Loading...
2012-027s:llegallour documentslordinances1121investment advisory services ordinance-fsam.doc ORDINANCE NO. 2012-027 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DENTON, TEXAS, AUTHORIZING THE CITY MANAGER OR HIS DESIGNEE TO EXECUTE AN INVESTMENT ADVISORY SERVICES CONTRACT WITH FIRST SOUTHWEST ASSET MANAGEMENT, 1NC. FOR AN AMOUNT NOT TO EXCEED $52,000; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, Section 2256.003 of the Texas Government Code permits cities to contract with an investment management firm in the exercise of their power to purchase, sell and invest their funds in investments authorized by the Public Funds Investment Act; and WHEREAS, on June 1, 2008, the City of Denton ("City") and First Southwest Asset Management, Inc. ("FSAM") entered into an Investment Advisory Services Contract whereby FSAM was designated as the investment advisor for the City beginning June 1, 2008 and ending May 31, 2010, with a possible two-year extension of the Contract not to extend beyond May 31, 2012; and WHEREAS, the City and FSAM desire to initiate a two-year contract which will begin June 1, 2012 and ending May 31, 2014; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The City Manager or his designee is authorized to execute a two-year contract between the City and FSAM for investment advisory services for an amount not to exceed $52,000, a copy of which is attached hereto and made a part hereof for all purposes. SECTION 2. The following officials: Jon Fortune, Assistant City Manager; Bryan Langley, Chief Financial Officer; Antonio Puente, Jr., Assistant Director of Finance; and Caroline Finley, Treasury Administrator are hereby authorized to transact business with the above listed institution regarding investments for the City. SECTION 3. The City Manager is authorized to make the expenditure of funds and fees and take the actions as required by the Investment Advisory Services Contract as amended. SECTION 4. This Ordinance is enacted pursuant to and in accordance with Section 2256.003 of the Texas Government Code. SECTION 5. This Ordinance sha11 become effective immediately upon its passage and approval. PASSED AND APPROVED this the ��5� day of ���'��G�'i"Yi��'' , 2012. MARK �i. Bi��U�HS� MA�OR s:Uegallour documents\ordinances1121investment advisory services ordinance-fsam.doc ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY BY: �� � �� -`.�- Page 2 AGREEMENT FOR INV�STMENT ADVISORY SERVICES BY AND BETWEEN THE CITY OF DENTON, TEXAS AND FIRSTSOUTHWEST ASSET MANAGEMENT, INC. This Inveshnent Advisory Agreement (the "Agreement") is made by and between the City of Denton, Texas (the "City") and FirstSouthwest Asset Management, Ina ("FSAM"). The term of this agreement shall commence on June 1, 2012 and conclude on May 31, 2014, and may be extended for additional two (2) year periods upon City approval. I. Terms and Conditions This Agreement sets forth the terms and conditions governing the relationship of the City to FSAM with respect to securities and money which the City in its discretion may malce a�ailable far investment or reinveshnent (the "Funds"). This Agreement shall apply to these investable funds during the period in which this Agreement shall be in effect. II. Investment Advisory Services A. Services. With respect to the Funds, FSAM will endeavor to provide investment advisory services and cause to be executed such investments as determined in accordance with Section II.B below. FSAM agrees to provide professional services and its facilities and to direct and coordinate a11 programs of investing as may be considered and authorized by the City and to assume and pay those expenses incurred by FSAM in connection with the execution of investment decisions. Specifically, FSAM agrees to perform the following duties: 1. Review and recommend changes ,to the City's investment policy annually, consistent with the provisions of Chapter 2256 and 2257 of the Texas Govemment Code and other applicable federal, state andlocal laws; 2. Advise the City on current marlcet conditions and other general financial and investment information through direct conversation, e-mail and other acceptable means of communication; 3. Advise in the investment of the available funds and, as directed by the City, cause the h•ansacrions to be executed on a fully documented and competitive basis; 4. Maintain and provide an authorized brolcer/dealer list from which securities wil] be competitively bid; 5. Assist in the security clearance process; 6. Prornptly send (or cause to.be sent) trade confirmations to the City; 7. Verify collateral pricing as needed; 8. Attend quarterly meetings with City staff to discuss economic trends, interest rates and investment strategies; and, � 9. Provide staff with research, analysis aud market-related projects as requested. B. Scope of Investment Decisions. In performing the services listed in Section II.A above, FSAM shall not have discretionary authority and, accardingly, shall obtain approval from the City for the investment of any City Funds. The City hereby represents and acknowledges that its written investment policy and 'vivestment strategy includes its investment objectives and all portfolio limitations and restrictions, including, without limitation, acceptable levels of investment risk. The City also agrees to notify FSAM in writing ten business days in advance of the implementation of any changes in the City's investment objectives, investment limitations, and/or fmancial condition. The City will give FSAM immediate verbal notice and written notice within five days of receipt of any trade coniu�mations should the City believe any investment in the Funds violates the City's investment objectives or limitations. C. Standard of Care. In the administration of its duties, FSAM shall exercise the