§1196.1. Investments

            A. No security or other investment shall be eligible for purchase or acquisition by a fund unless it is interest-bearing or interest-accruing or dividend- or income-paying, is not then in default in any respect, and the fund is entitled to receive for its exclusive account and benefit the interest or income accruing thereon.

            B. Amounts not needed for current obligations may be invested by the board of trustees as provided in this Section, and not otherwise, in any or all of the following:

            (1) Deposits in federally insured banks or savings and loan associations when:

            (a) Such deposits are insured by the Federal Deposit Insurance Corporation; or

            (b) Such 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 such collateralized mortgage obligations have a minimum rating of "A" by Moody's, Standard & Poor's, or Fitch.

            (4) Obligations of the state of Louisiana or its subdivisions having a minimum rating of "A" by Moody's, Standard & Poor's, or Fitch. No more than five percent of the fund's assets may be invested in any one issue nor can this type of investment 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, Standard & Poor's, or Fitch. No more than five percent of the fund's assets may be invested in any one issue nor can this type of investment 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, AAA by Standard and Poor's, or AAA by Fitch. No more than two percent of the fund's assets may be invested in one issue, nor can this type of investment 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, AA by Standard and Poor's, or AA by Fitch. No more than five percent of the fund's assets may be invested in one issue, nor can this type of investment 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:

            (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 must have a minimum rating of Baa by Moody's, BBB by Standard and Poor's, or BBB by Fitch.

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

            (c) Except as provided in Subparagraph (d) of this Paragraph, not more than fifty percent of a 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 a fund's assets in the event, and only in the event, of financial circumstances acceptable to the Department of Insurance, such as an increase in market value after initial purchase of a corporate bond, provided that:

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

            (ii) For the purpose of determining the financial condition of a fund, the Louisiana Department of Insurance will not include as assets of a fund corporate bonds which exceed fifty percent of a fund's total assets.

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

            (11)(a) Equities subject to 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) Equity holdings shall be 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 (NASDAQ).

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

            (c) In lieu of individual securities, 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 shall be acceptable. 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. A fund may not invest in rental assets, which for the purposes of this Section, shall include but not be limited to the following:

            (1) Any item carried as an asset on the fund's balance sheet which is not, in fact, actually owned by the fund.

            (2) Any item carried as an asset on the fund's balance sheet, the ownership of which 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 carried as an asset on the fund's balance sheet for which the fund pays a regular or periodic fee for the right to carry such items as an asset, whether or not such 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 is not intended to apply to leases capitalized under generally accepted accounting principles.

            (4) Any asset purchased for investment by the fund on credit whereby 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 item carried by the fund as an asset on its balance sheet which is 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, which meets any of the criteria set forth in Paragraphs (1) through (5) of this Subsection while in the hands of such contributing person, or at the moment of such contribution to capital, or thereafter.

            Acts 1997, No. 843, §1, eff. July 10, 1997; Acts 2015, No. 397, §1.