" and", or if an investment management firm, until the expiration of the contract with the investing entity", in the fourth sentence, added ", but the governing body of the investing entity retains ultimate responsibility of fiduciaries of the assets of the entity"; in subsec. (k), in the first sentence, added "or to an investment management firm under contract with an investing entity to invest or manage the entity's investment portfolio", and in the second sentence, added "and an investment management firm under contract with an investing entity to invest or manage the entity's investment portfolio"; in subsec. (m), in the first sentence, inserted "other than a state agency", and deleted the second and third sentences, which previously read, "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 committee."; and added subsecs. (n) and (0). Prior Laws: Acts 1979, 66th Leg., p. 2071, ch. 810. Acts 1987. 70th Leg., ch. 889. Acts 1989, 71st Leg., ch. 628, ~ 2. Acts 1989, 71st Leg., ch. 693, ~~ 2, 3. Vernon's Ann.Civ.St. arts. 842a-2, ~ 5; 4413(34c), ~~ 2(a), (b), 3(a), (b). Acts 1993, 73rd Leg., ch. 268, ~ 1. V.T.C.A.. Government Code ~~ 2256.004,2256.052,2256.0054, 2256.055. LIBRARY REFERENCES 2000 Main Volume Municipal Corporations €:= 884. States €:= 124. WESTLA W Topic Nos. 268, 360. C.J.S. Municipal Corporations ~ 1881. C.J.S. States ~ 225. NOTES OF DECISIONS Person responsible 1 1. Person responsible Copr. @West2001 No Claim to Orig. U.S. Gov!. Works Commissioners court may designate which county funds are to be invested and direct treasurer to invest those funds in accordance with Public Funds Investment Act. Op.Atty.Gen. 1992, No. DM-96. ~ 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 governed by the following investment objectives, in order of priority: (I) 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 determination shall be made taking into consideration: (I) the investment of all funds, or funds under the entity's control. over which the officer had responsibility rather than a consideration as to the prudence of a single investment; and (2) whether the investment decision was consistent with the written investment policy of the entity. Amended by Acts 1995, 74th Leg., ch. 402, ~ I, eft Sept. I, 1995. <General Materials (GM) - References, Annotations, or Tables> HISTORICAL AND STATUTORY NOTES 2000 Main Volume Prior Laws: Acts 1979, 66th Leg., p. 2071, ch. 810. Acts 1987, 70th Leg., ch. 889. Acts 1989, 71st Leg., ch. 693, ~ 2. Acts 1993, 73rd Leg., ch. 268, ~ 1. Vernon's Ann.Civ.St. arts. 842a-2. ~ 4; 4413(34c), ~ 6(a). V.T.C.A.. Government Code ~ 2256.005. LIBRARY REFERENCES 2000 Main Volume Municipal COtporations €:= 884. States €;;;:;;> 124. WESTLA W Topic Nos. 268, 360. C.J.S. Municipal Corporations ~ 1881. C.J.S. States ~ 225. ~ 2256.007. Investment Training; State Agencv Board Members and Officers (a) Each member of the governing board of a state agency and its investment officer shall attend at least one training session relating to the person's responsibilities under this chapter within six months after taking office or assuming duties. COpT. @West2001 No Claim to Orig. U.S. Govt. Works (b) The Texas Higher Education Coordinating Board shall provide the training under this section. (c) Training under this section must include education in investment controls, security risks, strategy risks, market risks, diversification of investment portfolio, and compliance with this chapter. (d) An investment 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 I 80th day after the last day of each regular session of the legislature. Amended by Acts 1995, 74th Leg., ch. 402, ~ I, eff. Sept. I, 1995; Acts 1997, 75th Leg., ch. 73, ~ I, eff. May 9, 1997; Acts 1997, 75th Leg., ch. 1421, ~ 4, eff. Sept. I, 1997; Acts 1999, 76th Leg., ch. 1454, ~ 5, eff. Sept. I, 1999. <General Materials (GM) - References, Annotations, or Tables> HISTORICAL AND STATUTORY NOTES 2000 Main Volume Section 7 of the 1995 amendatory act provides: "Each member of a governing board and each investment officer who is in office or who has assumed duties on September I, 1995, and who would be required by Section 2256.007(a). Government Code. as amended by this Act, to attend investment training within six months after taking office or assuming duties shall attend at least 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 1997, 75th Leg., ch. 73 rewrote subsec. (b), which previously read: "The governor's office shall provide training under this section for members and officers other than members and officers of an institution of higher education. The Texas Higher Education Coordinating Board shall provide the training for members and officers of institutions of higher education." Acts 1997, 75th Leg., ch. 1421 added subsec. (d). For application provisions of Acts 1997, 75th Leg., ch. 1421, see notes following V.T.C.A. Government Code * 2256.002. Acts 1999, 76th Leg., ch. 1454, in subsec. (c) inserted "diversification of investment portfolio". * 2256.008. Investment Training: Local Governments (a) Except as provided by Subsection (b), the treasurer, the chief financial officer if the treasurer is not the chief financial officer, and the investment officer of a local government shall: (I) attend at least one training session from an independent source approved by the governing body of the local government or a designated investment committee advising the investment officer as provided for in the investment policy of the local government and containing at least 10 hours of instruction relating to the treasurer's or officer's responsibilities under this subchapter within 12 months after taking office or assuming duties; and (2) except as provided by Subsection (b), attend an investment training session not less than once in a two-year period and receive not less than 10 hours of instruction relating to investment responsibilities under this subchapter from an independent source approved by the governing body of the local government or a designated investment committee advising the investment officer as provided for in the investment policy of the local government. Copr. @ West 2001 No Claim to Orig. U.S. Govt. Works (b) An investing entity created under authority of Section 52(b), Article 1Il. or Section 59. Article XVi. Texas Constitution, that has contracted with an investment management firm under Section 2256.003(b) and has fewer than five full-time employees or an investing entity that has contracted with another investing entity to invest the entity's funds may satisfy the training requirement provided by Subsection (a)(2) by having an officer of the governing body attend four hours of appropriate instruction in a two-year period. The treasurer or chief financial officer of an investing entity created under authority of Section 52(b), Article 1Il, or Section 59, Article XVi. Texas Constitution, and that has fewer than five full-time employees is not required to attend training required by this section unless the person is also the investment officer of the entity. (c) Training under this section must include education in investment controls, security risks, strategy risks, market risks, diversification of investment portfolio, and compliance with this chapter. (d) Not later than December 31 each year, each individual, association, business, organization, governmental entity, or other person that provides training under this section shall report to the comptroller a list of the governmental entities for which the person provided required training under this section during that calendar year. An individual's reporting requirements under this subsection are satisfied by a report of the individual's employer or the sponsoring or organizing entity of a training program or seminar. Amended by Acts 1995, 74th Leg., ch. 402, ~ I, eff. Sept. 1, 1995; Acts 1997, 75th Leg., ch. 1421, ~ 5, eff. Sept. 1, 1997; Acts 1999, 76th Leg., ch. 1454, ~ 6, eff. Sept. 1, 1999. <General Materials (GM) - References, Annotations, or Tables> HISTORICAL AND STATUTORY NOTES 2000 Main Volume Section 8 of the 1995 amendatory act provides: "Each treasurer, chief financial officer, and investment officer who is in office or who has assumed duties on September 1, 1995, and who would be required by Section 2256.008(a). Government Code, as amended by this Act, to attend investment training within 12 months after taking office or assuming duties shall attend at least one training session relating to the person's responsibilities under Chapter 2256, Government Code, that meets the requirements of that section not later than September 1, 1997." Acts 1997, 75th Leg., ch. 1421 in subsec. (a), inserted subdivision designator "(1)", substituted "subchapter" for "chapter", added subd. (2), and made other nonsubstantive changes. For application provisions of Acts 1997, 75th Leg., ch. 1421, see notes following V.T.C.A.. Government Code ~ 2256.002. Acts 1999, 76th Leg., ch. 1454, in subsec. (a), in the introductory paragraph, inserted "Except as provided by Subsection (b), ", in subd. (1), inserted "from an independent source approved by the governing body of the local government or a designated investment committee advising the investment officer as provided for in the investment policy of the local government and containing at least 10 hours of instruction", and in subd. (2). inserted "except as provided by Subsection (b),"; inserted subsec. (b); relettered former subsec. (b) as subsec. (c) ,and therein inserted "diversification of investment portfolio,"; and added subsec. (d). ~ 2256.009. Authorized Investments: Obligations of. or Guaranteed bv Governmental Entities (a) Except as provided by Subsection (b), the following are authorized investments under this subchapter: (1) obligations of the United States or its agencies and instrumentalities; (2) direct obligations of this state or its agencies and instrumentalities; Copr. @West2001 No Claim to Orig. U.S. Govt. Works (3) collateralized mortgage obligations directly issued by a federal agency 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 principal and interest of which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, this state or the United States or their respective agencies and instrumentalities; (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent; and (6) bonds issued, assumed, or guaranteed by the State of Israel. (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 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 interest; (3) collateralized mortgage obligations that have a stated final maturity date of greater than IO years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. Amended by Acts 1995, 74th Leg., ch. 402, ~ I, eff. Sept. 1, 1995; Acts 1999, 76th Leg., ch. 1454, ~ 7, eff. Sept. I, 1999. <General Materials (GM) - References. Annotations. or Tables> HISTORICAL AND STATUTORY NOTES 2000 Main Volume Section 6 of the 1995 amendatory act provides: "As provided by Section 1.02, Senate Bill No. 959. [ch. 76] Acts of the 74th Legislature, Regular Session, 1995, this Act controls over Senate Bill No. 959 to the extent of any conflict." Acts 1999, 76th Leg., ch. 1454, in subsec. (a) added subd. (6). Prior Laws: Acts 1987, 70th Leg., ch. 