judgment and care, under prevailing circumstances, that a prudent person would exercise in the management of the person's own affairs, not for speculation, but for investment, considering, with regard to the entire Funds rather than any particular investment or security, the probable safety of capital and the probable income to be derived. D. Settlement of Securities. The purchase of individual securities shall be executed "delivery versus payment" (DVP) through the City's safekeeping agent. By so doing, City funds will be released when and if the City has received, through the safekeeping agent, the designated securities purchased. E. Return on the Portfolio. The City expressly affirms and acknowledges that FSAM has not promised or guaranteed any stated or specified return on, or performance of, the City's Funds, and FSAM is not responsible for any market losses arising with respect to the Funds. III. Representations A. FSAM represents that it is registered as an investment advisor under the Investment Advisers Act of 1940 (the "Advisers Act") and is authorized and empowered to enter into this Agreement. B. The City represents and confirms that (1) the City has full power and authority to enter into this Agreement; (2) the terms hereof do not violate any obligation by which the City is bound, whether arising by contract, operation of law, or otherwise; and (3) this Agreement has been duly authorized by and will be binding on the City according to its terms. C. The City shall allow FSAM to rely upon all information regarding schedules or other infortnation pertaining to the Funds as provided to it by the City as being true and accurate. FSAM shall have no responsibility to verify, through audit or investigation, the accuracy or completeness of such information and FSAM will not undertake to authenticate any such Information and FSAM will not undertake to authenticate any such infoimation. D. The City recognizes that there may be loss or depreciation of the current liquidation, itrunediate and ongoing value of any investment due to the fluctuation of marlcet values. The City represents that no party to this Agreement has made any guarantee, either oral or written, that the City's investment objectives will be achieved. FSAM shall not be liable for any error in judgment and/or for any investtnent losses in the Funds in the absence of willful malfeasance, gross negligence, or violation of applicable law. Nothing in this Agreement shall constitute a waiver or limitation of any rights that the City may have under applicable state or federal law including without limitation, the state and federal securities laws. E. City represents and acknowledges that City has reviewed and understands the risk factors and fees associated with the Funds. -2- N. Fees and Costs of FSAM As consideration for the services provided by FSAM under this Agreement, FSAM will be entitled to a fee (the "Advisor Fee") determined in accordance with the schedule set forth in th�; fee schedule ("Schedule A"), a copy of which is attached hereto, is incorporated herein for all purposes and is being delivered to the City simultaneously with the execution, and as an integral part, of this Agreement. The obligation of FSAM to pay or incur expenses shall not include any costs incident to litigation, mandamus action, regulatory investigation, test case or other similar legal actions. The Advisor Fee will be payable quarterly in arrears. In the event this Agreement is terminated prior to the end of a quarter, the Advisor Fee shall be prorated and paid within 30 days of termination. V. Reporting and Account Statements FSAM will deliver or cause to be delivered to the City confirmation of investment and monthly statements for the Funds invested as set forth in this Agreement. The monthly statement will reflect all investments, including date of investment, purchase price, current price, date of maturity, profit or loss and cash balances. FSAM will also provide the City with an annual valuation of the City's Funds and any additional statements that may be required by applicable law, including the reporting provisions of the Public Funds Investment Act, or other applicable state law, with respect to transactions effected under this Agreement. VI. Other Services The investment advisory services provided hereunder by FSAM to the City are exclusive of any other services that FSAM may provide to the City. VII. Execution of Investment Transactions A. Af�liated Broker. FSAM is affiliated through common ownership and control with First Southwest Company ("FSC"), a registered broker/dealer with the National Association of Securities Dealers, Ina ("NASD"), the U.S. Securities and Exchange Commission ("SEC"), and various state and territorial regulatory authorities. The City hereby authorizes FSAM to effect transactions for its Funds by execution through FSC. Where transactions are effected through FSC, FSC may act on an agency or principal basis to the extent permitted by law. Pursuant to Rule 206(3) of the Advisers Act, FSAM will obtain the Crty's consent on each investment transaction to allow FSC to act as a principal in acquiring a security to facilitate a trade. B. Bundling of Investment Transactions. Transactions for each client account generally will be effected independently unless FSAM decides to purchase or sell the same securities for several of its clients at approximately the same time. FSAM may (but is not obligated to) combine or "batch" such orders to obtain best execution. Under this procedure, transactions will be averaged as to price and will be allocated among FSAM's clients included in the "batch" group in proportion to the purchase and sale orders placed for each client in batch transactions. VIII. Selection of Brokers The City agrees that when FSAM effects or places orders for