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Official Opinion 2003-10

Official Opinion 2003-10

October 20, 2003
To: 

Director, Financing and Investment Division
Georgia State Financing and Investment Commission

Re: 

Subsection (a) of O.C.G.A. § 50-17-2 gives agencies, authorities, boards, public corporations, instrumentalities, retirement systems, and other divisions of state government authority to enter into reverse repurchase agreements for certain specified underlying securities.

You have sought my opinion whether O.C.G.A. § 50-17-2 gives the Financing and Investment Division of the Georgia State Financing and Investment Commission (“GSFIC”) the authority to enter into reverse repurchase agreements. Subsection (a) of O.C.G.A. § 50-17-2 reads as follows:

Agencies, authorities, boards, public corporations, instrumentalities, retirement systems, and other divisions of state government authorized to invest in direct obligations of the United States government or in obligations unconditionally guaranteed by agencies of the United States government may do so by selling and purchasing such obligations under agreements to resell or repurchase the obligations at a date certain in the future at a specific price which reflects a premium over the purchase or selling price equivalent to a stated rate of interest. Delivery of the obligations purchased may be made by deposit through book entry in a safekeeping account maintained by the seller of the securities, in the name of the purchasing state entity or its agent, clearly indicating the interest of the purchasing state entity.

O.C.G.A. § 50-17-2(a) (2002) (emphasis added).

GSFIC is an agency and instrumentality of the State of Georgia. Ga. Const. Art. VII, Sec. IV, Para. VII; O.C.G.A. §§ 50-17-20 through -30. GSFIC is authorized to invest in direct obligations of the United States government or in obligations unconditionally guaranteed by agencies of the United States government. O.C.G.A. § 50-17-27(b) (2002).

Therefore, it is my official opinion that O.C.G.A. § 50-17-2(a) authorizes both selling and purchasing with a commitment to repurchase or resell. When GSFIC is selling the underlying security with a commitment to buy it back from the purchaser at a specified price at a designated future date, that transaction is commonly known as a “repurchase agreement.” Conversely, when GSFIC is purchasing the underlying security with a commitment to sell it back to the seller at a specified price at a designated future date, the transaction is commonly known as a “reverse repurchase agreement.” Thus, the statutory authorization for purchasing under agreements to resell is, in effect, an authorization to engage in reverse repurchase agreements, as I have described them. This analysis is consistent with 1979 Op. Att’y Gen. 79-62, which was issued the year before O.C.G.A. § 50-17-2 was first enacted.

Prepared by:

Shirley R. Kinsey

Assistant Attorney General