Gen. 199] 199

1 For bre vity ’s sake,this opinion re fers co llective ly to the Treasurer and all local officia ls who may

make inve stm ents under SFP §6-222 as “investment officials.”

2 The Attor

ney Genera l’s Offic e takes n

o posi tion on t his policy question. STATE TREASURER
A UTH ORITY TO I NVEST I N M ONEY M ARKET M UTUAL F U ND S T HAT H OLD C OMMERCIAL P APER

January 12, 1998

The Honorable Richard N. Dixon State Treasurer
You ha ve r equested our opinion on t

he relations hip between §6-222(a) (6) of the State Fi nance and Procur ement (“SFP”) Articl e, Ma ry landCode, which permit s invest ment in cer

tain c ommerci a l paper up to a

spec ified lim it, and S FP § 6-22 2(a)(7 ), wh ich pe rmits invest ment in cert ain moneymarket mutualfunds witho u t any specifi ed limi t. You ask whether the Treasur er and the local offic ials to whom SFP §6-222 applies 1 may inv est in money market mutual fu nds that hold comm ercial paper.
Our opinion i s as fol lows: SFP §6-222( a)(6) and (7) are sepa rate and dist inct a uthori zati ons. The refore , an i nvestment offic ia l may invest in a m utual fund pursuan t to SFP § 6-222(a)(7 ),
even if the m utual f

und holds subs tanti al amounts of commercial paper. If, as your lett er suggest s, y ou belie ve that this invest

ment alte rnati ve pose s un acceptabl e ris ks, t he General Assembly

may wish to consi der an amendment t o the st atute

. 2

I
Stat utor y Text
The statute in quest ion, SFP §6-222, authorizes the Treas urer to “invest

or rei nvest unexpende d or surplus money over which the200 [83 O p. Att’y

Treasurer

ha s c us to dy i n” eigh t inves tment cat egories . Arti cle 95, §22 of the Code generally authorizes l ocal inves tmen t offic ials to investunexpended or sur plus l ocal fu n ds “in obl igati ons or repurchas e agreements in accor dance with [SFP] §6- 222 ... .”
One of the ei ght permis sibl e invest ment c atego ries is “commercial paper that has r eceivedthe highe st l ette r and numerical rati ng by at

least one nati onally

recogniz ed statist ical rati ng organizationas designated by t he United States S e curities and Exchange Commissi on ..
.. ” SFP § 6-222(a) (6). This inves tment alte rnati ve is re stri cted, however: Inves tments in commercial pa per “may not exceed 5% of the t otal investments made by the Treasurer under thi s subsection.”
An other invest ment alt ernative is “money market mutualfu nd s regis tered

with the Sec urit ies and Exchange Commissi on under the Investment Company Act of 1940 .. . and ope r ated i n accordance with Rule 2A-7 of the I nves tment Com pany Act of 19 40 ..

.. ” SFP §6-222 (a)(7). Some money market mut ua l fun ds w ithin this description ho ld subst antia l amounts of c ommercial pape r; y our le tt erst at es th atsom e hold as m uch a s 60% of the ir inves tmen ts in commercial pap er. Yet, despi te the 5% cap in SFP §6-2 22(a )(6), this alter nativ e pla ces no r estric tion on i nve stm ent in thes e fu nds

. In constr uing a st atute , “[o]ur

search for

legi sla tive intent begins, and usu ally en ds, w ith th e w ord s of the s tatut e at is sue .” Marriott Em plo yee s Fe der al C red it U nio n v. M VA , 346 M d. 4 37 , 444-45, 697 A.2 d 45 5 (1 997 ). O rdin arily, w hen t he words of the statute do not set for

th a particular rest

riction, t he restriction may not be invoked through stat utory constr uction. “[ W]here the l anguage of a statu te is cle ar and unam bigu ous, w e w ill not ad d w ords to refle ct an inte nt not evi denced bythat language. ” In re Adopti on No. A91-71A , 334 Md. 538, 566 , 640 A.2 d 10 85 ( 199 4). See also , e.g., Marriott Employees Federal Credi t Uni on v. MVA , 346 Md. at 445.
To be sure, this general rule ha s its excepti ons. Even unambiguous text i s not t o be given effec t if the lan guag e is pate ntly
a dra fting mis take

. Kaczorow ski v. City of Baltimore , 309 Md. 505, 525 A .2d 628 (1987) ; 82 Opinions of the Attorney General 16 5 (1997). Hence, we might fi nd a basis for li miti ng the appar ent scope of SFP §6-222 (a)(7) if there we re evid ence in the legislative history that the omiss ion of a re stri ction a bout mutualfu nds ho ldingGen. 199] 201

3 The req uirement tha t a fund “

have re ceived t

he highest possib le ratin g” from a ra

ting organization was amend ed in comm

ittee to e liminate (continued...) commercial paper was a dr afti ng mistake. Our review of the perti nent legis lative hist ory , however , affords no suppor t for t he supposition that t

he text of SFP §6-222(a)( 7) refl ects a drafti ng error. Rath er, the tex t accu rate lyref lects the Gen eral Assem bly’s policy decisi on.

