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R-47-11 Res Investment Policy & Controls ManualRESOLUTION NO. R - 4-1 - i I A RESOLUTION ADOPTING AN INVESTMENT POLICY & INVESTMENT PROCEDURES AND INTERNAL CONTROLS MANUAL WHEREAS, the Village of Lemont desires to adopt an Investment Policy & Investment Procedures and Internal Controls Manual; and WHEREAS, the President and Board of Trustees find that adopting the attached Village of Lemont Investment Policy & Investment Procedures and Internal Controls Manual is in the interest of the public health, safety and welfare of the residents of Lemont; NOW, THEREFORE, BE IT RESOLVED BY THE PRESIDENT AND BOARD OF TRUSTEES as follows: SECTION 1: That the Village of Lemont Investment Policy & Investment Procedures and Internal Controls Manual, attached as Exhibit A hereto is hereby adopted. SECTION 2: This Resolution shall be in full force and effect from and after its passage as provided by law. SECTION 3: The Village Clerk of the Village of Lemont shall certify to the adoption of this Resolution and cause the same to be published in pamphlet form. PASSED AND APPROVED BY THE PRESIDENT AND BOARD OF TRUSTEES OF THE VILLAGE OF LEMONT, COUNTIES OF COOK, WILL AND DUPAGE, ILLINOIS on this 17 day of M-4 , 2011. Debby Blatzer Paul Chialdikas Clifford Miklos Ron Stapleton Rick Sniegowski Jeanette Virgilio ATTEST: PRESIDENT AND VILLAGE BOARD MEMBERS: AYES: NAYS: ABSENT: ABSTAIN 1 CHARLENE M. MOLLEN Village Clerk BRI 1 . REAVES President Village of Lemont Investment Policy Adopted: June 27, 2011 TABLE OF CONTENTS A. Scope 1 B. Objectives 1 1. Legality 1 2. Safety 1 3. Liquidity 3 4. Total Return 3 C. Standards o f Care 3 1. Prudence 3 2. Ethics and Conflicts of Interest 4 3. Delegati on of Authority 4 D. Safekeeping and Custody 4 1. Authorized Financial Dealers and Institutions 4 2. Internal Controls 5 3. Delivery vs Payment 6 4. Safekeeping 6 E. Suitable and Authorized Investments 6 1. Investment Types 6 2. Collateralization 7 F. Investment Parameters 8 1. Diversification 8 2. Maximum Maturities 8 G. Reporting 9 H. Performance Standards 9 I. Marking to Market 9 J. Policy Consideration 10 K. Approval of Policy 10 The Village of Lemont Investment Policy Adopted: June 27, 2011 A. Scope This Policy applies to the cash management and investment activities of the Village of Lemont and covers all Village funds other than those of the Police Pension Plan. It is the policy of the Village of Lemont to invest public funds in a manner which will provide the highest investment return with the maximum security while meeting the daily cash flow demands of the Village and conforming to all state and local statutes governing the investment of public funds. With the exception of the Police Pension Fund, all other funds of the Village shall be administered in accordance with the provisions of this policy. The Police Pension Fund shall be administered in accordance with the contractual and statutory requirements of that fund. Any monies received for the Police Pension Fund shall be administered by the written order of the Board of Trustees of that Fund. Pooling of Funds Except for cash in certain restricted and special funds, the Village will consolidate cash and investment balances from all funds to maximize investment earnings and to increase efficiencies with regard to investment pricing, safekeeping and administration. Investment income will be allocated to the various funds based on their respective participation and in accordance with generally accepted accounting principles monthly. B. Objectives The primary objectives of investment activities, in priority order, shall be Legality, Safety, Liquidity, and Total Return. 1. Legality The Village's investments will be in compliance with all federal, state and other legal statutes and requirements governing the investment of public funds. 2. Safety Safety of principal, along with legality, is the foremost objectives of the investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objective will be to mitigate credit risk, custodial credit risk, and interest rate risk in the overall portfolio. The Village shall diversify its investments to minimize risks regarding individual securities. 1 The Village of Lemont Investment Policy Adopted: June 27, 2011 a. Credit Risk Credit Risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Village will minimize credit risk by: • Limiting investments to the types of securities listed in Section E of this Investment Policy. • Pre - qualifying the financial institutions, broker /dealers, intermediaries, and advisers with which the Village will do business in accordance with Section D.1. of this policy. • Diversifying the investment portfolio so that the impact of potential losses from any one type of security or from any one individual issuer will be minimized. b. Custodial Credit Risk Custodial Credit Risk is the risk that, in the event of a bank or counterparty failure, the Village's collateral securing uninsured deposits or investments may not be recovered. The Village will minimize custodial credit risk over deposits with financial institutions by ensuring that all deposits with financial institutions are insured or collateralized with securities