S T A T E O F N E W Y O R K
________________________________________________________________________
1322
2009-2010 Regular Sessions
I N S E N A T E
January 28, 2009
___________
Introduced by Sen. KRUGER -- read twice and ordered printed, and when
printed to be committed to the Committee on Finance
AN ACT to amend the state finance law and the general municipal law, in
relation to the adoption by the state comptroller of investment guide-
lines to be disseminated to local government entities
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Section 8 of the state finance law is amended by adding a
new subdivision 21 to read as follows:
21. A. ADOPT RULES AND REGULATIONS NOT LATER THAN APRIL FIRST IN THE
YEAR NEXT SUCCEEDING THE YEAR IN WHICH THIS SUBDIVISION TAKES EFFECT,
WITH RESPECT TO COMPREHENSIVE INVESTMENT GUIDELINES AND PROCEDURES WHICH
SHALL INCLUDE THE INVESTING, MONITORING AND REPORTING OF FUNDS OF EACH
LOCAL GOVERNMENT ENTITY. FOR PURPOSES OF THIS SECTION, "LOCAL GOVERNMENT
ENTITY" SHALL INCLUDE COUNTIES, CITIES, TOWNS, VILLAGES, SCHOOL
DISTRICTS INCLUDING BOARDS OF COOPERATIVE EDUCATIONAL SERVICES AND
DISTRICT CORPORATIONS, WITHIN THE MEANING OF THAT TERM AS SET OUT IN
SUBDIVISION THREE OF SECTION SIXTY-SIX OF THE GENERAL CONSTRUCTION LAW,
OR ANY OTHER GOVERNMENT SUBDIVISION OF THE STATE. SUCH INVESTMENT GUIDE-
LINES AND PROCEDURES SHALL BE REVIEWED BY THE COMPTROLLER AT LEAST ANNU-
ALLY.
B. FUNDS OF THE LOCAL GOVERNMENT ENTITY, FOR PURPOSES OF THIS SUBDIVI-
SION, SHALL CONSIST OF ALL MONEYS AND OTHER FINANCIAL RESOURCES AVAIL-
ABLE FOR INVESTMENT BY SUCH ENTITY ON ITS OWN BEHALF OR ON BEHALF OF ANY
OTHER LOCAL GOVERNMENT ENTITY.
C. SUCH INVESTMENT GUIDELINES AND PROCEDURES SHALL INCLUDE, BUT NOT BE
LIMITED TO THE FOLLOWING:
(1) A DETAILED LIST OF THE PERMITTED INVESTMENTS OF THE LOCAL GOVERN-
MENT ENTITY, WHICH SHALL BE CONSISTENT WITH THE APPROPRIATE PROVISIONS
OF LAW RELATING TO THE APPLICABLE LOCAL GOVERNMENT ENTITY.
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD06800-01-9
S. 1322 2
(2) PROCEDURES AND PROVISIONS TO FULLY SECURE THE LOCAL GOVERNMENT
ENTITY'S FINANCIAL INTEREST IN INVESTMENTS.
