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TC Res. No. 1996-44RESOLUTION NO. 96-44 SERIES OF 1996 A RESOLUTION ADOPTING AN INVESTMENT POLICY WHEREAS, The Town of Avon wishes to implement a comprehensive investment program; and WHEREAS, The Town desires to establish policies that set forth the-parameters by which an investment program is operated. NOW, THEREFORE, BE IT HEREBY RESOLVED, that the Town Council of the Town of Avon, Colorado, adopts an INVESTMENT POLICY, a copy of which is attached and marked as EXHIBIT A. ADOPTED AND PASSED, this 22nd day of October, 1996 TOWN AVON By Ibert J. yn Mayor , ATT Patty Lambert, CHIC Town Clerk EXHIBIT A TOWN OF AVON, COLORADO INVESTMENT POLICY October 22, 1996 1. Policy It is the policy of the Town of Avon to invest public funds in a manner which will provide the highest investment return with maximum security while meeting the, daily cash flow demands of the Town and conforming to all state and local statutes governing the investment of public funds. 2. Purpose The purpose of this investment policy is to establish the Town of Avon's investment scope, standards of prudence, objectives, authority, eligible investments, safekeeping and custody requirements, diversification, and internal controls. 3. Finance Committee The members of the finance committee shall meet as necessary, to determine general strategies and monitor results. The finance committee shall include in its deliberations such topics as: economic outlook, portfolio diversification and maturity structure, potential risks to the Town's funds, brokers and dealers, and the rate of return on the investment portfolio. 4. Scope This investment policy applies to all investment activities of the Town of Avon. All financial assets of other funds, including funds that may be created from time to time, shall be administered in accordance with the provisions of this policy. These funds are accounted for in the Town's Comprehensive Annual Financial Report and include: a. General Fund b. Special Revenue Funds c. Debt Service Funds d. Capital Project Funds e. Internal Service Funds f. Enterprise Funds g. Trust and Agency Funds 5. Objectives The primary objectives of the Town of Avon's investment activities shall be: a. Safety: Safety of capital is the foremost objective of the investment program. Investments of the Town of Avon shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. Town of Avon, Colorado Investment Policy October 8, 1996 b. Liquidity: The Town of Avon's investment portfolio will remain s»ffiriently liquid to enable the Town of Avon to meet all operating requirements which might be reasonably anticipated. c. Return on Investment: The Town of Avon's investment portfolio shall be designed with the objective of attaining a market rate of return, taking into account the Town's investment risk constraints and the cash flow characteristics of the portfolio. 6. Authority Management responsibility for the investment program is hereby, delegated to the Finance Director. The Finance Director shall establish written procedures for the operation of the investment program consistent with this investment policy. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the Director of Finance. The Director of Finance shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate investment officials. 7. Prudence The standard of prudence to be used by Town investment officials shall be the "prudent person" standard, and shall be applied in the context of managing an overall portfolio. Investment officials acting in accordance with written procedures and the 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 expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. 8. Ethics and Conflicts of Interest 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. Investment officials shall disclose to the Town Manager any material financial interests in financial institutions that conduct business within this jurisdiction, and they shall further disclose any large personal financial/investment positions that could be related to the performance of the Town of Avon's portfolio. 2 Town of Avon, Colorado Investment Policy October 8, 1996 9. Internal Control The Finance Director shall establish a system of internal controls to ensure the integrity of the investment process. The system of internal controls shall be designed to prevent loss of public funds through fraud, error, misrepresentation by third parties, or imprudent actions by officers and employees of the Town of Avon. These internal controls shall be reviewed by the Town's independent auditor. 10. Authorized Financial Dealers and Institutions All investment transactions initiated by the Town must be executed with broker/dealers and financial institutions that have been preauthorized by the Town. The Finance Director will maintain a list of approved broker/dealers and financial institutions authorized to provide investment services in the,St.ate of Colorado. This list may include "primary" dealers or regional dealers that qualify under Securities and Exchange Commission Rule 15C3-1 (uniform net capital rule) and that meet a minimum capital requirement of $10,000,000. Independent brokers or agents not meeting these minimum capital requirements must have their principal office located in the State of Colorado and have at five years of operation in order to be considered for authorization to conduct securities/investment transactions with the Town. No public funds shall be deposited except in an eligible public depository as established by Colorado state law. The fact that a broker/dealer seeks to conduct securities business with