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
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 |
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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 [ |
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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 [ |
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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 [ |
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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. |