(3) A REQUIREMENT THAT THE LOCAL GOVERNMENT ENTITY ENTER INTO WRITTEN
CONTRACTS PURSUANT TO WHICH INVESTMENTS ARE MADE. SUCH CONTRACTS SHALL
INCLUDE, BUT NOT NECESSARILY BE LIMITED TO PROVISIONS:
(I) DEEMED NECESSARY AND SUFFICIENT TO SECURE IN A SATISFACTORY MANNER
THE LOCAL GOVERNMENT ENTITY'S FINANCIAL INTEREST IN EACH INVESTMENT;
(II) COVERING THE USE, TYPE AND AMOUNT OF COLLATERAL OR INSURANCE FOR
EACH INVESTMENT AND ESTABLISHING THE CONDITIONS, IF ANY, UPON WHICH THE
SUBSTITUTION OF TYPES OR AMOUNTS OF COLLATERAL MAY BE MADE FOR EACH
INVESTMENT;
(III) ESTABLISHING A METHOD FOR VALUATION OF COLLATERAL, AND PROCE-
DURES FOR MONITORING AND ADJUSTING WHEN NECESSARY THE VALUATION OF SUCH
COLLATERAL ON A REGULAR BASIS;
(IV) REQUIRING THAT THE OBLIGATIONS BE DELIVERED TO THE LOCAL GOVERN-
MENT ENTITY OR TO THE LOCAL GOVERNMENT ENTITY'S ACCOUNT AT A BANK OR
TRUST COMPANY WITH WHICH THE LOCAL GOVERNMENT ENTITY HAS EXECUTED A
WRITTEN CONTRACT FOR THE CUSTODY OF OBLIGATIONS AND COLLATERAL. IN THE
CASE OF OBLIGATIONS OF THE TYPE THE OWNERSHIP OF WHICH IS RECORDED
THROUGH A BOOK ENTRY MAINTAINED BY THE FEDERAL RESERVE SYSTEM, DELIVERY
OF SUCH OBLIGATIONS SHALL BE MADE BY TRANSFER THROUGH THE FEDERAL
RESERVE SYSTEM'S "BOOK-ENTRY SYSTEM" TO THE BANK OR TRUST COMPANY TO AN
ACCOUNT DESIGNATED BY THE LOCAL GOVERNMENT ENTITY. SUCH BANK OR TRUST
COMPANY SHALL NOT BE AN AGENT OF THE PARTY WITH WHOM THE LOCAL GOVERN-
MENT ENTITY ENTERS INTO SUCH INVESTMENT CONTRACT TO PURCHASE SUCH OBLI-
GATIONS;
(V) REQUIRING THAT OBLIGATIONS ARE NOT SUBJECT TO ANY LIEN OR SECURITY
INTEREST.
(4) PROCEDURES FOR THE MONITORING, CONTROL, DEPOSIT AND RETENTION OF
INVESTMENTS AND COLLATERAL.
(5) A REQUIREMENT THAT THE LOCAL GOVERNMENT ENTITY ENTER INTO WRITTEN
CONTRACTS WITH BANKS OR TRUST COMPANIES, PURSUANT TO WHICH OBLIGATIONS
AND COLLATERAL ARE HELD BY SUCH BANKS OR TRUST COMPANIES FOR THE LOCAL
GOVERNMENT ENTITY. SUCH CONTRACTS SHALL INCLUDE, BUT NOT NECESSARILY BE
LIMITED TO PROVISIONS:
(I) ESTABLISHING A METHOD FOR VALUATION OF COLLATERAL, AND PROCEDURES
FOR MONITORING AND ADJUSTING WHEN NECESSARY THE VALUATION OF SUCH COLLA-
TERAL ON A REGULAR BASIS;
(II) REQUIRING SUCH BANK OR TRUST COMPANY TO CERTIFY TO THE LOCAL
GOVERNMENT ENTITY THAT SUCH BANK OR TRUST COMPANY ASSERTS NO RIGHT,
TITLE OR INTEREST IN SUCH OBLIGATIONS;
(III) PRESCRIBING THE MANNER IN WHICH RECEIPT OF THE OBLIGATIONS BY
THE BANK OR TRUST COMPANY SHALL BE CONFIRMED, AND THE CONDITIONS UNDER
WHICH THE OBLIGATIONS HELD MAY BE SOLD, PRESENTED FOR PAYMENT, SUBSTI-
TUTED OR RELEASED. EACH SUCH TRANSACTION SHALL BE CONFIRMED IN WRITING
TO THE LOCAL GOVERNMENT ENTITY.
(6) STANDARDS FOR THE DIVERSIFICATION OF INVESTMENTS, INCLUDING DIVER-
SIFICATION WITH RESPECT TO TYPES OF INVESTMENTS AND FIRMS WITH WHICH THE
LOCAL GOVERNMENT ENTITY TRANSACTS INVESTMENT BUSINESS.
(7) STANDARDS FOR THE QUALIFICATION OF INVESTMENT AGENTS WHICH TRANS-
ACT BUSINESS WITH THE LOCAL GOVERNMENT ENTITY, SUCH AS CRITERIA COVERING
CREDITWORTHINESS, EXPERIENCE, CAPITALIZATION, SIZE AND ANY OTHER FACTORS
THAT, IN THE JUDGMENT OF THE COMPTROLLER, MAKE A FIRM CAPABLE AND QUALI-
FIED TO TRANSACT BUSINESS WITH THE LOCAL GOVERNMENT ENTITY.
