1 Del. Admin. Code § 1201-11.0

Current through Reigster Vol. 28, No. 6, December 1, 2024

Section 1201-11.0 - Restrictions & Violations

11.1 Investment Restrictions. Notwithstanding any other provision, none of the banks or managers engaged to manage or invest State Funds may:

11.1.1 Purchase any securities other than those expressly permitted under Sections 5.0 - 9.0 of these Guidelines;

11.1.2 Make investments for the purpose of exercising control or management of an issuer;

11.1.3 Purchase any securities on margin, except for use of short-term credit necessary for clearance of purchases and sales of portfolio securities;

11.1.4 Make short sales of securities or maintain a short position or write, purchase or sell puts, calls, straddles, spreads or combinations thereof;

11.1.5 Make loans to other persons, other than in connection with repurchase agreements as provided herein;

11.1.6 Mortgage, pledge, hypothecate or in any manner transfer as security for indebtedness any securities owned or held;

11.1.7 Invest in securities with legal or contractual restrictions on resale or for which no readily available market exists (except for repurchase agreements or variable rate master demand notes as provided herein and, if authorized under applicable U.S. Securities and Exchange Commission rules and regulations, 144A private placements considered not to be illiquid, but, instead, readily marketable by issuing dealers);

11.1.8 Act as an underwriter of securities on behalf of the State of Delaware; or

11.1.9 Buy or sell any authorized investment when it is a party or any related or affiliated party in the transaction on both sides.

11.1.10 Where these Guidelines require at least two NRSRO ratings for a security, the lowest such rating shall control.

11.2 Purchases in Violation of Guidelines. In the event that a bank or manager purchases any security that at the time of purchase violates Sections 5.0 - 10.0, the bank or manager shall remove the security from the State's portfolio by the close of the business day following the date on which the bank or manager learns of the violation and will bear all costs associated with the purchase and sale of such security. The bank or manager shall further ensure that the State recognizes no investment gain or loss on the purchase and sale of such security and/or shall effect such transactions as shall be necessary to eliminate any such gain or loss on the books and records of the State's Account with such bank or manager. A bank or manager shall report to OST any such violation and the remedial action(s) taken or proposed by the close of the business day following the date on which the bank or manager learns of the violation.

11.3 Holding Impermissible Securities Following a Downgrade. In the event that a bank or manager holds any security that complied with Sections 5.0 - 10.0 at the time of purchase, but which ceases to qualify as a permissible investment as the result of a downgrade, the bank or investment manager shall remove the security from the State's portfolio by the close of the business day following the date on which the bank or manager learns of the downgrade without any consideration as to the investment gains or losses occasioned thereby. In such case, the State shall bear all costs associated with the purchase and sale of such security and shall recognize any investment gain or loss on such transactions on the books and records of the State's Account with such bank or manager. A bank or manager shall report to OST any such downgrade and the remedial action(s) taken or proposed by the close of the business day following the date on which the bank or manager learns of the downgrade.

11.4 Holding Impermissible Securities Following a Drawdown. In the event that a manager's account exceeds the percentage of account limitations set forth in Sections 5.0 - 10.0 hereof as the result of a portfolio withdrawal, the manager shall provide to OST within two (2) business days, a detailed plan for remediation of the allocation to within the permissible percentage of account limitation. Such plan shall include: any expected pay-downs on structured securities, expected maturities and expected cash flow items. The manager and OST shall work together to determine a prudent path for remediation, with care taken to manage the overall portfolio risk and implications of any book gains or losses within the portfolio.

11.5Mutual or Commingled Fund Exceptions to Guidelines. The Board recognizes that (i) mutual funds and other types of commingled investment vehicles can provide, under some circumstances, lower costs and better diversification than can be obtained with a separately managed fund pursuing the same investment objectives and (ii) such funds cannot customize their investment policies to conform to the guidelines set out herein. In such cases, unless OST, after consultation with the Board or the Board's consultant determines otherwise, the policies of such funds shall supersede these guidelines and are exempt from the policies and restrictions specified herein.

1 Del. Admin. Code § 1201-11.0

Originally adopted January 18, 1982
Revised December 12, 2014
Revised August 12, 2015
Revised August 10, 2016
Revised May 14, 2018
18 DE Reg. 462 (12/1/2014)
20 DE Reg. 491 (12/1/2016)
21 DE Reg. 968 (6/1/2018)
23 DE Reg. 584 (1/1/2020)
24 DE Reg. 716 (1/1/2021)
25 DE Reg. 728 (1/1/2022) (Final)