Bill Text: TX SB1543 | 2011-2012 | 82nd Legislature | Engrossed
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Relating to the authority of an independent school district to invest in corporate bonds.
Spectrum: Partisan Bill (Republican 2-0)
Status: (Passed) 2011-06-17 - Effective immediately [SB1543 Detail]
Download: Texas-2011-SB1543-Engrossed.html
Bill Title: Relating to the authority of an independent school district to invest in corporate bonds.
Spectrum: Partisan Bill (Republican 2-0)
Status: (Passed) 2011-06-17 - Effective immediately [SB1543 Detail]
Download: Texas-2011-SB1543-Engrossed.html
By: Wentworth | S.B. No. 1543 |
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relating to the authority of an independent school district to | ||
invest in corporate bonds. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Subchapter A, Chapter 2256, Government Code, is | ||
amended by adding Section 2256.0204 to read as follows: | ||
Sec. 2256.0204. AUTHORIZED INVESTMENTS: INDEPENDENT | ||
SCHOOL DISTRICTS. (a) In this section, "corporate bond" means a | ||
senior secured debt obligation issued by a domestic business entity | ||
and rated not lower than "AA-" or the equivalent by a nationally | ||
recognized investment rating firm. The term does not include a debt | ||
obligation that: | ||
(1) on conversion, would result in the holder becoming | ||
a stockholder or shareholder in the entity, or any affiliate or | ||
subsidiary of the entity, that issued the debt obligation; | ||
(2) is secured by or payable from a pool of assets, | ||
receivables, or other similar collateral; | ||
(3) is a subordinate debt obligation and inferior in | ||
security to a senior secured debt obligation issued by a domestic | ||
business entity; or | ||
(4) is an unsecured debt obligation. | ||
(b) This section applies only to an independent school | ||
district that qualifies as an issuer as defined by Section | ||
1371.001. | ||
(c) In addition to authorized investments permitted by this | ||
subchapter, an independent school district subject to this section | ||
may purchase, sell, and invest its funds and funds under its control | ||
in corporate bonds that, at the time of purchase, are rated by a | ||
nationally recognized investment rating firm: | ||
(1) "AAA" or the equivalent and have a stated final | ||
maturity that is not later than the third anniversary of the date | ||
the corporate bonds were purchased; or | ||
(2) lower than "AAA" or the equivalent and have a | ||
stated final maturity that is not later than the second anniversary | ||
of the date the corporate bonds were purchased. | ||
(d) An independent school district subject to this section | ||
is not authorized by this section to: | ||
(1) invest in the aggregate more than 20 percent of its | ||
monthly average fund balance, excluding bond proceeds, reserves, | ||
and other funds held for the payment of debt service, in corporate | ||
bonds; | ||
(2) invest more than 25 percent of the funds invested | ||
in corporate bonds in any one domestic business entity, including | ||
subsidiaries and affiliates of the entity; or | ||
(3) invest any portion of bond proceeds, reserves, and | ||
other funds held for the payment of debt service in corporate bonds. | ||
(e) An independent school district subject to this section | ||
may purchase, sell, and invest its funds and funds under its control | ||
in corporate bonds if the governing body of the district: | ||
(1) amends its investment policy to authorize | ||
corporate bonds as an eligible investment; | ||
(2) adopts procedures to provide for: | ||
(A) monitoring rating changes in corporate bonds | ||
acquired with public funds; and | ||
(B) liquidating the investment in corporate | ||
bonds; and | ||
(3) identifies the funds, other than bond proceeds, | ||
reserves, and other funds held for the payment of debt service, | ||
eligible to be invested in corporate bonds. | ||
(f) The investment officer of an independent school | ||
district, acting on behalf of the district, shall sell corporate | ||
bonds in which the district has invested its funds not later than | ||
the seventh day after the date a nationally recognized investment | ||
rating firm: | ||
(1) issues a release that places the corporate bonds | ||
or the domestic business entity that issued the corporate bonds on | ||
negative credit watch or the equivalent, if the corporate bonds are | ||
rated "AA" or the equivalent at the time the release is issued; or | ||
(2) changes the rating on the corporate bonds to a | ||
rating lower than "AA-" or the equivalent. | ||
(g) Corporate bonds are not an eligible investment for a | ||
public funds investment pool. | ||
SECTION 2. 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. |