COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: INVESTMENT POLICY AND
GUIDELINES
POLICY
NUMBER EFFECTIVE
DATE
PAGE
220-01 02/13/2024 1 OF 20
ADOPTED BY: Resolution No. 17578 DATED: 07/26/94
AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 (2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 (3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 (10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 (05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 (03/01/2022); 2023-024 (03/07/2023);
1.0 Purpose:
This “Investment Policy and Guidelines” (the “Inve stment Policy”) Policy is intended to provide guidelines for the prudent investment of the City of Chula Vista’s (the “City”) cash balances, and outline policies to assist in maximizing the efficiency of the City’s cash management system, while meeting the daily cash flow demands of the City.
2.0 Policy:
The investment practices and policies of the City of Chula Vista are based upon state law and prudent money management.
3.0 Scope:
This Investment Policy applies to all financial assets of the City of Chula Vi sta, as indicated in 3.1 below. These funds are accounted for in the City’s Comprehensive Annual Financial Report.
3.1 Funds:
The Director of Finance/Treasurer is responsible for investing the unexpended cash in the City Treasury for all funds, except for the employee’s retirement funds, which are administered separately, and those funds which are managed separately by trustees appointed under inde nture agreements. The Director of Finance/Treasurer will strive to maintain the level of investment of this cash as close as possible to 100%. These funds are described in the City’s annual financial report and include:
General Fund
Special Revenue Funds
Capital Project Funds
Enterprise Funds
Fiduciary Funds
Any new fund created by the legislative body, unless specifically exempted
This Investment Policy applies to all transactions involving the financial assets a nd related activity of the fore
going funds.
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: INVESTMENT POLICY AND
GUIDELINES
POLICY
NUMBER EFFECTIVE
DATE
PAGE
220-01 02/13/2024 2 OF 20
ADOPTED BY: Resolution No. 17578 DATED: 07/26/94
AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 (2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 (3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 (10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 (05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 (03/01/2022); 2023-024 (03/07/2023);
Bond proceeds shall be invested in the investments permitted by the applicable bond documents.
If the bond documents are silent as to the perm itted investments, the bond proceeds will be invested in the securities permi tted by this Policy. Notwithstanding the other provisions of this Policy, the percentage limitations listed elsewhere in this Policy do not apply to bond proceeds.
4.0 Prudence:
The standard of prudence to be used by the Director of Finance/Tr easurer shall be the “prudent investor standard”. This shall be applied in the cont ext of managing an overall portfolio.
The “prudent investor standard” is applied to local agencies, pu rsuant to California Government Code Section 53600.3 which provides, in pertinent part:
“ … all governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiri ng, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agen cy, that a prudent person ac ting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency…”
4.1 Personal Responsibility:
The Director of Finance/Treasurer, Assistant Di rector of Finance, Treas ury Manager and Finance Manager as investment officers acting in accordance with written procedures and the Investment Policy and exercising due diligence, shall be relieved of personal responsibil ity for an individual security’s credit risk or market price cha nges, provided deviations from expect ations are reported to the City Council in a timely fashion and appropriate action is taken to control adverse developments.
5.0 Objective:
Consistent with this aim, investments are ma de under the terms and conditions of California
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: INVESTMENT POLICY AND
GUIDELINES
POLICY
NUMBER EFFECTIVE
DATE
PAGE
220-01 02/13/2024 3 OF 20
ADOPTED BY: Resolution No. 17578 DATED: 07/26/94
AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 (2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 (3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 (10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 (05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 (03/01/2022); 2023-024 (03/07/2023);
Government Code Section 53600, et seq. Criteria for selecting investments and the absolute order of priority are:
5.1 Safety:
Safety of principal is the foremost objective of the investment program. Inve stments of the City of Chula Vista shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, diversification is required in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio.
5.2 Liquidity:
The City of Chula Vista’s investment portfolio will remain sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated and to maintain compliance with any indenture agreement, as applicable. Liquidity is essential to the safety of principal.
5.3 Return on Investments:
The City of Chula Vista’s investment portfolio sh all be designed with the objective of attaining a market-average rate of return throughout budgetary and economic cycles (market interest rates), within the City’s Investment Policy’s risk parameters and the City’s cash flow needs. See also Section 16.0.
6.0 Delegation of Authority:
The City Council delegates res ponsibility for the investment program to the Director of Finance/Treasurer for a period of one year. S ubject to review, the City Council may renew the delegation of authority each year. The Director of Finance/Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls and written procedures to regulate the activities of subordinate officials. The responsibility for the day-to-day investment of City funds will be delegated to the Assistant Director of Finance or their designee. The Director of Finance/Treasurer may delegate day-to-day investment decision making and execution authority to an investment advisor.
