ELIGIBLE INVESTMENTS, RELATED FINANCIAL AGREEMENTS AND PRUDENT INVESTMENT

CONTENTS PART I ELIGIBLE INVESTMENTS AND FORWARD RATE AGREEMENTS 1. Investment under s. 418 of the Act 2. Eligible investments 2.1 Eligible investments, continued 3. Ratings, financial indicators 4. Investment limit 4.1 Conditions 5. School purposes 6. Canadian dollars 7. Statement of policies and goals 8. Investment report 8.1 Inconsistencies, treasurer’s duty 9. Investments pre March 6, 1997 Forward Rate Agreements 10. Forward rate agreements 11. Statement of policies and goals 12. Report to council PART II PRUDENT INVESTMENT 13. Definitions 14. Application 15. Requirements under s. 418.1 (3) of the Act 16. Limitation, school board securities 17. Investments only through Investment Board or Joint Investment Board 18. Investment policy 19. Investment plan 20. Investment report 21. Inconsistencies, treasurer’s duty 22. Agents of the Investment Board 23. Withdrawal from investment arrangement 24. Application of Part, withdrawal or dissolution 25. Transitional matters, what may be done in advance 26. Transitional matters, s. 418.1 of the Act Part I Eligible Investments and forward rate agreements Investment under s. 418 of the Act 1. (1) This Part applies in respect of investments by a municipality under section 418 of the Act. O. Reg. 43/18, s. 2. (2) A municipality does not have the power to invest under section 418 of the Act in a security other than a security prescribed under this Part. O. Reg. 43/18, s. 2. Eligible investments 2. The following are prescribed, for the purposes of subsection 418 (1) of the Act, as securities that a municipality may invest in: 1. Bonds, debentures, promissory notes or other evidence of indebtedness issued or guaranteed by, i. Canada or a province or territory of Canada, ii. an agency of Canada or a province or territory of Canada, iii. a country other than Canada, iv. a municipality in Canada including the municipality making the investment, iv.1 the Ontario Infrastructure and Lands Corporation, v. a school board or similar entity in Canada, v.1 a university in Ontario that is authorized to engage in an activity described in section 3 of the Post-secondary Education Choice and Excellence Act, 2000, v.2 a college established under the Ontario Colleges of Applied Arts and Technology Act, 2002, vi. a local board as defined in the Municipal Affairs Act (but not including a school board or a municipality) or a conservation authority established under the Conservation Authorities Act, vi.1 a board of a public hospital within the meaning of the Public Hospitals Act, vi.2 a non-profit housing corporation incorporated under section 13 of the Housing Development Act, vi.3 a local housing corporation as defined in section 24 of the Housing Services Act, 2011, or vii. the Municipal Finance Authority of British Columbia. 2. Bonds, debentures, promissory notes or other evidence of indebtedness of a corporation if, i. the bond, debenture or other evidence of indebtedness is secured by the assignment, to a trustee, as defined in the Trustee Act, of payments that Canada or a province or territory of Canada has agreed to make or is required to make under a federal, provincial or territorial statute, and ii. the payments referred to in subparagraph i are sufficient to meet the amounts payable under the bond, debenture or other evidence of indebtedness, including the amounts payable at maturity. 3. Deposit receipts, deposit notes, certificates of deposit or investment, acceptances or similar instruments the terms of which provide that the principal and interest shall be fully repaid no later than two years after the day the investment was made, if the receipt, note, certificate or instrument was issued, guaranteed or endorsed by, i. a bank listed in Schedule I, II or III to the Bank Act (Canada), ii. a loan corporation or trust corporation registered under the Loan and Trust Corporations Act, or iii. a credit union or central to which the Credit Unions and Caisses Populaires Act, 2020 applies. 3.1 Deposit receipts, deposit notes, certificates of deposit or investment, acceptances or similar instruments the terms of which provide that the principal and interest shall be fully repaid more than two years after the day the investment was made, if the receipt, note, certificate or instrument was issued, guaranteed or endorsed by, i. a bank listed in Schedule I, II or III to the Bank Act (Canada), or ii. a loan corporation or trust corporation registered under the Loan and Trust Corporations Act. iii. Revoked: O. Reg. 43/18, s. 3 (1). 4. Bonds, debentures, promissory notes or other evidence of indebtedness, the terms of which provide that the principal and interest shall be fully repaid no later than two years after the day the investment was made if issued or guaranteed by an institution listed in paragraph 3.1. 4.1 Bonds, debentures, promissory notes or other evidence of indebtedness, the terms of which provide that the principal and interest shall be fully repaid more than two years after the day the investment was made if issued or guaranteed by an institution listed in paragraph 3.1. 4.2 Deposit receipts, deposit notes, certificates of deposit or investment, acceptances or similar instruments, the terms of which provide that the principal and interest shall be fully repaid more than two years after the day the investment was made if the receipt, note, certificate or instrument was issued, guaranteed or endorsed by a credit union or central to which the Credit Unions and Caisses Populaires Act, 2020 applies. 4.3 Bonds, debentures, promissory notes or other evidence of indebtedness issued or guaranteed by a credit union or central to which the Credit Unions and Caisses Populaires Act, 2020 applies. 