410-141-5150 ASSET VALUATION AND PERMITTED INVESTMENTS: Investment of Funds in Obligations That Are Not Investment Quality; Percentage of Assets (1) A CCO may acquire or hold obligations that are not investment grade only as provided in this section. (2) For purposes of this section, an obligation is not investment grade if the obligation is either of the following: (a) A “medium grade obligation”, which means an obligation that is rated three by the SVO; (b) A “lower grade obligation”, which means an obligation that is rated four, five or six by SVO. (3) A CCO shall not acquire, directly or indirectly, any medium grade or lower grade obligation of any person if, after given effect to the acquisition, the aggregate amount of all medium grade and lower grade obligations then held by the CCO would exceed 20% of its allowed assets. For purposes of this section, the aggregate amount of medium grade and lower grade obligations shall be the aggregate value of the obligations as set forth in the most recent financial statement required by, and filed with, the Authority. (4) In addition to the prohibition in subsection (3) on the aggregate amount of medium grade and lower grade obligations, a CCO shall not acquire or hold: (a) More than ten percent of its allowed assets in obligations rated four, five or six by the SVO; (b) More than three percent of its allowed assets in obligations rated five or six by the SVO; (c) More than one percent of its allowed assets in obligations rated six by the SVO. (5) Attaining the limit of any one category under subsection (4) does not preclude a CCO from acquiring or holding obligations in other categories, subject to the specific and multi-category limits of this section. (6) The following prohibitions apply to investments in lower grade obligations and medium grade obligations issued, guaranteed or insured by any one person: (a) A CCO shall not acquire or hold more than an aggregate of one percent of its allowed assets in medium grade obligations issued, guaranteed or insured by any one person; (b) A CCO shall not acquire or hold more than one-half of one percent of its allowed assets in lower grade obligations issued, guaranteed or insured by any one person; (c) In addition to the prohibitions in subsections (a) and (b) of this section, a CCO shall not acquire or hold more than one percent of its allowed assets in any medium or lower grade obligations issued, guaranteed or insured by any one person. (7) This section does not prohibit a CCO from doing any of the following: (a) Acquiring any obligation that the CCO committed prior to the effective date of this section to acquire if the CCO would have been permitted to acquire the obligation when the CCO made the commitment; (b) Acquiring an obligation as a result of a restructuring of a medium or lower grade obligation already held. (8) A CCO may acquire a medium or lower grade obligation of a person in which the CCO already has one or more medium or lower grade obligations if the obligation is acquired in order to protect an investment previously made in the obligations of the person. All such acquired obligations, however, shall not exceed one-half of one percent of the CCO's allowed assets. (9) The board of directors of a CCO that acquires, hold or invests, directly or indirectly, more than two percent of its allowed assets in medium grade and lower grade obligations shall adopt a written plan for the making of such investments. The plan shall contain guidelines with respect to the quality of the issues invested in as well as diversification standards. The diversification standards shall at least include standards regarding the issuer, industry, duration, liquidity and geographic location. (10) A CCO shall not acquire any lower grade or medium grade obligation that in whole or in part exceed the applicable limitation established in this section. The requirement under this section does not apply to the acquisition of an obligation to which subsection (7) applies. (11) If an obligation held by a CCO is of investment grade when acquired but subsequently becomes a medium grade or lower grade obligation, and that event causes the obligations of the CCO to exceed an applicable limit established under this section, the CCO shall not count the excess as an allowed asset. A CCO shall not hold any excess ascribable to deterioration of an obligation as described in this section longer than a continuous period of three years during which the obligation is a medium or lower grade obligation, except with the consent of the Authority. Statutory/Other Authority: ORS 413.042, 414.572, 414.591 & 414.605 Statutes/Other Implemented: ORS 414.570-414.686 & 415.001-415.430 History: DMAP 143-2024, amend filed 12/29/2024, effective 01/01/2025 DMAP 59-2019, adopt filed 12/18/2019, effective 01/01/2020