A list will be maintained of financial institutions and depositories authorized to provide investment services. In addition, a list will be maintained of approved security brokers/dealers selected by conducting a process of due diligence. These may include "primary" dealers or regional dealers that qualify under Securities and Exchange Commission (SEC) Rule 15C3-1 (uniform net capital rule).
(A) The Designated Officials shall determine which financial institutions are authorized to provide investment services to city. Institutions eligible to transact investment business with city include:
(1) Primary government dealers as designated by the Federal Reserve Bank;
(2) Nationally or state-chartered banks;
(3) The Federal Reserve Bank;
(4) Direct issuers of securities eligible for purchase; and
(5) Kentucky League of Cities Investment Pool Plus.
(B) Selection of financial institutions and brokers/dealers authorized to engage in transactions with the City of Middletown shall be at the sole discretion of the city.
(C) All brokers/dealers who desire to become qualified for investment transactions must supply the following (as appropriate):
(1) Audited financial statements demonstrating compliance with state and federal capital adequacy guidelines;
(2) Proof of state registration;
(3) Completed broker/dealer questionnaire (not applicable to Certificate of Deposit counterparties); and
(4) Certification of having read and understood and agreeing to comply with the entity's investment policy. Evidence of adequate insurance coverage.
(D) All financial institutions who desire to become depositories must supply the following (as appropriate):
(1) Audited financial statements demonstrating compliance with state and federal capital adequacy guidelines;
(2) Proof of state registration;
(3) Evidence of adequate insurance coverage.
(E) A periodic review of the financial condition and registration of all qualified financial institutions and brokers/dealers will be conducted by the Designated Officials.
(1) Minority, emerging and community financial institutions. From time to time, the Designated Officials may choose to invest in instruments offered by minority, emerging, and community financial institutions. All terms and relationships will be fully disclosed prior to purchase and will be reported to the appropriate entity on a consistent basis and should be consistent with Kentucky law and city ordinance.
(2) Competitive transactions.
(a) The Designated Officials shall obtain competitive bid information on all purchases of investment instruments purchased on the secondary market. A competitive bid can be executed through a bidding process involving at least three separate brokers/financial institutions or through the use of a nationally recognized trading platform.
(b) If the city is offered a security for which there is no readily available competitive offering on the same specific issue, then the Designated Officials shall document quotations for comparable or alternative securities. When purchasing original issue instrumentality securities, no competitive offerings will be required as all dealers in the selling group offer those securities as the same original issue price.
(c) If the city hires an investment adviser to provide investment management services, the adviser must provide documentation of competitive pricing execution on each transaction. The investment adviser will retain documentation and provide upon request.
(Ord. 08-08-19-B, passed 9-12-2019)