The advisor shall follow the Investment Policy and such other written instructions as are provided.
7.0 Ethics and Conflicts of Interest:
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: INVESTMENT POLICY AND
GUIDELINES
POLICY
NUMBER EFFECTIVE
DATE
PAGE
220-01 02/13/2024 4 OF 20
ADOPTED BY: Resolution No. 17578 DATED: 07/26/94
AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 (2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 (3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 (10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 (05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 (03/01/2022); 2023-024 (03/07/2023);
In addition to state and local stat utes relating to conflicts of inte rest, all persons involved in the investment process shall refrain from personal busine ss activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Employees and investment officers, including invest ment advisors, are required to file annual disclosure statements as required for “public officials who manage public investments” [as defined and required by the Political Reform Act and related regulations, including Government Code Sections 81000, et seq., and the rules, regulations and guide lines promulgated by California’s Fair Political Practices Commission (FPPC)].
8.0 Authorized Financial Dealers and Institutions:
For any transactions executed by the City, the City’s Director of Finance/Treasurer will maintain a list of the financial institutions and brokers/dealers authorized to provide i nvestment and depository services and will perform an annual review of their financial condition. The City will utilize Moody’s Securities or other such services to determine financially sound institutions with which to do business.
The City shall annually send a copy of the current Investment Policy to all financial institutions and brokers/dealers approved to do business with the City.
As far as possible, all money bel onging to, or in the custody of, a lo cal agency, including money paid to the City’s Director of Finance/Treasurer or other official to pay the principal, interest, or penalties of bonds, shall be deposited for safekeeping in state or national banks, savings associations, federal associations, credit unions, or fede rally insured industrial lo an companies in this state selected by the City’s Director of Finance/Treasurer; or may be invested in the investments set forth in Section 9.0. To be eligible to receive local agency money, a bank, savings association, federal association, or federally insured industrial loan company shall have received an overall rating of not less than “satisfactory” in its most recent evaluation by the a ppropriate federal financial superv isory agency of its record of meeting the credit needs of California’s comm unities, including low- and moderate-income neighborhoods.
To provide for the optimum yield in the investment of City funds, the City’s investment procedures shall encourage competitive bidding on transactions. Any transactions not executed directly with the issuer shall be made with appr oved brokers/dealers. In order to be approved by the City, the broker/dealer must meet the follow ing criteria: (i) the broker/dealer must be a “primary” dealer or regional broker/dealer that qualifies under Securities and Exchange Commission Rule 15C3-1 (Uniform Net Capital Rule); (ii) the
broker/dealer must be experienced in institutional tradin g practices and
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: INVESTMENT POLICY AND
GUIDELINES
POLICY
NUMBER EFFECTIVE
DATE
PAGE
220-01 02/13/2024 5 OF 20
ADOPTED BY: Resolution No. 17578 DATED: 07/26/94
AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 (2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 (3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 (10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 (05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 (03/01/2022); 2023-024 (03/07/2023);
familiar with the California Gove rnment Code as related to investments appropriate for the City; and (iii) all other applicable criteria, as may be established in the investment procedures. All brokers/dealers and financial institutions who desire to become qua lified bidders for invest ment transactions must submit documents relative to eligibility including U4 form for the broker, proof of Financial Industry Regulatory Authority (FINRA) certification and a certification of having read and understood the City’s Investment Policy and agreeing to comply with the Investment Policy. The City’s Director of Finance/Treasurer shall determine if they are adequately capitalized (i.e. minimum capital requirements of $10,000,000 and five years of operation).
If the City has an investment advisor, the investment advisor may use its own list of authorized issuers and broker/dealers to conduct transactions on behalf of the City.
9.0 Authorized and Suitable Investments:
The City is authorized by California Government Code Section 53600, et. seq., to invest in specific types of securities. Where this section specifies a percen tage limitation for a particul ar security type, that percentage is applicable only on the date of purchase. Credit criteria listed in this section refers to the credit rating at the time the security is purchased. If an investment’s credit rating falls below the minimum rating required at the time of purchase, the Director of Finance/Treasurer will perform a timely review and decide whether to sell or hold the investment.
Investments not specifically listed below are deemed inappropriate and prohibited:
A. BANKERS’ ACCEPTANCES. A maximum of 40% of the portfolio may be invested in bankers’ acceptances. The maximum maturity is 180 days. No more than 30% of the agency’s moneys may be invested in the bankers’ acceptances of any one commercial bank. See Government Code Section 53601(g).