5. Short term securities, the terms of which provide that the principal and interest shall be fully repaid no later than three days after the day the investment was made, that are issued by, i. a university in Ontario that is authorized to engage in an activity described in section 3 of the Post-secondary Education Choice and Excellence Act, 2000, ii. a college established under the Ontario Colleges of Applied Arts and Technology Act, 2002, or iii. a board of a public hospital within the meaning of the Public Hospitals Act. 6. Bonds, debentures, promissory notes, other evidence of indebtedness or other securities issued or guaranteed by the International Bank for Reconstruction and Development. 6.1. Bonds, debentures, promissory notes or other evidence of indebtedness issued or guaranteed by a supranational financial institution or a supranational governmental organization, other than the International Bank for Reconstruction and Development. 7. Securities that are arrangements for the sale of assets that entitle the purchaser to an undivided beneficial interest in a pool of assets. 7.1 Bonds, debentures, promissory notes or other evidence of indebtedness issued by a corporation that is incorporated under the laws of Canada or a province of Canada, the terms of which provide that the principal and interest shall be fully repaid more than five years after the date on which the municipality makes the investment. 7.2 Bonds, debentures, promissory notes or other evidence of indebtedness issued by a corporation that is incorporated under the laws of Canada or a province of Canada, the terms of which provide that the principal and interest shall be fully repaid more than one year and no later than five years after the date on which the municipality makes the investment. 8. Negotiable promissory notes or commercial paper, other than securities referred to in paragraph 7, maturing one year or less from the date of issue, if that note or commercial paper has been issued by a corporation that is incorporated under the laws of Canada or a province of Canada. 8.1 Shares issued by a corporation that is incorporated under the laws of Canada or a province of Canada. 9. Bonds, debentures, promissory notes and other evidences of indebtedness of a corporation incorporated under section 142 of the Electricity Act, 1998. 10. Any security if the municipality acquires the security as a gift in a will or as a donation not made for a charitable purpose. 11. Revoked: O. Reg. 43/18, s. 3 (5). 12. Shares of a corporation if, i. the corporation has a debt payable to the municipality, ii. under a court order, the corporation has received protection from its creditors, iii. the acquisition of the shares in lieu of the debt is authorized by the court order, and iv. the treasurer of the municipality is of the opinion that the debt will be uncollectable by the municipality unless the debt is converted to shares under the court order. O. Reg. 438/97, s. 2; O. Reg. 265/02, s. 1; O. Reg. 399/02, s. 2; O. Reg. 655/05, s. 2; O. Reg. 607/06, s. 1; O. Reg. 39/07, s. 1; O. Reg. 373/11, s. 1; O. Reg. 74/16, s. 1, 2; O. Reg. 43/18, s. 3; O. Reg. 106/22, s. 1. Eligible investments, continued 2.1 A security is prescribed for the purposes of subsection 418 (1) of the Act as a security that a municipality may invest in if, (a) the municipality invested in the security before January 12, 2009; and (b) the terms of the municipality’s continued investment in the security have been changed pursuant to the Plan Implementation Order of the Ontario Superior Court of Justice dated January 12, 2009 (Court file number 08-CL-7440) and titled “In the matter of the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 as amended and in the matter of a plan of compromise and arrangement involving Metcalfe & Mansfield Alternative Investments II Corp. et al”. O. Reg. 292/09, s. 1. Ratings, financial indicators 3. (1) A municipality shall not invest in a security under subparagraph 1 iii, v.1, v.2, vi.1, vi.2 or vi.3 or paragraph 4 of section 2 unless the bond, debenture, promissory note or evidence of indebtedness is rated, (a) Revoked: O. Reg. 265/02, s. 2 (1). (b) by Dominion Bond Rating Service Limited as “AA(low)” or higher; (b.1) by Fitch Ratings as “AA-” or higher; (c) by Moody’s Investors Services Inc. as “Aa3” or higher; or (d) by Standard and Poor’s as “AA-” or higher. O. Reg. 438/97, s. 3 (1); O. Reg. 265/02, s. 2 (1); O. Reg. 399/02, s. 3 (1); O. Reg. 655/05, s. 3 (1, 2); O. Reg. 607/06, s. 2; O. Reg. 39/07, s. 2; O. Reg. 43/18, s. 4 (1). (2) A municipality shall not invest in a security under paragraph 3.1 or 4.1 of section 2 unless the bond, debenture, promissory note or evidence of indebtedness is rated, (a) by Dominion Bond Rating Service Limited as “A(low)” or higher; (b) by Fitch Ratings as “A-” or higher; (c) by Moody’s Investors Services Inc. as “A3” or higher; or (d) by Standard and Poor’s as “A-” or higher. O. Reg. 43/18, s. 4 (2). (2.0.1) If a municipality’s total investments in securities under subparagraph 3 iii and paragraph 4.2 of section 2 have, in the opinion of the treasurer, a value in excess of $250,000, the municipality shall not invest in any additional security under paragraph 4.2 of section 2 unless the credit union or central that issues, guarantees or endorses the security provides, within 30 days before the day the investment is made, (a) audited financial statements indicating that the financial indicators mentioned in subsection (2.0.2) are met by the credit union or central; or (b) certification in writing that all of the financial indicators mentioned in subsection (2.0.2) are met by the credit union or central. O. Reg. 43/18, s. 4 (2); O. Reg. 106/22, s. 2 (1). (2.0.2) For the purposes of subsection (2.0.1), the financial indicators to be met by the credit union or central are the following: 1. Positive retained earnings in its audited financial statements for its most recently completed fiscal year. 2. Regulatory capital of at least the percentage of its total assets set out in subsection (2.0.3) as of the date of the latest audited financial statements, calculated in accordance with the regulations made under the Credit Unions and Caisses Populaires Act, 2020. 3. Regulatory capital of at least the percentage of its total risk weighted assets set out in subsection (2.0.4) as of the date of the latest audited financial statements, calculated in accordance with the regulations made under the Credit Unions and Caisses Populaires Act, 2020. 