889. Acts 1989, 71st Leg., ch. 39, ~ 1. Acts 1989, 71st Leg., ch. 628, ~ 1. Acts 1989, 71st Leg., ch. 693, ~ 4. Acts 1989, 71st Leg., ch. 750, ~ 1. Acts 1993, 73rd Leg., ch. 946, ~ 1. Vernon's Ann.Civ.St. art. 842a-2. ~ 2(a). Acts 1993, 73rd Leg., ch. 268, ~ 1. Acts 1993, 73rd Leg., ch. 820, ~ 2. Acts 1995, 74th Leg., ch. 76, S 5,45(a), (t). Acts 1995, 74th Leg., ch. 402. S 5. V.T.eA., Government Code ~ 2256.006. LIBRARY REFERENCES 2000 Main Volume Copr. @West2001 No Claim to Orig. U.S. Govt. Works Municipal Corporations €;:;;;> 884. States ~ 124. WESTLA W Topic Nos. 268, 360. c.r.s. Municipal Corporations ~ 188l. c.r.s. States ~ 225. * 2256.0 I O. Authorized investments: Certificates of Deposit and Share Certiticates 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: (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 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 by Section 2256.009(b); or (3) secured in any other manner and amount provided by law for deposits of the investing entity. Amended by Acts 1995, 74th Leg., ch. 32, ~ I, eff. April 28. 1995; Acts 1995, 74th Leg., ch. 402, ~ I, eff. Sept. I, 1995; Acts 1997, 75th Leg., ch. 1421, ~ 6, eff. Sept. I, 1997. <General Materials (GM) - References, Annotations. or Tables> HISTORICAL AND STATUTORY NOTES 2000 Main Volume Acts 1995, 74th Leg., ch. 32, in the section heading, added "and share certificates"; in the introductory paragraph, inserted "or share certificate", following "the certificate", deleted "of deposit", and inserted ", or a state or federal credit union domiciled in this state"; and in subd. (I), added "or the National Credit Union Share Insurance Fund or its successor". Acts 1997, 75th Leg., ch. 1421, in the introductory language, substituted "bank" for "and loan association". For application provisions of Acts 1997, 75th Leg., ch. 1421, see notes following V.T.C.A.. Government Code * 2256.002. Prior Laws: Acts 1987, 70th Leg., ch. 889. Acts t989, 71st Leg., ch. 39, ~ l. Acts 1989, 7lst Leg., ch. 628, ~ l. Acts 1989, 7IstLeg.,ch. 693, H. Acts 1989, 7IstLeg.,ch. 750, ~ l. Vernon's Ann.Civ.St. art. 842a-2, * 2(a). Acts 1993, 73rd Leg., ch. 268, ~ l. V.T.CA. Government Code * 2256.007. LIBRARY REFERENCES 2000 Main Volume Municipal Corporations ~ 884. Copr. @West2001 No Claim to Orig. U.S. Govt. Works States €= 124. WESTLAW Topic Nos. 268, 360. C.J.S. Municipal Corporations ~ 1881. C.J.S. States ~ 225. ~ 2256.0 II. Authorized Investments: Reourchase Agreements (a) A fully collateralized repurchase agreement is an authorized investment under this subchapter if the repurchase agreement: (1) has a defined termination date; (2) is secured by obligations described by Section 2256.009(a)(I); 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 investment is made with the entity or with a third party selected and approved by the entity; and (4) is placed through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in this state. (b) In this section, "repurchase agreement.. means a simultaneous agreement to buy, hold for a specified time, and sell back at a future date obligations described by Section 2256.009(a)(1), at a market 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 and a reverse security repurchase agreement. (c) Notwithstanding any other law, the term of any reverse security repurchase 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 investments, but the term of the authorized investments acquired must mature not later than the expiration date stated in the reverse security repurchase agreement. Amended by Acts 1995, 74th Leg., ch. 402, ~ 1, eff. Sept. 1, 1995. <General Materials (GM) - References, Annotations, or Tables> HISTORICAL AND STATUTORY NOTES 2000 Main Volume Section 6 of the 1995 amendatory act provides: "As provided by Section 1.02, Senate Bill No. 959. [ch. 76] Acts of the 74th Legislature. Regular Session, 1995, this Act controls over Senate Bill No. 959 to the extent of any conflict... Prior Laws: Acts 1987, 70th Leg., ch. 889. Acts 1989, 71st Leg., ch. 39, ~ 1. Acts 1989, 7IstLeg.,ch.628,~ 1. Acts 1989, 7IstLeg., ch. 693, ~ 4. Acts 1989, 71st Leg., ch. 750, ~ 1. Acts 1993, 73rd Leg., ch. 946, ~ 1. Vernon's Ann.Civ.St. art. 842a-2. ~ 2(a). (c). Acts 1993, 73rd Leg., ch. 268, ~ 1. Acts 1995, 74th Leg., ch. 76, ~ 5.45(b), (f). Copr. @West2001 No Claim to Orig. U.S. Govt. Works V.T.eA.. Government Code & 2256.008. LIBRARY REFERENCES 2000 Main Volume Municipal Corporations €;;;;;> 884. States €;;;;;> 124. WESTLA W Topic Nos. 268, 360. C.J.S. Municipal Corporations ~ 1881. c.J.S. States ~ 225. & 2256.012. Authorized Investments: Banker's Acceptances A bankers' acceptance is an authorized investment under this subchapter if the bankers' acceptance: (1) has 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 any state, if the short-term obligations of the bank, or of a bank holding company of which the bank is the largest subsidiary, are rated not less than A-lor P-1 or an equivalent rating by at least one nationally recognized credit rating agency. Amended by Acts 1995, 74th Leg., ch. 402, ~ I, eff. Sept. 1, 1995. <General Materials (GM) - References, Annotations, or Tables> HISTORICAL AND STATUTORY NOTES 2000 Main Volume Prior Laws: Acts 1987, 70th Leg., ch. 889. Acts 1989, 7IstLeg.,ch. 39, ~ 1. Acts 1989, 71st Leg., ch. 628, ~ 1. Acts 1989, 71st Leg., ch. 693, ~ 4. Acts 1989, 71st Leg., ch. 750, ~ 1. Vernon's Ann.Civ.St. art. 842a-2. & 2(a), (c). Acts 1993, 73rd Leg., ch. 268, ~ 1. V.T.C.A.. Government Code & 2256.009. LIBRARY REFERENCES 2000 Main Volume Municipal Corporations €:= 884. States €;;;;;> 124. WESTLA W Topic Nos. 268, 360. c.J.S. Municipal Corporations ~ 1881. C.J.S. States ~ 225. & 2256.013. Authorized Investments: Commercial Paper Copr. @West2001 No Claim to Orig. U.S. Govt. Works Commercial paper is an authorized investment under this subchapter if the commercial paper: (I) has 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 equivalent rating by 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 by a bank organized and existing under the laws of the United States or any state. Amended by Acts 1995, 74th Leg., ch. 402, ~ I, eff. Sept. I, 1995. <General Materials (GM) - References, Annotations, or Tables> HISTORICAL AND STATUTORY NOTES 2000 Main Volume Prior Laws: Acts 1987, 70th Leg., ch. 889. Acts 1989. 71st Leg., ch. 39, ~ 1. Acts 1989, 71st Leg., ch. 628, ~ 1. Acts 1989, 71st Leg., ch. 693, ~ 4. Acts 1989, 71st Leg., ch. 750, ~ I. Vernon's Ann.Civ.St. art. 842a-2. ~ 2(a). Acts 1993, 73rd Leg., ch. 268, ~ 1. V.T.eA.. Government Code ~ 2256.010. LIBRARY REFERENCES 2000 Main Volume Municipal Corporations €=> 884. States €=> 124. WESTLA W Topic Nos. 268. 360. C.J.S. Municipal Corporations ~ 1881. C.J.S. States ~ 225. ~ 2256.014. Authorized Investments: Mutual Funds (a) A no-load money market mutual fund is an authorized investment under this subchapter if the mutual fund: (I) is registered with and regulated by the Securities and Exchange Commission; (2) provides the investing entity with a prospectus and other information required by the Securities Exchange Act of 1934 (15 u.s.e Section 78a et seq.) or the investment Company Act of 1940 (15 u.s.e Section 80a-1 et seq.); (3) has a dollar-weighted average stated maturity of 90 days or fewer; and (4) includes in its investment objectives the maintenance of a stable net asset value of $1 for each share. (b) in addition to a no-load money market mutual fund permitted as an authorized investment in Subsection (a), a no-load mutual fund is an authorized investment under this subchapter if the mutual fund: (I) is registered with the Securities and Exchange Commission; Copr. @ West 2001 No Claim to Orig. U.S. Govt. Works (2) has an average weighted maturity of less than two years; (3) is invested exclusively in obligations approved by this subchapter; (4) is continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than AAA or its equivalent; and (5) conforms to the requirements set forth in Sections 2256.016(b) and (c) relating to the eligibility of investment pools to receive and invest funds of investing entities. (c) An entity is not authorized by this section to: (1) 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); (2) invest any portion of bond proceeds, reserves and funds held for debt service, in mutual funds described in Subsection (b); or (3) invest its funds or funds under its control, including bond proceeds and reserves 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. Amended by Acts 1995, 74th Leg., ch. 402, ~ I, eff. Sept. I, 1995; Acts 1997, 75th Leg., ch. 1421, ~ 7, eff. Sept. I, 1997; Acts 1999, 76th Leg., ch. 1454, ~ 8, eff. Sept. 1, 1999. <General Materials (GM) - References, Annotations, or Tables> HISTORICAL AND STATUTORY NOTES 2000 Main Volume Section 6 of the 1995 amendatory act provides: "As provided by Section 1.02, Senate Bill No. 959, [ch. 76] Acts of the 74th Legislature, Regular Session, 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. (I), inserted "registered with and", added new subd. (2), and redesignated former subds. (2) and (3) as subds. (3) and (4), respectively. For application provisions of Acts 1997, 75th Leg., ch. 1421, see notes following V.T.eA., Government Code ~ 2256.002. Acts 1999, 76th Leg., ch. 1454, in subsec. (c). in subd. (1) substituted" 15 percent" for "80 percent", and deleted "money-market mutual funds described in Subsection (a) or" following "debt service, in" and ", either separately or collectively" following "Subsection boo, deleted subd. (2), and renumbered former subds. (3) and (4) as subds. (2) and (3). Prior to deletion, subsec. (c)(2) read: "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);" Prior Laws: Acts 1987, 70th Leg., ch. 889. Acts 1989, 71st Leg., ch. 628, ~ I. Acts 1991, 72nd Leg., ch. 732, ~ I. Acts 1993, 73rd Leg., ch. 946, ~ I. Vernon's Ann.Civ.St. art. 842a-2. ~ 2(c). (d). Acts 1993, 73rd Leg., ch. 268, ~ I. Copr. @West2001 No Claim to Orig. U.S. Govt. Works Acts 1995, 74th Leg.. ch. 76, ~ 5.45(c), (t). V.T.CA. Government Code & 2256.011. LIBRARY REFERENCES 2000 Main Volume Municipal Corporations €;;:;;> 884. States €;;:;;> 124. WESTLA W Topic Nos. 268, 360. C.J.S. Municipal Corporations ~ 1881. C.J.S. States ~ 225. NOTES OF DECISIONS Type of securities 1 1. Type of securities The Public Funds Investment Act, V.T.C.S. article 842a-2, authorizes cities, counties, and certain other public and nonprofit entities to invest their funds and funds under their control in mutual funds holding only adjustable rate mortgages that obligate United States agencies provided that the mutual fund complies with section 2(d) of the act, and provided that the entity invests no more of its money in the mutual fund than section 2(d) permits. Op.Atty.Gen.1993, No. DM-202. & 2256.015. Authorized investments: Guaranteed Investment Contracts (a) A guaranteed investment contract is an authorized investment for bond proceeds under this subchapter if the guaranteed investment contract: (I) has a defined termination date; (2) is secured by obligations described by Section 2256.oo9(a)(I), excluding 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 term of longer than five years from the date of issuance of the bonds. (c) To be