held by the Village's agent in the Village's name. —All investments shall be conducted on a Delivery vs Payment (DVP) basis. Securities will be held by a third -party securities custodian designated by the Village separate from where the investment was purchased. c. Interest Rate Risk Interest Rate Risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The Village will minimize interest rate risk by: • Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity. • Investing operating funds primarily in shorter -term securities, money market mutual funds, or similar investment pools and limiting the weighted average maturity of the portfolio to no more than two years and limiting the maximum maturity of any investment to three years from the date of purchase, unless matched to a specific future cash flow need. The Village of Lemont Investment Policy Adopted: June 27, 2011 3. Liquidity The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so that securities mature concurrent with cash needs to meet anticipated demands. Furthermore, since all possible cash demands cannot be anticipated, the portfolio should consist largely of securities with active secondary or resale markets. Alternatively, a portion of the portfolio may also be placed in local government investment pools which offer same -day liquidity for short-term funds. 4. Total Return The investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the legality, safety and liquidity objectives described above. Return on investments is of secondary importance compared to the safety and liquidity objectives described above. The core investments are limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. C. Standards of Care 1. Prudence The standard of prudence to be used by investment officials shall be the "prudent person, ", which states " Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probably safety of their capital as well as the probable income to be derived" and shall be applied in the context of managing the entire portfolio. Investment officers acting in accordance with written procedures and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. 3 The Village of Lemont Investment Policy Adopted: June 27, 2011 2. Ethics and Conflicts of Interest Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial decisions. Employees and investment officials shall disclose any material interests in financial institutions with which they conduct business. They shall further disclose any personal financial or investment positions that could be related to the performance of the investment portfolio. Employees and officers shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the Village. 3. Delegation of Authority Authority to manage the investment program is granted to the Assistant Village Administrator derived from the following: 30 ILCS 235 et. seq. The Assistant Village Administrator or designee establishes written procedures and internal controls for the operation of the investment program that is consistent with the investment policy. E. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the Assistant Village Administrator. The Assistant Village Administrator and Village Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials, including outside investment managers. D. Safekeeping and Custody 1. Authorized Financial Dealers and Institutions A list will be maintained of financial institutions authorized to provide investment services. In addition, a list also will be maintained of approved security broker /dealers selected by creditworthiness (e.g., a minimum capital requirement of $1 0,000,000 and at least five years of operation). These may include "primary" dealers or regional dealers that qualify under Securities and Exchange Commission (SEC) Rule 15C3 -1 (uniform net capital rule). All financial institutions and broker /dealers who desire to become qualified bidders for investment transactions must supply the following as appropriate: • Audited financial statements. • Proof of National Association of Securities Dealers (NASD) certification. 4 The Village of Lemont Investment Policy Adopted: June 27, 2011 • Proof of state registration. • Completed broker /dealer questionnaire. • Certification of having read and understood and agreeing to comply with the Village's investment policy. An annual review of the financial condition and registration of qualified bidders will be conducted by the Assistant Village Administrator. 2. Internal Controls The Assistant Village Administrator is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the entity are protected from loss, theft or misuse. The internal control structure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived and the valuation of costs and benefits requires estimates and judgments by management. Accordingly, the Assistant Village Administrator shall establish a process for an annual independent review by an external auditor to assure compliance with policies and procedures. The internal controls shall address the following points: • Control of collusion. • Separation of transaction authority from accounting and recordkeeping. • Custodial safekeeping. • Avoidance of physical - delivery securities. • Clear delegation of authority to subordinate staff members. • Written confirmation of telephone transactions for investments and wire transfers. • Dual authorizations of wire transfers. • Development of a wire transfer agreement with the lead bank or third party custodian. See Attachment A: Village of Lemont Investment Procedures and Internal Controls Manual. 