4. Positive net income in its audited financial statements for three of its five most recently completed fiscal years. O. Reg. 43/18, s. 4 (2); O. Reg. 106/22, s. 2 (2-4). (2.0.3) The percentage mentioned in paragraph 2 of subsection (2.0.2) is the percentage obtained by adding one percent to the minimum percentage set out in paragraph 1 of subsection 20 (1) of Ontario Regulation 105/22 (General). O. Reg. 43/18, s. 4 (2); O. Reg. 106/22, s. 2 (5). (2.0.4) The percentage mentioned in paragraph 3 of subsection (2.0.2) is the percentage obtained by adding one percent to the minimum percentage set out in paragraph 2 of subsection 20 (1) of Ontario Regulation 105/22 (General). O. Reg. 43/18, s. 4 (2); O. Reg. 106/22, s. 2 (6). (2.0.5) A municipality shall not invest in securities under paragraph 4.3 of section 2 unless the credit union or central that issues or guarantees the security satisfies the conditions set out in subsection (2.0.1). O. Reg. 43/18, s. 4 (2); O. Reg. 106/22, s. 2 (7). (2.1) A municipality shall not invest in a security under paragraph 6.1 of section 2 unless the security is rated, (a) by Dominion Bond Rating Service Limited as “AAA”; (b) by Fitch Ratings as “AAA”; (c) by Moody’s Investors Services Inc. as “Aaa”; or (d) by Standard and Poor’s as “AAA”. O. Reg. 655/05, s. 3 (4). (3) A municipality shall not invest in a security under paragraph 7 of section 2 that matures more than one year from the date of issue unless the security is rated, (a) by Dominion Bond Rating Service Limited as “AAA”; (a.1) by Fitch Ratings as “AAA”; (b) by Moody’s Investors Services Inc. as “Aaa”; or (c) by Standard and Poor’s as “AAA”. O. Reg. 265/02, s. 2 (2); O. Reg. 399/02, s. 3 (2); O. Reg. 655/05, s. 3 (5); O. Reg. 43/18, s. 4 (3). (4) A municipality shall not invest in a security under paragraph 7 of section 2 that matures one year or less from the date of issue unless the security is rated, (a) by Dominion Bond Rating Service Limited as “R-1(high)”; (a.1) by Fitch Ratings as “F1+”; (b) by Moody’s Investors Services Inc. as “Prime-1”; or (c) by Standard and Poor’s as “A-1+”. O. Reg. 265/02, s. 2 (2); O. Reg. 399/02, s. 3 (3); O. Reg. 655/05, s. 3 (6); O. Reg. 43/18, s. 4 (4). (4.1) A municipality shall not invest in a security under paragraph 7.1 or 7.2 of section 2 unless the security is rated, (a) by Dominion Bond Rating Service Limited as “A(low)” or higher; (b) by Fitch Ratings as “A-” or higher; (c) by Moody’s Investors Services Inc. as “A3” or higher; or (d) by Standard and Poor’s as “A-” or higher. O. Reg. 43/18, s. 4 (5). (4.2) Revoked: O. Reg. 43/18, s. 4 (5). (5) A municipality shall not invest in a security under paragraph 8 of section 2 unless the promissory note or commercial paper is rated, (a) by Dominion Bond Rating Service Limited as “R-1(mid)” or higher; (a.1) by Fitch Ratings as “F1+”; (b) by Moody’s Investors Services Inc. as “Prime-1”; or (c) by Standard and Poor’s as “A-1+”. O. Reg. 265/02, s. 2 (2); O. Reg. 399/02, s. 3 (4); O. Reg. 655/05, s. 3 (8). (6) If an investment made under subparagraph 1 iii, v.1, v.2, vi.1, vi.2 or vi.3 of section 2 or paragraph 3.1, 4, 4.1, 6.1, 7, 7.1, 7.2 or 8 of section 2 falls below the standard required by this section, the municipality shall create a plan, including expected timelines, for selling the investment and shall sell the investment in accordance with the plan. O. Reg. 43/18, s. 4 (6). (6.1) Subsection (6) does not apply with respect to an investment made by a municipality under paragraph 7 of section 2 on a day before the day this subsection comes into force. O. Reg. 292/09, s. 2 (3). (6.1.1) If a municipality’s total investments in securities under subparagraph 3 iii and paragraph 4.2 of section 2 have, in the opinion of the treasurer, a value in excess of the limit mentioned in subsection (2.0.1) of this section and one of the following circumstances applies, the municipality shall create a plan, including expected timelines, for selling investments made under paragraph 4.2 of section 2 in excess of that limit and shall sell the investments in accordance with the plan: 1. The financial indicators mentioned in subsection (2.0.2) are not met. 2. The credit union or central fails to provide audited financial statements or a certification as mentioned in subsection (2.0.1). O. Reg. 43/18, s. 4 (7); O. Reg. 106/22, s. 2 (8). (6.1.2) For the purposes of determining the value of investments under subsection (6.1.1), the value of all investments under subparagraph 3 iii of section 2 shall be counted as part of the total first, followed by the value of all investments made under paragraph 4.2 of section 2. O. Reg. 43/18, s. 4 (7). (6.1.3) If one of the circumstances in paragraph 1 or 2 of subsection (6.1.1) applies, the municipality shall create a plan, including expected timelines, for selling investments made under paragraph 4.3 of section 2 and shall sell the investments in accordance with the plan. O. Reg. 43/18, s. 4 (7). (7) A municipality shall not invest in a security under paragraph 9 of section 2 unless, at the time the investment is made and as long as it continues, the investment ranks, at a minimum, concurrently and equally in respect of payment of principal and interest with all unsecured debt of the corporation. O. Reg. 265/02, s. 2 (2). (8) A municipality shall not invest in a security under paragraph 9 of section 2 unless, at the time the investment is made, the total amount of the municipality’s investment in debt of any corporation incorporated under section 142 of the Electricity Act, 1998 that would result after the proposed investment is made does not exceed the total amount of investment in debt, including any interest accrued on such debt, of the municipality in such a corporation that existed on the day before the day the proposed investment is to be made. O. Reg. 265/02, s. 2 (2). (9) Any investment made under paragraph 9 of section 2, including any refinancing, renewal or replacement thereof, may not be held for longer than a total of 10 years from the date