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6.A. -Page 8 of 40 CITY OF REDWOOD CITY INVESTMENT POLICY VII. Investment Controls A. The City Manager shall oversee and ensure that the City Treasurer implements and maintains a system of internal investment controls and segregated responsibilities of the investment function in order to prevent fraud, theft, loss of principal, loss of control over funds, inaccurate reporting, negligence, and over -reliance on a single employee for investment decisions. B. Internal controls should include but are not limited to: 1. Segregation of duties (e.g., the purchaser of investments is different than the person recording the transaction) 2. Reconciliation of investment report and cash balances 3. Authorization of transactions C. The external City auditor will review the investment program annually in order to provide reasonable assurance that the policy and procedures are complied with. VIII. Authorized Financial Dealers and Institutions A. The City Treasurer or designee will obtain financial information from qualified institutions to determine if the institution markets in securities appropriate to the City's needs, can assign qualified sales representatives, and can provide written agreement to abide by the conditions set forth in the this Policy. B. The City Treasurer will maintain a list of financial institutions and broker/dealers authorized to provide investment services to the City. An eligible designation does not guarantee that the City will do business with the firm or institution. C. If the City utilizes an external investment manager/advisor, the manager will perform due diligence and maintain their own list of approved broker/dealers. The manager is authorized to transact with its own approved broker/dealer list on behalf of the City. Such managers must be registered under the Investment Advisers Act of 1940. D. The following criteria will be used in determining investment providers: 1. Broker/Dealers: The purchase by the City of any investment other than those purchased directly from the issuer shall be purchased from a broker/dealer firm designated as a Primary Government Dealer by the Federal Reserve Bank of New York or a regional dealer that qualifies under SEC Rule 150-1 (uniform net capital rule). 2. Banks: The City shall purchase securities from banks which meet all of the following criteria: a. Nationally or State chartered banks b. Registered as investment securities dealers with the Securities and Exchange Commission c. Independently rated "A" or higher by two nationally recognized statistical rating organizations 3. Investment Bankers, Underwriters and Financial Advisors: The purchase by the City of any investments from these providers in the course of completing a bond transaction must be expressly authorized by the City Council after such a provider discloses their commission, spread or fee in approximate dollar amount. Otherwise, the acquisition of such DRAFT on 1/13/20 Approved by Council 1/14/2019 4 14