5 The Village of Lemont Investment Policy Adopted: June 27, 2011 3. Delivery vs Payment All trades of marketable securities will be executed by delivery vs. payment (DVP) to ensure that securities are deposited in an eligible Village custodian prior to the release of funds. 4. Safekeeping Securities will be held by a [centralized] independent third -party custodian selected by the Village as evidenced by safekeeping receipts in the Village's name and a written custodial agreement. The safekeeping institution shall annually provide a copy of their most recent report on internal controls (Statement of Auditing Standards No. 70, or SAS 70). E. Suitable and Authorized Investments 1. Investment Types Except as modified herein all investments purchased under this policy shall be guided by the Public Funds Investment Act 30 ILCS 235 et seq. and all revisions thereto, as may be made by the Illinois Legislature. Below is a summary of acceptable investments as determined by the Assistant Village Administrator in compliance with the applicable statute: a. U.S. government obligations, U.S. government agency obligations, and U.S. government instrumentality obligations, which have a liquid market with a readily determinable market value and are rated A or better by a nationally recognized ratings agency. b. Certificates of deposit and other evidences of deposit at financial institutions, bankers' acceptances, and commercial paper, rated in the three highest tier (e.g., A -1, P- 1,D -1, or F- 1 or higher) by a nationally recognized rating agency c. Investment -grade obligations (rated A or better by a nationally recognized ratings agency) of state, provincial and local governments and public authorities. d. Money market mutual funds regulated by the Securities and Exchange Commission and whose portfolios consist only of dollar- denominated securities. e. Local government investment pools. Investment in derivatives shall be prohibited without the approval of the Board of Trustees of the above instruments shall require authorization by the appropriate governing authority. 6 The Village of Lemont Investment Policy Adopted: June 27, 2011 2. Collateralization Monies held in depository accounts, time deposit accounts, or money market mutual funds, or invested in the certificates of deposit of financial institutions (banks, savings and loan associations, or credit unions) in excess of FDIC or SAIF insurance shall be secured by some form of collateral. The Village will accept the following assets as collateral: (a) U.S. Government securities. (b) Obligations of federal agencies. (c) Obligations of federal instrumentalities. (d) General obligation bonds of any United States state or local government rated "A" or better (i.e., at least upper medium quality) by Moody's Investors Service, Standard & Poor's Rating Service, or Fitch Investors Service. The chief investment officer may reject any form of collateral at any time. The amount of the collateral provided by a financial institution will not be less than 110% of the market value of the net amount of deposits and investments to be secured. The ratio of market value of collateral to the amount of funds to be secured will be reviewed monthly by the chief investment officer. Additional collateral will be requested of a financial institution when the ratio declines below the required level. Collateral may not be released without the signature of the chief investment officer. Pledged collateral will be held in safekeeping, by an independent third -party depository, or the Federal Reserve Bank, as designated by the chief investment officer, and evidenced by a safekeeping receipt. The market value of collateral will be determined based upon quotations reflected in the edition of The Wall Street Journal published on the first business day following the quarter concerned. (This edition will report the market value of securities as of the last day of the quarter concerned.) If a security provided as collateral is not listed in The Wall Street Journal, its market value will be determined using a comparable source acceptable to the chief investment officer. Financial institutions pledging collateral will sign a collateral agreement that meets the requirements of the Financial Institution Resource Recovery Enforcement Act (FIRREA) acceptable to the chief investment officer. 7 The Village of Lemont Investment Policy Adopted: June 27, 2011 F. Investment Parameters 1. Diversification The investments shall be diversified by: • Limiting investments to avoid overconcentration in securities from a specific issuer or business sector (excluding U.S. Treasury securities). No more than 10% of the portfolio can be invested in any one investment. • Limiting investment in securities that have higher credit risks. • Investing in securities with varying maturities. • Continuously investing a portion of the portfolio in readily available funds such as local government investment pools (LGIPs), money market funds or overnight repurchase agreements to ensure that appropriate liquidity is maintained in order to meet ongoing obligations. 