SACRAMENTO GROUNDWATER AUTHORITY POLICIES AND PROCEDURES MANUAL

Transcription

1 SACRAMENTO GROUNDWATER AUTHORITY POLICIES AND PROCEDURES MANUAL Plicy Type : Fiscal Management Plicy Title : Investment Plicy Plicy Number : Date Adpted : February 13, 2003 Date Amended : Octber 11, 2012 SACRAMENTO GROUNDWATER AUTHORITY INVESTMENT POLICY 1.0 Purpse The purpse f this Investment Plicy ( Plicy ) is t establish cash management and investment guidelines fr the Treasurer, wh is respnsible fr investing and safeguarding the Sacrament Grundwater Authrity s ( SGA ) surplus funds. Each transactin and the entire prtfli must cmply with Califrnia Gvernment Cde (the Cde ) Sectins thrugh (Investment f Surplus), Sectins thrugh (Depsit f Funds), and this Plicy. 2.0 Scpe This Plicy applies t all surplus financial funds f SGA that may be invested because they are nt needed fr immediate payment f expenses. These funds are accunted fr in SGA s audited annual financial reprt and include: 1. Special Revenue Funds 2. Trust and Agency Funds 3. Any new fund created by the legislative bdy, unless specifically exempted. Except fr cash in certain restricted and special funds, SGA will cnslidate cash balances frm all funds t maximize investment earnings. Investment incme will be allcated t the varius funds based n their respective participatin and in accrdance with generally accepted accunting principles. In additin, the csts f managing the investment prtfli, including but nt limited t the csts f investment management, custdy f assets, managing and accunting fr banking, and versight cntrls, will be charged t investment earnings based upn actual hurs f labr devted t managing each f the funds investment plicy.dc Page 1 f 10

2 3.0 General Objectives In accrdance with the Cde, the primary bjectives, in pririty rder, f investment activities will be safety, liquidity, and yield: 1. Safety. Safety f principal is the fremst bjective f the investment prgram. Investments will be undertaken in a manner that seeks t ensure the preservatin f principal in the verall prtfli. Each investment transactin will be entered int with cnsideratin fr the quality f the issuer and f the underlying security and cllateral. 2. Liquidity. The investment prtfli will remain sufficiently liquid t meet all perating requirements that may be reasnably anticipated. Liquidity will be accmplished by structuring the prtfli s that securities mature cncurrent with cash needs t meet anticipated demands whenever feasible. A prtin r the entire prtfli als may be placed in mney market mutual funds r lcal gvernment investment pls which ffer same-day liquidity fr shrtterm funds. 3. Yield. The investment prtfli will be designed with the bjective f attaining a market rate f return thrughut budgetary and ecnmic cycles, taking int accunt the investment risk cnstraints and liquidity needs. 4.0 Standards f Care 1. Prudent Investr Standard. In accrdance with Sectin , the SGA Bard and Treasurer are trustees and fiduciaries subject t the "Prudent Investr Standard. The Prudent Investr Standard requires the Bard and Treasurer, when investing, reinvesting, purchasing, acquiring, exchanging, selling, r managing the SGA s funds, t act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but nt limited t, the general ecnmic cnditins and the anticipated needs f the SGA, that a prudent persn acting in a like capacity and familiarity with thse matters wuld use in the cnduct f funds f a like character and with like aims, t safeguard the principal and maintain the liquidity needs f the SGA. This standard will be applied in all investment decisins, including thse related t hedging interest rate risks assciated with debt financing. This standard will be applied in all investment decisins. 2. Ethics and Cnflicts f Interest. The Treasurer and any ther fficers and emplyees invlved in the investment prcess will refrain frm persnal business activity that culd cnflict with the prper executin and management f the investment prgram, r that culd impair their ability t make impartial investment decisins. Such fficers and emplyees will disclse t the Bard f Directrs any material interests in financial institutins with which they cnduct business. They will further disclse any investment plicy.dc Page 2 f 10

