N.Y. General Municipal Law § 43: Required elements of a cooperative investment agreement

§ 43. Required elements of a cooperative investment agreement. Every

cooperative investment agreement shall contain, at a minimum, the

following:

1. a description of the creation, membership, powers and

responsibilities of the governing board of the cooperative investment

agreement as set forth in sections forty-four and forty-five of this

article.

2. a statement designating one of the participants as the lead

participant. Moneys to be invested pursuant to the cooperative

investment agreement and the investments made pursuant to the

cooperative investment shall be held in the custody of the lead

participant on behalf of all the participants. Moneys or investments

held in the custody of the lead participant on behalf of the

participants shall not be commingled with other moneys or investments of

the lead participant.

3. a statement that each participant shall have an undivided interest

in moneys and investments held by the lead participant on behalf of the

participants in the proportion that the total amount of contributions

made by that participant bears to the total amount of contributions by

all the participants.

4. a statement of the investment policy applicable to investments made

pursuant to the agreement. This investment policy shall conform to the

requirements of section thirty-nine of this chapter and shall also

include:

(a) a statement of the governing board's intention to maintain the

value of each participant's interest in the cooperative investments at a

stable value of one dollar,

(b) a statement of the types of investments authorized by section

eleven of this chapter in which moneys may be invested under the

agreement and, if deemed appropriate, further limitations pertaining to

matters such as the use of repurchase agreements and the purchase of

variable rate and structured obligations,

(c) a statement of the maximum time remaining to maturity of

individual investments permitted under the agreement and the maximum

weighted average maturity of all investments made pursuant to the

agreement as are deemed necessary to fulfill the investment policy

stated in the agreement and to ensure that a participant's investment

will be available when needed to meet expenditures; provided, however,

that the maximum time remaining to maturity of individual investments

shall not exceed three hundred ninety-seven days and the maximum

weighted average maturity of all investments shall not exceed sixty

days. Compliance under the cooperative investment agreement with the

maturity limitations stated in this subdivision shall be deemed to be

compliance with the requirements of paragraph a of subdivision three of

section eleven of this chapter, and

(d) standards for the diversification of investments, including

diversification with respect to types of investments and firms with whom

the governing board transacts business.

5. the participants' rights to make contributions and receive

distributions, the frequency with which earnings will be distributed

to the participants, and the circumstances, if any, under which a

participant's rights to make contributions or receive distributions may

be limited or deferred.

6. a description of the manner in which expenses incurred by the

governing board in administering the cooperative investment agreement,

including, but not limited to, the cost of procuring the services of

professionals to assist the governing board, the compensation of an

executive director, if one is appointed, and other costs of

administering the investments made pursuant to the agreement, are to be

apportioned among the participants.

7. a description of the methodology, including, but not limited to,

the amortized cost method, that will be utilized to establish the value

of each participant's interest in investments made pursuant to the

agreement, including the value of contributions and distributions, and

the calculation of yield thereon.

8. a provision requiring that the market value of investments made

pursuant to the agreement shall be determined at least monthly and

whenever the method of valuation authorized by the agreement does not

accurately reflect the value of participants' interests in such

investments.

9. a provision requiring that, at least once a month, the portfolio of

investments made pursuant to the agreement be tested for sensitivity to

changes in interest rates. This provision must require that the testing

methodology adopted by the board be reasonably designed to reliably

quantify the effect of a change in interest rates on the market

value of the portfolio.

10. a provision requiring that the governing board secure an

irrevocable letter of credit in an amount sufficient to cover any

potential losses as quantified pursuant to the testing described in

subdivision nine of this section. The cost of such irrevocable letter of

credit shall be deemed to be an expense incurred by the board in

administering the investments made pursuant to the agreement.

11. a statement that the governing board may procure the services of

professionals such as an administrator, investment advisor, independent

auditor, custodial bank, and any other professional services it deems

appropriate to assist the governing board in fulfilling its

responsibilities under the agreement, provided that: (a) the

professionals who will render such services, individually and

collectively, shall meet all qualifications deemed appropriate by the

governing board; (b) the procurement of such services shall be in

compliance with section one hundred four-b of this chapter, subject

to a request for proposal process at least every three years; (c) the

contracts for such services shall ensure compliance with the

requirements of sections ten and eleven of this chapter; and (d) the

charges, fees and other compensation for any contracted services

shall be clearly stated in written service contracts.

12. a provision requiring that each participant receive written

confirmation of each contribution made by or distribution made to the

participant no later than the following business day after which the

contribution or distribution occurs.

13. a provision requiring that each participant receive a monthly

statement that sets forth the following information for the preceding

month: (a) all activity by the participant; (b) the value of the

participant's interest under the agreement at the beginning and end of

the month; and (c) an itemization of all investments held under the

agreement as of the end of the month, including the market value of

each investment as of that date.

14. a provision requiring that each participant and the state

comptroller receive immediate notification of any event or

circumstance that may require a deferral of distributions or may cause

investment losses not anticipated by the investment policy and of any

other material adverse event relating to the investments made pursuant

to the agreement.

15. a provision requiring that a certified public accountant annually

conduct an audit, in accordance with generally accepted government

auditing standards, of the activities undertaken pursuant to the

agreement. A copy of this annual audit shall be distributed to each

participant and to the state comptroller within ninety days after the

close of the fiscal year established under the agreement.

16. a provision requiring that each participant annually receive,

and each prospective participant receive prior to their participation

in the agreement, an information statement that includes, at a

minimum, the following: (a) a brief history of the agreement; (b) a

description of the organization and terms of the cooperative

investment agreement, including the powers and responsibilities of the

governing board and the qualifications of any professionals retained

under the agreement; (c) a description of the investment objectives,

policies and practices contained in the agreement including those

pertaining to liquidity, methodology for determining participants'

interests, distribution of earning and calculation of yield; (d) a

description of the current investments held under the agreement; (e) a

listing of any fees or charges to be incurred by participants; and (f)

a description of the required procedures for initiation and termination

of participation in the agreement.

17. a provision requiring that all participants receive at least

once a year a report detailing the following information for the

preceding twelve months: (a) the portfolio of investments currently

held pursuant to the agreement, including, for each investment, the

market value, time remaining to maturity, interest earned and

realized, and unrealized gains and losses; (b) the overall investment

results, yield and weighted average maturity; (c) a list of the fees

paid for all professional services procured under the agreement; and

(d) a statement of all other expenses incurred by the governing board in

administering the investments made pursuant to the agreement.

18. a provision requiring that, if the governing board obtains a

rating from a nationally recognized statistical rating organization,

such rating and any subsequent changes therein be disclosed to each

participant.