(8) REQUIREMENTS FOR THE LOCAL GOVERNMENT ENTITY TO REPORT ON ITS
INVESTMENTS, INCLUDING PROVISIONS FOR AN ANNUAL INDEPENDENT AUDIT OF ALL
S. 1322 3
INVESTMENTS AND INVESTMENT PRACTICES. SUCH REPORTING SHALL ALSO INCLUDE
ANNUAL REPORTS, OR REPORTS COVERING SUCH OTHER PERIOD AS MAY BE APPROVED
BY THE COMPTROLLER, FROM THE CHIEF FISCAL OFFICER OF THE LOCAL GOVERN-
MENT ENTITY, REGARDING THE INVENTORY OF EXISTING INVESTMENTS, FIRMS WITH
WHICH INVESTMENT CONTRACTS WERE MADE, THE INVESTMENT INCOME RECORD FOR
SUCH ENTITY AND A LIST OF TOTAL FEES, COMMISSIONS OR OTHER CHARGES PAID
TO ANY BANK OR INVESTMENT AGENT RENDERING INVESTMENT ASSOCIATED SERVICES
TO THE ENTITY SINCE THE LAST REPORT. SUCH REPORT AND THE INDEPENDENT
AUDIT REPORT SHALL BE SUBMITTED TO THE COMPTROLLER OF THE STATE OF NEW
YORK AND SHALL BE AVAILABLE TO THE PUBLIC UPON REASONABLE REQUEST THERE-
FOR.
D. THE PROPOSED COMPREHENSIVE INVESTMENT GUIDELINES AND PROCEDURES
SHALL BE SUBMITTED BY THE COMPTROLLER TO THE TEMPORARY PRESIDENT OF THE
SENATE, THE SPEAKER OF THE ASSEMBLY, THE CHAIRMAN OF THE SENATE FINANCE
COMMITTEE, THE CHAIRMAN OF THE ASSEMBLY WAYS AND MEANS COMMITTEE AND THE
DIRECTOR OF THE BUDGET NOT LATER THAN JANUARY FIRST IN THE YEAR NEXT
SUCCEEDING THE YEAR IN WHICH THIS SUBDIVISION TAKES EFFECT. IN ADDITION,
THE COMPTROLLER SHALL SUBMIT ANNUALLY IN HIS STATISTICAL REPORT REQUIRED
BY SECTION THIRTY-SEVEN OF THE GENERAL MUNICIPAL LAW A SUMMARY OF LOCAL
GOVERNMENT INVESTMENT PRACTICES AS DISCLOSED BY THE INVESTMENT REPORTS
SUBMITTED TO THE COMPTROLLER PURSUANT TO SUBPARAGRAPH EIGHT OF PARAGRAPH
C OF THIS SUBDIVISION.
SUCH SUMMARY SHALL INCLUDE TOTAL INVESTMENT INCOME OF LOCAL GOVERNMENT
ENTITIES, AN INVENTORY OF EXISTING LOCAL GOVERNMENT ENTITY INVESTMENTS
BY INVESTMENT TYPE, AND THE TOTAL FEES, COMMISSIONS, OR OTHER CHARGES
PAID TO BANKS OR INVESTMENT AGENTS RENDERING INVESTMENT ASSOCIATED
SERVICES TO LOCAL GOVERNMENT ENTITIES.
