Responsibilities
All investment policies and procedures of SWAN will be in accordance with Illinois Law. Administration and execution of these policies are the responsibility of the SWAN Treasurer and/or his/her designee.
Delegation of authority
Management and administrative responsibility for the investment program is hereby delegated to the Treasurer and/or her/his designee.
The Treasurer and/or her his designee is responsible for establishing internal controls and written procedures for the operation of the investment program.
"Prudent person" standard
All SWAN investment officers, including but not limited to the Treasurer and his/her designee, shall use a prudent person standard of care. This standard shall be applied in the context of managing an overall portfolio and specifies 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 probable income to be derived. Investment officers, acting in accordance with this Policy and the written procedures of SWAN, and exercising due diligence, shall be relieved of personal responsibility for a security’s credit risk or market price/value changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments.
Objectives
In selecting financial institutions and investment instruments to be used, the following general objectives should be considered in the priority listed:
- Legality (conforming with all legal requirements)
- Safety (preserving capital and including diversification appropriate to the nature and amount of the funds)
- Liquidity (maintaining sufficient liquidity to meet current obligations and those reasonably to be anticipated)
- Yield (attaining a market rate of return on investments)
- Investments will be diversified as is possible based on the nature of the funds invested and the cash flow needs of those funds.
Guidelines
The following guidelines should be used to meet the general investment objectives:
- Legality and Safety:
Only investments consistent with the Public Funds Investment Act, 30 ILCS 235/1 et seq. will be permitted by this policy. Deposit accounts in banks or savings and loan institutions must be protected by FDIC insurance and will not exceed the amount insured by FDIC coverage (unless adequately collateralized as stated below). - Liquidity:
In general, investments should be managed to meet liquidity needs for four months operating expenses, based on forecasted needs, and any reasonably anticipated special needs. - Yield-Return on investment:
Within the constraints on Illinois law, considerations of safety, and this investment policy, every effort should be made to maximize return on investments made. All available funds will be placed in investments or kept in interest bearing deposit accounts. -
Simplicity of management:
The time required by SWAN administrative staff to manage investments shall be kept to a minimum.
Collateral
Funds on deposit in excess of FDIC limits will be secured by collateral. Investments in U.S. Treasuries or Federal Agencies do not require collateral. SWAN will accept the following as collateral:
- U. S. Government Securities
- Obligations of Federal Agencies
- Obligations of Federal Instrumentalities
- Obligations of the State of Illinois – rated A or higher
The amount of collateral provided is to have a current market value equal to at least 110% of the current amount by which SWAN funds on deposit (including accrued interest) exceed the FDIC insured amount. Maturities of collateral will be no more than five years longer than the maturity of the investment. Collateral with maturities of no more than ten (10) years longer than the maturity of the investment are acceptable if SWAN’s deposits in excess of FDIC limits are collateralized at 115%.
The Treasurer will review the ratio of fair market value of collateral to the amount of funds secured monthly, and additional collateral will be required when the ratio declines below the 110% level.
Pledged collateral will be held in safekeeping by an independent third party bank, the Federal Reserve Bank, or the State Treasurer's Municipal Safekeeping account. The collateral will be held in accordance with an agreement with the institution that precludes the release of the pledged assets without authorized signatures; however, the agreement allows for an exchange of collateral of like value. Collateral transfers require the approval of the Treasurer or designee.
Reporting
At least quarterly, the Treasurer or designee shall prepare a report that includes information regarding securities in the portfolio by class or type, book value, income earned and market value as of the report date. At least annually, the Treasurer and her/his designee shall review this Policy for any needed modifications and report to the Board on the investment portfolio, its effectiveness in meeting the needs of SWAN for safety, liquidity, rate of return, diversification and general performance. These reports will be available to the SWAN Membership upon request.
Internal controls
In addition to these guidelines, the Treasurer and/or his/her designee shall establish a system of internal controls and written operational procedures designed to prevent fraud, loss, theft or misuse of funds.
Authorized financial institutions
Any financial institution shall be considered and authorized only by the action of the SWAN Board upon the recommendation of the Treasurer. The Treasurer and/or her/his designee will maintain a list of financial institutions authorized to provide investment services.
Conflicts of interest
SWAN Board members, the SWAN Executive Director and/or any SWAN employees who have personal business activities with an investment institution shall abstain from discussion, making recommendations and voting relative to investment of funds. Employees and investment officials shall disclose any material interests in financial institutions with which they conduct business. They shall further disclose any personal financial/investment positions that could be related to the performance of the investment portfolio. Employees and officers shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of SWAN.
No person acting as Treasurer or investment advisor for the SWAN, or who is employed in any similar capacity by or for the SWAN, may do any of the following:
- Have any interest, directly or indirectly, in any investments in which the SWAN is authorized to invest.
- Have any interest, directly or indirectly, in the sellers, sponsors, or managers of those investments.
- Receive, in any manner, compensation of any kind from any investments in which the SWAN is authorized to invest.
Diversification
SWAN shall diversify its investments to the best of its ability based on the type of funds invested and the cash flow needs of those funds. Diversification can be by investment type, number of institutions invested in, and or length of maturity.
Types of investments
SWAN follows the provisions of 30 ILCS 235, the Public Funds Investment Act, for all of its investments. These investments may include:
- Bonds, notes, certificates of indebtedness, treasury bills or other securities.
- Bonds, notes debentures or other similar obligations of the United States of America or its agencies.
- Interest-bearing savings accounts, interest-bearing certificates of deposit or interest-bearing time deposits or any other investments constituting direct obligations of any bank as defined by the Illinois Banking Act.
- Short-term obligations of corporations organized in the United States with assets exceeding $500,000.
- Money market mutual funds registered under the Investment Company Act of 1940. Investments may be made only in banks which are insured by the F.D.I.C.
- Any public agency may also invest any public funds in the Illinois Funds, created under Section 17 of the State Treasurer’s Act.
- Illinois Metropolitan Investment Fund local government investment pool.
