Honorable Gordon H. Lloyd 

Executive Secretary 

Employees Retirement System 

of Texas 

Capitol Station 

Austin 11, Texas 

Dear Mr. Lloyd: 

Opinion No. WW-548 

Re: Whether retirement funds 

of the Employees Retirement System may be invested in corporation 

stocks and bonds other 

than those in which the 

Permanent University Fund 

of The University of Texas 

is invested, 

Your request for an opinion is, in part, as follows: 

I 

~ . . , is the investment of Employees 

Retirement Funds in corporate bonds, preferred stocks and common stocks subject to 

the discretion of the Board of Trustees of 

the Employees Retirement System, within 

those limits set out in Section lla of 

Article VII of the Constitution for guidance of the Board of Regents of the University, or may the Board of Trustees of 

the Employees Retirement System make such 

investments within its discretion, but only 

in the specific stocks and bonds which have 

been deemed proper investments for the Permanent Un,iversity Fund by the Board of Regents of the University of Texas?" 

When the amendment of Section 62(a) of Article XVI of the Constitution of Texas was adopted in November, 1957, the amendment 

of Article 6228a, V.C.S., by Acts of the 55th Legislature, 

Regular Session, 1957, Chapter 402, page 1208, became effective 

and this statute, as thereby amended, became operative on September 1, 1958. 
Honorable Gordon H. Lloyd, page 2 (WW-548) 

The pertinent portion of the constitutional amendment is as 

follows: 

"All funds provided from the compensation 

of such person or by the State of Texas 

for such Retirement, Disability and Death 

Compensation Fund, as are received by the 

Treasury of the State of Texas. shall be 

invested in bonds of the United States, or 

in bonds issued by any agency of the United 

States Government, the payment of the principal of and interest on which is guaranteed 

by the United States: or in such other securities as are now or hereafter may be permitted by law as investments for the Permanent University Fund or for the Permanent 

School Fund of this State, under the same 

limitations and restrictions imposed by the 

Constitution for investment of those funds 

and subject to such regulations as the Leqislature may provide.* (Emphasis added) 

The applicable provisions of the statute, as amended, appear 

in Section 7A thereof, as followsr 

"The State Board of Trustees shall be the 

Trustees of the several funds as herein 

created by this Act andlshalk ,haue.full 

power to invest and reinvest such funds 

subject to the following limitations and 

restrictions: 

'All retirement funds as are received by the 

Treasury of the State of Texas as deposits 

from contributions of employees or employer 

as herein provided, may be invested only in 

. . . ; and in securities in which the State 

Permanent School Fund or the Permanent University Fund of the University of Texas mSy 

be invested under present or hereafter enacted laws.' (Emphasis added) 
Honorable Gordon H, Lloyd, page 3 (WW-548) 

We find no authority for the investment of the State Permanent 

School Fund in corporation bonds and stocks, but such investment of the Permanent University Fund of the University of Texas 

is permitted by Section lla of Article VII of the Constitution 

of Texas, which follows: 

"In addition to the bonds now enumerated 

in Section 11 of'Article VII of the Constitution of the State of Texas, the Permanent University Fund may be invested in 

first lien real estate mortgage securities 

guaranteed in anv manner in whole by the 

United~ States Government or any agency 

thereof and in such corporation bonds, preferred stocks and common stocks as the Board 

of Regents of The University of Texas may 

deem to be proper investments for said fund; 

and the interest and dividends accruing from 

the securities listed in Section 11 and Section lLa, except the portion thereof which 

is appropriated by the operation of Section 

18 of Article VII for the payment of principal and interest on bonds or notes issued 

thereunder, shall be subject to appropriation by the Legislature to accomplish the 

purposed declared in Section 10 of Article 

VII of this Constitution. In making each 

and all of such investments said Board of 

Regents shall exercise the judgment and care 

under the circumstances then prevailing ~which 

men of ordinary prudence, discretion, and intelligence exercise in the management of their 

own affairs not in regard to speculation but 

in regard to the permanent disposition of their 

funds, considering the probable income therefrom as well as the probable safety of their 

capital: provided, however, that not more than 

fifty per cent (50%) of said fund s,hall be inveeted st any given time in corporate stocks 