eligible as an authorized investment: (I) 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; (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 certify the administrative costs reasonably expected to be paid to third parties in connection COpT. @ West 2001 No Claim to Orig. U.S. Govt. Works with the guaranteed investment contract. Amended by Acts 1995, 74th Leg., ch. 402, ~ I, eff. Sept. I, 1995; Acts 1997, 75th Leg., ch. 1421, ~ 8, eff. Sept. I, 1997; Acts 1999, 76th Leg., ch. 1454, ~~ 9, 10, eff. Sept. 1, 1999. <General Materials (GM) - References, Annotations, or Tables> HISTORICAL AND STATUTORY NOTES 2000 Main Volume Acts 1997, 75th Leg., ch. 1421, in the section heading, inserted "for State Agencies". For application provisions of Acts 1997, 75th Leg., ch. 1421, see notes following V.T.C.A.. Government Code ~ 2256.002. Acts 1999, 76th Leg., ch. 1454, in the section heading, following "Investments" deleted "for State Agencies"; and in subsec. (a), in the introductory paragraph, following "investment", deleted "for state agencies". LIBRARY REFERENCES 2000 Main Volume Municipal Corporations €;;;;> 884. States €;;;;> 124. WESTLA W Topic Nos. 268, 360. C.J.S. Municipal Corporations ~ 1881. c.J.S. States ~ 225. ~ 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, authorizes investment in the particular pool. An investment pool shall invest the funds it receives from entities in authorized investments permitted by this subchapter. (b) To be eligible 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 representative of the entity an offering circular or other similar disclosure instrument that contains, at a minimum, the following information: (I) the types of investments in which money is allowed to be invested; (2) the maximum average dollar-weighted maturity allowed, based on the stated maturity date, of the pool; (3) the maximum 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; Copr. 19 West 2001 No Claim to Orig. U.S. Govt. Works (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 an entity to deposit funds in and withdraw funds from the pool and any deadlines or other operating policies required for the entity to invest funds in and withdraw funds from the pool; and (12) the performance history of the pool, including yield, average dollar- weighted maturities, and expense ratios. (c) To maintain 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 representative of the entity: (1) investment transaction confirmations; and (2) a monthly report that contains, at a minimum, the following information: (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 market value of the pool's portfolio, using amortized 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 the pool; (H) a listing of daily transaction activity of the entity participating in the pool; (I) the yield and expense ratio of the pool; (1) 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 investment companies under the Investment Company Act of 1940, as promulgated from time to time by the federal Securities and Exchange Commission. (I) To be eligible to receive funds from and invest funds on behalf of an entity under this chapter, a public funds investment 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 $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, 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: (1) equally of participants in the pool and other persons who do not have a business relationship with the pool and Copr. @West2001 No Claim to Orig. U.S. Govt. Works are qualified to advise the pool, for a public funds investment pool created under Chapter 791 and managed by a state agency~ or (2) of participants 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 investment pool must be continuously rated no lower than AAA or AAA-m or at an equivalent rating by at least one' nationally recognized rating service. Amended by Acts 1995, 74th Leg., ch. 402, ~ 1, eff. Sept. I, 1995; Acts 1997, 75th Leg., ch. 1421, ~ 9, eff. Sept. I, 1997. <General Materials (GM) - References, Annotations, or Tables> HISTORICAL AND STATUTORY NOTES 2000 Main Volume Acts 1997, 75th leg., ch. 1421 added subsecs. (t) to (h). For application provisions of Acts 1997, 75th Leg., ch. 1421, see notes following V.T.eA.. Government Code ~ 2256.002. Prior Laws: Acts 1979, 66th Leg., p. 2071, ch. 810. Acts 1987, 70th Leg.. ch. 889. Acts 1989, 71st Leg., ch. 693, ~ 2. Acts 1993, 73rd Leg., ch. 946, ~ l. Vernon's Ann.Civ.St. arts. 842a-2. ~ 3(a) to (c), (e) to (g); 4413(34c), ~ 6(b). Acts 1995, 74th Leg., ch. 76, ~ 5.45(e), (t). Acts 1995, 74th Leg., ch. 402, ~ 5. Acts 1993, 73rd Leg., ch. 268, ~ l. V.T.CA. Government Code ~~ 2256.013, 2256.056. LIBRARY REFERENCES 2000 Main Volume Municipal Corporations €;::;;:> 884. States €;::;;:> 124. WESTLA W Topic Nos. 268, 360. C.J.S. Municipal Corporations ~ 1881. C.J.S. States ~ 225. ~ ~ 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, 74th Leg., ch. 76, ~ 5.46(a), eff. Sept. I, 1995; Acts 1995, 74th Leg., ch. 402, ~ 1, eff. Sept. 1, 1995. Amended by Acts 1997. 