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<br />Internal Revenue Service's Fair Market Rules. <br /> <br />VII. ETHICS AND CONFLICTS OF INTEREST <br /> <br />Investment officers and employees involved in the investment process shall refrain from 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. Employees and investment officers shall <br />disclose in writing to the City Manager any material financial interests in financial institutions that <br />conduct business with the City, and they shall further disclose any large personal <br />financial/investment positions that could be related to the performance of the City's portfolio. <br /> <br />VIII. AUTHORIZED BROKER/DEALERS AND FINANCIAL INSTITUTIONS <br /> <br />The City objective of safety requires that it transact business with financially strong broker/dealers <br />and financial institutions. Therefore, financial broker/dealers and institutions shall be subject to a <br />screening process to eliminate those dealers and institutions that lack economic viability or whose <br />past practices put the safety of public capital at risk. <br /> <br />Purchases of securities shall be limited to authorized broker/dealers and institutions approved by the <br />Investment Committee (Section V). The Investment Officer(s) will maintain this list authorized of <br />dealers and institutions. This list may include "primary" dealers or regional dealers that qualify under <br />Securities and Exchange Commission Rule 15C3-1 (uniform net capital rule). Authorized dealers <br />and institutions shall provide proof of National Association of Security Dealers certification, an <br />annual audited financial statement, and a completed broker/dealer questionnaire. <br /> <br />Each dealer and institution with whom the City transacts business will be provided a copy of this <br />Policy to assure that they are familiar with the goals and objectives of the investment program. The <br />broker/dealer or institution will be required to return a signed copy of the Certification by Business <br />Organization substantially in the form provided as Appendix B. <br /> <br />Banking institutions may be used for City time and demand deposits. These depositories will <br />continuously provide their most recent "Consolidated Report of Condition" (call report). The City <br />may also utilize third-party rating agencies in order to assess the overall financial strength of <br />potential depositories. <br /> <br />City of San Marcos Investment Policy <br /> <br />Page 4 <br />