7 LONG TITLE
8 General Description:
9 This bill modifies the State Money Management Act by amending provisions relating to
10 specie legal tender.
11 Highlighted Provisions:
12 This bill:
13 ▸ provides definitions;
14 ▸ authorizes a public treasurer to invest public funds in specie legal tender;
15 ▸ grants the State Money Management Council rulemaking authority to make rules
16 governing quality criteria for a commercial specie repository; and
17 ▸ makes technical and conforming changes.
18 Money Appropriated in this Bill:
20 Other Special Clauses:
22 Utah Code Sections Affected:
24 51-7-3, as last amended by Laws of Utah 2013, Chapters 204 and 388
25 51-7-11, as last amended by Laws of Utah 2015, Chapter 171
26 51-7-17, as last amended by Laws of Utah 2015, Chapter 164
27 51-7-18, as last amended by Laws of Utah 2004, Chapter 248
29 Be it enacted by the Legislature of the state of Utah:
30 Section 1. Section 51-7-3 is amended to read:
31 51-7-3. Definitions.
32 As used in this chapter:
33 (1) "Agent" means "agent" as defined in Section 61-1-13.
34 (2) "Certified dealer" means:
35 (a) a primary reporting dealer recognized by the Federal Reserve Bank of New York
36 who is certified by the director as having met the applicable criteria of council rule; or
37 (b) a broker dealer who:
38 (i) has and maintains an office and a resident registered principal in the state;
39 (ii) meets the capital requirements established by council rules;
40 (iii) meets the requirements for good standing established by council rule; and
41 (iv) is certified by the director as meeting quality criteria established by council rule.
42 (3) "Certified investment adviser" means a federal covered adviser, as defined in
43 Section 61-1-13, or an investment adviser, as defined in Section 61-1-13, who is certified by
44 the director as having met the applicable criteria of council rule.
45 (4) "Commercial specie repository" means an institution that holds or receives deposits
46 of specie legal tender that is located within the state.
51 regulated financial institution, or a subsidiary of either that is secured by a pool of loans that
52 remain on the balance sheet of the issuer or its subsidiary.
54 Department of Commerce.
56 kind donated to a higher education institution from any source.
57 (b) "Endowment funds" does not mean money used for the general operation of a
58 higher education institution that is received by the higher education institution from:
59 (i) state appropriations;
60 (ii) federal contracts;
61 (iii) federal grants;
62 (iv) private research grants; and
63 (v) tuition and fees collected from students.
65 nationally recognized statistical rating organizations in the highest short-term rating category.
67 whose corpus is intended to be held in perpetuity by formal institutional designation according
68 to the institution's policy for designating those funds.
70 Governmental Accounting Standards Board that is responsible for accounting standards used
71 by public entities.
73 provision applicable at issue to a note or bond, allowing holders to sell their holdings back to
74 the issuer or to an equal or higher-rated third party provider at specific intervals and specific
75 prices determined at the time of issuance.
79 defined in Section 61-1-13.
81 specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated
82 interest rate.
83 (b) "Investment agreement" includes any agreement to supply investments on one or
84 more future dates.
86 district under Title 17B, Limited Purpose Local Government Entities - Local Districts, special
87 service district under Title 17D, Chapter 1, Special Service District Act, or any other political
88 subdivision of the state.
92 Repurchase Agreement approved by the Public Securities Association or by any successor
95 amount of:
96 (a) deposits in excess of the federal deposit insurance limit; and
97 (b) nonqualifying repurchase agreements.
100 (a) that complies with the diversification, quality, and maturity requirements of Rule
101 2a-7 or any successor rule of the Securities and Exchange Commission applicable to money
102 market mutual funds; and
103 (b) that assesses no sales load on the purchase of shares and no contingent deferred
104 sales charge or other similar charges, however designated.
106 organization that has been designated as a nationally recognized statistical rating organization
107 by the Securities and Exchange Commission's Division of Market Regulation.
109 evidencing indebtedness of a qualified depository arising from the transfer of obligations of the
110 United States Treasury or other authorized investments to public treasurers that is:
111 (a) evidenced by a safekeeping receipt issued by the qualified depository;
112 (b) included in the depository's maximum amount of public funds; and
113 (c) valued and maintained at market value plus an appropriate margin collateral
114 requirement based upon the term of the agreement and the type of securities acquired.
116 disbursed for operation of the state government or any of its boards, commissions, institutions,
117 departments, divisions, agencies, or other similar instrumentalities, or any county, city, school
118 district, political subdivision, or other public body.