B. NEGOTIABLE CERTIFICATES OF DEPOSIT. A maximum of 30% of the portfolio may be invested in negotiable certificates of deposit (NCD’s). The maximum maturity of a NCD issue shall be 5 years. These are issued by commercial banks and thrift institutions against funds deposited for specified periods of time and earn specified or variab le rates of interest. Negotiable certificates of deposit (NCD’s) differ from other certificates of deposit by their liquidity. NCD’s are traded actively in secondary markets. See Government Code Section 53601(i).
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: INVESTMENT POLICY AND
GUIDELINES
POLICY
NUMBER EFFECTIVE
DATE
PAGE
220-01 02/13/2024 6 OF 20
ADOPTED BY: Resolution No. 17578 DATED: 07/26/94
AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 (2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 (3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 (10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 (05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 (03/01/2022); 2023-024 (03/07/2023);
C. COMMERCIAL PAPER. A maximum of 40% of th e portfolio may be invested in commercial paper. No more than 10% of the outstanding commercial pape r of any single issuer may be purchased. The maximum maturity is 270 days. Commercial paper of prime quality of the highest ranking or of the highest letter and number ratin g as provided for by a NRSRO. The entity that issues the commercial paper shall meet all of the following conditi ons in either paragraph (1) or paragraph (2):
1) The entity meets the following criteria:
a. Is organized and operating in the United States as a general corporation. b. Has total assets in excess of five hundred million dollars ($500,000,000). c. Has debt other than commercial paper, if any, that is rated in a rating category of “A” or higher, or the equivalent, by a NRSRO.
2) The entity meets the following criteria:
a. Is organized within the United States as a special purpose corporation, trust, or limited liability company.
b. Has program wide credit enhancements including, but not limited to, over collateralization, letters of credit, or surety bond.
c. Has commercial paper that is rated in a ra ting category of “A-1” or higher, or the equivalent, by a NRSRO.
See Government Code Section 53601(h).
D. BONDS ISSUED BY THE CI TY OR ANY LOCAL AGENCY WITHIN THE STATE OF CALIFORNIA. There is no limit on the percentage of the portfolio that can be invested in this category. See Government Code Section 53601(a) and 53601(e).
E. OBLIGATIONS OF THE UNITED STATES TREASURY. United States Treasury Notes, bonds, bills or certificates of indebtedness, or those for which the faith and credit of the United States are pledged for the payment of principal and interest. There is no limit on the percentage of the portfolio that can be invested in this category. See Government Code Section 53601(b).
F. FEDERAL AGENCIES. Federal agency or Un ited States government-sponsored enterprise obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government-sponsored enterprises.
There is no limit on the percentage of the portfol io that can be invested in this category. See Government Code Section 53601(f).
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: INVESTMENT POLICY AND
GUIDELINES
POLICY
NUMBER EFFECTIVE
DATE
PAGE
220-01 02/13/2024 7 OF 20
ADOPTED BY: Resolution No. 17578 DATED: 07/26/94
AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 (2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 (3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 (10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 (05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 (03/01/2022); 2023-024 (03/07/2023);
G. REPURCHASE AGREEMENT, maximum term 1 year . Investments in re purchase agreements may be made, on any investment au thorized in this section, when the term of the agreement does not exceed 1 year. A Master Repurchase Agreement must be signed with the bank or broker/dealer who is selling the securities to the City. There is no limit on the percentage of the portfolio that can be invested in this category. See Government Code Section 53601(j).
H. REVERSE-REPURCHASE AGREEMENTS (Requires Council approval for each transaction). Per Government Code Section 53601(j), reverse repurchase agreements or securities lending agreements may be utilized only when all of the following conditions are met:
a) The security to be sold on reverse repurchase agreement or securities lending agreement has been owned and fully paid for by the local agency for a minimum of 30 days prior to sale.
b) The total of all reverse repurchase agreemen ts and securities lending agreements on investments owned by the local agency does not exceed 20% of the base value of the portfolio.
c) The agreement does not exceed a term of 92 days, unless the agreement includes a written codicil guaranteeing a minimum earning or spread for the entire period between the sale of a security using a reverse repurchase agreement or securities lending agreement and the final maturity date of the same security. d) Funds obtained or funds within the pool of an equivalent amount to that obtained from selling a security to a c ounter party by way of a reve rse repurchase agreement or securities lending agreement, shall not be used to purchase another security with a maturity longer than 92 days from the initial settlement date of the reverse repurchase agreement or securities lending agreement, unless the reverse repurchase agreement or securities lending agreement includes a written codicil guaranteeing a minimum earning or spread for the entire period between the sale of a security using a reverse repurchase agreement or securities lending agreement an d the final maturity date of the same security.
e) Investments in reverse repurchase agreements, securities lending agreements, or similar investments in which the local agency sells securities prior to purchase with a simultaneous agreement to repurchase the security shall only be made with primary dealers of the Federal Reserve Bank of New York or with a nationally or state-chartered bank that has or has had a significant banking relationship with a local agency.
