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CITY OF REDWOOD CITY <br />INVESTMENT POLICY <br /> Last update: 6/22/2016 8 <br /> <br />3. Due to the complexity of the securities market and ever-changing market conditions, it <br />is difficult to define derivatives and specifically prohibit their acquisition. Therefore, the <br />City desires to limit the potential risk of derivatives by specifically prohibiting the most <br />common types of derivatives with certain market exposures. These prohibited derivatives <br />include but are not limited to: inverse floaters, interest only securities derived from <br />mortgages, residual securities, structured notes, forward based derivatives, forward <br />contracts, forward rate agreements, futures contracts, interest rate futures contracts, <br />foreign currency futures contracts, option based derivatives, option contracts, interest rate <br />caps, interest rate floors, swap contracts, interest rate swaps, interest rate collars, foreign <br />currency swaps, cross currency exchange agreements, fixed rate currency swaps, basis <br />swaps, equity swaps, fixed rate equity swaps, floating rate equity swaps and commodity <br />swaps. <br /> <br />4. Leveraging <br />a. The City may not purchase investments on a margin or through a margin account. <br />b. The General Portfolio may not be leveraged by more than 30% through the issuance of <br />tax and revenue anticipation notes (TRANS). The proceeds of any TRANS issue are <br />to be invested in accordance with the guidelines in this policy, with investment <br />maturities not to exceed the life of the TRANS. <br />c. The City may not leverage its investments through the use of reverse repurchase <br />agreements. <br /> <br />X. Review of Investment Portfolio <br /> <br />The securities held by the City must be in compliance with the authorized investments in this policy at <br />the time of purchase. Because some securities may not comply with this policy subsequent to the date <br />of purchase, the Treasurer shall at least quarterly review the portfolio to identify those securities that do <br />not comply. The Treasurer shall establish procedures to report to the City Council and or the Finance <br />Committee major and critical incidences of noncompliance identified through the review of the portfolio. <br /> <br />XI. Investment Pools <br /> <br />A. A thorough investigation of the pool is required prior to investing, and on a continual basis. There <br />shall be a questionnaire developed which will answer the following general requests for <br />information: <br /> <br />1. A description of eligible investment securities, and a written statement of investment policy <br />and objectives. <br />2. A description of interest calculations and how it is distributed, and how gains and losses are <br />treated. <br />3. A description of how the securities are safeguarded (including the settlement processes), and <br />how often the securities are priced and the program audited. <br />4. A description of who may invest in the program, how often, what size deposit and withdrawal <br />are allowed. <br />5. A schedule for receiving statements and portfolio listings. <br />6. Whether reserves, retained earnings, etc. are utilized by the pool. <br />7. A fee schedule, and when and how is it assessed. <br />6.1.I. - Page 21