[Ord. No. 3048 § 4, 3-7-2017]
A. This policy applies to the investment of all operating funds of the
City of St. Robert, Missouri. Longer-term funds, including investment
of employees' retirement funds and proceeds from certain bond
issues, are covered by a separate policy.
B. Pooling Of Funds. Except for cash in certain restricted and special
funds, the City of St. Robert, Missouri, will consolidate cash balances
from all funds to maximize investment earnings. Investment income
will be allocated to the various funds based on their respective participation
and in accordance with generally accepted accounting principles.
C. External Management Of Funds. Investment through external programs,
facilities and professionals operating in a manner consistent with
this policy will constitute compliance.
[Ord. No. 3048 § 4, 3-7-2017]
A. The primary objectives, in priority order, of investment activities
shall be safety, liquidity, and yield:
1.
Safety. Safety of principal is the foremost objective of the
investment program. Investments shall be undertaken in a manner that
seeks to ensure the preservation of capital in the overall portfolio.
The objective will be to mitigate credit risk and interest rate risk.
a.
Credit Risk. The City of St. Robert, Missouri, will minimize
credit risk, the risk of loss due to the failure of the security issuer
or backer, by:
(1) Prequalifying the financial institutions, broker/dealers,
intermediaries and advisors with which the City of St. Robert, Missouri,
will do business.
(2) Diversifying the portfolio so that potential losses
on individual securities will be minimized.
b.
Interest Rate Risk. The City of St. Robert, Missouri, will minimize
the risk that the market value of securities in the portfolio will
fall due to changes in general interest rates, by:
(1) Structuring the investment portfolio so that securities
mature to meet cash requirements for ongoing operations, thereby avoiding
the need to sell securities on the open market prior to maturity.
(2) Investing operating funds primarily in shorter-term
securities.
2.
Liquidity. The investment portfolio shall remain sufficiently
liquid to meet all operating requirements that may be reasonably anticipated.
This is accomplished by structuring the portfolio so that securities
mature concurrent with cash needs to meet anticipated demands (static
liquidity). Furthermore, since all possible cash demands cannot be
anticipated, the portfolio should consist largely of securities with
active secondary or resale markets (dynamic liquidity). A portion
of the portfolio also may be placed in bank deposits or repurchase
agreements that offer same-day liquidity for short-term funds.
3.
Yield. The investment portfolio shall be designed with the objective
of attaining a market rate of return throughout budgetary and economic
cycles, taking into account the investment risk constraints and liquidity
needs. Return on investment is of secondary importance compared to
the safety and liquidity objectives described above. The core of investments
is limited to relatively low-risk securities in anticipation of earning
a fair return relative to the risk being assumed. Securities shall
not be sold prior to maturity with the following exceptions:
a.
A security with declining credit may be sold early to minimize
loss of principal.
b.
A security swap would improve the quality, yield, or target
duration in the portfolio.
c.
Liquidity needs of the portfolio require that the security be
sold.
[Ord. No. 3048 § 4, 3-7-2017]
A. Prudence. All participants in the investment process shall act responsibly
as custodians of the public trust. The standard of prudence to be
applied by the personnel of the Investment Division is the prudent
investor rule, which states, "Investments shall be made with judgment
and care, under circumstances then prevailing, which persons of prudence,
discretion and intelligence exercise in the management of their own
affairs, not for speculation, but for investment, considering the
probable safety of their capital as well as the probable income to
be derived."
B. Ethics And Conflicts Of Interest. Officers and employees involved
in the investment process shall refrain from personal business activity
that could conflict with the proper execution and management of the
investment program, or that could impair their ability to make impartial
decisions. Employees and investment officials shall disclose any material
interests in financial institutions with which they conduct business.
They shall further disclose any personal financial/investment positions
that could be related to the performance of the investment portfolio.
Employees and officers shall refrain from undertaking personal investment
transactions with the same individual with which business is conducted
on behalf of the City of St. Robert, Missouri.