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: INVESTMENT POLICY AND
GUIDELINES
POLICY
NUMBER EFFECTIVE
DATE
PAGE
220-01 02/13/2024 8 OF 20
ADOPTED BY: Resolution No. 17578 DATED: 07/26/94
AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 (2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 (3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 (10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 (05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 (03/01/2022); 2023-024 (03/07/2023);
f) For purposes of this policy, “significant banking relationship” means any of the following activities of a bank:
i. Involvement in the creation, sale, purchase , or retirement of a local agency’s bonds, warrants, notes, or other evidence of indebtedness. ii. Financing of a local agency’s activities.
iii. Acceptance of a local agency’s securities or funds as deposits.
I. MEDIUM-TERM CORPORATE NOTES. A maximum of 30% of the portfolio may be invested in medium-term corporate notes, with a maximum remaining maturity of five years or less. Notes eligible for investment shall be rated in a rati ng category of “A,” its e quivalent or better by a NRSRO. See Government Code Section 53601(k). No more th an 10% of the City’s total investment assets may be invested in the commercial paper and the medium-term notes of any single issuer.
J. NON-NEGOTIABLE CERTIFICATES OF DEPOSIT. The maximum matur ity is 5 years.
Certificates of deposit are required to be collateralized as specified under Government Code Section 53630 et seq. The City, at its discretion, may wa ive the collateralization requirements for any portion that is covered by Federal Deposit Insuran ce Corporation (FDIC) insurance. There is no limit on the percentage of the portfolio that can be invested in this category.
K. OBLIGATIONS OF THE STATE OF CALIFORNIA. Including bonds payable solely out of revenues from a revenue producing property owned, controlled or operated by the state, or by a department, board, agency or authority of the state. The maximum maturity is 5 years. There is no limit on the percentage of the portfolio that can be invested in this category. See Government Code Section 53601(d).
L. OBLIGATIONS OF THE OTHER 49 STATES. Includi ng bonds payable solely out of revenues from a revenue producing property ow ned, controlled or operated by any of these states, or by a department, board, agency or authority of the state. The maximum maturity is 5 years. There is no limit on the percentage of the portfolio that can be invested in this category. See Government Code Section 53601(d).
M. MONEY MARKET FUNDS. A maximum of 20% of the portfolio may be invested in money market funds. No more than 10% of the agency’s funds may be i nvested in shares of beneficial interest of an
y one mutual fund. Local agencies may invest in “shares of beneficial interest” issued
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: INVESTMENT POLICY AND
GUIDELINES
POLICY
NUMBER EFFECTIVE
DATE
PAGE
220-01 02/13/2024 9 OF 20
ADOPTED BY: Resolution No. 17578 DATED: 07/26/94
AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 (2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 (3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 (10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 (05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 (03/01/2022); 2023-024 (03/07/2023);
by diversified management companies which invest in the securities and obligations as authorized by California Government Code Section 53601, subdivisions (a) to (k), inclusive, and subdivisions (m) to (q), inclusive. They must have the hi ghest rating from tw o NRSRO’s or have retained an investment advisor registered or exempt from registration with the Securities and Exchange Commission with not less than five years of experience managing money market mutual funds and with assets under management in excess of $500,000,000. The purchase price of the shares may not include commission. See Government Code Section 53601(l).
N. SAN DIEGO COUNTY TREASURER’ S POOLED MONEY FUND. Also known as the San Diego County Investment Pool, th e pool is a local government mone y fund created to invest the assets of the County of San Diego and other public agencies located within the County. The three primary objectives of the County Pool are to safeguard principal; to meet liquidity needs of Pool participants; and to achieve an investment return on the funds within the guidelines of prudent risk management. Investment in the County Pool is highly liquid and the City may invest with no portfolio percentage limit. See Government Code Section 27133.
O. THE LOCAL AGENCY INVESTMENT FUND (LAIF). LAIF is a special fund of the California State Treasury through which any local government may pool investments. The City may invest up to $75 million in this fund. Investments in LAIF are highly liquid and may be converted to cash within 24 hours. See Government Code Section 16429.1.
