New Jersey § 40a:5-15

§ 40a:5-15.

Securities which may be purchased by local units. a. When authorized by a cash management plan approved pursuant to N.J.S.40A:5-14 , any local unit may use moneys which may be in hand for the purchase of the following

types of securities which, if suitable for registry, may be registered in the name

of the local unit: (1) Bonds or other obligations of the United States of America or obligations guaranteed

by the United States of America; (2) Government money market mutual funds; (3) Any obligation that a federal agency or a federal instrumentality has issued in

accordance with an act of Congress, which security has a maturity date not greater

than 397 days from the date of purchase, provided that such obligation bears a fixed

rate of interest not dependent on any index or other external factor; (4) Bonds or other obligations of the local unit or bonds or other obligations of

school districts of which the local unit is a part or within which the school district

is located; (5) Bonds or other obligations, having a maturity date not more than 397 days from

the date of purchase, issued by New Jersey school districts, municipalities, counties, and entities subject

to the “Local Authorities Fiscal Control Law,” P.L.1983, c. 313 ( C.40A:5A-1 et seq. ). Other bonds or obligations having a maturity date not more than 397 days from the

date of purchase may be approved by the Division of Local Government Services in the Department of Community

Affairs for investment by local units; (6) Local government investment pools; (7) Deposits with the State of New Jersey Cash Management Fund established pursuant

to section 1 of P.L.1977, c. 281 ( C.52:18A-90.4 ); or (8) Agreements for the repurchase of fully collateralized securities, if: (a) the underlying securities are permitted investments pursuant to paragraphs (1)

and (3) of this subsection a. or are bonds or other obligations, having a maturity date not more than 397 days from

the date of purchase, issued by New Jersey school districts, municipalities, counties,

and entities subject to the “Local Authorities Fiscal Control Law,” P.L.1983, c. 313

( C.40A:5A-1 et seq. ) ; (b) the custody of collateral is transferred to a third party; (c) the maturity of the agreement is not more than 30 days; (d) the underlying securities are purchased through a public depository as defined

in section 1 of P.L.1970, c. 236 ( C.17:9-41 ); and (e) a master repurchase agreement providing for the custody and security of collateral

is executed. b. Any investment instruments in which the security is not physically held by the

local unit shall be covered by a third party custodial agreement which shall provide

for the designation of such investments in the name of the local unit and prevent

unauthorized use of such investments. c. Purchase of investment securities shall be executed by the “delivery versus payment”

method to ensure that securities are either received by the local unit or a third

party custodian prior to or upon the release of the local unit's funds. d. Any investments not purchased and redeemed directly from the issuer, government

money market mutual fund, local government investment pool, or the State of New Jersey

Cash Management Fund, shall be purchased and redeemed through the use of a national

or State bank located within this State or through a broker-dealer which, at the time

of purchase or redemption, has been registered continuously for a period of at least

two years pursuant to section 9 of P.L.1967, c. 93 ( C.49:3-56 ) and has at least $25 million in capital stock (or equivalent capitalization if not

a corporation), surplus reserves for contingencies and undivided profits, or through

a securities dealer who makes primary markets in U.S. Government securities and reports

daily to the Federal Reserve Bank of New York its position in and borrowing on such

U.S. Government securities. e. For the purposes of this section: (1) a “ government money market mutual fund ” means an investment company or investment trust: (a) which is registered with the Securities and Exchange Commission under the “Investment

Company Act of 1940,” 15 U.S.C. s.80a-1 et seq., and operated in accordance with 17 C.F.R. s.270.2a-7 , except that a government money market mutual fund may not impose liquidity fees

or redemption gates regardless of whether permitted to do so under 17 C.F.R. s.270.2a-7 ; (b) the portfolio of which is limited to U.S. Government securities that meet the definition of an eligible security pursuant to 17 C.F.R. s.270.2a-7 , securities that have been issued by New Jersey school districts, municipalities,

counties, and entities subject to the “Local Authorities Fiscal Control Law,” P.L.1983,

c. 313 ( C.40A:5A-1 et seq. ) that meet the definition of an eligible security pursuant to 17 C.F.R. s.270.2a-7 , and repurchase agreements that are collateralized by such securities in which direct investment may be made pursuant to paragraphs (1), (3),

and (5) of subsection a. of this section; and (c) which is rated by a nationally recognized statistical rating organization. (2) a “ local government investment pool ” means an investment pool: (a) which is managed in accordance with generally accepted accounting and financial reporting principles for local government

investment pools established by the Governmental Accounting Standards Board ; (b) which is rated in the highest category by a nationally recognized statistical

rating organization; (c) which is limited to U.S. Government securities that meet the definition of an eligible security pursuant to 17 C.F.R. s.270.2a-7 , securities that have been issued by New Jersey school districts, municipalities,

counties, and entities subject to the “Local Authorities Fiscal Control Law,” P.L.1983,

c. 313 ( C.40A:5A-1 et seq. ) that meet the definition of an eligible security pursuant to 17 C.F.R. 270.2a-7 and repurchase agreements that are collateralized by such securities in which direct investment may be made pursuant to paragraphs (1), (3),

and (5) of subsection a. of this section; (d) which is in compliance with such rules as may be adopted pursuant to the “Administrative Procedure Act,” P.L.1968, c. 410 ( C.52:14B-1 et seq. ) by the Local Finance Board of the Division of Local Government Services in the Department

of Community Affairs, which may promulgate rules providing for disclosure and reporting requirements, and other provisions deemed necessary

by the board to provide for the safety, liquidity and yield of the investments; (e) which does not permit investments in instruments that: are subject to high price

volatility with changing market conditions; cannot reasonably be expected, at the

time of interest rate adjustment, to have a market value that approximates their par

value; or utilize an index that does not support a stable net asset value; (f) which purchases and redeems investments directly from the issuer, government money

market mutual fund, or the State of New Jersey Cash Management Fund, or through the

use of a national or State bank located within this State, or through a broker-dealer

which, at the time of purchase or redemption, has been registered continuously for

a period of at least two years pursuant to section 9 of P.L.1967, c. 93 ( C.49:3-56 ) and has at least $25 million in capital stock (or equivalent capitalization if not

a corporation), surplus reserves for contingencies and undivided profits, or through

a securities dealer who makes primary markets in U.S. Government securities and reports

daily to the Federal Reserve Bank of New York its position in and borrowing on such

U.S. Government securities ; and (g) which does not impose liquidity fees or redemption gates . f. Investments in, or deposits or purchases of financial instruments made pursuant

to this section shall not be subject to the requirements of the “Local Public Contracts

Law,” P.L.1971, c. 198 ( C.40A:11-1 et seq. ).