C. Delegation Of Authority. Authority to manage the investment program
is granted to the Mayor as investment officer. Responsibility for
the operation of the investment program is hereby delegated to the
investment officer with approval of the Board of Aldermen, who shall
act in accordance with the established written procedures and internal
controls for the operation of the investment program consistent with
this investment policy. Procedures should include references to safekeeping,
delivery vs. payment, investment accounting, repurchase agreements,
wire transfer agreements, and collateral/depository agreements. No
person may engage in an investment transaction except as provided
under the terms of this policy and the procedures established by the
investment officer. The investment officer shall be responsible for
all transactions undertaken and shall establish a system of controls
to regulate the activities of subordinate officials.
[Ord. No. 3048 § 4, 3-7-2017]
A. Authorized Financial Dealers And Institutions.
1.
A list will be maintained of financial institutions authorized
to provide investment transactions. In addition, a list also will
be maintained of approved security broker/dealers selected by creditworthiness
as determined by the investment officer and approved by the Governing
Body. These may include primary dealers or regional dealers that qualify
under Securities and Exchange Commission (SEC) Rule 15C3-1 (uniform
net capital rule).
2.
All financial institutions and broker/dealers who desire to
become qualified for investment transactions must supply the following
as appropriate:
a.
Audited financial statements.
b.
Proof of National Association of Securities Dealers (NASD) certification.
c.
Proof of State registration.
d.
Completed broker/dealer questionnaire.
e.
Certification of having read and understood and agreeing to
comply with the City of St. Robert, Missouri's investment policy.
3.
An annual review of the financial condition and registration
of qualified financial institutions and broker/dealers will be conducted
by the investment officer.
B. Internal Controls.
1.
The investment officer is responsible for establishing and maintaining
an internal control structure that will be reviewed annually with
the City of St. Robert, Missouri, independent auditor. The internal
control structure shall be designed to ensure that the assets of the
City of St. Robert, Missouri, are protected from loss, theft or misuse
and to provide reasonable assurance that these objectives are met.
The concept of reasonable assurance recognizes that:
a.
The cost of control should not exceed the benefits likely to
be derived; and
b.
The valuation of costs and benefits require estimates and judgments
by management.
2.
The internal controls shall address the following points:
b.
Separation of transaction authority from accounting and recordkeeping.
d.
Avoidance of physical delivery securities.
e.
Clear delegation of authority to subordinate staff members.
f.
Written confirmation of transactions for investment and wire
transfers.
g.
Development of a wire transfer agreement with the lead bank
and third-party custodian.
C. Delivery Vs. Payment. All trades where applicable will be executed
by delivery vs. payment (DVP) to ensure that securities are deposited
in eligible financial institutions prior to the release of funds.
All securities shall be perfected in the name or for the account of
the City of St. Robert, Missouri, and shall be held by a third-party
custodian as evidenced by safekeeping receipts.
[Ord. No. 3048 § 4, 3-7-2017]
A. Investment Types. In accordance with and subject to restrictions
imposed by current statutes, the following list represents the entire
range of investments that the City of St. Robert, Missouri, will consider
and which shall be authorized for the investment of funds by the City
of St. Robert, Missouri.
1.
Governmental And Agency Debt: Those Securities Issued By And/Or
Guaranteed By The Federal Government Or An Agency Or Instrumentality
Of The Federal Government.
a.
United States Treasury Securities. The City of St. Robert, Missouri,
may invest in obligations of the United States government for which
the full faith and credit of the United States are pledged for the
payment of principal and interest.
b.
United States Agency Securities. The City of St. Robert, Missouri, may invest in obligations issued or guaranteed by any agency of the United States Government as described in Section
160.050(B).
2.
Fixed Income Investments Secured By The FDIC Insurance And/Or
Collateral.
a.
Repurchase Agreements. The City of St. Robert, Missouri, may
invest in contractual agreements between the City of St. Robert, Missouri,
and commercial banks or primary government securities dealers. The
purchaser in a repurchase agreement (repo) enters into a contractual
agreement to purchase United States Treasury and government agency
securities while simultaneously agreeing to resell the securities
at predetermined dates and prices.
b.
Collateralized Public Deposits (Certificates Of Deposit). Instruments
issued by financial institutions which state that specified sums have
been deposited for specified periods of time and at specified rates
of interest. The certificates of deposit are required to be backed
by acceptable collateral securities as dictated by State statute.
3.