P. SHARES OF BENEFICIAL INTEREST ISSUED BY A JOINT POWERS AUTHORITY (Local Government Investment Pools [LGIP]). Per Gove rnment Code Section 53601(p), there is no limit on the percentage of the portfolio that can be invested in this category. LGIP’s organized pursuant to Government Code Section 6509.7 that invests in the securities and oblig ations authorized in subdivisions (a) to (q) of Califo rnia Government Code Section 53601, inclusive. Each share will represent an equal proportional interest in the underlying pool of securities owned by the joint powers authority. To be eligible under this section the joint powers authority issuing the shares will have retained an investment adviser that meets all of the following criteria:
• The adviser is registered or exempt from registra tion with the Securi ties and Exchange Commission.
• The adviser has not less than five years of experience investing in the securities and obligations authorized in subdivisions (a) to (q) Government Code Section 53601, inclusive. • The adviser has assets under management in excess of five hund red million dollars ($500,000,000).
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: INVESTMENT POLICY AND
GUIDELINES
POLICY
NUMBER EFFECTIVE
DATE
PAGE
220-01 02/13/2024 10 OF 20
ADOPTED BY: Resolution No. 17578 DATED: 07/26/94
AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 (2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 (3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 (10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 (05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 (03/01/2022); 2023-024 (03/07/2023);
Q. ASSET BACKED SECURITIES (ABS). A maximum of 20% of the portfolio may be invested in ABS. The maximum maturity is five years. Securities eligible for investment under this subdivision not issued or guaranteed by issuer s identified in subdivision E a nd F, shall be ra ted in a rating category of “AA” or its equivalent or better by an NRSRO. ABS constitutes a mortgage pass- through security, collateralized mortgage obligat ion, mortgage-backed or other pay-through bond, equipment lease-backed certificate, consumer receivable pa ss-through certificate, or consumer receivable-backed bond. See Government Code Section 53601(o).
R. SUPRANATIONALS. A maximum of 30% of the portfolio may be invested in supranationals. The maximum maturity is five years. Securities eligible for purchase under this subdivision shall be United States dollar denominated senior uns ecured unsubordinated obligations issued or unconditionally guaranteed by the Internationa l Bank for Reconstruction and Development, International Finance Corporati on, or Inter-American Developmen t Bank that are eligible for purchase and sale within the United States. Inves tments under this subdivisi on shall be rated in a rating category of “AA,” its equi valent or better by an NRSRO. See Government Code Section 53601(q).
S. PLACEMENT SERVICE DEPOSITS. A maximum of 30% of the portfolio may be invested in placement service deposits. The maximum maturity is 5 years. Deposits placed through a deposit placement service shall meet the requireme nts under Government Code Section 53601.8 and 53635.8. The full amount of the principal and the interest that may be accrued during the maximum term of each certificate of deposit shall at all times be insured by federal deposit insurance.
T. COLLATERALIZED BANK DEPOSITS. Notes, bonds, or other obliga tions that are at all times secured by a valid first priority se curity interest in securities of the types listed by California Government Code Section 53651 as eligible securi ties for the purpose of securing local agency deposits having a market value at least equal to that required by California Government Code Section 53652 for the purpose of securing local agency deposits. The securities serving as collateral shall be placed by delivery or book entry into the custody of a trust company or the trust department of a bank that is not affiliated w ith the issuer of the secured oblig ation. The maximum maturity is 5 years. There is no limit on the percentage of the portfolio that can be invested in this category.
See Government Code Section 53601(n) and 53630 et seq.
9.1 Investment Pools:
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220-01 02/13/2024 11 OF 20
ADOPTED BY: Resolution No. 17578 DATED: 07/26/94
AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 (2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 (3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 (10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 (05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 (03/01/2022); 2023-024 (03/07/2023);
The City’s Director of Finance/ Treasurer or designee shall be re quired to investigate all local government investment pools and money market mutual funds prior to investing and performing at least a quarterly review thereafter while the City is invested in the pool or the money market fund. LAIF is authorized under provisions in Section 16429.1 of the California Government Code as an allowable investment for local agencies even though some of the individual invest ments of the pool are not allowed as a direct investment by a local agency.
10.0 Portfolio Adjustments:
Should any investment listed in se ction 9.0 exceed a percentage-of-portfolio limitation due to an incident such as fluctuation in portfolio size, the a ffected securities may be held to maturity to avoid losses. When no loss is indicated, the Director of Finance/Treasurer shall consider reconstructing the portfolio basing his or her decision on the expected length of time the portfolio will be unbalanced. If this occurs, the City Council shall be notified.