3 persnal financial/investment psitins that culd be related t the perfrmance f the investment prtfli. Affected fficers and emplyees will refrain frm undertaking persnal investment transactins with the same individual with whm business is cnducted n behalf f SGA. All such fficers and emplyees are prhibited frm accepting hnraria, gifts frm financial dealers and financial institutins. 3. Delegatin f Authrity. Under Sectin f the Cde, authrity t manage SGA s investment prtfli is expressly delegated t the Bard f Directrs, which may delegate its authrity t the Treasurer. In accrdance with Sectin 53607, the Bard hereby delegates its respnsibility fr the peratin f the investment prgram t the Treasurer, wh will act in accrdance with established written prcedures and internal cntrls fr the peratin f the investment prgram cnsistent with this Plicy. 5.0 Safekeeping and Custdy 1. Authrized Financial Dealers and Institutins. The Treasurer will maintain a list f financial institutins authrized t prvide investment services and a list f apprved security brker/dealers selected by creditwrthiness (e.g., a minimum capital requirement f $10,000,000 and at least five years f peratin). These may include primary dealers r reginal dealers that qualify under Securities and Exchange Cmmissin (SEC) Rule 15C3-1 (unifrm net capital rule). SGA will nly depsit funds in a depsitry that is established and perated in accrdance with applicable federal and state laws and regulatins. All financial institutins and brker/dealers wh desire t becme qualified t cnduct investment transactins fr SGA must supply the fllwing t the Treasurer as requested: Audited financial statements Prf f Natinal Assciatin f Securities Dealers (NASD) certificatin Trading reslutin Prf f state registratin Cmpleted brker/dealer questinnaire Certificatin signed by an authrized fficer that he r she has read and understd and that the institutin agrees t cmply with this Plicy. The Treasurer will cnduct an annual review f the financial cnditin and registratin f qualified financial institutins and brker/dealers. A current audited financial statement is required t be n file fr each financial institutin and brker/dealer in r thrugh which SGA invests. N brker, dealer, r securities firm will be eligible t prvide services t SGA within investment plicy.dc Page 3 f 10

4 mnths f making a campaign cntributin t any SGA Bard member, if the cntributin exceeds the limits cntained in Rule G-37 f the Municipal Securities Rulemaking Bard. 2. Delivery vs. Payment. Where applicable, all trades will be executed by delivery vs. payment (DVP) t ensure that securities are depsited in an eligible financial institutin prir t the release f funds. Securities will be held by a third-party custdian as evidenced by safekeeping receipts. 6.0 Suitable and Authrized Investments The Treasurer is authrized t make investments in accrdance with the general categries and limitatins established by Sectins 53601, , , 53635, , and f the Cde. Authrized investments als will include investment int the Lcal Agency Fund ( LAIF ) in accrdance with Sectin f the Cde. See Appendix A, which summarizes the categries f permitted investments. 1. U.S. Gvernment, Agencies, State and Lcal Gvernment Spnsred Enterprises a. United States Treasury ntes, bnds, bills, r certificates f indebtedness, r thse fr which the faith and credit f the United States are pledged fr the payment f principal and interest. b. Registered state warrants r treasury ntes r bnds f Califrnia, including bnds payable slely ut f the revenues frm a revenueprducing prperty wned, cntrlled, r perated by the state r by a department, bard, agency, r authrity f the state. c. Registered treasury ntes r bnds f any f the ther 49 states in additin t Califrnia, including bnds payable slely ut f the revenues frm a revenue-prducing prperty wned, cntrlled, r perated by a state r by a department, bard, agency, r authrity f any f the ther 49 states, in additin t Califrnia. d. Bnds, ntes, warrants, r ther evidences f indebtedness f a lcal agency within Califrnia, including bnds payable slely ut f the revenues frm a revenue-prducing prperty wned, cntrlled, r perated by the lcal agency, r by a department, bard, agency r authrity f the lcal agency; prvided, hwever, that any bnd r certificate f participatin investments in member agencies require prir Bard apprval. e. Federal agency r United States gvernment-spnsred enterprise bligatins, participatins, r ther instruments, including thse issued by r fully guaranteed as t principal and interest by federal agencies r United States gvernment-spnsred enterprises. f. These investments have a maximum maturity f five years investment plicy.dc Page 4 f 10

5 2. Bankers Acceptance Ntes a. Investments in prime bankers acceptances may nt exceed 40 percent f the prtfli in effect n the date f purchase f any such investment. b. N mre than 30 percent f this categry f investments may be invested in any ne cmmercial bank s acceptances. c. The maximum maturity shall be limited t 180 days. 3. Cmmercial Paper a. Only cmmercial paper f prime quality f the highest ranking r f the highest letter and numerical rating, at the time f purchase, as prvided by Mdy s Investrs Services r Standard & Pr s Crpratin may be purchased. b. Investments in cmmercial paper shall nt exceed 25 percent f the prtfli in effect n the date f purchase f any such investment. c. Each investment shall nt exceed 270 days maturity. d. N mre than 10 percent f the utstanding cmmercial paper f an issuing crpratin may be purchased. e. The issuer is either: (1) rganized and perating in the United States as a general crpratin and has ttal assets in excess f $500 millin. If the entity has debt ther than cmmercial paper, it is rated A, A-2 r higher by a natinally recgnized rating agency; r (2) is rganized within the United States as a special purpse crpratin, trust r limited liability cmpany. Has prgram-wide credit enhancements including, but nt limited t, vercllateralizatin, letters f credit r surety bnd. Has cmmercial paper that is rated A-1, A+ r higher by a natinally recgnized rating agency. 4. Negtiable Certificates f Depsit a. A negtiable certificate f depsit must be issued by a natinally r state-chartered bank, a state r federal savings and lan assciatin r savings bank, a state r federal credit unin, r by a federally-licensed r state-licensed branch f a freign bank and be rated A r better by at least ne natinally recgnized rating agency. b. Investments in negtiable certificates f depsit may nt exceed 30 percent f the ttal prtfli in effect n the date f purchase f any such investment. c. The investment will nt exceed the ttal f the net wrth f any depsitry savings and lan assciatin, except that investments up t a ttal f $500,000 may be made t a savings and lan investment plicy.dc Page 5 f 10

