(a) An entity may invest its funds and funds under its control through an eligible investment pool if the governing body of the entity by rule, order, ordinance, or resolution, as appropriate, authorizes investment in the particular pool. An investment pool shall invest the funds it receives from entities in authorized investments permitted by this subchapter. An investment pool may invest its funds in money market mutual funds to the extent permitted by and consistent with this subchapter and the investment policies and objectives adopted by the investment pool.
(b) To be eligible to receive funds from and invest funds on behalf of an entity under this chapter, an investment pool must furnish to the investment officer or other authorized representative of the entity an offering circular or other similar disclosure instrument that contains, at a minimum, the following information:
(1) the types of investments in which money is allowed to be invested;
(2) the maximum average dollar-weighted maturity allowed, based on the stated maturity date, of the pool;
(3) the maximum stated maturity date any investment security within the portfolio has;
(4) the objectives of the pool;
(5) the size of the pool;
(6) the names of the members of the advisory board of the pool and the dates their terms expire;
(7) the custodian bank that will safekeep the pool’s assets;
(8) whether the intent of the pool is to maintain a net asset value of one dollar and the risk of market price fluctuation;
(9) whether the only source of payment is the assets of the pool at market value or whether there is a secondary source of payment, such as insurance or guarantees, and a description of the secondary source of payment;
(10) the name and address of the independent auditor of the pool;
(11) the requirements to be satisfied for an entity to deposit funds in and withdraw funds from the pool and any deadlines or other operating policies required for the entity to invest funds in and withdraw funds from the pool;
(12) the performance history of the pool, including yield, average dollar-weighted maturities, and expense ratios; and
(13) the pool’s policy regarding holding deposits in cash.

(c) To maintain eligibility to receive funds from and invest funds on behalf of an entity under this chapter, an investment pool must furnish to the investment officer or other authorized representative of the entity:
(1) investment transaction confirmations; and
(2) a monthly report that contains, at a minimum, the following information:
(A) the types and percentage breakdown of securities in which the pool is invested;
(B) the current average dollar-weighted maturity, based on the stated maturity date, of the pool;
(C) the current percentage of the pool’s portfolio in investments that have stated maturities of more than one year;
(D) the book value versus the market value of the pool’s portfolio, using amortized cost valuation;
(E) the size of the pool;
(F) the number of participants in the pool;
(G) the custodian bank that is safekeeping the assets of the pool;
(H) a listing of daily transaction activity of the entity participating in the pool;
(I) the yield and expense ratio of the pool, including a statement regarding how yield is calculated;
(J) the portfolio managers of the pool; and
(K) any changes or addenda to the offering circular.
(d) An entity by contract may delegate to an investment pool the authority to hold legal title as custodian of investments purchased with its local funds.
(e) In this section, for purposes of an investment pool for which a $1.00 net asset value is maintained, “yield” shall be calculated in accordance with regulations governing the registration of open-end management investment companies under the Investment Company Act of 1940, as promulgated from time to time by the federal Securities and Exchange Commission.
(f) To be eligible to receive funds from and invest funds on behalf of an entity under this chapter:
(1) a public funds investment pool that uses amortized cost or fair value accounting must mark its portfolio to market daily; and
(2) if the investment pool uses amortized cost:
(A) the investment pool must, to the extent reasonably possible, stabilize at a $1.00 net asset value, when rounded and expressed to two decimal places;
(B) the governing body of the investment pool must, if the ratio of the market value of the portfolio divided by the book value of the portfolio is less than 0.995 or greater than 1.005, take action as the body determines necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair result to existing participants, including a sale of portfolio holdings to attempt to maintain the ratio between 0.995 and 1.005; and
(C) the investment pool must, in addition to the requirements of its investment policy and any other forms of reporting, report yield to its investors in accordance with regulations of the federal Securities and Exchange Commission applicable to reporting by money market funds.
(g) To be eligible to receive funds from and invest funds on behalf of an entity under this chapter, a public funds investment pool must have an advisory board composed:
(1) equally of participants in the pool and other persons who do not have a business relationship with the pool and are qualified to advise the pool, for a public funds investment pool created under Chapter 791 and managed by a state agency; or
(2) of participants in the pool and other persons who do not have a business relationship with the pool and are qualified to advise the pool, for other investment pools.
(h) To maintain eligibility to receive funds from and invest funds on behalf of an entity under this chapter, an investment pool must be continuously rated no lower than AAA or AAA-m or at an equivalent rating by at least one nationally recognized rating service.
(i) If the investment pool operates an Internet website, the information in a disclosure instrument or report described in Subsections (b), (c)(2), and (f) must be posted on the website.
(j) To maintain eligibility to receive funds from and invest funds on behalf of an entity under this chapter, an investment pool must make available to the entity an annual audited financial statement of the investment pool in which the entity has funds invested.
(k) If an investment pool offers fee breakpoints based on fund balances invested, the investment pool in advertising investment rates must include either all levels of return based on the breakpoints provided or state the lowest possible level of return based on the smallest level of funds invested.