[§88-121.5]  Power to enter into securityloan agreements.  Anything in this part to the contrary notwithstanding,the board of trustees may enter into an agreement or agreements with afinancially responsible stock or bond brokerage firm, bank, or similarfinancial institution ("borrower") authorized to do business underthe laws of any state or the United States, for the purpose of lending to theborrower securities held by the system, subject to the following conditions:

(1)  The securities shall be loaned to the borrowerfor a period not to exceed one year;

(2)  At the termination of the loan period, theborrower shall deliver to the board of trustees certificates for identicalsecurities which are of the same class and issue as the loaned securities;

(3)  For the protection of the system, the borrowershall deliver to the board of trustees or its agent, collateral in the form ofcash, letters of credit, bonds, or other interest-bearing notes and obligationsof the United States or federal instrumentalities which are eligible forinvestment by the board of trustees, in an amount not less than one hundred twoper cent of the market value of the loaned securities, as determined by theboard of trustees.  The system shall have a security interest in the collateralto secure borrower's obligations under the agreement.  The board of trusteesshall not be obligated to return the collateral or any part thereof to theborrower, except upon borrower's delivery to the board or its agent ofsecurities identical to the loaned securities, as provided in paragraph (2). The board of trustees or its designated agent shall monitor the market value ofthe loaned securities daily, and if, on any business day, the amount of thecollateral deposited by the borrower is less than one hundred two per cent ofthe market value of the loaned securities on that day, the borrower shallimmediately deposit with the board or its agent additional collateral in theform of cash, letters of credit, bonds, or other interest-bearing notes andobligations of the United States or federal instrumentalities which areeligible for investment by the board of trustees.  Such additional collateral,together with the collateral previously on deposit, shall be in an amount notless than one hundred two per cent of the market value of the loaned securitiesat the time of such deposit;

(4)  The board of trustees, at its election, may useor invest any collateral delivered by a borrower to the board or its agentpursuant to the agreement, and any income and profits earned on the collateralshall be retained for the benefit of the system.  Any investment of thecollateral shall be subject to section 88-119;

(5)  Until the termination of the loan, the borrowermay exercise all the incidents of ownership of loaned securities, including theright to transfer the loaned securities to others and vote or otherwise consentas a holder of such securities; provided that the borrower shall be obligatedto the board of trustees for all dividends and distributions made with respectto the loaned securities during the period of the agreement, including, withoutlimitation, cash, stock or property dividends or distributions, interestpayments, and subscription rights;

(6)  In the event that the borrower, at thetermination of the loan period, fails to deliver to the board of trusteescertificates for identical securities which are of the same class and issue asthe loaned securities, the borrowers shall forfeit to the system the collateraldeposited. [L 1981, c 212, §1]