and bonds, nor shall more than one per cent 

(1%) of said fund be invested in securities 

issued by any one (1) corporation, nor shall 
Honorable Gordon H. Lloyd, page 4 (WW-548) 

more than five per cent (5%) of the voting 

stock of any one (1) corporation be owned: 

and provided, further, that stocks eligible 

for purchase shall be restricted to stocks 

of companies incorporated within the United 

States which have paid dividends for ten 

(10) consecutive years or longer immediately prior to the date of purchase and 

which, except for bank stocks and insurance 

stocks, are listed upon an exchange registered with the Securities and Exchange Commission or its successors. This amendment 

shall be self-enacting, and shall become 

effective upon its adoption, provided, however, that the Legislature shall provide by 

law for full disclosure of all details concerning the investments in corporate stocks 

and bonds and other investments authorized 

herein." (Emphasis added) 

Neither the underlined language in Section 62(a) of Article 

XVI of the Constitution of Texas, supra, nor that in Article 

6228a, supra, is sufficient within itself to serve as a complete guide for the investment of the Employees Retirement 

Funds in corporation stocks or corporation bonds for both 

refer to and wholly depend upon what ". . . may be permitted 

by law as investments for the Permanent University Fund. . .I 

This, in turn, is clearly set out in Section lla of Article 

VII, supra, as being only "such corporation bonds, preferred 

stocks and common stocks as the Board of Regents of The University of Texas may deem to be proper investments for said 

fund." There follows a delineation of certain further limits 

and conditions governing such investments. 

Certainly the Permanent University Fund may not be invested in 

any or all corporation stocks and bonds which are to be found 

in the market, but only in those which fall within such limits 

and conditions as are set out in Section lla of Article VII, 

supra, and which the said Board of Regents "may deem to be 

proper investments for said fund." "Deem" does not signify an 

arbitrary exercise of will, but a deliberate exercise of judgment. 
Honorable Gordon H. Lloyd, page 5 (WW-548) 

"To deem" is to think, judge, hold as an opinion, decide or 

believe on consideration, to adjudge. State v. Cohen, 63 A. 

928, 930, 73 N.H. 543. 

Since no investment of the Permanent University Fund in corporation stocksand bonds is permitted by law unless it is deemed 

to be a proper investment by the Board of Regents, and since 

Employees Retirement funds may be invested in such corporation 

stocks and bonds only if they are "permitted by law" as investments for the Permanent University Fund, it follows that if the 

Employees Retirement funds are invested in corporation stocks 

and bonds, only those particular corporation stocks and bonds 

are eligible which are deemed to be proper by the Board of Regents of the University of Texas as investments for the Permanent 

University Fund. The best evidence of what these may be is the 

actual investment of the Permanent University Fund within the 

limitations of Section lla of Article VII, supra, as shown by 

public records both at the University and at the office of the 

State Comptroller of Public Accounts. 

This is not to 'say that when the Permanent University Fund is 

invested in a particular security, such security must also be 

purchased by the Employees Retirement funds. Purchase of that 

security thereby becomes permissive in respect to the Employees 

Retirement funds and whether or not it is actually purchased is 

a ma,tter resting within the sound discretion of the State Board 

of Trustees of the Employees Retirement System of Texas. 

Since the word "invested" contemplates not only the original 

purchase but the holding of a particular security as an investment, we ,th,ink that if the Permanent University Fund is withdrawn from investment in a particular security the Employees 

Retirement funds must likewise be withdrawn within a reasonable 

time. 

Retirement funds of the Employees Retirement System of 'Texas may not be invested 

in corpcration stocks and bonds other than 

those in which the Permanent Universi,ty Fund 

of The University of Texas is invested. 
Honorable Gordon H. Lloyd, page 6 (wW-548) 

Very truly yours, 

WILL WILSON 

Attorney Cj&eral of Texas 

Hww s 

APPROVED: 

OPINION COMMITTEE 

W. R. Hemphill, Chairman 

Marietta Payne 

Thomas Burrus 

Robert T. Lewis 

BY 

Howard W. Mays 

Assistant Attorniy General 

REVIEWED FOR THE ATTORNEY GENERAL 

By: Morgan Nesbitt