S 2. The general municipal law is amended by adding a new section 40
to read as follows:
S 40. INVESTMENT GUIDELINES FOR LOCAL GOVERNMENT ENTITIES. 1. EACH
LOCAL GOVERNMENT, WHICH FOR PURPOSES OF THIS SECTION SHALL INCLUDE COUN-
TIES, CITIES, TOWNS, VILLAGES, SCHOOL DISTRICTS INCLUDING BOARDS OF
COOPERATIVE EDUCATIONAL SERVICES AND DISTRICT CORPORATIONS, WITHIN THE
MEANING OF THAT TERM AS SET OUT IN SUBDIVISION THREE OF SECTION
SIXTY-SIX OF THE GENERAL CONSTRUCTION LAW, OR ANY OTHER GOVERNMENTAL
SUBDIVISION OF THE STATE, SHALL BY RESOLUTION ADOPT A COMPREHENSIVE
INVESTMENT POLICY WHICH DETAILS THE LOCAL GOVERNMENT ENTITY'S OPERATIVE
POLICY AND INSTRUCTIONS TO OFFICERS AND STAFF REGARDING THE INVESTING,
MONITORING AND REPORTING OF FUNDS OF THE LOCAL GOVERNMENT ENTITY. SUCH
INVESTMENT POLICY SHALL BE IN COMPLIANCE WITH THE COMPREHENSIVE INVEST-
MENT GUIDELINES PROMULGATED BY THE STATE COMPTROLLER. THE INVESTMENT
POLICY SHALL BE ADOPTED BY THE LOCAL GOVERNMENT ENTITY BY JANUARY FIRST
IN THE SECOND YEAR NEXT SUCCEEDING THE YEAR IN WHICH THIS SECTION TAKES
EFFECT AND SHALL BE ANNUALLY REVIEWED BY THE LOCAL GOVERNMENT ENTITY.
2. FUNDS OF THE LOCAL GOVERNMENT ENTITY, FOR PURPOSES OF THIS SECTION,
SHALL CONSIST OF ALL MONEYS AND OTHER FINANCIAL RESOURCES AVAILABLE FOR
INVESTMENT BY THE LOCAL GOVERNMENT ENTITY ON ITS OWN BEHALF OR ON BEHALF
OF ANY OTHER ENTITY OR INDIVIDUAL.
3. THE INVESTMENT POLICY ADOPTED BY THE LOCAL GOVERNMENT ENTITY,
SUBJECT TO THE COMPTROLLER'S GUIDELINES, SHALL INCLUDE, BUT NOT BE
LIMITED TO THE FOLLOWING:
(A) A DETAILED LIST OF THE PERMITTED INVESTMENTS OF THE LOCAL GOVERN-
MENT ENTITY, WHICH SHALL BE CONSISTENT WITH THE APPROPRIATE PROVISIONS
OF LAW RELATING TO THE LOCAL GOVERNMENT ENTITY AND ANY ADDITIONAL
REQUIREMENTS PURSUANT TO ANY CONTRACT WITH BONDHOLDERS AND NOTEHOLDERS.
S. 1322 4
(B) PROCEDURES AND PROVISIONS TO FULLY SECURE THE LOCAL GOVERNMENT
ENTITY'S FINANCIAL INTEREST IN INVESTMENTS.
(C) A REQUIREMENT THAT THE LOCAL GOVERNMENT ENTER INTO WRITTEN
CONTRACTS PURSUANT TO WHICH INVESTMENTS ARE MADE. SUCH CONTRACTS SHALL
INCLUDE, BUT NOT NECESSARILY BE LIMITED TO PROVISIONS:
(I) DEEMED NECESSARY AND SUFFICIENT TO SECURE IN A SATISFACTORY MANNER
THE LOCAL GOVERNMENT ENTITY'S FINANCIAL INTEREST IN EACH INVESTMENT;
(II) COVERING THE USE, TYPE AND AMOUNT OF COLLATERAL OR INSURANCE FOR
EACH INVESTMENT AND ESTABLISHING THE CONDITIONS, IF ANY, UPON WHICH THE
SUBSTITUTION OF TYPES OR AMOUNTS OF COLLATERAL MAY BE MADE FOR EACH
INVESTMENT;
(III) ESTABLISHING A METHOD FOR VALUATION OF COLLATERAL, AND PROCE-
DURES FOR MONITORING AND ADJUSTING WHEN NECESSARY THE VALUATION OF SUCH
COLLATERAL ON A REGULAR BASIS;
(IV) REQUIRING THAT THE OBLIGATIONS BE DELIVERED TO THE LOCAL GOVERN-
MENT ENTITY OR TO THE LOCAL GOVERNMENT ENTITY'S ACCOUNT AT A BANK OR
TRUST COMPANY WITH WHICH THE LOCAL GOVERNMENT ENTITY HAS EXECUTED A
WRITTEN CONTRACT FOR THE CUSTODY OF OBLIGATIONS AND COLLATERAL. IN THE
CASE OF OBLIGATIONS OF THE TYPE THE OWNERSHIP OF WHICH IS RECORDED
THROUGH A BOOK ENTRY MAINTAINED BY THE FEDERAL RESERVE SYSTEM, DELIVERY
OF SUCH OBLIGATIONS SHALL BE MADE BY TRANSFER THROUGH THE FEDERAL
RESERVE SYSTEM'S "BOOK-ENTRY SYSTEM" TO THE BANK OR TRUST COMPANY TO AN
ACCOUNT DESIGNATED BY THE LOCAL GOVERNMENT ENTITY. SUCH BANK OR TRUST
COMPANY SHALL NOT BE AN AGENT OF THE PARTY WITH WHOM THE LOCAL GOVERN-
MENT ENTITY ENTERS INTO SUCH INVESTMENT CONTRACT TO PURCHASE SUCH OBLI-
GATIONS;
(V) REQUIRING THAT OBLIGATIONS ARE NOT SUBJECT TO ANY LIEN OR SECURITY
INTEREST.