11.0 Collateralization:
Under provisions of the Californi a Government Code, California banks, and savings and loan associations are required to secure the City’s deposits by pledging letters of credit issued by the Federal Home Loan Bank of San Francisco with a value of 105% of the principa l and accrued interest, government securities with a value of 110% of principal and accrued interest or first trust deed mortgage notes having a value of 150% of the City’s total deposits. Collateral will be handled as required by the California Government Code. The Director of Finance/Treasurer, at his or her discretion, may waive the collateral require ment for deposits that are fully insured up to $250,000 by the Federal Deposit Insurance Corporation.
The market value of securities that underlay a repurchase agreement shall be valued at 102% or greater of the funds borrowed against those s ecurities and the value shall be ad justed no less than quarterly.
Since the market value of the un derlying securities is subject to daily market fluctuations, the investments in repurchase agreements shall be in compliance if the value of the underlying securities is brought back up to 102% no later than the next busin ess day. Collateral will always be held by an independent third party. A clearly marked evid ence of ownership (safekeeping receipt) must be supplied to the City and retained. The right of collateral substitution is granted.
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: INVESTMENT POLICY AND
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220-01 02/13/2024 12 OF 20
ADOPTED BY: Resolution No. 17578 DATED: 07/26/94
AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 (2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 (3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 (10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 (05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 (03/01/2022); 2023-024 (03/07/2023);
12.0 Safekeeping and Custody:
All City investments shall identify the City of Chula Vista as the registered owner, and all interest and principal payments and withdrawals shall indicate the City of Chula Vista as the payee. All securities shall be safe kept with the City itself or with a qualified financial institution, contracted by the City as a third party. All agreements and statements will be subject to review annually by external auditors in conjunction with their audit. In th e event that the City has a financial institution hold the securities, a separate custodial agreement shall be required. All deliverable securities shall be acquired by the safekeeping institution on a “Delivery-Vs-Payment” (DVP) basis. For Repurchase Agreements, the purchase may be delivered by book entry, physical de livery or by third-part y custodial agreement consistent with the Government Code. The transfer of securities to the counter party bank’s customer book entry account may be used for book entry delivery.
13.0 Diversification:
The City’s investment portfolio will be diversified to avoid incurring unreasonable and avoidable risks associated with concentrating investments in specific security types, maturity segment, or in individual financial institutions. No more than 5% of the inve stment portfolio shall be in securities of any one issuer except for U.S. Treasuries, U.S. Government Agency issues, and investment pools such as LAIF, the San Diego County Pool, money market funds, and local government investment pools (LGIP’s).
A. Credit risk, defined as the risk of loss due to failur e of the insurer of a security, shall be mitigated by investing in those securities with an “A” or above rating and approved in the Investment Policy and by diversifying the investment portfolio so that the failure of any one issuer would not unduly harm the City’s cash flow.
B. Market risk, defined as the risk of market value fluctuations due to overall changes in the general level of interest rates, shall be mitigated by im plementing a long-term inve stment strategy. It is explicitly recognized herein, however, that in a diversified portfolio, occasional measured losses are inevitable and must be considered within the c ontext of overall investment return. The City’s investment portfolio will remain sufficiently liqui d to enable the City to meet all operating requirements which might be reasonably anticipated.
14.0 Maximum Maturities:
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SUBJECT: INVESTMENT POLICY AND
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220-01 02/13/2024 13 OF 20
ADOPTED BY: Resolution No. 17578 DATED: 07/26/94
AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 (2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 (3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 (10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 (05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 (03/01/2022); 2023-024 (03/07/2023);
To the extent possible, the City will attempt to match its investments with anticipated cash flow requirements. The City will not directly invest in securities maturing more than five (5) years from the date of purchase, unless, the legislative body has gr anted express authority to make that investment either specifically, or as a part of an investment program approved by the City Council at least three (3) months prior to the investment.
15.0 Internal Control:
The Director of Finance/Treasurer shall establish a system of internal controls designed to prevent loss of public funds due to fraud, employee error, or mis representation by third parties. No investment personnel, including an investment advisor, may engage in an investment transaction except as provided for under the terms of this Investment Policy a nd the procedure established by the Director of Finance/Treasurer.
The external auditors shall annually review the investments with respect to the Investment Policy. This review will provide internal control by assuring compliance with policies and procedures for the investments that are selected for testing. Additionally, account reconciliation and verification of general ledger balances relating to the purchasing or maturing of investments and allocation of investments to fund balances shall be performed by the Finance Department and approved by the Director of Finance/Treasurer. To provide further protection of City funds, written procedures prohibit the wiring of any City funds without the authorization of at least two of the following six designated City staff:
1. Director of Finance/Treasurer
2. Assistant Director of Finance
3. Treasury Manager
4. Finance Manager
5. Revenue Manager
6. Budget and Analysis Manager
16.0 Performance Standards:
The investment portfolio shall be managed to attain a market-ave rage rate of return throughout budgetary and economic cycles, taking into account th e City’s investment risk constraints and cash flow. Investment return becomes a consideration only after the basic requirements of investment safety and liquidit
y have been met. In evaluatin g the performance of the Cit y’s portfolio in complying with
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220-01 02/13/2024 14 OF 20
ADOPTED BY: Resolution No. 17578 DATED: 07/26/94
AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 (2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 (3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 (10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 (05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 (03/01/2022); 2023-024 (03/07/2023);
this policy, the City shall establish an appropriate performance benchmark and compare the return of its portfolio to the return of the benchmark.
