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6.A. -Page 16 of 40 CITY OF REDWOOD CITY INVESTMENT POLICY G. The right of collateral substitution is granted based on the approval of the City Treasurer. XIII. Safekeeping. Custody and Competitive Bids A. Third -party safekeeping is required for all investments. Securities may be maintained by a banking institution or a broker/dealer firm for safekeeping as long as the securities are held in the City's name. B. Third -party safekeeping arrangements will be approved by the City Treasurer and will be corroborated by a written custodial agreement. C. All investment transactions of the City will be conducted using standard delivery vs. payment (DVP) procedures. D. All securities held by the safekeeping custodian on behalf of the City shall have the City of Redwood City as the registered owner, and all interest and principal payments and withdrawals shall indicate the City of Redwood City as the payee. E. All bank deposits will be FDIC insured or deposited with institutions that comply with the State collateral requirements for public funds. F. Securities used as collateral for repurchase agreements with a maturity from one to seven days can be held in safekeeping by a third- party bank trust department or by the broker/dealer's safekeeping institution, acting as the agent for the City, under the terms of a custody agreement executed by the selling institution and by the City specifying the City's right to the collateral. G. All investment transactions shall be conducted on a competitive basis with quotes from a minimum of two brokers or financial institutions when possible. XIV. Diversification and Credit Risk Management A. Investments contained within the portfolio will be diversified by security type, institution and maturity. B. The diversification requirements included in Section IX are designed to mitigate credit risk in the portfolio. C. No more than 5% of the total portfolio maybe invested insecurities of any single issuer, other than the US Government, its agencies and instrumentalities. For some investment types, a more restrictive limit is specified in the policy. D. The City may elect to sell a security prior to its maturity and record a capital gain or loss in order to improve the quality, liquidity or yield of the portfolio in response to market conditions or City's risk preferences. E. If securities owned by the City are downgraded by any nationally recognized statistical ratings organization to a level below the quality required by this Investment Policy, it shall be the City's policy to review the credit situation and make a determination as to whether to sell or Approved by Council MO 20-001 on 1/13/20 12 22