Other Fixed Income Debt Issued By Commercial Enterprises. It
should be noted that investments in the following instruments require
an additional level of care and prudence when undertaken by the investment
officer. Because these investments are in commercial credits as opposed
to governmental credit, or subject to the added safety of collateral,
the risk of loss of principal is significantly higher for the following
investments than in the four prior categories. Added financial training
and education is recommended for the investment officer wishing to
participate in and/or manage a commercial paper program. Outside professional
management of your commercial paper program is highly recommended.
a.
Bankers' Acceptances. Bills of exchange or time drafts
on and accepted by a commercial bank, otherwise known as bankers'
acceptances. An issuing bank must have received the highest letter
and numeral ranking (i.e., A1/P1) by at least two nationally recognized
statistical rating organizations (NRSROs). Must be issued by domestic
commercial banks. Purchases of bankers' acceptances may not exceed
one hundred eighty (180) days to maturity. No more than five percent
(5%) of the total market value of the portfolio may be invested in
the bankers' acceptances of any one issuer, and no more than
twenty-five percent (25%) of the entire portfolio may be invested
in bankers' acceptances.
b.
Commercial Paper. Commercial paper which has received the highest
letter and numeral ranking (i.e., A1/P1) by at least two nationally
recognized statistical rating organizations (NRSROs). Eligible paper
is further limited to issuing corporations that have a total commercial
paper program size in excess of $250,000,000 and have long-term debt
ratings, if any, of "A" or better from at least one NRSRO. Purchases
of commercial paper may not exceed one hundred eighty (180) days to
maturity. Approved commercial paper programs should provide some diversification
by industry. Additionally, purchases of commercial paper in industry
sectors that may from time to time be subject to undue risk and potential
illiquidity should be avoided. The only asset-backed commercial paper
programs that are eligible for purchase are fully supported programs
that provide adequate diversification by asset type (trade receivables,
credit card receivables, auto loans, etc.). No securities arbitrage
programs or commercial paper issued by structured investment vehicles
(SIVs) shall be considered. No more than five percent (5%) of the
total market value of the portfolio may be invested in the commercial
paper of any one issuer. No more than twenty-five percent (25%) of
the entire investment portfolio may be invested in commercial paper.
Commercial paper issuers must be subject to weekly credit review and
daily news research and analysis, and a monitoring program must be
established to promulgate best practices credit monitoring.
B. Security Selection. The following list represents the entire range
of United States agency securities that the City of St. Robert, Missouri,
will consider and which shall be authorized for the investment of
funds by the City of St. Robert, Missouri. Additionally, the following
definitions and guidelines should be used in purchasing the instruments:
1.
United States Government Agency Coupon And Zero Coupon Securities.
Bullet coupon bonds with no embedded options.
2.
United States Government Agency Discount Notes. Purchased at
a discount with maximum maturities of one (1) year.
3.
United States Government Agency Callable Securities. Restricted
to securities callable at par only with final maturities of five (5)
years or less.
4.
United States Government Agency Step-Up Securities. The coupon
rate is fixed for an initial term. At coupon date, the coupon rate
rises to a new, higher fixed term. Restricted to securities with final
maturities of five (5) years.
C. Investment Restrictions And Prohibited Transactions. To provide for
the safety and liquidity of the City of St. Robert, Missouri's,
funds, the investment portfolio will be subject to the following restrictions:
1.
Borrowing for investment purposes ("leverage") is prohibited.
2.
Instruments known as variable-rate demand notes, floaters, inverse
floaters, leveraged floaters, and equity-linked securities are not
permitted. Investment in any instrument which is commonly considered
a "derivative" instrument (e.g. options, futures, swaps, caps, floors,
and collars) is prohibited.
3.
Contracting to sell securities not yet acquired in order to
purchase other securities for purpose of speculating on developments
or trends in the market is prohibited.
D. Collateralization.
1.
Collateralization will be required on two types of investments:
certificates of deposit and repurchase agreements. The market value
(including accrued interest) of the collateral should be at least
one hundred percent (100%).
2.
For certificates of deposit, the market value of collateral
must be at least one hundred percent (100%) or greater of the amount
of certificates of deposit plus demand deposits with the depository,
less the amount, if any, which is insured by the Federal Deposit Insurance
Corporation, or the National Credit Unions Share Insurance Fund.
3.
All securities which serve as collateral against the deposits
of a depository institution must be safekept at a non-affiliated custodial
facility. Depository institutions pledging collateral against deposits
must, in conjunction with the custodial agent, furnish the necessary
custodial receipts within five (5) business days from the settlement
date.