such investment is made. O. Reg. 265/02, s. 2 (2). (10) Subsections (7), (8) and (9) do not prevent a municipality from holding or disposing of a security described in paragraph 9 of section 2 issued by a corporation incorporated under section 142 of the Electricity Act, 1998, if the municipality acquired the security through a transfer by-law or otherwise under that Act. O. Reg. 655/05, s. 3 (9). (11) If a municipality acquires a security under paragraph 10 of section 2 that is not otherwise prescribed under this Part, the municipality shall create a plan, including expected timelines, for selling the investment and shall sell the investment in accordance with the plan. O. Reg. 43/18, s. 4 (8). (12) Revoked: O. Reg. 292/09, s. 2 (4). Investment limit 4. (1) A municipality shall not invest more than 25 per cent of the total amount in all sinking and retirement funds in respect of debentures of the municipality, as estimated by its treasurer on the date of the investment, in short-term debt issued or guaranteed by the municipality. O. Reg. 438/97, s. 4 (1). (2) In this section, “short-term debt” means any debt, the terms of which provide that the principal and interest of the debt shall be fully repaid no later than 364 days after the debt is incurred. O. Reg. 438/97, s. 4 (2). Conditions 4.1 (1) A municipality shall not invest in a security under paragraph 7 of section 2 or in a promissory note or commercial paper under paragraph 8 of section 2 unless, on the date that the investment is made, (a) the municipality itself is rated, or all of the municipality’s long-term debt obligations are rated, (i) by Dominion Bond Rating Service Limited as “AA(low)” or higher, (i.1) by Fitch Ratings as “AA-” or higher, (ii) by Moody’s Investors Services Inc. as “Aa3” or higher, or (iii) by Standard and Poor’s as “AA–” or higher; or (b) the municipality has entered into an agreement with the Local Authority Services and the CHUMS Financing Corporation to act together as the municipality’s agent for the investment in that security, promissory note or commercial paper. O. Reg. 265/02, s. 3; O. Reg. 399/02, s. 4; O. Reg. 655/05, s. 4 (1, 2); O. Reg. 43/18, s. 5 (1). (1.1) A municipality shall not invest in a security under paragraph 7.1 or 8.1 of section 2 unless, on the date the investment is made, the municipality has entered into an agreement with the Local Authority Services and the CHUMS Financing Corporation to act together as the municipality’s agent for the investment in the security. O. Reg. 655/05, s. 4 (3); O. Reg. 43/18, s. 5 (2). (1.2) Subsection (1.1) does not apply to investments in securities by the City of Ottawa if all of the following requirements are satisfied: 1. Only the proceeds of the sale by the City of its securities in a corporation incorporated under section 142 of the Electricity Act, 1998 are used to make the investments. 2. The investments are made in a professionally-managed fund. 3. The terms of the investments provide that, i. where the investment is in debt instruments, the principal must be repaid no earlier than seven years after the date on which the City makes the investment, and ii. where the investment is in shares, an amount equal to the principal amount of the investment cannot be withdrawn from the fund for at least seven years after the date on which the City makes the investment. 4. The City establishes and uses a separate reserve fund for the investments. 5. Subject to paragraph 6, the money in the reserve fund, including any returns on the investments or proceeds from their disposition, are used to pay capital costs of the City and for no other purpose. 6. The City may borrow money from the reserve fund but must repay it plus interest. O. Reg. 655/05, s. 4 (3). (2) The investment made under clause (1) (b) or described in subsection (1.1), as the case may be, must be made in the One Investment Program of the Local Authority Services and the CHUMS Financing Corporation with, (a) another municipality; (b) a public hospital; (c) a university in Ontario that is authorized to engage in an activity described in section 3 of the Post-secondary Education Choice and Excellence Act, 2000; (d) a college established under the Ontario Colleges of Applied Arts and Technology Act, 2002; (d.1) a foundation established by a college mentioned in clause (d) whose purposes include receiving and maintaining a fund or funds for the benefit of the college; (e) a school board; (f) any agent of an institution listed in clauses (a) to (e); (g) Local Authority Services; (h) CHUMS Financing Corporation; (i) Association of Municipalities of Ontario; or (j) Municipal Finance Officers’ Association of Ontario. O. Reg. 265/02, s. 3; O. Reg. 655/05, s. 4 (4); O. Reg. 607/06, s. 3; O. Reg. 292/09, s. 3; O. Reg. 52/11, s. 1; O. Reg. 74/16, s. 1, 3; O. Reg. 43/18, s. 5 (3-5). School purposes 5. A municipality shall not invest in a security issued or guaranteed by a school board or similar entity unless, (a) the money raised by issuing the security is to be used for school purposes; and (b) Revoked: O. Reg. 248/01, s. 1. O. Reg. 438/97, s. 5; O. Reg. 248/01, s. 1. Canadian dollars 6. (1) Subject to subsection (3), a municipality shall not invest in a security that is expressed or payable in any currency other than Canadian dollars. O. Reg. 43/18, s. 6 (1). (2) Subsection (1) does not prevent a municipality from continuing an investment, made before this Regulation comes into force, that is expressed and payable in the currency of the United States of America or the United Kingdom. O. Reg. 438/97, s. 6 (2). (3) Subsection (1) does not apply in respect of securities listed in paragraphs 3, 3.1 and 4.2 of section 2, which may also be expressed or payable in the currency of the United States of America. O. Reg. 43/18, s. 6 (2). Statement of policies and goals 7. (1) Before a municipality invests in a security prescribed under this Part, the council of the municipality shall, if it has not already done so, adopt a statement of the municipality’s investment policies and goals. O. Reg. 438/97, s. 7; O. Reg. 43/18, s. 7. (2) In