§ 53601.6. — (Amended (as added by Stats. 2020, Ch. 235, Sec. 5) by Stats. 2025, Ch. 323, Sec. 4.)

(a)
A local agency shall not invest any funds pursuant to this article or pursuant to Article 2 (commencing with Section 53630) in inverse floaters, range notes, or mortgage-derived, interest-only strips.
(b)
(1)
Except as provided in paragraph (2), a local agency shall not invest any funds pursuant to this article or pursuant to Article 2 (commencing with Section 53630) in any security that could result in zero-interest accrual if held to maturity. However, a local agency may hold prohibited instruments until their maturity dates. The limitation in this subdivision shall not apply to local agency investments in shares of beneficial interest issued by diversified management
companies registered under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.) that are authorized for investment pursuant to subdivision (l) of Section 53601.
(2)
Notwithstanding the prohibition in paragraph (1), a local agency may invest in securities issued by, or backed by, the United States government that could result in zero- or negative-interest accrual if held to maturity, in the event of, and for the duration of, a period of negative market interest rates. A local agency may hold these instruments until their maturity dates.
(c)
This section shall remain in effect only until January 1, 2031, and as of that date is repealed.

Legislative History

Amended (as amended by Stats. 2020, Ch. 235, Sec. 4) by Stats. 2025, Ch. 323, Sec. 3. (SB 595) Effective January 1, 2026. Repealed as of January 1, 2031, by its own provisions. See later operative version, as amended by Sec. 4 of Stats. 2025, Ch. 323.