4.2. SR 07-26-1993 - Laserfiche WebLink

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I. . speculate and lose is discussed later. If the association decides that equi- ties and other even riskier and more volatile investments have a place in the association's portfolio, the mechanism by which it selects and executes the investment becomes very important. Few treasurers or other officers of associations, nor even most city finance officers, are qualified to handle a sophisticated investment program appropriate for a pension fund. Even if such investing talent is available locally, when small dollar amounts are involved, the time spent in selecting appropriate investments, and high transaction costs for small-lot traders, may still make the rates for certificates of deposit more attractive. ~ The State Board of Investment offers a very economical way to get professional investment management of some or all of these funds, through the Minnesota Supplemental Investment Fund. State law allows relief associa- tions to certify monies for investment in anyone of four accounts offering varying advantages and degrees of risk.4 However, in addition to timing the purchases and redemptions, the association would still need to decide what portion of its assets to put with the state board and which of the four funds to buy shares in. The 1986 Legislature amended the statutes governing relief associations to provide that each officer and member of the board of the relief association is a fiduciary. 5 Each member " . . . shall act in good faith and shall exercise that degree of judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the manage- ment of their own affairs, not for speculation, but for investment, consid- ering the probable safety of their capital as well as the probable income to be derived therefrom." This responsibility means that the association officer could be answerable personally for failure to exercise reasonable control over the investment process. Another 1986 change in the law is an apparent attempt to shield relief funds and association officers from invest- ment losses through mismanagement and dishonesty. The statutes now require the treasurer of each relief association to furnish the association ~th a bond for the faithful discharge of his or her duty. 6 This faithful perfor- mance bond is likely to be about 25 November 1986 percent more expensive than the usual surety or honesty bond, but presum- ably would protect the fund against the treasurer's failure to perform his or her fiduciary duty. The amount of the performance bond must be acceptable to the city council in cities that offer a monthly payment for retired firefighters. In those cities with lump-sum benefits, the bond must be at least 10 percent of the assets of the association. In cases where it could be proved that the treasurer failed to meet the fiduciary standard and a loss resulted, the bond might provide a source to make the fund whole again. - However, in such a case the bonding company could seek to recover its loss from the treasurer. The many recent changes in laws dealing with relief association invest- ments mean that cities must now give this subject some thoughtful attention. Footnotes I M.S. 424A.04 2 M.S. 424A.05, Subd. 4 3 M.S. 424A.02, Subd. 10 4 M.S. llA.17, Subd. 5 5 M.S. llA.09 6 M.S. 69.051, Subd. 2 . ,-: Money ---SA VE~- Downtim:l I I I The next time you need: I I · Know how · Fast turnaround . Repair integrity I CAll MNWATIS 1-800-447-8677 Local 644-0812 M&M HYDRAULIC & EQUI~ CO. 770 Transfer Rd. St. Paul, MN 55114 (Metro-area pickup & delivery) . Cylinders Repacked Barrels honed . Pumps & Motors - Tested - Chrome rods made Rebuilt to mfgs. specs Resealed - Tested . Control Valves - Single or stack-type - Rebuilt to mfgs. specs - Resealed - Tested I I I I I I · We quote you first, then YOU make the decision to rebuild or rep:ace. I L_____________________________~ · We stano behind our overhaul jobs, and offer new replacement units for any units beyond economical repair. 33