16.03: Authority of Investment Managers to Invest Funds

(1) Every board which has received an exemption pursuant to 840 CMR
19.00 shall by vote authorize a qualified investment manager as defined in
840 CMR 16.01 to invest and reinvest the funds of the system on behalf of
the board in accordance with the board's statement of investment objectives.

(2) Every investment made by a qualified investment manager on behalf of
a board shall comply with the requirements of M.G.L. c. 32, § 23 and 840
CMR 16.00 through 25.00.

16.04: Use of Custodian Banks; Nominees; Securities Depository

(1) Every board shall designate one or more banks or trust companies,
organized under the laws of the Commonwealth or of the United States,
custodian of the securities and assets of the system, and shall designate as
members of any nominee holding securities of the system any authorized
employee of such custodian. All assets of the system shall be held by the
custodian on behalf of the board. Each board shall direct its custodian to
provide the Commission with the reports and information required pursuant
to 840 CMR 4.00 and if possible, said reports and information shall be
provided by electronic means or electronic access granted to the

(2) Any board may authorize a custodian designated pursuant to 840 CMR
16.04(1) to place the securities of the system in a securities depository
registered with the Securities and Exchange Commission for the purpose of
facilitating security trading and certificate delivery.

(3) In the event a board changes its custodian it shall make every effort to
effectuate that change as of January 1.

16.05: Use of Brokers

(1) Retirement system board members and employees shall not:
      (a) direct brokerage commissions for services, or
      (b) instruct its qualified investment manager or managers to direct
      brokerage commissions.

(2) Selection of brokers shall be based on competitive criteria including
best price and execution.

(3) Commission rates shall be negotiated.

(4) Board members shall review on an on-going basis all brokerage costs.

(5) Board members shall review on an on-going basis the selection of
brokers and use of "soft dollars" (arrangements under which products or
services other than execution of securities transactions are obtained from or
through a broker in exchange for the direction of brokerage transactions to
the broker) by its qualified investment manager or managers.

(6) Board members shall require the qualified investment manager or
managers or brokers to disclose in writing to the board all commissions
charged on all transactions and investments made.

(7) Board members shall require the qualified investment manager or
managers or brokers to disclose in writing to the board mark-ups and
mark-downs on all trades where the broker acted as dealer/principal.

(8) Notwithstanding the provisions of 840 CMR 16.00 boards may
participate in so-called "commission recapture" programs provided that such
participation is consistent with the board's fiduciary duty and other
provisions of 840 CMR

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