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City of Pleasanton Operating Budget • FY 2023/24 - FY 2024/25C - 30 Credit risk is the risk of loss due to failure of an issuer of a security or a financial institution. The City purchases U.S. Treasuries and high-grade securities which will lessen this type of risk. In addition, the portfolio will be diversified so that the failure of any one issuer will not unduly harm the City’s cash flow. Custodial credit risk is the risk that in the event of the failure of the custodian, the investments may not be returned. The City’s investment securities are to be held by a third party custodian designated by the City and evidenced by safekeeping receipts. Concentration of credit risk is the risk associated with a lack of diversification of having too much invested in a few individual issuers, thereby exposing the organization to greater risks resulting from adverse economic, political, regulatory, geographic, or credit developments. The City’s investments will be diversified and will not exceed maximum percentages allowed in the California Government Code. Interest rate risk is the risk that the market value of securities in the portfolio will fall due to an increase in general interest rates. Interest rate risk may be reduced by structuring the portfolio so that securities are maturing periodically to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity. The City will limit investments to a maximum maturity of five years (unless otherwise authorized by City Council). Foreign currency risk results from investment in foreign currency-denominated securities. The City will not invest in foreign currency investments. DELEGATION OF AUTHORITY Authority to manage the City’s investment program is derived from Section 53600 et seq. of the Government Code and Chapter 2.16 of the Pleasanton Municipal Code. Management responsibility for the investment program is delegated by the City Council and City Manager to the Director of Finance. The authority to manage some or all of the City’s investment portfolio can be further delegated to outside professional investment managers (Advisers) at the election and further approval of the City Council at the recommendation of the City Manager and Director of Finance. The Adviser shall be registered under the Investment Advisers Act of 1940. The Adviser shall follow this Investment Policy, written internal controls and other written instructions as provided by the City. Such delegation is subject to City review and overriding discretion which will be exercised as needed. ETHICS AND CONFLICTS OF INTEREST Officers and 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 who manage the investment of public funds must file an annual Statement of Economic Interests. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS The Director of Finance will maintain a list of financial institutions authorized to provide investment services. In addition, a list will also be maintained of approved security broker/dealers selected by credit worthiness, these may include “primary” dealers or regional dealers that qualify under Security & Exchange Commission Rule 15C3-1 (uniform net capital rule). All broker investment transactions require the approval of authorized City staff. No public deposit shall be made except in a qualified public depository as established by state laws. All financial institutions and broker/dealers who desire to become qualified bidders for investment transactions must supply the Director of Finance with the following: audited financial statements, completed broker/dealer questionnaire, and certification of having read the City’s investment policy.