120 earnings from which are to be used for purposes designated by law.
122 meets quality criteria established by rule of the council.
124 from which the money, funds, and accounts are derived, that are owned, held, or administered
125 by the state or any of its boards, commissions, institutions, departments, divisions, agencies,
126 bureaus, laboratories, or other similar instrumentalities, or any county, city, school district,
127 political subdivision, or other public body.
129 (b) "Public money," as used in Article VII, Sec. 15, Utah Constitution, means the same
130 as "state funds."
132 board, commission, institution, department, division, agency, or other similar instrumentality,
133 or of any county, city, school district, political subdivision, or other public body who has the
134 responsibility for the safekeeping and investment of any public funds.
136 out-of-state depository institution, as those terms are defined in Section 7-1-103, that is
137 authorized to conduct business in this state under Section 7-1-702 or Title 7, Chapter 19,
138 Acquisition of Failing Depository Institutions or Holding Companies, whose deposits are
139 insured by an agency of the federal government and that has been certified by the commissioner
140 of financial institutions as having met the requirements established under this chapter and the
141 rules of the council to be eligible to receive deposits of public funds.
143 evidencing indebtedness of a financial institution or government securities dealer acting as
144 principal arising from the transfer of obligations of the United States Treasury or other
145 authorized investments to public treasurers only if purchased securities are:
146 (a) delivered to the public treasurer's safekeeping agent or custodian as contemplated
147 by Section 7 of the Master Repurchase Agreement; and
148 (b) valued and maintained at market value plus an appropriate margin collateral
149 requirement based upon the term of the agreement and the type of securities acquired.
151 qualified depository and are then redeposited through a deposit account registry service:
152 (a) in one or more FDIC-insured depository institutions in amounts up to the relevant
153 FDIC-insured deposit limit for a depositor in each depository institution; and
154 (b) in exchange for reciprocal FDIC-insured deposits made through the deposit account
155 registry service to the qualified depository.
157 Department of Commerce by Section 13-1-2.
158 (34) "Specie legal tender" means the same as that term is defined in Section
161 (a) public money raised by operation of law for the support and operation of the state
162 government; and
163 (b) all other money, funds, and accounts, regardless of the source from which the
164 money, funds, or accounts are derived, that are owned, held, or administered by the state or any
165 of its boards, commissions, institutions, departments, divisions, agencies, bureaus, laboratories,
166 or other similar instrumentalities.
167 Section 2. Section 51-7-11 is amended to read:
168 51-7-11. Authorized deposits or investments of public funds.
169 (1) (a) Except as provided in Subsections (1)(b) and (1)(c), a public treasurer shall
170 conduct investment transactions through qualified depositories, certified dealers, or directly
171 with issuers of the investment securities.
172 (b) A public treasurer may designate a certified investment adviser to make trades on
173 behalf of the public treasurer.
174 (c) A public treasurer may make a deposit in accordance with Section 53B-7-601 in a
175 foreign depository institution as defined in Section 7-1-103.
176 (2) The remaining term to maturity of the investment may not exceed the period of
177 availability of the funds to be invested.
178 (3) Except as provided in Subsection (4), all public funds shall be deposited or invested
179 in the following assets that meet the criteria of Section 51-7-17:
180 (a) negotiable or nonnegotiable deposits of qualified depositories;
181 (b) qualifying or nonqualifying repurchase agreements and reverse repurchase
182 agreements with qualified depositories using collateral consisting of:
183 (i) Government National Mortgage Association mortgage pools;
184 (ii) Federal Home Loan Mortgage Corporation mortgage pools;
185 (iii) Federal National Mortgage Corporation mortgage pools;
186 (iv) Small Business Administration loan pools;
187 (v) Federal Agriculture Mortgage Corporation pools; or
188 (vi) other investments authorized by this section;
189 (c) qualifying repurchase agreements and reverse repurchase agreements with certified
190 dealers, permitted depositories, or qualified depositories using collateral consisting of:
191 (i) Government National Mortgage Association mortgage pools;
192 (ii) Federal Home Loan Mortgage Corporation mortgage pools;
193 (iii) Federal National Mortgage Corporation mortgage pools;
194 (iv) Small Business Administration loan pools; or
195 (v) other investments authorized by this section;
196 (d) commercial paper that is classified as "first tier" by two nationally recognized
197 statistical rating organizations, which has a remaining term to maturity of:
198 (i) 270 days or fewer for paper issued under 15 U.S.C. Sec. 77c(a)(3); or
199 (ii) 365 days or fewer for paper issued under 15 U.S.C. Sec. 77d(2);
200 (e) bankers' acceptances that:
201 (i) are eligible for discount at a Federal Reserve bank; and
202 (ii) have a remaining term to maturity of 270 days or fewer;
203 (f) fixed rate negotiable deposits issued by a permitted depository that have a
204 remaining term to maturity of 365 days or fewer;
205 (g) obligations of the United States Treasury, including United States Treasury bills,
206 United States Treasury notes, and United States Treasury bonds that, unless the funds invested
207 are pledged or otherwise deposited in an irrevocable trust escrow account, have a remaining
208 term to final maturity of:
209 (i) five years or less; or
210 (ii) if the funds are invested by an institution of higher education as defined in Section
211 53B-3-102, a city of the first class, or a county of the first class, 10 years or less;
212 (h) obligations other than mortgage pools and other mortgage derivative products that:
213 (i) are issued by, or fully guaranteed as to principal and interest by, the following
214 agencies or instrumentalities of the United States in which a market is made by a primary
215 reporting government securities dealer, unless the agency or instrumentality has become private
216 and is no longer considered to be a government entity:
217 (A) Federal Farm Credit banks;
218 (B) Federal Home Loan banks;
219 (C) Federal National Mortgage Association;
220 (D) Federal Home Loan Mortgage Corporation;
221 (E) Federal Agriculture Mortgage Corporation; and
222 (F) Tennessee Valley Authority; and
223 (ii) unless the funds invested are pledged or otherwise deposited in an irrevocable trust
224 escrow account, have a remaining term to final maturity of:
225 (A) five years or less; or
226 (B) if the funds are invested by an institution of higher education as defined in Section
227 53B-3-102, a city of the first class, or a county of the first class, 10 years or less;
228 (i) fixed rate corporate obligations that:
229 (i) are rated "A" or higher or the equivalent of "A" or higher by two nationally
230 recognized statistical rating organizations;
231 (ii) are senior unsecured or secured obligations of the issuer, excluding covered bonds;
232 (iii) are publicly traded; and
233 (iv) have a remaining term to final maturity of 15 months or less or are subject to a
234 hard put at par value or better, within 365 days;
235 (j) tax anticipation notes and general obligation bonds of the state or a county,
236 incorporated city or town, school district, or other political subdivision of the state, including
237 bonds offered on a when-issued basis without regard to the limitations described in Subsection
238 (7) that, unless the funds invested are pledged or otherwise deposited in an irrevocable trust
239 escrow account, have a remaining term to final maturity of:
240 (i) five years or less; or
241 (ii) if the funds are invested by an institution of higher education as defined in Section
242 53B-3-102, a city of the first class, or a county of the first class, 10 years or less;
243 (k) bonds, notes, or other evidence of indebtedness of a county, incorporated city or
244 town, school district, or other political subdivision of the state that are payable from
245 assessments or from revenues or earnings specifically pledged for payment of the principal and
246 interest on these obligations, including bonds offered on a when-issued basis without regard to
247 the limitations described in Subsection (7) that, unless the funds invested are pledged or
248 otherwise deposited in an irrevocable trust escrow account, have a remaining term to final
249 maturity of:
250 (i) five years or less; or
251 (ii) if the funds are invested by an institution of higher education as defined in Section
252 53B-3-102, a city of the first class, or a county of the first class, 10 years or less;
253 (l) shares or certificates in a money market mutual fund;
254 (m) variable rate negotiable deposits that:
255 (i) are issued by a qualified depository or a permitted depository;
256 (ii) are repriced at least semiannually; and
257 (iii) have a remaining term to final maturity not to exceed three years;
258 (n) variable rate securities that:
259 (i) (A) are rated "A" or higher or the equivalent of "A" or higher by two nationally
260 recognized statistical rating organizations;
261 (B) are senior unsecured or secured obligations of the issuer, excluding covered bonds;
262 (C) are publicly traded;
263 (D) are repriced at least semiannually; and
264 (E) have a remaining term to final maturity not to exceed three years or are subject to a
265 hard put at par value or better, within 365 days; and
266 (ii) are not mortgages, mortgage-backed securities, mortgage derivative products, or a
267 security making unscheduled periodic principal payments other than optional redemptions;
269 (o) reciprocal deposits made in accordance with Subsection 51-7-17(4); and
270 (p) specie legal tender of a commercial specie repository.
