Nevada Administrative Code Chapter 355 - Public Investments
Nevada Administrative Code Chapter 355 – Public Investments
Overview
NAC Chapter 355 sets forth the administrative rules governing the investment of public funds by various Nevada public entities, including state agencies, boards, commissions, and local government bodies. The goal is to ensure that public monies are invested prudently, securely, and in compliance with state law.
This chapter outlines the standards, procedures, and restrictions related to how public funds must be managed and invested to safeguard taxpayers' money while aiming for reasonable returns.
Purpose
Safeguard Public Funds: Establish strict guidelines to minimize risk and prevent losses of public money.
Promote Transparency and Accountability: Ensure public entities manage investments with clear procedures and oversight.
Comply with State Law: Align with the Nevada Revised Statutes (NRS), especially NRS Chapter 355 which provides the statutory authority.
Key Provisions of NAC Chapter 355
Scope and Applicability:
Applies to all public entities in Nevada authorized to invest public funds.
Includes state agencies, boards, counties, cities, school districts, and other political subdivisions.
Investment Objectives:
Safety of principal (the highest priority).
Liquidity to meet cash flow needs.
Reasonable return consistent with risk and liquidity requirements.
Permissible Investments:
Investments must comply with NRS 355.170 and related statutes.
Allowed investment vehicles include:
Obligations of the U.S. government and its agencies.
Certificates of deposit with qualified financial institutions.
Certain bonds and securities rated highly by national rating agencies.
Other investments explicitly authorized by statute or by the governing body.
Diversification and Limits:
Rules require diversification to avoid concentration risk.
Limits on investment amounts in a single issuer or type of security.
Delegation of Authority:
Governing bodies may delegate investment authority to qualified officials.
Delegated officials must act prudently and report regularly.
Reporting Requirements:
Regular reporting on investment performance, holdings, and compliance.
Annual reports are submitted to governing bodies and made available for public review.
Custody and Safekeeping:
Investments must be held by an independent third-party custodian.
Adequate controls and safeguards are required.
Ethical Standards:
Officers and employees involved in investing public funds must avoid conflicts of interest.
Prohibitions on personal financial gain from investment decisions.
Relevant Statutory Framework
Nevada Revised Statutes (NRS) Chapter 355:
Provides the statutory basis for investment authority and duties of public entities.
NAC 355 implements these statutes by detailing operational and procedural requirements.
Legal Principles and Case Law
While NAC 355 governs administrative rules for public investment, related case law generally focuses on fiduciary duties, prudent investor standards, and statutory compliance.
1. Fiduciary Duty and Prudent Investor Standard
Public officials managing investments have fiduciary duties to act prudently, in good faith, and in the public interest.
The “prudent investor” rule requires officials to make investment decisions that a prudent person would make in managing their own affairs.
Case Example:
City of Reno v. Sierra Pacific Power Co., 747 P.2d 1378 (Nev. 1987) —
Although primarily a contract case, this decision reflects the court’s expectation that public entities act with due care and comply with statutory obligations. This principle extends to investment decisions, requiring adherence to NAC 355 and NRS 355.
2. Delegation and Accountability
Courts uphold delegation of investment authority as long as delegated officials act within statutory and regulatory boundaries.
Case Example:
Clark County v. State, 112 Nev. 550 (1996) —
The court affirmed that county officials must exercise delegated authority in compliance with the law, and improper delegation or failure to supervise may result in liability.
3. Compliance with Statutory Limits
Investments exceeding statutory or regulatory limits can be invalidated, and officials may be held liable for resulting losses.
Case Example:
Board of Trustees of Washoe County School District v. Peavine, 126 Nev. 70 (2010) —
While not directly on investments, this case stresses strict compliance with statutory mandates in public fund management. It implies that exceeding limits in NAC 355 could lead to judicial consequences.
4. Transparency and Public Access
Courts recognize the importance of transparency in public investments to prevent misuse or fraud.
Case Example:
Nevada Open Meeting Law Cases —
Several cases emphasize that investment decisions and reports must be made available in public forums to ensure accountability.
Summary
NAC Chapter 355 governs how Nevada public entities invest funds, emphasizing safety, liquidity, and reasonable return.
The Code specifies allowable investments, diversification, delegation, reporting, custody, and ethics.
Officials must follow fiduciary duties and statutory requirements under NRS Chapter 355.
Nevada courts uphold prudent management and strict compliance, with case law underscoring fiduciary accountability and transparency.
Failure to comply with NAC 355 or statutory mandates can result in legal liability or invalidation of investment actions.
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