CO Code § 24-75-601.1 (2021)
2021 Colorado Code|Title 24 - Government - State|Article 75 - State Funds|Part 6 - Funds - Legal Investments|§ 24-75-601.1. Legal Investments of Public Funds - Definition

  It is lawful to invest public funds in any of the following securities:   Any security issued by, fully guaranteed by, or for which the full credit of the United States treasury is pledged for payment and, notwithstanding paragraph (a) of subsection (1.3) of this section, inflation indexed securities issued by the United States treasury. The period from the date of settlement of this type of security to its maturity date shall be no more than five years unless the governing body of the public entity authorizes investment for a period in excess of five years.      Any security issued by, fully guaranteed by, or for which the full credit of the following is pledged for payment: The federal farm credit bank, the federal land bank, a federal home loan bank, the federal home loan mortgage corporation, the federal national mortgage association, the export-import bank, the Tennessee valley authority, the government national mortgage association, the world bank, or an entity or organization that is not listed in this paragraph (b) but that is created by, or the creation of which is authorized by, legislation enacted by the United States congress and that is subject to control by the federal government that is at least as extensive as that which governs an entity or organization listed in this paragraph (b). The period from the date of settlement of this type of security to its maturity date shall be no more than five years unless the governing body of the public entity authorizes investment for a period in excess of five years. (b) (I) Any security issued by, fully guaranteed by, or for which the full credit of the following is pledged for payment: The federal farm credit bank, the federal land bank, a federal home loan bank, the federal home loan mortgage corporation, the federal national mortgage association, the export-import bank, the Tennessee valley authority, the government national mortgage association, the world bank, or an entity or organization that is not listed in this paragraph (b) but that is created by, or the creation of which is authorized by, legislation enacted by the United States congress and that is subject to control by the federal government that is at least as extensive as that which governs an entity or organization listed in this paragraph (b). The period from the date of settlement of this type of security to its maturity date shall be no more than five years unless the governing body of the public entity authorizes investment for a period in excess of five years.    No subordinated security may be purchased pursuant to this paragraph (b).       (Deleted by amendment,L. 2006, p. 552, § 3, effective August 7, 2006.)      Any security that is a general obligation of any state of the United States, the District of Columbia, or any territorial possession of the United States or of any political subdivision, institution, department, agency, instrumentality, or authority of any of such governmental entities. (d) (I) Any security that is a general obligation of any state of the United States, the District of Columbia, or any territorial possession of the United States or of any political subdivision, institution, department, agency, instrumentality, or authority of any of such governmental entities.    No security may be purchased pursuant to this subsection (1)(d) unless:         Any security that is a revenue obligation of any state of the United States, the District of Columbia, or any territorial possession of the United States or of any political subdivision, institution, department, agency, instrumentality, or authority of any of such governmental entities. (e) (I) Any security that is a revenue obligation of any state of the United States, the District of Columbia, or any territorial possession of the United States or of any political subdivision, institution, department, agency, instrumentality, or authority of any of such governmental entities.    No security may be purchased pursuant to this subsection (1)(e) unless, at the time of purchase, the security carries at least two credit ratings at or above "A- or A3" or its equivalent from NRSROs if it is a revenue obligation of this state or of any political subdivision, institution, department, agency, instrumentality, or authority of this state or carries at least two credit ratings at or above "AA- or Aa3" or its equivalent from such NRSROs if it is a revenue obligation of any other governmental entity listed in subsection (1)(e)(I) of this section.    The period from the date of settlement of this type of security to its maturity date or date of optional redemption that has been exercised as of the date the security is purchased shall be no more than five years.       and    (Deleted by amendment,L. 2006, p. 552, § 3, effective August 7, 2006.)    