2. Maximum Maturities To the extent possible, the Village shall attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the Village will not directly invest in securities maturing more than three (3) years from the date of purchase. The Village shall adopt weighted average maturity limitations, consistent with the investment objectives, as previously noted. Reserve funds and other funds with longer -term investment horizons may be invested in securities exceeding five (5) years if the maturity of such investments are made to coincide as nearly as practicable with the expected use of funds. The intent to invest in these types of securities shall be disclosed in writing to the Board of Trustees. Because of inherent difficulties in accurately forecasting cash flow requirements, a portion of the portfolio should be continuously invested in readily available funds such as local government investment pools, money market funds, or overnight repurchase agreements to ensure that appropriate liquidity is maintained to meet ongoing obligations. 8 The Village of Lemont Investment Policy Adopted: June 27, 2011 G. Reporting The Village Treasurer shall prepare an investment report at least quarterly, including a management summary that provides an analysis of the status of the current investment portfolio and the individual transactions executed over the last quarter. This management summary will be prepared in a manner which will allow the Village to ascertain whether investment activities during the reporting period have conformed to the investment policy. The report should be provided to the Village Administrator and the Village Board Finance Officer. The report will include the following: • Listing of individual securities held, by fund, at the end of the reporting period reporting original cost and current market value of each security. • Average weighted yield to maturity of portfolio on investments as compared to applicable benchmarks. • Listing of investments by maturity date. • The purchase and safekeeping institutions. H. Performance Standards The investment portfolio will be managed in accordance with the parameters specified within this policy. The portfolio should obtain a market average rate of return during a market /economic environment of stable interest rates. Portfolio performance should be compared to appropriate benchmarks on a regular basis. The benchmarks shall be reflective of the actual securities being purchased and risks undertaken and the benchmark shall have a similar weighted average maturity as the portfolio. I. Marking to Market The market value of the portfolio shall be calculated at least quarterly and a statement of the market value of the portfolio shall be issued at least quarterly. This review of the investment portfolio, in terms of value and price volatility, should be performed consistent with the GFOA Recommended Practices on "Mark -to- Market Practices for State and Local Government Investment Portfolios and Investment Pools ". In defining market value, considerations should be given to the GASB Statement 31 pronouncement. 9 The Village of Lemont Investment Policy Adopted: June 27, 2011 J. Policy Consideration 1. Exemption Any investment currently held that does not meet the guidelines of this policy shall be exempted from the requirements of this policy. At maturity or liquidation, such monies shall be reinvested only as provided by this policy. 2. Amendments This policy shall be reviewed on an annual basis. Any changes must be approved by the Village board in consultation with the individuals charged with maintaining internal controls. K. Approval of Investment Policy The investment policy shall be formally approved and adopted by the Village Board of the Village of Lemont and reviewed annually. 10 Investment Procedures and Internal Controls Manual — Attachment A A. Introduction The Finance Department and Assistant Village Administrator is responsible for conducting cash and investment transactions for all funds (except the Police Pension Fund) held by or for the benefit of the Village of Lemont. The responsibility for the administration of the investment program has been delegated to the Assistant Village Administrator and Village Treasurer, who shall implement the following investment procedures and internal controls, as prescribed by the Investment Policy. B. Objective The Procedures and Internal Control Manual provides an outline for cash and investment transactions. This manual shall be reviewed on a yearly basis for possible revisions by the Assistant Village Administrator and Village Treasurer to ensure that the manual is current with investment industry standards and practices. C. Prudence and Standard of Prudence The standard of prudence to be used by the investment staff shall be that of a "prudent person" and shall be applied in the context of managing the overall portfolio. The Village Treasurer, or persons performing the investment functions, acting in accordance with written policies and procedures and exercising due diligence, shall not be responsible for an individual security's credit risk or market price changes, provided that deviations from expectations are reported in a timely fashion and appropriate action is taken to control or mitigate adverse developments. The "prudent person" standard is herewith understood to mean the following: Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. D. Investment Decisions The investment staff, which includes the Assistant Village Administrator and Village Treasurer, shall adhere to the guidelines of the Village of Lemont's Investment Policy regarding all investment procedures or any other cash and investment transactions. 