17.0 Reporting:
The Director of Finance/Treasurer shall submit a quarterly investme nt report to the City Council and City Manager within 45 days following the end of each quarter. This report will include the following elements:
Type of investment
Institutional issuer
Purchase date
Date of maturity
Amount of deposit or cost of the investment
Face value of the investment
Current market value of securities and source of valuation Rate of interest
Interest earnings
Statement relating the report to its compliance w ith the Statement of Investment Policy or the manner in which the portfolio is not in compliance
Statement on availability of funds to meet the next six month’s obligations Monthly and year-to-date budget amounts for interest income Percentage of portfolio by investment type
Days to maturity for all investments
Comparative report on interest yields
Monthly transactions
Compare portfolio total return to market benchmark total return
In addition, a commentary on capital markets and economic conditions may be included with the report.
18.0 Investment Policy Review and Adoption:
This Investment Policy shall be re viewed at least annually by the Di rector of Finance/Treasurer to ensure its consistenc
y with the overall objective of preservation of principal, liquidity, and return, and
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SUBJECT: INVESTMENT POLICY AND
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220-01 02/13/2024 15 OF 20
ADOPTED BY: Resolution No. 17578 DATED: 07/26/94
AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 (2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 (3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 (10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 (05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 (03/01/2022); 2023-024 (03/07/2023);
its relevance to current law and financial and economic trends. Each fiscal year, the Finance Director shall provide a copy of the City’s current Investment Policy and Guidelines to the City Council. By virtue of a resolution of the City Council of the City of Chula Vista, the Council shall acknowledge the receipt of the Policy for the respective fiscal year.
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SUBJECT: INVESTMENT POLICY AND
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220-01 02/13/2024 16 OF 20
ADOPTED BY: Resolution No. 17578 DATED: 07/26/94
AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 (2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 (3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 (10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 (05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 (03/01/2022); 2023-024 (03/07/2023);
GLOSSARY
AGENCIES: Federal agency securities.
ASSET BACKED SECURITIES: Securities supported by pools of in stallment loans or leases or by pools of revolving lines of credit. ASKED: The price at which securities are offered. (The price at which a firm will sell a security to an investor.)
BANKERS’ ACCEPTANCE (BA): A draft or bill or exchange accepted by a bank or trust company.
The accepting institution guarantees payment of the bill, as well as the issuer. The drafts are drawn on a bank by an exporter or importer to obtain funds to pay for specific merchandise. An acceptance is a high-grade negotiable instrument.
BASIS POINT: One one-hundredth of a percent (i.e., 0.01 %).
BID: The price offered by a buyer of securities. (When you are selling securities, you ask for a bid.)
BROKER: A broker brings buyers and sellers together for a commission. He does not take a position.
CALLABLE: A callable security gives the issuer the option to call it from the investor prior to its maturity. The main cause of a call is a decline in intere st rates. If interest rates decline, the issuer will likely call its current securities and reissue them at a lower rate of interest.
CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a certificate. Large-denomination CD’s are typically negotiable.
COLLATERAL: Securities, evidence of deposit or other property, which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMO) : Classes of bonds that redistribute the cash flows of mortgage securities (and whole loans) to create securities that have different levels of prepayment risk, as compared to the underlying mortgage securities.
COMMERCIAL PAPER: Short term unsecured promissory not e issued by a corporation to raise workin
g capital. These negotiable instruments are purchased at a discount to par value or at par value
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220-01 02/13/2024 17 OF 20
ADOPTED BY: Resolution No. 17578 DATED: 07/26/94
AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 (2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 (3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 (10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 (05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 (03/01/2022); 2023-024 (03/07/2023);
with interest bearing. Commercial paper is issued by corporations such as General Motors Acceptance Corporation, IBM, Bank of America, etc.
DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account.
DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus payment and delivery versus receipt. Delivery ve rsus payment is delivery of securities with an exchange of money for the securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the securities.
DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns.
FEDERAL AGENCIES: Agencies of the Federal government set up to supply credit to various classes of institutions (e.g., S&L’s, small business firms, students, farmers, farm cooperatives, and exporters).
