Legal investment of public funds - definitions. The act defines a nationally recognized statistical rating organization as a credit rating agency that is registered with the U.S. securities and exchange commission's office of credit ratings and defines a negotiable certificate of deposit as an unsecured noncollateralized obligation of a bank to pay the holder of a negotiable certificate of deposit specified principal, plus interest, upon a particular maturity.
The act also modifies statutes governing the legal investments of public funds as follows:
- Modifies and standardizes the credit rating requirements for securities invested in by public entities;
- Requires money market funds invested in by public funds to have an investment policy or objective that seeks to maintain a stable net asset value of one dollar per share;
- Requires rating requirements to first apply to the security being purchased by a public entity and, if there is no such rating, to then apply to the issuer;
- Clarifies that negotiable certificates of deposit are a legal investment and not deposits subject to the limitation of the "Public Deposit Protection Act";
- Includes the secured overnight financing rate, the federal funds rate, or other reference rates that are similar to the United States dollar London interbank offer rate, the secured overnight financing rate, and the federal funds rate as permissible reference rates; and
- Allows public entities to invest in local government investment pools.
(Note: This summary applies to this bill as enacted.)