preparing the statement of the municipality’s investment policies and goals under subsection (1), the council of the municipality shall consider, (a) the municipality’s risk tolerance and the preservation of its capital; (b) the municipality’s need for a diversified portfolio of investments; and (c) obtaining legal advice and financial advice with respect to the proposed investments. O. Reg. 265/02, s. 4. (3) Revoked: O. Reg. 655/05, s. 5. (4) In preparing the statement of the municipality’s investment policies and goals under subsection (1) for investments made under paragraph 9 of section 2, the council of the municipality shall consider its plans for the investment and how the proposed investment would affect the interest of municipal taxpayers. O. Reg. 265/02, s. 4. Investment report 8. (1) If a municipality has an investment in a security prescribed under this Part, the council of the municipality shall require the treasurer of the municipality to prepare and provide to the council, each year or more frequently as specified by the council, an investment report. O. Reg. 438/97, s. 8 (1); O. Reg. 43/18, s. 7. (2) The investment report referred to in subsection (1) shall contain, (a) a statement about the performance of the portfolio of investments of the municipality during the period covered by the report; (b) a description of the estimated proportion of the total investments of a municipality that are invested in its own long-term and short-term securities to the total investment of the municipality and a description of the change, if any, in that estimated proportion since the previous year’s report; (c) a statement by the treasurer as to whether or not, in his or her opinion, all investments are consistent with the investment policies and goals adopted by the municipality; (d) a record of the date of each transaction in or disposal of its own securities, including a statement of the purchase and sale price of each security; and (e) such other information that the council may require or that, in the opinion of the treasurer, should be included. O. Reg. 438/97, s. 8 (2); O. Reg. 655/05, s. 6. (2.1) The investment report referred to in subsection (1) shall contain a statement by the treasurer as to whether any of the following investments fall below the standard required for that investment during the period covered by the report: 1. An investment described in subparagraph 1 iii, v.1, v.2, vi.1, vi.2 or vi.3 of section 2. 2. An investment described in paragraph 3.1, 4, 4.1, 6.1, 7, 7.1, 7.2 or 8 of section 2. 3. An investment described in subsection 9 (1). O. Reg. 292/09, s. 4; O. Reg. 43/18, s. 8 (1). (2.2) The investment report referred to in subsection (1) shall contain a statement by the treasurer as to whether any investments under paragraphs 4.2 and 4.3 of section 2 are affected by the circumstances set out in paragraphs 1 and 2 of subsection 3 (6.1.1) during the period covered by the report. O. Reg. 43/18, s. 8 (2). (3) Upon disposition of any investment made under paragraph 9 of section 2, the council of the municipality shall require the treasurer of the municipality to prepare and provide to the council a report detailing the proposed use of funds realized in the disposition. O. Reg. 265/02, s. 5. Inconsistencies, treasurer’s duty 8.1 If an investment made by the municipality is, in the treasurer’s opinion, not consistent with the investment policies and goals adopted by the municipality, the treasurer shall report the inconsistency to the council of the municipality within 30 days after becoming aware of it. O. Reg. 655/05, s. 7. Investments pre March 6, 1997 9. (1) Despite this Part, an investment by a municipality in bonds, debentures or other indebtedness of a corporation made before March 6, 1997 may be continued if the bond, debenture or other indebtedness is rated, (a) Revoked: O. Reg. 265/02, s. 6. (b) by Dominion Bond Rating Service Limited as “AA(low)” or higher; (b.1) by Fitch Ratings as “AA-” or higher; (c) by Moody’s Investors Services Inc. as “Aa3” or higher; or (d) by Standard and Poor’s as “AA-” or higher. O. Reg. 438/97, s. 9 (1); O. Reg. 265/02, s. 6; O. Reg. 399/02, s. 5; O. Reg. 655/05, s. 8; O. Reg. 43/18, s. 7. (1.1) Revoked: O. Reg. 43/18, s. 9 (1). (2) If the rating of an investment continued under subsection (1) falls below the standard required by that subsection, the municipality shall create a plan, including expected timelines, for selling the investment and shall sell the investment in accordance with the plan. O. Reg. 43/18, s. 9 (2). Forward Rate Agreements Forward rate agreements 10. (1) A municipality that enters into an agreement to make an investment on a future date in a security prescribed by section 2 may enter one or more forward rate agreements with a bank listed in Schedule I, II or III to the Bank Act (Canada) in order to minimize the cost or risk associated with the investment because of fluctuations in interest rates. O. Reg. 655/05, s. 9. (2) A forward rate agreement shall provide for the following matters: 1. Specifying a forward amount, which is the principal amount of the investment or that portion of the principal amount to which the agreement relates. 2. Specifying a settlement day, which is a specified future date. 3. Specifying a forward rate of interest, which is a notional rate of interest applicable on the settlement day. 4. Specifying a reference rate of interest, which is the market rate of interest payable on a specified future date on an acceptance issued by a bank listed in Schedule I, II or III to the Bank Act (Canada). 