AN ACT
RELATING TO PUBLIC EMPLOYEES RETIREMENT; AMENDING A SECTION
OF THE PUBLIC EMPLOYEES RETIREMENT ACT TO CHANGE THE TYPES OF INVESTMENTS
AUTHORIZED FOR STATE RETIREMENT TRUST FUNDS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
Section 1. Section 10-11-132 NMSA 1978 (being Laws 1987,
Chapter 253, Section 132, as amended) is amended to read:
"10-11-132. INVESTMENT OF FUNDS--TYPES OF INVESTMENTS--
INDEMNIFICATION OF BOARD MEMBERS.--The funds created by the
state retirement system acts are trust funds of which the retirement board is
trustee. Members of the retirement board
jointly and individually shall be indemnified from the funds by the state from
all claims, demands, suits, actions, damages, judgments, costs, charges and
expenses, including court costs and attorney fees, and against all liability
losses and damages of any nature whatsoever that members shall or may at any
time sustain by reason of any decision made in the performance of their duties
pursuant to the state retirement system acts.
The retirement board may invest and reinvest the funds in the following
classes of securities and investments:
A. bonds, notes or other obligations of the
United States treasury or those guaranteed by or for which the credit of the
United States government is pledged for the payment of the principal and
interest;
B. bonds, notes or other obligations of a
municipality or other political subdivision of this state that are registered
by the United States securities and exchange commission, are publicly traded
and are issued pursuant to a law of this state if the issuer, within ten years
prior to making the investment, has not been in default in payment of any part
of the principal or interest on any debt evidenced by its bonds, notes or other
obligations. If any bonds are municipal
or county utility revenue bonds or utility district revenue bonds, the revenues
of the utility, except for operation and maintenance expenses, shall be pledged
wholly to the payment of the interest and principal of the indebtedness and the
utility project shall have been completely self-supporting for a period of five
years next preceding the date of investment;
C. stocks, bonds, debentures or other
obligations issued by any agency or corporation of the United States government
under the authority of acts of the United States congress;
D. collateralized obligations held in trust
that:
(1) are publicly traded and are registered with
the United States securities and exchange commission; and
(2) have underlying collateral that is either an
obligation of the United States government or else has a credit rating above or
equal to BBB according to the Standard and Poor's rating system or Baa
according to the Moody's investors rating system;
E. bonds, notes, commercial paper or other
obligations of any corporation organized and operating within the United
States; provided that the securities shall have a minimum credit rating of B
according to the Standard and Poor's rating system or B according to the
Moody's investors rating system or their equivalents; and provided that not
more than ten percent of the funds for which the retirement board is trustee
shall at any one time be invested in debt obligations of corporations with a
credit rating less than BBB according to the Standard and Poor's rating system
or Baa according to the Moody's investors rating system of their equivalents;
F. preferred stock, common stock, any security
convertible to common stock or American depository receipts that are registered
by the United States securities and exchange commission of any corporation
organized and operating within the United States whose securities are listed on
at least one stock exchange that has been approved by or is controlled by the
United States securities and exchange commission or on the national association
of securities dealers national market; provided that the corporations shall
have minimum shareholders' equity of twenty-five million dollars ($25,000,000)
and that the funds of which the retirement board is trustee shall not be
invested in more than ten percent of the voting stock of a company; and further
provided that investing with enhanced index managers using futures and options
is permitted solely for the purpose of adding incremental value and controlling
risk and not for speculation;
G. obligations of non-United States governmental
or quasi-governmental entities, and these may be denominated in foreign
currencies; obligations, including but not limited to bonds, notes or
commercial paper of any corporation organized outside of the United States, and
these may be denominated in foreign currencies; or preferred stock or common
stock of any corporation organized outside of the United States whose
securities are listed on at least one national or foreign stock exchange or are
traded in an over-the-counter market, and these may be denominated in foreign
currencies. Currency transactions,
including spot or cash basis currency transactions, forward contracts and
buying or selling options or futures on foreign currencies, shall be permitted
but only for the purposes of hedging foreign currency risk and not for
speculation;
H. stocks or shares of a diversified investment
company registered under the federal Investment Company Act of 1940, provided
that the investment company has total assets under management of at least one
hundred million dollars ($100,000,000); individual, common or collective trust
funds of banks or trust companies, provided that the investment manager has
assets under management of at least one hundred million dollars ($100,000,000);
provided that the board may allow reasonable administrative and investment
expenses to be paid directly from the income or assets of these investments;
I. contracts, including contracts through its
designated agent, for the temporary exchange of securities for the use by
broker-dealers, banks or other recognized institutional investors, for periods
not to exceed one year, for a specified fee or consideration; provided no such
contracts shall be entered into unless the contracts are fully secured by a
collateralized, irrevocable letter of credit running to the retirement board,
cash or equivalent collateral of at least one hundred two percent of the market
value of the securities plus accrued interest temporarily exchanged, which
collateral shall be delivered to the state fiscal agent or its designee
contemporaneously with the transfer of funds or delivery of the securities; and
further provided that such contracts may authorize the retirement board to
invest cash collateral in instruments or securities that are authorized
investments for the funds and may authorize payment of a fee from the funds or
from income generated by the investment of cash collateral to the borrower of
securities providing cash as collateral, and the retirement board may apportion
income derived from the investment of cash collateral to pay its agent in
securities lending transactions; and
J. contracts for the present purchase and resale
at a specified time in the future, not to exceed one year, of specific
securities at specified prices at a price differential representing the
interest income to be earned by the retirement board. No such contract shall be entered into unless
the contract is fully secured by obligations of the United States, or other
securities backed by the United States, having a market value of at least one
hundred two percent of the amount of the contract. The collateral required in this section shall
be delivered to the state fiscal agent or his designee contemporaneously with
the transfer of funds or delivery of the securities, at the earliest time
industry practice permits, but in all cases settlement shall be on a same day
basis. No such contract shall be entered
into unless the contracting bank, brokerage firm or recognized institutional
investor has a net worth in excess of five hundred million dollars
($500,000,000)."