200 KAR 14:091. Guidelines for money market instruments.

      RELATES TO: KRS 41.610, 42.014(1), 42.500, 42.505-42.545

      STATUTORY AUTHORITY: KRS 42.500(10), 42.520(2), 42.525

      NECESSITY, FUNCTION, AND CONFORMITY: KRS 42.525, requires the State Investment Commission to prescribe standards for the operation of the state's investment program. This administrative regulation establishes the standards which shall apply to the use of certain money market instruments which include bankers' acceptances, commercial paper and negotiable collateralized and uncollateralized certificates of deposit.

      Section 1. Definitions. (1) "Commission" means the State Investment Commission.

      (2) "Office" means the Office of Financial Management and Economic Analysis.

      (3) "Bankers' acceptance" means a short-term negotiable discount note drawn on and accepted by a bank or trust company which is obligated to pay the face value amount at maturity, which is rated in one (1) of the three (3) highest categories by a nationally recognized rating agency.

      (4) "Commercial paper" means an unsecured promissory obligation having a maturity of less than 270 days and is originated by an institution that is rated in the highest category by a nationally recognized rating agency.

      Section 2. Bankers' Acceptances. (1) The office may purchase bankers' acceptances if originated by a bank rated in one (1) of the three (3) highest categories by a nationally recognized rating agency.

      (2) The purchase of these instruments shall be:

      (a) Made on a payment versus delivery basis; and

      (b) Held in the Commonwealth's account in whatever depository shall be designated as eligible by the commission.

      (3)(a) Investment in bankers' acceptances shall be made for a period of no longer than six (6) months per investment.

      (b) The total amount of the investment in this security shall not exceed the amount of ten (10) million dollars in one (1) institution at a time.

      Section 3. Commercial Paper. (1) The office may purchase commercial paper if originated by an issuer that is rated in the highest category by a nationally recognized rating agency.

      (2) The purchase of these instruments shall be:

      (a) Made on a payment versus delivery basis; and

      (b) Held in the Commonwealth's account in whatever depository shall be designated as eligible by the commission.

      (3) The investments in commercial paper shall be made for a period of no longer than nine (9) months per investment and the total amount of the investment in this security shall not exceed the amount of twenty-five (25) million dollars by any issuer at a time.

      Section 4. Negotiable Certificates of Deposit, Collateralized and Uncollateralized. (1) The office may purchase collateralized and uncollateralized negotiable certificates of deposit if issued by banks rated in one (1) of the three (3) highest categories by a nationally recognized rating agency.

      (2) The purchase of these instruments shall be:

      (a) Made on a payment versus delivery basis; and

      (b) Held in the Commonwealth's account in whatever depository shall be designated as eligible by the commission.

      (3)(a) Investment in negotiable certificates of deposits shall be made for a period of no longer than nine (9) months per investment unless specifically authorized by KRS 41.610.

      (b) The total amount of investments in certificates of deposit shall not exceed the amount of ten (10) million dollars in any one (1) institution

at a time.

      Section 5. Limit of Money Market Instruments of the State's Total Portfolio. The aggregate investment in bankers' acceptances, commercial paper, and negotiable certificates of deposit shall not exceed twenty (20) percent of the Commonwealth's total investment portfolio. (19 Ky.R. 540; Am. 1068; eff. 10-22-92; 26 Ky.R. 422; 996; eff. 10-28-99.)