271 (4) The following public funds are exempt from the requirements of Subsection (3):
272 (a) the Employers' Reinsurance Fund created in Section 34A-2-702;
273 (b) the Uninsured Employers' Fund created in Section 34A-2-704;
274 (c) a local government other post-employment benefits trust fund under Section
275 51-7-12.2; and
276 (d) a nonnegotiable deposit made in accordance with Section 53B-7-601 in a foreign
277 depository institution as defined in Section 7-1-103.
278 (5) If any of the deposits authorized by Subsection (3)(a) are negotiable or
279 nonnegotiable large time deposits issued in amounts of $100,000 or more, the interest shall be
280 calculated on the basis of the actual number of days divided by 360 days.
281 (6) A public treasurer may maintain fully insured deposits in demand accounts in a
282 federally insured nonqualified depository only if a qualified depository is not reasonably
283 convenient to the entity's geographic location.
284 (7) Except as provided under Subsections (3)(j) and (k), the public treasurer shall
285 ensure that all purchases and sales of securities are settled within:
286 (a) 15 days of the trade date for outstanding issues; and
287 (b) 30 days for new issues.
288 Section 3. Section 51-7-17 is amended to read:
289 51-7-17. Criteria for investments.
290 (1) As used in this section:
291 (a) "Affiliate" means, in relation to a provider:
292 (i) an entity controlled, directly or indirectly, by the provider;
293 (ii) an entity that controls, directly or indirectly, the provider; or
294 (iii) an entity directly or indirectly under common control with the provider.
295 (b) "Control" means ownership of a majority of the voting power of the entity or
297 (2) (a) A public treasurer shall consider and meet the following objectives when
298 depositing and investing public funds:
299 (i) safety of principal;
300 (ii) protection of principal during periods of financial market volatility;
301 (iii) need for liquidity;
302 (iv) yield on investments;
303 (v) recognition of the different investment objectives of operating and permanent
304 funds; and
305 (vi) maturity of investments, so that the maturity date of the investment does not
306 exceed the anticipated date of the expenditure of funds.
307 (b) A public treasurer shall invest the proceeds of general obligation bond issues, tax
308 anticipation note issues, and funds pledged or otherwise dedicated to the payment of interest
309 and principal of general obligation bonds and tax anticipation notes issued by the state or a
310 political subdivision of the state in accordance with:
311 (i) Section 51-7-11; or
312 (ii) the terms of the borrowing instrument applicable to those issues and funds, if those
313 terms are more restrictive than Section 51-7-11.
314 (c) A public treasurer shall invest the proceeds of bonds other than general obligation
315 bonds and the proceeds of notes other than tax anticipation notes issued by the state or a
316 political subdivision of the state, and all funds pledged or otherwise dedicated to the payment
317 of interest and principal of those notes and bonds:
318 (i) in accordance with the terms of the borrowing instruments applicable to those bonds
319 or notes; or
320 (ii) if none of those provisions are applicable, in accordance with Section 51-7-11.
321 (d) A public treasurer may invest proceeds of bonds, notes, or other money pledged or
322 otherwise dedicated to the payment of debt service on the bonds or notes in investment
323 agreements if:
324 (i) the investment is permitted by the terms of the borrowing instrument applicable to
325 those bonds or notes or the borrowing instrument authorizes the investment as an investment
326 permitted by the State Money Management Act;
327 (ii) either the provider of the investment agreement or an entity fully, unconditionally,
328 and irrevocably guaranteeing the provider's obligations under the investment agreement has
329 received a rating of:
330 (A) at least "AA-" from S&P or "Aa3" from Moody's for investment agreements
331 having a term of more than one year; or
332 (B) at least "A-1+" from S&P or "P-1" from Moody's for investment agreements
333 having a term of one year or less;
334 (iii) the investment agreement contains provisions approved by the public treasurer that
335 provide that, in the event of a rating downgrade of the provider or its affiliate guarantor, as
336 applicable, by either S&P or Moody's below the "A" category or its equivalent, or a rating
337 downgrade of a nonaffiliate guarantor by either S&P or Moody's below the "AA" category or
338 its equivalent, the provider must, within 30 days after receipt of notice of the downgrade:
339 (A) collateralize the investment agreement with direct obligations of, or obligations
340 guaranteed by, the United States of America having a market value at least equal to 105% of
341 the amount of the money invested, valued at least quarterly, and deposit the collateral with a
342 third-party custodian or trustee selected by the public treasurer; or
343 (B) terminate the agreement without penalty and repay all of the principal invested and
344 the interest accrued on the investment to the date of termination; and
345 (iv) the public treasurer receives an enforceability opinion from the legal counsel of the
346 investment agreement provider and, if there is a guarantee, an enforceability opinion from the
347 legal counsel of the guarantor with respect to the guarantee.