5. Requiring a settlement payment to be payable on the settlement day if the forward rate and the reference rate of interest are different. O. Reg. 655/05, s. 9. (3) A municipality shall not enter a forward rate agreement if the forward amount described in paragraph 1 of subsection (2) for the investment whose cost or risk the agreement is intended to minimize, when added to all forward amounts under other forward rate agreements, if any, relating to the same investment, would exceed the total amount of the principal of the investment. O. Reg. 655/05, s. 9. (4) A municipality shall not enter a forward rate agreement unless the settlement day under the agreement is within 12 months of the day on which the agreement is executed. O. Reg. 655/05, s. 9. (5) A municipality shall not enter a forward rate agreement if the settlement payment described in paragraph 5 of subsection (2) exceeds the difference between the amount of interest that would be payable on the forward amount calculated at the forward rate of interest for the period for which the investment was made and the amount that would be payable calculated at the reference rate of interest. O. Reg. 655/05, s. 9. (6) A municipality shall not enter a forward rate agreement except with a bank listed in Schedule I, II or III to the Bank Act (Canada) and only if the bank’s long-term debt obligations on the day the agreement is entered are rated, (a) by Dominion Bond Rating Service Limited as “A(high)” or higher; (b) by Fitch Ratings as “A+” or higher; (c) by Moody’s Investors Service Inc. as “A1” or higher; or (d) by Standard and Poor’s as “A+” or higher. O. Reg. 655/05, s. 9. Statement of policies and goals 11. (1) Before a municipality passes a by-law authorizing a forward rate agreement, the council of the municipality shall adopt a statement of policies and goals relating to the use of forward rate agreements. O. Reg. 655/05, s. 9. (2) The council of the municipality shall consider the following matters when preparing the statement of policies and goals: 1. The types of investments for which forward rate agreements are appropriate. 2. The fixed costs and estimated costs to the municipality resulting from the use of such agreements. 3. A detailed estimate of the expected results of using such agreements. 4. The financial and other risks to the municipality that would exist with, and without, the use of such agreements. 5. Risk control measures relating to such agreements, such as, i. credit exposure limits based on credit ratings and on the degree of regulatory oversight and the regulatory capital of the other party to the agreement, ii. standard agreements, and iii. ongoing monitoring with respect to the agreements. O. Reg. 655/05, s. 9. Report to council 12. (1) If a municipality has any subsisting forward rate agreements in a fiscal year, the treasurer of the municipality shall prepare and present to the municipal council once in that fiscal year, or more frequently if the council so desires, a detailed report on all of those agreements. O. Reg. 655/05, s. 9. (2) The report must contain the following information and documents: 1. A statement about the status of the forward rate agreements during the period of the report, including a comparison of the expected and actual results of using the agreements. 2. A statement by the treasurer indicating whether, in his or her opinion, all of the forward rate agreements entered during the period of the report are consistent with the municipality’s statement of policies and goals relating to the use of forward rate agreements. 3. Such other information as the council may require. 4. Such other information as the treasurer considers appropriate to include in the report. O. Reg. 655/05, s. 9. Part II Prudent investment Definitions 13. In this Part, “Investment Board” means a municipal service board that is established under section 196 of the Act by a municipality for the purposes of this Part and includes, for the purposes of paragraph 3 of section 15, subsection 17 (3) and sections 21 and 23, the Toronto Investment Board; (“commission des placements”) “Joint Investment Board” means a municipal service board that is established under section 202 of the Act by two or more municipalities for the purposes of this Part; (“commission mixte des placements”) “Toronto Investment Board” means the board of the City of Toronto described in subsection 46 (2) of Ontario Regulation 610/06 (Financial Activities) made under the City of Toronto Act, 2006. (“Commission des placements de Toronto”) O. Reg. 43/18, s. 10. Application 14. This Part applies in respect of investments by a municipality under section 418.1 of the Act. O. Reg. 43/18, s. 10. Requirements under s. 418.1 (3) of the Act 15. A municipality must satisfy one of the following requirements on the day referred to in subsection 418.1 (3) of the Act in order to pass a by-law for the purposes of that subsection: 1. The municipality must have, in the opinion of its treasurer, at least, i. $100,000,000 in money and investments that it does not require immediately, or ii. $50,000,000 in net financial assets, as indicated in Schedule 70 of the most recent Financial Information Return supplied to the Ministry of Municipal Affairs by the municipality under the Act and posted on the Ministry’s website on the day the municipality passes the by-law under subsection 418.1 (2) of the Act. 2. The municipality must have entered into an agreement to establish and invest through a Joint Investment Board with one or more other municipalities, and all of the municipalities must have, in the opinion of each of their treasurers, a combined total of at least $100,000,000 in money and investments that the municipalities do not require immediately. 3. The municipality must have entered into an agreement with the following parties to invest through an Investment Board or a Joint Investment Board that was established by another municipality or municipalities before the day the municipality passes the by-law: i. The Investment Board or Joint Investment Board, as the case may be. ii. Any other municipalities investing through the Investment Board or Joint Investment Board on the day the municipality passes the by-law. O. Reg. 43/18, s. 10. Limitation, school board securities 16. A municipality shall not invest money in a security issued or guaranteed by a school board or similar entity in Canada unless the money raised by issuing the security is to be used for school purposes. O. Reg. 43/18, s. 10. Investments only through Investment Board or Joint Investment Board 17. (1) A municipality that satisfies the requirement set out in paragraph 1 of section 15 may invest money only by having an Investment Board that meets the following criteria do so on its behalf: 1. The Investment Board has been established by the municipality. 