Policy No..: MDTA 7010 Effective: August 16, 2005
1. If held by a custodian, the securities must be in the MDTA’s name or in the custodian’s nominee name and identifiable on the custodian’s books as belonging to the MDTA. a. If held by a custodian, the custodian must be a third party, not a counterparty (buyer or seller).
i. The third-party requirement does not apply to excess checking account funds invested overnight in a bank “sweep” repurchase agreement or similar vehicle. b. Policy Statement 10. Collateralization is required for Certificates of Deposit and repurchase agreements.
1. In order to anticipate market changes and provide a level of security for all funds, the collateralization level will be at least one hundred and two percent (102%) of market value of principal and accrued interest. 2. Collateral will always be held by an independent third party with whom the Authority has a current custodial agreement. 3. Acceptable collateral is specified under Section 6-202 of the State Finance and Procurement Article of the Annotated Code of Maryland. 4. The third party trust custodian has the right to reject otherwise acceptable collateral based on their discretion concerning market conditions.
X. Internal Controls a. Policy Statement 11. The MDTA shall establish a system of internal controls to reasonably prevent loss of public funds as a result of fraud, employee error and/or imprudent action, or misrepresentation by third parties. This system will include: i. An audit of the investment operation shall be part of the annual financial audit conducted by the MDTA or an outside independent audit company. ii. Separation of transaction authority from accounting and record keeping. iii. Avoidance of physical delivery of securities when possible. iv. Clear delegation of responsibility to subordinate staff members. v. Written records of all telephone transactions for investments and wire transfers. vi. Development of a wire transfer agreement with lead bank or third-party custodian, as appropriate. XI. Authorized Financial Dealers and Institutions a. Policy Statement 12. The MDTA shall transact securities purchases and sales only with Qualified Institutions or directly with issuers. i. The MDTA shall maintain a list of financial institutions and broker/dealers that are approved for investments purposes (“Qualified Institutions”). ii. Direct purchases of securities from issuers are not subject to the Qualified Institutions restrictions. iii. Only firms meeting the following requirements will be eligible to serve as Qualified Institutions: 1. Primary dealers and regional dealers that qualify under Securities
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