HomeMy WebLinkAboutReso 2018-090RESOLUTION NO. 2018-090
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CHULA VISTA ACKNOWLEDGING RECEIPT OF COUNCIL
POLICY NO. 220-01, THE CITY OF CHULA VISTA
INVESTMENT POLICY AND GUIDELINES; AMENDING
THE EXISTING POLICY; AND DELEGATING INVESTMENT
ACTIVITY AUTHORITY TO THE DIRECTOR OF
FINANCE/TREASURER
WHEREAS, the City of Chula Vista’s “Investment Policy and Guidelines,” adopted on
May 23, 2017 by Resolution No. 2017-078 (the Policy), is intended to provide direction for the
prudent investment of temporarily idle cash and to maximize the efficiency of the cash
management process; and
WHEREAS, the stated goal of the Policy is to enhance the economic condition of the
City while ensuring the safety of funds invested; and
WHEREAS, the Policy includes a list of specific investment instruments available
pursuant to California Government Code sections 53600, et. seq.; and
WHEREAS, each investment transaction is made in the context of: (i) ensuring the
“safety” of principal; (ii) investing only for that timeframe during which the cash is not needed
for operational purposes (“liquidity”); and (iii) seeking the highest return possible (“yield”),
provided that the first two factors are met; and
WHEREAS, in accordance with Section 18.0 of the Policy, staff has provided the City
Council with a copy of the City’s Investment Policy; and
WHEREAS, staff recommends that the Policy be amended to clarify policy requirements
and update Government Code references; and
WHEREAS, City staff recommends that the Policy be amended to reflect these changes;
as reflected in the attached Exhibit 1; and
WHEREAS, pursuant to California Government Code section 53607, the City Council
may delegate the authority to conduct investment activities of the City to the Finance
Director/Treasurer on an annual basis.
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Resolution No. 2018-090
Page No. 2
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Chula Vista
that:
It acknowledges receipt of council policy 220-01, the City of Chula Vista Investment
Policy and Guidelines (the “Policy”); and
Amends the existing Policy, as reflected in Exhibit 1; and
Delegates the authority to conduct and supervise the investment activities of the City to
the Director of Finance/Treasurer.
[SIGNATURES ON FOLLOWING PAGE]
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Resolution No. 2018-090
Page No. 3
Presented by Approved as to form by
David Bilby, MSBA, CPFO Glen R. Googins
Director of Finance/Treasurer City Attorney
PASSED, APPROVED, and ADOPTED by the City Council of the City of Chula
Vista, California, this 22nd day of May 2018 by the following vote:
AYES: Councilmembers: Aguilar, Diaz, McCann, Padilla, and Salas
NAYS: Councilmembers: None
ABSENT: Councilmembers: None
Mary Salas, Mayor
ATTEST:
Kerry K. Bigelow, MMC, City Clerk
STATE OF CALIFORNIA )
COUNTY OF SAN DIEGO )
CITY OF CHULA VISTA )
I, Kerry K. Bigelow, City Clerk of Chula Vista, California, do hereby certify that the foregoing
Resolution No. 2018-090 was duly passed, approved, and adopted by the City Council at a
regular meeting of the Chula Vista City Council held on the 22nd day of May 2018.
Executed this 22nd day of May 2018.
Kerry K. Bigelow, MMC, City Clerk
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COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: INVESTMENT POLICY AND
GUIDELINES
POLICY
NUMBER EFFECTIVE
DATE
PAGE
220-01 05/2223/20187 1 OF 18
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-XXX
(05/22/2018)
1.0 Purpose:
This “Investment Policy and Guidelines” (the “Investment 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 Vista, 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 indenture 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
Trust and Agency Funds
Any new fund created by the legislative body, unless specifically exempted
This Investment Policy applies to all transactions involving the financial assets and related activity of
the foregoing funds.
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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-XXX
(05/22/2018)
Bond proceeds shall be invested in the investments permitted by the applicable bond documents. If
the bond documents are silent as to the permitted investments, the bond proceeds will be invested in
the securities permitted 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/Treasurer shall be the “prudent
investor standard”. This shall be applied in the context of managing an overall portfolio.
