HomeMy WebLinkAbout025557 RES - 11/11/2003RESOLUTION
AMENDING THE CITY INVESTMENT POLICY TO PROVIDE MAXIMUM
AMOUNT THAT MAY BE INVESTED IN LOCAL GOVERNMENT
INVESTMENT POOLS AND ADOPTING THE INVESTMENT POLICY AS
AMENDED
WHEREAS, the City of Corpus Christi Investment Policy was adopted in Resolution No.
022390 on October 24, 1995; amended in Resolution No. 022980 on July 8, 1997;
amended in Resolution No. 023472 on October 27, 1998; amended in Resolution No.
023864 on December 14, 1999; amended in Resolution No. 024208 on September 12,
2000; amended in Resolution No. 024679 on December 11, 2001; amended in
Resolution No. 025151 on December 17, 2002; and amended in Resolution No. 025266
on April 15, 2003;
WHEREAS, the City of Corpus Christi Investment Committee reviewed these proposed
amendments to the Investment Policy and recommends that the City Council amend the
City Investment Policy; and
WHEREAS, as provided in Section II. C of the Investment Policy, the City Council must
review the Investment Policy on or before December 31 of each year;
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
CORPUS CHRISTI, TEXAS:
SECTION 1. Section V, Authorized Investments and Maximum Term, Subsection A.4,
is amended to read as follows:
4. Local Government Investment Pool ................................................................ daily
Investments made on behalf of the City by a public funds investment pool duly
created to function as a money market mutual fund that marks its portfolio to
market daily and, to the extent reasonably possible, which stabilizes its portfolio
to market daily and, to the extent reasonably possible, which stabilizes its
portfolio at a $1 net asset value. If the ratio of the market value of the Pool's
portfolio divided by the book value of the portfolio is less than 99.50% or greater
than 100.50%, the Pool's portfolio holdings shall be sold as necessary to
maintain the ratio between 99.50% and 100.50%.
.... *;"~ The maximum amount that may be invested in any one local government
investment pool is the lesser of the followin,q: (i) an amount equal to 5% of the current
invested balance of the local qovernment investment pool, or (ii) $50,0001000. Th~:
maximum total amount that may be invested in all local government investment pools i:~
twenty-five (25) per cent of the Investment Portfolio. The Director of Financial Services
or designee may allow for up to a two-day increase in maximum amounts upon
notification to Investment Committee.
Page 2 of 2
The 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 with a weighted average maturity no greater than 90 days. Local
Government Investment Pools may contain investment securities that are not
directly authorized by this Policy, so long as (i) the rating standard hereinabove
stated is satisfied, and (ii) the investment is permitted by Subchapter A of the
Texas Public Funds Investment Act, Chapter 2256 of the Texas Government
Code. Subchapter A of the Texas Public Funds Investment Act, Chapter 2256 of
the Texas Government Code, currently permits following investments:
Obligations of, or Guaranteed by Governmental Entities
Certificates of Deposit and Share Certificates
Repurchase Agreements
Banker's Acceptances
Commercial Paper
Mutual Funds; and
Guaranteed Investment Contracts
SECTION 2. A copy of the amended City Investment Policy is attached and
incorporated as an Exhibit. The Investment Policy is adopted as amended. The
adoption of this Resolution is in furtherance of the City's statutory duty under Chapter
2256, Texas Government Code, to review its investment policy and investment strategy
not less often than annually, and adopt a written resolution evidencing the review of and
approval of changes to its Investment Policy.
ATTEST:~
Armando Chapa
City Secretary
THE CITY OF CORPUS CHRISTI
Mayor
Approved: October 29, 2003
Lisa Aguilar/~
Assistant City Attorney
for City Attorney
H:\LEG-DIR\Lisa\RES\Nov 2003 Investment Policy.doc
Corpus Christi, Texas
i l~ payor ~~- ,200
The above resolution was passed by the following vote:
Samuel L. Neal, Jr.
'" I
Brent Chesney ~ J~
I
Javier D. Colmenero ~ ~,~
Melody Cooper
Henry Garrett ~ ~..i'-~
Bill Kelly
Rex A. Kinnison (~ ~ '~'
Jesse Noyola
Mark Scott
INVESTMENT POLICY
Investment Policy- Resolution No.
Approved on
TABLE OF CONTENTS
Pa.qe
I. INTRODUCTION ............................................................................................................ 3
Il. PURPOSE ..................................................................................................................... 3
III. DEFINITIONS ................................................................................................................ 4
IV. INVESTMENT OBJECTIVES ......................................................................................... 5
V. AUTHORIZED INVESTMENTS AND MAXIMUM TERM ................................................ 7
VI. INVESTMENT MIX AND STRATEGIES ....................................................................... 10
VII. RESPONSIBILITY AND CONTROLS ........................................................................... 12
VIII. COMPETITIVE SOLICITATION ................................................................................... 14
IX. AUTHORIZED INSTITUTIONS .................................................................................... 14
X. PLEDGED COLLATERAL ............................................................................................ 15
XI. SAFEKEEPING ............................................................................................................ 15
XII. WIRE AND ELECTRONIC SERVICES ......................................................................... 16
XIII. INFORMATION REPORTING/EVALUATION ............................................................... 16
XIV. BANKING SERVICES .................................................................................................. 17
XV. GENERAL PROVISIONS ............................................................................................. 18
APPENDICES
D.
E.
F.
G.
PUBLIC FUNDS INVESTMENT ACT ........................................................................... 19
LIST OF AUTHORIZED CITY REPRESENTATIVES ................................................... 29
CITY'S CODE OF ETHICS ORDINANCE .................................................................... 30
CITY'S INDEMNIFICATION ORDINANCE ................................................................... 43
WIRE AND ELECTRONIC SERVICES ......................................................................... 45
INVESTMENT POLICY RESOLUTIONS ...................................................................... 46
RESOLUTION .............................................................................................................. 49
I. INTRODUCTION
The City of Corpus Christi shall invest all available monies in compliance with this Investment
Policy as authorized by the Public Funds Investment Act.
