§ 43 — Required elements of a cooperative investment agreement

§ 43. Required elements of a cooperative investment agreement. Every\ncooperative investment agreement shall contain, at a minimum, the\nfollowing:\n 1. a description of the creation, membership, powers and\nresponsibilities of the governing board of the cooperative investment\nagreement as set forth in sections forty-four and forty-five of this\narticle.\n 2. a statement designating one of the participants as the lead\nparticipant. Moneys to be invested pursuant to the cooperative\ninvestment agreement and the investments made pursuant to the\ncooperative investment shall be held in the custody of the lead\nparticipant on behalf of all the participants. Moneys or investments\nheld in the custody of the lead participant on behalf of the\nparticipants shall not be commingled with other moneys or investments of\nthe lead participant.\n 3. a statement that each participant shall have an undivided interest\nin moneys and investments held by the lead participant on behalf of the\nparticipants in the proportion that the total amount of contributions\nmade by that participant bears to the total amount of contributions by\nall the participants.\n 4. a statement of the investment policy applicable to investments made\npursuant to the agreement. This investment policy shall conform to the\nrequirements of section thirty-nine of this chapter and shall also\ninclude:\n (a) a statement of the governing board's intention to maintain the\nvalue of each participant's interest in the cooperative investments at a\nstable value of one dollar,\n (b) a statement of the types of investments authorized by section\neleven of this chapter in which moneys may be invested under the\nagreement and, if deemed appropriate, further limitations pertaining to\nmatters such as the use of repurchase agreements and the purchase of\nvariable rate and structured obligations,\n (c) a statement of the maximum time remaining to maturity of\nindividual investments permitted under the agreement and the maximum\nweighted average maturity of all investments made pursuant to the\nagreement as are deemed necessary to fulfill the investment policy\nstated in the agreement and to ensure that a participant's investment\nwill be available when needed to meet expenditures; provided, however,\nthat the maximum time remaining to maturity of individual investments\nshall not exceed three hundred ninety-seven days and the maximum\nweighted average maturity of all investments shall not exceed sixty\ndays. Compliance under the cooperative investment agreement with the\nmaturity limitations stated in this subdivision shall be deemed to be\ncompliance with the requirements of paragraph a of subdivision three of\nsection eleven of this chapter, and\n (d) standards for the diversification of investments, including\ndiversification with respect to types of investments and firms with whom\nthe governing board transacts business.\n 5. the participants' rights to make contributions and receive\ndistributions, the frequency with which earnings will be distributed\nto the participants, and the circumstances, if any, under which a\nparticipant's rights to make contributions or receive distributions may\nbe limited or deferred.\n 6. a description of the manner in which expenses incurred by the\ngoverning board in administering the cooperative investment agreement,\nincluding, but not limited to, the cost of procuring the services of\nprofessionals to assist the governing board, the compensation of an\nexecutive director, if one is appointed, and other costs of\nadministering the investments made pursuant to the agreement, are to be\napportioned among the participants.\n 7. a description of the methodology, including, but not limited to,\nthe amortized cost method, that will be utilized to establish the value\nof each participant's interest in investments made pursuant to the\nagreement, including the value of contributions and distributions, and\nthe calculation of yield thereon.\n 8. a provision requiring that the market value of investments made\npursuant to the agreement shall be determined at least monthly and\nwhenever the method of valuation authorized by the agreement does not\naccurately reflect the value of participants' interests in such\ninvestments.\n 9. a provision requiring that, at least once a month, the portfolio of\ninvestments made pursuant to the agreement be tested for sensitivity to\nchanges in interest rates. This provision must require that the testing\nmethodology adopted by the board be reasonably designed to reliably\nquantify the effect of a change in interest rates on the market\nvalue of the portfolio.\n 10. a provision requiring that the governing board secure an\nirrevocable letter of credit in an amount sufficient to cover any\npotential losses as quantified pursuant to the testing described in\nsubdivision nine of this section. The cost of such irrevocable letter of\ncredit shall be deemed to be an expense incurred by the board in\nadministering the investments made pursuant to the agreement.\n 11. a statement that the governing board may procure the services of\nprofessionals such as an administrator, investment advisor, independent\nauditor, custodial bank, and any other professional services it deems\nappropriate to assist the governing board in fulfilling its\nresponsibilities under the agreement, provided that: (a) the\nprofessionals who will render such services, individually and\ncollectively, shall meet all qualifications deemed appropriate by the\ngoverning board; (b) the procurement of such services shall be in\ncompliance with section one hundred four-b of this chapter, subject\nto a request for proposal process at least every three years; (c) the\ncontracts for such services shall ensure compliance with the\nrequirements of sections ten and eleven of this chapter; and (d) the\ncharges, fees and other compensation for any contracted services\nshall be clearly stated in written service contracts.\n 12. a provision requiring that each participant receive written\nconfirmation of each contribution made by or distribution made to the\nparticipant no later than the following business day after which the\ncontribution or distribution occurs.\n 13. a provision requiring that each participant receive a monthly\nstatement that sets forth the following information for the preceding\nmonth: (a) all activity by the participant; (b) the value of the\nparticipant's interest under the agreement at the beginning and end of\nthe month; and (c) an itemization of all investments held under the\nagreement as of the end of the month, including the market value of\neach investment as of that date.\n 14. a provision requiring that each participant and the state\ncomptroller receive immediate notification of any event or\ncircumstance that may require a deferral of distributions or may cause\ninvestment losses not anticipated by the investment policy and of any\nother material adverse event relating to the investments made pursuant\nto the agreement.\n 15. a provision requiring that a certified public accountant annually\nconduct an audit, in accordance with generally accepted government\nauditing standards, of the activities undertaken pursuant to the\nagreement. A copy of this annual audit shall be distributed to each\nparticipant and to the state comptroller within ninety days after the\nclose of the fiscal year established under the agreement.\n 16. a provision requiring that each participant annually receive,\nand each prospective participant receive prior to their participation\nin the agreement, an information statement that includes, at a\nminimum, the following: (a) a brief history of the agreement; (b) a\ndescription of the organization and terms of the cooperative\ninvestment agreement, including the powers and responsibilities of the\ngoverning board and the qualifications of any professionals retained\nunder the agreement; (c) a description of the investment objectives,\npolicies and practices contained in the agreement including those\npertaining to liquidity, methodology for determining participants'\ninterests, distribution of earning and calculation of yield; (d) a\ndescription of the current investments held under the agreement; (e) a\nlisting of any fees or charges to be incurred by participants; and (f)\na description of the required procedures for initiation and termination\nof participation in the agreement.\n 17. a provision requiring that all participants receive at least\nonce a year a report detailing the following information for the\npreceding twelve months: (a) the portfolio of investments currently\nheld pursuant to the agreement, including, for each investment, the\nmarket value, time remaining to maturity, interest earned and\nrealized, and unrealized gains and losses; (b) the overall investment\nresults, yield and weighted average maturity; (c) a list of the fees\npaid for all professional services procured under the agreement; and\n(d) a statement of all other expenses incurred by the governing board in\nadministering the investments made pursuant to the agreement.\n 18. a provision requiring that, if the governing board obtains a\nrating from a nationally recognized statistical rating organization,\nsuch rating and any subsequent changes therein be disclosed to each\nparticipant.\n