The “prudent investor standard” is applied to local agencies, pursuant 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, acquiring, 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 agency, that a prudent person acting 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 Director of Finance, Treasury 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 responsibility for an individual
security’s credit risk or market price changes, provided deviations from expectations 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 made under the terms and conditions of California
Government Code Section 53600, et seq. Criteria for selecting investments and the absolute order of
priority are:
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COUNCIL POLICY
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220-01 05/2223/20187 3 OF 18
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-XXX
(05/22/2018)
5.1 Safety:
Safety of principal is the foremost objective of the investment program. Investments 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 shall 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 responsibility for the investment program to the Director of
Finance/Treasurer for a period of one year. Subject 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:
In addition to state and local statutes relating to conflicts of interest, all persons involved in the
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220-01 05/2223/20187 4 OF 18
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-XXX
(05/22/2018)
investment process shall refrain from personal business 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 investment 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 guidelines promulgated by California’s Fair
Political Practices Commission (FPPC)].
8.0 Authorized Financial Dealers and Institutions:
For any transactions executed by the City, theThe City’s Director of Finance/Treasurer will maintain
a list of the financial institutions and brokers/dealers authorized to provide investment and depository
services and will perform an annual review of the financial condition and registrations of qualified
bidders and require annual audited financial statements to be on file for each company. 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 belonging to, or in the custody of, a local 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 federally insured industrial loan 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 appropriate federal financial supervisory agency of
its record of meeting the credit needs of California’s communities, 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 from approved brokers/dealers. In order to be approved by the City, the
broker/dealer must meet the following criteria: (i) the 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’s institution must have an office in California; (iii) the dealer
must be experienced in institutional trading practices and familiar with the California Government
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220-01 05/2223/20187 5 OF 18
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-XXX
(05/22/2018)
Code as related to investments appropriate for the City; and (iv) all other applicable criteria, as may
be established in the investment procedures. All brokers/dealers and financial institutions who desire
to become qualified bidders for investment transactions must submit a “Broker/Dealer Application”
and related documents relative to eligibility including a current audited annual financial statement, U4
form for the broker, proof of state registration, 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 & 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 percentage limitation for a particular 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. Eligible bankers’ acceptances shall have the
highest ranking or the highest letter and number rating in a rating category as provided by a
nationally recognized statistical rating organization (NRSRO).
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 variable 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. NCD’s with maturities under one year must be rated in
a rating category of “A-1,” its equivalent, or better by a NRSRO. NCD’s with maturities in
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220-01 05/2223/20187 6 OF 18
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-XXX
(05/22/2018)
excess of one year must be rated in a rating category of “A,” its equivalent or better by a NRSRO.
In compliance with California Code 53601.8, all FDIC insured CD’s, when placed through a
deposit placement service, will be measured for compliance with NCD’s.
C. COMMERCIAL PAPER. A maximum of 25% of the portfolio may be invested in commercial
paper. The maximum maturity is 270 days. Commercial paper of prime quality of the highest
ranking or of the highest letter and number rating as provided for by a NRSRO. The entity that
issues the commercial paper shall meet all of the following conditions 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 rating category of “A-1” or higher, or the
equivalent, by a NRSRO.
D. BONDS ISSUED BY THE CITY OR ANY LOCAL AGENCY WITHIN THE STATE OF
CALIFORNIA. Bonds must have a rating in a rating category of “A,” its equivalent or better
from a NRSRO. There is no limit on the percentage of the portfolio that can be invested in this
category.
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.
F. FEDERAL AGENCIES. Federal agency or United 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 portfolio that can be invested in this category.
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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-XXX
(05/22/2018)
G. REPURCHASE AGREEMENT, maximum term 3 months. Investments in repurchase agreements
may be made, on any investment authorized in this section, when the term of the agreement does
not exceed 3 months. 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.
H. REVERSE-REPURCHASE AGREEMENTS (Requires Council approval for each transaction).
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 agreements 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 counter party by way of a reverse 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 and the final maturity date of the
same security. 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.
e) For purposes of this policy, “significant banking relationship” means any of the
following activities of a bank:
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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-XXX
(05/22/2018)
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 rating category of “A,” its equivalent or better by a
NRSRO.
J. TIME DEPOSITS-CERTIFICATES OF DEPOSIT (non-negotiable certificates of deposit). The
maximum maturity is 3 years. Certificates of deposit are required to be collateralized as specified
under Government Code Section 53630 et seq. The City, at its discretion, may waive the
collateralization requirements for any portion that is covered by Federal Deposit Insurance
Corporation (FDIC) insurance. The City shall have a signed agreement with any depository
accepting City funds per Government Code Section 53649. No deposits shall be made at any time
in certificates of deposit issued by a state or federal credit union if a member of the City Council
or the Chief Financial Officer serves on the board of directors or any committee appointed by the
board of directors of the credit union. In accordance with Government Code Section 53638, any
deposit shall not exceed that total shareholder’s equity of any depository bank, nor shall the
deposit exceed the total net worth of any institution. 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. Obligations must be rated in a rating category
of “A,” its equivalent or better by a NRSRO. There is no limit on the percentage of the portfolio
that can be invested in this category.