348 (3) (a) As used in this Subsection (3), "interest rate contract" means interest rate
349 exchange contracts, interest rate floor contracts, interest rate ceiling contracts, or other similar
350 contracts authorized by resolution of the governing board or issuing authority, as applicable.
351 (b) A public treasurer may, with the approval of the state treasurer:
352 (i) enter into interest rate contracts that the governing board or issuing authority
353 determines are necessary, convenient, or appropriate for the control or management of debt or
354 for the cost of servicing debt; and
355 (ii) use its public funds to satisfy its payment obligations under those contracts.
356 (c) Those contracts:
357 (i) shall comply with the requirements established by council rules; and
358 (ii) may contain payment, security, default, termination, remedy, and other terms and
359 conditions that the governing board or issuing authority considers appropriate.
360 (d) Neither interest rate contracts nor public funds used in connection with these
361 interest rate contracts may be considered a deposit or investment.
362 (4) A public treasurer shall ensure that all public funds invested in deposit instruments
363 are invested with qualified depositories within Utah, except:
364 (a) for deposits made in accordance with Section 53B-7-601 in a foreign depository
365 institution as defined in Section 7-1-103;
366 (b) reciprocal deposits, subject to rules made by the council under Subsection
367 51-7-18(2); [
368 (c) if national market rates on instruments of similar quality and term exceed those
369 offered by qualified depositories, investments in out-of-state deposit instruments may be made
370 only with institutions that meet quality criteria set forth by the rules of the council; or
371 (d) specie legal tender of a commercial specie repository that meets the quality criteria
372 set forth by the rules of the council.
373 Section 4. Section 51-7-18 is amended to read:
374 51-7-18. Duties of council.
375 (1) The council shall:
376 (a) advise the state treasurer and other public treasurers about investment policies;
377 (b) cooperate with the commissioner of financial institutions by promoting measures
378 and rules that will assist in strengthening the banking and credit structure of the state;
379 (c) at least annually, review the rules adopted under the authority of this chapter that
380 relate to the deposit and investment of public funds;
381 (d) at least annually, distribute the rules and amendments to rules adopted under the
382 authority of this chapter that relate to the deposit and investment of public funds to all public
383 treasurers; and
384 (e) provide, at least semiannually, a list of certified dealers that meet criteria
385 established by this chapter and council rules.
386 (2) The council may:
387 (a) recommend proposed changes in statutes governing the deposit and investment of
388 public funds to the Legislature;
389 (b) make rules governing:
390 (i) the financial reporting requirements of qualified depositories in which public funds
391 may be deposited;
392 (ii) the conditions and procedures for maintaining and revoking a financial institution's
393 designation as a qualified depository;
394 (iii) the definition of depository capital;
395 (iv) the conditions for maintaining deposits at a permitted depository;
396 (v) the conditions and procedures for maintaining and revoking a primary reporting
397 dealer's or a broker dealer's designation as a certified dealer;
398 (vi) certified investment advisers who deal with public treasurers, including
399 establishing standards and requirements for the use, qualification, and regulation of certified
400 investment advisers;
401 (vii) the conditions and procedures for maintaining and revoking a federal covered
402 adviser's or an investment adviser's designation as a certified investment adviser;
403 (viii) the conditions and procedures by which public treasurers may deposit and invest
404 public funds;
405 (ix) quality criteria for corporate obligations;
406 (x) the conditions and procedures by which public entities may use interest rate
407 contracts authorized by Subsection 51-7-17(3); [
408 (xi) quality criteria for a commercial specie repository; and
410 responsibilities under this chapter.
411 (3) The council may not make rules requiring a qualified depository to pledge or
412 deposit any of its assets in order to secure a deposit of public funds, except that public deposits
413 in excess of the maximum amount shall be collateralized as provided in Subsections
414 51-7-18.1(5)(b) and (6).
415 (4) Subject to legislative funding, the state treasurer shall supply qualified staff to the
417 (5) If any rule or act of the council would constitute an infringement upon the state
418 treasurer's constitutional duties and powers to have custody of and invest public money, the
419 conflicting rule or act is advisory and not mandatory.
Legislative Review Note
Office of Legislative Research and General Counsel