4.
The City of St. Robert, Missouri, shall have a depository contract
and pledge agreement with each safekeeping bank that will comply with
the Financial Institutions Reform, Recovery, and Enforcement Act of
1989 (FIRREA). This will ensure that the City of St. Robert, Missouri's,
security interest in collateral pledged to secure deposits is enforceable
against the receiver of a failed financial institution.
E. Repurchase Agreements. These securities for which repurchase agreements
will be transacted will be limited to United States Treasury and government
agency securities that are eligible to be delivered via the Federal
Reserve Fed wire book entry system. Securities will be delivered to
the City of St. Robert, Missouri's, designated custodial agent.
Funds and securities will be transformed on a delivery vs. payment
basis.
[Ord. No. 3048 § 4, 3-7-2017]
A. Diversification. The investments shall be diversified to minimize
the risk of loss resulting from over-concentration of assets in specific
maturity, specific issuer, or specific class of securities. Diversification
strategies shall be established and periodically reviewed. Diversification
standards by security type and issuer shall be:
1.
United States treasuries and securities having principal and/or
interest guaranteed by the United States Government: one hundred percent
(100%).
2.
Collateralized time and demand deposits: one hundred percent
(100%).
3.
United States Government agencies, and government-sponsored
enterprises: no more than sixty percent (60%).
4.
Collateralization repurchase agreements: fifty percent (50%).
5.
United States Government agency callable securities: no more
than thirty percent (30%).
B. Maximum Maturities.
1.
To the extent possible, the City of St. Robert, Missouri, shall
attempt to match its investments with anticipated cash flow requirements.
Investments in repurchase agreements shall mature and become payable
not more than ninety (90) days from the date of purchase. All other
investments shall mature and become payable not more than five (5)
years from the date of purchase. The City of St. Robert, Missouri,
shall adopt weighted average maturity limitations that should not
exceed three (3) years and is consistent with the investment objectives.
2.
Because of inherent difficulties in accurately forecasting cash
flow requirements, a portion of the portfolio should be continuously
invested in readily available funds such as in bank deposits or overnight
repurchase agreements to ensure that appropriate liquidity is maintained
to meet ongoing obligations.
[Ord. No. 3048 § 4, 3-7-2017]
A. Methods. The investment officer shall prepare an investment report
at least quarterly, including a management summary that provides an
analysis of the status of the current investment portfolio and transactions
made over the last quarter. This management summary will be prepared
in a manner that will allow the City of St. Robert, Missouri, to ascertain
whether investment activities during the reporting period have conformed
to the investment policy. The report should be provided to the Governing
Body of the City of St. Robert, Missouri. The report will include
the following (if applicable):
1.
Listing of individual securities held at the end of the reporting
period.
2.
Realized and unrealized gains or losses resulting from appreciation
or depreciation by listing the cost and market value of securities
over one-year duration [in accordance with Government Accounting Standards
Board (GASB) 31 requirements]. (Note, this is only required annually.)
3.
Average weighted yield to maturity of portfolio an investments
as compared to applicable benchmarks.
4.
Listing of investment by maturity date.
5.
Percentage of the total portfolio which each type of investment
represents.
B. Performance Standards. The investment portfolio will be managed in
accordance with the parameters specified within this policy. The portfolio
should obtain a market average rate of return during a market/economic
environment of stable interest rates. A series of appropriate benchmarks
may be established against which portfolio performance shall be compared
on a regular basis.
C. Marking To Market. The market value of the portfolio shall be calculated
at least quarterly, and a statement of the market value of the portfolio
shall be issued at least annually to the Governing Body of the City
of St. Robert. This will ensure that review of the investment portfolio,
in terms of value and price volatility, has been performed.
[Ord. No. 3048 § 4, 3-7-2017]
A. Exemption. Any investment currently held that does not meet the guidelines
of this policy shall be exempt from the requirements of this policy.
At maturity or liquidation, such monies shall be reinvested only as
provided by this policy.
B. This policy shall be adopted by resolution of the City of St. Robert,
Missouri, Boverning Body.
C. The policy shall be reviewed annually by the investment officer,
and recommended changes will be presented to the Governing Body for
consideration.