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protection for City owned securities, the City requires delivery versus payment procedures for all <br />transactions, except pools „money market funds and time deposits, which have no book entry delivery. <br />All security transactions, including collateral for repurchase agreements shall be conducted on a delivery <br />versus payment (DVP) basis to the City's depository or a City approved third party custodian. Securities <br />will be held by a third party custodian approved by the Investment Officer(s) and evidenced by proof of <br />ownership (original safekeeping receipts). <br />XIII. DIVERSIFICATION <br />Diversification of the overall portfolio will be maintained in accordance with the following diversification <br />limits. <br />Security Type <br />US Government Treasury Obligations <br />US Government Agencies and Instrumentalities <br />Municipal Instruments <br />Certificates of Deposit <br />Issued by institution <br />Repurchase Agreements <br />Flex repurchase agreements for bond proceeds <br />Constant dollar investment pools <br />Ownership of the pool <br />Commercial Paper <br />Limit per commercial paper issuer <br />Money Market Mutual Fund <br />Ownership of the fund <br />XIV. INTERNAL CONTROLS <br />Maximum % of Portfolio <br />100% <br />80% <br />20% <br />35% <br />10% <br />25% <br />100% <br />100% <br />10% <br />25% <br />10% <br />50% <br />10% <br />The Investment Officer(s) shall establish a system of written internal controls that will be reviewed <br />annually with the City or independent auditor of the City along with quarterly investment reports. The <br />controls will be designed to prevent loss of public funds due to fraud, employee error, misrepresentation <br />by third parties, unanticipated market changes, or imprudent actions by employees, contracted <br />investment managers or financial counterparties of the City. <br />Loss of Rating <br />The Investment Officer or investment adviser shall monitor, on no less than a weekly basis, the credit <br />rating on all authorized investments in the portfolio based upon independent information from a nationally <br />recognized rating agency. If any security falls below the minimum rating required by Policy, the <br />Investment Officer or adviser shall notify the City Manager of the loss of rating, conditions affecting the <br />rating and possible loss of principal with liquidation options available, within two weeks after the loss of <br />the required rating. <br />Monitoring FDIC Status <br />The Investment Officer or Investment Adviser shall monitor, on no less than a weekly basis, the status <br />and ownership of all banks issuing brokered CDs owned by the City based upon information from the <br />FDIC. If any bank has been acquired or merged with another bank in which brokered CDs are owned, <br />the Investment Officer or Adviser shall immediately liquidate any brokered CD which places the City <br />above the FDIC insurance level. <br />City of San Marcos Investment Policy Page 6 <br />