Curry Bill Puts 35% Of Pool Funds In Texas Banks

The text as introduced · 1,556 words

By: Curry
H.B. No. 5270

A BILL TO BE ENTITLED

AN ACT

relating to authorized investments by governmental entities.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 2256.002, Government Code, is amended by

adding Subdivision (9-a) to read as follows:

(9-a) "Qualified manager" means:

(A) an investment management firm registered:

(i) under the Investment Advisers Act of

1940 (15 U.S.C. Section 80b-1 et seq.); or

(ii) with the State Securities Board;

(B) a bank, as defined by Section 3, Federal

Deposit Insurance Act (12 U.S.C. Section 1813); or

(C) a bank holding company, as defined by Section

2(a), Bank Holding Company Act of 1956 (12 U.S.C. Section 1841(a)).

SECTION 2. Section 2256.003(b), Government Code, is amended

to read as follows:

(b) In the exercise of its powers under Subsection (a), the

governing body of an investing entity may contract with a qualified

manager [ 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.

SECTION 3. Section 2256.016, Government Code, is amended to

read as follows:

Sec. 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. An investment pool may

invest its funds in money market mutual funds to the extent

permitted by and consistent with this subchapter and the investment

policies and objectives adopted by the investment pool.

(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;

(12) the performance history of the pool, including

yield, average dollar-weighted maturities, and expense ratios;

[ and ]

(13) the pool's policy regarding holding deposits in

cash ; and

(14) written confirmation in readily visible font and

positioning on the disclosure that there is no sponsorship

agreement or royalty paid to any association or organization from

funds or interest income of the pool .

(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,

including a statement regarding how yield is calculated;

(J) the portfolio managers of the pool; [ and ]

(K) any changes or addenda to the offering

circular ; and

(L) written confirmation in readily visible font

and positioning on the disclosure that there is no sponsorship

agreement or royalty paid to any association or organization from

funds or interest income of the pool .

(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, for purposes of an investment pool for

which a $1.00 net asset value is maintained, "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:

(1) a public funds investment pool that uses amortized

cost or fair value accounting must mark its portfolio to market

daily; [ and ]

(2) if the investment pool uses amortized cost:

(A) the investment pool must, to the extent

reasonably possible, stabilize at a $1.00 net asset value, when

rounded and expressed to two decimal places;

(B) the governing body of the investment pool

must, 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, take action as the body determines necessary to eliminate or

reduce to the extent reasonably practicable any dilution or unfair

result to existing participants, including a sale of portfolio

holdings to attempt to maintain the ratio between 0.995 and 1.005;

and

(C) the investment pool must, in addition to the

requirements of its investment policy and any other forms of

reporting, report yield to its investors in accordance with

regulations of the federal Securities and Exchange Commission

applicable to reporting by money market funds ; and

(3) an investment pool must invest at least 35 percent

of the pool’s funds with an authorized investment described by

Sections 2256.009(a)(7) or (8) or 2256.010 in a bank located in this

state .

(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.

(i) If the investment pool operates an Internet website, the

information in a disclosure instrument or report described in

Subsections (b), (c)(2), and (f) must be posted on the website.

(j) To maintain eligibility to receive funds from and invest

funds on behalf of an entity under this chapter, an investment pool

must make available to the entity an annual audited financial

statement of the investment pool in which the entity has funds

invested.

(k) If an investment pool offers fee breakpoints based on

fund balances invested, the investment pool in advertising

investment rates must include either all levels of return based on

the breakpoints provided or state the lowest possible level of

return based on the smallest level of funds invested.

(l) The annual audit under Section 2256.016(j) shall be

posted on the publicly accessible internet website of the

investment pool and on the comptroller’s internet website.

(m) To be eligible to receive funds from and invest funds on

behalf of an entity under this chapter, a public funds investment

pool is prohibited from:

(1) entering into a royalty or sponsorship agreement

with an association or organization; and

(2) paying a royalty or sponsorship from funds or

interest income available to the pool.

SECTION 4. This Act takes effect September 1, 2026.