La. Corporations and Associations § 12:1857

Current with operative changes from the 2024 Third Special Legislative Session

Section 12:1857 - Investments

A. Only a security or other investment that is interest-bearing or interest-accruing or dividend-paying or income-paying and which is not then in default may be purchased or acquired by the fund, and the fund shall receive for its exclusive account and benefit the interest or income accruing on the security.

B. The board of trustees may invest amounts not needed for current obligations in any or all of the following items:

(1) Deposits in federally insured banks or savings and loan associations when any one of the following applies:

(a) The deposits are insured by the Federal Deposit Insurance Corporation.

(b) The deposits are collateralized by direct obligations of the United States government.

(2) Bonds or securities not in default as to principal or interest, which are obligations of the United States government or of any agency of the United States government, without limitation.

(3) Pass-through mortgage-backed securities and collateralized mortgage obligations issued by the Federal National Mortgage Association, the Government National Mortgage Association, the Federal Home Loan Mortgage Corporation, or the Federal Housing Administration, without limitation, provided that the collateralized mortgage obligations have a minimum rating of A by Moody's Investors Service, S&P Global Ratings, or Fitch Ratings.

(4) Obligations of this state or its subdivisions having a minimum rating of A by Moody's Investors Service, S&P Global Ratings, or Fitch Ratings. Not more than five percent of the fund's assets may be invested in any particular issue, and the type of investment shall not exceed fifteen percent of the fund's assets in the aggregate.

(5) Obligations of any state or its subdivisions having a minimum rating of A by Moody's Investors Service, S&P Global Ratings, or Fitch Ratings. Not more than five percent of the fund's assets may be invested in any particular issue, and the type of investment shall not exceed fifteen percent of the fund's assets in the aggregate.

(6) Commercial mortgage-backed securities with purchases having a minimum rating of Aaa by Moody's Investors Service, AAA by S&P Global Ratings, or AAA by Fitch Ratings. Not more than two percent of the fund's assets may be invested in one issue, and this type of investment shall not exceed ten percent of the fund's assets in the aggregate.

(7) Asset-backed securities with purchases having a minimum rating of Aa by Moody's Investors Service, AA by S&P Global Ratings, or AA by Fitch Ratings. No more than five percent of the fund's assets may be invested in one issue, and this type of investment shall not exceed ten percent of the fund's assets in the aggregate.

(8) Repurchase agreements, without limitation, when the collateral for the agreement is a direct obligation of the United States government, provided that the repurchase agreement shall meet all of the following specifications:

(a) Be in writing.

(b) Have a specific maturity date.

(c) Adequately identify each security to which the agreement applies.

(d) State that in the event of default by the party agreeing to repurchase the securities described in the agreement at the term contained in the agreement, title to the described securities shall pass immediately to the fund without recourse.

(9) Corporate bonds, subject to the following limitations:

(a) The bonds shall have a minimum rating of Baa by Moody's Investors Service, BBB by S&P Global Ratings, or BBB by Fitch Ratings.

(b) Except as provided in Subparagraph (d) of this Paragraph, not more than five percent of the fund's assets may be invested in corporate bonds of any particular issue or issuer.

(c) Except as provided in Subparagraph (d) of this Paragraph, not more than fifty percent of the fund's assets may be invested in corporate bonds of all types.

(d) The five-percent and fifty-percent limitations specified in Subparagraphs (b) and (c) of this Paragraph, respectively, may be exceeded up to an additional ten percent of the fund's assets if the financial circumstances are acceptable to the department, such as an increase in market value after initial purchase of a corporate bond, provided that the following occur:

(i) The initial purchase of corporate bonds was within the limitations specified in Subparagraphs (b) and (c) of this Paragraph.

(ii) In determining the financial condition of the fund, the department shall not include as assets of the fund those corporate bonds which exceed fifty percent of the fund's total assets.

(10) Mutual or trust fund institutions registered with the Securities and Exchange Commission under the Securities Act of 1933 and the Investment Company Act of 1940 which have underlying investments consisting solely of securities approved for investment as set forth in this Subsection. This investment shall not exceed fifty percent of the fund's assets in the aggregate.

(11)

(a) Equities subject to all of the following limitations:

(i) The equity sector shall not exceed fifteen percent of the overall investment fund.

(ii) A minimum of five different issues shall be held in the equity sector to provide for diversification.

(iii) No single issue may represent more than five percent, at cost, of the overall investment fund.

(iv) Market capitalization of each issue shall be at least one billion dollars.

(v) Each eligible issue shall be paying a cash dividend.

(vi) Except as provided in Subparagraph (b) of this Paragraph, equity holdings are restricted to high quality, readily marketable securities corporations that are domiciled in the United States and that are actively traded on the major United States exchanges, including the New York Stock Exchange and the National Association of Securities Dealers Automated Quotation Stock Market, LLC.

(b) Foreign domiciled corporations are eligible if they trade American Depositary Receipts on the major United States exchanges.

(c) In lieu of individual securities, investment in a mutual fund or exchange-traded fund which pays a dividend and consists of securities which have an average market capitalization of at least one billion dollars is permitted. The same general quality constraints shall be met, and the aggregate total of the funds, plus any individual securities, may not exceed fifteen percent of the overall investment fund.

C. The fund shall not invest in rental assets, which assets shall include, without limitation, all of the following:

(1) Any item which is not, in fact, actually owned by the fund.

(2) Any item of which the ownership is subject to resolution, rescission, or revocation upon the fund's insolvency, receivership, bankruptcy, statutory supervision, rehabilitation, liquidation, or upon the occurrence of any other contingency.

(3) Any item for which the fund pays a regular or periodic fee for the right to carry the item as an asset, whether the fee is characterized as a rental, a management fee, or a dividend not previously approved by the department, or other periodic payment for such right. This provision does not apply to leases capitalized under generally accepted accounting principles.

(4) Any asset purchased for investment by the fund on credit in which the interest rate paid by the fund on its credit instrument is greater than the interest rate or yield generated by the purchased asset.

(5) Any asset on the fund's balance sheet subject to a mortgage, lien, privilege, preference, pledge, charge, or other encumbrance which is not accurately reflected in the liability section of the fund's balance sheet.

(6) Any asset received by the fund as a contribution to capital or surplus from any person that meets any of the criteria set forth in Paragraphs (1) through (5) of this Subsection while in the hands of that contributing person, or at the moment of the contribution to capital, or thereafter.

La. Corporations and Associations § 12:1857

Added by Acts 2023, No. 259, §§1, 3A, eff. June 12, 2023.