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Repurchase agreements shall be collateralized to 102% of principal and accrued interest. The counter <br /> party shall be made contractually liable for monitoring and maintaining the collateral and required margins <br /> at all times. Collateral shall be priced daily. The Custodian shall provide the required periodic reports <br /> directly to the City. <br /> Authorized Collateral <br /> Collateral shall be limited to the following: <br /> - Obligations of the US Government, its agencies and instrumentalities to include mortgage-backed <br /> securities which pass the bank test. <br /> - Obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as <br /> to investment quality by a nationally recognized investment rating firm not less than A or its equivalent. <br /> Collateral will always be held by an independent third party with whom the City has a current custodial <br /> agreement. A clearly marked evidence of ownership (report or receipt) must be supplied to the City and <br /> retained. The right of collateral substitution is granted with prior City approval. <br /> XII. SAFEKEEPING <br /> Safekeeping function will be provided by the City's banking services depository or a PFIA approved <br /> Safekeeping service contracted in conjunction to the City's banking services depository agreement. In <br /> order to ensure protection for City owned securities, the City requires delivery versus payment procedures <br /> for all transactions, except pools, money market funds and time deposits, which have no book entry <br /> 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 Maximum % of Portfolio <br /> US Government Treasury Obligations 100% <br /> US Government Agencies and Instrumentalities 80% <br /> Municipal Instruments 40% <br /> Certificates of Deposit 40% <br /> Issued by institution 20% <br /> Repurchase Agreements 25% <br /> Flex repurchase agreements for bond proceeds 100% <br /> Constant dollar investment pools 100% <br /> Ownership of the pool 10% <br /> Commercial Paper 25% <br /> Limit per commercial paper issuer 10% <br /> Money Market Mutual Fund 50% <br /> Ownership of the fund 10% <br /> XIV. INTERNAL CONTROLS <br /> City of San Marcos Investment Policy Page 5 <br />