75th Leg., ch. 1421, ~ 10, eff. Sept. 1, 1997. <General Materials (GM) - References, Annotations, or Tables> HISTORICAL AND STATUTORY NOTES Copr. @West2001 No Claim to Orig. U.S. Govt. Works 2000 Main Volume Acts 1995, 74th Leg., ch. 76, ~ 5.46(a), to conform to Acts 1993, 73rd Leg., ch. 946, ~ 1, added ~ 2256.017. That provision did not take effect pursuant to Acts 1995, 74th Leg., ch. 402, ~ 6, which provides: "As provided by Section 1.02, Senate Bill No. 959, [ch. 76] Acts of the 74th Legislature, Regular Session, 1995, this Act controls over Senate Bill No. 959 to the extent of any conflict." Acts 1997, 75th Leg., ch. 1421, in the section heading, substituted "Existing Investments" for "Portfolio of Certain Investment Pools", and rewrote the section, which previously read: "A public funds investment 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 $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, portfolio holdings shall be sold as necessary to maintain the ratio between 0.995 and 1.005." For application provisions of Acts 1997, 75th Leg., ch. 1421, see notes following V.T.eA.. Government Code ~ 2256.002. Prior Laws: Acts 1993, 73rd Leg., ch. 858, ~ 1. Vernon's Ann.Civ.st. art. 842a-2. ~ 2(e). Acts 1995, 74th Leg., ch. 76, ~ 5.46(b). ~ 2256.018. Repealed bv Acts 1997. 75th Leg.. rh. 1421. ~ 15, eff. Sept. 1. 1997 <General Materials (GM) - References, Annotations, or Tables> HISTORICAL AND STA TUTORY NOTES 2000 Main Volume The repealed section, providing for an advisory board of investment pools, was derived from: Acts 1987, 70th Leg., ch. 889. Acts 1993, 73rd Leg., ch. 946, ~ 1. Vernon's Ann.Civ.st. art. 842a-2, ~~ 2(e). 3m. Acts 1993, 73rd Leg., ch. 268, ~ 1. Acts 1995, 74th Leg., ch. 76, ~~ 5.45(e), (t). V.T.eA.. Government Code ~ 2256.014(d). Acts 1995, 74th Leg., ch. 402, ~ 1. ~ 2256.019. Rating of Certain Investment Pools A public funds investment pool must be continuously rated no lower than AAA or AAA-m or at an equivalent rating by at least one nationally recognized rating service or no lower than investment grade by at least one nationally recognized rating service with a weighted average maturity no greater than 90 days. Added by Acts 1995, 74th Leg., ch. 402, ~ I, eff. Sept. I, 1995. Amended by Acts 1997, 75th Leg., ch. 1421, ~ 11, eff. Sept. I, 1997. <General Materials (GM) - References, Annotations, or Tables> HISTORICAL AND STATUTORY NOTES 2000 Main Volume Copr. @West2001 No Claim to Orig. U.S. Govt. Works Acts 1997, 75th Leg., ch. 1421 inserted "or no lower than investment grade by at least one nationally recognized rating service with a weighted average maturity no greater than 90 days". For application provisions of Acts 1997, 75th Leg., ch. 1421, see notes following V.T.eA., Government Code ~ 2256.002. ~ 2256.020. Authorized Investments: institutions of Higher Education In addition to the authorized investments permitted by this 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 fixed income funds sponsored by organizations exempt from federal income taxation under Section 50W).lnternaI Revenue Code of 1986 (26 u.s.e Section 501(/)); (2) negotiable certificates of deposit issued by a bank that has a certificate of deposit rating of at least I or the equivalent by a nationally recognized credit rating agency or that is associated with a holding company having a commercial paper rating of at least A-I, P-I, or the equivalent by a nationally recognized credit rating agency; and (3) corporate bonds, debentures, or similar debt obligations rated by a nationally recognized investment rating firm in one of the two highest long- term rating categories, without regard to gradations within those categories. Added by Acts 1995, 74th Leg., ch. 402, ~ I, eff. Sept. I, 1995. <General Materials (GM) - References, Annotations, or Tables> HISTORICAL AND STATUTORY NOTES 2000 Main Volume Prior Laws: Acts 1987, 70th Leg., ch. 889. Acts 1989, 71st Leg., ch. 628, ~ 1. Acts 1989, 71st Leg., ch. 750, ~ 1. Acts 1993, 73rd Leg., ch. 946, ~ 1. Vernon's Ann.Civ.St. art. 842a-2. ~ 2(b). Acts 1993, 73rd Leg., ch. 268, ~ 1. Acts 1995, 74th Leg., ch. 76, ~ 5.45(d), (t). V.T.eA., Government Code ~ 2256.012. LIBRARY REFERENCES 2000 Main Volume Colleges and Universities ~ 6(1). WESTLA W Topic No. 81. C.J.S. Colleges and Universities ~ 10. ~ 2256.0201. Authorized Investments; Municipal Utility (a) A municipality that owns a municipal electric utility that is engaged in the distribution and sale of electric energy or natural gas to the public may enter into a hedging contract and related security and insurance agreements in relation to fuel oil, natural gas, and electric energy to protect against loss due to price fluctuations. A hedging transaction must comply with the regulations of the Commodity Futures Trading Commission and the Securities and Exchange Commission. If there is a conflict between the municipal charter of the municipality and this chapter, this chapter prevails. Copr. @West2001 No Claim to Orig. U.S. Govt. Works (b) A payment by a municipally owned electric or gas utility under a hedging contract or related agreement in relation to fuel supplies or fuel reserves is a fuel expense, and the utility may credit any amounts it receives under the contract or agreement against fuel expenses. (c) The governing body of a municipally owned electric or gas utility or the body vested with power to manage and operate the municipally owned electric or gas utility may set policy regarding hedging transactions. (d) In this section, "hedging" means the buying and selling of fuel oil, natural gas, and electric energy futures or options or similar contracts on those commodity futures as a protection against loss due to price fluctuation. Added by Acts 1999, 76th Leg., ch. 405, ~ 48, eff. Sept. I, 1999. <General Materials (GM) - References, Annotations, or Tables> LIBRARY REFERENCES 2000 Main Volume Electricity €=> 1.5. WESTLA W Topic No. 145. C.J.S. Electricity ~ 6. ~ 2256.021. Effect of Loss of Reeuired 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, ~ I, eff. Sept. I, 1995. <General Materials (GM) - References, Annotations, or Tables> ~ 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, ~ I, eff. Sept. I, 1995. <General Materials (GM) - References, Annotations, or Tables> ~ 2256.023. Internal Management Reports (a) Not less than quarterly, the investment officer shall prepare and submit to the governing body of the entity a written report of investment transactions for all funds covered by this chapter for the preceding 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; Copt. @West2001 No Claim to Orig. U.S. Govt. Works (4) contain a summary statement, prepared in compliance with generally accepted accounting principles, of 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; (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 government's investment policy; and (B) relevant provisions of this chapter. (c) The report shall be presented not less than quarterly to the governing body and the chief executive officer of the entity within a reasonable time after the end of the period. (d) 1f an entity invests in other than money market mutual funds, investment pools or accounts offered by its depository bank in the form of certificates of deposit, or money market accounts or similar accounts, the reports prepared by the investment officers under this section shall be formally reviewed at least annually by an independent auditor, and the result of the review shall be reported to the governing body by that auditor. Added by Acts 1995, 74th Leg., ch. 402, ~ 1, eff. Sept. 1, 1995. Amended by Acts 1997, 75th Leg., ch. 1421, ~ 12, eff. Sept. 1, 1997. <General Materials (GM) - References, Annotations, or Tables> HISTORICAL AND STATUTORY NOTES 2000 Main Volume Acts 1997, 75th Leg., ch. 1421, in subsec. (b), in subd. (4), inserted ", prepared in compliance with generally accepted accounting principles,", added par. (D), and made other nonsubstantive changes; and added subsec. (d). For application provisions of Acts 1997, 75th Leg., ch. 1421, see notes following V.T.C.A., Government Code * 2256.002. Prior Laws: Acts 1979, 66th Leg., p. 2071, ch. 810. Vernon's Ann.Civ.St. art. 4413(34c), * 4. Acts 1993, 73rd Leg., ch. 268, ~ l. V.T.eA.. Government Code * 2256.057. * 2256.024. Subchapter Cumulative Copr. @West2001 No Claim to Orig. U.S. Govt. Works (a) The authority granted by this subchapter is in addition to that 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 described in Subsection (c), a security described in Section 2256.009(b) is not an authorized investment for a state agency, a local government, or another investing entity, notwithstanding any other provision of this chapter or other law to the contrary. (c) Mortgage pass-through certificates and individual mortgage loans that may constitute an investment described in Section 2256.009(b) are authorized investments with respect to the housing bond programs operated by: (I) the Texas Department of Housing and Community Affairs or a nonprofit 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, ~ 1. eff. Sept. 1, 1995. <General Materials (GM) - References, Annotations, or Tables> HISTORICAL AND STATUTORY NOTES 2000 Main Volume Prior Laws: Acts 1979, 66th Leg., p. 2071, ch. 810. Acts 1987, 70th Leg., ch. 889. Vernon's Ann.Civ.St. arts. 842a-2, ~ 7; 4413(34c), ~ 7. Acts 1993, 73rd Leg., ch. 268, ~ 1. V.T.CA. Government Code ~~ 2256.015, 2256.059. ~ 2256.025. Selection of Authorized Brokers The governing body of an entity subject to this subchapter or the designated investment committee of the entity shall, at least annually, review, revise, and adopt a list of qualified brokers that are authorized to engage in investment transactions with the entity. Added by Acts 1997, 75th Leg., ch. 1421, ~ 13, eff. Sept. 1, 1997. <General Materials (GM) - References, Annotations, or Tables> HISTORICAL AND STATUTORY NOTES 2000 Main Volume For application provisions of Acts 1997, 75th Leg., ch. 1421, see notes following V.T.eA.. Government Code ~ 2256.002. ~ 2256.026. Statutorv Compliance Copr. @West 2001 No Claim to Orig. U.S. Govt. Works All investments made by entities must comply with this subchapter and all federal, state, and local statutes, rules, or regulations. Added by Acts 1997, 75th Leg., ch. 1421, il13, eff. Sept. 1, 1997. <General Materials (GM) - References, Annotations, or Tables> HISTORICAL AND STATUTORY NOTES 2000 Main Volume For application provisions of Acts 1997, 75th Leg., ch. 1421, see notes following V.T.C.A.. Government Code * 2256.002. I Sections 2256.027 to 2256.050 reserved for exoansion 1 <General Materials (GM) - References, Annotations, or Tables> I Sections 2256.027 to 2256.050 reserved for expansion I <General Materials (GM) - References, Annotations, or Tables> * 2256.051. Electronic Funds Transfer Any local government may use electronic means to transfer or invest all funds collected or controlled by the local government. Amended by Acts 1995, 74th Leg., ch. 402, ill, eff. Sept. 1, 1995. <General Materials (GM) - References, Annotations, or Tables> * 2256.052. Private Auditor Notwithstanding any other law, a state 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, ill, eff. Sept. 1, 1995. <General Materials (GM) - References, Annotations, or Tables> HISTORICAL AND STATUTORY NOTES 2000 Main Volume Prior Laws: Acts 1979, 66th Leg., p. 2071, ch. 810. Vernon's Ann.Civ.St. art. 4413<34c). * 5. Acts 1993, 73rd Leg., ch. 268, ill. V.T.eA., Government Code * 2256.058. * 2256.053. Pavment for Securities Purchased bv State Copr. @ West 2001 No Claim to Orig. U.S. Govt. Works 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 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. 