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VII. INVESTMENT PROCEDURES <br />The Investment Officer(s) shall establish reasonable commercial written procedures for the operation of <br />the investment program consistent with this Policy. The procedures should include to safekeeping, <br />repurchase agreements, wire transfer agreements, banking service contracts and collateral /depository <br />agreements. No person may engage in an investment transaction except as provided under the terms of <br />this Policy and the procedures established by the Investment Officer(s). <br />All investment purchases will be executed using the competitive bidding process and settled on a delivery <br />versus payment (DVP) basis. A minimum of three competitive offers on the purchase /sale of every <br />security will be obtained. All investment purchases will be executed in compliance with the Internal <br />Revenue Service's Fair Market Rules. <br />VIII. ETHICS AND CONFLICTS OF INTEREST <br />Investment officers and employees involved in the investment process shall refrain from any personal <br />business activity that could conflict with proper execution of the investment program, or which could <br />impair their ability to make impartial investment decisions. Investment Officers shall disclose in writing to <br />the City Manager any material financial interests in financial institutions that conduct business with the <br />City, and they shall further disclose any large personal financial /investment positions that could be related <br />to the performance of the City's portfolio. Investment officers involved in the investment process with <br />personal business relationships or relatives within the second degree of affinity or consanguinity seeking <br />to sell investment /securities to the City shall disclose the relationship and file a statement with the Texas <br />Ethics Commission and the City Council. Personal business relationships are defined in the Act. <br />IX. AUTHORIZED BROKER/DEALERS AND FINANCIAL INSTITUTIONS <br />The objective of safety requires that the City transact business with financially strong broker /dealers and <br />financial institutions. Therefore, financial broker /dealers and institutions shall be subject to a screening <br />process to eliminate those dealers and institutions that lack economic viability or whose past practices put <br />the safety of public capital at risk. <br />Purchases of securities shall be limited to authorized broker /dealers and institutions approved by the <br />Investment Committee (Section VI). The Investment Officer(s) will maintain this list of authorized dealers <br />and institutions. This list may include "primary" dealers or regional dealers that qualify under Securities <br />and Exchange Commission Rule 15C3 -1 (uniform net capital rule). Authorized dealers and institutions <br />shall provide proof of Financial Institutions Regulatory Authority (FINRA) certification, an annual audited <br />financial statement, and a completed broker /dealer questionnaire. <br />Each bank, pool, dealer and institution with which the City transacts business will be provided a copy of <br />this Policy to assure that they are familiar with the goals and objectives of the investment program. The <br />entity will be required to return a signed copy of the Certification by Business Organization substantially in <br />the form provided as Appendix B. <br />Additional financial institutions may be used for time or demand deposits designed for investment <br />purposes (i.e. not as the primary depository of the City). These institutions may be approved by the <br />Investment Officer(s) on an ongoing basis to accommodate the need for timely action. Action by the <br />Investment Committee is not required before use of such institutions. Each financial institution will <br />provide policy certification and execute a depository agreement. The City may utilize third -party rating <br />agencies in order to assess the overall financial strength of potential depositories. <br />The depository, or its brokerage subsidiary, from which the City obtains banking services including safe- <br />keeping, will not be used for brokerage services in order to perfect ownership on delivery versus payment <br />settlement. The bank may be used for time deposits but all time deposits will be bid competitively. <br />Page 3 <br />City of San Marcos Investment Policy <br />