1 Investment Procedures and Internal Controls Manual — Attachment A E. Chain of Command For the purpose of obtaining approval on investment matters not addressed in the Investment Policy, the following chain of command is appropriate: 1. Village Board of Trustees 2. Village Administrator 3. Assistant Village Administrator 4. Village Treasurer F. Duties and Responsibilities The Assistant Village Administrator and the Village Treasurer have specific duties and responsibilities as stated in their respective position descriptions. The Assistant Village Administrator shall be responsible for the management of the investment program and the Village Treasurer shall be responsible for the daily operational duties (i.e., purchases, sells, bank transfers, wires, and reports) with another finance department employee responsible for the accounting along with monitoring compliance with the internal control procedures. G. Ethics and Conflict of Interest For the protection of the investment staff, it is imperative that full disclosure be made by investment personnel and the Board of Trustees to the Village Administrator of any material interests which they may hold in a financial institution (brokers /dealers, banks, etc.) which conducts business with the Village. H. Separation of Duties Investment staff shall observe proper segregation of duties while engaged in investment activities. Persons responsible for approving investment transactions should not be engaged in activities relating to the recording of transactions in the financial records or the reconciliation of cash and safekeeping account statements. Reporting Requirements A quarterly report shall be prepared and forwarded to the Village Administrator who in turn shall forward to the Village Board. The report shall contain, but not be limited to, the following information: a) b) c) d) e) Security ID Purchase date Maturity date Purchase institution Safekeeping institution 2 f) g) h) i) J) Par value Original cost value Coupon rate (if applicable) Yield to maturity System assigned account number Investment Procedures and Internal Controls Manual — Attachment A A mark -to- market report shall be prepared on a quarterly basis. This report shall include the market value, book value, and unrealized gain or loss of the securities in the portfolio. These values should be obtained from a reputable and independent source. J. Operations "Operations" is defined as those necessary procedures and duties required to maintain a properly working department on a daily basis. 1. Daily Investment Procedures The following is a basic outline of routine daily procedures necessary to maintain proper documentation on cash and investment transactions. Each morning, the daily bank balances shall be obtained from the depository bank via computer. The Village Treasurer shall be responsible for providing the Assistant Village Administrator with daily information regarding the cash requirements and required maturity dates for all funds. 2. Daily Investment Worksheet ( "cash book ") On a daily basis, it is necessary to monitor cash activity within specific bank accounts for the purpose of determining net cash available for investment. A "cash book" shall be maintained by the Village Senior Fiscal Assistant which shall include a summary of daily cash inflows and outflows by bank account and corresponding book balances at the end of each day. A review of the "cash book" shall be conducted by the Village Treasurer and shall consider net available cash for investment as well as future anticipated cash flows for the purpose of determining the amount and duration in which funds might be invested. All cash and investment transactions shall be journalized, by bank account, and given to the Village Treasurer before 2:00 p.m. each day. Proper documentation and authorization shall be required before any cash or investment transaction is executed. 3 Investment Procedures and Internal Controls Manual — Attachment A 3. Authorized Wire Transfers Only the Village Treasurer shall be authorized to originate the wiring Village funds for investment and payment of debt service purposes to established Village bank accounts. Wire instructions and personal identification numbers (PIN's) shall be safeguarded by the authorized representatives. All bank transfer requests shall be in writing and approved by an authorized representative and all requests shall be filed with the investment work -up documents. Al bank transfers will require two signatures, the Village Treasurer and the Assistant Village Administrator. Phone wire transfers may be performed provided such requests are made over recorded lines and a written confirmation of the transfer is prepared by the bank. The purpose of the bank transfer must be noted as part of the transfer information. Wire transfers shall be confirmed by a third party independent of the authorization function. 