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, ~ I, eff. Sept. I, 1995; Acts 1997, 75th Leg., ch. 1423. ~ 8.67, eff. Sept. 1,1997. <General Materials (GM) - References, Annotations, or Tables> HISTORICAL AND STATUTORY NOTES 2000 Main Volume Acts 1997, 75th Leg., ch. 1423 made conforming amendments to reflect the abolishment of the office of the state treasurer. Sections 22.01 to 22.03 of Acts 1997, 75th Leg., ch. 1423 provide: "Sec. 22.01. The purpose of this Act is to conform the statutes to reflect the abolishment of the office of state treasurer. "Sec. 22.02. (a) This Act does not revive a fund or account that was abolished or consolidated in accordance with Section 403.094. Government Code, as added by Chapter 4, Acts of the nnd Legislature, 1st Called Session, 1991, or in accordance with other law. "(b) This Act does not revive a dedication of money for a particular purpose that was abolished in accordance with Section 403.094. Government Code, as added by Chapter 4, Acts of the nnd Legislature, 1st Called Session, 1991, or in accordance with other law. "(c) This Act does not, of itself, impose a new power or duty on the comptroller, transfer a power or duty to or from the comptroller, re-create a power or duty no longer possessed or performed by the comptroller, or abolish a power or duty possessed or performed by the comptroller, except with regard to: "(1) the abolished requirement to appoint a first assistant under Chapter 404, Government Code; and "(2) matters relating to a bond required of the comptroller or an employee of the comptroller. "Sec. 22.03. (a) Except as provided by Subsection (b) of this section, if another law enacted by the 75th Legislature, Regular Session, 1997, that is intended in whole or in part to make a substantive change to the law conflicts with this Act, the other law controls. "(b) This Act controls over another law enacted by the 75th Legislature, Regular Session, 1997, with regard to: "(1) the abolished requirement to appoint a first assistant under Chapter 404, Government Code; and "(2) matters relating to a bond required of the comptroller or an employee of the comptroller." Prior Laws: Acts 1967, 60th Leg., p. 915, ch. 401. Acts 1979, 66th Leg., p. 310, ch. 143, ~ 1. Vernon's Ann.Civ.St. art. 6252-5a, ~ 2. Acts 1993, 73rd Leg., ch. 268, ~ 1. V.T.C.A.. Government Code ~ 2256.102. Copr. @ West 2001 No Claim to Orig. U.S. Govt. Works ~ 2256.054. Deliverv of Securities Purchased bv 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 normal and recognized practices in the securities and banking industries, including the book entry procedure of the Federal Reserve Bank. Amended by Acts 1995, 74th Leg., ch. 402, ~ I, eff. Sept. I, 1995; Acts 1997, 75th Leg., ch. 1423, ~ 8.68, eff. Sept. 1,1997. <General Materials (GM) - References, Annotations, or Tables> HISTORICAL AND STATUTORY NOTES 2000 Main Volume Acts 1997, 75th Leg., ch. 1423 made conforming amendments to reflect the abolishment of the office of the state treasurer. Prior Laws: Acts 1967, 60th Leg., p. 915, ch. 401. Acts 1979, 66th Leg., p. 310, ch. 143, ~ 1. Vernon's Ann.Civ.St. art. 6252-5a, ~ 2. Acts 1993, 73rd Leg., ch. 268, ~ 1. V.T.eA" Government Code ~ 2256.103. ~ 2256.055. Deposit of Securities Purchased bv State At the direction of the comptroller or the agency, a security purchased under 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, ~ 1, eff. Sept. I, 1995; Acts 1997, 75th Leg.. ch. 1423, ~ 8.69, eff. Sept. 1,1997. <General Materials (GM) . References, Annotations, or Tables> HISTORICAL AND STATUTORY NOTES 2000 Main Volume Acts 1997, 75th Leg., ch. 1423 made conforming amendments to reflect the abolishment of the office of the state treasurer. Prior Laws: Acts 1967, 60th Leg., p. 915, ch. 401. Acts 1979, 66th Leg., p. 310, ch. 143, ~ 2. Vernon's Ann.Civ.St. art. 6252-5a. ~ 3. Acts 1993, 73rd Leg., ch. 268, ~ 1. V.T.eA.. Government Code ~ 2256.104. NOTES OF DECISIONS Delegation of authority ;& Depositories! Copr. @West 2001 No Claim to Orig. U.S. Govt. Works 1. Depositories Brazos River Authority cannot directly or indirectly deposit its funds in depositories that have not qualified according to law, but in order to qualify as an official depository, the depository selected need not furnish bonds or pledge securities to protect deposits that are insured by the Federal Deposit Insurance Corporation. Op.Atty.Gen. 1987, No. JM-832. Legal requirements for official depositories have not been altered by Vernon's Ann.Texas Civ.St. art. 4413(34c). Op.Atty.Gen. 1987, No. JM-832. ;1,. Delegation of authority The 1nterlocal Cooperation Act, article 4413<32c), V.T.eS., does not authorize local governments to delegate to another entity their authority to make investments; nor does article 842a-2. V.T.C.S., or article 4413(34c), authorize such delegation. Op.Atty.Gen.1988, No. JM-932. ~ 2256.056. ReDealed bv Acts 1999. 76th Leg.. ch. 227. ~ 28(b)(1). eff. Sept. I. 1999; Acts 1999, 76th Leg.. ch. 350. ~ I. eff. Sept. I. 1999 HISTORICAL AND STATUTORY NOTES 2000 Main Volume Section I of Acts 1999, 76th Leg., ch. 227, repealing this section, adopts Title 9 of the Government Code. For disposition of the subject matter of repealed section, see Disposition Table in volume containing V.T.C.A., Government Code Title 9. The repealed section, relating to compliance with other laws, was added by Acts. 1997 75th Leg., ch. 1421, ~ 14. ~~ 2256.057 to 2256.059. Deleted bv Acts 1995. 74th Leg.. ch. 402, ~ I. eff. Sept. I. 1995 I Sections 2256.060 to 2256.100 reserved for expansion I ~~ 2256.101 to 2256.104. Deleted bv Acts 1995, 74th Leg.. ch. 402. ~ I. eff. SePt. I. 1995 Copr. @West2001 No Claim to Orig. U.S. Gov!. Works