Investments in securities and bank certificates of deposit

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  1. (a)

    1. (1) Trust fund accounts in the State Treasury may be invested in:

      1. (A) Certificates of deposit of banks and savings and loan associations; and

      2. (B) Securities eligible under other law.

    2. (2)

      1. (A) The administrator of a trust fund account shall review, from time to time, the flow of moneys through the trust fund account in the State Treasury to determine the estimated surplus moneys in the trust fund account that exceed the immediate requirements of the trust fund account.

      2. (B)

        1. (i)

          1. (a) After taking into consideration the amount of the estimated surplus moneys under subdivision (a)(2)(A) of this section, the administrator shall certify to the Treasurer of State the amount of surplus moneys and the period of time during which the surplus moneys are not required.

          2. (b) The Treasurer of State shall invest the amount certified in certificates of deposit issued by eligible banks and savings and loan associations.

          3. (c) If the Treasurer of State is unable to place the certified amount in certificates of deposit, then the remainder may be placed in securities with the administrator's approval.

        2. (ii)

          1. (a) Moneys required for a purchase under this subdivision (a)(2)(B) shall be withdrawn from the Cash Account and paid to the bank depository issuing the certificate of deposit or the investment depository selling the securities.

          2. (b)

            1. (1) The principal amount of the certificate of deposit shall be debited to the Trust Deposit Account.

            2. (2) The principal amount of a security shall be debited to the Trust Investment Account.

        3. (iii) The certificates of deposit shall be secured by the Treasurer of State in accordance with the collateralization and investment policies of the State Board of Finance.

        4. (iv)

          1. (a) Interest on bank certificates of deposit shall be paid at competitive rates according to the investment policy established by the State Board of Finance.

          2. (b) All interest income derived from certificates of deposit or securities shall be credited as trust fund income to the trust fund used to purchase a certificate of deposit or security.

    3. (3)

      1. (A) The Securities Reserve Fund shall be maintained on demand deposit in depository banks.

      2. (B) This subsection does not apply to the Securities Reserve Fund.

  2. (b)

    1. (1)

      1. (A) The State Board of Finance may direct that a portion of state funds in the State Treasury be invested in certificates of deposit in the State Treasury Certificate of Deposit Investment Program as provided in § 19-3-519.

      2. (B) The remaining portion of state funds in the State Treasury may be invested in:

        1. (i) Certificates of deposit;

        2. (ii) Direct obligations of the United States Government;

        3. (iii) Obligations of agencies and instrumentalities created and authorized by act of the United States Congress to issue securities or evidences of indebtedness, regardless of guarantee of repayment by the United States Government;

        4. (iv) Obligations in which the principal and interest are fully guaranteed by:

          1. (a) The United States Government; or

          2. (b) An agency or an instrumentality created by an act of the United States Congress and authorized by the United States Congress to issue the guarantee;

        5. (v) Obligations in which the principal and interest are fully secured, insured, or covered by a commitment or agreement to purchase the obligation by:

          1. (a) The United States Government; or

          2. (b) An agency or instrumentality created by an act of the United States Congress and authorized by the United States Congress to issue the commitment or agreement;

        6. (vi) General obligations of the states of the United States and of the political subdivisions, municipalities, commonwealths, territories, or insular possessions of the states of the United States;

        7. (vii) Obligations issued by the State Board of Education under authority of the Arkansas Constitution or applicable statutes;

        8. (viii) Warrants of a political subdivision or municipality of the State of Arkansas having maturities not exceeding one (1) year;

        9. (ix) Prerefunded municipal bonds, if the principal and interest of the municipal bonds are fully secured by the principal and interest of a direct obligation of the United States Government;

        10. (x) The sale of federal funds with a maturity of not more than one (1) business day;

        11. (xi) Demand, savings, or time deposits or accounts of a depository institution chartered by the United States, a state of the United States, or the District of Columbia if funds invested in the demand, savings, or time deposits or accounts are fully insured by a federal deposit insurance agency;

        12. (xii) Repurchase agreements that are fully collateralized by securities stated in subdivisions (b)(1)(B)(ii)-(v) of this section if the repurchase agreement provides for taking delivery of the collateral directly or through an authorized custodian;

        13. (xiii) A securities or other interest in an open-end type investment company or investment trust registered under the Investment Company Act of 1940 and that is defined as a “money market fund” under 17 C.F.R. § 270.2a-7 if:

          1. (a) The portfolio of the investment company or investment trust is limited principally to United States Government obligations and to repurchase agreements fully collateralized by United States Government obligations; and

          2. (b) The investment company or investment trust takes delivery of the collateral either directly or through an authorized custodian; or

        14. (xiv) As approved by the guidelines established by the State Treasury investment policy approved by the State Board of Finance, a corporate obligation with an investment grade rating of at least BBB, A2, P2, or an equivalent rating as indicated by at least two (2) nationally recognized statistical rating organizations.