Effective cash management is recognized as essential to good fiscal management. An
aggressive cash management program will be pursued to maximize interest earnings as a
viable and material revenue source. The City's portfolio shall be designated and managed in a
manner responsive to the public trust and consistent with local, state, and federal law.
Investments shall be made with the primary objective of:
· Preservation of capital and protection of principal;
· Maintenance of sufficient liquidity to meet operating needs;
· Security of city funds and investments;
· Diversification of investments to minimize risk while maximizing interest earnings; and
· Maximization of return on the portfolio.
Earnings from investments will be used in a manner that will best serve the interests of the City
of Corpus Christi.
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 that
person's own affairs, not for speculation, but for investment, considering the probable safety of
capital and the probable income to be derived.
II. PURPOSE
A. Authorization
This Investment Policy is authorized by the City Council (see Appendix F) in
accordance with Chapter 2256, Subchapter A of the Government Code - The
Public Funds Investment Act (see the attached and incorporated Appendix A).
B. Scope
This Investment Policy applies to activities of the City, excluding pension funds,
with regard to investing the financial assets of Funds, including, but not limited to:
General Funds
Special Revenue Funds
Enterprise Funds
Internal Service Funds
Special Purpose Funds (within the control of Investment Officers)
Capital Improvement Funds (Bond Proceeds, Bond Reserves and Debt Service,
Interrund Transfer and Commercial Paper)
In addition to this policy, the investment of Bond Funds, Debt Service, and
Reserve Funds shall be managed by their governing ordinances and Federal
Law, including the Tax Reform Act of 1986 and subsequent legislation.
C. Review and Amendment
This Policy shall be reviewed annually by the City Council on or before
December 31 of each calendar year subsequent to its adoption. Amendments
must be authorized by the City Council. The City Council shall adopt a written
instrument by ordinance or resolution stating that it has reviewed the Investment
Policy. The written instrument so adopted shall record any changes made to the
Investment Policy.
III. DEFINITIONS
Authorized City Representative - Officers authorized to transact as set out in the attached and
incorporated Appendix B on behalf of the City (City Treasurer, Controller, Chief Accountant, and
Director of Financial Services).
Authorized Selling Group - Primary dealer and regional firms that have been selected by the
underwriter to sell their securities. Each authorized member of a selling group will offer the
issue at the price authorized by the governmental agency.
Collateral - Securities pledged by an Institution to safeguard City assets; the City requires either
U.S. Treasuries or U.S. Agencies Securities so that the market values can be readily
determined at any point in time.
Director of Financial Services - The Director of Financial Services is the Municipal Finance
Officer responsible for City investments.
Director of Financial Services Designee - Controller or Chief Accountant.
Excess Cash Balances - Collected bank balances not needed to pay estimated check clearings.
Failed Transaction - An Investment, which an Institution fails to deliver the City's Third Party
Safekeeping Institution.
Institution - Any firm, bank, bank holding company, broker or dealer who provides quotes for
either the purchase or sale of investments.
Investment - All authorized Securities listed in Item V. Authorized investments and maximum
term investments approved by the Investment Committee include U.S. Treasuries, U.S.
Agencies, Repurchase Agreements, Local Government Investment Pool, Guaranteed
Investment Contracts (with respect to bond proceeds), and Collateralized Certificates of
Deposit.
Investment Officers - City Treasurer and Investment Analyst.
Investment Portfolio - All City monies being invested under authority of the Investment Officers.
Qualified Representative - 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:
(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; or
(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.
(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.
Reserve Funds - Funds designated by Council for specific purposes, which have not been
appropriated for spending.
Securities - Approved Investments designated by the Investment Committee to be held in the
Investment Portfolio or acceptable to be pledged as Collateral to secure the monies of the City.
Special Purpose Funds - Monies of non-profit corporations that Investment Officers are
permitted to invest; includes such entities as the Corpus Christi Health Facilities Development
Corporation, Coastal Bend Health Facilities Development Corporation, Corpus Christi Housing
Finance Corporation, Corpus Christi Community Improvement Corporation, HOME Project, First
Time Home Buyer, Corpus Christi Industrial Development Corporation, Corpus Christi Business
and Job Development Corporation, North Padre Island Development Corporation, and Corpus
Christi Crime Control and Prevention District.
Third Party Safekeeping Institution - Any Institution not affiliated with Institution
delivering the Investment.
IV. INVESTMENT OBJECTIVES
The following states the investment objectives of the City, in order of priority:
A. Preservation and Safety of Principal
Investments of the City shall be undertaken in a manner that seeks to ensure the
preservation of capital in the overall Investment Portfolio.
B. Liquidity
The City's Investment Portfolio must be structured in a manner; which maintains
the liquidity necessary to pay obligations as they become due. Sufficient cash
flows must be maintained by rapidly depositing monies and timing
disbursements. Generally, Investments are matched to specific cash flow
requirements such as payrolls, construction drawdown schedules, debt service
payments, and other payables. Liquidity is also achieved by investing in
Investments with active secondary markets or in Local Government Pools with
stable net asset values.
It is imperative that the Investment Portfolio and Excess Cash Balances be
protected with sufficient Collateral at a minimum of 102% of current market
values so that monies are available as needed.
Return on Investments
The City's Investment Portfolio shall be designed with the objective of regularly
exceeding the average yield of the following benchmarks in a manner consistent
with the principles of this policy described in IV.A and B.
Operating Funds - Six-Month Constant Maturity Index
Capital Improvement Funds - Three-Month Constant Maturity Index
Core Funds - One-Year Constant Maturity Index
Special Funds - Three-Month U.S. Treasury Bill Yield
However, it must be recognized that during a declining market, satisfying this
objective may not be practical until Investments mature and can be re-invested,
especially since preservation of capital is the first priority in the investment of
monies pursuant to this Policy.
For bond issues to which arbitrage restrictions apply, the primary objectives shall
be to obtain satisfactory market yields and to minimize the costs associated with
investing such monies.
Diversification
Diversification is required because of differing liquidity needs of the City and is
employed as a way to control risk. Diversification minimizes the risk to the
overall Investment Portfolio of potential losses on individual Securities and
enhances the safety of the Investment Portfolio.
