HomeMy WebLinkAboutAdministrative Order 2024-01 - City of Bozeman Investment Policy (2)City of Bozeman Policies & Procedures:
Investment Policy
1 | P a g e
CITY OF BOZEMAN
POLICIES & PROCEDURES:
INVESTMENT POLICIES
Per Administrative Order 2024-01
DocuSign Envelope ID: BDCB4F97-C514-434C-9B3E-4C897B8C6F62
City of Bozeman Policies & Procedures:
Investment Policy
2 | P a g e
Purpose
The purpose of the Investment Policy is to ensure investment of cash funds will be maintained
in accordance with Montana Code Annotated (MCA) by defining the parameters within which
public funds will be managed. In methods, procedures, and practices, the policy formalizes the
framework for the City’s investment activities that must be exercised to ensure effective and
judicious fiscal and investment management of the City’s funds.
Scope
This investment policy applies to all City monies and bond funds invested to those investments
authorized by MCA 7-6-202.
Objectives
The primary objectives, in order of priority, of the City’s investment activities shall be:
a. Safety. Safety of principal is the foremost objective of the portfolio. Investments of
the City shall be undertaken in a manner that seeks to ensure preservation of
principal in the overall portfolio.
b. Liquidity. The portfolio shall remain sufficiently liquid to meet all current obligations
of the City that might be reasonably anticipated. Minimum liquidity levels may be
established to meet such current obligations.
c. Return. The portfolio shall be managed with the objective of attaining the maximum
rate of return throughout budgetary and economic cycles, given the constraints of the
aforementioned, safety and liquidity objectives.
Prudence
The City of Bozeman investment program shall follow the “Prudent Person Rule” which states
that, “Investments shall be made with judgment and care, under circumstances then prevailing,
which persons of prudence, discretion and intelligence exercise in the management of their own
affairs, not for speculation, but for investment, considering the probable safety of their capital as
well as the probably income to be derived.”
The standard of prudence shall be applied in the context of managing the portfolio. The City
Treasurer and designees acting in accordance with procedures and this investment policy and
exercising due diligence shall be relieved of personal liability for an individual security’s credit
risk or market price changes. It is required that deviations from expectations are reported in a
timely fashion and appropriate action is taken to control adverse developments.
Ethics and Conflicts of Interest
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. Employees and investment officials shall disclose any
material interests in financial institutions with which they conduct business. Disclosure shall be
made to the governing body. Refer also to the City’s Ethics Code for additional specific conflict
of interest regulations and prohibitions applicable to employees.
DocuSign Envelope ID: BDCB4F97-C514-434C-9B3E-4C897B8C6F62
City of Bozeman Policies & Procedures:
Investment Policy
3 | P a g e
Delegation of Authority
Responsibility for the operation of the investment program is hereby delegated to the City
Treasurer who shall act in accordance with established procedures and internal controls for the
operation of the investment program consistent with this Investment Policy. All participants in
the investment process shall seek to act responsibly as custodians of the public trust. No officer
or designee may engage in an investment transaction except as provided under the terms of
this policy and supporting procedures.
Approved Depositories
The Treasurer will reference MCA 7-6-207 in making decisions regarding depositing of funds.
Registered Investment Advisers
The City may engage the services of an external investment adviser to assist in the
management of the City’s investment portfolio in a manner consistent with the City’s objectives.
Such external advisers may be granted discretion to purchase and sell investment securities in
accordance with this Investment Policy. Such advisers must be registered with the State and
with the Securities Exchange Commission and act under fiduciary standards.
Broker Dealers
The City may use qualified broker/dealers to purchase securities. Broker Dealers must operate
under suitability standards, and the City Treasurer has fiduciary responsibly over the
investments. Transactions with broker/dealers must comply with the City’s Procurement Policy.
Suitable and Authorized Investment Types
The City Treasurer will reference code MCA Title 7 Chapter 6 Part 21 as amended. .
Portfolio Management
Following the primary objective of safety of principal, investments shall be managed to take
advantage of market opportunities. In so doing, negotiable securities may be “redeemed or sold”
prior to their maturity under the following conditions:
(1) To meet additional liquidity needs
(2) To purchase another security to increase yield or current income.
(3) To lengthen or shorten the portfolio’s average maturity (duration)
(4) To realize any capital gains and/or income
(5) To adjust the portfolio’s asset allocation
Such transactions may be referred to as a “sale and purchase” or a “swap”. For purposes of this
section, redeemed shall also mean “called” in the case of a callable security.
Purchases and Sales of Securities
All trades shall be executed with the objective of realizing the best bid or offer price available.
The method used by the investment personnel and investment advisers shall be the one that
will obtain the best execution price or value, given the objective of the transaction.
Safekeeping and Custody
The City Treasurer shall appoint a custodian for the safekeeping of the City’s investments. All
securities shall be held in safekeeping by a third-party institution which is qualified and
1 Part 2. Deposit and Investment of Public Money - Table of Contents, Title 7, Chapter 6, MCA (mt.gov)
DocuSign Envelope ID: BDCB4F97-C514-434C-9B3E-4C897B8C6F62
City of Bozeman Policies & Procedures:
Investment Policy
4 | P a g e
experienced in providing custodial services for institutional investors, specifically for public
entities. Where allowed by governing legislation full collateralization will be required on all
demand deposit accounts, including checking accounts and non-negotiable certificates of
deposit.
Delivery Vs. Payment
All Trades of marketable securities will be executed by delivery vs. payment (DVP) to ensure
that securities are deposited in an eligible financial institution prior to the release of funds.
Reporting
The City Treasurer or his/her designee shall maintain a detailed inventory of the investment
assets of the City. A description of each security will include but is not limited to the following.
Reporting shall be provided by the custodian in and the Broker/Dealer or Registered Investment
Adviser.
The Issuer Description
Cost (purchase cost/current book value)
Par value (maturity value)
Maturity date
Settlement date of purchased or sold securities
Yield of each security, and any coupon (interest) rate.
Weighted Average Yield of the portfolio
Weighted Average Maturity of the portfolio, and
List of Investment transactions for the period
Approval
The City’s Investment Policy shall be adopted by Administrative Order. The Policy shall be
reviewed and updated on an annual basis by the City Treasurer and Finance Director.
DocuSign Envelope ID: BDCB4F97-C514-434C-9B3E-4C897B8C6F62