(a)

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Terms Used In Tennessee Code 9-4-602

  • Contract: A legal written agreement that becomes binding when signed.
  • Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
  • Federal Reserve System: The central bank of the United States. The Fed, as it is commonly called, regulates the U.S. monetary and financial system. The Federal Reserve System is composed of a central governmental agency in Washington, D.C. (the Board of Governors) and twelve regional Federal Reserve Banks in major cities throughout the United States. Source: OCC
  • Interest rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. Source: OCC
  • Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
  • State: when applied to the different parts of the United States, includes the District of Columbia and the several territories of the United States. See Tennessee Code 1-3-105
  • United States: includes the District of Columbia and the several territories of the United States. See Tennessee Code 1-3-105
  • Year: means a calendar year, unless otherwise expressed. See Tennessee Code 1-3-105
(1)

(A) It is the policy of the state of Tennessee that all funds in the state treasury shall be invested by the state treasurer to the extent practicable.
(B)

(i) Investments shall be made in accordance with policy guidelines approved by resolution of the state funding board, which may authorize investment in any of the following:

(a) Bonds, notes and treasury bills of the United States or other obligations guaranteed as to principal and interest by the United States or any of its agencies;
(b) Obligations guaranteed as to principal and interest by the federal home loan mortgage corporation, federal national mortgage association, student loan marketing association and other United States government-sponsored corporations;
(c) Repurchase agreements for obligations of the United States or its agencies;
(d) Certificates of deposit in banks and savings and loan associations recognized as state depositories pursuant to § 9-4-107; provided, that certificates of deposit are collateralized in accordance with § 9-4-403;
(e) Prime commercial paper which shall be rated in the highest category by at least two (2) commercial paper rating services;
(f) Prime banker’s acceptances that are eligible for purchase by the federal reserve system; and
(g) Securities lending agreements whereby securities may be loaned for a fee; provided, that eligible collateral as defined in § 9-4-103 whose market value is at least equal to one hundred two percent (102%) of the value of the borrowed securities shall be required for each loan. For purposes of this subdivision (a)(1)(B)(i)(g), if “eligible collateral” is pledged as cash, the cash collateral must be equal to at least one hundred percent (100%) of the market value of the borrowed securities. Institutions and other entities governed by the board of trustees of the University of Tennessee or the board of regents do not have the authority to use the investment vehicle established pursuant to this subdivision (a)(1)(B)(i)(g).
(ii) Investment in the instruments authorized in subdivisions (a)(1)(B)(i)(e)-(g) shall be prohibited until the state funding board adopts a resolution approving policy guidelines authorizing use of such investment instruments. Such policy guidelines shall include limitations on the amount of funds which may be invested in instruments authorized pursuant to subdivisions (a)(1)(B)(i)(e)-(g).
(C) Included within the policy guidelines approved by the funding board shall be the procedure for determining the interest rate to be paid on investments of the treasury. Each time interest rates are changed, pursuant to the policy, the state treasurer shall report the change to the other members of the funding board.
(2) In lieu of actual physical delivery of investments purchased pursuant to this section, the state treasurer may accept trust receipts therefor as provided in § 9-4-408.
(b)

(1) In addition to the authority granted in subsection (a), the state funding board may, by resolution duly adopted, authorize the state treasurer to invest so much cash in the state treasury as it may deem appropriate in obligations of the state or any agency of the state maturing in not more than one (1) year from the date of such investment; provided, that the funding board has determined that such obligations could not otherwise be sold in traditional markets at reasonable rates of interest; and provided further, that the yield on such obligations is equal to or greater than, in the determination of the funding board with the concurrence of the state treasurer, the yield of other obligations in which the state could invest at that time under subsection (a). The funding board may, by resolution, establish guidelines and, within such guidelines, delegate the investment authority hereby conferred to the state treasurer. Such obligations, when so purchased, shall be turned over to the state treasurer, whose official bond shall be security for the safekeeping of such obligations. In lieu of actual physical delivery of such obligations so purchased, the state treasurer may accept trust receipts as provided in § 9-4-408.
(2) The funding board and the governing boards of the respective state agencies may authorize the sale of obligations of the state and state agencies, respectively, to the state pursuant to the terms and conditions set forth in this section.
(c)

(1) The state funding board is authorized to establish policy and procedure for investment of bond proceeds, as defined in subdivision (c)(2), in guaranteed investment contracts, including security requirements, if any. Prior to the adoption or promulgation by the state funding board of such policy and procedures, the entities listed in this subsection (c) may enter into such investments to the extent otherwise authorized by law. Nothing in this subsection (c) is intended to alter any existing authority in this chapter or in any other law otherwise providing authority for an investment entered into prior to the adoption or promulgation by the state funding board of such policies and procedures.
(2) “Bond proceeds” means the proceeds from the sale of bonds, notes, and other obligations issued by the state funding board, the state school bond authority, the local development authority, state housing development agency and the state veterans’ homes board, and reserves and funds maintained for debt service purposes.
(3) A guaranteed investment contract is an authorized investment for bond proceeds if the guaranteed investment contract:

(A) Has a defined termination date no later than five and one-half (5 1/2) years from the date of issuance of the debt obligations, except for funds held in a debt service reserve fund, which shall be no later than the final maturity of the debt obligations; and
(B) Complies with standards in the policy established by the state funding board, including creditworthiness.
(4) The governing body of the entity shall, in the resolution or action authorizing the issuance of bonds, expressly authorize guaranteed investment contracts as an eligible investment.
(d) In addition to the authority granted in subsection (a), the state funding board may, in accordance with policy guidelines approved by resolution of the board and duly acknowledged by the finance, ways and means committees of the house of representatives and the senate, authorize the state treasurer to enter into short-term arrangements or obligations not authorized elsewhere in this section for the sole purpose of meeting the liquidity needs of the pooled investment fund. The state treasurer shall report any such arrangements to the finance, ways and means committees of the house of representatives and the senate. Such arrangements or obligations shall not be used for the purposes of speculation, but shall only be used to meet operational liquidity requirements.
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