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Mr. Chas. M. Rogers,
Chairman, Board of Trustees
Teacher Retirement System of Texas
Austin, Texas
Opinion No. (WW-24)
Re: Whether funds of the Teacher
Retirement System of Texas
may be invested in Corporate
Dear Sir: Stocks and Bonds.
Your request, dated February 11, 1957, presents in
substance the following question:
'May the Board of Trustees of the Teacher
Retirement System of Texas invest funds of the
System in corporate stocks and bonds?"
Section 48a, Article III, of the Constitution of Texas,
as amended by the Constitutional Amendment adopted at the General
Election held November 6, 1956, In providing for the investment
of Retirement System funds, reads in part as follows:
"Section 48a. . . .
"The Legislature may authorize all moneys
coming into such fund to be invested . . .;
or in such other securities as are now or here-
after may be permitted by law as investments
for the Permanent University Fund or for t\e
Permanent School Fund of this State; . . .
Section 13, of Article 2922-1, Vernon's Civil Statutes,
provides in part:
'Sec. 13. 1. . . . All retirement funds
and monies, including those received into
the Treasury of the State of Texas as de-
posits and contributions of teachers and
employers, may be invested only . . .; and
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Mr. Chas. M. Rogers, page 2. (WI?-24)
in securities in which the State Permanent
School Fund of Texas or the Permanent Univer-
sity Fund of the University of Texas may be
Invested under present or hereafter enacted
laws."
From a reading of the foregoing constitutional and
statutory provisions, It will be seen that all retirement funds,
therein specified, may be invested by the Board of Trustees of
the Teacher Retirement System in certain designated bonds and
other evidences of indebtedness "and in securities In which the
State Permanent School Fund of Texas or the Permanent University
Fund of the University of Texas may be invested under present or
hereinafter enacted laws." (Emphasis added)
We find no authority for funds of the State Permanent
School Fund to be invested in corporate bonds and stocks. Sec-
tion lla of Article VII, of the State Constitution, adopted at
the General Election held November 6, 1956, provides for the
investment of the Permanent University Fund and reads,in part,
as follows:
"Section lla. 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 . . . such cor-
poration bonds, preferred stocks and common stocks
as the Board of Regents of The University of Texas
may deem to be proper Investments for said funds;
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 appro-
priation by the Legislature to accomplish the pur-
poses 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, discre-
tion, and intelligence exercise in the management
of theirown 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 shall be invested at any
Mr. Chas. M. Rogers, page 3. (Ww-24)
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 (I)
car oration, nor shall more than five er cent
(5J of the voting stock of any one (1P corpora-
tion 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 Com-
mission or its successors. . . .II
The provisions of Section lla, for purposes of this
opinion, are self-explanatory.
We conclude that the Board of Trustees of the Teacher
Retirement System may Invest funds of the System in those cor-
porate stocks and bonds in which funds of the Permanent Univer-
sity Fund of the University of Texas may be invested, pursuant
to the provisions of Section lla of Article III of the Constltu-
tion of the State of Texas, and subject to the applicable condl-
tions and limitations set forth therein.
SUMMARY
The Board of Trustees of the Teacher Re-
tirement System may invest funds of the
System in those corporate stocks and bonds
%n which funds of the Permanent University
Fund of the University of Texas may be in-
vested, pursuant to the provisions of Sec-
tion lla of Article III of the Constitution
of the State of Texas, and subject to the
applicable conditions and limitations set
forth therein.
Very truly yours,
WILL WILSON
Attorney General of Texas
LP:F:st
APPROVED:
OPINION COMMITTEE -LEdRARD PASSMORE
H. Grady Chandler Assistant
Chairman