Section 12365.7 Of Article 3. Retirement Board From California Public Utilities Code >> Division 6. >> Chapter 5. >> Article 3.
12365.7
. (a) Notwithstanding any other provision of this chapter,
the retirement board, or the district's treasurer with the approval
of the retirement board, may enter into security loan agreements with
broker-dealers and with California or national banks for the purpose
of prudently supplementing the income normally received from
investments.
(b) "Security loan agreement" means a written contract whereby a
legal owner, the lender, agrees to lend specific marketable corporate
or government securities for a period not to exceed one year. The
lender retains the right to collect from the borrower all dividends,
interest, premiums, rights, and any other distributions to which the
lender would otherwise have been entitled. The lender waives the
right to vote the securities during the term of the loan. The lender
may terminate the contract upon not more than five business days'
notice as agreed, and the borrower may terminate the contract upon
not less than two business days' notice as agreed. The borrower shall
provide collateral to the lender in the form of cash or bonds or
other interest-bearing notes and obligations of the United States or
federal instrumentalities eligible for investment by a lending
retirement fund.
The collateral shall be in an amount equal to at least 102 percent
of the market value of the loaned securities as agreed. The lender
shall monitor the market value of the loaned securities daily. The
loan agreement shall provide for payment of additional collateral on
a daily basis, or at the time the value of the loaned securities
increases, to agreed-upon ratios. In no event shall the amount of the
collateral be less than the market value of the loaned securities.
(c) "Marketable securities" means securities that are freely
traded on recognized exchanges or marketplaces.
(d) The retirement board or district treasurer entering into
security loan agreements shall do all of the following:
(1) Maintain detailed records of all security loans.
(2) Develop controls and reports to monitor the conduct of the
transactions.
(3) Publicize the net results of the security loan transaction
separate from the results of other investment activities.