the execution of transactions far the Funds (other than situations where the City specifically instructs otherwise in writing), FSAM may allocate such transactions to such brokers and dealers for execution on such markets, at such prices as in the judgment of FSAM will be in the best interests of the City, taking into consideration, in the selection of such brokers and dealers, the available prices and rates of brokerage commissions and other relevant factors, without having to demonstrate that such factors are of a direct benefit to the City. Subject to the foregoing, FSAM will arrange for the execution of securities transactions for City Funds through brokers or dealers that FSAM reasonably believes will provide best execution. -3- IX. Non-Exclusive Relationship The City hereby acknowledges that FSAM's services under this Agreement are nonexclusive, and that FSAM shall be free to render the same or similar services to other clients. The City further acknowledges that FSAM's advice is specific to each individual City's investtnent objectives, limitations and financial condition. Therefore FSAM, in the performance of its investment advisory duties, may give advice to, and take action on behalf of, other clients that may differ from the advice given, or the timing and nature of the action taken, with respect to the City's Funds. Nothing in this Agreement shall be deemed to impose upon FSAM any obligation to purchase or sell, or to recommend for purchase or sale for the City's Funds, any security that FSAM or its affiliates may purchase or sell, for their own account or for the accounts of any other client if, at the sole discretion of FSAM, it is for any reason undesirable or impractical to take such action or make such recommendation for the City's Funds. The City also acknowledges that FSAM has varying fee structures and arrangements with other clients and may charge other clients different fees, which may be higher or lower than the fees charged with respect to the City's Funds for similar services. X. Instructions from the City FSAM may rely on all instructions (whether oral or written) given by the City or its agents that FSAM believes to be genuine. Instructions may be given to FSAM by any officer or agent authorized by (1) the investment policy; (2) a duly executed "Authorization to Trade Public Funds" form provided by FSAM; or (3) a resolution of the governing body of the City. FSAM may rely on such authorization until written notice to the contra�y is delivered to FSAM by the City; and if the City does not deliver appropriate authorizing documentation, FSAM may accept instructions from any person reasonably believed by FSAM to be an officer of the City. XI. Transactions Subject to Industry Regulations and Standards All transactions shall be subject to the regulations of all applicable government authorities and self- regulatory agencies including, but not limited to, the constitutions and rules of the clearing agent, exchange, or market where executed. The City understands that FSAM is registered as an investment advisor under the Advisers Act, and as such is obligated to comply with all applicable laws and regulations, including those of the SEC and other regulatory and self-regulatory agencies, and agrees that FSAM shall not be liable to the City as a result of any action taken by FSAM to comply with any rul'rng, interpretation, or directive of such organizations. Further, the City understands and agrees that FSAM will not accept any instructions from the City which would require a violation of any such rules or regulations. XII. Assignment Neither FSAM nor the City may assign any of its rights, authorizations, or obligations under this Agreement without the prior written consent of the other party. XIII. Term and City's Right of Cancellation This Agreement shall become effective as of the date hereof and continue for a period of two (2) years. This Agreement may be extended for additional two (2) year periods upon approval by the City. Either party may tertninate this Agreement upon delivering to the other party thirty (30) calendar days' prior written notice. In addition, the City may terminate this Agreement without penalty for a period of five (5) business days after the date it is executed by the City. The City may exercise this right by giving written notice to FSAM within the required time period. In the event of termination, it is understood and a�eed that only the amounts due to FSAM for services provided and expenses incurred to and including the date of termination, plus those costs and expenses incurred or sustained as a result of the termination, will be due and payable. No penalty will be assessed for ternunation of this Agreement. In addition, the parties hereto agee that upon termination of this Agreement FSAM shall have no continuing obligation to the City regarding the inveshnent of funds or performing any other services contemplated herein. � X1V. Custodial Arrangements Custody of the Funds' invested assets will be maintained with a custodian selected by the City and identified to FSAM (the "Custodian"). FSAM will not have custo�y of any assets in the Funds. The City will be solely responsible for paying all fees or charges of the Custodian. The City authorizes FSAM to give Custodian instructions far the purchase, sale, conversion, redemption, exchange or retention of any security, cash or cash equivalent ar other investment for the Funds. XV. Miscellaneous A. Notices to the City. All written communication to the City shall be sent to the City's address set forth on the signature page hereof or as directed in writing to FSAM by the City. Any notice, statement, or other communication mailed to the City by FSAM in accordance with this section will be deemed to be given to the City personally on the date it so