6 assciatin withut regard t the net wrth f that depsitry, if such investments are insured r secured as required by law. d. The investment shall nt exceed the sharehlders equity f any depsitry bank. Fr the purpse f this cnstraint, sharehlders equity shall be deemed t include capital ntes and debentures. e. The SGA Bard and the Treasurer r ther fficial f the SGA having legal custdy f the mneys are prhibited frm investing SGA funds, r funds in the custdy f the SGA, in negtiable certificates f depsit issued by a state r federal credit unin if a member f the SGA s Bard, r a persn with investment decisin making authrity at the SGA als serves n the bard f directrs, r any cmmittee appinted by the bard f directrs, r the credit cmmittee r the supervisry cmmittee f the state r federal credit unin issuing the negtiable certificates f depsit. f. The maximum maturity is limited t five years. 5. Medium-term ntes a. Investment in medium-term ntes are limited t crpratins rganized and perating within the United States r by depsitry institutins licensed by the United States r any state and perating within the United States. b. Purchases f medium-term ntes will be limited t a maximum maturity f five years. c. Purchases f medium-term ntes may nt exceed 30 percent f the prtfli. d. Ntes eligible fr investment shall be rated in a rating categry f at least A r its equivalent r better by a natinally recgnized rating service. 6. Shares f Beneficial Interest (Mney Market Funds) a. Investment in shares f beneficial interest issued by eligible diversified management cmpanies that invest in securities that cmply with Sectin and f the Cde r are mney market funds registered with the Securities and Exchange Cmmissin under the Investment Cmpany Act f b. These eligible cmpanies must meet the fllwing criteria: i. Attain the highest ranking f the highest letter and numerical rating prvided by nt less than tw natinally recgnized rating agencies ii. Retain an investment adviser registered r exempt frm registratin with the Securities and Exchange Cmmissin with nt less than five years experience managing mney market funds with assets under management in excess f $500 millin investment plicy.dc Page 6 f 10

7 c. The purchase price f the shares will nt include any cmmissin that the cmpanies may charge and will nt exceed 20 percent f the prtfli. d. N mre than 10 percent f prtfli may be invested in ne mutual fund. 7. Cllateralized Bank Depsits a. Maximum maturity is limited t five years. b. Cllateralizatin must be cnsistent with the requirements f Sectins thrugh f the Cde. 8. Time Depsits a. Fr purpses f this Plicy, cllateralized time depsits will be cnsidered investments. b. The financial institutin used must have been in existence fr at least five years. c. The financial institutin must have received an verall rating f nt less than satisfactry in its mst recent evaluatin by the apprpriate federal financial supervisry agency f its recrd f meeting the credit needs f Califrnia s cmmunities. d. Eligibility fr depsits will be limited t thse financial institutins that have a branch in the State f Califrnia and maintain a rating equivalent t Thmpsn BankWatch Service f B r better. e. Credit requirements may be waived fr a $100,000 time depsit that is federally insured. f. The depsit will nt exceed the sharehlders equity f any depsitry bank. Fr the purpse f this cnstraint, sharehlders equity will be deemed t include capital ntes and debentures. g. The depsit will nt exceed the ttal f the net wrth f any depsitry savings and lan assciatin, except that depsits nt exceeding a ttal f $500,000 may be made t a savings and lan assciatin withut regard t the net wrth f that depsitry, if such depsits are insured r secured as required by law. h. Depsits must be insured up t the FDIC s current limit. Fr uninsured depsits, the financial institutin will maintain in the cllateral pl securities having a market value f at least 10 percent in excess f the ttal amunt depsited. SGA, at its discretin, may waive the cllateralizatin requirements fr any prtin that is cvered by federal depsit insurance. SGA shall have a signed agreement with any depsitry accepting SGA funds. Prmissry ntes secured by real estate mrtgages r deeds f trust are nt acceptable as cllateral. i. When ther factrs are equal, apprpriate cnsideratin will be given t a financial institutin that either individually r as a member investment plicy.dc Page 7 f 10

