Fort Walton Beach Ordinance — 1894--Investment Policy-surplus funds — reading text

City of Fort Walton Beach, FL INVESTMENT POLICY the security in question must be competitively bid when feasible and appropriate. Except as otherwise required by law, the bid deemed to best meet the investment objectives specified in Section III Investment Objective must be selected. However, if obtaining bids /offers is not feasible and appropriate, securities may be purchased utilizing the comparison to current market price method on an exception basis. Acceptable current market price providers include, but are not limited to: A. Telerate Information System B. Bloomberg Information Systems C. Wall Street Journal or a comparable nationally recognized financial publication providing daily market pricing D. Daily market pricing provided by the City' s custodian or the correspondent institution The Finance Director or the Investment Advisor(s) shall utilize the competitive bid process to select the securities to be purchased or sold. Selection by comparison to a current market price, as indicated above, shall only be utilized when, in judgment of the Finance Director or the Investment Advisor( s), competitive bidding would inhibit the selection process. Examples of when this method may be used include: A. Time constraints due to unusual circumstances preclude the competitive bidding process B. No active market exists for the issue being traded due to the age or depth of the issue C. A security is unique to a single dealer, for example, a private placement D. The transaction involves new issues or issues in the " when issued" market Overnight sweep investments or repurchase agreements will not be bid, but may be placed with the City' s depository bank relating to the demand account for which the sweep investments or repurchase agreement was purchased. VI. RISK AND DIVERSIFICATION The City recognizes the strategic importance of asset allocation and style diversification in the investment performance of the funds over long periods of time. Asset allocation and diversification is the fundamental strategy adopted by the City to ensure risk versus reward in regards to standard deviation. Investments should be diversified to the extent practicable to control the risk of loss resulting from overconcentration of assets. in a specific maturity, issuer, instrument,' asset class, geography, investment style, dealer, or bank through which financial instruments are bought and sold. Investment risk can result from issuer defaults, market price changes, and changes in credit ratings, reinvestment of principal or interest, duration, or various technical complications leading to illiquidity. The City' s investment portfolios will be structured to always maintain prudent levels of diversification. In relation to risk versus reward, the volatility of the portfolio will account for general market conditions, as well as the City' s risk tolerance. Ordinance 1875, Adopted January 8, 2013 Page 6 of 25  City of Fort Walton Beach, FL INVESTMENT POLICY VII. MASTER REPURCHASE AGREEMENT All approved investment institutions and brokers /dealers transacting repurchase agreements are required to execute and perform as state in the City' s Master Repurchase Agreement. All repurchase agreement transactions shall adhere to the requirements of the Master Repurchase Agreement. VIII. DERIVATIVES AND REVERSE REPURCHASE AGREEMENTS Investment in any derivative products or the use of reverse repurchase agreements is prohibited. A " derivative" is defined as a financial instrument the value of which depends on, or is derived from, the value of one or more underlying assets or indices or asset values. IX. PERFORMANCE MEASUREMENTS To assist in the evaluation of the portfolios' performance, the City will use performance benchmarks for short- term and long -term portfolios appropriate for the construction of the portfolios. The use of benchmarks will allow the City to measure its returns against other investors in the same markets. Custom benchmarks may be provided by the Investment Advisor(s) when the construction of the portfolio( s) cannot fit into the style box of established benchmarks. All portfolios will be monitored by an established benchmark mutually agreed upon by the City and the Investment Advisor(s). Examples of benchmarks include, but are not limited to: Barclays Capital U.S. Aggregate Bond Index, Merrill Lynch 1 - 3 Year Treasury Index, and Citigroup One -Month Treasury Bill Index and/ or other appropriate indices. Each portfolio' s overall performance will be reviewed on a quarterly basis, with emphasis placed on results achieved over a rolling time period of three to five years for long -term portfolios. Objectives will be reviewed annually and adjusted as necessary after consultation with the Finance Director, Investment Advisor(s), and Portfolio Manager( s). Each portfolio should at least equal the performance of the benchmark. The volatility of investment returns, as measured by the standard deviation of quarterly returns, should be comparable to that of the benchmark. X. REPORTING The Finance Director and/ or Investment Advisor(s) shall provide the City Manager with a " Quarterly Investment Report", which shall also be provided to the City Council. The Investment Report shall include the following information, at minimum, as of the report date: A. Securities in the portfolios by class or type B. Book value C. Market value ( presented consistent with accounting guidelines in GASB Statement 31) D. Income earned E. Recent market conditions, economic developments and anticipated investment conditions F. Investment strategies employed in the most recent quarter G. Quarterly total rate of return compared to the appropriate benchmark H. Year -to -date total rate of return compared to the appropriate benchmark Ordinance 1875, Adopted January 8, 2013 Page 7 o1` 25  City of Fort Walton Beach, FL INVESTMENT POLICY I. Any areas of concern warranting possible revisions to current or planned investment strategies Investment reports shall be available to the public. XI. DELEGATION OF AUTHORITY In accordance with the City' s Charter, the responsibility for providing oversight and direction in regard to the management of the investment program resides with the City Manager. Responsibility for the administration of the investment program is hereby delegated to the Finance Director. The Finance Director shall be responsible for monitoring internal controls and regulating the activities of the City' s staff involved with the investment program. The City may employ Investment Advisor( s) to assist in managing the City' s portfolios. Such Investment Advisor( s) must be registered under the Investment Advisor' s Act of 1940. XII. STANDARDS OF PRUDENCE The standard of prudence to be used by Charter Officers or employees of the City of Fort Walton Beach shall be the " Prudent Person Rule" standard and shall be applied in the context of managing the overall investment program. Charter Officers and employees acting in accordance with written procedures and this Investment Policy and exercising due diligence shall be relieved of personal responsibility for an individual security' s credit risk or market price changes, provided deviations from expectation are reported to the City Council in a timely fashion and the liquidity and the sale of securities are carried out in accordance with the terms of this Policy. The " Prudent Person Rule" states the following: Investments should be made with judgment and care, cinder 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 oftheir capital as well as the probable income to be derivedfrom the investment. Any person or firm hired or retained to invest, monitor, or advise concerning the City' s investment program shall be held to the higher standard of "Prudent Expert". The standard shall be that in investing and reinvesting moneys and in acquiring, retaining, managing, and disposing of investments of these funds, the contractor shall exercise: the judgment, care, skill, prudence, and diligence under the circumstances then prevailing, which persons of prudence, discretion, and intelligence, acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims by diversifying the investments of the funds, so as to minimize the risk, considering the probable income as well as the probable safety of their capital. XIII. ETHICS AND CONFLICTS OF INTEREST Charter Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Also, Charter Officers and employees involved in the investment process shall disclose to the Finance Director any material financial interests in financial institutions that conduct business with the City, and they shall further disclose any material personal financial/ investment positions that could be related to the performance of the City' s investment program. XIV. INTERNAL CONTROLS AND INVESTMENT PROCEDURES The Finance Director shall establish a system of internal controls and operational procedures that are in writing and made a part of the City' s operational procedures. The internal controls should be designed to prevent losses of funds which might arise from fraud, employee error, misrepresentation by third parties, or imprudent actions by employees. The written procedures should include reference to safekeeping, repurchase agreements, separation of transaction authority from accounting and record keeping, wire transfer agreements, banking service contracts, collateral/ depository agreements, and " delivery vs. payment" procedures. No person may engage in an investment transaction except as authorized under the terms of this Policy. These procedures are intended to reduce the .relatively low risk that material losses may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Ordinance 1875, Adopted January 8, 2013 Page 8 of 25  City of Fort Walton Beach, FL INVESTMENT POLICY Independent auditors as a normal part of the annual financial audit to the City shall conduct a review of the system of internal controls. XV. CONTINUING EDUCATION The Finance Director and/ or investment staff shall annually complete 8 hours of continuing education in subjects or courses of study related to investment practices and products. XVI. AUTHORIZED INVESTMENT ADVISORS Any person or firm hired or.retained to invest, monitor, or advise concerning the City' s investment program must meet the following qualifications: A. A bank, insurance company, or investment adviser as defined by the Investment Advisers Act of 1940. B. . Provide detailed information on the history of the firm, key personnel, support personnel, key clients, and fee schedule. This information can be a copy of a recent Request for Proposal