Through the solicitation of competitive proposals, the City shall allocate and
diversify its Investments through various Institutions. The following types of
Investments will be solicited from approved Institutions:
U.S. Treasuries
U.S. Government Agencies
Repurchase Agreements - through a Third Party Safekeeping Institution
Agreement, which includes an approved primary dealer doing business in
Texas as required by the PFIA.
Public Funds Investments Pools - through participation agreements; and
Certificates of Deposit - through approved local banks.
Money Market Mutual Funds
Guaranteed Investment Contracts (for Bond Proceeds only)
The City recognizes that investment risks can result from default risk, credit
volatility risk, and market price risks due to various technical and fundamental
economic factors, and other complications, leading to temporary illiquidity.
To control market price risks, volatile Investments shall be avoided. To control
default risk, the only acceptable method of payment will be on a delivery versus
payment-basis for all transactions, except investment pool funds and repurchase
agreements.
Delivery versus Payment provides for payment to Institutions at the time the
Investments are recorded in book entry form at the City's Third Party
Safekeeping Institution, currently maintained at the Federal Reserve. For
certificates of deposit, sufficient Collateral at 102% of current market values must
be pledged to protect all City monies or monies under its control that exceed
Federal Deposit Insurance Corporation (FDIC) coverage; the Collateral must be
safekept at a Third Party Safekeeping Institution not affiliated with the bank or
bank holding company providing the certificate of deposit.
AUTHORIZED INVESTMENTS AND MAXIMUM TERM
The City of Corpus Christi is authorized to invest in:
A. Authorized Investments
Obligations of the United States or its agencies and instrumentalities, which
currently include:
1. Short-term U.S. Treasuries: Maximum Term
a. U.S. Treasury Bills .................................................. up to 365 days
b. U.S. Treasury Coupon Notes .................................... up to 3 years
c, U.S. Treasury Notes and Strips ............................... up to 3 years*
*see Section V.B.3.
U.S. Agencies: Maximum Term
a. Federal Home Loan Bank ......................................... up to 2 years
b. Federal National Mortgage Association .................... up to 2 years
c. Federal Farm Credit .................................................. up to 2 years
d. Federal Home Loan Mortgage Corporation ............... up to 2 years
e. Student Loan Marketing Association ......................... up to 2 years
3. Repurchase Agreements ...........................................up to 365 days
Repurchase agreements fully collateralized at 102% with a defined
maturity date placed with a primary government dealer and safekept at a
Third Party Safekeeping Institution, as provided under the provisions of
the PSA (Public Securities Association) master repurchase agreement.
An executed agreement between the City, primary government dealer
and Third Party Safekeeping Institution will be on file before the City will
enter into a tri-party repurchase agreement.
Weekly monitoring by the City's Investment Officers of all Collateral
underlying repurchase agreements is required. More frequent monitoring
may be necessary during periods of market volatility. Reverse
repurchase agreements are not a permitted Investment.
7
4. Local Government Investment Pool .......................................... daily
Investments made on behalf of the City by a public funds investment pool
duly created to function as a money market mutual fund that marks its
portfolio to market daily and, to the extent reasonably possible, which
stabilizes its portfolio to market daily and, to the extent reasonably
possible, which stabilizes its portfolio at a $1 net asset value. If the ratio
of the market value of the Pool's portfolio divided by the book value of the
portfolio is less than 99.50% or greater than 100.50%, the Pool's portfolio
holdings shall be sold as necessary to maintain the ratio between 99.50%
and 100.50%
*~'""* """~ "* .... *;'~ The maximum amount that may be invested
in any one local government investment pool is the lesser of the followinq:
(i) 5% of the current invested balance of the local government nvestment
pool, or (ii) $50,000,000. The maximum total amount that may be
invested in all local ,qovernment investment pools is twenty-five (25) per
cent of the Investment Portfolio. The Director of Financial Services or
designee may allow for up to a two-day increase in maximum amounts
upon notification to Investment Committee.
The 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 with a weighted average maturity no greater
than 90 days. Local Government Investment Pools may contain
investment securities that are not directly authorized by this Policy, so
long as (i) the rating standard hereinabove stated is satisfied, and (ii) the
investment is permitted by Subchapter A of the Texas Public Funds
Investment Act, Chapter 2256 of the Texas Government Code.
5. Collateralized Certificates of Deposit ............................ up to 1 year
Certificates of deposit or other instruments issued by state and national
banks domiciled in Texas that are:
Guaranteed or insured by the Federal Deposit Insurance
Corporation or its successor; or
Secured by obligations that are described by Section V,
Subdivision A.1 (a) through A.2 (e).
Certificates of deposit must be fully collateralized at 102% of their
market value. The City requires the bank to pledge U.S.
Treasuries or U.S. Agencies as collateral. (Collateral Mortgage
Obligations will not be eligible as Collateral-see X.C,). The
Investment Officers will monitor adequacy of collateralization on a
weekly basis.
6.~. Money Market Mutual Fund
A no-load money market mutual fund is an authorized investment if:
a. the money market mutual fund is registered with and regulated
by the Securities and Exchange Commission
13. the money market mutual fund provides the City with a
prospectus and other information required by the Securities
Exchange Act of 1934 (15 USC. Section 78a et seq.) or the
Investment Company Act of 1940 (15 U.S.C. Section 80a-1 et
seq.);
c. the money market mutual fund has a dollar weighted average
stated maturity of 90 days or fewer; and
d. the money market mutual fund includes in its investment
objectives the maintenance of a stable net asset value of $1
for each share.
e. the assets of the money market mutual fund are invested in
those investments authorized under this Investment Policy.
7. Guaranteed Investment Contracts ............................... up to 3 years
Guaranteed investment contracts offer to pay a specific interest rate over
a period of time, and can be structured to reflect an anticipated draw
down schedule for capital improvements funded with bond proceeds. The
collateral and monitoring requirements applicable to repurchase
agreements shall apply to guaranteed investment contracts. A
guaranteed investment contract may be utilized only in connection with
the investment of bond proceeds. The maximum term of a guaranteed
investment contract shall not exceed the anticipated construction period
for the capital improvement, the construction of which is to be funded with
Bond Proceeds.