Any security of the investing public entity or any certificate of participation or other security evidencing rights in payments to be made by the investing public entity under a lease, lease-purchase agreement, or similar arrangement;  (h.5) Any certificate of participation or other security evidencing rights in payments to be made by a school district under a lease, lease-purchase agreement, or similar arrangement if the security, at the time of purchase, carries at least two credit ratings from NRSROs and is rated at or above "A- or A3" or its equivalent by all such organizations that have provided a rating;     Any interest in any local government investment pool organized pursuant to part 7 of this article;    The purchase of any repurchase agreement concerning any securities referred to in paragraph (a) or (b) of this subsection (1) that can otherwise be purchased under this section if all of the conditions of subparagraphs (I) to (VI) of this paragraph (j) are met:   The securities subject to the repurchase agreement must be marketable.    The title to or a perfected security interest in such securities along with any necessary transfer documents must be transferred to the investing public entity or to a custodian acting on behalf of the investing public entity.    Such securities must be actually delivered versus payment to the public entity's custodian or to a third-party custodian or third-party trustee for safekeeping on behalf of the public entity.    The collateral securities of the repurchase agreement must be collateralized at no less than one hundred two percent and marked to market no less frequently than weekly.    The securities subject to the repurchase agreement may have a maturity in excess of five years.    The period from the date of settlement of a repurchase agreement to its maturity date shall be no more than five years unless the governing body of the public entity authorizes investment for a period in excess of five years. (j.5) Any reverse repurchase agreement concerning any securities referred to in paragraph (a) or (b) of this subsection (1) that can otherwise be purchased under this section if all of the conditions of subparagraphs (I) to (VII) of this paragraph (j.5) are met:   Any necessary transfer documents must be transferred to the investing public entity.    Cash must be received by the investing public entity or a custodian acting on behalf of the investing public entity in a deliver versus payment settlement.    The cash received from a reverse repurchase agreement must be collateralized at no more than one hundred and five percent and marked to market no less frequently than weekly.    The repurchase agreement is not greater than ninety days in maturity from the date of settlement unless the governing body of the public entity authorizes investment for a period in excess of ninety days.    The counter-party meets the credit conditions of an issuer that would qualify under paragraph (m) of this subsection (1).    The value of all securities reversed under this paragraph (j.5) does not exceed eighty percent of the total deposits and investments of the public entity.    No securities are purchased with the proceeds of the reverse repurchase agreement that are greater in maturity than the term of the reverse repurchase agreement. (j.7) A securities lending agreement in which the public entity lends securities in exchange for securities authorized for investment in this section, if all of the following conditions are met:   Any necessary transfer documents must be transferred to the investing public entity.    Securities must be received by the investing public entity or a custodian acting on behalf of the investing public entity in a simultaneous settlement.    The securities received in the securities lending agreement must be no less than one hundred two percent of the value of the securities lent and marked to market no less frequently than weekly.    The counter-party meets the conditions of an issuer specified in paragraph (m) of this subsection (1).    In the case of a local government, the securities lending agreement shall be approved and designated by written resolution adopted by a majority vote of the governing body of the local government, which resolutions shall be recorded in its minutes.             Any money market fund that is registered as an investment company under the federal "Investment Company Act of 1940", as amended, if, at the time the investing public entity invests in such fund:   The investment policies of the fund include seeking to maintain a constant share price;    No sales or load fee is added to the purchase price or deducted from the redemption price of the investments in the fund and no fee may be charged unless the governing body of the public entity authorizes such a fee at the time of the initial purchase;    The fund operates in accordance with rule 2a-7 under the federal "Investment Company Act of 1940", as amended, or any successor regulation under that act regulating money market funds. The fund must have an investment policy or objective which seeks to maintain a stable net asset value of one dollar per share.    