46th legislature - STATE OF NEW MEXICO - first session, 2003
RELATING TO THE PUBLIC PEACE, HEALTH, SAFETY AND WELFARE; AMENDING AND REPEALING SECTIONS OF THE NMSA 1978 TO CLARIFY INVESTMENT GUIDELINES PURSUANT TO THE UNIFORM PRUDENT INVESTOR ACT; DECLARING AN EMERGENCY.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
Section 1. Section 6-8-7 NMSA 1978 (being Laws 1957, Chapter 179, Section 7, as amended) is amended to read:
"6-8-7. POWERS AND DUTIES OF STATE INVESTMENT OFFICER--
INVESTMENT POLICY--INVESTMENT MANAGERS.--
A. Subject to the limitations, conditions and restrictions contained in policy-making regulations or resolutions adopted by the council and subject to prior authorization by the council, the state investment officer may make purchases, sales, exchanges, investments and reinvestments of the assets of all funds administered under the supervision of the council. The state investment officer shall see that money invested is at all times handled in the best interests of the state.
B. Securities or investments purchased or held may be sold or exchanged for other securities and investments; provided, however, that no sale or exchange shall be at a price less than the going market at the time the securities or investments are sold or exchanged.
C. [In purchasing bonds, the state investment
officer shall require a certified or original written opinion
of a reputable bond attorney or the attorney general of the
state certifying the legality of the bonds to be purchased;
provided, however, this written opinion may be the approving
legal opinion ordinarily furnished with the bond issue.] Assets
of the land grant permanent funds and other funds managed by
the state investment officer may be combined for investment as
common pooled funds to effectuate efficient management.
D. The state investment officer shall formulate and recommend to the council for approval investment regulations or resolutions pertaining to the kind or nature of investments and limitations, conditions and restrictions upon the methods, practices or procedures for investment, reinvestment, purchase, sale or exchange transactions that should govern the activities of the investment office.
E. The council shall meet at least once each month, and as often as exigencies may demand, to consult with the state investment officer concerning the work of the investment office. The council shall have access to all files and records of the investment office and shall require the state investment officer to report on and provide information necessary to the performance of council functions. The council may hire one or more investment management firms to advise the council with respect to the council's overall investment plan for the investment of all funds managed by the investment office and pay reasonable compensation for such advisory services from the assets of the applicable funds, subject to budgeting and appropriation by the legislature. The terms of any such investment management services contract shall incorporate the statutory requirements for investment of funds under the council's jurisdiction.
F. For the purposes of the investment of all funds managed by the investment office, the state investment officer shall manage the funds in accordance with the prudent investor rule set forth in the Uniform Prudent Investor Act. With the approval of the council, the state investment officer may employ investment management services to invest the funds and may pay reasonable compensation for investment management services from the assets of the applicable funds, subject to budgeting and appropriation by the legislature.
G. For funds available for investment for more than one year, the state investment officer may contract with any state agency to provide investment advisory or investment management services, separately or through a pooled investment fund, provided the state agency enters into a joint powers agreement with the council and that state agency pays at least the direct cost of such services. Notwithstanding any statutory provision governing state agency investments, the state investment officer may invest funds available from a state agency pursuant to a joint powers agreement in any type of investment permitted for the land grant permanent funds under the prudent investor rule. In performing investment services for a state agency, the council and the state investment officer are exempt from the New Mexico Securities Act of 1986. As used in this subsection, "state agency" means any branch, agency, department, board, instrumentality, institution or political subdivision of the state, the New Mexico finance authority and any tax-exempt private endowment entity whose sole beneficiary is a state agency."
Section 2. Section 6-8-9 NMSA 1978 (being Laws 1957, Chapter 179, Section 9, as amended) is amended to read:
"6-8-9. SECURITIES AND INVESTMENT.--
A. Money made available from the land grant
permanent funds [for investment for a period in excess of one
year] may be invested in the following classes of securities
and investments:
(1) bonds, notes or other obligations of the United States government, its agencies, government-sponsored enterprises, corporations or instrumentalities and that portion of bonds, notes or other obligations guaranteed as to principal and interest and issued by the United States government, its agencies, government-sponsored enterprises, corporations or instrumentalities or issued pursuant to acts or programs authorized by the United States government;
(2) bonds, notes, debentures and other
obligations issued by the state of New Mexico or a municipality
or other political subdivision of the state that are secured by
an investment grade bond rating from a national rating service,
pledged revenue or other collateral or insurance necessary to
satisfy the standard of prudence set forth in [Section 6-8-10
NMSA 1978] Subsection D of this section;
(3) bonds, notes, debentures, instruments, conditional sales agreements, securities or other evidences of indebtedness of any corporation, partnership or trust organized and operating within the United States rated not less than Baa or BBB or the equivalent by a national rating service;
(4) bonds, notes, debentures, instruments, conditional sales agreements, securities or other evidences of indebtedness rated not less than BB or B or the national association of insurance commissioners' equivalent by a national rating service. An investment made under this paragraph shall be in publicly traded debt issues with an outstanding par value of at least one hundred million dollars ($100,000,000) and issued by a corporation, partnership or trust listed on a national exchange and organized and operating within the United States; provided that investments made pursuant to this paragraph shall not exceed three percent of the market value of the land grant permanent funds, calculated at the time of investment;
(5) notes or obligations securing loans or participation in loans to business concerns or other organizations that are obligated to use the loan proceeds within New Mexico, to the extent that loans are secured by first mortgages on real estate located in New Mexico and are further secured by an assignment of rentals, the payment of which is fully guaranteed by the United States in an amount sufficient to pay all principal and interest on the mortgage;
(6) common and preferred stocks and convertible issues of any corporation; provided that it has securities listed on one or more national stock exchanges or included in a nationally recognized list of stocks; and provided further that the fund shall not own more than five percent of the voting stock of any company;
(7) real estate investments, including real property and undivided interests in real property, debt instruments secured by first liens on real property or limited partnership interests; provided that the total value of investments made under this paragraph shall not exceed three percent of the market value of the land grant permanent funds, calculated at the time of investment;
(8) securities of non-United States governmental, quasi-governmental, partnership, trust or corporate entities, and these may be denominated in foreign currencies; provided:
(a) aggregate non-United States investments shall not exceed fifteen percent of the book value of the land grant permanent funds;
(b) for non-United States stocks and non-United States bonds and notes, issues permitted for purchase shall be limited to those issues traded on a national stock exchange or included in a nationally recognized list of stocks or bonds;
(c) currency contracts may be used for investing in non-United States securities only for the purpose of hedging foreign currency risk and not for speculation;
(d) the investment management services of a trust company or national bank exercising trust powers or of an investment counseling firm may be employed; and
(e) reasonable compensation for
investment management services and other administrative and
investment expenses related to these investments shall be paid
directly from the assets of the funds, subject to budgeting and
appropriation by the legislature; [and]
(9) stocks or shares of a diversified investment company registered under the federal Investment Company Act of 1940, as amended, and listed securities of long-term unit investment trusts or individual, common or collective trust funds of banks or trust companies that invest primarily in equity securities authorized in Paragraphs (6) and (8) of this subsection; provided that the investment company has total assets under management of at least one hundred million dollars ($100,000,000); and provided further that the council may allow reasonable administrative and investment expenses to be paid directly from the assets derived from these investments, subject to budgeting and appropriation by the legislature; and
(10) other types of investments, investment instruments and investment strategies proposed by the state investment officer and authorized by the council; provided that:
(a) no investment shall be made pursuant to this paragraph until the type of investment, investment instrument or investment strategy has been reviewed by the legislative finance committee;
(b) each calendar quarter, the state investment officer shall report to the legislative finance committee on specific investments made pursuant to this paragraph during the previous three months, the performance of those investments and the overall performance of all previous investments made pursuant to this paragraph; and
(c) not more than five percent of the book value of the land grant permanent funds shall be invested at any given time pursuant to the provisions of this paragraph.
B. Not more than sixty-five percent of the book value of the land grant permanent funds shall be invested at any given time in securities described in Paragraphs (6), (8) and (9) of Subsection A of this section, and no more than ten percent of the book value of the land grant permanent funds shall be invested at any given time in securities described in Paragraph (3) of Subsection A of this section that are rated Baa or BBB. Assets of the land grant permanent funds may be combined for investment in common pooled funds to effectuate efficient management.
C. Commissions paid for the purchase and sale of any security shall not exceed brokerage rates prescribed and approved by national stock exchanges or by industry practice.
D. Money made available from the land grant permanent fund for investment pursuant to this section shall be invested pursuant to the Uniform Prudent Investor Act."
Section 3. Section 7-27-5.1 NMSA 1978 (being Laws 1983, Chapter 306, Section 8, as amended) is amended to read:
"7-27-5.1. MARKET RATE INVESTMENTS.--
A. Money made available from the severance tax permanent fund for investment for a period in excess of one year in market rate investments may be invested in the following classes of securities and investments:
(1) bonds, notes or other obligations of the United States government, its agencies, government-sponsored enterprises, corporations or instrumentalities and that portion of bonds, notes or other obligations guaranteed as to principal and interest and issued by the United States government, its agencies, government-sponsored enterprises, corporations or instrumentalities or issued pursuant to acts or programs authorized by the United States government;
(2) bonds, notes, debentures and other
obligations issued by the state of New Mexico or a municipality
or other political subdivision of the state that are secured by
an investment grade bond rating from a national rating service,
pledged revenue or other collateral or insurance necessary to
satisfy the standard of prudence set forth in [Section 6-8-10
NMSA 1978] Subsection D of this section;
(3) bonds, notes, debentures, instruments, conditional sales agreements, securities or other evidences of indebtedness of any corporation, partnership or trust organized and operating within the United States rated not less that Baa or BBB or the equivalent by a national rating service;
(4) bonds, notes, debentures, instruments, conditional sales agreements, securities or other evidences of indebtedness rated not less than BB or B or the national association of insurance commissioners' equivalent by a national rating service. An investment made under this paragraph shall be in publicly traded debt issues with an outstanding par value of at least one hundred million dollars ($100,000,000) and issued by a corporation, partnership or trust listed on a national exchange and organized and operating within the United States; provided that investments made pursuant to this paragraph shall not exceed three percent of the market value of the severance tax permanent fund, calculated at the time of investment;
(5) notes or obligations securing loans or participation in loans to business concerns or other organizations that are obligated to use the loan proceeds within New Mexico, to the extent that loans are secured by first mortgages on real estate located in New Mexico and are further secured by an assignment of rentals, the payment of which is fully guaranteed by the United States in an amount sufficient to pay all principal and interest on the mortgage;
(6) common and preferred stocks and convertible issues of any corporation; provided that it has securities listed on one or more national stock exchanges or included in a nationally recognized list of stocks; and provided further that the fund shall not own more than five percent of the voting stock of any company;
(7) real estate investments, including real property and undivided interests in real property, debt instruments secured by first liens on real property, or limited partnership interests; provided that the total value of investments made under this paragraph shall not exceed three percent of the market value of the severance tax permanent fund, calculated at the time of investment;
(8) securities of non-United States governmental, quasi-governmental, partnership, trust or corporate entities, and these may be denominated in foreign currencies; provided:
(a) aggregate non-United States investments shall not exceed fifteen percent of the book value of the severance tax permanent fund;
(b) for non-United States stocks and non-United States bonds and notes, issues permitted for purchase shall be limited to those issues traded on a national stock exchange or included in a nationally recognized list of stocks or bonds;
(c) currency contracts may be used for investing in non-United States securities only for the purpose of hedging foreign currency risk and not for speculation;
(d) the investment management services of a trust company or national bank exercising trust powers or of an investment counseling firm may be employed; and
(e) reasonable compensation for investment management services and other administrative and investment expenses related to these investments shall be paid directly from the assets of the fund, subject to budgeting and appropriation by the legislature;
(9) stocks or shares of a diversified
investment company registered under the federal Investment
Company Act of 1940, as amended, and listed securities of long-term unit investment trusts or individual, common or collective
trust funds of banks or trust companies that invest primarily
in equity securities authorized in Paragraphs (6) and (8) of
this subsection; provided that the investment company has total
assets under management of at least one hundred million dollars
($100,000,000); and provided further that the council may allow
reasonable administrative and investment expenses to be paid
directly from the assets derived from these investments,
subject to budgeting and appropriation by the legislature;
[and]
(10) participation interests in New Mexico real-property-related business loans. The actual amount invested under this paragraph shall not exceed ten percent of the severance tax permanent fund and shall be included in any minimum amount of severance tax permanent fund investments required to be placed in New Mexico certificates of deposit. Investments authorized in this paragraph are subject to the following:
(a) the state investment officer may purchase from eligible institutions a participation interest of up to eighty percent in any loan secured by a first mortgage or a deed of trust on the real property located in New Mexico of an eligible business entity, or its subsidiary, that is operating or shall use loan proceeds to commence operations within New Mexico plus any other guarantees or collateral that may be judged by the eligible institution or the state investment officer to be prudent. To be eligible for investment the following minimum requirements shall be met: 1) the loan proceeds shall be used exclusively for the purpose of expanding or establishing businesses in New Mexico, including the refinancing of such businesses for expansion purposes only. If a portion of the loan proceeds were used for refinancing or repaying an existing loan and payment of principal and interest to the state has not been made within ninety days from the due date, unless extended pursuant to agreement between the originating institution and the state investment officer, the originating institution shall buy back the state's participation interest in the loan and begin foreclosure proceedings; 2) eligible business entities shall not include public utilities or financial institutions or shopping centers, apartment buildings or other such passive investments; 3) the minimum loan amount shall be two hundred fifty thousand dollars ($250,000) and may be met by packaging up to ten separate loans satisfying the requirements of this paragraph. The maximum loan amount shall be two million dollars ($2,000,000); 4) the loan maturity shall be not less than five years or more than thirty years; 5) the maximum loan-to-value ratio shall be seventy-five percent and based on current appraisal of the real property by an appraiser who is licensed or certified in New Mexico and approved by the state investment officer, which shall be made not more than one hundred eighty days from the loan origination date; 6) the interest rate of the loan shall be fixed for five years and shall be adjusted at every fifth anniversary of the note to the rate specified in Item 7) of this subparagraph; 7) the yield on the state's participation interest shall in no case be less than the greater of the then-prevailing yield on United States treasury securities of five-year maturity plus two and one-half percent or the yield received by the lending institution calculated exclusive of servicing fees; 8) if payment of principal or interest has not been made within one hundred eighty days from the due date, unless extended pursuant to agreement between the originating institution and the state investment officer, the originating institution shall buy back the state's participation interest in the loan, substitute another qualifying loan or begin foreclosure proceedings; and 9) if foreclosure proceedings are commenced, the state and the originating institution shall share in proportion to their participation interest, as provided in this subparagraph, in the legal and other foreclosure expenses and in any loss incurred as a result of a foreclosure sale;
(b) a standardized participation agreement, the form of which shall be approved by the attorney general's office, shall be executed between the investment office and each eligible originating institution. The participation agreement shall provide that the originating institution shall not assign its interest in any loan covered by the agreement without the prior written consent of the state investment officer;
(c) a formal forward commitment program may be instituted by the state investment officer with the approval of the council;
(d) the council shall adopt regulations: 1) defining passive investments; 2) establishing underwriting guidelines; 3) ensuring diversification across a variety of types of collateral, types of businesses and regions of the state; and 4) providing for the review by the state investment officer of servicing and other fees that may be charged by the eligible institution;
(e) eligible institutions include banks, savings and loan associations and credit unions operating in the state; and
(f) real property is defined as land and attached buildings, but excludes all interests that may be secured by a security interest under Article 9 of the Uniform Commercial Code, and mineral resource values; and
(11) other types of investments, investment instruments and investment strategies proposed by the state investment officer and authorized by the council; provided that:
(a) no investment shall be made pursuant to this paragraph until the type of investment, investment instrument or investment strategy has been reviewed by the legislative finance committee;
(b) each calendar quarter, the state investment officer shall report to the legislative finance committee on specific investments made pursuant to this paragraph during the previous three months, the performance of those investments and the overall performance of all previous investments made pursuant to this paragraph; and
(c) not more than five percent of the book value of the severance tax permanent fund shall be invested at any given time pursuant to the provisions of this paragraph.
B. Not more than sixty-five percent of the book value of the severance tax permanent fund shall be invested at any given time in securities described in Paragraphs (6), (8) and (9) of Subsection A of this section, and no more than ten percent of the book value of the severance tax permanent fund shall be invested at any given time in securities described in Paragraph (3) of Subsection A of this section that are rated Baa or BBB. Assets of the severance tax permanent fund may be combined for investment in common pooled funds to effectuate efficient management.
C. Commissions paid for the purchase and sale of any security shall not exceed brokerage rates prescribed and approved by national stock exchanges or by industry practice.
D. Money made available from the severance tax permanent fund for investment pursuant to this section shall be invested pursuant to the Uniform Prudent Investor Act."
Section 4. REPEAL.--Section 6-8-10 NMSA 1978 (being Laws 1957, Chapter 179, Section 10, as amended) is repealed.
Section 5. EMERGENCY.--It is necessary for the public peace, health and safety that this act take effect immediately.