H.B. No. 2226

	AN ACT
	relating to authorized investments for governmental entities.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1.  Section 2256.005(b), Government Code, is amended
	to read as follows:
	(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; and
	(F)  procedures to monitor rating changes in
	investments acquired with public funds and the liquidation of such
	investments consistent with the provisions of Section 2256.021.
	SECTION 2.  Section 2256.007(d), Government Code, is amended
	to read as follows:
	(d)  An investment officer shall attend a training session
	not less than once each state fiscal biennium [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.
	SECTION 3.  Sections 2256.008(a) and (b), Government Code,
	are amended to read as follows:
	(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 that begins on the first day of that local
	government's fiscal year and consists of the two consecutive fiscal
	years after that date, 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 III, or Section 59, Article XVI, Texas Constitution,
	that has contracted with an investment management firm under
	Section 2256.003(b) and has fewer than five full-time employees or
	an investing entity that has contracted with another investing
	entity to invest the entity's funds may satisfy the training
	requirement provided by Subsection (a)(2) by having an officer of
	the governing body attend four hours of appropriate instruction in
	a two-year period that begins on the first day of that local
	government's fiscal year and consists of the two consecutive fiscal
	years after that date. The treasurer or chief financial officer of
	an investing entity created under authority of Section 52(b),
	Article III, or Section 59, Article XVI, Texas Constitution, and
	that has fewer than five full-time employees is not required to
	attend training required by this section unless the person is also
	the investment officer of the entity.
	SECTION 4.  Section 2256.009(a), Government Code, is amended
	to read as follows:
	(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, including
	obligations that are fully guaranteed or insured by the Federal
	Deposit Insurance Corporation or by the explicit full faith and
	credit of the United States;
	(5)  obligations of states, agencies, counties,
	cities, and other political subdivisions of any state rated as to
	investment quality by a nationally recognized investment rating
	firm not less than A or its equivalent; and
	(6)  bonds issued, assumed, or guaranteed by the State
	of Israel.
	SECTION 5.  Section 2256.010(b), Government Code, is amended
	to read as follows:
	(b)  In addition to the authority to invest funds in
	certificates of deposit under Subsection (a), an investment in
	certificates of deposit made in accordance with the following
	conditions is an authorized investment under this subchapter:
	(1)  the funds are invested by an investing entity
	through:
	(A)  a broker that has its main office or a branch
	office in this state and is selected from a list adopted by the
	investing entity as required by Section 2256.025; or
	(B)  a depository institution that has its main
	office or a branch office in this state and that is selected by the
	investing entity;
	(2)  the broker or the depository institution selected
	by the investing entity under Subdivision (1) arranges for the
	deposit of the funds in certificates of deposit in one or more
	federally insured depository institutions, wherever located, for
	the account of the investing entity;
	(3)  the full amount of the principal and accrued
	interest of each of the certificates of deposit is insured by the
	United States or an instrumentality of the United States; and
	(4)  the investing entity appoints the depository
	institution selected by the investing entity under Subdivision (1),
	an entity described by Section 2257.041(d), or a clearing
	broker-dealer registered with the Securities and Exchange
	Commission and operating pursuant to Securities and Exchange
	Commission Rule 15c3-3 (17 C.F.R. Section 240.15c3-3) [acts] as
	custodian for the investing entity with respect to the certificates
	of deposit issued for the account of the investing entity[; and
	[(5)     at the same time that the funds are deposited and
	the certificates of deposit are issued for the account of the
	investing entity, the depository institution selected by the
	investing entity under Subdivision (1) receives an amount of
	deposits from customers of other federally insured depository
	institutions, wherever located, that is equal to or greater than
	the amount of the funds invested by the investing entity through the
	depository institution selected under Subdivision (1)].
	SECTION 6.  Section 2256.011(a), Government Code, is amended
	to read as follows:
	(a)  A fully collateralized repurchase agreement is an
	authorized investment under this subchapter if the repurchase
	agreement:
	(1)  has a defined termination date;
	(2)  is secured by a combination of cash and
	obligations described by Section 2256.009(a)(1); and
	(3)  requires the securities being purchased by the
	entity or cash held by the entity to be pledged to the entity, held
	in the entity's name, and deposited at the time the investment is
	made with the entity or with a third party selected and approved by
	the entity; and
	(4)  is placed through a primary government securities
	dealer, as defined by the Federal Reserve, or a financial
	institution doing business in this state.
	SECTION 7.  Section 2256.016, Government Code, is amended by
	amending Subsections (a), (c), and (f) and adding Subsections (i),
	(j), and (k) to read as follows:
	(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.
	(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.
	(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,
	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. In
	addition to the requirements of its investment policy and any other
	forms of reporting, a public funds investment pool created to
	function as a money market mutual fund shall report yield to its
	investors in accordance with regulations of the federal Securities
	and Exchange Commission applicable to reporting by money market
	funds.
	(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.
	SECTION 8.  Section 2256.019, Government Code, is amended to
	read as follows:
	Sec. 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].
	SECTION 9.  Section 2256.023(b), Government Code, is amended
	to read as follows:
	(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
	(C) [(D)]  fully accrued interest for the
	reporting period;
	(5)  state the book value and market value of each
	separately invested asset at the [beginning and] end of the
	reporting period by the type of asset and fund type invested;
	(6)  state the maturity date of each separately
	invested asset that has a maturity date;
	(7)  state the account or fund or pooled group fund in
	the state agency or local government for which each individual
	investment was acquired; and
	(8)  state the compliance of the investment portfolio
	of the state agency or local government as it relates to:
	(A)  the investment strategy expressed in the
	agency's or local government's investment policy; and
	(B)  relevant provisions of this chapter.
	SECTION 10.  This Act takes effect immediately if it
	receives a vote of two-thirds of all the members elected to each
	house, as provided by Section 39, Article III, Texas Constitution.
	If this Act does not receive the vote necessary for immediate
	effect, this Act takes effect September 1, 2011.
	______________________________	______________________________
	President of the Senate	Speaker of the House
	I certify that H.B. No. 2226 was passed by the House on April
	26, 2011, by the following vote:  Yeas 148, Nays 0, 2 present, not
	voting; that the House refused to concur in Senate amendments to
	H.B. No. 2226 on May 25, 2011, and requested the appointment of a
	conference committee to consider the differences between the two
	houses; and that the House adopted the conference committee report
	on H.B. No. 2226 on May 28, 2011, by the following vote:  Yeas 148,
	Nays 0, 1 present, not voting.
	______________________________
	Chief Clerk of the House
	I certify that H.B. No. 2226 was passed by the Senate, with
	amendments, on May 23, 2011, by the following vote:  Yeas 30, Nays
	0; at the request of the House, the Senate appointed a conference
	committee to consider the differences between the two houses; and
	that the Senate adopted the conference committee report on H.B. No.
	2226 on May 29, 2011, by the following vote:  Yeas 31, Nays 0.
	______________________________
	Secretary of the Senate
	APPROVED: __________________
	Date
	__________________
	Governor