L. OBLIGATIONS OF THE OTHER 49 STATES. Including bonds payable solely out of revenues
from a revenue producing property owned, controlled or operated by any of these states, or by a
department, board, agency or authority of the state. Obligations must be rated in a rating category
of “A,” its equivalent or better by a NRSRO. There is no limit on the percentage of the portfolio
that can be invested in this category.
M. MONEY MARKET FUNDS. A maximum of 20% of the portfolio may be invested in money
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220-01 05/2223/20187 9 OF 18
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-XXX
(05/22/2018)
market funds. No more than 10% of the City’s portfolio may be invested in shares of beneficial
interest of any one Money Market fund. Local agencies may invest in “shares of beneficial
interest” issued by diversified management companies which invest only in direct obligations in
U.S. Treasury bills, notes and bonds, and repurchase agreements collateralized with U.S.
Treasuries with a weighted average of 60 days or less. They must have the highest rating from
two 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 man aging
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.
N. SAN DIEGO COUNTY TREASURER’S POOLED MONEY FUND. Also known as the San
Diego County Investment Pool, the pool is a local government money 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.
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 $50 million in this fund. Investments in LAIF are highly liquid and may be converted to
cash within 24 hours.
P. SHARES OF BENEFICIAL INTEREST ISSUED BY A JOINT POWERS AUTHORITY (Local
Government Investment Pools [LGIP]). 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 obligations authorized in subdivisions (a) to (qo) of California
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 registration with the Securities and Exchange
Commission.
• The adviser has not less than five years of experience investing in the securities and
obligations authorized in subdivisions (a) to (qo) Government Code Section 53601,
inclusive.
DocuSign Envelope ID: 1BC870B2-6009-4295-B380-251DB1091343
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: INVESTMENT POLICY AND
GUIDELINES
POLICY
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220-01 05/2223/20187 10 OF 18
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-XXX
(05/22/2018)
• The adviser has assets under management in excess of five hundred million dollars
($500,000,000).
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 shall be issued by an issuer rated in a rating category of “A,” its equivalent or higher
rating for the issuer’s debt as provided by an NRSRO and rated in a rating category of “AA” or its
equivalent or better by an NRSRO. ABS constitutes a mortgage pass-through security,
collateralized mortgage obligation, mortgage-backed or other pay-through bond, equipment lease-
backed certificate, consumer receivable pass-through certificate, or consumer receivable-backed
bond.
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 unsecured unsubordinated obligations issued or
unconditionally guaranteed by the International Bank for Reconstruction and Development,
International Finance Corporation, or Inter-American Development Bank that are eligible for
purchase and sale within the United States. Investments under this subdivision shall be rated in a
rating category of “AA,” its equivalent or better by an NRSRO.
S. Placement Service Deposits. A maximum of 30% of the portfolio may be invested in placement
service deposits. Deposits placed through a deposit placement service shall meet the requirements
under Government Code Section 53601.8. 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.
9.1 Investment Pools:
The City’s Director of Finance/Treasurer or designee shall be required 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 investments of the pool
are not allowed as a direct investment by a local agency.
10.0 Portfolio Adjustments:
DocuSign Envelope ID: 1BC870B2-6009-4295-B380-251DB1091343
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SUBJECT: INVESTMENT POLICY AND
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220-01 05/2223/20187 11 OF 18
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-XXX
(05/22/2018)
Should any investment listed in section 9.0 exceed a percentage-of-portfolio limitation due to an
incident such as fluctuation in portfolio size, the affected 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 California 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 principal and accrued interest,
government securities with a value of 110 % of principal and accrued interest or . California law also
allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having
a value of 150% of the City’s total deposits. Collateral will always be handled as required by the
California Government Code. The Director of Finance/Treasurer, at his or her discretion, may waive
the collateral requirement 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 securities and the value shall be adjusted no less than
quarterly. Since the market value of the underlying securities is subject to daily market fluctuations,
the investments in repurchase agreements shall be in compliance if the value of th e underlying
securities is brought back up to 102% no later than the next business day. Collateral will always be
held by an independent third party. A clearly marked evidence of ownership (safekeeping receipt)
must be supplied to the City and retained. The market value of securities that underlay a repurchase
agreement shall be valued at 102% or greater of the funds borrowed against those securities and the
value shall be adjusted no less than quarterly. Since the market value of the underlying 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 business
day. The Director of Finance/Treasurer, at his or her discretion, may waive the collateral requirement
for deposits that are fully insured up to $250,000 by the Federal Deposit Insurance Corporation.The
right of collateral substitution is granted.