the Town of Avon and meets the minimum requirements above is insufficient reason to assume that the Town will approve such a broker/dealer for purposes of selling or buying, securities. The Town must satisfy itself that the broker/dealer and the individual agent with whom the Town has direct day-to-day contact can demonstrate the prerequisite skill, experience, and reputation to conduct business with the Town. Only broker/dealers who can clearly demonstrate this professionalism and business integrity will qualify as financial intermediaries with regard to the Town of Avon's investment portfolio. Towards that end, a list of a prospective broker/dealer's (or agent's) qualifications must include, but should not be limited to, registration in good standing with the National Association of Securities Dealers (NASD), and registration in good standing as a registered investment advisor with the Securities and Exchange Commission (SEC). The Town has designed a Broker/Dealer Questionnaire and Certification form which must be submitted to the Town for its approval before a broker/dealer will be designated as eligible to conduct securities trades with the Town of Avon. A copy of the Broker/Dealer Questionnaire and Certification and a current audited financial 3 Town of Avon, Colorado Investment Policy October 8, 1996 statement is required to be on file for each financial institution and broker/dealer with whom the Town invests. 11. Authorized and Suitable Investments This Investment Policy and Colorado Revised Statutes Section 24-75-601 permits investment in the following securities: a. Direct obligations of the United. States Government, including the U.S. Treasury, Federal Farm Credit Bank, Federal Land Bank, Federal Home Loan Bank, Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, Export-Import Bank, and the Government National Mortgage Association. b. Obligations of U.S. Government agencies which are subject to control by the federal government which is at least as extensive as that which governs an entity or organization listed in paragraph (a). i. At the time of purchase, securities in this category must be rated in its highest rating category by one or more nationally recognized organizations which regularly rate such obligations. c. General obligations of any state of the United States, or of any political subdivision, institution, department, agency; instrumentality, or authority of any such governmental entities. i. At the time of purchase, securities in this category must be rated in one of its three highest rating categories by one or more nationally recognized organizations which regularly rate such obligations. d. Revenue obligations of any state of the United States, or of any political subdivision, institution, department, agency, instrumentality, or authority of any such governmental entities. i. At the time of purchase, securities in this category must be rated in one of its two highest rating categories by one or more nationally recognized organizations which regularly rate such obligations. e. Interest-bearing accounts or time certificates of deposit in state or national banks doing business in Colorado which have been designated as eligible public depositories by the Colorado Banking Board. 4 Town of Avon, Colorado Investment Policy October 8, 1996 f. Interest-bearing accounts or time certificates of deposit at state or federally-chartered savings and loan associations in Colorado which have been designated as eligible public depositories by the Colorado Banking Board g. Commercial paper that, at the time of purchase, is rated in its highest rating category by one or more nationally recognized organizations which regularly rate such obligations. h. Any interest in any local government pool organized pursuant to Article 75, Part 7 of the Colorado Revised Statutes. L Any money market fund as authorized in C.R.S. 24-75-601.1(k) 12. Safekeeping and Collateralization Wireable investment securities purchased by the Town of Avon will be delivered by book-entry and held in third party safekeeping. Ownership of all securities shall be evidenced by an acceptable safekeeping receipt issued by a third-party custodian. In most instances, the Town of Avon's safekeeping receipts will be issued by the Town's depository bank and will indicate that the securities are being held by the bank in the Town of Avon's name. Other types of nonbook-entry securities shall be evidenced by a third-party custodian safekeeping receipt and will be physically delivered and held in third-party safekeeping by a Federal Reserve member financial institution approved by the Town of Avon. The Town of Avon's depository bank shall not provide safekeeping services in cases in which the depository bank is a "principal" or "counterparty" in the investment transaction itself. In such instances, safekeeping documentation similar to that in the preceding paragraph and which is acceptable to the Town of Avon must be provided by an independent third-party custodian. A Custodial Agent Agreement, executed by both the Town of Avon and the third-party financial institution, shall specifically delineate the custodial role and responsibilities in these situations. ' All security transactions entered into by the Town of Avon, shall be conducted on a delivery- versus-payment (DVP) basis. In addition to the securities which are owned by the Town of Avon, the Colorado Public Deposit Protection Act (PDPA) requires banks in Colorado which are eligible depositories of public funds to pledge eligible collateral having a market value in excess of 102% of their aggregate uninsured deposits to secure uninsured public funds on deposit with the banks. Town of Avon, Colorado Investment Policy October 8, 1996 All deposits of the Town of Avon are to be placed only with, commercial banks or savings and loan associations which have been designated as eligible public depositories by the Colorado Banking Board, and shall be collateralized through the state collateral pool as required by PDPA for any amount exceeding FDIC or FSLIC coverage. The Town of Avon must have on file the most recent Statement of Financial Position issued by such bank or savings and loan association. 