2009 California Government Code - Section 7600-7601 :: Article 1. General

7600.  It is the intent of the Legislature that:
   (a) Specified state agencies be authorized to invest marketable
securities by entering into security loan agreements;
   (b) State agencies charged with such authority exercise prudence
in making such agreements;
   (c) Sound fiscal management be established with respect to
transactions involving security agreements.

7601.  As used in this chapter:
   (a) "Security loan agreement" means a written contract whereby a
legal owner (the lender) agrees to lend specific marketable corporate
or government securities for a period not to exceed one year. The
lender retains the right to collect from the borrower all dividends,
interest, premiums, rights, and any other distributions to which the
lender would otherwise have been entitled. The lender waives the
right to vote the securities during the term of the loan. The lender
may terminate the contract upon not more than five business days'
notice as agreed, and the borrower may terminate the contract upon
not less than two business days' notice as agreed. The borrower shall
provide collateral to the lender in the form of cash, or bonds,
other interest-bearing notes and obligations of the United States or
federal instrumentalities eligible for investment by a lending state
agency.
   Such collateral shall be in an amount equal to at least 102
percent of the market value of the loaned securities as agreed. The
administrators of the funds involved shall monitor the market value
of the loaned securities daily. The loan agreement shall provide for
payment of additional collateral on a daily basis, or at such times
as the value of the loaned securities increases, to agreed upon
ratios. In no event shall the amount of the collateral be less than
the market value of the loaned securities.
   (b) "Marketable securities" means securities that are freely
traded on recognized exchanges or marketplaces.