Weighted Average Maturity
In order to minimize risk of loss to the Investment Portfolio due to interest rate
fluctuations, Investment maturities will not exceed the anticipated cash flow
requirements of the Funds. Maturity guidelines by Fund are as follows:
The maximum term for any Investment other than Reserve Funds is three years.
The weighted averaged days to maturity shall be less than 365 days for
Investments, other than Reserve Funds.
1. Operating Funds
The weighted average days to maturity of Investments, other than
Reserve Funds, shall be 365 days or less. The Investment Officers will
monitor the maturity level and make changes as appropriate.
Capital Improvement Funds (Bond Proceeds, I~ond Reserves, and Debt
Service)
The Investment maturity of that portion of the City Portfolio that
represents Capital Improvement Funds (bond proceeds, reserve funds,
and debt service) shall be determined considering:
a. The anticipated cash flow requirements of the Capital
VI.
Improvement Funds; and
The "temporary period" as defined by Federal income tax law
during which time bond proceeds may be invested at an
unrestricted yield. After the expiration of the temporary period,
bond proceeds subject to yield restriction shall be invested
considering the anticipated cash flow requirements of the Capital
Improvement Funds.
Before an Investment can be made of bond proceeds from all bond
issues affected by the tax-exempt bond provisions of the Internal
Revenue Code of 1986, as amended (the "IRC"), a careful yield analysis
must be performed to comply with the IRC. Also, an annual rebate
calculation must be performed to determine if the City is required to
rebate interest at the end of each respective bond issue's five-year term.
Beginning on the anniversary of the third year for the respective bond
issues, all bond proceeds will be yield restricted as required by the IRC.
Reserve Funds: Established by Operative Bond Funds or by the City
Council.
The following Reserve Funds may be invested up to seven years in U.S.
Treasuries: Maximum
Choke Canyon Fund 4050 ............................................ $2,000,000
Debt Service Fund 2010 ............................................... $4,000,000
Utility Refunding Fund 4100 .......................................... $5,975,000
City monies governed by this Policy may not be invested in other
investments permitted by law unless (i} such investments are specifically
authorized for the investment of these monies by an ordinance adopted
by the City Council issuing bonds or other debt obligations or (ii) this
Policy is amended to permit such investment.
C. Methods to Monitor Investment Market Price
The City monitors the market price of investments by obtaining this information
from the Bloomberg system or the Tele-Rate system which is made available
through the City's authorized institutional brokers. The City may also obtain
market price information from other nationally recognized sources of financial
information such as the Walk Street Journal.
INVESTMENT MIX AND STRATEGIES
A, Investment Mix
A minimum of 15% of the total Investment Portfolio shall be held in Investments
with maturity dates of 90 days or less for liquidity. U.S. Treasuries/Agencies may
be purchased for longer-term maturities (greater than one year) but shall not
exceed 40% of the total Investment Portfolio to preserve liquidity.
10
Daily Investment reports shall specifically address whether stated Investment mix
requirements are being met. Unless approved by the Investment Advisory
Committee, the target percentages specified shall not be exceeded for temporary
periods greater than thirty (30) days without the Investment Officers taking
corrective action.
Strategies
Investment strategies for Operating Funds and Capital Improvement Funds have
as their primary objective the assurance that anticipated cash flows are matched
with adequate investment liquidity. The secondary objective is to create an
Investment Portfolio structure, which will experience minimal volatility during
economic cycles. To accomplish this strategy, the City will purchase high quality,
short-to-medium-term investments which will compliment each other.
To pay for anticipated disbursements, investments will be laddered to correspond
with the projected cash needs of the City. Some Investments are acquired on
the short end of the yield curve (90 days or less) to meet immediate cash needs.
A few Investments are purchased on the intermediate part of the yield curve (1-3
years) to lock in higher interest rates when rates are projected to decline due to
the economic cycle of the economy. The dollar weighted average investment
maturity of 365 days or less will be calculated using the stated final maturity
dates of each investment.
Investment strategies for debt service funds shall have as the primary objective
the assurance of investment liquidity adequate to cover the debt service
obligations on the required payment date. Investments purchased shall not have
a stated final maturity date that exceeds the debt service payment date.
Investment strategies for debt service reserve funds shall have as the primary
objective the ability to generate a dependable revenue stream to the appropriate
debt service fund from investments with a Iow degree of volatility. In accordance
with the bond ordinance specific to an individual bond issue, which sets out the
maximum investment term, Investments should be of high quality, with short-to-
intermediate-term maturities.
Investment strategies for Special Purpose Funds will have as their primary
objective the assurance that anticipated cash flows are matched with adequate
Investment liquidity.
These investment portfolios shall include highly liquid investments to allow for
flexibility and unanticipated project outlays. The stated final maturity dates of
Investments held shall not exceed the estimated project completion date.
Achieving Investment Return Objectives
Investment selection shall be based on legality, appropriateness, liquidity, and
risk/return considerations. Monies designated for immediate expenditure should
be passively invested.
Passive investment provides for:
l!
1. Liquidity to pay upcoming disbursements (payroll, debt service,
payments, payables, etc.)
2. Maximizing investment terms under the current budget; and
3. Structuring the Investment Portfolio on a "laddered" basis.
The remaining portion of the Investment Portfolio may be invested actively and
the reasons for doing so are:
Active investment provides for:
The ability to improve yields in the Investment Portfolio by riding the yield
curve during business cycle recovery and expansion periods. Interest
rates on longer maturities typically exceed those on shorter maturities.
Therefore, longer maturities (that can be held to maturity, if necessary)
are purchased in anticipation of selling later at the same or lower interest
rate, improving the total return during the holding period.
The ability to improve market sector diversification by swapping out of
one investment into another for a better total return, to realign for
disbursement projections, or to extend or shorten maturity depending on
economic forecasts. The City Manager, or his designee, is required to
approve any investment that must be sold at a loss. All gains and losses
will be reported to the City Council and Investment Committee no less
frequently than on a quarterly basis.
