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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
                                                   -    -___




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