II

Legislat ive Histor y
SFP §6-222(a) (6) and ( 7) were added by Chapter 304 (Ho use Bill 9 13) of the Laws of M ary land 1995. When the billwas origina llydrafte d for the House Chairman of t he Joint Committee on the Management of Public Funds, the bil l would have au thoriz ed inv es tme nt in “m oney m arket m utual f und s that co ntain o nly securi ties of the orga nizatio ns listed in para grap hs (1) a nd (2 ) of this subsect ion and which are r egist ered under Sec urit ies and Exchange Commission Rule 2A-7 of the Investment Company Act of 1940 as
am end ed.” The reference to “securities of t he organizations liste d in paragraphs (1) and ( 2) of thi s subsection” meant obl igati ons of the UnitedStates it self and federal agencies and instrumentali ties. This language wo uld h ave p reclud ed inv estme nt in money market mutual fun ds th at he ld co mm ercia l pap er.
A ppar ently at the sugge stion of the staff of the T reasurer’ s Office, however, the bill was altered even before introducti on, so that the inve stment alternative for money market mutualfunds was
no longer l imit ed to thos e holding f ed er al government obligations. As in tro du ce d, t he bi ll p ro vi de d f or in ve stm en t in “m on ey m ar ket mutual funds r e gist ered with t he Securities and Exchange Co mm is sio n under the I nvestment Company Act of 1940 .. . and operate d in accor dance with 17 C.F. R. §270.2A-7 a nd tha t have recei ved the highe st poss ible r ating by at least o ne na tionally recogniz ed stat ist ical rati ng organization as designat ed by t he United States Securities and Exchange Commissi on or as approved by the Tre asu rer.” With minor amend ments, this pro vision rema ined in the bill as enact ed. 3 This change i n the bil l had the eff ect , w hi ch we202 [83 O p. Att’y

3 (...continued) the alternative of the Treasurer’s approvalof the rating organization. Two years la ter, the requirement itself was deleted.

4 Whenfirst add

ed by amendme

nt, the cap was 3%. A subsequent amendment raised the cap to 5%. must presu me w as inte nde d, o f all owing invest ment in money marketmutual funds that he ld commercialpaper. Ther e would have been li ttl e point to the change i f that were not the object ive.
The same legi slat ion authoriz ed dire ct inve stmen t in commercial paper. As i ntroduced, House Bill 913 aut horized invest ment in “commercia l paper t hat has r eceived t

he highest

lett er and numericalrati ng by at least o ne na tionally recogniz ed statist ical rati ng organization as designat ed by t he UnitedStates Securities and Exchange C o mm ission.” By am endm ent, the G enera l Ass emb ly added the 5% cap: “provi ded tha t such commercial pa per may not exceed 5% of the total inv estme nts m ade b y the Tre asure r und er this subs ectio n.” 4 The General Assembly made no comparable change to the p rovisi on on m oney m arket m utual f und s, desp ite its b roaden ing of that

provisi on to all ow investment in mutual funds that themselve s held com mercial pap er. Although the leg islative h istory sugg ests a des ire to “modernize” invest

ment alternatives, it does not specifi cally discuss the reaso ns fo r diffe rential trea tmen t of inv estme nts in commercial paper, depending on whether the in vestm ent is dire ct or no t. Pr es um ab ly, the G enera l Ass emb lyconcludedthat direct investment in commercial pa

per was more ri sky t

han indir ec t in vestm ent in commercial p aper t hrough the medi um of a money market mutual fund. The General Assembly might have suppos ed that a mutual fund’s decisio n to hold com merc ial pap er com es on lyafter extensi ve an alys is of ris k by pr ofessi onals at the mutualfund. Accordi ngl y , the G eneral Assembly imposed a 5% limitation on di rect inv estment s and no limi tati on at al l on inve stments via moneymarket mutual fun ds.
We are no t c om menting on t he correc tness of

this policy ju dgme nt or on relat ed issue s, l ike the degree of ri sk that gov ernm ents ought to t olerat e in order to obtain the highe r rat e o fGen. 199] 203

5 SFP §6-222 (d)(4)delphica lly i nstructs i nvestmen t officia ls to invest “with due regard for

minimi zing risk while maximizing return.” Allinvestment decisions are to be made under a“prudent person” standard. SFP §6-222(d)(1). return afforde d by comm ercial paper. 5 These are matter s on which
we defer t o your

experti se and ultimatel y t he judgment of t

he General Assembly. We recite t hese co nsid eration s me rely to unde rscor e our conclus ion that there i s no evidence of the ki nd of drafting error

thatwould allow us t o depart f rom the import of the statutory tex t.
III
Conclusion
In summar y , it

is our opinion that

invest ment offici als have autho rityund er SF P §6 -222 (a)(7) to invest in moneymarket mutual funds that hol d com merc ial pape r, even if the c onse quen ce of this inves tmen t choic e is that in direct in vestm ents in commercial pa per exceed the 5% cap that

would be appli cable under SFP §6-222 (a)( 6) to direct investme nts in com mercial pap er.

J. Joseph C urran, Jr. AttorneyGeneral
Jack Sch wa rtz Chief Counsel Opinions and Advic e