12.0 Safekeeping and Custody:
DocuSign Envelope ID: 1BC870B2-6009-4295-B380-251DB1091343
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CITY OF CHULA VISTA
SUBJECT: INVESTMENT POLICY AND
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220-01 05/2223/20187 12 OF 18
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-XXX
(05/22/2018)
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 the 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 delivery or by third-party 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 investment 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 failure 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 implementing a long-term investment strategy. It is
explicitly recognized herein, however, that in a diversified portfolio, occasional measured losses
are inevitable and must be considered within the context of overall investment return. The City’s
investment portfolio will remain sufficiently liquid to enable the City to meet all operating
requirements which might be reasonably anticipated.
14.0 Maximum Maturities:
To the extent possible, the City will attempt to match its investments with anticipated cash flow
requirements. Unless matched to a specific cash flow, Tthe City will not directly invest in securities
DocuSign Envelope ID: 1BC870B2-6009-4295-B380-251DB1091343
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CITY OF CHULA VISTA
SUBJECT: INVESTMENT POLICY AND
GUIDELINES
POLICY
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220-01 05/2223/20187 13 OF 18
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-XXX
(05/22/2018)
maturing more than five (5) years from the date of purchase, unless, the legislative body has granted
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 misrepresentation 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 and 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 four
designated City staff:
1. Director of Finance/Treasurer
2. Assistant Director of Finance
3. Treasury Manager
4. Finance Manager
16.0 Performance Standards:
The investment portfolio shall be managed to attain a market-average rate of return throughout
budgetary and economic cycles, taking into account the City’s investment risk constraints and cash
flow. Investment return becomes a consideration only after the basic requirements of investment
safety and liquidity have been met. In evaluating the performance of the City’s portfolio in
complying with 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:
DocuSign Envelope ID: 1BC870B2-6009-4295-B380-251DB1091343
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CITY OF CHULA VISTA
SUBJECT: INVESTMENT POLICY AND
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220-01 05/2223/20187 14 OF 18
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-XXX
(05/22/2018)
The Director of Finance/Treasurer shall submit a quarterly investment report to the City Council and
City Manager 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 with 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 monthly investment balances & 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 reviewed at least annually by the Director of Finance/Treasurer to
ensure its consistency with the overall objective of preservation of principal, liquidity, and return, and
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.
DocuSign Envelope ID: 1BC870B2-6009-4295-B380-251DB1091343
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: INVESTMENT POLICY AND
GUIDELINES
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220-01 05/2223/20187 15 OF 18
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-XXX
(05/22/2018)
GLOSSARY
AGENCIES: Federal agency securities.
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.
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.
COMMERCIAL PAPER: Short term unsecured promissory note issued by a corporation to raise
working capital. These negotiable instruments are purchased at a discount to par value or at par value
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 versus payment is delivery of securities with an
DocuSign Envelope ID: 1BC870B2-6009-4295-B380-251DB1091343
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CITY OF CHULA VISTA
SUBJECT: INVESTMENT POLICY AND
GUIDELINES
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220-01 05/2223/20187 16 OF 18
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-XXX
(05/22/2018)
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 Governors in Washington, D.C.; 12 regional banks and about
5,700 commercial banks are members of the system.
LIQUIDITY: A liquid asset is one that can be converted 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 all funds from political
subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment.
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 trading and could presumable be purchased or
sold.
MATURITY: The date upon which the principal or stated value of an investment becomes due and
payable.
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS (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.
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SUBJECT: INVESTMENT POLICY AND
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220-01 05/2223/20187 17 OF 18
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-XXX
(05/22/2018)
NEGOTIABLE CERTIFICATES OF DEPOSIT: Unsecured obligations of the financial
institution, bank or savings and loan, bought at par value with the promise to pay face value plus
accrued interest at maturity. They are high-grade negotiable instruments, paying a higher interest 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 fiduciary, such as a trustee, may invest money only in a list of securities selected by the custody
state-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 discretion and intelligence who is seeking a reasonable
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”.
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SUBJECT: INVESTMENT POLICY AND
GUIDELINES
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220-01 05/2223/20187 18 OF 18
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-XXX
(05/22/2018)
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 having 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 securities 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, expressed as a percentage. (a) Income
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 income yield minus any premium above par or plus
any discount from par in purchase price, with the adjustment spread over the period from the date of
purchase to the date of maturity of the bond.
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