4. Securities' Confirmations The processing of securities' confirmations, including the filing and reconciling, shall be reviewed by an individual who did not execute the purchase or sale. All confirmations for securities, including certificates of deposit, shall be attached to the daily investment work -up documentation. The original confirmations are not permitted to leave the Finance Department, and only copies will be provided upon request. Upon receipt, the safekeeping account listing shall be reconciled against the appropriate investment reports. Coupon Notices Securities which periodically pay coupons will require that the amount of the coupon payments be transferred to the appropriate bank account and a journal entry prepared and given to the Village Treasurer. 4 Investment Procedures and Internal Controls Manual — Attachment A 6. Safekeeping Procedures All securities purchased for the Village shall be received by "delivery vs. payment" (DVP) to the Village's designated custodian for safekeeping. The Village's designated safekeeping institution shall be notified of the trade prior to or on the day of settlement. Confirmation of the delivery will include the type of security purchased/sold, CUSIP, coupon rate (if applicable), maturity, purchase and settlement dates, par value and purchase price. Nonnegotiable Certificates of deposit are permitted to be safe kept at the issuing bank provided they are fully collateralized and pledges are held at an independent third party institution. Negotiable certificates of deposit should be on a DVP basis as noted above. All certificates of deposit confirmations must be verified against the appropriate investment reports and general ledger account on a monthly basis. Additional requirements and procedures are outlined in the Third -Party Custodial Safekeeping Agreement regarding safekeeping procedures. K. Accounting for Investment Transactions Investments shall be recorded in the financial records at original cost. Interest income will be recognized at maturity or amortized as of the last day of the fiscal year according to the effective interest method of amortization. L. Investment Information 1. Internal Investment Reports Investment reports are generated by the Village Treasurer. Each report shall be checked against the original documentation and the appropriate general ledger accounts to ensure the accuracy of the reports on a monthly basis. Furthermore, the investment reports shall be safe kept by the Finance Department. 2. Market Values Market values shall be calculated on a quarterly basis by the Village Treasurer and a report provided to the Village Administrator and the Board of Trustees. 3. Trust Statements Original statements for the Village's investment accounts which are held by a custodian shall be reconciled by the Village Treasurer on a monthly basis. 5 Investment Procedures and Internal Controls Manual — Attachment A M. Selection of Dealers and Bankers As stated in the Village of Lemont's Investment Policy, the Village Treasurer shall only purchase securities from financial institutions which are qualified as public depositories by the Village of Lemont or from broker /dealers that were selected based on credit worthiness that qualify under Securities and Exchange Commission Rule 15C3 -1 (uniform net capital rule). The Finance Department shall provide each authorized dealer a copy of the Village's Investment Policy and each dealer shall be required to submit, in writing, a statement that they have received, read and understand the Village's investment policy. This statement shall be submitted to the Assistant Village Administrator. Once all requirements are met, the Finance Department will provide the dealer with a list of staff members who are authorized to conduct cash and investment transactions. N. Security Selection Process When purchasing or selling securities, the Finance Department shall select the security which provides both the highest rate of return within the established parameters of the Investment Policy and satisfies the current objectives and needs of the Village's portfolio. These selections shall be made based on a minimum of two (2) bids /quotes (unless securities are being purchased at the FED window) being obtained from banks and/or broker /dealers on the securities in question. Two bids /quotes are not necessary in the following situations: 1. When time constraints due to unusual circumstances preclude the use of the competitive bidding process. 2. When no active market exists for the issue being traded due to the age or depth of the issue. 3. When a security is unique to a single dealer, for example, a private placement. 4. When the transaction involves new issue or issues in the "when issued" market. When using the competitive bid process, all bids shall become part of the record of the specific security involved. 6