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A Federal agency that insures bank deposits, currently up to $250,000 per deposit.
FEDERAL RESERVE SYSTEM : The central bank of the United States created by Congress and consisting of a seven-member Board of Governor s in Washington, D.C.; 12 re gional banks and about 5,700 commercial banks are members of the system.
FIDUCIARY: A person or organization that acts on behalf of another person(s) or organization that puts their clients’ interest ahead of their own as they ar e bound both legally and et hically to act in the other’s best interests.
LIQUIDITY: A liquid asset is one that can be conve rted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes.
LOCAL AGENCY INVESTMENT FUND (LAIF) : The aggregate of al l funds from political subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment.
COUNCIL POLICY
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SUBJECT: INVESTMENT POLICY AND
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220-01 02/13/2024 18 OF 20
ADOPTED BY: Resolution No. 17578 DATED: 07/26/94
AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 (2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 (3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 (10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 (05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 (03/01/2022); 2023-024 (03/07/2023);
LOCAL GOVERNMENT INVESTMENT POOL (LGIP) : An investment pool offered by a state or local agency to public entities for the investment of public funds.
MARKET VALUE: The price at which a security is trad ing and could presumable be purchased or sold.
MATURITY: The date upon which the principal or stated value of an inves tment becomes due and payable. The investment’s term or remaining maturity is measured from the settlement date to final maturity.
MORTGAGE PASS-THROUGH SECURITIES : A securitized participation in the interest and principal cash flows from a specified pool of mortga ges. Principal and interest payments made on the mortgages are passed through to the holder of the security.
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANI ZATIONS (NRSROs) :
Credit rating agencies that issue credit ratings that the Securities and Exchange Commission (SEC) permits other financial firms to use for certain regulatory purposes.
NEGOTIABLE CERTIFICATES OF DEPOSIT: Unsecured obligations of the financial institution, bank or savings and loan, bought at par value with th e promise to pay face value plus accrued interest at maturity. They are high-grade negotiable instrume nts, paying a higher inte rest rate than regular certificates of deposit.
OFFER: The price asked by a seller of securities. (When you are buying securities, you ask for an offer).
PORTFOLIO: Collection of securities held by an investor.
PRIMARY DEALER: A group of government securities dealers who submit daily reports of market activity and positions and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC)-registered securities broker/dealers, banks and a few unregulated firms.
PRUDENT INVESTOR STANDARD: An investment standard. In some states, the law requires that a fiduciar
y, such as a trustee, may invest money only in a list of securities selected by the custody state-
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: INVESTMENT POLICY AND
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220-01 02/13/2024 19 OF 20
ADOPTED BY: Resolution No. 17578 DATED: 07/26/94
AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 (2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 (3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 (10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 (05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 (03/01/2022); 2023-024 (03/07/2023);
the so-called “legal list”. In other states, the trustee may invest in a security if it is one that would be bought by a prudent person of discre tion and intelligence who is s eeking a reasonab le income and preservation of capital.
RATE OF RETURN : The yield obtainable on a security based on its purchase price or its current market price.
SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank’s vaults for protection.
SECONDARY MARKET: A market made for the purchase and sale of outstanding issues following the initial distribution.
SECURITIES & EXCHANGE COMMISSION (SEC) : Agency created by Congress to protect investors in securities transactions by administering securities legislation.
SEC RULE 15C3-1: See “Uniform Net Capital Rule”.
TREASURY BILLS: A non-interest bearing discount security issued by the U.S. Treasury to finance the national debt. Most bills are issued to mature in three months, six months, or one year.
TREASURY BOND: Long-term U.S. Treasury securities ha ving initial maturities of more than 10 years.
TREASURY NOTES: Intermediate-term coupon bearing U.S. Treasury having initial maturities of one year to ten years.
UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member firms as well as nonmember broker/dealers in secu rities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio. Indebtedness covers all money owed to a firm, including margin loans and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash.
YIELD: The rate of annual income return on an investment, expr essed as a percenta ge. (a) Income
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SUBJECT: INVESTMENT POLICY AND
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220-01 02/13/2024 20 OF 20
ADOPTED BY: Resolution No. 17578 DATED: 07/26/94
AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 (2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 (3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 (10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 (05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 (03/01/2022); 2023-024 (03/07/2023);
Yield is obtained by dividing the current dollar income by the current market price for the security. (b) Net Yield or Yield to Maturity is the current inco me yield minus any premiu m above par or plus any discount from par in purchase price, with the adju stment spread over the period from the date of purchase to the date of maturity of the bond.