2. The Investment Board has been given the control and management of the municipality’s investments by the municipality delegating to the Investment Board, i. the municipality’s powers to make the investments, and ii. the municipality’s duties under section 418.1 of the Act. O. Reg. 43/18, s. 10. (2) A municipality that satisfies the requirement set out in paragraph 2 of section 15 may invest money only by having a Joint Investment Board that satisfies the following criteria do so on its behalf: 1. The Joint Investment Board is the subject of an agreement referred to in paragraph 2 of section 15. 2. The Joint Investment Board has been given the control and management of the municipality’s investments, together with that of all the other municipalities that are party to the agreement referred to under paragraph 2 of section 15, by each municipality delegating to the Joint Investment Board, i. the municipality’s powers to make the investments, and ii. the municipality’s duties under section 418.1 of the Act. O. Reg. 43/18, s. 10. (3) A municipality that satisfies the requirement under paragraph 3 of section 15 may invest money only by having an Investment Board or Joint Investment Board, as the case may be, that satisfies the following criteria do so on its behalf: 1. The Investment Board or Joint Investment Board is the subject of an agreement referred to in paragraph 3 of section 15. 2. The Investment Board or Joint Investment Board has been given the control and management of the municipality’s investments by the municipality delegating to the Investment Board or Joint Investment Board, i. the municipality’s powers to make the investments, and ii. the municipality’s duties under section 418.1 of the Act. O. Reg. 43/18, s. 10. (4) The following persons may not be appointed as members of the Investment Board or Joint Investment Board: 1. An officer or employee of any municipality for which it invests. 2. A member of council of any municipality for which it invests. O. Reg. 43/18, s. 10. (5) Subsection (4) does not apply to any treasurer of a municipality for which the board invests provided that treasurers do not make up more than one quarter of the members. O. Reg. 43/18, s. 10; CTR 12 AU 22 - 1. Investment policy 18. (1) The council of a municipality shall adopt and maintain an investment policy in relation to investing under this Part. O. Reg. 43/18, s. 10. (2) The investment policy shall include requirements with respect to the following: 1. The municipality’s objectives for return on investment and risk tolerance. 2. The municipality’s need for liquidity including, for greater certainty, the municipality’s anticipated needs for funds for planned projects and the municipality’s needs to have funds available for unanticipated contingencies. O. Reg. 43/18, s. 10. (3) The investment policy may include other requirements with respect to investment matters that council considers to be in the interests of the municipality. O. Reg. 43/18, s. 10. (4) At least annually, the council shall review the investment policy and update it, as necessary, as a result of the review. O. Reg. 43/18, s. 10. Investment plan 19. (1) An Investment Board or Joint Investment Board shall adopt and maintain an investment plan in respect of all municipalities that have delegated to it, (a) the municipality’s powers to make investments; and (b) the municipality’s duties under section 418.1 of the Act. O. Reg. 43/18, s. 10. (2) The investment plan shall deal with how the Investment Board or Joint Investment Board will invest each municipality’s money and set out the Board’s projections of the proportions of each municipality’s portfolio of investments to be invested at the end of the year in each type of security selected by the Investment Board or Joint Investment Board and may include other requirements. O. Reg. 43/18, s. 10. (3) At least annually, following each council’s review of the investment policy under subsection 18 (4), the Investment Board or Joint Investment Board shall review the investment plan and update it, as necessary, as a result of the reviews. O. Reg. 43/18, s. 10. Investment report 20. (1) An Investment Board or Joint Investment Board shall prepare and provide to the council of each municipality referred to in subsection 19 (1), each year or more frequently as specified by the council, an investment report. O. Reg. 43/18, s. 10. (2) The investment report shall contain, (a) a statement about the performance of the municipality’s portfolio of investments during the period covered by the report; (b) a statement by the treasurer of the municipality as to whether or not, in the opinion of the treasurer, all investments are consistent with the municipality’s investment policy under section 18 and the investment plan for the municipality under section 19; and (c) such other information that the council may require or that, in the opinion of the treasurer, should be included. O. Reg. 43/18, s. 10. Inconsistencies, treasurer’s duty 21. If an investment made by an Investment Board or a Joint Investment Board is, in the opinion of the municipality’s treasurer, not consistent with the municipality’s investment policy under section 18 and the investment plan for the municipality under section 19 of this Regulation or section 48.1 of Ontario Regulation 610/06 (Financial Activities) made under the City of Toronto Act, 2006, as the case may be, the treasurer shall report the inconsistency to the council within 30 days after becoming aware of it. O. Reg. 43/18, s. 10. Agents of the Investment Board 22. (1) Subject to subsections (2) and (3), an Investment Board or Joint Investment Board may authorize an agent to exercise any of the board’s functions to the same extent that a prudent investor, acting in accordance with ordinary investment practice, would authorize an agent to exercise any investment function. O. Reg. 43/18, s. 10. (2) An