mailed, whether or not it is actually received by the City. B. Notices to FSAM. Any notice, statement, or other communication from the City to FSAM under this Agreement must be in written form and will be deemed to be given to FSAM upon actual receipt thereof by FSAM whether such notice was mailed, personally delivered, or telecopied to: FirstSouthwest Asset Management, Inc. 300 West Sixth Street, Suite 1940 Austin, Texas 78701 Attention: Mr. Scott Mclntyre Fax Number: (512) 481-2020 C. Confidential Relationship. All of the infortnation and advice furnished by either party to the other under this Agreement, including their respective agents and employees, will be treated as strictly confidential by each party and will not be disclosed to third parties under any circumstances except as required by law. D. Limitations of Liability. Federal and state securities laws impose liabilities under certain circumstances on persons who do not act in good faith and, therefore, nothing in this Agreement shall in any way constitute a waiver or limitation of any rights that the City may have under federal and state securities laws. E. Indemnity. The City will indemnify FSAM for any loss, liability, or expense (including attorney's fees) which FSAM may incur as a result of, or arising from, any claims asserted by any third party with respect to the Funds or the services rendered by FSAM under this Agreement, except in cases of gross negligence or willful misconduct by FSAM in managing the City's Funds. F. Inconsistent Provisions; Agreements. If any provisions of this Agreement should become or be found to be inconsistent with laws, rules, or regulations of any government or regulato�y body having jurisdiction over the subject matter herein, such provisions shall be deemed modified or rescinded in accordance with any such laws, rules, or regulations. To the extent that the provisions of this Agreement are inconsistent with the provisions of any account agreement or clearing agreement with FSAM or its clearing agent, as the case may be, then FSAM shall provide notice to the City to resolve the conflict. G. Invalid Provisions. If any provision or condition of this Agreement shall be held to be invalid or unenforceable by any Court, or regulatory or self-regulatory agency or body, such invalidity or unenforceability shall attach only to such provision or condition. The validity of the remaining provisions and conditions shall not be affected, and this Agreement shall be carried out as if any such invalid or unenforceable provision or condition were not contained herein. H. Waiver of Terms. FSAM's failure to insist at any time upon strict compliance with any terms of this Agreement shall not constitute a waiver of any of FSAM's rights as described herein. -5- I. Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Texas, without regard to its principles of conflicts of laws. J. Extraordinary Events. Neither FSAM nor any of its officers, directors, shareholders, affiliates, general partners, employees, agents, or trustees shall be liable for losses caused directly or indirectly by government restrictions, securities exchange or market actions, suspensions of trading, wars, strikes, delays in the transmission of orders due to breakdown or failure of transmission or communication facilities, or any other causes beyond FSAM's reasonable control or anticipation. K. Written Disclosure Statement. Simultaneously with the execution of this Agreement, FSAM has delivered to the City Part II of its Form ADV as filed with the SEC, or a similar disclosure document, as its brochure puc•suant to Rule 204.3 of the Advisers Act. The City's execution of this Agreement shall be deemed acknowledgment of receipt thereof. L. Veri�cation of Information. The City represents and warrants to FSAM that all information furnished to FSAM in connection with the Agreement (and all documents supplied by the City in this regard, including fmancial statements) are true, complete, and correct. FSAM is entitled to rely on this information until FSAM receives written notice of any change, which the City agrees to furnish promptly should any material changes occur. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK. THE NEXT PAGE IS A SIGNATLJRE PAGE.] � By signing this Agreement, the undersigned City official acknowledges receipt of a copy of this Agreement, including Schedule A. CITY OF DENTON, TEXAS 215 E McKinney Denton, TX 76201 �/2//2Q�� Sig re of fficer Date �N �o,e r�c�E (Name) �/ G�Tr�✓C7 �i7�/ �/flidf� C7�. (Title) FIRSTSOUTHWEST ASSET MANAGEMENT, INC. G.�.� � �_ - � of Officer Scott Mclntyre Senior Vice-President -7- APPROVED AS TO FORM: CITY ATTORNEY CITY OF DENTON, TEXAS BY: Z! `/2o�Z Date SCHEDULE A FEE SCHEDULE AND EXPENSE ITEMS In consideration for the services rendered by FirstSouthwest Asset Management, Inc. ("FSAM") in connection with the investment of the Portfolio for the City, it is understood and agreed that its fee will be at fixed quarterly rate of $6,500. The fees due FSAM shall be due and payable 30 days following the conclusion of each calendar quarter. Said fee includes all costs of services related to the investment services provided under this Agreement. Any other fees earned by FSAM relating to City transactions, shall be disclosed to the City. Fee Calculation for Investment of Bond Proceeds into Flexible Repurchase Agreements (`�Flex Repos") and Guaranteed Investment Contracts ("GIC's"): In the event that specific bond proceeds are invested by FSAM as per instruction of the Investor into either a Flex Repo or GIC, FSAM shall be entitled to the lesser of $36,000 or 0.2 percent (0.002) of the aggregate amount reasonably expected as of the issue date to be deposited over the term of the contract. This fully disclosed fee would be paid to FSAM by the winning bidder. :