Board adopts revisions to Treasury investment policy, expands permissible investments and adjusts duration rules

Treasury legal counsel TJ Fowler and Chief Deputy Treasurer Grant Wallace presented consolidated redline revisions to the Treasury Investment Policy and related money-management trust rules. Fowler said the redline combined stylistic edits to conform with the Code of Arkansas Rules and substantive changes affecting permissible asset classes and duration measurement.

Fowler described six substantive areas of change: removal of the 90/180-day maturity cap for commercial paper (noting commercial paper offerings rarely exceed 270 days), lowering the rating threshold for certain corporate bonds to investment grade, permitting purchase of general obligation municipal bonds of counties and municipalities if investment grade (citing the controlling statute language in the board materials), clarifying that buying a single unit of an asset implies the ability to buy an investment pool of the same assets, changing portfolio maturity measurement from a straight average to a weighted-average maturity, exempting federal treasuries and agencies from the 10-year individual-asset limit (while still counting toward total portfolio limits), and increasing the allowable average life for CMOs and mortgage-backed securities to 15 years with a restriction that such instruments with average lives greater than 10 years shall not exceed 5% of the total portfolio at purchase.

A board member asked why the board was being asked to vote on a draft instead of a fully cleaned document; Fowler said stylistic changes were largely required by the Code of Arkansas Rules and the substantive investment changes had been presented at the prior meeting three months earlier. He described the Administrative Procedures Act timeline and the impact of the legislative session on timing.

Commissioner Marshall moved to approve the consolidated changes as presented; the board approved the investment-policy updates and the corresponding money-management trust revisions by voice votes.

Fowler said the Arkansas Bankers Association had provided input and that staff will date and publish the approved broker-dealer list so board members can track additions or removals. The board directed staff to continue coordination on implementation and to follow the APA notice and comment requirements for final rulemaking.