Bill Text: TX HB2706 | 2019-2020 | 86th Legislature | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Relating to authorized investments for governmental entities and a study of the investment and management of funds by public schools.

Spectrum: Partisan Bill (Republican 3-0)

Status: (Passed) 2019-06-14 - Effective on 9/1/19 [HB2706 Detail]

Download: Texas-2019-HB2706-Introduced.html
 
 
  By: Capriglione H.B. No. 2706
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to local government public investment of funds.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 2256.010(b), Government Code, is amended
  to read as follows:
         (b)  In addition to the authority to invest funds in
  certificates of deposit under Subsection (a), an investment in
  certificates of deposit made in accordance with the following
  conditions is an authorized investment under this subchapter:
               (1)  the funds are invested by an investing entity
  through:
                     (A)  a broker that has its main office or a branch
  office in this state and is selected from a list adopted by the
  investing entity as required by Section 2256.025; or
                     (B)  a depository institution that has its main
  office or a branch office in this state and that is selected by the
  investing entity;
               (2)  the broker or the depository institution selected
  by the investing entity under Subdivision (1) arranges for the
  deposit of the funds in certificates of deposit in one or more
  federally insured depository institutions, wherever located, for
  the account of the investing entity;
               (3)  the full amount of the principal and accrued
  interest of each of the certificates of deposit:
                     (A)  is insured by the United States or an
  instrumentality of the United States; or
                     (B)  has a stated maturity of 365 days or fewer
  from the date of its issuance; and
                           (i)  is rated not less than A-1 or P-1 or an
  equivalent rating by at least two nationally recognized credit
  rating agencies; or
                           (ii)  one nationally recognized credit
  rating agency and is fully secured by an irrevocable letter of
  credit issues by a bank organized and existing under the laws of the
  United States or any state. 
               (4)  the investing entity appoints the depository
  institution selected by the investing entity under Subdivision (1),
  an entity described by Section 2257.041(d), or a clearing
  broker-dealer registered with the Securities and Exchange
  Commission and operating pursuant to Securities and Exchange
  Commission Rule 15c3-3 (17 C.F.R. Section 240.15c3-3) as custodian
  for the investing entity with respect to the certificates of
  deposit issued for the account of the investing entity.
         SECTION 2.  Subsections (a) and (b), Section 2256.011,
  Government Code, are amended to read as follows:
         (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 a combination of cash and
  obligations described by Section 2256.009(a)(1), Section 2256.013,
  or Section 2256.0204; and
               (3)  requires the securities being purchased by the
  entity or cash held 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), Section 2256.013, or Section 2256.0204, 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.
         SECTION 3.  Section 2256.013, Government Code, is amended to
  read as follows:
         Sec. 2256.013.  AUTHORIZED INVESTMENTS: COMMERCIAL PAPER.
  Commercial paper is an authorized investment under this subchapter
  if the commercial paper:
               (1)  has a stated maturity of 365 [270] days or fewer
  from the date of its issuance; and
               (2)  is rated not less than A-1 or P-1 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.
         SECTION 4.  Subsections (e) and (f), Section 2256.016,
  Government Code, are amended to read as follows:
         (e)  In this section, for pools that intend to maintain a
  $1.00 net asset value, "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.
         (f)  To be eligible to receive funds from and invest funds on
  behalf of an entity under this chapter, a public funds investment
  pool that uses amortized cost or fair value accounting must mark its
  portfolio to market daily, and, to the extent reasonably possible,
  pools that used amortized cost will stabilize at a $1.00 net asset
  value, when rounded and expressed to two decimal places.  For pools
  that use amortized cost, if [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, the governing body of the public
  funds investment pool shall take action as the body determines
  necessary to eliminate or reduce to the extent reasonably
  practicable any dilution or unfair result to existing participants,
  including a sale of portfolio holdings to attempt to maintain the
  ratio between 0.995 and 1.005. In addition to the requirements of
  its investment policy and any other forms of reporting, a public
  funds investment pool that uses amortized cost shall report yield
  to its investors in accordance with regulations of the federal
  Securities and Exchange Commission applicable to reporting by money
  market funds.
         SECTION 5.  Section 2256.0204, Government Code, is amended
  to read as follows:
         (b)  This section applies only to an independent school
  district [that qualifies   as an issuer as defined by   Section
  1371.001].
         SECTION 6.  Chapter 2256, Government Code, is amended to add
  Section 2256.0207 to read as follows:
         Sec. 2256.0207.  BOND PROCEEDS INVESTMENTS. Money held by a
  trustee or fiscal agent and pledged to the payment or security of
  bonds or other indebtedness, or obligations under a lease,
  installation sale, or other agreement of a local agency, or
  certificates of participation in those bonds, indebtedness, or
  lease installment sale, or other agreements, may be invested: 
               (1)  in accordance with the statutory provisions
  governing the issuance of those bonds, indebtedness, or lease
  installment sales, or other agreement; or
               (2)  to the extent not inconsistent with or if there are
  no specific statutory provisions, in accordance with the investment
  policy the local government provides for the bond issuance.
         SECTION 7.  Chapter 2256.0204(g) is repealed.
         SECTION 8.  This Act takes effect September 1, 2019.
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