VII. RESPONSIBILITY AND CONTROLS
A. Authority to Invest
The authority to invest City funds and the execution of any documentation
necessary to evidence the investment of City funds is granted to the Director of
Financial Services. The City Treasurer and the Investment Analyst are the
designated Investment Officers responsible for the daily operation of the
investment program. All investments will be approved in writing by the Director
of Financial Services or Designee (excluding Investment Officers).
The City Council 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
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 City Council by ordinance or
resolution.
B. Establishment of Internal Controls
The City Treasurer will establish a system of internal controls over the
Investment activities of the City and document such controls in the Investment
Procedures Manual. These internal controls shall be approved by the Director of
Financial Services.
12
Bo
Prudent Investment Management
Investments shall be made with the same 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. Prudent investment is to be judged by the Investment
Portfolio as a whole, not on individual Investments.
If liquidation is necessary due to a pool losing its AAA rating or for other reasons,
liquidation will be done in a prudent manner consistent with the investment
objectives of this policy and as provided in 2256.021 of the Government Code.
Investment of monies shall be governed by the following investment objectives in
order of priority:
preservation and safety of principal;
liquidity; and
yield.
The designated Investment Officers shall perform their duties in accordance with
the adopted Investment Policy and Procedures set forth in the Investment
Procedures Manual. Investment Officers acting in good faith and in accordance
with these policies and procedures shall be relieved of personal liability. The
Investment Committee and Officers are indemnified as provided by City
Ordinance attached and incorporated as Appendix D.
Standards of Ethics
The Investment Committee and City Treasurer will comply with the City's Code of
Ethics Ordinance attached and incorporated as Appendix C which requires
disclosure of financial interests by April of each year.
The designated Investment Officers and all members of the Investment
Committee shall adhere to the City's Ethics Ordinance. To the extent required by
section 2256.005(I) of the Government Code, the Investment Committee and City
Treasurer shall make such filings as required by law.
Training and Education
Recognizing that the training and education of Investment Officers contributes to
efficient and effective investment management, the City requires its Investment
Officers to obtain appropriate professional training. Such training is currently
required by, and shall be obtained in accordance with Section 2256.008 of the
Government Code Public Funds Investment Act. The Investment Committee
approves investment-training seminars presented by the following organizations:
Government Finance Officers Association
Government Finance Officers Association of Texas
Government Treasurers Organization of Texas
Municipal Treasurers Association
Texas Municipal League
UNT Center for Public Management
If the Investment Officer desires to attend an investment-training seminar
presented by another organization for training credit, such seminar must be
approved by the City Manager or his designee.
VIII. COMPETITIVE SOLICITATION
IX.
Except for repurchase agreements, guaranteed investment contracts, and public
funds investment pools, any new issue investment will be purchased through an
Authorized Selling Group or directly through the issuer.
For any Investment purchased or sold through the secondary market, the City will
obtain at least three proposals from Authorized Institutions.
Any Institution authorized to participate in the City's investment program must
meet Collateral pledge requirements outlined in Section IV.D. of these guidelines
and must submit annual financial reports.
AUTHORIZED INSTITUTIONS
All institutions who seek to sell an authorized Investment to the City are required
to complete the questionnaire approved by the Investment Committee and
furnish supporting documentation required by the Investment Committee.
Securities shall only be purchased through those Institutions approved by the
Investment Committee.
Investments shall only be made with those Institutions who have executed a
written instrument in a form acceptable to the City, executed by a Qualified
Representative of the Institution, and substantially to the effect that the Institution
has:
Received, thoroughly reviewed and acknowledged, in writing,
receipt and understanding of the City's Investment Policy, and;
Acknowledged that the Institution has implemented reasonable
procedures and controls in an effort to preclude investment
transactions conducted between the Institution and the City that
are not authorized by the City's Investment Policy.
Investments shall only be made with those Institutions who have met the
qualifications and standards established by the City's Investment Committee and
set forth in the Investment Procedures Manual.
The Investment Committee shall, at least annually, review, revise, and adopt a
list of qualified brokers that are authorized to engage in investment transactions
with the City.
The City Treasurer will request the Investment Committee to authorize deletion of
Institutions for:
Slow response time;
Less than competitive pricing;
Little or no information on technical or fundamental expectations based
]4
on economic indicators;
Failed transactions or continuing operational difficulties; or
Unwillingness to continue to abide the provisions listed in IX.A.; or
Other reasons as approved by the Investment Committee.
X. PLEDGED COLLATERAL
The market value of pledged Collateral must be at least 102% of the principal plus accrued
interest for Excess Cash Balances, certificates of deposit, guaranteed investment contracts, and
repurchase agreements. Evidence of proper collateralization in the form of original safekeeping
receipts held at a Third Party Safekeeping Institution not affiliated with the Institution pledging
the Collateral will be approved by the City Treasurer and will be maintained in the City's
Treasurer Office. An authorized City Representative (See Appendix B) will approve and release
all pledged collateral.
A. Collateral Substitution
Collateralized Investments and certificates of deposit often require substitution of
Collateral. Any Institution must contact the Investment Officers for approval and
settlement. The substituted collateral's value will be calculated and substitution
approved if its value is equal to or greater than the required collateral value.
Substitution is allowable for all transactions, but should be limited, to minimize
the City's potential administrative problems.
B. Collateral Reductions
Should the collateral's market value exceed the required amount, any institution
may request approval from the Investment Officer to reduce collateral. Collateral
reductions may be permitted only if the City's records indicate that the collateral's
market value exceeds the required amount.
C. Prohibited Securities
investment securities described in Section 2256.009(b), Government Code, shall
not be eligible for use as collateral of City monies governed by this Policy.
Xl. SAFEKEEPING
A. Third Party Safekeeping Agreement
The City shall contract with a Bank or Banks for the safekeeping of Securities
either owned by the City as a part of its Investment Portfolio or held by the City or
a Third Party Safekeeping Institution as Collateral to secure certificates of
deposit, repurchase agreements, guaranteed investment contracts or Excess
Cash Balances.
B. Safekeeping of Certificate of Deposit Collateral
All Collateral securing bank and savings and loan deposits must be held by a
Third Party Safekeeping Institution approved by the City, or Collateral may be
held at the Federal Reserve Bank.
