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

( " RFP ") completed by the Investment Advisor or regulatory disclosure. All Investment Advisors conducting investment transactions on behalf of the City shall provide written acknowledgement of receiving a current copy of the City' s Investment Policy. XVII. AUTHORIZED INVESTMENT INSTITUTIONS AND DEALERS The following institutions are authorized to provide investment services and act as portfolio managers to the City of Fort Walton Beach: A. Financial institutions included on the State of Florida' s list of Qualified Public Depositories B. Entities providing intergovernmental investment pools authorized per Florida State Statute 163. 01 C. Securities brokers /dealers meeting all of the following requirements 1. Regional dealers that qualify under Securities and Exchange Commission Rule 150- 1 ( uniform net capital rule) 2. Assets under management of no less than $ 500 million 3. Registered as a dealer under the Securities Exchange Act of 1934 4. Member of the National Association of Dealers ( NASD) 5. Registered to sell securities in Florida 6. The firm and assigned broker have been engaged in the business of effecting transactions in U. S. government and agency obligations for at least five ( 5) consecutive years All institutions conducting investment transactions on behalf of the City shall provide written acknowledgement of receiving a current copy of the City' s Investment Policy. XVIII. THIRD -PARTY CUSTODIAL AGREEMENTS Securities, with the exception of certificates of deposits, shall be held with a third party custodian; and all securities purchased by, and all collateral obtained by the City, should be properly designated as an asset of the Ordinance 1875, Adopted January 8, 2013 Page 9 of25  City of Fort Walton Beach, FL INVESTMENT POLICY City. The securities must be held in an account separate and apart from the assets of the financial institution. A third party custodian is defined as any bank depository chartered by the Federal Government, the State of Florida, or any other state or territory of the United States which has a branch or principal place of business in the State of Florida, or by a national association organized and existing under the laws of the United States which is authorized to accept and execute trusts and which is doing business in the State of Florida. Certificates of deposits will be placed in the provider' s safekeeping department for the term of the deposit. The custodian shall accept transaction instructions only from those persons who have been duly authorized by the Finance Director and which authorization has been provided, in writing, to the custodian. No withdrawal of securities, in whole or in part, shall be made from safekeeping unless by such a duly authorized person. The custodian shall provide the Finance Director with safekeeping statements that provide detail information on the securities held by the custodian. On a monthly basis, the custodian will also provide reports that list the dates and nature of all transactions as well as all securities held for the City and the book value and the market value of each as of month -end. Security transactions between a broker /dealer and the custodian involving the purchase or sale of securities by transfer of money or securities must be made on a " delivery vs. payment" basis, if applicable, to ensure that the custodian will have the security or money, as appropriate, in hand at the conclusion of the transaction. Securities held as collateral shall be held free and clear of any liens. XIX. INVESTMENT POLICY ADOPTION The Investment Policy shall be adopted by ordinance of the City Council. The Finance Director shall review the Policy annually and submit recommendations to the City Manager for City Council consideration and approval. Ordinance 1875, Adopted January 8, 2013 Page 10 of 25  City of Fort Walton Beach, FL INVESTMENT POLICY Attachment A - Review and Evaluation of Investment Advisor ( as applicable) The Finance Director will meet at least quarterly with the Investment Advisor(s) to review market conditions and investment results. These reviews will focus on: A. The Investment Advisor' s adherence to the City' s Investment Policy guidelines ( i. e. compliance) B. Investment results C. Material changes to the City' s future investment strategy D. Material changes in the Investment Advisor' s organization, such as philosophical or personnel changes Guidelines for evaluation, retention, and replacement of Investment Advisor: A. Communication regarding changing market conditions B. Responsiveness to questions or correspondence from the City C. Portfolio Manager(s) performance ( quarterly, annual, trailing) against peers, benchmarks, and market indices Deviation from the City' s Investment Policy is grounds for immediate termination of Investment Advisor. Ordinance 1875, Adopted January 8, 2013 Page 1 1 of25  City of Fort Walton Beach, FL INVESTMENT POLICY Attachment B - Review and Evaluation of Portfolio Manager ( as applicable) The Finance Director will meet at least annually with Portfolio Manager(s) or representative These reviews will focus on: A. The Portfolio Manager' s adherence.to the City' s Investment Policy guidelines ( i. e. compliance) B. Comparison of the Portfolio Manager' s results to the objectives established for each Portfolio C. Comparison of the Portfolio Manager' s results against a universe of comparable funds and investment styles D. Opportunities available in the market E. Material changes in the Portfolio