1. (a) A securities lending program is an authorized investment under this subchapter if it meets the conditions provided by this section.

2. (b) To qualify as an authorized investment under this subchapter:

   1. (1) the value of securities loaned under the program must be not less than 100 percent collateralized, including accrued income;
   2. (2) a loan made under the program must allow for termination at any time;

   3. (3) a loan made under the program must be secured by:

      1. (A) pledged securities described by Section 2256.009;

      2. (B) pledged irrevocable letters of credit issued by a bank that is:

         1. (i) organized and existing under the laws of the United States or any other state; and
         2. (ii) continuously rated by at least one nationally recognized investment rating firm at not less than A or its equivalent; or

      3. (C) cash invested in accordance with Section:

         1. (i) 2256.009;
         2. (ii) 2256.013;
         3. (iii) 2256.014; or
         4. (iv) 2256.016;

   4. (4) the terms of a loan made under the program must require that the securities being held as collateral be:

      1. (A) pledged to the investing entity;
      2. (B) held in the investing entity's name; and
      3. (C) deposited at the time the investment is made with the entity or with a third party selected by or approved by the investing entity;

   5. (5) a loan made under the program must be placed through:

      1. (A) a primary government securities dealer, as defined by 5 C.F.R. Section 6801.102(f), as that regulation existed on September 1, 2003; or
      2. (B) a financial institution doing business in this state; and
   6. (6) an agreement to lend securities that is executed under this section must have a term of one year or less.

Added by Acts 2003, 78th Leg., ch. 1227, Sec. 1, eff. Sept. 1, 2003.