    2. (2)

      1. (A)

        1. (i) Moneys required for a purchase under subdivision (b)(1) of this section shall be withdrawn from the Cash Account and paid to the seller of the securities.

        2. (ii) The cost of the securities shall be debited to the Securities Account.

      2. (B) The proceeds of the sale or redemption of securities withdrawn from the Securities Account shall be debited in the Cash Account in the State Treasury.

      3. (C)

        1. (i) For all purchases, sales, and redemptions of securities under this subsection, discounts and premiums shall be credited or charged, as appropriate, to the Securities Reserve Fund.

        2. (ii) Discounts and premiums that are increments and all interest received on securities held in the Securities Account shall be classified as trust fund income and credited to the Securities Reserve Fund by the Treasurer of State.

    3. (3)

      1. (A) All purchases and sales of securities by the Treasurer of State shall be made through securities brokers:

        1. (i) Specifically approved by the State Board of Finance; or

        2. (ii) Meeting criteria established by the State Board of Finance.

      2. (B) All purchases and sales of securities by the Treasurer of State shall be made using a competitive procedure that:

        1. (i) Is approved by the State Board of Finance; and

        2. (ii) Has the goals of:

          1. (a) Obtaining the optimal price and value for the securities; and

          2. (b) Not showing preference toward any securities broker.

      3. (C)

        1. (i) However, the State Board of Finance may subscribe for obligations offered by the United States Department of the Treasury.

        2. (ii) An obligation offered by the United States Department of the Treasury held in the State Treasury may be exchanged for another obligation offered by the United States Department of the Treasury if an exchange privilege has been extended by the United States Department of the Treasury.

    4. (4) [Repealed.]

    5. (5)

      1. (A) All or any part of the bonds of local industrial development corporations, authorized and issued under the Arkansas Industrial Development Act, § 15-4-101 et seq., and all or any part of the bonds of municipalities and counties, authorized and issued under the Municipalities and Counties Industrial Development Revenue Bond Law, § 14-164-201 et seq., at any time held in the Securities Account in the State Treasury, may be sold at public sale or at private sale as the State Board of Finance shall determine.

      2. (B) However, in a private sale, the sales price of the bonds or obligations shall not be less than the amount paid for the bonds or obligations.

    6. (6) The State Board of Finance shall provide ministerial authority to the Treasurer of State to take whatever action becomes necessary in regard to securities held in the Securities Account to provide the requisite amount of cash necessary in demand deposit accounts to carry out the business of the state or to correct any miscalculations that have arisen.

    7. (7)

      1. (A) A purchase, exchange, or receipt of an obligation by the State Treasury shall not cancel the obligation purchased, exchanged, or received.

      2. (B) The obligation shall be held in trust for the use and benefit of the state fund used to purchase the obligation, subject only to the right of the State Board of Finance to sell or exchange the obligation if the best interest of the state is served.

    8. (8)

      1. (A) The State Board of Finance shall meet at fiscal quarters to evaluate, discuss, and review the advice of the Chief Fiscal Officer of the State under § 19-3-512 and authorize the deposit and investment of State Treasury funds to be made during the period before the next meeting of the State Board of Finance.

      2. (B) The deposit and investment of funds and the purchase and sale of permissible securities may be made at any time it is advantageous to the State Treasury by the Treasurer of State under the guidelines in the State Treasury investment policy established by the State Board of Finance.

    9. (9)

      1. (A) In order to increase investment income with minimal risk, the Treasurer of State may loan securities held in the Securities Account if, at the time the loan is executed, at least one hundred two percent (102%) of the full market value of the security loaned is collateralized by cash or securities guaranteed by the United States Government or an agency of the United States Government.

      2. (B) At all times during the term of the loan, the collateral shall equal or exceed one hundred percent (100%) of the full market value of all securities on loan.

      3. (C) For purposes of this subdivision (b)(9), the full market value of the collateral shall be determined on a daily basis.

  3. (c)

    1. (1) The State Board of Finance may invest federal funds, as described in § 19-7-101 et seq., the same as state funds that are authorized by subsection (b) of this section.

    2. (2) The proceeds of investing federal funds shall be used for the same purpose authorized for other moneys accruing to the benefit of the Securities Reserve Fund under § 19-3-521.

  4. (d)

    1. (1) The State Board of Finance may invest funds deposited into the State Treasury by state agencies, boards, and commissions that were previously held as cash funds in a bank depository or investment depository to enhance investment opportunities and earnings.

    2. (2) The State Board of Finance may invest interest-bearing funds the same as state funds under subsection (b) of this section.

    3. (3) The interest earned on investments under this subsection shall be credited under subdivision (d)(4) of this section to the interest-bearing fund.

    4. (4) The State Board of Finance shall establish the method of computing the participants' rate of return and earning to determine the distribution to each participant.

    5. (5) On the second business day that the State Treasury is open after the twenty-fifth day of the month, the Treasurer of State shall transfer to the participants of the fund interest earned on all State Treasury funds invested as authorized under this section during the preceding month less the proportionate share of any assessments for the expenses of administration.


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