Investment Board or Joint Investment Board may not authorize an agent under subsection (1) unless a written agreement between the board and the agent is in effect and the agreement includes, (a) a requirement that the agent comply with the requirements included in the investment policy or policies under section 18 and with the investment plan under section 19; and (b) a requirement that the agent report to the board at regular stated intervals. O. Reg. 43/18, s. 10. (3) An Investment Board or Joint Investment Board shall exercise prudence in selecting an agent, in establishing the terms of the agent’s authority and in monitoring the agent’s performance to ensure compliance with those terms. O. Reg. 43/18, s. 10. (4) For the purpose of subsection (3), prudence in monitoring an agent’s performance includes, (a) reviewing the agent’s reports; (b) regularly reviewing the agreement between the Investment Board or Joint Investment Board and the agent and how it is being put into effect, including assessing whether the requirement described in clause (2) (a) is being complied with; (c) considering whether directions should be provided to the agent or whether the agent’s appointment should be revoked; and (d) providing directions to the agent or revoking the appointment if the Investment Board or Joint Investment Board considers it appropriate to do so. O. Reg. 43/18, s. 10. (5) This section does not prevent the investment, by the Investment Board or Joint Investment Board, in mutual funds, pooled funds or segregated funds under variable insurance contracts, and the manager of such a fund is not an agent for the purpose of this section. O. Reg. 43/18, s. 10. Withdrawal from investment arrangement 23. A municipality may withdraw from investing through an Investment Board or Joint Investment Board that the municipality has not established if all of the following conditions are met: 1. All the municipalities investing through the board agree to the withdrawal. 2. The municipality has done one of the following: i. Entered into an agreement with another municipality that has established an Investment Board, that Investment Board and any other municipalities investing through that Investment Board, to invest through that Investment Board. ii. Entered into an agreement with the municipalities that have established a Joint Investment Board, that Joint Investment Board and any other municipalities investing through that Joint Investment Board, to invest through that Joint Investment Board. iii. Established an Investment Board on its own or established a Joint Investment Board with one or more other municipalities. 3. The municipality has given the Investment Board or Joint Investment Board through which it will be investing the control and management of the municipality’s investments by delegating to the board, i. the municipality’s powers to make the investments, and ii. the municipality’s duties under section 418.1 of the Act. O. Reg. 43/18, s. 10. Application of Part, withdrawal or dissolution 24. (1) This section applies if a municipality establishes an Investment Board or a Joint Investment Board, (a) in order to meet the condition set out in subparagraph 2 iii of section 23 with respect to withdrawing from investing; or (b) in order to meet a condition set out in Ontario Regulation 42/18 (Dissolution of and Prescribed Changes to Investment Board or Joint Investment Board) made under the Act. O. Reg. 43/18, s. 10. (2) The municipality must satisfy the requirement set out in paragraph 1 or 2 of section 15 at the time of establishing the board and the reference in subparagraph 1 ii of section 15 to “the day the municipality passes the by-law under subsection 418.1 (2) of the Act” is deemed for the purposes of this section to be a reference to “the day the Investment Board is established”. O. Reg. 43/18, s. 10. (3) Subsections 17 (1) and (2) apply to the municipality. O. Reg. 43/18, s. 10. (4) Sections 16 and 18 to 22 apply with respect to the investment of money by the Investment Board or Joint Investment Board. O. Reg. 43/18, s. 10. Transitional matters, what may be done in advance 25. For greater certainty, before a municipality passes a by-law under subsection 418.1 (2) of the Act and before the effective date of the by-law, (a) the municipality may establish an Investment Board or Joint Investment Board and appoint the members; (b) the municipality may enter into an agreement described in paragraph 2 or 3 of section 15; (c) the municipality may adopt an investment policy under section 18; (d) an Investment Board or Joint Investment Board may adopt an investment plan under section 19; and (e) an Investment Board or Joint Investment Board may authorize an agent under section 22. O. Reg. 43/18, s. 10. Transitional matters, s. 418.1 of the Act 26. (1) No municipality shall pass a by-law under subsection 418.1 (2) of the Act until January 1, 2019. O. Reg. 43/18, s. 10.

(2) Despite the passing of a by-law by a municipality under subsection 418.1 (2) of the Act, (a) section 8 of this Regulation continues to apply to the municipality for the purposes of reporting in respect of any period up to and including the effective date of the by-law; and (b) section 20 of this Regulation applies to an Investment Board or Joint Investment Board for the purposes of reporting in respect of any period following the effective date of the by-law. O. Reg. 43/18, s. 10. (3) Despite the passing of a by-law by a municipality under subsection 418.1 (2) of the Act, (a) section 8.1 of this Regulation continues to apply with respect to investments made on or before the effective date of the by-law; and (b) section 21 of this Regulation applies with respect to investments made following the effective date of the by-law. O. Reg. 43/18, s. 10. (4) Despite the passing of a by-law by a municipality under subsection 418.1 (2) of the Act, reports shall be made by the treasurer under subsection 12 (1) of this Regulation until reports have been made covering the periods up to and including the period ending on the effective date of the by-law. O. Reg. 43/18, s. 10.