(D) PROCEDURES FOR THE MONITORING, CONTROL, DEPOSIT AND RETENTION OF
INVESTMENTS AND COLLATERAL.
(E) A REQUIREMENT THAT THE LOCAL GOVERNMENT ENTITY ENTER INTO WRITTEN
CONTRACTS WITH BANKS OR TRUST COMPANIES, PURSUANT TO WHICH OBLIGATIONS
AND COLLATERAL ARE HELD BY SUCH BANKS OR TRUST COMPANIES FOR THE LOCAL
GOVERNMENT ENTITY. SUCH CONTRACTS SHALL INCLUDE, BUT NOT NECESSARILY BE
LIMITED TO PROVISIONS:
(I) ESTABLISHING A METHOD FOR VALUATION OF COLLATERAL, AND PROCEDURES
FOR MONITORING AND ADJUSTING WHEN NECESSARY THE VALUATION OF SUCH COLLA-
TERAL ON A REGULAR BASIS;
(II) REQUIRING SUCH BANK OR TRUST COMPANY TO CERTIFY TO THE LOCAL
GOVERNMENT ENTITY THAT SUCH BANK OR TRUST COMPANY ASSERTS NO RIGHT,
TITLE OR INTEREST IN SUCH OBLIGATIONS;
(III) PRESCRIBING THE MANNER IN WHICH RECEIPT OF THE OBLIGATIONS BY
THE BANK OR TRUST COMPANY SHALL BE CONFIRMED, AND THE CONDITIONS UNDER
WHICH THE OBLIGATIONS HELD MAY BE SOLD, PRESENTED FOR PAYMENT, SUBSTI-
TUTED OR RELEASED. EACH SUCH TRANSACTION SHALL BE CONFIRMED IN WRITING
TO THE LOCAL GOVERNMENT ENTITY.
(F) STANDARDS FOR THE DIVERSIFICATION OF INVESTMENTS, INCLUDING DIVER-
SIFICATION WITH RESPECT TO TYPES OF INVESTMENTS AND FIRMS WITH WHOM THE
LOCAL GOVERNMENT ENTITY TRANSACTS BUSINESS.
(G) STANDARDS FOR THE QUALIFICATION OF INVESTMENT AGENTS WHICH TRANS-
ACT BUSINESS WITH THE LOCAL GOVERNMENT ENTITY, SUCH AS CRITERIA COVERING
CREDITWORTHINESS, EXPERIENCE, CAPITALIZATION, SIZE AND ANY OTHER FACTORS
THAT MAKE A FIRM CAPABLE AND QUALIFIED TO TRANSACT BUSINESS WITH THE
LOCAL GOVERNMENT ENTITY.
4. EACH LOCAL GOVERNMENT ENTITY SHALL HAVE THE POWER TO AMEND ITS
INVESTMENT POLICY FROM TIME TO TIME IN ACCORDANCE WITH THE PROVISIONS OF
S. 1322 5
THIS SECTION AND THE COMPREHENSIVE INVESTMENT GUIDELINES OF THE STATE
COMPTROLLER.
S 3. This act shall take effect immediately.