13. Investment Diversification It is the policy of the Town of Avon to diversify its investment portfolios. Investments shall be diversified to eliminate the risk of loss resulting from overconcentration of assets in a specific maturity, a specific issuer, or a specific class of securities. Diversification strategies and guidelines shall be determined and revised periodically by the Finance Committee. 14. Investment Maturity and Liquidity Investments of the Town shall be limited to maturities not exceeding five (5) years. The Town shall at all times maintain ten percent (15%) of its total investment portfolio in instruments maturing in 120 days or less. At least 10% of the portfolio shall be invested in overnight instruments or in marketable securities' which can be sold to raise cash in one day's notice. 15. Investment Policy Adoption The Town of Avon's investment policy shall be adopted by resolution of the Town Council. The policy shall be reviewed on an annual basis by the Town Finance Committee and any modifications made thereto must be approved by the Town Council. 6 TOWN OF AVON, COLORADO PRIMARY/SECONDARY DEALER QUESTIONNAIRE AND CERTIFICATION 1. Name of firm: 2. Address: (Local) (National) 3. Telephone No.: ( ) (Local) ( ) (National) 4. Primary Representative/Manager/Partner-in-Charge: Name Name Title Title Telephone No. ( ) Telephone No. { ) 5. Identify all personnel who will be trading with or quoting prices on securities to our investment officials. Name Name Title Title Telephone No. ( ) Telephone No. ( ) 6. Please indicate which agents of your firm's local offices currently are licensed, certified or Town of Avon, Colorado Broker/Dealer Questionnaire and Certification registered to do business in the State of Colorado. Aggei2l Licensed or Registered by 7. Please provide references of other public-sector clients in the Town's geographical area. Entity Contact Person Telephone No. Client Since 8. Are you a primary dealer in U.S. Government securities? ( ) Yes ( ) No 9. If so, for how long has your firm been a primary dealer? years 10. What was your firms total volume in U.S. Government and agency securities trading last year? Firm-wide $ Local office $ 11. Which instruments are offered regularly by your local desk? ( ) T-Bills ( ) BAs ( ) Treasury Notes/Bonds { ) Commercial Paper ( } Agencies (specify) ( ) Bank CDs ( ) ( )S&LCDs ( ) ( ) Other (Specify) Town of Avon, Colorado Broker/Dealer Questionnaire and Certification 12. Have any of your public-sector clients ever sustained a loss on a securities transaction arising from ,a misunderstanding or misrepresentation of the risk characteristics of the instrument? If so, explain. 13. Have any of your public-sector clients ever reported to your firm, its officers or employees, orally or in writing, that they sustained a loss (in a single year) exceeding ten percent (10%) of original purchase price on any individual security purchased through your firm? Explain. 14. Has your firm ever been subject to a regulatory or state or federal agency investigation for alleged improper, fraudulent, disreputable or unfair activities related to the sale of government securities or money market instruments? Have any of your employees ever been so investigated? .Explain. 15. Has a public-sector client ever claimed in writing that your firm was responsible for investment losses? Explain. 16. Please include samples of research reports that your firm regularly provides to public-sector clients. 17. Please explain your normal custody and delivery process. 18. Please provide certified financial statements and any other indicators regarding your firm's capitalization. 19. Please describe the capital line and any trading limits of your office. Town of Avon, Colorado Broker/Dealer Questionnaire and Certification 20. Has your firm consistently complied with the Federal Reserve Bank's capital adequacy guidelines? Please include certified documentation of your capital adequacy as measured by Federal Reserve standards. 21. Do you participate in the SPIC insurance program? 22. What portfolio information do you require from your clients? 23. Describe what reports, confirmations and audit trail we will receive. 24. Please enclose a complete schedule, of all fees and charges for various transactions. 25. Describe the precautions taken by your firm to protect the interests of the public when dealing with governmental agencies as investors. -CERTIFICATION-- I hereby certify that I have read and understand the investment policies and objectives of the Town of Avon and have implemented reasonable procedures and a system of controls designed to preclude imprudent investment activities arising out of transactions conducted between our firm and the Town of Avon. We will notify your investment officials immediately of any material adverse change in our financial condition. We pledge to exercise due diligence in informing you of all foreseeable risks associated with financial transactions conducted with our firm. I attest to the accuracy of our responses to your questionnaire. Signed: Date: Title: