§ 177-D — Security loan agreements

§ 177-d. Security loan agreements. 1. A fund may enter into security\nloan agreements with broker-dealers and with New York state or national\nbanks for the purpose of prudently supplementing the income normally\nreceived from investments.\n 2. The trustees of the funds involved shall monitor the market value\nof the loaned marketable securities daily. In no event shall the\ntrustees allow the value of collateral posted to fall below the market\nvalue of the loaned marketable securities.\n 3. The term "security loan agreement", as used in this section, shall\nmean a written contract whereby a fund (the lender) agrees to lend\nmarketable securities for a period not to exceed one year, subject,\nhowever, to the following limitations:\n (a) The lender must retain the right to collect from the borrower all\ndividends, interest, premiums, rights, and any other distributions to\nwhich the lender would otherwise have been entitled,\n (b) The lender may waive the right to vote the securities during the\nterm of the loan,\n (c) The lender must retain the right to terminate the contract upon\nnot more than five business days' notice.\n (d) The borrower shall provide collateral to the lender in the form of\ncash, bonds, or performance letters of credit drawn on a bank with\ncapital, surplus and undivided earnings in excess of one hundred million\ndollars, or other interest-bearing notes and obligations of the United\nStates or federal instrumentalities eligible for investment by a fund,\n (e) The security loan agreement shall provide for payment of\nadditional collateral on a daily basis, or at such time as the value of\nthe loaned marketable securities increases to agreed upon ratios.\n 4. The term "marketable securities", as used in this section, shall\nmean securities that are freely traded on recognized exchanges or\nmarketplaces.\n