Repealed.         Any guaranteed investment contract, guaranteed interest contract, annuity contract, or funding agreement if, at the time the contract or agreement is entered into, the long-term credit rating, financial obligations rating, claims paying ability rating, or financial strength rating of the party, or of the guarantor of the party, with whom the public entity enters the contract or agreement is, at the time of issuance, rated in one of the two highest rating categories by two or more NRSROs. (l) (I) Any guaranteed investment contract, guaranteed interest contract, annuity contract, or funding agreement if, at the time the contract or agreement is entered into, the long-term credit rating, financial obligations rating, claims paying ability rating, or financial strength rating of the party, or of the guarantor of the party, with whom the public entity enters the contract or agreement is, at the time of issuance, rated in one of the two highest rating categories by two or more NRSROs.    (Deleted by amendment,L. 2004, p. 950, 7, effective May 21, 2004.)    (A) Except as provided in sub-subparagraph (B) of this subparagraph (III), the contracts or agreements purchased under this paragraph (l) shall not have a maturity period greater than three years.         Any corporate or bank security that is denominated in United States dollars, that matures within three years from the date of settlement, that at the time of purchase carries at least two credit ratings from any of the NRSROs, and that is not rated below: (m) (I) Any corporate or bank security that is denominated in United States dollars, that matures within three years from the date of settlement, that at the time of purchase carries at least two credit ratings from any of the NRSROs, and that is not rated below:    At no time shall the book value of a public entity's investment in notes evidencing a debt pursuant to this paragraph (m) exceed the following:    No subordinated security may be purchased pursuant to this paragraph (m). No security issued by a corporation or bank that is not organized and operated within the United States may be purchased pursuant to this paragraph (m) unless the governing body of the public entity authorizes investment in such securities.    As used in this subsection (1)(m), the term "bank security" includes negotiable certificates of deposit issued by banks organized and chartered within the United States. Public entities must consider these bank securities as investments and not deposits subject to the protections of the "Public Deposit Protection Act", article 10.5 of title 11, or insured by the federal deposit insurance corporation.       (Deleted by amendment,L. 2006, p. 552, § 3, effective August 7, 2006.)   (1.3) (a) Except as provided in subsections (1)(a) and (1.3)(b) of this section, public funds must not be invested in any security on which the coupon rate is not fixed, or a schedule of specific fixed coupon rates is not established, from the time the security is settled until its maturity date, other than shares in qualified money market mutual funds, unless the coupon rate is:   Established by reference to the United States dollar London interbank offer rate of one year or less maturity, the secured overnight financing rate, the federal funds rate, or other reference rates which are similar to the United States dollar London interbank offer rate, the secured overnight financing rate, the federal funds rate, the cost of funds index, or the prime rate as published by the federal reserve; and    Expressed as a positive value of the referenced index plus or minus a fixed number of basis points.       A municipal index may be used for the investment of bond or note accounts from issues with coupons linked to the same index.    For purposes of this section, "maturity date" means the last possible date, barring default, that principal can be repaid to the purchaser. (1.5) Any firm that sells any financial instrument that fails to comply with the provisions of this section to any public entity in the state of Colorado shall, upon demand of the public entity through the state treasurer, repurchase such instruments for the greater of the original purchase principal amount or the original face value, plus any and all accrued interest, within one business day of the demand.          Investments made pursuant to this section shall be made in conformance with the standard set forth in section 15-1-304, C.R.S.  (2.3) Public entities shall adopt criteria designating eligible broker-dealers for the purchase of term securities, except for bond proceed investments, under this section.    (2.5) (a) If a public entity invests public moneys through an investment firm offering for sale corporate stocks, bonds, notes, debentures, or a mutual fund that contains corporate securities, the investment firm shall disclose, in any research or other disclosure documents provided in support of the securities being offered, to the public entity whether the investment firm has an agreement with a for-profit corporation that is not a government-sponsored enterprise, whose securities are being offered for sale to the public entity and because of such agreement the investment firm:   Had received compensation for investment banking services within the most recent twelve months; or    May receive compensation for investment banking services within the next three consecutive months.       For the purposes of this subsection (2.5), "investment firm" means a bank, brokerage firm, or other financial services firm conducting business within this state, or any agent thereof.       Nothing in this section is intended to limit:   The power of any public entity to invest any public funds in any security or other investment permitted to such public entities under any other valid law of the state; or    The power of any home rule city, city and county, town, or county to invest any public funds in any security or other investment permitted under the charter or ordinance of such home rule city, city and county, town, or county; or    The authority of the state board of regents to invest any funds available to the board in any security or other investment otherwise provided by law. (3.5) (Deleted by amendment,L. 2006, p. 552, § 3, effective August 7, 2006.)       Nothing in this section is intended to apply to public funds held or invested as part of any pension plan, full or supplemental retirement plan, or deferred compensation plan.     (A) "A1, P1, or F1" or their equivalents by either rating used to fulfill the requirements of this subparagraph (I) if the security is a money market instrument such as commercial paper or bankers' acceptance; or   (B) "AA- or Aa3" or their equivalents by either rating used to fulfill the requirements of this subparagraph (I) if the security is any other kind of security.   Source: L. 89: Entire section added, p. 1102, § 2, effective July 1. L. 91: (4) amended, p. 1917, § 39, effective June 1. L. 93: (1)(k)(II), IP(1)(k)(III), and (1)(k)(III)(C) amended and (1)(k)(IV) added, p. 1260, § 7, effective June 6. L. 94: (1)(k)(III) amended and (1)(m) added, p. 449, § 1, effective March 29. L. 95: IP(1)(j), (1)(k)(III), (1)(k)(III)(C), and (1)(k)(III)(D) amended and (1.3) and (1.5) added, p. 772, § 1, effective May 24. L. 2000: (1)(n) added, p. 182, § 2, effective August 2; (3.5) added, p. 811, § 1, effective August 2. L. 2002: (1)(d)(II) and (3.5) amended, pp. 258, 259, §§ 2, 3, effective April 12. L. 2003: (1)(l)(I) amended, p. 623, § 40, effective July 1; (2.5) added, p. 674, § 3, effective August 6. L. 2004: (1)(j)(I) and (1)(l) amended, p. 950, § 7, effective May 21. L. 2006: Entire section amended, p. 552, § 3, effective August 7. L. 2009: (1)(h.5) added, (SB 09-256), ch. 294, p. 1569, § 36, effective May 21. L. 2012: (1)(b)(II) and (1)(m)(I) amended and (1)(m)(III) added, (HB 12-1005), ch. 6, p. 19, § 1, effective March 7. L. 2014: (1)(d)(II)(A), (1)(d)(II)(C), (1)(e)(II), (1)(e)(III), (1)(h.5), (1)(k)(III), and (1)(l)(I) amended, (HB 14-1103), ch. 81, p. 322, § 1, effective March 27. L. 2019: IP(1)(d)(II), (1)(d)(II)(A), (1)(e)(II), (1)(h.5), (1)(k)(III), (1)(l)(I), IP(1)(m)(I), IP(1.3)(a), and (1.3)(a)(I) amended, (1)(k)(IV) repealed, and (1)(m)(I)(C) and (1)(m)(IV) added, (HB 19-1179), ch. 279, p. 2620, § 2, effective August 2.   Cross references: For the legislative declaration contained in the 2002 act amending subsections (1)(d)(II) and (3.5), see section 1 of chapter 94, Session Laws of Colorado 2002.   ANNOTATION   This section is not preempted by federal law. It is not preempted by 15 U.S.C. § 77r of the National Securities Markets Improvement Act because it does not impose any broad registration or qualification requirements or other merit-based conditions on the offering or sale of covered securities within the state, nor does it achieve a similar objective by totally prohibiting the sale of such securities within the state for failure to fulfill a merit-based condition. Griffin v. Capital Sec. of Am., 298 P.3d 970 (Colo. App. 2010), rev'd on other grounds, 2012 CO 39, 278 P.3d 342.   It is not preempted by the Federal Home Loan Mortgage Corporation Act, as the act contains an express allowance for state laws such as the one contained in this section. The state's enforcement of this section by holding violators liable does not create a conflict. Griffin v. Capital Sec. of Am., 298 P.3d 970 (Colo. App. 2010), rev'd on other grounds, 2012 CO 39, 278 P.3d 342.   When a public entity purchases unlawful securities under this section, disgorgement is not an available remedy against the seller. While the legislature expressly provided a damages remedy, an equitable remedy, and a regulatory remedy, it did not provide a disgorgement remedy under a theory of common law restitution. Under these circumstances, the addition of disgorgement would impermissibly alter the extensive and detailed remedial scheme adopted by the legislature. Capital Sec. of Am. v. Griffin, 2012 CO 39, 278 P.3d 342.