8 f a syndicate bids n r makes a substantial investment in the SGA s securities, cntributes service t the SGA, and ffers significant assistance t the SGA, s as t prvide fr distributin f ttal depsits amng eligible financial institutins. j. Purchased time depsits will be limited t a maximum maturity f five years. 9. Lcal Agency Investment Fund 7.0 Reprting a. Depsits fr the purpse f investment in the Lcal Agency Investment Fund f the State f Califrnia may be made up t the maximum amunt permitted by State Treasury plicy. 1. Required Peridic Reprts. The Treasurer shall prepare an investment reprt at least quarterly, including a management summary that prvides an analysis f the status f the current investment prtfli and transactins made ver the last quarter. This management summary will be prepared in a manner which will allw the members f the SGA Bard f Directrs and Executive Directr t ascertain whether investment activities during the reprting perid have cnfrmed t this Plicy. The reprt shall be prvided t the Bard f Directrs and the Executive Directr. If applicable, the investment reprt will include the fllwing: Listing f individual securities held at the end f the reprting perid by investment categry. Average life and final maturity f all investments listed Cupn, discunt, r earnings rate Par value, amrtized bk value and market value Percentage f prtfli represented by the investment categry 2. LAIF Reprting. If the surplus funds are slely invested in the Lcal Agency Investment Fund (LAIF), the mnthly LAIF statement shall be sufficient fr reprting purpses. 8.0 Plicy Cnsideratins 1. Amendments. This Plicy will be reviewed by the Treasurer n an annual basis. Any changes t this Plicy recmmended by the Treasurer must be apprved by the Bard f Directrs, after review and cmment by the individual(s) charged with maintaining internal cntrls. 2. Administratin. The Treasurer may at any time further restrict the securities apprved fr investment as deemed prudent. Frm time t time, the established prtfli limitatins may be exceeded due t irregular cash investment plicy.dc Page 8 f 10

9 flws r in certain ecnmic cnditins. In such cases, the Treasurer will infrm the Bard f Directrs and Executive Directr and take actin cnsistent with the prudent investr standard t ensure that n categry f investments exceeds the statutry limitatins prvided in the Cde. 3. Perfrmance Review. The Treasurer will cnduct an annual appraisal f SGA s investment prtfli t evaluate its effectiveness and cnfrmance with this Plicy. T the extent necessary r apprpriate, the Treasurer will make recmmendatins t the Bard f Directrs cncerning the imprvement and/r restructuring f the prtfli. 4. Existing Investments. Any investment held by SGA at the time this Plicy is first adpted r revised t cnfrm t changes in law r this Plicy will nt be sld because f a failure t cnfrm t this Plicy, unless the Treasurer deems sale f the investment t be prudent r required by law. 5. Cnflict With Statute. In the event that any prvisin f this Plicy cnflicts with the Cde r any ther applicable state r federal statute, the prvisins f any such statute will gvern investment plicy.dc Page 9 f 10

10 APPENDIX A PERMITTED INVESTMENT INSTRUMENTS PER GOVERNMENT CODE (AS OF JANUARY 1, 2012) 1 Investment Type Maximum Maturity Maximum Specified % f Prtfli Minimum Quality Requirement Lcal Agency Bnds 5 years 100 Nne U.S. Treasury Obligatins 5 years 100 Nne State Obligatins CA And Others 5 years 100 Nne CA Lcal Agency Obligatins 5 years 100 Nne U.S Agency Obligatins 5 years 100 Nne Bankers Acceptances 180 days 40% Nne Cmmercial Paper Select Agencies 270 days 25% f the agency s mney Cmmercial Paper Other Agencies 270 days 40% f the agency s mney A-1 if the issuer has issued lng-term debt it must be rated A withut regard t mdifiers A-1 if the issuer has issued lng-term debt it must be rated A withut regard t mdifiers Negtiable Certificates f Depsit and 5 years 30% Nne CD Placement Service Medium-Term Ntes 5 years 30% A Rating Mutual Funds And Mney Market N/A 20% Multiple Mutual Funds Cllateralized Bank Depsits 5 years 100 Nne Bank/Time Depsits 5 years 100 Nne Cunty Pled Investment Funds N/A 100 Nne Jint Pwers Authrity Pl N/A 100 Multiple Lcal Agency Investment Fund (LAIF) N/A 100 Nne 1 See Article 6 f the Plicy fr a mre cmplete descriptin f each permitted investment and related limitatins investment plicy.dc Page 10 f 10