Manager' s organization, such as philosophical or personnel changes Guidelines for evaluation, retention, and replacement of Portfolio Manager: A. Compare performance, to established benchmarks ( quarterly, annual, trailing) B. Compare' performance to established target ( e. g.: To outperform benchmark/ index and to achieve investment returns, such as maintaining purchasing power defined as returns in excess of inflation as defined by the United States Consumer Price Index) A Portfolio Manager will be rated in a " Favorable Status" if he is delivering favorable performance and there are no outstanding organizational issues. A Portfolio Manager will be in a " Caution Status" if the three year performance is trailing the established benchmark. A Portfolio Manager that falls in " Caution Status" will undergo a formal review by the Investment Advisor. The review will address how the Portfolio Manager will move back to " Favorable Status" or recommend termination. A Portfolio Manager can move back to " Favorable Status" by improving performance above the criteria as listed above. Highest priority will be given to a Portfolio Manager failing to meet the five - year target and next to those failing to meet the three -year target. There may be situations where immediate problems, questions, or short-term performance issues arise regarding a Portfolio Manager and the priority will shift to review these situations first. Reasons for immediate termination of Portfolio Manager: A. Deviation from the City' s Investment Policy or instructions without written authority B. Substantial deviation from investment disciplines and process Ordinance 1875, Adopted January 8, 2013 Page 12 of 25  City of Fort Walton Beach, FL INVESTMENT POLICY Attachment C - Glossary of Investment Terms Accrued Interest. Interest earned but which has not yet been paid or received. Agency. See " Federal Agency Securities." Ask Price. Price at which a broker /dealer offers to sell a security to an investor. Also known as " offered price." Asset Backed Securities ( ABS). A fixed- income security backed by notes or receivables against assets other than real estate. Generally issued by special purpose companies that " own" the assets and issue the ABS. Examples include securities backed by auto loans, credit card receivables, home equity loans, manufactured housing loans, farm equipment loans and aircraft leases. Average Life. The average length of time that an issue of serial bonds and/ or term bonds with a mandatory sinking fund feature is expected to be outstanding. Bankers' Acceptance ( BA' s). A draft or bill of exchange drawn upon and accepted by a bank. Frequently used to finance shipping of international goods. Used as a short- term credit instrument, bankers' acceptances are traded at a discount from face value as a money market instrument in the secondary market on the basis of the credit quality of the guaranteeing bank. Basis Point. One hundredth of one percent, or 0. 01 %. Thus 1% equals 100 basis points. Bearer Security. A security whose ownership is determined by the holder of the physical security. Typically, there is no registration on the issuer' s books. Title to bearer securities is transferred by delivery of the physical security or certificate. Also known as " physical securities." Benchmark Bills: In November 1999, FNMA introduced its Benchmark Bills program, a short- term debt securities issuance program to supplement its existing discount note program. The program includes a schedule of larger, weekly issues in three- and six- month maturities and biweekly issues in one -year for Benchmark Bills. Each issue is brought to market -via a Dutch ( single price) auction. FNMA conducts a weekly auction for each Benchmark Bill maturity and accepts both competitive and non -competitive bids through a web based auction system. This program is in addition to the variety of other discount note maturities, with rates posted on a daily basis, which FNMA offers. FNMA's Benchmark Bills are unsecured general obligations that are issued in book - entry form through the Federal Reserve Banks. There are no periodic payments of interest on Benchmark Bills, which are sold at a discount from the principal amount and payable at par at maturity. Issues under the Benchmark program constitute the same credit standing as other FNMA discount notes; they simply add organization and liquidity to the short- term Agency discount note market. Benchmark Notes/ Bonds: Benchmark Notes and Bonds are a series of FNMA " bullet" maturities ( non -callable) issued according to a pre -announced calendar. Under its Benchmark Notes/ Bonds program, 2, 3, 5, 10 and 30- year maturities are issued each quarter. Each Benchmark Notes new issue has a minimum size of $4 billion, 30- year new issues having a minimum size of $ 1 billion, with re- openings based on investor demand to further enhance liquidity. The amount of non -callable issuance has allowed FNMA to build a yield curve in Benchmark Notes and Bonds in maturities ranging from 2 to 30 years. The liquidity emanating from these large size issues has facilitated favorable financing opportunities through the development of a liquid overnight and term repo market. Issues under the Benchmark program constitute the same credit standing as other FNMA issues; they simply add organization and liquidity to the intermediate- and long -term Agency market. Benchmark. A market index used as a comparative basis for measuring the performance of an investment portfolio. A performance benchmark should represent a close