C. Safekeeping of Repurchase Agreement Collateral
Repurchase Agreement Collateral is restricted to U.S. Treasuries and must be
delivered to a Third-Party Safekeeping Institution with which the City has (subject
to the limitation described in Section X.C. above) established a third-party
safekeeping agreement.
D. Guaranteed Investment Agreement Collateral
Guaranteed investment contract collateral is restricted to U.S. Treasuries and
Agencies (subject to the limitation described in Section X.C. above) and must be
delivered to a Third-Party Safekeeping Institution with which a third-party
safekeeping agreement has been established pursuant to the terms of the
guaranteed investment contract.
Xll. WIRE AND ELECTRONIC SERVICES
Wire and electronic services are to be provided as referenced in the City's
Depository Services agreement, portions of which are attached and incorporated
as Appendix E. The City requests applications for depository services every
three to five years.
XlII. INFORMATION REPORTING/EVALUATION
The City Treasurer and Investment Analyst are hereby designated as the
Investment Officers and are responsible for the daily operation of the Investment
program and will report to the Investment Committee on a quarterly basis.
A. Investment Committee consists of:
City Manager
Deputy City Manager
Assistant City Managers
Director of Financial Services
City Attorney
Director of Management and Budget
The Investment Committee will be responsible for monitoring, reviewing, and
making recommendations regarding the City's Investment program to the City
Council. Reports will be provided to the City Council by the Investment Officers
no less than quarterly, as required by the Public Funds Investment Act.
B. Internal Reporting/Evaluation
The following reports are to be submitted on a:
Daily basis to the Director of Financial Services or Designee (Excluding
Investment Officers):
Cash Position by Bank Account
Collateral Position
Investment Portfolio (Including Purchases/Maturities)
2. Quarterly Reporting to Investment Committee and City Council.
Executive Summary
Schedules
m.
n.
o.
Combined Investment Report of Market Versus Book Values
Combined Portfolio Composition
Individual Portfolio Composition
Cash and Equivalents
U.S. Treasuries
Investments Greater than One Year
Combined Summary of Investment Transactions
Combined Summary of Portfolio Activity
Combined Investment Portfolio - Weighted Average Maturity
Income Received from Investments
Combined Analysis of Gains on Sale of Securities
Aggregate Activity per Broker
Analysis of Excess Coverage
Comparison of Investment Returns to Benchmarks
Combined Summary of Investment Transactions - Lake Texana
Project
Summary of Portfolio Activity - Lake Texana Project
Weighted Average Maturity - Lake Texana Project
Trade Journal
Trade Journal
Approved Institutional Brokers
Glossary
Compliance Statement
Quarterly Investment Committee Meeting Agenda and Minutes
C. External Reporting/Evaluations
On a quarterly basis, the City's main depository and all applicable Institutions
providing certificates of deposit in excess of FDIC coverage will provide to the
Investment Officer for review a copy of the balance sheet and income statement
for the Call Report. All Institutions will provide annual audited financial
statements. Any local government investment pools must provide reports and
disclosure statements as required by the Public Funds Investment Act.
D. Record Retention
The City follows the guidelines of retaining records for seven years from City's
current fiscal year, as recommended in the Texas State Library Municipal
Records Manual or may be authorized by the City's local records management
guidelines.
XlV. BANKING SERVICES
All depository services are provided in the City's main depository agreement.
Other services such as credit cards, direct deposit of payroll or other services
may be administered through separate agreements. To aggressively invest
Excess Cash Balances, controlled disbursements accounts, zero balance
accounts and other cash management tools may be employed.
17
XV. GENERAL PROVISIONS
Audits and Inspections. During regular business hours and as often as the
Investment Officers deem necessary, the Institution providing certificates of
deposit will make available for examination by the City Manager, his duly
authorized agent, accountant, or legal representative, such records and data to
assure the pledge of Collateral, availability of Collateral, and financial stability of
the Institution.
Compliance with Laws. Each Institution agrees to comply with all federal, state,
and local laws, rules, regulations, and ordinances. The personnel or officers of
such Institution shall be fully qualified and authorized under federal, state, and
local law to perform the services set out under this Policy. Each Institution shall
permit the Investment Officers to audit, examine, and make excerpts or
transcripts from such records and to make audits of all contract, invoices,
materials, and other data relating to applicable Investments.
Performance Audits. The City's Annual External Financial Audit shall include a
compliance audit of management controls on Investments and adherence to this
Policy. If the City invests in other than money market mutual funds, investment
pools or accounts offered by its depository in the form of certificates of deposit or
money market accounts, the quarterly reports prepared by Investment Officers
for the City Council must be formally reviewed at least annually by an
independent auditor. The results of the review must be reported to the City
Council by that auditor.
Investment Policy Resolution. The resolution authorizing this Investment
Policy is attached and incorporated as Appendix F "Investment Policy
Resolutions."
APPENDIX A.
TEXAS GOVERNMENT CODI:
CHAPTER 2256. PUBLIC FUNDS INVE[STMENT
SUBCHAPTER A. AUTHORIZED INVESTMENTS FOR GOVERNMENTAL £NTITIES
§ 2256.001. Short Title
This chapter may be cited as the Public Funds Investment Act.
Amended by Acts 1995, 74th Leg., ch. 402, § 1, eft. Sept. 1, 1995.
§ 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:
(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.
(11 ) "School district" means a public school district.
(12) "Separately invested asset" means an account or fund of a state agency or local
government that is not invested in a pooled fund group.
(13) "State 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, eft. Sept. 1, 1995; Acts 1997, 75th
Leg., ch. 1421, § 1, eft. Sept. 1, 1997; Acts 1999, 76th Leg., ch. 1454, § 1, eft. Sept. 1,
1999.
20
§ 2256.003. Authority to Invest Funds; Entities Subject 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, eft. Sept. 1, 1995; Acts 1999, 76th
Leg., ch. 1454, § 2, eft. Sept. 1, 1999.
§ 2256.004. Applicability
(a) This subchapter does not apply to:
(1) a public retirement system as defined by Section 802.001;
(2) state funds invested as authorized by Section 404.024;
(3) an institution of higher education having total endowments of at least $95 million in
book value on May 1, 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
2!
(6) a deferred compensation plan that qualifies under either Section 401(k) or 457 of the
Internal Revenue Code of 1986 (26 U.S.C. Section 1 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, § 1, eft. Sept. 1, 1995; Acts 1997, 75th
Leg., ch. 505, § 24, eft. Sept. 1, 1997; Acts 1997, 75th Leg., ch. 1421, § 2, eft. Sept. 1,
1997; Acts 1999, 76th Leg., ch. 62, § 8.21, eft. Sept. 1, 1999; Acts 1999, 76th Leg., ch.
1454, § 3, eft. Sept. 1, 1999.
§ 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.
(b) The investment policies must:
(1) 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:
(1) orally;
(2) in writing;
(3) electronically; or
(4) in any combination of those methods.
(d) As an integral part 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;
22
(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 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 (f) does not apply to a state agency, local government, or investment
pool for which an officer of the entity is assigned by law the function of investing its
funds.
<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 (f) if the officer or employee is an investment officer designated under
Subsection (f) 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 (f) 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:
(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 (o), 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. Subject to a risk assessment and to the legislative
audit committee's approval of including a review by the state auditor in the audit plan
under Section 321.013, the state auditor may review information provided under this
24
section. If review by the state auditor is approved by the legislative audit committee, the
state auditor may, based on its review, require a state agency to also 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.
(o) 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.
CREDIT(S)
Amended by Acts 1995, 74th Leg., ch. 402, § 1, eft. Sept. 1, 1995; Acts 1997, 75th
Leg., ch. 685, § 1, eft. Sept. 1, 1997; Acts 1997, 75th Leg., ch. 1421, § 3, eft. Sept. 1,
1997; Acts 1999, 76th Leg., ch. 1454, § 4, eft. Sept. 1, 1999; Acts 2003, 78th Leg., ch.
785, § 41, eft. Sept. 1,2003.
§ 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:
(1) preservation and safety of principal;
(2) liquidity; and
(3) yield.
(b) In determining whether an investment officer has exercised prudence with respect to
an investment decision, the determination shall be made taking into consideration:
(1) 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, § 1, eft. Sept. 1, 1995.
§ 2256.007. Investment Training; State Agency 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.
25
(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 180th day after the last day of each regular session of the legislature.
Amended by Acts 1995, 74th Leg., ch. 402, § 1, eft. Sept. 1, 1995; Acts 1997, 75th
Leg., ch. 73, § 1, eft. May 9, 1997; Acts 1997, 75th Leg., ch. 1421, § 4, eft. Sept. 1,
1997; Acts 1999, 76th Leg., ch. 1454, § 5, eft. Sept. 1, 1999.
§ 2256.008. Investment Training; Local Governments
(a) Except as provided by Subsections (b) and (e), the treasurer, the chief financial
officer if the treasurer is not the chief financial officer, and the investment officer of a
local government shall:
(1) 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 Subsections (b) and (e), 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.
(b) An investing entity created under authority of Section 52(b), Article Ill, or Section 59,
Article XVl, 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 III, or Section 59, Article XVl, 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.
(e) This section does not apply to a district governed by Chapter 36 or 49, Water Code.
Amended by Acts 1995, 74th Leg., ch. 402, § 1, eft. Sept. 1, 1995; Acts 1997, 75th
Leg., ch. 1421, § 5, eft. Sept. 1, 1997; Acts 1999, 76th Leg., ch. 1454, § 6, eft. Sept. 1,
1999.
Amended by Acts 2001, 77th Leg., ch. 69, § 4, eft. May 14, 2001.
§ 2256.009. Authorized Investments: Obligations of, or Guaranteed by
Governmental Entities
(a) Except as provided by Subsection (b), the following are authorized investments
under this subchapter:
(1) obligations, including letters of credit, of the United States or its agencies and
instrumentalities;
(2) direct obligations of this state or its agencies and instrumentalities;
(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
27
(6) bonds issued, assumed, or guaranteed by the State of israel.
(b) The following are not authorized investments under this section:
(1) obligations whose payment represents the coupon payments on the outstanding
principal balance of the underlying mortgage-backed security collateral and pays no
principal;
(2) obligations whose payment represents the principal stream of cash flow from the
underlying mortgage-backed security collateral and bears no interest;
(3) collateralized mortgage obligations that have a stated final maturity date of greater
than 10 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, § 1, eft. Sept. 1, 1995; Acts 1999, 76th
Leg., ch. 1454, § 7, eft. Sept. 1, 1999.
Amended by Acts 2001, 77th Leg., ch. 558, § 1, eft. Sept. 1, 2001.
§ 2256.010. Authorized Investments: Certificates of Deposit and Share Certificates
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, § 1, eft. April 28, 1995; Acts 1995, 74th Leg.,
ch. 402, § 1, eft. Sept. 1, 1995; Acts 1997, 75th Leg., ch. 1421, § 6, eft. Sept. 1, 1997.
§ 2256.011. Authorized Investments: Repurchase Agreements
(a) A fully collateralized repurchase agreement is an authorized investment under this
subchapter if the repurchase agreement:
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(1) has a defined termination date;
(2) is secured by obligations described by Section 2256.009(a)(1); and
(3) requires the securities being purchased by the entity to be pledged to the entity, held
in the entity's name, and deposited at the time the 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, eft. Sept. 1, 1995.
§ 2256.0115. Authorized Investments: Securities Lending Program
(a) A securities lending program is an authorized investment under this subchapter if it
meets the conditions provided by this section.
(b) To qualify as an authorized investment under this subchapter:
(1) the value of securities loaned under the program must be not less than 100 percent
collateralized, including accrued income;
(2) a loan made under the program must allow for termination at any time;
(3) a loan made under the program must be secured by:
(A) pledged securities described by Section 2256.009;
(B) pledged irrevocable letters of credit issued by a bank that is:
(i) organized and existing under the laws of the United States or any other state; and
(ii) continuously rated by at least one nationally recognized investment rating firm at
not less than A or its equivalent; or
(C) cash invested in accordance with Section:
(i) 2256.009;
(ii) 2256.013;
(iii) 2256.014; or
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(iv) 2256.016;
(4) the terms of a loan made under the program must require that the securities being
held as collateral be:
(A) pledged to the investing entity;
(B) held in the investing entity's name; and
(C) deposited at the time the investment is made with the entity or with a third party
selected by or approved by the investing entity;
(5) a loan made under the program must be placed through:
(A) a primary government securities dealer, as defined by 5 C.F.R. Section
6801.102(0, as that regulation existed on September 1,2003; or
(B) a financial institution doing business in this state; and
(6) an agreement to lend securities that is executed under this section must have a
term of one year or less.
CREDIT(S)
Added by Acts 2003, 78th Leg., ch. 1227, § 1, eft. Sept. 1, 2003
§ 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-1 or P-1 or an
equivalent rating by at least one nationally recognized credit rating agency.
Amended by Acts 1995, 74th Leg., ch. 402, § 1, eft. Sept. 1, 1995.
§ 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 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
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(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, § 1, eft. Sept. 1, 1995.
§ 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:
(1) 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.C. Section 78a et seq.) or the Investment
Company Act of 1940 (15 U.S.C. 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:
(1) is registered with the Securities and Exchange Commission;
(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 any one 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, § 1, eft. Sept. 1, 1995; Acts 1997, 75th
Leg., ch. 1421, § 7, eft. Sept. 1, 1997; Acts 1999, 76th Leg., ch. 1454, § 8, eft. Sept. 1,
1999.
§ 2256.0'15. 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:
(1) has a defined termination date;
(2) is secured by obligations described by Section 2256.009(a)(1), 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:
(1) the governing body of the entity must specifically authorize guaranteed investment
contracts as an eligible investment in the order, ordinance, or resolution authorizing the
issuance of bonds;
(2) the entity must receive bids from at least three separate providers with no material
financial interest in the bonds from which proceeds were received;
(3) the entity must purchase the highest yielding guaranteed investment contract for
which a qualifying bid is received;
(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 with the guaranteed investment contract.
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Amended by Acts 1995, 74th Leg., ch. 402, 9 1, eft. Sept. 1, 1995; Acts 1997, 75th
Leg., ch. 1421, 9 8, eft. Sept. 1, 1997; Acts 1999, 76th Leg., ch. 1454, 99 9, 10, eft.
Sept. 1, 1999.
9 2256.016. Authorized Investments: Investment Pools
(a) An entity may invest its funds and funds under its control through an eligible
investment pool if the governing body of the entity by rule, order, ordinance, or
resolution, as appropriate, 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:
(1) 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;
(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;
(J) the portfolio managers of the pool; and
(K) any changes or addenda to the offering circular.
(d) An entity by contract may delegate to an investment pool the authority to hold legal
title as custodian of investments purchased with its local funds.
(e) In this section, "yield" shall be calculated in accordance with regulations governing
the registration of open-end management 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 created to function as a money market mutual
fund must mark its portfolio to market daily, and, to the extent reasonably possible,
34
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 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, eft. Sept. 1, 1995; Acts 1997, 75th
Leg., ch. 1421, § 9, eft. Sept. 1, 1997.
§ 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), eft. Sept. 1, 1995; Acts 1995, 74th
Leg., ch. 402, § 1, eft. Sept. 1, 1995. Amended by Acts 1997, 75th Leg., ch. 1421, § 10,
eft. Sept. 1, 1997.
§ 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, § 1, eft. Sept. 1, 1995. Amended by Acts 1997,
75th Leg., ch. 1421, § 11, eft. Sept. 1, 1997.
§ 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 501(f), Internal Revenue Code of 1986 (26
U.S.C. Section 501 (f));
(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-l, P-l, 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, § 1, eft. Sept. 1, 1995.
§ 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.
(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, eft. Sept. 1, 1999.
§ 2256.021. Effect of Loss of Required Rating
An investment that requires a minimum rating under this subchapter does not qualify as
an authorized investment during the period the investment does not have the minimum
rating. An entity shall take all prudent measures that are consistent with its investment
policy to liquidate an investment that does not have the minimum rating.
Added by Acts 1995, 74th Leg., ch. 402, § 1, eft. Sept. 1, 1995.
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§ 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,
subject to the legislative audit committee's approval of including the review in the audit
plan under Section 321.013.
Added by Acts 1995, 74th Leg., ch. 402, § 1, eft. Sept. 1, 1995. Amended by Acts
2003, 78 Leg., ch. 785, Section 42, eff. Sept. 1,2003.
§ 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;
(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:
37
(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) If 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, eft. Sept. 1, 1995. Amended by Acts 1997,
75th Leg., ch. 1421, § 12, eft. Sept. 1, 1997.
§ 2256.024. Subchapter Cumulative
(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:
(1) 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, eft. Sept. 1, 1995.
§ 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, eft. Sept. 1, 1997.
§ 2256.026. Statutory Compliance
Ail 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, § 13, eft. Sept. 1, 1997.
SUBCHAPTER B. MISCELLANEOUS PROVISIONS
§ 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, § 1, eft. Sept. 1, 1995.
§ 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, § 1, eft. Sept. 1, 1995.
§ 2256.053. Payment for Securities Purchased by State
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, § 1, eft. Sept. 1, 1995; Acts 1997, 75th
Leg., ch. 1423, § 8.67, eft. Sept. 1, 1997.
§ 2256.054. Delivery of Securities Purchased by State
A security purchased under this chapter may be delivered to the comptroller, a bank, or
the board or agency investing its funds. The delivery shall be made under 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, § 1, eft. Sept. 1, 1995; Acts 1997, 75th
Leg., ch. 1423, § 8.68, eft. Sept. 1, 1997.
§ 2256.055. Deposit of Securities Purchased by 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, eft. Sept. 1, 1995; Acts 1997, 75th
Leg., ch. 1423, § 8.69, eft. Sept. 1, 1997.
SUBCHAPTER C. PAYMENT FOR AND DELIVERY AND DEPOSIT OF SECURITIES
PURCHASED BY STATE [DELETED]
40